Investments

Type 6-Okay C21 Investments Inc. For: Apr 30


Get on the spot alerts when information breaks in your shares. Declare your 1-week free trial to StreetInsider Premium right here.



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-Okay

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934

For the month of August 2022.

Fee File Quantity 000-55982

C21 INVESTMENTS INC.
(Translation of registrant’s identify into English)

Suite 1900-855 West Georgia St
Vancouver BC, V6C 3H4
Canada
(Tackle of principal government workplaces)

Point out by test mark whether or not the registrant recordsdata or will file annual studies underneath cowl Type 20-F or Type 40-F

Type 20-F [X]           Type 40-F [   ]

Point out by test mark if the registrant is submitting the Type 6-Okay in paper as permitted by Regulation S-T Rule 101(b)(1): [   ]

Notice: Regulation S-T Rule 101(b)(1) solely permits the submission in paper of a Type 6-Okay if submitted solely to supply an connected annual report back to safety holders.

Point out by test mark if the registrant is submitting the Type 6-Okay in paper as permitted by Regulation S-T Rule 101(b)(7): [   ]

Notice: Regulation S-T Rule 101(b)(7) solely permits the submission in paper of a Type 6-Okay if submitted to furnish a report or different doc that the registrant international personal issuer should furnish and make public underneath the legal guidelines of the jurisdiction through which the registrant is included, domiciled or legally organized (the registrant’s “residence nation”), or underneath the foundations of the house nation alternate on which the registrant’s securities are traded, so long as the report or different doc is just not a press launch, is just not required to be and has not been distributed to the registrant’s safety holders, and, if discussing a cloth occasion, has already been the topic of a Type 6-Okay submission or different Fee submitting on EDGAR.


SIGNATURE

Pursuant to the necessities of the Securities Trade Act of 1934, the registrant has duly precipitated this report back to be signed on its behalf by the undersigned, thereunto duly licensed.

  C21 INVESTMENTS INC.
   
Date: August 15, 2022 /s/ Michael Kidd
  Michael Kidd
  Chief Monetary Officer

-2-


INDEX TO EXHIBITS



C21 INVESTMENTS INC.

Interim Condensed Consolidated Monetary Statements

For the three months ended April 30, 2022 and 2021

(Expressed in U.S. {Dollars})



Discover of Disclosure of Non-auditor Evaluation of the Interim Condensed Consolidated Monetary Statements for the three months ended April 30, 2022 and 2021.

Pursuant to Nationwide Instrument 51-102, Half 4, subsection 4.3(3)(a) issued by the Canadian Securities directors, if an auditor has not carried out a evaluate of the interim monetary statements, they should be accompanied by a discover indicating that the monetary statements haven’t been reviewed by an auditor.

The accompanying unaudited interim condensed consolidated monetary statements of C21 Investments Inc. (the “Firm” or “C21”) for the interim interval ended April 30, 2022, have been ready in accordance with accounting ideas typically accepted in america of America (“U.S. GAAP”). and are the duty of the Firm’s administration.

The Firm’s impartial auditors, Baker Tilly US, LLP, haven’t carried out a evaluate of those interim condensed consolidated monetary statements.

August 15, 2022


    April 30, 2022     January 31, 2022  
    $     $  
ASSETS            
Present belongings            
Money   2,501,758     3,067,983  
Receivables   378,703     210,423  
Stock   4,727,513     4,054,473  
Pay as you go bills and deposits   520,915     773,450  
Present portion of belongings labeled as held on the market   1,855,468     2,178,145  
    9,984,357     10,284,474  
Non-current belongings            
Property and gear   5,075,306     4,869,593  
Proper-of-use belongings   8,756,283     8,875,884  
Intangible belongings   8,889,830     9,224,165  
Goodwill   28,541,323     28,541,323  
Restricted money   48,916     49,011  
Deferred tax asset   284,407     9,024  
TOTAL ASSETS   61,580,422     61,853,474  
             
LIABILITIES            
Present liabilities            
Accounts payable and accrued liabilities   2,487,120     2,508,869  
Promissory word payable – present portion   6,080,000     6,080,000  
Convertible promissory notes – present portion   1,281,442     1,281,442  
Revenue taxes payable   4,431,808     3,658,162  
Lease liabilities – present portion   343,257     325,698  
Present portion of liabilities labeled as held on the market   1,040,728     874,379  
    15,664,355     14,728,550  
Non-current liabilities            
Lease liabilities   8,858,201     8,953,425  
Deposit legal responsibility   100,000     100,000  
Promissory word payable   506,667     2,026,667  
By-product legal responsibility   1,000,625     1,006,368  
Reclamation obligation   54,956     55,272  
TOTAL LIABILITIES   26,184,804     26,870,282  
             
SHAREHOLDERS’ EQUITY            
Frequent inventory, no par worth; limitless shares licensed; 120,047,814 and 117,057,860 shares issued and excellent as at April 30, 2022 and January 31, 2022 and 2021, respectively   105,339,137     105,236,351  
Dedication to subject shares   628,141     628,141  
Amassed different complete losses   (2,368,147 )   (2,370,967 )
Deficit   (68,203,513 )   (68,510,333 )
TOTAL SHAREHOLDERS’ EQUITY   35,395,618     34,983,192  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   61,580,422     61,853,474  

On behalf of the Board:

 

 

 

“Bruce Macdonald”

Director

“Michael Kidd”

Director


    April 30, 2022     April 30, 2021  
    $     $  
             
Income   7,472,461     8,797,350  
Price of gross sales   3,484,824     3,512,604  
Gross Revenue   3,987,637     5,284,746  
             
Promoting, common and administrative expense   2,292,326     2,232,201  
             
Revenue from operations   1,695,311     3,052,545  
             
Curiosity expense   (164,049 )   (327,106 )
Accretion expense       (154,911 )
Different earnings   4,146     119,933  
Acquire on change in honest worth of by-product liabilities       3,122,310  
Internet earnings from persevering with operations earlier than earnings taxes   1,535,408     5,812,771  
Revenue tax expense   (498,263 )   (910,620 )
Internet earnings from persevering with operations after earnings taxes   1,037,145     4,902,151  
             
Internet (loss) earnings from discontinued operations after earnings taxes   (730,325 )   146,155  
             
NET INCOME   306,820     5,048,306  
             
Different complete earnings (loss)            
Cumulative translation adjustment   2,820     (718,323 )
COMPREHENSIVE INCOME   309,640     4,329,983  
Primary earnings per share from persevering with operations   0.01     0.04  
Diluted earnings per share from persevering with operations   0.01     0.04  
Primary and diluted earnings per share from discontinued operations   (0.01 )   0.00  
Primary (loss) earnings per share   0.00     0.04  
Diluted (loss) earnings per share   0.00     0.04  
Weighted common variety of widespread shares excellent – primary   120,047,814     117,499,016  
Weighted common variety of widespread shares excellent – diluted   122,880,907     122,693,775  


    Variety of
shares
    Frequent inventory     Dedication to
subject shares
    Amassed
different
complete
loss
    Deficit     Complete  
          $     $     $     $     $  
Steadiness at January 31, 2021   117,057,860     103,636,830     649,928     (1,604,126 )   (79,426,484 )   23,256,148  
Dedication to subject shares on buy of EFF   19,774     21,787     (21,787 )            
Shares issued on train of Phantom Farms warrants   456,100     533,326                 533,326  
Shares issued on train of choices       141,716                 141,716  
Internet earnings and different complete loss for the yr               (718,323 )   5,048,306     4,329,983  
Steadiness at April 30 2021   117,533,734     104,333,659     628,141     (2,322,449 )   (74,378,178 )   28,261,173  
                                     
Steadiness at January 31, 2022   120,047,814     105,236,351     628,141     (2,370,967 )   (68,510,333 )   34,983,192  
Share-based compensation       102,786                 102,786  
Internet earnings and different complete earnings for the yr               2,820     306,820     309,640  
Steadiness at April 30, 2022   120,047,814     105,339,137     628,141     (2,368,147 )   (68,203,513 )   35,395,618  


    April 30, 2022     April 30, 2021  
    $     $  
OPERATING ACTIVITIES            
Internet earnings from persevering with operations   1,037,145     4,875,001  
Changes to reconcile web earnings to web money supplied by working actions:          
Depreciation and amortization   460,431     326,921  
Share-based compensation   102,786     141,716  
Curiosity expense       99,617  
Accretion expense       21,207  
Deferred earnings tax   (275,383 )   341,793  
Overseas alternate achieve   (5,964 )    
Acquire on change in honest worth of by-product liabilities       (2,716,722 )
Modifications in working belongings and liabilities            
Stock   (673,040 )   (274,290 )
Pay as you go bills and deposits   252,536     118,165  
Receivables   (168,280 )   84,625  
Accounts payable and accrued liabilities   (7,251 )   (631,948 )
Revenue tax payable   773,646     (181,996 )
Lease liabilities   41,936     96,119  
Money supplied by working actions of continuous operations   1,538,562     2,300,208  
Money utilized in working actions of discontinued operations   (33,382 )   (157,892 )
             
INVESTING ACTIVITIES            
Purchases of property and gear   (390,595 )   (1,334,306 )
Money utilized in investing actions of continuous operations   (390,595 )   (1,334,306 )
Money supplied by investing actions of discontinued operations   38,383     1,200,592  
             
FINANCING ACTIVITIES            
Principal repayments on promissory word payable   (1,520,000 )   (1,520,000 )
Money proceeds from warrants       315,902  
Curiosity paid in money   (178,027 )   (328,642 )
Money utilized in financing actions of continuous operations   (1,698,027 )   (1,532,740 )
Money utilized in financing actions of discontinued operations   (23,986 )   (33,365 )
             
Impact of international alternate on money   2,820     295  
             
(Lower) enhance in money in the course of the interval   (566,225 )   442,792  
Money starting of interval   3,067,983     6,237,182  
Money finish of interval   2,501,758     6,679,974  
             
Supplemental disclosure of money circulate info            
Curiosity paid in money   178,027     321,202  
Revenue taxes paid in money       982,893  
             
Non-cash financing actions            
Frequent shares issued as partial settlement of dedication to subject shares       21,787  


1. NATURE OF OPERATIONS

C21 Investments Inc. (the “Firm” or “C21”) was included January 15, 1987, underneath the Firm Act of British Columbia. The Firm is a publicly traded firm with its registered workplace is 1900-885 West Georgia Avenue, Vancouver, BC, V6C 3H4.

Pursuant to a change of enterprise introduced on January 29, 2018 to the Hashish {industry}, the Firm commenced buying and working revenue-producing hashish operations within the USA.

On June 15, 2018, the Firm’s widespread shares had been delisted from the TSX Enterprise Trade (“TSX-V”) on the Firm’s request and on June 18, 2018 the Firm commenced buying and selling on the Canadian Securities Trade (“CSE”), accomplished its change of enterprise to the hashish {industry} and commenced buying and selling underneath the image CXXI. The Firm registered its widespread shares in america and on Might 6, 2019, its shares had been cleared by the Monetary Trade Regulatory Authority for buying and selling on the OTC Markets platform underneath the U.S. buying and selling image CXXIF. On September 28, 2020, the Firm started buying and selling on the OTCQB® Enterprise Market.

For the yr ended January 31, 2021, the Firm operated in two segments: leisure hashish in Oregon, USA and leisure and medical hashish in Nevada, USA (Notice 15). In the course of the yr ended January 31, 2022, the Firm made the strategic choice to exit operations in Oregon. The comparative outcomes of operations have been re-stated to current the working outcomes of the Oregon phase as discontinued operations. The Nevada phase stays engaged within the cultivation of and manufacturing of hashish flower merchandise, vape merchandise and extract merchandise for wholesale and retail gross sales.

At April 30, 2022, the Firm had money of $2,501,758, a working capital deficit of $5,679,998, and an collected deficit of $68,203,513. Nonetheless, for the interval ended April 30, 2022, the Firm generated web earnings and constructive money flows from operations. 

