CWLXF 6-K, filed Aug 13, 2020, 0001062993-20-003910

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

FORM 6-K

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

For the month of April 2020.

Commission File Number 000-55982

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

Suite 1900-855 West Georgia St Vancouver BC, V6C 3H4 Canada (Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F [X] Form 40-F [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	C21 INVESTMENTS INC.
Date: August 13, 2020	/s/ Michael Kidd
	Michael Kidd
	Chief Financial Officer

-2-

INDEX TO EXHIBITS

Exhibit	Description
99.1	Interim Condensed Consolidated Financial Statements for the period ended April 30, 2020
99.2	Management's Discussion and Analysis for the period ended April 30, 2020
99.3	Form 52-109FV2 Certification of Interim Filings Venture Issuer Basic Certificate - CEO
99.4	Form 52-109FV2 Certification of Interim Filings Venture Issuer Basic Certificate - CFO

C21 Investments Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

C21 INVESTMENTS INC.

Interim Condensed Consolidated Financial Statements<br><br> <br>For the three months ended April 30, 2020 and 2019<br><br> <br>(Expressed in U.S. Dollars) - Unaudited

C21 INVESTMENTS INC. INDEX TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTICE OF NO AUDITOR REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION	1
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS	2
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY	3
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	4
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5-28

Notice of Disclosure of Non-auditor Review of the Interim Condensed Consolidated Financial Statements for the three months ended April 30, 2020 and 2019.

Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a) issued by the Canadian Securities administrators, if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim condensed consolidated financial statements of C21 Investments Inc. (the "Company" or "C21") for the interim period ended April 30, 2020, have been prepared in accordance with the International Accounting Standard 34 - Interim Financial Reporting as issued by the International Accounting Standards Board and are the responsibility of the Company's management.

The Company's independent auditors, Davidson & Company LLP, have not performed a review of these interim condensed consolidated financial statements.

August 13, 2020

C21 INVESTMENTS INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at April 30, 2020 and January 31, 2020 (Expressed in U.S. dollars) - Unaudited

****	****	April 30, 2020	January 31, 2020
****	Note	- -	- -
ASSETS
Current assets
Cash		1,314,632	3,076,493
Biological assets	10	1,394,337	1,408,271
Inventory	11	5,925,658	6,191,843
Prepaid expenses and deposits		637,570	543,482
Receivables	9	456,933	443,122
Total current assets		9,729,130	11,663,211
Property and equipment	12	5,060,601	3,834,131
Right-of-use assets	15	4,261,499	4,660,688
Intangible assets	13	12,284,276	12,704,626
Goodwill	13	28,541,323	28,541,323
Restricted cash	8	43,861	46,106
TOTAL ASSETS	****	59,920,690	61,450,085
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	14 & 26	2,936,298	3,488,274
Promissory note payable - current portion	17	19,400,000	21,200,000
Convertible promissory note - current portion	17	1,093,699	1,244,041
Convertible debentures - current portion	17	6,787,097	6,867,255
Income taxes payable		4,325,466	3,714,666
Consideration payable - current portion	18	846,256	846,256
Short-term debt	16	148,414	126,119
Lease liabilities - current portion	15	1,080,065	1,131,149
Total current liabilities		36,617,295	38,617,760
Lease liabilities	15	3,585,203	3,870,211
Long-term debt	16	488,506	494,217
Convertible promissory note	17	1,167,966	1,136,065
Derivative liability	20	3,434,350	3,699,152
Reclamation obligation	19	50,539	53,126
TOTAL LIABILITES		45,343,859	47,870,531
SHAREHOLDERS' EQUITY
Share capital	21	78,649,586	76,028,268
Commitment to issue shares	21	1,100,881	1,100,881
Reserves	21	8,043,926	8,008,176
Accumulated other comprehensive loss		(917,915	(1,047,387
Deficit		(72,299,647	(70,510,384
TOTAL SHAREHOLDERS' EQUITY		14,576,831	13,579,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	****	59,920,690	61,450,085

All values are in US Dollars.

