C21 Investments Modifies Terms of Silver State Debt Payments

C21 Investments (CSE: CXXI) announced this morning that it has restructed certain debts owed related to the acquisition of Silver State Relief in Nevada. The firm has also amended the terms of the acquisition of Phantom Farms in terms of what assets will be acquired by C21.

With respect to Silver State Relief, the terms of debt payments owed to the current chief executive officer, Sonny Newman, have been modified significantly. C21 will no longer be liable for a December debt payment of US$800,000 which was previously due December 1, 2019. Furthermore, the monthly debt payments which were due to increase to $2.0 million in cash per month as of January have now been reduced to $600,000 per month.

The total amount outstanding, which currently sits at $21.8 million, will remain due on July 1, 2020. However, the interest rate for the debt will be reduced from 10% to 9.5%. The total remaining debt will be due in a lump sum payment, expected to occur on July 1.

While this is positive for C21 in the near term with respect to cash flow, it still presents itself as a hurdle to investors. The debt itself is secured against all assets – meaning that if C21 fails to provide the capital to close out the debt on July 1, CEO Sonny Newman finds himself within a peculiar position. While acting as the chief executive of the public issuer, he would theoretically have the ability to secure the assets of the issuer due to the debts owed by C21 to himself. The ideal scenario would rather see the debt paid out in the form of common shares of the issuer, despite Newman’s already large shareholdings.

In addition to the amended terms related to Silver State Relief, C21 has renegotiated the terms of Phantom Farms. Under the amended terms, the real estate assets of the Oregon operation will return to the original vendors in a leaseback arrangement. By returning the real estate assets, C21 will reduce its share issuance obligations by approximately 6 million shares. Any difference in valuation that occurred between the time of initial acquisition of the real estate assets and now will be offset with share issuances rather than cash. The amended agreement is expected to close in January 2020.

C21 has additionally engaged Eight Capital as a financial advisor to identify and assess strategic opportunities for the issuer.

C21 Investments last traded at $0.76 on the CSE.

Information for this briefing was found via Sedar and C21 Investments. The author has no securities or affiliations related to the discussed organizations. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.