Administration has taken a number of actions to make sure that the Firm will proceed as a going concern by means of April 30, 2023, together with the closing of its operations in Oregon (Notice 4), promoting the belongings in Oregon, decreasing headcount, and decreasing discretionary expenditures. The Firm is searching for further financing within the type of debt which may consolidate current debt on its steadiness sheet on extra favorable phrases. Administration believes that these actions will allow the Firm to proceed as a going concern by means of August 15, 2023, one yr from the date these consolidated monetary statements had been issued.

In america, 36 states, the District of Columbia, and 4 out of 5 U.S. territories enable using medical hashish. The leisure adult-use of hashish is legalized in 17 states, together with Alaska, Arizona, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, Oregon, Vermont, Virginia, Washington, and the District of Columbia. On the federal degree, nevertheless, hashish presently stays a Schedule I managed substance underneath the Federal Managed Substances Act of 1970. Beneath U.S. federal legislation, a Schedule I drug or substance has a excessive potential for abuse, no accepted medical use in america, and a scarcity of accepted security for using the drug underneath medical supervision. As such, even in these states through which marijuana is legalized underneath state legislation, the manufacture, importation, possession, use or distribution of hashish stays unlawful underneath U.S. federal legislation. This has created a dichotomy between state and federal legislation, whereby many states have elected to manage and take away state-level penalties relating to a substance which continues to be unlawful on the federal degree. There stays uncertainty concerning the US federal authorities’s place on hashish with respect to cannabis-legal standing. A change in its enforcement insurance policies may affect the power of the Firm to proceed as a going concern.


2. BASIS OF PREPARATION

Foundation of presentation

These unaudited interim condensed consolidated monetary statements as at and for the three months ended April 30, 2022 and 2021 (“consolidated monetary statements”) are ready in accordance with accounting ideas typically accepted in america of America (“U.S. GAAP”). These consolidated monetary statements have been ready on an accrual foundation and are based mostly on historic prices, apart from sure monetary devices labeled as honest worth by means of revenue or loss.

Useful and reporting forex

The useful forex of C21 Investments Inc. is Canadian {dollars} (“C$”), and the useful forex of the Firm’s subsidiaries is U.S. {dollars}. C21 has decided that the U.S. greenback (“USD”) is essentially the most related and acceptable reporting forex because the Firm’s operations are carried out in U.S. {dollars} and its monetary outcomes are ready and reviewed internally by administration in U.S. {dollars}. The consolidated monetary statements are introduced in U.S. {dollars} except in any other case famous.

Foundation of consolidation

The consolidated monetary statements incorporate the accounts of the Firm and all of the entities through which the Firm has a controlling voting curiosity and is deemed to be the first beneficiary. All consolidated entities had been underneath widespread management in the course of the entirety of the durations for which their respective outcomes of operations had been included within the consolidated statements (i.e. from the date of acquisition). All intercompany balances and transactions are eradicated upon consolidation.

The next are the Firm’s subsidiaries which are included in these interim monetary statements as at and for the interval ended April 30, 2022:

Title of Subsidiary

Nation of
Incorporation

Proportion
Possession

Useful
Foreign money

Principal Exercise

320204 US Holdings Corp.

USA

100%

USD

Holding Firm

320204 Oregon Holdings Corp.

USA

100%

USD

Holding Firm

320204 Nevada Holdings Corp.

USA

100%

USD

Holding Firm

320204 Re Holdings, LLC

USA

100%

USD

Holding Firm

Eco Firma Farms LLC

USA

100%

USD

Hashish producer

Silver State Cultivation LLC

USA

100%

USD

Hashish producer

Silver State Reduction LLC

USA

100%

USD

Hashish retailer

Swell Corporations LTD

USA

100%

USD

Hashish processor, distributor

Megawood Enterprises Inc.

USA

100%

USD

Hashish retailer

Phantom Enterprise Group, LLC

USA

100%

USD

Holding Firm

Phantom Manufacturers, LLC

USA

100%

USD

Holding Firm

Phantom Distribution, LLC

USA

100%

USD

Hashish distributor

63353 Bend, LLC

USA

100%

USD

Hashish producer

20727-4 Bend, LLC

USA

100%

USD

Hashish processor

4964 BFH, LLC

USA

100%

USD

Hashish producer

Workforce Ideas 21, Inc.

USA

100%

USD

Payroll and advantages companies

3. SIGNIFICANT ACCOUNTING POLICIES

The Firm’s vital accounting insurance policies are extra absolutely described in Notice 3 to the consolidated monetary statements for the years ended January 31, 2022 and December 31, 2021. There have been no materials adjustments to the Firm’s vital accounting insurance policies.


3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Important accounting estimates and assumptions

The preparation of the Firm’s monetary statements in conformity with U.S. GAAP requires administration to make judgments, estimates and assumptions that have an effect on the reported quantities of belongings, liabilities and contingent liabilities on the date of the monetary statements and reported quantities of revenues and bills in the course of the reporting interval. Estimates and assumptions are repeatedly evaluated and are based mostly on administration’s expertise and different components, together with expectations of future occasions which are believed to be affordable underneath the circumstances. Precise outcomes might differ from these estimates and judgments.

Areas requiring a major diploma of estimation and judgment relate to the willpower of honest values of belongings acquired and liabilities assumed in enterprise combos, impairment of long-lived belongings and stock, honest worth measurements, helpful lives, depreciation and amortization of property, gear and intangible belongings, the recoverability and measurement of deferred tax belongings and liabilities, share-based compensation, and honest worth of by-product liabilities.

Lately issued accounting pronouncements

Latest accounting pronouncements, apart from these under, issued by the FASB, the American Institute of Licensed Public Accountants (“AICPA”) and the U.S. Securities and Trade Fee (“SEC”) didn’t or aren’t believed by administration to have a cloth impact on the Firm’s current or future monetary statements.

In October 2021, the FASB issued ASU No. 2021-08, Enterprise Mixtures (Matter 805): Accounting for Contract Belongings and Contract Liabilities from Contracts with Clients (“ASU 2021-08”), which requires an acquirer to acknowledge and measure contract belongings and liabilities acquired in a enterprise mixture in accordance with Income from Contracts with Clients (“Matter 606”) reasonably than regulate them to honest worth on the acquisition date.  ASU 2021-08 is efficient for fiscal durations starting after December 15, 2022. The Firm doesn’t anticipate the adoption of this normal to have any materials affect on the consolidated monetary statements.

4. DISCONTINUED OPERATIONS

In January 2022, the Firm entered into to a lease-to-own association with a lessee for sure licenses, land and gear in Oregon, USA, representing its out of doors rising operation. The lease-to-own association concludes in January 2027 with complete undiscounted funds over the time period amounting to $2,514,805. The Firm decided that the association ought to be accounted for as a sales-type lease and concluded that it isn’t possible that each one required funds shall be made such that title will switch on the finish of the time period. As such, in accordance with ASC 842, the land and gear haven’t been derecognized and funds obtained shall be recorded as a deposit legal responsibility till such time that collectability turns into possible. As at April 30, 2022, $100,000 has been obtained underneath the association and has been recorded as a deposit legal responsibility.

Because of non-profitable operations within the Oregon reporting unit, the Firm started to wind down operations in Oregon starting within the yr ended January 31, 2021. At January 31, 2021, the Firm labeled the belongings and liabilities in Swell and Megawood as held on the market and accomplished the sale of those belongings in April 2021. By January 31, 2022, the Firm made the choice to stop all rising, manufacturing, and processing actions in Bend, Oregon. Because the Oregon reporting unit contains the belongings of a number of parts in distinct geographic areas, administration anticipates finishing the sale on a piecemeal foundation.  Administration is engaged in an lively program to hunt patrons for the foremost lessons of belongings and liabilities in Oregon with the intention to full a sale within the subsequent twelve months.

Remaining stock available at April 30, 2022 had an estimated mixture web realizable worth of $89,856. Subsequent to April 30, 2022, the Firm bought the remaining Oregon stock on July 20, 2022.


4. DISCONTINUED OPERATIONS (Continued)

Pay as you go bills labeled as held on the market primarily pertains to the renewal of licenses which may be transferred within the occasion of a sale. In any other case, pay as you go bills shall be expensed inside loss from discontinued operations over the following twelve months.

Lengthy-term debt consists of auto loans and a constructing mortgage. The mortgage started on February 1, 2015 and matures on January 1, 2035 (20 years). The mortgage bears curiosity at a hard and fast fee of 4.5% with funds made month-to-month. The gear and automobile loans encompass three loans with maturity dates starting from June 1, 2021 by means of Might 15, 2023 and rates of interest starting from 5.59% to 19.9% with funds made month-to-month.

The next desk summarizes the foremost lessons of belongings and liabilities of the discontinued Oregon operation which were labeled as held-for-sale within the consolidated steadiness sheets:

    April 30, 2022     January 31, 2022  
    $     $  
Carrying quantities of the foremost lessons of belongings included in discontinued operations:            
Receivables   225,234     64,456  
Stock   89,856     363,391  
Pay as you go bills and deposits   92,872     111,617  
Deferred tax asset       152,177  
Property and gear   1,139,517     1,139,517  
Proper-of-use belongings   307,989     346,987  
Complete belongings labeled as held on the market   1,855,468     2,178,145  
Present portion of belongings labeled as held on the market   (1,855,468 )   (2,178,145 )
Non-current portion of belongings labeled as held on the market        
             
Carrying quantities of the foremost lessons of liabilities included in discontinued operations:            
Deferred tax legal responsibility   232,614      
Lease liabilities   364,659     412,093  
Lengthy-term debt   443,455     462,286  
Complete liabilities labeled as held on the market   1,040,728     874,379  
Present portion of liabilities labeled as held on the market   (1,040,728 )   (874,379 )
Non-current portion of liabilities labeled as held on the market        


4. DISCONTINUED OPERATIONS (Continued)

The next desk supplies the foremost lessons of line gadgets constituting pre-tax loss from discontinued operations:

    April 30, 2022     April 30, 2021  
    $     $  
Income   267,684     352,918  
Price of gross sales   435,656     319,401  
Gross margin   (167,972 )   33,517  
             
Bills (earnings)            
Normal and administration   117,895     93,600  
Gross sales, advertising and marketing, and promotion   1,939     26,553  
Working lease value       1,233  
Depreciation and amortization   3,000     79,354  
Impairment of intangible asset   47,476      
Different (earnings) bills   7,252     (340,528 )
Internet (loss) earnings from discontinued operations   (345,534 )   173,305  
Revenue tax expense   (384,791 )   (27,150 )
Internet (loss) earnings from discontinued operations after earnings taxes   (730,325 )   146,155  

The next desk summarizes the money flows from discontinued operations:

    April 30, 2022     April 30, 2021  
    $     $  
Internet money utilized in working actions of discontinued operations   (33,382 )   (157,892 )
Internet money supplied by investing actions of discontinued operations   38,383     1,200,592  
Internet money utilized in financing actions of discontinued operations   (23,986 )   (33,365 )

5. RECEIVABLES

    April 30, 2022     January 31, 2022  
    $     $  
Taxes receivable   3,693     11,945  
Commerce receivables   375,010     198,478  
    378,703     210,423  

There was no provision for anticipated credit score losses on commerce receivables at April 30, 2022 or January 31, 2022.

6. INVENTORY

    April 30, 2022     January 31, 2022  
    $     $  
Completed items   2,813,778     1,848,392  
Work in progress   1,708,038     2,029,133  
Uncooked supplies   205,697     176,948  
    4,727,513     4,054,473  


7. PROPERTY AND EQUIPMENT AND RIGHT-OF-USE ASSETS

Property and gear

The next desk summarizes the Firm’s property and gear:

    April 30, 2022     January 31, 2022  
    $     $  
Land   1,330,000     1,330,000  
Leasehold enhancements   1,892,078     1,758,229  
Furnishings & fixtures   357,942     460,890  
Pc gear   46,444     46,484  
Equipment & gear   2,417,020     2,305,217  
    6,043,484     5,900,820  
Much less: collected depreciation   (968,178 )   (1,031,227 )
    5,075,306     4,869,593  

Complete depreciation expense for the three months ended April 30, 2022 was $126,096 (2021 – $118,353). Of the entire expense, $110,063 was allotted to stock (2021 – $69,269).