Nature of operations and going concern (Note 1)

Taxation (Note 25)

Commitments (Note 26)

Subsequent events (Note 29)

On behalf of the Board:
"Michael Kidd"	Director	"Bruce Macdonald"	Director
See accompanying notes to the interim condensed consolidated finance statements	p. 1
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C21 INVESTMENTS INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS For the three months ended April 30, 2020 and 2019 (Expressed in U.S. dollars) - Unaudited

****	****	2020	2019
	Note	--	--
Revenue		8,145,824	7,757,022
Cost of sales	11	5,237,254	4,439,871
Gross margin before the undernoted		2,908,570	3,317,151
Realized fair value adjustment on biological assets	10	(1,350,773	(1,712,835
Unrealized fair value adjustment on biological assets	10	1,679,719	1,259,899
Gross Profit		3,237,516	2,864,215
Expenses
General and administration	22 & 26	1,766,529	2,497,099
Sales, marketing, and promotion		74,863	368,338
Depreciation and amortization	12 & 13	488,952	1,046,551
Share based compensation	21	35,750	184,580
Total expenses		2,366,094	4,096,568
Income (loss) before undernoted items		871,422	(1,232,353
Interest expense	15 & 17	777,220	751,617
Accretion expense	17	94,719	424,055
Transaction costs		-	116,357
Other Income		(17,839	(20,738
Restructuring cost	12	1,481,560	-
Interest and other income		(163	(118,268
(Gain) loss on change in fair value of derivative liabilities	20	(264,802	358,452
Loss before income taxes		(1,199,273	(2,743,828
Current income tax expense		(589,990	(383,165
NET LOSS		(1,789,263	(3,126,993
Other comprehensive income (loss)
Cumulative translation adjustment		129,472	(61,671
LOSS AND COMPREHENSIVE LOSS		(1,659,791	(3,188,664
Basic and diluted loss per share		(0.02	(0.05
Weighted average number of common shares outstanding - basic and diluted		95,643,225	59,480,095

All values are in US Dollars.

See accompanying notes to the interim condensed consolidated finance statements	p. 2

C21 INVESTMENTS INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY) For the three months ended April 30, 2020 and 2019 (Expressed in U.S. dollars) - Unaudited

	Share capital				Reserves									****			****
	Number of shares		Amount		Share based compensation		Equity component of convertible instruments		Commitment to issue shares		Accumulated other comprehensive income (loss)			Deficit			Total
Balance at January 31, 2020	89,388,639		76,028,268		8,008,176		-		1,100,881		(1,047,387	)		(70,510,384	)		13,579,554
Shares issued on purchase of Phantom Farms	7,132,041		2,582,903		-		-		-		-			-			2,582,903
Shares issued on convertible promissory note	95,849		38,415		-		-		-		-			-			38,415
Share based compensation	-		-		35,750		-		-		-			-			35,750
Net loss and comprehensive loss for the period	-		-		-		-		-		129,472			(1,789,263	)		(1,659,791	)
Balance at April 30, 2020	96,616,529	$	78,649,58	$	8,043,926	$	-	$	1,100,881	$	(917,915	)	$	(72,299,647	)	$	14,576,831
	Share capital				Reserves										****			****
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Number of shares		Amount		Share based compensation			Equity component of convertible instruments		Commitment to issue shares		Accumulated other comprehensive loss			Deficit			Total
Balance at January 31, 2019	58,505,255	$	52,923,983	$	5,435,551		$	-	$	1,044,881	$	(363,051	)	$	(37,954,751	)	$	21,086,613
Shares issued on purchase of Phantom Farms	2,670,000		2,501,827		-			-		-		-			-			2,501,827
Warrants issued on purchase of Phantom Farms	-		-		793,745			-		-		-			-			793,745
Share based compensation - option issuance	-		-		(286,304	)		-		-		-			-			(286,304	)
Shares issued on exercise of warrants	913,045		1,044,359		317,313			-		-		-			-			727,046
Shares issued on exercise of EFF convertible note	977,479		719,175		-			-		-		-			-			719,175
Shares issued on exercise of options	80,000		77,980		(38,952	)		-		-		-			-			39,028
Shares issued on exercise of convertible debentures	512,500		267,202		-			-		-		-			-			267,202
Share based compensation - option cancellation	-		-		(568,565	)		-		-		-			568,565			-
Net loss and comprehensive loss for the period	-		-		-			-		-		(61,671	)		(3,126,993	)		(3,188,664	)
Balance at April 30, 2019	63,658,279	$	57,534,526	$	5,018,162		$	-	$	1,044,881	$	(424,722	)	$	(40,513,179	)	$	22,659,668
See accompanying notes to the interim condensed consolidated finance statements	p. 3
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C21 INVESTMENTS INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended April 30, 2020 and 2019 (Expressed in U.S. dollars) - Unaudited

