C21 investments (CSE: CXXI) this morning reported its second quarter financial results for the period ended July 31, 2020. The company reported revenues of US$9.4 million during the quarter, along with a net loss of US$38,183, which largely appears to be due to the tax regime in place south of the border for cannabis operations.
Revenues generated during the quarter were up approximately 15% from the first quarter of the year, when the company reported US$8.1 million in revenues. The second quarter saw costs of sales hit $4.6 million, resulting in a gross margin of $4.8 million before biological adjustments.
Expenses during the quarter totaled out at $2.3 million, essentially flat compared to the previous quarter. These expenses were comprised largely of general and administrative expenses of $1.6 million, followed by depreciation and amortization of $0.6 million. However, interest expenses of $0.6 million during the quarter, along with a current income tax expenses of $1.0 million resulted in the company posting a small net loss for the quarter.
Looking towards the balance sheet, C21’s cash position increased to $2.7 million from that of $1.3 million in the prior quarter, a function of generating positive cash flows from operations during the quarter of $4.2 million, before certain funds were spent on paying down debts. Inventory remained relatively unchanged, falling to $5.7 million from $5.9 million. Biological assets remained unchanged at $1.4 million. Total current assets improved slightly overall, rising from $9.7 million to $10.6 million over the quarter.
The slight improvement in current assets was offset over the course of the quarter by a slight increase in total liabilities, which grew from $36.6 million to $38.0 million. Current liabilities are largely comprised of the promissory note that remains payable to the firms CEO, with a stated figure of $17.6 million remaining on the balance sheet, down from $19.4 million in the prior quarter. A convertible promissory note is the second largest liability here, which has now grown to $6.9 million. Accounts payable increased marginally as well, climbing to $3.7 million from $2.9 million.
Of note for shareholders, is that the large convertible note due to CEO Sonny Newman still remains outstanding, with the maturity currently sitting at January 1, 2021. Also of note is the revelation that wildfires that occured subsequent to the quarter in Oregon have damaged the firms current crop of cannabis at Phantom Farms. The company indicates that a fire break protected the property itself, however smoke damage will limit the ability to sell the product as dried flower. Some value is expected to be captured through extraction of the harvest however.
C21 Investments last traded at $0.81 on the CSE.
Information for this analysis 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.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.