At January 31, 2022, the Firm reclassified buildings with a value of $1,370,212 and collected depreciation of $230,695 to belongings labeled as held on the market. The prior interval comparative quantities of value of $1,370,212 and collected depreciation of $202,072 had been additionally re-classified.

Proper-of-use belongings

The Firm’s right-of-use belongings end result from its working leases (Notice 10) and encompass land and buildings used within the cultivation, processing, and warehousing of its merchandise.

At April 30, 2022, belongings labeled as held on the market comprises right-of-use belongings with a carrying worth of $307,989 (January 31, 2022 – $346,987). Administration estimated the honest worth much less prices to promote exceeds the carrying worth and subsequently the belongings are measured at their carrying values.

8. INTANGIBLE ASSETS AND GOODWILL

Intangible belongings

The next desk summarizes the Firm’s intangible belongings:

    April 30, 2022     January 31, 2022  
    $     $  
Licenses   12,167,022     12,141,476  
Manufacturers   644,800     868,982  
Buyer relationships   1,540,447     1,758,553  
    14,352,269     14,769,011  
Much less: collected amortization   (5,462,439 )   (5,544,846 )
    8,889,830     9,224,165  


8. INTANGIBLE ASSETS AND GOODWILL (Continued)

Complete amortization expense from intangible belongings for the yr ended January 31, 2022 was $334,334 (2021 – $342,571). Of this, $27,676 was allotted to stock (2021 – $6,919).

In the course of the yr ended January 31, 2022, the Firm acknowledged impairment prices of $363,510 on buyer relationships allotted to the Oregon reporting unit (Notice 4).

Goodwill

As at April 30, 2022, the Firm had goodwill of $28,541,323 (2021 – $28,541,323) which was allotted to the Nevada reporting unit.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The next desk presents the composition of accounts payable and accrued liabilities:

    April 30, 2022     January 31, 2022  
    $     $  
Accounts payable   1,543,915     1,402,546  
Accrued liabilities   891,775     1,040,914  
Curiosity payable   51,430     65,409  
    2,487,120     2,508,869  

10. LEASES

The Firm’s leases encompass land and buildings used within the cultivation, processing, and warehousing of its merchandise. All leases had been labeled as working leases in accordance with ASC 842.

The next desk presents the Firm’s lively leases and complete lease time period underneath contract:

Entity Title/Lessee

Asset

Helpful life
(years)

Sort

Swell Corporations, LTD

Land/Constructing

5

Working lease

Silver State Cultivation LLC

Land/Constructing

12

Working lease

Silver State Reduction LLC (Sparks)

Land/Constructing

12

Working lease

Silver State Reduction LLC (Fernley)

Land/Constructing

12

Working lease

Megawood Enterprises Inc.

Land/Constructing

5

Working lease

Phantom Distribution, LLC

Land/Constructing

5

Working lease

63353 Bend, LLC

Land/Constructing

5

Working lease

20727-4 Bend, LLC

Land/Constructing

5

Working lease

4964 BFH, LLC

Land/Constructing

5

Working lease

For the three months ended April 30, 2022 and 2021, the Firm incurred working lease prices in persevering with operations of $350,936 and $350,936, respectively. Of those quantities, $203,092 and $203,092, had been allotted to stock, respectively.


10. LEASES (Continued)

The next desk shows the weighted common low cost fee utilized in calculating lease liabilities and weighted common remaining lease time period:

    April 30, 2022     January 31, 2022  
Weighted common low cost fee   10%     10%  
Weighted common remaining lease time period (years)   10.26     10.46  

The maturity of the contractual undiscounted lease liabilities of the Firm’s working leases as of April 30, 2022 is as follows:

12 months ending January,

$

2023

1,248,360

2024

1,285,811

2025

1,324,385

2026

1,364,117

2027

1,405,040

Thereafter

8,790,724

Complete undiscounted lease liabilities

15,418,437

Curiosity on lease liabilities

(6,216,979)

Complete current worth of minimal lease funds

9,201,458

Present portion of lease legal responsibility

343,257

Lease legal responsibility

8,858,201

As at April 30, 2022, liabilities labeled as held on the market contains lease liabilities of $364,659 (January 31, 2022 – $412,093). The Firm has complete undiscounted lease liabilities with associated events of $15,817,771 (Notice 17). Of the entire undiscounted lease liabilities, $399,336 are labeled as held on the market.

11. PROMISSORY NOTES

The Firm early adopted ASU 2020-06 on February 1, 2021 utilizing the total retrospective technique. The adoption eliminates the money conversion and helpful conversion function fashions used to individually account for embedded conversion options as a element of fairness.

Transaction prices associated to the issuance of convertible promissory notes are apportioned to their respective monetary legal responsibility and fairness parts (if relevant) in proportion to the allocation of proceeds as a discount to the carrying quantity of every element.

When valuing the monetary legal responsibility element of the promissory notes, the Firm used particular rates of interest assuming no conversion options existed. The ensuing legal responsibility element is accreted to its face worth over the convertible word’s time period till its maturity date.


11. PROMISSORY NOTES (Continued)

Convertible promissory notes

The next is a continuity of the Firm’s convertible promissory notes denominated in U.S. {dollars}:

    June 13, 2018     Might 24, 2019        
    issuance     issuance     Complete  
    $     $     $  
Steadiness, January 31, 2021   1,072,590     1,130,056     2,202,646  
Fee       (1,210,000 )   (1,210,000 )
Curiosity expense   17,649     40,685     58,334  
Accretion expense   191,203     39,259     230,462  
Steadiness, January 31, 2022 and April 30, 2022   1,281,442         1,281,442  

On June 13, 2018, the Firm issued convertible promissory notes to the distributors that bought Eco Firma Farms, LLC (“EFF”) to the Firm within the mixture principal quantity of $2,000,000. The convertible promissory notes had been convertible at $1.00 per share. The convertible promissory notes accrue curiosity at a fee of 4% each year, compounded yearly, and had been absolutely due and payable on June 13, 2021. The Firm is in an ongoing dispute with the distributors over compensation (Notice 19). On issuance, the Firm decided the conversion function was a by-product legal responsibility because the convertible promissory notes are exercisable in USD whereas the useful forex of the Firm is Canadian {dollars}. The honest worth of the conversion function as at April 30, 2022 was $nil (January 31, 2022 – $nil).

On Might 24, 2019, the Firm issued a two-year unsecured convertible promissory word to a debtor of Swell Corporations within the principal quantity of $1,000,000. The convertible word accrues curiosity at 10% each year compounded yearly and payable at maturity. The word is convertible into widespread shares of the Firm at a conversion value of $1.56 per share and could also be transformed on the maturity date. On issuance, the Firm decided the conversion function was a by-product legal responsibility because the convertible promissory notes are exercisable in USD whereas the useful forex of the Firm is Canadian {dollars}. On Might 24, 2021 the word was absolutely repaid.

Promissory word payable

The next is a continuity of the Firm’s promissory word payable denominated in U.S. {dollars}:

    January 1, 2019  
    issuance  
    $  
Steadiness, January 31, 2021   14,186,667  
Funds   (6,080,000 )
Steadiness, January 31, 2022   8,106,667  
Funds   (1,520,000 )
Steadiness, April 30, 2022   6,586,667  
Present portion   6,080,000  
Non-current portion   506,667  

On January 1, 2019, the Firm issued a promissory word to Mr. Newman, who bought Silver State to the Firm within the principal quantity of $30,000,000. The word is payable within the following principal instalments: $3,000,000 on April 1, 2019, $6,000,000 on every of July 1, 2019, October 1, 2019, January 1, 2020, and April 1, 2020, and $3,000,000 on July 1, 2020. The word accrues curiosity at a fee of 10% each year. The word is secured by the entire excellent membership pursuits, and a safety curiosity in the entire belongings, of Silver State.


11. PROMISSORY NOTES (Continued)

On July 1, 2019, the phrases of the promissory word payable for the acquisition of Silver State had been amended to name for speedy cost of $2,000,000 plus accrued curiosity on July 1, 2019 adopted by funds of $800,000 plus accrued curiosity on the primary of every of August, September, October, November, and December 2019.

Efficient November 21, 2019 and June 25, 2020, Mr. Newman and the Firm agreed to additional amend the phrases of the promissory word as a result of Mr. Newman. The December 1, 2019 principal cost of $800,000 was cancelled and the month-to-month principal funds thereafter had been lowered to $600,000 per 30 days.  Additional, the annual rate of interest on the word was lowered from 10% to 9.5%.  The remaining steadiness on the promissory word is due and payable on January 1, 2021. This modification resulted in a achieve of $nil.

On November 19, 2020, the Firm introduced an settlement with Mr. Newman that the remaining $15,200,000 principal excellent on his promissory word, as a result of mature on January 1, 2021, has been amended with decrease month-to-month funds amortized over a 30-month interval.  Commencing December 1, 2020, the month-to-month funds are $506,667 plus curiosity.  The rate of interest at 9.5% was unchanged.

For the three months ended April 30, 2022, curiosity expense was $178,027 (2021 – $321,202). Curiosity paid in the course of the three months ended April 30, 2022 was $178,027 (yr ended January 31, 2021 – $321,202).

12. DERIVATIVE LIABILITY

The next displays the continuity of by-product liabilities:

    Conversion
function of
convertible
promissory notes
    Earn out shares     Complete  
    $     $     $  
Steadiness, January 31, 2021   485,157     9,273,970     9,759,127  
Honest worth adjustment on by-product liabilities   (485,157 )   (8,091,133 )   (8,576,290 )
Settlement of Phantom earn out       (677,939 )   (677,939 )
Impact of international alternate       501,470     501,470  
Steadiness, January 31, 2022       1,006,368     1,006,368  
Impact of international alternate       (5,743 )   (5,743 )
Steadiness, April 30, 2022       1,000,625     1,000,625  

Upon the February 4, 2019 acquisition of Phantom Farms, the distributors can earn as much as 4,500,000 ‘earn out’ shares over a interval of seven years. The circumstances had been based mostly on the Firm’s widespread shares exceeding sure share costs in the course of the interval. The honest worth of the by-product legal responsibility is derived utilizing a Monte Carlo simulation. On January 24, 2022, the Firm issued 1,300,000 widespread shares for full settlement of the Phantom earn out shares.

Upon the Might 24, 2019 acquisition of Swell Corporations, the distributors can earn as much as 6,000,000 ‘earn out’ shares over a interval of seven years. The circumstances had been based mostly on the Firm’s widespread shares exceeding sure share costs in the course of the interval. Moreover, the 50% of the earn out shares are earned upon a change of management of the Firm. The honest worth of the by-product legal responsibility is derived utilizing a Monte Carlo simulation.


12. DERIVATIVE LIABILITY (Continued)

Important inputs into the Monte Carlo simulation used to find out the honest worth of earn out shares had been as follows:

 

Earn out shares
January 31, 2022

Low cost fee

1.24%

Anticipated life in years

4.33

Anticipated inventory volatility

80%

Anticipated volatility of international alternate

6.52%

The conversion function of the June 13, 2018 and Might 24, 2019 convertible promissory notes expired on June 13, 2021 and Might 24, 2021, respectively. As such, the honest worth of every at April 30, 2022 and January 31, 2022 was $nil.

13. SHARE CAPITAL

Share capital consists of 1 class of absolutely paid widespread shares, with no par worth. The Firm is allowed to subject a vast variety of widespread shares. All shares are equally eligible to obtain dividends and compensation of capital and symbolize one vote on the Firm’s shareholders’ conferences.