****	****	2020	2019
****	Note	--	--
OPERATING ACTIVITIES	****
Net loss before income taxes		(1,199,273	(2,743,828
Depreciation and amortization	12,13,15	959,031	1,157,040
Net effect of fair value changes in biological assets	10	(328,946	(452,936
Share based compensation	21	35,750	184,580
Restructuring cost	12	1,481,560	-
Interest expense	15 & 17	778,403	739,726
Accretion expense	17	94,719	367,995
(Gain) loss on change in fair value of derivative liabilities	20	(264,802	358,452
Changes in working capital items
Biological assets		342,880	-
Inventory	11	(10,635	770,411
Receivables	9	(13,811	(417,002
Accounts payable and accrued liabilities	14	(422,504	(827,830
Prepaid expenses and deposits		(94,088	111,775
Cash provided by (used in) operating activities	****	1,358,284	(751,617
INVESTING ACTIVITIES	****
Purchases of property and equipment	12	(35,962	(532,868
Payment of Megawood consideration payable	17	(130,000	-
Loans to acquisition targets		-	(1,205,000
Net cash outflow on acquisition of subsidiaries	3,4	-	(1,960,037
Cash used in investing activities	****	(165,962	(3,697,905
FINANCING ACTIVITIES	****
Issuance of convertible debentures on exercise of warrants		-	335,262
Payments of long term debt	16	(36,847	-
Payments on promissory notes payable	17	(1,800,000	(2,710,000
Cash proceeds from warrants		-	727,046
Cash proceeds from options		-	44,576
Interest paid in cash		(452,252	-
Lease payments made		(447,327	-
Cash used in financing activities	****	(2,736,426	(1,603,116
Effect of foreign exchange on cash		(217,757	(62,047
Decrease in cash during the period		(1,761,861	(6,114,685
Cash, beginning of period		3,076,493	9,067,095
Cash, end of period	****	1,314,632	2,952,410

All values are in US Dollars.

Supplementary disclosure with respect to cash flows (Note 24)

See accompanying notes to the interim condensed consolidated finance statements	p. 4
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
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NATURE OF OPERATIONS AND GOING CONCERN

C21 Investments Inc. (the "Company" or "C21") was incorporated January 15, 1987, under the Company Act of British Columbia. The Company is a publicly traded company with its registered office is 1900-885 West Georgia Street, Vancouver, BC, V6C 3H4.

Pursuant to a change of business announced on January 29, 2018 to the Cannabis industry, the Company commenced acquiring and operating revenue-producing cannabis operations in the USA and internationally.

On June 15, 2018, the Company's common shares were delisted from the TSX Venture Exchange ("TSX-V") at the Company's request and on June 18, 2018 the Company commenced trading on the Canadian Securities Exchange ("CSE"), completed its change of business to the cannabis industry and commenced trading under the symbol CXXI. The Company registered its Common Shares in the United States and on May 6, 2019, its shares were cleared by FINRA for trading on the OTC Markets platform under the U.S. trading symbol CXXIF. On August 23, 2019 the Company announced it had been upgraded to the OTCQB® Venture Market

As at April 30, 2020, the Company operates in two segments, recreational cannabis in Oregon, USA and recreational and medical cannabis in Nevada, USA (Note 23).

These interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue its operations and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company reports a net loss for the three months ended April 30, 2020 of $1,789,263, and accumulated deficit of $72,299,647, and a working capital deficit of $26,888,165 as at April 30, 2020. In July 2019, the Company accelerated a restructuring and integration of operations that resulted in significant cash savings. While these efforts have resulted in positive cash flow from operations, they will not be sufficient to fund payments on the short-term debt obligations owing to the Company's CEO (Notes 17, 28 and 29). The Company's working capital deficit position is due primarily to these short-term debt service payments which will require additional funding to satisfy by January 1, 2021 under the Company's current payment schedule. The ability of the Company to continue as a going concern is dependent on either raising additional financing or further restructuring of its current payment schedule with the Company's CEO, Sonny Newman, who is also the Company's majority secured debt holder and largest shareholder. These material uncertainties cast significant doubt upon the Company's ability to continue as a going concern.

Historically, management has been successful in obtaining adequate funding for operating and capital requirements. The Company takes a disciplined approach to financing and intends to protect shareholder value by raising capital strategically. The Company is assessing various opportunities for additional financing through either debt or equity to be used to satisfy current obligations, for corporate working capital and possible future acquisitions. There is no assurance that the Company will be able to secure financing on acceptable terms or at all to cover its current obligations.

In the United States, 34 states, the District of Columbia, and four U.S. territories allow the use of medical cannabis. Alaska, California, Colorado, Illinois Maine, Massachusetts, Michigan, Nevada, Oregon, Washington, Vermont, and the District of Columbia legalized the sale and adult-use of recreational cannabis. At the federal level, however, cannabis currently remains a Schedule I controlled substance under the Federal Controlled Substances Act of 1970 ("Federal CSA"). Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision. As such, even in those states in which marijuana is legalized under state law, the manufacture, importation, possession, use or distribution of cannabis remains illegal under U.S. federal law. This has created a dichotomy between state and federal law, whereby many states have elected to regulate and remove state-level penalties regarding a substance which is still illegal at the federal level.

There remains uncertainty about the US federal government's position on cannabis with respect to cannabis-legal states. A change in its enforcement policies could impact the ability of the Company to continue as a going concern.

p. 5
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
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NATURE OF OPERATIONS AND GOING CONCERN (continued)

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments may adversely affect workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or results of operations at this time.

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION

The unaudited interim condensed consolidated financial statements were authorized for issuance on August 12, 2020 by the directors of the Company.

Basis of consolidation

These unaudited interim condensed consolidated financial statements as at and for the three months ended April 30, 2020 and 2019 ("interim financial statements"), incorporate the accounts of the Company and its wholly-owned subsidiaries as defined in IFRS 10 - Consolidated Financial Statements ("IFRS 10"). All consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements (i.e., from the date of their acquisition). All intercompany balances and transactions are eliminated upon consolidation.

The following are the Company's wholly owned subsidiaries that are included in these interim financial statements as at and for the period ended April 30, 2020:

Name of Subsidiary	Country of Incorporation	Percentage Ownership	Functional Currency	Principal Activity
320204 US Holdings Corp.	USA	100%	USD	Holding Company
320204 Oregon Holdings Corp.	USA	100%	USD	Holding Company
320204 Nevada Holdings Corp.	USA	100%	USD	Holding Company
320204 Re Holdings, LLC	USA	100%	USD	Holding Company
Eco Firma Farms LLC	USA	100%	USD	Cannabis producer
Silver State Cultivation LLC	USA	100%	USD	Cannabis producer
Silver State Relief LLC	USA	100%	USD	Cannabis retailer
Swell Companies LTD	USA	100%	USD	Cannabis processor, distributor
Megawood Enterprises Inc.	USA	100%	USD	Cannabis retailer
Phantom Venture Group, LLC	USA	100%	USD	Holding Company
Phantom Brands, LLC	USA	100%	USD	Holding Company
Phantom Distribution, LLC	USA	100%	USD	Cannabis distributor
63353 Bend, LLC	USA	100%	USD	Cannabis producer
20727-4 Bend, LLC	USA	100%	USD	Cannabis processor
4964 BFH, LLC	USA	100%	USD	Cannabis producer
Workforce Concepts 21, Inc.	USA	100%	USD	Payroll and benefits services

Basis of preparation

These interim financial statements have been prepared on an accrual basis and are based on historical costs, except for certain financial instruments and biological assets classified as fair value through profit or loss. The financial statements are presented in U.S. dollars unless otherwise noted. Amounts in comparative years may have been reclassified to conform with the current year's presentation.

p. 6
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
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SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued)

Statement of compliance

These interim financial statements are prepared in accordance with IAS 34 - Interim Financial Reporting and in accordance with the accounting policies adopted in the Company's most recent audited annual consolidated financial statements for the year ended January 31, 2020 ("annual financial statements"). These interim financial statements do not contain all of the information required for full annual financial statements and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that this financial report should be read in conjunction with the annual financial statements which have been prepared in accordance with International Financial Reporting Standards ("IFRS").

