VANCOUVER, Nov. 21, 2019 /CNW/ - PRESS RELEASE - C21 Investments Inc. has announced that it has reached an agreement to restructure payments for the $21.8 million balance remaining on the secured promissory note issued on Jan. 15, 2019 to Sonny Newman in connection with the company's purchase of Silver State Relief LLC and Silver State Cultivation LLC. The company has also agreed to revised terms for the acquisition of Phantom Venture Group LLC and Phantom Brands LLC. These changes are designed to maintain positive cash flow for C21 Investments and position it for future growth. All figures are in US dollars unless stated otherwise.
Restructuring highlights include:
1. December principal payment to Newman cancelled; monthly debt service obligations reduced by 70% to $600,000 per month starting Jan. 1, 2020.
2. Consolidation of the Oregon business operations including the sale lease-back with the vendors of the Phantom Farms' properties on favorable terms.
3. Reduction of future share issuance obligations by approximately 6 million shares.
4. Aggregate annual run-rate cost reductions now tracking in excess of $6 million.
Demonstrating his flexibility and commitment to shareholders, President and CEO Newman has agreed to cancel the Dec. 1, 2019 principal payment of $800,000, lower the monthly payments due thereafter by $1,400,000 to $600,000 per month, and reduce the annual interest rate on the note to 9.5% from 10%. These terms will be effective through July 1, 2020 at which time the balance of the note will be due and payable.
"This restructuring will allow the company to move forward with its strategic plans and as the company's largest shareholder, I continue to fully support the company," said Newman. "In my letter to shareholders dated July 16, 2019, I identified right-sizing and integration of our operations in Oregon as a top priority. Today's announcement marks a significant milestone in achieving this goal."
C21 Investments has revised the terms of its acquisition of Phantom Farms. Under the revised agreement, the real estate assets of Phantom Farms will transfer back to the vendors. C21 Investments will have a third-party appraise the value of the properties and will issue to the vendors in shares priced at CAD$1.05 for any difference between the properties' current value and the original agreement of $8.01 million due in October 2020. This represents a reduction in share issuance obligations for the company of approximately 6 million shares. This transaction is scheduled to close in January 2020. In addition, under the new terms, the vendors will decrease the lease rates for C21 Investments on the Properties to 7% of the assessed value, and the company will retain an option to purchase the properties. The Phantom Farms' vendors will retain their earn-out shares per the original agreement.
Having successfully negotiated new debt service and acquisition terms, C21 Investments has formally engaged Eight Capital as its exclusive financial advisor to identify and assess strategic opportunities for the company. Eight Capital is a Canadian, full-service investment dealer with a leading practice in the cannabis sector.
"The cannabis space continues to evolve rapidly and we want to ensure that all avenues for increasing shareholder value are considered by management and the Board," said Newman.