The next desk displays the continuity of share capital for the three months ended April 30, 2022 and 2021:

    Variety of
Shares
    Frequent inventory  
          $  
Steadiness, January 31, 2021   117,057,860     103,636,830  
Shares issued – Phantom Farm warrants workout routines (i)   456,100     533,326  
Shares issued – EFF dedication (ii)   19,774     21,787  
Shares issued – Assured warrants (iii)   1,214,080      
Shares issued – Settlement of Earn out shares (iv)   1,300,000     677,939  
Share-based compensation       366,469  
Steadiness, January 31, 2022   120,047,814     105,236,351  
Share-based compensation       102,786  
Steadiness, April 30, 2022   120,047,814     105,339,137  

(i) On February 4, 2021 the Firm issued 456,100 shares upon the train of Phantom Farm warrants.

(ii) On April 5, 2021, the Firm issued 19,774 widespread shares to the distributors of EFF for a partial settlement of the Firm’s dedication to subject shares.

(iii) On June 17, 2021, the Firm issued 1,214,080 widespread shares pursuant to the cashless train of 4,160,000 warrants.

(iv) On January 24, 2022, the Firm issued 1,300,000 widespread shares for the settlement of Phantom earn out shares.

Dedication to subject shares

The Firm issued a promissory word payable to ship 2,142,000 shares to the distributors of EFF within the quantity of $1,905,635, with out curiosity, any time after October 15, 2018. As at April 30, 2022 shares issued pursuant to this dedication complete 793,093 shares.


13. SHARE CAPITAL (Continued)

Warrants

The next summarizes the Firm’s warrant exercise:

    Warrants
excellent
    Weighted
common train
value
    Weighted
common
remaining life
 
    #     C$     Years  
Steadiness January 31, 2021   11,894,746     1.32     1.96  
Exercised   (4,616,100 )   1.05        
Expired   (4,038,646 )   1.73        
Steadiness, January 31, 2022   3,240,000     1.18     2.10  
Exercised              
Steadiness, April 30, 2022   3,240,000     1.18     1.85  

As at April 30, 2022, the next warrants had been excellent and exercisable:

Expiry Date   Train Worth     Variety of
Warrants
 
    C$     #  
December 31, 2023   1.00     632,400  
January 30, 2024   1.00     1,407,600  
Might 24, 2024   1.50     1,200,000  
          3,240,000  

On February 4, 2021, 456,100 warrants with an train value of $1.17 (C$1.50) had been exercised to buy 456,100 widespread shares of the Firm for proceeds of $533,326. Of the warrants exercised, 426,100 had been exercised by a Director of the Firm. On the identical date, 1,243,900 warrants expired unexercised.

On June 17, 2021, 4,160,000 warrants had been exercised on a cashless foundation for 1,214,080 widespread shares of the Firm.

Inventory choices

The Firm is allowed to grant choices to government officers and administrators, staff and consultants, enabling them to accumulate as much as 10% of the issued and excellent widespread shares of the Firm. The train value of every choice equals the market value of the Firm’s shares as calculated on the date of grant. The choices may be granted for a most time period of 10 years. Vesting is decided by the Board of Administrators.

Particulars of the Firm’s inventory choice exercise are as follows:

    Choices
excellent and
exercisable
    Weighted
common train
value
    Weighted
common
remaining life
 
    #     C$     Years  
Steadiness January 31, 2021   6,965,000     1.22     2.05  
Expired   (1,350,000 )   2.80        
Steadiness, January 31, 2022   5,615,000     0.84     1.45  
Granted   600,000     0.70        
Expired   (460,000 )   1.11        
Steadiness April 30, 2022   5,755,000     0.80     1.48  


13. SHARE CAPITAL (Continued)

As at April 30, 2022, the next inventory choices had been excellent and exercisable:

Expiry Date   Train Worth     Excellent     Exercisable  
    C$     #     #  
October 9, 2022   1.38     500,000     500,000  
January 24, 2023   0.80     100,000     100,000  
August 17, 2023   0.70     3,905,000     2,603,333  
January 28, 2024   1.50     150,000     100,000  
October 9, 2024   1.00     500,000     500,000  
February 10, 2025   0.70     600,000     199,998  
          5,755,000     4,003,331  

In the course of the three months ended April 30, 2022, the Firm recorded a share-based compensation expense of $102,786 (2021 – $141,716). The honest worth of inventory choices was calculated utilizing the Black-Scholes Possibility Pricing Mannequin utilizing the next weighted common assumptions:

    2022     2021  
Danger-free fee   1.60%     0.19%  
Anticipated lifetime of choices   3 years     3 years  
Annualized volatility   80%     80%  
Dividend fee   0%     0%  

The Firm has computed the honest worth of choices granted utilizing the Black-Scholes choice pricing mannequin. The anticipated time period used for choices issued to non-employees is the contractual life and the anticipated time period used for choices issued to staff and administrators is the estimated time period that choices granted are anticipated to be excellent. The Firm makes use of the “simplified” technique to develop an estimate of the anticipated time period of “plain vanilla” worker choice grants. The Firm is using an anticipated volatility determine based mostly on a evaluate of the historic volatilities, over a time period, equal to the anticipated lifetime of the instrument being valued, of equally positioned public corporations inside its {industry}. The chance-free rate of interest was decided from the implied yields from U.S. Treasury zero-coupon bonds with a remaining time period per the anticipated time period of the instrument being valued.


14. GENERAL AND ADMINISTRATIVE EXPENSE

Normal and administration bills for the three months ended April 30, 2022 and 2021 had been comprised of the next:

    2022     2021  
    $     $  
Accounting and authorized   93,194     104,102  
Depreciation and amortization   341,286     320,633  
License charges, taxes and insurance coverage   413,484     448,213  
Workplace Amenities and administrative   101,707     66,383  
Working lease value   147,844     147,844  
Different   162,618     59,794  
Skilled Charges and consulting   168,947     154,331  
Salaries and wages   720,244     748,102  
Gross sales, advertising and marketing, and promotion   21,901     15,998  
Share-based compensation   102,786     141,716  
Shareholder Communications   3,971     10,185  
Journey and leisure   14,344     14,899  
    2,292,326     2,232,201  

15. SEGMENTED INFORMATION

The Firm defines its main geographic working segments as Oregon and Nevada. Because of the jurisdictional hashish compliance points ever-present within the {industry}, every state operation is by nature operationally segmented.

Key choice makers primarily evaluate income, value of gross sales expense, and gross margin as the first indicators of phase efficiency. Because the Firm continues to increase through acquisition, the segmented info will increase based mostly on administration’s agreed upon allocation of prices past gross margin.

Segmented operational exercise and balances are as follows:

April 30, 2022   Discontinued
operations
    Nevada     Company     Consolidated  
    $     $     $     $  
Complete income   267,684     7,472,461         7,740,145  
Gross revenue   (167,972 )   3,987,637         3,819,665  
Working bills:                        
Normal and administration   (117,895 )   (1,073,840 )   (604,669 )   (1,796,404 )
Gross sales, advertising and marketing, and promotion   (1,938 )   (21,901 )       (23,839 )
Working lease value       (147,844 )       (147,844 )
Depreciation and amortization   (3,000 )   (318,257 )   (23,029 )   (344,286 )
Share-based compensation           (102,786 )   (102,786 )
Impairment of stock   (55,625 )           (55,625 )
Impairment of intangible asset                
Curiosity, accretion, and different   896     3,304     (163,207 )   (159,007 )
Internet earnings (loss) earlier than taxes   (345,534 )   2,429,099     (893,691 )   1,189,874  

Entity-wide disclosures

All income for the three months ended April 30, 2022 and 2021 was earned in america.

For the three months ended April 30, 2022 and yr ended January 31, 2022, no buyer represented greater than 10% of the Firm’s web income.


15. SEGMENTED INFORMATION (Continued)

The next desk shows the disaggregation of long-lived tangible belongings by geographic space:

    April 30, 2022     January 31,
2022
 
    $     $  
Nevada   12,048,350     11,903,430  
Discontinued operations (Oregon)   1,758,846     1,817,633  
Different   24,393     24,414  
Complete   13,831,589     13,745,477  

16. COMMITMENTS

The Firm and its subsidiaries are dedicated underneath lease agreements with third events and associated events, for land, workplace house, and gear in Nevada and Oregon. At April 30, 2022, the Firm has the next future minimal funds:

    Third Events     Associated Events     Complete  
    $     $     $  
2023   41,598     1,101,234     1,142,832  
2024   48,855     1,504,455     1,553,310  
2025   45,551     1,314,551     1,360,102  
2026   45,551     1,353,987     1,399,538  
2027   45,551     1,394,607     1,440,158  
Thereafter   368,202     9,148,937     9,517,139  
    595,308     15,817,771     16,413,079  

17. RELATED PARTY TRANSACTIONS

Balances as a result of associated events included in accounts payable, accrued liabilities, and promissory word payable at April 30, 2022 and January 31, 2022:

    April 30, 2022     January 31, 2022  
    $     $  
Because of the President and CEO   6,638,097     8,172,075  
Lease liabilities as a result of an organization managed by the CEO   9,201,457     9,279,123  
Lease liabilities as a result of SDP Growth       412,093  
Because of the CFO of the Firm   253     360  
    15,839,807     17,863,651  

Because of the President and CEO consists of promissory word principal and curiosity and reimbursable bills incurred within the regular course of enterprise.


17. RELATED PARTY TRANSACTIONS (Continued)

The Firm had the next transactions with associated events together with key administration personnel in the course of the interval ended April 30, 2022 and 2021:

    2022     2021  
    $     $  
Consulting charges paid to a director   20,000     60,000  
Quantities paid to CEO or corporations managed by CEO   2,060,873     2,262,168  
Share based mostly compensation together with warrants and inventory choices for administrators and officers   14,364     142,581  
Lease funds made to SDP Growth       57,048  
    2,095,237     2,521,797  

Quantities paid to CEO or corporations managed by CEO consists of wage, lease funds, and promissory word principal and curiosity.

On February 12, 2020, the Firm amended the acquisition settlement with SDP Growth, of which a Director of the Firm is a principal proprietor. The Firm had agreed on February 4, 2019 to buy SDP Growth on October 15, 2020, which owned six actual property properties that had been leased in reference to Phantom Farms’ hashish cultivation, processing and wholesale distribution operations. The combination buy value was $8,010,000 payable in money, or, on the election of the distributors, in complete or partly by the difficulty of two,670,000 shares at $3.00 per widespread share.

18. EARNINGS PER SHARE

The next is a reconciliation for the calculation of primary and diluted earnings per share for the durations ended April 30, 2022 and 2021:

    April 30, 2022     April 30, 2021  
Internet earnings from persevering with operations after earnings taxes $ 1,037,145   $ 4,902,151  
Internet (loss) earnings from discontinued operations after earnings taxes   ($730,325 ) $ 146,155  
Internet earnings $ 306,820   $ 5,048,306  
             
Weighted common variety of widespread shares excellent   120,047,814     117,499,016  
Dilutive impact of warrants and inventory choices excellent   2,833,093     5,194,759  
Diluted weighted common variety of widespread shares excellent   122,880,907     122,693,775  
             
Primary earnings per share, persevering with operations $ 0.01   $ 0.04  
Diluted earnings per share, persevering with operations $ 0.01   $ 0.04  
             
Primary (loss) earnings per share, discontinued operations   ($0.01 ) $ 0.00  
Diluted (loss) earnings per share, discontinued operations   ($0.01 ) $ 0.00  
             
Primary earnings per share $ 0.00   $ 0.04  
Diluted earnings per share $ 0.00   $ 0.04  

The computation of diluted earnings per share excludes the impact of the potential train of warrants and inventory choices when the typical market value of the widespread inventory is decrease than the train value of the respective warrant or inventory choice and when inclusion of those quantities can be anti-dilutive. For the three months ended April 30, 2022, the variety of warrants and inventory choices excluded from the computation was 5,203,331 and 5,461,667, respectively.