Functional and presentation currency

We have chosen to present these interim financial statements in U.S. dollars. The functional currency of the Company's subsidiaries is U.S. dollars. The parent company's functional currency is the Canadian dollar. All amounts presented are in U.S. dollars unless otherwise noted.

Foreign currency translation

Foreign currency transactions are translated into U.S. dollars at exchange rates in effect on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate at the reporting date. All differences are recorded in the consolidated statement of loss and comprehensive loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

Assets and liabilities of foreign operations are translated into U.S. dollars at year-end exchange rates and any revenue and expenses are translated at the average exchange rate for the year. The resulting exchange differences are recognized in other comprehensive income (loss).

Significant accounting policies

The accounting policies applied in the preparation of these interim financial statements are consistent with those applied and disclosed in Note 2 to the annual financial statements.

Significant accounting judgments, estimates and assumptions

The preparation of the Company's financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from those estimates and judgments.

Areas requiring a significant degree of estimation and judgment relate to the determination of business combinations, impairment of long-lived assets, biological assets and inventory, fair value measurements, useful lives, depreciation and amortization of property, equipment and intangible assets, the recoverability and measurement of deferred tax assets and liabilities, and share based compensation.

p. 7
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
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ACQUISITION OF PHANTOM FARMS

On February 4, 2019, the Company acquired all membership units of Phantom Farms, which encompasses the following limited liability companies: Phantom Venture Group, LLC, Phantom Distribution, LLC, 63353 Bend, LLC, 20727‐4 Bend, LLC, 4964 BFH, LLC, and Phantom Brands, LLC. Phantom Farms has outdoor cannabis cultivation facilities in southern Oregon and a wholesale distribution warehouse, an extraction laboratory and an indoor grow facility in central Oregon. The Company acquired Phantom Farms for total consideration of $10,539,260 comprised of cash deposits on closing of $3,200,000, a promissory note for $290,000, common shares issued in the amount of $2,507,138, share purchase warrants issued in the amount of $793,745, and an earnout valued at $3,748,377.

This acquisition is being accounted for using the acquisition method, in accordance with IFRS 3 - Business Combinations, with the assets and liabilities acquired recorded at their fair values at the acquisition date. The Company is required to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values of the net assets acquired is recorded as goodwill.

The purchase price and allocation of the purchase price is as follows:


Cash
Receivables
Inventory
Biological assets
Other assets
Property and equipment
Right-of-use asset
Lease liability
Brand
Customer relationships
Licenses
Goodwill
Accounts payable and accrued liabilities
Total assets and liabilites acquired
Cash deposits on closing date
Common shares issued
Stock warrants issued**
Consideration payable *
Promissory note payable
Total consideration
*all of the consideration payable was recognized as derivative liability (Note 20)
**value based on acquisition date share price of 1.23, exercise price of 1.50, expected life of 2 years, volatility of 102.6%, risk free rate of 2.50%

All values are in US Dollars.

In an agreement signed contemporaneously, the Company committed to purchase SDP Development Group, LLC ("SDP") on October 15, 2020, which owned six real estate properties used in connection with Phantom Farms' cannabis cultivation, processing and distribution operations.

p. 8
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
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On February 19, 2020, the Company completed the restructuring of the purchase of Phantom Farms and related companies, including SDP. The restructuring terms of the purchase agreement regarding the real estate assets of SDP group resulted in the Company electing to purchase the real estate of the Phantom Farms outdoor grow (two parcels), and SDP receiving 7,132,041 shares of C21 with a fair value of $2,582,903 (Note 20).

ACQUISITION OF PHANTOM FARMS (continued)

The consideration exceeded the fair market value of land acquired and as a result, the Company recorded a restructuring charge of $1,204,740.