19. CONTINGENCIES

On occasion, the Firm is concerned in varied litigation issues arising within the extraordinary course of its enterprise. Administration is of the opinion that disposition of any present matter is not going to have a cloth antagonistic affect on the Firm’s monetary place, outcomes of operations, or the power to hold on any of its enterprise actions.

Authorized proceedings

Oregon Motion:  A criticism was filed within the Oregon State Circuit Courtroom for Clackamas County, on April 29, 2019, by two present house owners of Proudest Monkey Holdings, LLC (the previous sole member of EFF) (the “Plaintiffs”), alleging contract, employment, and statutory claims, alleging $612,500 in damages (as amended), in opposition to the Firm, its wholly-owned subsidiaries 320204 US Holdings Corp, EFF, Swell Corporations Restricted, and Phantom Manufacturers LLC, along with three administrators, two officers, and one former worker (the “Oregon Motion”). The Firm and the opposite defendants wholly denied the allegations and claims made within the lawsuit and is defending the lawsuit. On June 21, 2019, the Firm filed Oregon Rule of Civil Process (“ORCP”) 21 motions to dismiss the entire Plaintiffs’ claims in opposition to it, its wholly-owned subsidiaries, and different defendants; on Might 6, 2020, the court docket granted the Firm’s ORCP 21 movement in its entirety to dismiss all of Plaintiffs’ claims. The judgment of dismissal was entered by the Clackamas County court docket on or about October 14, 2020.  On November 12, 2020, Plaintiffs filed a discover of enchantment of the judgement of dismissal.

On October 22, 2020, the Firm submitted a petition to get better the prices and legal professional charges incurred by the Firm because the prevailing celebration within the Oregon Motion. On January 20, 2021, the Courtroom dominated within the Firm’s favor, awarding the Firm and its subsidiaries $68,195 in legal professional’s charges, $1,252 in prices, and a statutory prevailing celebration payment of $640, by means of a supplemental judgment.  On March 3, 2021, Plaintiffs filed an amended discover of enchantment from the supplemental judgement awarding legal professional charges. 

The events have since briefed the enchantment to the Oregon Courtroom of Appeals and await a willpower from the Courtroom.  It’s too early to foretell the decision of the enchantment.

British Columbia Motion:  On or about September 13, 2019, the Firm delivered a discover to the above-mentioned Plaintiffs of alleged breach and default underneath the EFF buy and sale settlement, as a result of alleged illegal, intentional acts and materials misrepresentations by the Plaintiffs earlier than and after the completion of the acquisition.  Because of such breach, the Firm denied the Plaintiffs’ tender of their share cost notes in reference to the settlement.  On or about October 14, 2019, Proudest Monkey Holdings, LLC and one in every of its present house owners, sued the Firm within the Supreme Courtroom of British Columbia to compel the issuance and supply of the topic shares, together with pursuits and prices (the “British Columbia Motion”).

On November 8, 2019, the Firm responded and counterclaimed for common, particular and punitive damages, together with curiosity and prices, associated to breach of contract, repudiation of contract, breach of indemnity and fraudulent and negligent misrepresentation by the Plaintiffs.  Plaintiffs filed a response to the Firm’s counterclaims on or about June 5, 2020, and the events stipulated to a type of amended pleading which included the joinder of further events, an proprietor of Proudest Monkey Holdings, LLC and EFF, and extra contract and equitable claims and damages, partially duplicative to these alleged by the Plaintiffs within the Oregon lawsuit (breach of contract, indemnity, unjust enrichment and wrongful termination claims).  Plaintiffs allege $2,774,176 in damages (as amended), plus unquantified further damages, curiosity and prices, of which quantities are partially duplicative of the Oregon Motion.  This motion stays within the discovery stage, however no trial date has been set.  It’s too early to foretell the decision of the claims and counterclaims.


19. CONTINGENCIES (Continued)

Settled and Dismissed Motion:  On or about Might 30, 2019, Wallace Hill Companions Ltd. (“Wallace Hill”) filed a civil declare within the Supreme Courtroom of British Columbia alleging breach of contract and entitlement to 1,800,000 widespread shares of the Firm, absolutely vested by March 1, 2019, and damages as a result of misplaced alternative to promote these shares after such date for a revenue.  On June 23, 2019, the Firm circulated a letter to Wallace Hill terminating the settlement and accepting Wallace Hill’s repudiation of the settlement based mostly on Wallace Hill’s beforehand printed defamatory feedback and termination of the settlement.  Additionally, on June 23, 2019, the Firm filed its response to the civil declare denying all claims and filed counterclaims alleging breach of contract, a declaratory judgment of termination of the settlement, defamation and an injunction from additional defamatory feedback.

On March 23, 2022, the Firm and Wallace Hill entered right into a mutual launch settlement, pursuant to which, amongst different issues, all events agreed to dismiss their respective claims and to launch each other from any additional causes of motion in reference to the subject material of the unique claims.  On April 23, 2022, the events filed a Discover of Discontinuance within the Supreme Courtroom of British Columbia formally dismissing the civil motion.

20. INCOME TAXES

The next desk summarizes the Firm’s earnings tax expense and efficient tax fee for the three months ended April 30, 2022 and 2021:

    April 30, 2022     April 30, 2021  
Internet earnings from persevering with operations earlier than earnings taxes $ 1,535,408   $ 5,812,771  
Revenue tax expense $ 498,263   $ 910,620  
Efficient tax fee   32%     16%  

The Firm is topic to earnings taxes in america and Canada.  Important judgement is required in evaluating the Firm’s unsure tax positions and figuring out the availability for earnings taxes.  The Firm’s gross unrecognized tax advantages totaled roughly $1,354,322 and $42,974 as of April 30 2022, and January 31, 2022, respectively, which is recorded in deferred tax asset within the condensed consolidated steadiness sheet.

21. FINANCIAL INSTRUMENTS

The next tables current details about the Firm’s monetary devices and their classifications as of April 30, 2022 and January 31, 2022 and point out the honest worth hierarchy of the valuation inputs utilized to find out such honest worth:

Honest worth measurements at
April 30, 2022 utilizing:
  Stage 1     Stage 2     Stage 3     Complete  
    $     $     $     $  
Monetary liabilities:                        
Earn out shares (Notice 12)           1,000,625     1,000,625  
                         
Honest worth measurements at January 31, 2022 utilizing:   Stage 1     Stage 2     Stage 3     Complete  
    $     $     $     $  
Monetary liabilities:                        
Earn out shares (Notice 12)           1,006,368     1,006,368  

The honest worth of the by-product legal responsibility related to the earn out shares was derived utilizing a Monte Carlo simulation utilizing non-observable inputs, and subsequently symbolize a degree 3 measurement.



C21 INVESTMENTS INC.

Administration’s Dialogue and Evaluation

For the three months ended April 30, 2022
(Expressed in U.S. {Dollars})


GENERAL

This Administration’s Dialogue and Evaluation (“MD&A“) is ready as of August 15, 2022, and covers the operations of the Firm for the three months ended April 30, 2022.  This MD&A ought to be learn together with the Firm’s unaudited interim condensed consolidated monetary statements and accompanying notes for the three months ended April 30, 2022.  All inter-company balances and transactions have been eradicated upon consolidation.  The Firm’s monetary statements are ready in accordance accounting ideas typically accepted in america of America (“GAAP“). Monetary info introduced on this MD&A is introduced in United States {dollars} (“$” or “US$“), except in any other case indicated.

The Firm’s unaudited interim condensed consolidated monetary statements for the three months ended April 30, 2022 had been licensed for issuance on August 15, 2022 by the Board.

Extra info associated to the Firm is on the market for viewing on SEDAR at www.sedar.com or the Firm web site at www.cxxi.ca.

DESCRIPTION OF BUSINESS

The Firm is a vertically built-in hashish firm that cultivates, processes, distributes and sells high quality hashish and hemp-derived shopper merchandise in america. The Firm is targeted on worth creation by means of the disciplined acquisition and integration of core retail, manufacturing, and distribution belongings in strategic markets; leveraging industry-leading retail revenues along with high-growth potential and multi-market branded shopper packaged items (“CPG“).

The Firm focuses on scalable alternatives in key markets that benefit from its core competencies, together with: (i) retail operational excellence and increasing its retail footprint by means of value-add acquisitions in current markets, and (ii) branded CPG enlargement by means of each captive retail and wholesale channels. The Firm focuses on buying companies that present speedy contribution to general profitability, or have a path to profitability inside twelve months, the place it might leverage current belongings, manufacturers, and area experience.

The Firm presently holds licenses in Nevada spanning all the hashish provide chain and in Oregon.  With the winding down and sale of our Oregon operations, the Firm presents the Oregon operations now as ‘held on the market’ on the Steadiness Sheet and as ‘discontinued operations’ within the Revenue Assertion.

The Firm is operated by a administration staff that has vital skilled expertise, together with deep expertise each throughout the hashish {industry} and different fast-paced progress industries like know-how and enterprise capital.  Administration additionally contains specialists from extra conventional industries like forestry, manufacturing, actual property, and capital markets

Strategic Focus and Progress

Our flagship operation in Reno, Nevada underneath the Silver State Reduction model continues its sturdy monetary efficiency producing wholesome money circulate and happy clients.  Constructing round this sturdy core now we have completed a lot prior to now 12 months.

 Executed on our capital enlargement program in Nevada which included new develop rooms and upgraded lighting within the current rooms, constructing out an extra 15,000 sq ft of house (cover added of 4,800 sq ft).  The brand new rooms along with yield positive aspects from the lighting has doubled the manufacturing of high-quality flower to eight,200 lbs/yr.  Complete constructed out house is now 37,000 sq ft. This undertaking, together with the lighting retrofit accomplished in April 2022, value $3.0 million.

 A further 30,000 sq ft of cultivation to be constructed out on enlargement of Nevada retail footprint would produce an extra 6,000 lbs/yr of high-quality flower. 

 Paid down the $30 million secured promissory word (the “Newman Notice“) owing to the Firm’s President and Chief Govt Officer to a steadiness of $6.6 million as at April 30, 2022 ($8.1 million as at January 31, 2022).  The steadiness of the Newman Notice is $4.6 million as of August 2, 2022.


The Firm’s strategic Initiatives over the following 12 months embody extending our Nevada retail footprint the place now we have a confirmed observe report of success, persevering with our disciplined strategy to progress and financing, and internally producing product to increase our Nevada retail footprint, which incorporates the enlargement of our Nevada cultivation operations. 

The Firm has modified from Worldwide Monetary Reporting Requirements to GAAP beginning with the January 31, 2022 audited monetary statements, which has been utilized retrospectively again to February 1, 2020.  Subsequently, all of the figures and comparative figures within the monetary statements and on this MD&A had been ready in GAAP.

With the issuance of the January 31, 2022 audited monetary statements, the Oregon operations are introduced as discontinued operations.  This therapy has been utilized retrospectively again to February 1, 2020.  As such, the income and bills of the Firm now embody solely the Nevada operations. 

NEVADA

The Firm acquired Silver State Reduction and Silver State Cultivation on January 1, 2019.  The Nevada enterprise operates in Sparks and Fernley, Nevada, and is the flagship operation of C21. 

CULTIVATION, PROCESSING AND WHOLESALE

Via Silver State Cultivation in Nevada, the Firm operates its not too long ago expanded indoor cultivation and processing out of a 104,000 sq. foot facility now with 37,000 sq. ft of cultivation and 1,200 sq. ft devoted to risky extraction.  Silver State has expanded manufacturing as much as 11,700 kilos of biomass with flower of 8,200 kilos and trim 3,400 kilos yearly.  Greater than half of this expanded manufacturing shall be bought throughout the Firm’s Silver State Reduction dispensaries.

The Firm’s extraction processing helps branded CPG in each captive retail and wholesale channels.  Silver State manufactures Hood Oil cartridges, Phantom Farms pre-rolls, and flower strains, along with the Silver State branded merchandise which embody Flower, pre-rolls, and concentrates.  These in-house manufacturers make up over 60% of gross sales within the dispensaries.  Wholesale gross sales amounted to $0.5 million in gross sales in the course of the quarter ended April 30, 2022 ($0.6 million in prior yr Q1). 

RETAIL

The Firm operates two dispensaries, an 8,000-square foot retail dispensary, positioned in Sparks, and a 6,000-square foot dispensary positioned in Fernley, Nevada collectively servicing a complete of greater than 125,000 leisure and medical hashish clients per quarter, with over 700 SKUs in every retailer and averaging just below $60.00 per transaction.  Because the novel coronavirus (“COVID-19“) restrictions have eased prior to now 12 months, the Nevada {industry} has seen gross sales gradual since a peak in March/April 2021.  Silver State had complete retail gross sales of $32.4 million in the course of the yr ended January 31, 2022 as in comparison with $32.9 million within the prior yr.

Constant high quality, market-leading pricing, and superior customer support have translated into gross sales per sq. foot of ($2,552/sq. ft. in Q1). Likewise, due to its substantial buying leverage, Silver State Reduction persistently gives clients among the many lowest costs throughout the state.

Regardless of COVID-19 closures and phased re-openings in 2020, the Firm’s Nevada companies are working usually. Nonetheless, the Firm continues to carefully monitor the continuing COVID-19 pandemic and its persevering with affect on the worldwide economic system and the retail sector, specifically.


RESULTS OF OPERATIONS

Abstract derived from the Firm’s audited consolidated monetary statements:

PROFIT AND LOSS   3 months ended April 30  
    2022     2021  
Income $ 7,472,461   $ 8,797,350  
Stock expensed to value of gross sales   3,484,824     3,512,604  
Gross revenue   3,987,637     5,284,746  
    53.4%     60.1%  
             
Bills            
Normal and administration   1,678,509     1,606,010  
Gross sales, advertising and marketing, and promotion   21,901     15,999  
Working lease value   147,844     147,844  
Depreciation and amortization   341,286     320,633  
Share based mostly compensation   102,786     141,716  
Complete bills   2,292,326     2,232,202  
             
Revenue from operations   1,695,311     3,052,544  
Different gadgets            
Curiosity expense   (164,049 )   (327,106 )
Accretion expense       (154,911 )
Different Revenue (loss)   4,146     119,933  
Change in honest worth of by-product liabilities       3,122,310  
             
Revenue (loss) earlier than undernoted   1,535,408     5,812,770  
Internet earnings (loss) from discontinued operations   (730,325 )   173,305  
Provision for earnings taxes   (498,263 )   (937,770 )
Internet earnings (loss) $ 306,820     5,048,305  
             
Cumulative translation adjustment   2,820     (718,323 )
Revenue (loss) and complete earnings (loss)for the interval   309,640     4,329,982  

The Firm has adopted GAAP as of Jan 31, 2022 with impact retroactively to February 1, 2020.  All the present and comparative figures are in GAAP.

Income” contains retail revenues from our two shops and wholesale income from our cultivation operations.  First Quarter 2023 (“Q1”) revenues declined versus prior yr Q1-2022 by 15% to $7.5 million.  That is per {industry} developments because the easing of pandemic restrictions.  This pattern can be per the State of Nevada {industry} figures.   

“Price of Gross sales” contains the prices immediately attributable to cultivating and processing hashish plus the price of product purchases from third events, on the market in our shops.  With the enlargement of our cultivation facility our prices to provide have elevated, however the manufacturing value per pound has began to return down as a result of economies of scale.  We use a median costing mannequin which captures and averages prices over a number of quarters. 

Gross revenue” fell in Q1 versus prior yr Q1 from 60% to 53%, primarily as a result of weaker demand and a decline in retail promoting costs.     

“Revenue from operations” for Q1 decreased to $1.7 million, down 44% versus prior yr Q1 of $3.1 million.   


Bills

Normal and administration” contains all overhead prices that haven’t in any other case been allotted to value of gross sales.  These embody salaries and wages, skilled charges together with authorized and accounting, insurance coverage, and a few native taxes.  Q1 prices elevated by $72,499 as in comparison with prior yr Q1. 

“Working lease value” is the price of our leases not included in value of gross sales and was $147,844, unchanged from prior yr Q1.

Depreciation and amortization” embody provisions for fastened belongings and intangibles not included in value of gross sales.  The entire depreciation and amortization in Q1 was $341,286 versus $320,633 in prior yr Q1.   

Share based mostly compensation” is a non-cash merchandise and displays the issuance of inventory choices to staff, officers and administrators. 

Different Objects

Curiosity expense” in Q1 was $164,049 versus $327,095 in prior yr Q1.  This lower displays the discount in curiosity bearing debt in the course of the interval. 

“Change in honest worth of by-product liabilities” is a periodic revaluation of the earn out shares excellent to distributors of companies bought by the Firm.  These earn out shares are revalued utilizing a Monte Carlo simulation.  The honest worth of this legal responsibility will enhance with a rise within the inventory value of the Firm and vice-versa.  The change in honest worth should be recorded by means of the Firm’s revenue or loss assertion.  In consequence, a share value enhance period-over-period, will lead to a discount in web earnings and vice-versa. 

“Internet earnings (loss) from discontinued operations” the Firm has labeled all revenues and bills pertaining to its Oregon operations to ‘discontinued operations’.  This therapy has been utilized to all the present and comparative figures above. 

“Provision for earnings taxes” for Q1 of $0.50 million is down $0.44 million in comparison with the earlier yr Q1 as a result of much less taxable earnings. 

“Different complete earnings (loss), particularly the cumulative translation adjustment, comes about in GAAP when translating the balances between the mother or father firm (investments made in C$) and the US subsidiaries (US$). These international alternate positive aspects or losses at every reporting date end result from the interpretation of C$ quantities to US$ (which is our reporting forex).   


Adjusted EBITDA

The adjusted EBITDA figures under are introduced in GAAP and with the Oregon operations categorized as “discontinued”.  Each these adjustments took impact with the preparation of the January 31, 2022 audited monetary statements and had been utilized retroactively again to February 1, 2020. 

ADJUSTED EBITDA – Quarters ending                              
                               
    30-Apr-22     31-Jan-22     31-Oct-21     31-Jul-21     30-Apr-21  
                               
Internet earnings (loss)   306,820     (1,031,705 )   2,837,732     4,061,818     5,048,306  
                               
Curiosity & accretion   164,049     206,116     242,645     376,752     482,017  
Provision for taxes   498,263     948,152     1,105,542     981,782     937,770  
Depreciation and amort   341,286     319,445     319,561     320,807     320,633  
Depr and int in COS   203,092     203,093     203,092     203,091     203,092  
EBITDA   1,513,510     645,101     4,708,572     5,944,250     6,991,818  
                               
Change in FV of by-product       (315,943 )   (2,392,019 )   (2,746,018 )   (3,122,310 )
Share based mostly compensation   102,786     44,902     67,396     112,455     141,716  
Loss from discontinued operations   730,325     1,914,577     325,237     176,135     (173,305 )
One-time particular proj prices           229,069          
Different achieve/loss   (4,146 )   29,268     (23,132 )   5,327     (119,933 )
Adjusted EBITDA   2,342,475     2,317,905     2,915,123     3,492,149     3,717,986  

Non-GAAP Monetary Measures

Adjusted EBITDA” is supplemental, non-GAAP monetary measures. The Firm defines EBITDA as earnings earlier than depreciation and amortization, depreciation and curiosity in value of gross sales, earnings taxes, and curiosity. Moreover, the Firm’s Adjusted EBITDA introduced above excludes accretion, loss from discontinued operations, one-time transaction prices and all different non-cash gadgets. The Firm has introduced “Adjusted EBITDA” as a result of its administration believes it’s a helpful measure for buyers when assessing and contemplating the Firm’s persevering with operations and prospects for the longer term.  Moreover, “Adjusted EBITDA” is a generally used measurement within the monetary neighborhood when evaluating the market worth of comparable corporations.  “Adjusted EBITDA” is just not a measure of efficiency calculated in accordance with GAAP, and these metrics shouldn’t be thought of in isolation of, or as an alternative to, the measurement of the Firm’s efficiency ready in accordance with GAAP. “Adjusted EBITDA,” as calculated and reconciled within the desk above, might not be similar to equally titled measurements utilized by different issuers and isn’t essentially a measure of the Firm’s capacity to fund its money wants.  Figures have been restated to match present presentation.


SELECTED QUARTERLY INFORMATION

The next desk summarizes chosen consolidated monetary info of the Firm for the previous eight quarters.

SUMMARY OF QUARTERLY RESULTS  
    30-Apr-22     31-Jan-22     31-Oct-21     31-Jul-21  
Complete belongings $ 61,580,422   $ 61,853,474   $ 64,315,094     65,317,561  
Working capital (deficiency) $ (5,679,998 ) $ (4,444,076 ) $ (5,133,865 )   (4,632,617 )
Shareholders’ fairness (deficiency) $ 35,395,618   $ 34,983,192   $ 35,204,614     32,321,225  
Income $ 7,472,461   $ 7,654,566   $ 7,938,188   $ 8,592,872  
Internet earnings (loss) $ 309,640   $ (944,266 ) $ 2,815,995   $ 3,947,598  
Internet earnings (loss) per share   0.00     (0.01 )   0.02     0.03  
    30-Apr-21     31-Jan-21     31-Oct-20     31-Jul-20  
Complete belongings $ 66,261,274     66,819,464     59,614,191     59,517,840  
Working capital (deficiency) $ (4,014,559 )   (3,914,024 )   (26,298,511 )   (30,181,880 )
Shareholders’ fairness (deficiency) $ 28,043,749     23,256,148     16,384,432     13,776,062  
Income $ 8,797,350     8,811,046     8,994,301     8,547,532  
Internet earnings (loss) $ 4,329,983     (7,436,731 )   1,511,568     (141,696 )
Internet earnings (loss) per share   0.04     (0.08 )   0.02     (0.00 )

Quarter ended April 30, 2022

Complete belongings decreased barely in the course of the Quarter. Small enhance in fastened belongings from the tip of the capital undertaking within the cultivation develop rooms in Nevada, enhance in stock ensuing from the enlargement start-up, offset by a lower in money and reduce in Proper-of-use and intangible belongings as a result of accretion. 

Working capital deficiency fell to $5.7 million throughout Q1, constructive operations money circulate was offset by debt and curiosity funds and enhance in earnings taxes payable. 

Shareholders fairness improved from $35.0 million to $35.4 million throughout Q1. 

Income fell sequentially from prior yr This autumn-2022 to present Q1 -2023 by 2%, per {industry} developments; the {industry} web site BDSA has reported a 7% drop in Nevada hashish gross sales over the identical interval, and different Western USA states have seen related drops. BDSA additionally studies a 31% decline in Nevada retail gross sales from quarter ending April 2021 to quarter ending April 2022, whereas C21 revenues have fallen by 15% in the identical interval.  This displays extra distributed buyer discretionary spending whereas COVID-19 restrictions and stimulus eased, in addition to elevated native competitors.  At present, supply and curbside pick-up account for about 21% of transactions and 25% of income.

Internet Revenue elevated sequentially in Q1-2023 to $0.3 million from ($0.9) million in This autumn-2022.  Income in Q1-2023 fell versus Q1-2021 from $4.3m to $0.3 million.  The outsized impact of the achieve or loss on honest worth change of the by-product legal responsibility dominates this determine.  In Q1-2023 we recorded no change within the honest worth of the by-product liabilities. 


CONTRACTUAL OBLIGATIONS

The next desk contains the Firm’s obligations to make future funds for every of the following 5 years that symbolize contracts and different commitments which are identified and dedicated:

CONTRACTUAL OBLIGATIONS  
    Carrying
quantity
    Contractual
money flows
    Beneath 1 yr     1-3 years     3-5 years     Greater than 5
years
 
As at April 30, 2022                                    
Commerce and different payables $ 2,487,120   $ 2,487,120   $ 2,487,120   $   $   $  
Finance lease funds (1)   9,201,458     15,418,437     1,248,360     2,610,196     2,769,157     8,790,724  
Convertible debt (2)   1,281,442     1,281,442     1,281,442              
Notes and different borrowings (3)   7,171,236     7,171,236     6,125,551     597,769     91,102     356,814  
Complete $ 20,141,256   $ 26,358,235   $ 11,142,473   $ 3,207,965   $ 2,860,259   $ 9,147,538  

(1) Quantities within the desk replicate minimal funds due for the Firm’s leased amenities and sure leased gear underneath varied lease agreements and buy agreements.

(2) Quantities within the desk replicate the contractually required principal funds payable underneath a convertible promissory word settlement.

(3) Quantities within the desk replicate the contractually required principal funds payable underneath a promissory word issued to the seller that bought Silver State to the Firm, and miscellaneous debt.

On March 11, 2020, the World Well being Group (“WHO“) declared the novel coronavirus contagious illness outbreak and associated antagonistic public well being developments (“COVID-19“) a world pandemic and really helpful containment and mitigation measures worldwide. Whereas the continued severity of the pandemic and its affect on the financial atmosphere is unsure, the Firm continues to observe its standing carefully. The Firm’s precedence in the course of the COVID-19 pandemic is the safety and security of its staff and clients and it continues to observe the really helpful tips of relevant authorities and well being authorities. Regardless of being deemed as a vital retailer in its core markets, the Firm skilled a detrimental affect on FY 2022 gross sales in sure markets.

COVID-19 might proceed to materially affect the Firm, together with its capacity, and the power of its suppliers and distributors, to successfully handle the restrictions, limitations and well being points introduced by the COVID-19 pandemic, the power to proceed its manufacturing, distribution and wholesale sale of its merchandise and the demand for and use of its merchandise by customers, disruptions to the worldwide and native economies as a result of associated stay-at-home orders, quarantine insurance policies and restrictions on journey, commerce and enterprise operations and a discount in discretionary shopper spending.  The Firm continues to carefully monitor the continuing impacts of COVID-19, specifically relating to the worldwide provide chain and the retail sector.

The Firm takes all affordable steps to make sure employees are appropriately knowledgeable and skilled to advertise a tradition of well being, security, and steady enchancment, particularly throughout these tough occasions for public well being and security as a result of COVID-19 pandemic.  Wherever doable, the Firm will proceed to undertake typically accepted well being and security finest practices from non-cannabis-related industries and follows all well being and security tips issued by america Facilities for Illness Management and all orders from related provincial, state and native jurisdictions and authorities.

ADDITIONAL INFORMATION

LEGAL PROCEEDINGS

For a abstract of the present authorized proceedings, please confer with the Firm’s MD&A for the years ended January 31, 2022 and 2021 for detailed disclosure on this regard. 

OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this report, the Firm has not entered into any off-balance sheet preparations.


DISCLOSURE OF OUTSTANDING SHARE DATA

The Firm’s licensed share capital consists of a vast variety of widespread shares with out par worth. 

As of April 30, 2022, there have been:

 120,047,814 Frequent Shares issued and excellent;

 5,755,000 choices excellent to buy Frequent Shares, of which 4,033,333 choices had vested; 

 3,240,000 warrants excellent to buy Frequent Shares; and

 no restricted share models (“RSUs“) excellent to buy Frequent Shares.

As of August 15, 2022 (the date of this MD&A) the Firm had the next securities excellent:

Sort of Safety Quantity excellent
Frequent Shares 120,047,814
Inventory Choices 5,755,000
Warrants 3,240,000
Acquisition shares 793,093
  129,835,907

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

The Firm’s monetary statements and the opposite monetary info included on this MDA are the duty of the Firm’s administration and have been examined and authorized by the Board. The accompanying audited monetary statements are ready by administration in accordance with Worldwide Monetary Reporting Requirements (“IFRS“) issued by the Worldwide Accounting Requirements Board, and embody sure quantities based mostly on administration’s finest estimates utilizing cautious judgment. The number of accounting ideas and strategies is administration’s duty.

Administration acknowledges its duty for conducting the Firm’s affairs in a fashion that complies with the necessities of relevant legal guidelines and established monetary requirements and ideas and maintains correct requirements of conduct in its actions. The Board supervises the monetary statements and different monetary info by means of its audit committee, which is comprised of a majority of non-management administrators.

The audit committee’s position is to look at the monetary statements and suggest that the Board approve them, to look at the interior management and data safety methods, and all different issues regarding the Firm’s accounting and funds. To take action, the audit committee meets yearly with the exterior auditors, with or with out the Firm’s administration, to evaluate their respective audit plans and focus on the outcomes of their examination. This committee is answerable for recommending the appointment of the exterior auditors or the renewal of their engagement.

ACCOUNTING POLICIES AND ESTIMATES

FINANCIAL RISK MANAGEMENT

The Board approves and displays the chance administration processes of the Firm, inclusive of documented funding insurance policies, counterparty limits, and controlling and reporting buildings. The kind of danger publicity and the way in which through which such publicity is managed is supplied as follows:

CREDIT RISK

Credit score danger is the chance that one celebration to a monetary instrument will fail to discharge an obligation and trigger the opposite celebration to incur a monetary loss. The Firm’s major publicity to credit score danger is on its money held in financial institution accounts, accounts receivable, and its notes receivable from acquisition targets. The Firm’s money is deposited in financial institution accounts held with a financial institution in Canada, a belief firm in Canada, and three credit score unions in Nevada, Washington and Colorado; and accordingly, there’s a focus of credit score danger. This danger is managed through the use of a financial institution that could be a excessive credit score high quality monetary establishment as decided by ranking companies. The Firm’s notes receivables are positioned with acquisition targets which are underneath definitive agreements, through which closing relies totally on receipt of regulatory approval. If an unlikely occasion occurred which delayed regulatory approval for an prolonged time period or completely, the chance of default on these notes can be elevated based mostly on the liquidity of the acquisition targets.


LIQUIDITY RISK

Liquidity danger is the chance that the Firm will be unable to fulfill its obligations as they grow to be due. The Firm’s capacity to proceed as a going concern depends on administration’s capacity to boost required funding by means of future fairness or debt issuances. The Firm manages its liquidity danger by forecasting money flows from operations and anticipating any investing and financing actions. Administration and the Board are actively concerned within the evaluate, planning and approval of great expenditures and commitments.

The Firm’s consolidated monetary statements for 3 months ended April 30, 2022, have been ready on a going concern foundation, which assumes that the Firm will have the ability to proceed its operations and understand its belongings and discharge its liabilities within the regular course of enterprise for the foreseeable future.

The Firm studies an collected deficit of $68,203,513, and a working capital deficit of $5,679,998 as at April 30, 2022.   

The Firm has generated vital constructive money circulate for the three months ended April 30, 2022, and the fiscal yr ended January 31, 2022.  The Assertion of Money Flows for the three months ended April 30, 2022, exhibits money supplied by persevering with operations of $1.5 million ($8.4 million – yr ended January 31, 2022).  Administration has taken a number of actions to make sure that the Firm will proceed as a going concern by means of April 30, 2023, together with the closing of its operations in Oregon, promoting the belongings in Oregon, decreasing headcount, and decreasing discretionary expenditures. The Firm is searching for further financing within the type of debt which may consolidate current debt on its steadiness sheet on extra favorable phrases. Administration believes that these actions will allow the Firm to proceed as a going concern by means of August 15, 2023, one yr from the date these consolidated monetary statements had been issued.

There stays uncertainty concerning the U.S. federal authorities’s place on hashish with respect to cannabis-legal states. A change in its enforcement insurance policies may affect the power of the Firm to proceed as a going concern and have a cloth antagonistic affect on the enterprise.

INTEREST RATE RISK

Rate of interest danger is the chance that the honest worth or future money flows of a monetary instrument will fluctuate due to adjustments in market rates of interest. The Firm is just not topic to any rate of interest volatility as its long-term debt devices and convertible notes are carried at a hard and fast rate of interest all through their time period.

CAPITAL MANAGEMENT

The Firm’s aims when managing its capital are to make sure there are sufficient capital sources to proceed working as a going concern and keep the Firm’s capacity to make sure enough ranges of funding to help its ongoing operations and growth. The aim of those aims is to supply continued returns and advantages to the Firm’s shareholders. The Firm’s capital construction contains gadgets labeled in debt and shareholders’ fairness.

The Board doesn’t set up quantitative return on capital standards for administration, however reasonably depends on the experience of the Firm’s administration to maintain future growth of the enterprise contemplating adjustments in financial circumstances and the chance traits of the Firm’s underlying asset.

The Firm works with its capital advisors, Needham & Firm based mostly in California and CB1 Capital based mostly in New York, to determine the most effective strategic choices to execute our company progress plans, in addition to rising monetary flexibility in managing our debt.


U.S. INDUSTRY BACKGROUND AND REGULATORY ENVIRONMENT

INDUSTRY BACKGROUND AND TRENDS

The emergence of the authorized hashish sector in america, each for medical and grownup use, has been fast as extra states undertake rules for its manufacturing and sale. In the present day 60% of People reside in a state the place hashish is authorized in some type and virtually 1 / 4 of the inhabitants lives in states the place it’s absolutely legalized for grownup use.

The usage of hashish and hashish derivatives to deal with or alleviate the signs of all kinds of persistent circumstances has been typically accepted by a majority of residents with a rising acceptance by the medical neighborhood as nicely. A evaluate of the analysis, printed in 2015 within the Journal of the American Medical Affiliation, discovered proof that hashish can deal with ache and muscle spasms. The ache element is especially necessary, as a result of different research have steered that hashish can exchange sufferers’ use of extremely addictive, probably lethal opiates – that means hashish legalization actually improves lives.

Polls all through america persistently present overwhelming help for the legalization of medical hashish, along with sturdy majority help for the total legalization of leisure adult-use hashish. It’s estimated that 94% of U.S. voters help legalizing hashish for medical use. As well as, 66% of the U.S. public helps legalizing hashish for grownup leisure use. These are massive will increase in public help over the previous 40 years in favor of legalized hashish use.

However that 36 states and the District of Columbia have now legalized adult-use and/or medical hashish, hashish stays unlawful underneath U.S. federal legislation with hashish listed as a Schedule I drug underneath the U.S. Federal Managed Substances Act of 1970 (“CSA“).

At present the Firm solely operates within the states of Oregon and Nevada. The Firm might increase internally inside Nevada or into different states inside america which have legalized hashish use both medicinally or recreationally and increase internationally.

FEDERAL REGULATORY UPDATE

For an entire abstract of the Federal regulatory atmosphere, please confer with the Firm’s MDA for the years ended January 31, 2022, and 2021, for detailed disclosure on this regard. 

NEVADA REGULATORY UPDATE

For a abstract of the Nevada regulatory atmosphere, please confer with the Firm’s MDA for the years ended January 31, 2022, and 2021, for detailed disclosure on this regard. 

OREGON REGULATORY UPDATE

For a abstract of the Oregon regulatory atmosphere, please confer with the Firm’s MDA for the years ended January 31, 2022, and 2021 for detailed disclosure on this regard. 

RISK FACTORS

For a complete record of the chance components regarding the enterprise and securities of the Firm, please confer with the Firm’s MDA for the years ended January 31, 2022 and 2021 for detailed disclosure on this regard.  The Firm will face a couple of challenges and vital dangers within the growth of its enterprise as a result of nature of and current stage of its enterprise. These dangers and uncertainties aren’t the one ones going through the Firm. Extra dangers and uncertainties not presently identified to the Firm or presently deemed immaterial by the Firm, may additionally impair the operations of or materially adversely have an effect on the securities of the Firm. If any such dangers happen, the Firm’s shareholders may lose all or a part of their funding and the enterprise, monetary situation, liquidity, outcomes of operations and prospects of the Firm might be materially adversely affected. A number of the danger components beforehand disclosed are interrelated and, consequently, readers ought to learn such danger components in reference to each other.

The acquisition of any of the securities of the Firm is speculative, involving a excessive diploma of danger and ought to be undertaken solely by individuals whose monetary sources are sufficient to allow them to imagine such dangers and who haven’t any want for speedy liquidity of their funding. An funding within the securities of the Firm mustn’t represent a significant portion of an individual’s funding portfolio and may solely be made by individuals who can afford a complete lack of their funding.


FORWARD LOOKING STATEMENTS

This Administration’s Dialogue and Evaluation contains “forward-looking info” and “forward-looking statements” throughout the that means of Canadian securities legal guidelines and United States securities legal guidelines. All info, apart from statements of historic information, included on this MDA that addresses actions, occasions or developments that the Firm expects or anticipates will or might happen sooner or later is forward-looking info. Ahead-looking info contains, amongst different issues, info relating to: statements regarding the enterprise and future actions of, and developments associated to, the Firm, together with things like the continuing affect of the COVID-19 pandemic with reductions of working (together with advertising and marketing) and capital bills and revenues, future enterprise technique, aggressive strengths, objectives, enlargement and progress of the Firm’s enterprise, operations and plans, together with the Firm’s positioning in america hashish {industry}, together with the continued efficiency of the Firm’s operations typically, and particularly its Nevada retail operations, together with the continued profitability of the Firm’s Nevada operations, together with the Firm’s capacity to proceed to service its debt by means of working money flows, together with the Firm’s capacity to pursue progress alternatives and generate future progress for the Firm by scaling and replicating its worthwhile mannequin in Nevada, together with the Firm’s capacity of to safe non-dilutive debt financing, together with the continued efficiency of the Firm’s manufacturers and the expectations as to the event and distribution of the Firm’s manufacturers and merchandise, together with the continued demand for hashish merchandise, together with the timing of the completion of any acquisitions or tendencies and expectations of whether or not such proposed transactions shall be consummated on the present phrases or in any other case and contemplated timing, expectations and results of such proposed transactions, estimates of future cultivation, manufacturing and extraction capability, expectations as to the event and distribution of the Firm’s manufacturers and merchandise, the enlargement into further U.S. and worldwide markets, any potential future legalization of adult-use and/or medical hashish underneath U.S. federal legislation, expectations of market measurement and progress in america and the states through which the Firm operates or contemplates future operations and the impact such progress may have on the Firm’s monetary efficiency, expectations for different financial, enterprise, regulatory and/or aggressive components associated to the Firm or the hashish {industry} typically, and different occasions or circumstances that will happen sooner or later. 

Readers are cautioned that forward-looking info and statements are based mostly on affordable assumptions, estimates, evaluation and opinions of administration of the Firm on the time they had been supplied or made in gentle of their expertise and their notion of developments, present circumstances and anticipated developments, in addition to different components that administration believes to be related and affordable within the circumstances, and contain identified and unknown dangers, uncertainties and different components which can trigger the precise outcomes, efficiency or achievements of the Firm, to be materially completely different from any future outcomes, efficiency or achievements expressed or implied by such forward-looking info and statements.

Ahead-looking info and statements aren’t a assure of future efficiency and are based mostly upon plenty of estimates and assumptions of administration on the date the statements are made together with amongst different issues assumptions about: the contemplated acquisitions and tendencies being accomplished on the present phrases and present contemplated timeline; growth prices remaining per budgets; capacity to handle anticipated and unanticipated prices; favorable fairness and debt capital markets; the power to boost enough capital to advance the enterprise of the Firm; favorable working and financial circumstances; political and regulatory stability; acquiring and sustaining all required licenses and permits; receipt of governmental approvals and permits; sustained labor stability; favorable manufacturing ranges and prices from the Firm’s operations; the pricing of varied hashish merchandise; the extent of demand for hashish merchandise; the supply of third celebration service suppliers and different inputs for the Firm’s operations; the Firm’s capacity to conduct operations in a protected, environment friendly and efficient method; the power of the Firm to restructure and repair its secured debt; the supply of the Firm to safe a non-dilutive debt financing on phrases acceptable to the Firm;  and the power of the Firm’s operations to proceed to carry out and proceed within the extraordinary course in gentle of the continuing COVID-19 pandemic. Whereas the Firm considers these assumptions to be affordable, the assumptions are inherently topic to vital enterprise, social, financial, political, regulatory, aggressive and different dangers, uncertainties, contingencies and different components that might trigger precise efficiency, achievements, actions, occasions, outcomes or circumstances to be materially completely different from these projected within the forward-looking info and statements. Many assumptions are based mostly on components and occasions that aren’t throughout the management of the Firm and there’s no assurance they’ll show to be right.

Dangers, uncertainties and different components which can trigger the precise outcomes, efficiency or achievements of the Firm to be materially completely different from any future outcomes, efficiency or achievements expressed or implied by such forward-looking info and statements embody, amongst others, dangers regarding U.S. regulatory panorama and enforcement associated to hashish, together with governmental and environmental regulation, public opinion and notion of the hashish {industry}, dangers associated to the power to consummate any proposed acquisitions or tendencies on the proposed phrases and the power to acquire requisite regulatory approvals and third celebration consents and the satisfaction of different circumstances, dangers associated to reliance on third celebration service suppliers, the restricted working historical past of the Firm, dangers inherent in an agricultural enterprise, dangers associated to proprietary mental property, dangers regarding financing actions, dangers regarding the administration of progress, rising competitors within the hashish {industry}, dangers related to hashish merchandise manufactured for human consumption together with potential product remembers, reliance on key inputs, suppliers and expert labor (the supply and retention of which is topic to uncertainty), cybersecurity dangers, capacity and constraints on advertising and marketing merchandise, fraudulent exercise by staff, contractors and consultants, danger of litigation and conflicts of curiosity, and the issue of enforcement of judgments and effecting service outdoors of Canada, restricted analysis and information regarding hashish, dangers and uncertainties associated to the affect of the COVID-19 pandemic and the affect it might proceed to have on the worldwide economic system and the retail sector, notably the hashish retail sector within the states through which the Firm operates, in addition to these danger components mentioned elsewhere herein, together with underneath “Danger Components”.


Though the Firm has tried to determine necessary components that might trigger precise outcomes to vary materially, there could also be different components that trigger outcomes to not be as anticipated, estimated or supposed. There may be no assurance that such forward-looking info and statements will show to be correct as precise outcomes and future occasions may differ materially from these anticipated in such info and statements. Accordingly, readers mustn’t place undue reliance on forward-looking info and statements.

Whereas the Firm might elect to replace such forward-looking info and statements at a future time, it assumes no obligation for doing so besides to the extent required by relevant legislation.



That is an unofficial consolidation of Type 52-109FV2 Certification of Interim Filings Enterprise Issuer Primary Certificates reflecting amendments made efficient January 1, 2011 in reference to Canada’s changeover to IFRS. The amendments apply for monetary durations regarding monetary years starting on or after January 1, 2011. This doc is for reference functions solely and isn’t an official assertion of the legislation.

Type 52-109FV2

Certification of Interim Filings

Enterprise Issuer Primary Certificates

I, Sonny Newman, Chief Govt Officer of C21 Investments Inc., certify the next:

1. Evaluation: I’ve reviewed the interim monetary report and interim MD&A (collectively, the “interim filings”) of C21 Investments Inc. (the “issuer”) for the interim interval ended April 30, 2022.

2. No misrepresentations: Based mostly on my data, having exercised affordable diligence, the interim filings don’t comprise any unfaithful assertion of a cloth reality or omit to state a cloth reality required to be said or that’s essential to make a press release not deceptive in gentle of the circumstances underneath which it was made, with respect to the interval coated by the interim filings.

3. Honest presentation: Based mostly on my data, having exercised affordable diligence, the interim monetary report along with the opposite monetary info included within the interim filings pretty current in all materials respects the monetary situation, monetary efficiency and money flows of the issuer, as of the date of and for the durations introduced within the interim filings.

Date: August 15, 2022

SIGNED: “Sonny Newman    
Sonny Newman, Chief Govt Officer    

NOTE TO READER

In distinction to the certificates required for non-venture issuers underneath Nationwide Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Enterprise Issuer Primary Certificates doesn’t embody representations regarding the institution and upkeep of disclosure controls and procedures (DC&P) and inside management over monetary reporting (ICFR), as outlined in NI 52-109. Particularly, the certifying officers submitting this certificates don’t make any representations regarding the institution and upkeep of

i) controls and different procedures designed to supply affordable assurance that info required to be disclosed by the issuer in its annual filings, interim filings or different studies filed or submitted underneath securities laws is recorded, processed, summarized and reported throughout the time durations laid out in securities laws; and

ii) a course of to supply affordable assurance relating to the reliability of monetary reporting and the preparation of monetary statements for exterior functions in accordance with the issuer’s GAAP.

The issuer’s certifying officers are answerable for making certain that processes are in place to supply them with enough data to help the representations they’re making on this certificates.  Traders ought to be conscious that inherent limitations on the power of certifying officers of a enterprise issuer to design and implement on a value efficient foundation DC&P and ICFR as outlined in NI 52-109 might lead to further dangers to the standard, reliability, transparency and timeliness of interim and annual filings and different studies supplied underneath securities laws.



That is an unofficial consolidation of Type 52-109FV2 Certification of Interim Filings Enterprise Issuer Primary Certificates reflecting amendments made efficient January 1, 2011 in reference to Canada’s changeover to IFRS. The amendments apply for monetary durations regarding monetary years starting on or after January 1, 2011. This doc is for reference functions solely and isn’t an official assertion of the legislation.

Type 52-109FV2

Certification of Interim Filings

Enterprise Issuer Primary Certificates

I, Michael Kidd, Chief Monetary Officer of C21 Investments Inc., certify the next:

1. Evaluation: I’ve reviewed the interim monetary report and interim MD&A (collectively, the “interim filings”) of C21 Investments Inc. (the “issuer”) for the interim interval ended April 30, 2022.

2. No misrepresentations: Based mostly on my data, having exercised affordable diligence, the interim filings don’t comprise any unfaithful assertion of a cloth reality or omit to state a cloth reality required to be said or that’s essential to make a press release not deceptive in gentle of the circumstances underneath which it was made, with respect to the interval coated by the interim filings.

3. Honest presentation: Based mostly on my data, having exercised affordable diligence, the interim monetary report along with the opposite monetary info included within the interim filings pretty current in all materials respects the monetary situation, monetary efficiency and money flows of the issuer, as of the date of and for the durations introduced within the interim filings.

Date:  August 15, 2022

SIGNED: “Michael Kidd    
Michael Kidd, Chief Monetary Officer    

NOTE TO READER

In distinction to the certificates required for non-venture issuers underneath Nationwide Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Enterprise Issuer Primary Certificates doesn’t embody representations regarding the institution and upkeep of disclosure controls and procedures (DC&P) and inside management over monetary reporting (ICFR), as outlined in NI 52-109. Particularly, the certifying officers submitting this certificates don’t make any representations regarding the institution and upkeep of

i) controls and different procedures designed to supply affordable assurance that info required to be disclosed by the issuer in its annual filings, interim filings or different studies filed or submitted underneath securities laws is recorded, processed, summarized and reported throughout the time durations laid out in securities laws; and

ii) a course of to supply affordable assurance relating to the reliability of monetary reporting and the preparation of monetary statements for exterior functions in accordance with the issuer’s GAAP.

The issuer’s certifying officers are answerable for making certain that processes are in place to supply them with enough data to help the representations they’re making on this certificates.  Traders ought to be conscious that inherent limitations on the power of certifying officers of a enterprise issuer to design and implement on a value efficient foundation DC&P and ICFR as outlined in NI 52-109 might lead to further dangers to the standard, reliability, transparency and timeliness of interim and annual filings and different studies supplied underneath securities laws.


Related posts

The 7 Greatest Investments for the Second Half of 2022

admin

World’s First Halal DeFi Ecosystem MRHB DeFi Receives Strategic Funding from NewTribe Capital

admin

Future Returns: Investing in Client Particular Goal Acquisition Firms

admin