At January 31, 2020, it was determined that the goodwill amounts for Phantom were impaired and should be written off. The Company has written off $8,009,248 of goodwill in relation to Phantom for the year ended January 31, 2020 (Note 13).

ACQUISITION OF SWELL COMPANIES

On May 24, 2019, the Company acquired all the common shares held in Swell Companies Limited ("Swell"). Swell operates an extraction laboratory, manufacturing, and wholesale facility in Oregon. The Company acquired Swell for total consideration of $18,812,683 comprised of cash deposits and notes receivable of $5,050,000, a convertible promissory note for $1,000,000, assumed liabilities of $1,070,907, common shares issued in the amount of $1,130,363, stock warrants issued in the amount of $786,284, and consideration payable of $9,775,129.

This acquisition is being accounted for using the acquisition method, in accordance with IFRS 3 - Business Combinations, with the assets and liabilities acquired recorded at their fair values at the date of acquisition. The Company is required to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values of the net assets acquired is recorded as goodwill.

The purchase price and allocation of the purchase price is as follows:

****	- -
Cash	173,422
Receivables	160,801
Inventory	2,069,349
Other assets	13,565
Property and equipment	1,152,519
Right-of-use asset	611,890
Lease liability	(611,890
Brand	709,496
Customer relationships	592,852
Licenses	915,000
Goodwill	13,676,649
Accounts payable and accrued liabilities	(650,970
Total assets and liabilites acquired	18,812,683
Cash deposits and notes receivable	5,050,000
Convertible promissory note	1,000,000
Liabilities assumed	1,070,907
Common shares issued	1,130,363
Stock warrants issued**	786,284
Consideration payable *	9,775,129
Total consideration	18,812,683

All values are in US Dollars.

p. 9
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

*consideration payable includes $4,707,370 of derivative liabilities (Note 20) **value based on acquisition date share price of $1.20, exercise price of $1.50, expected life of 5 years, volatility of 102.6%, risk free rate of 2.16%

ACQUISITION OF SWELL COMPANIES (continued)

During the year ended January 31, 2020, the Company finalized an agreement with the former owners Swell Companies Limited (the "Swell Vendors") to amend the terms of the Company's forward-cash obligations to the Swell Vendors. Pursuant to the terms of the amended agreement: (a) the cash sum due to the Swell Vendors through September 2019 under the original agreement, in the amount of $850,000, will be paid by the Company on or before July 1, 2020 with interest from Nov 15, 2019 at 9.5%.; and (b) the sum of $7,350,000 due to the Swell Vendors on May 24, 2021 under the original agreement, including the Swell Vendors' option to receive

$5,000,000 of such sum in cash, will be satisfied in full by the issuance of 7,015,238 common shares of C21. The shares were issued into escrow on December 27, 2019 and will be released as follows: (a) twenty-five percent (25%) four-months-and-a-day from October 4, 2019; and (b) the remainder of the shares in three equal instalments of one-third every four months thereafter.

At May 24, 2019, consideration payable included derivative liabilities of $4,707,370, cash consideration payable of $846,256 and commitment to issue shares of $4,221,503.

At January 31, 2020, it was determined that the goodwill and intangible amounts for Swell were impaired and should be written off. The Company has written off $13,676,649 of goodwill and $1,536,260 of intangibles for the year ended January 31, 2020 (Note 13).

ACQUISITION OF SILVER STATE

On January 1, 2019, the Company acquired all membership units of Silver State Relief LLC, and Silver State Cultivation LLC, which collectively form an integrated licensed cannabis operation comprised of two dispensary locations in Sparks and Fernley Nevada, and a cultivation and processing facility in Sparks Nevada (hereinafter called "Silver State"). The Company acquired Silver State for total consideration of $49,105,048 comprised of cash deposits upon closing of $9,009,800, consideration payable of $1,143,873, common shares issued in the amount of $8,951,375, and a promissory note for $30,000,000 (Note 17).

The purchase price and the allocation of the purchase price is as follows:

****	- -
Cash	417,453
Inventory	5,903,468
Biological assets	2,113,917
Other assets	16,085
Property and equipment	569,518
Right-of-use asset	3,950,682
Lease liability	(3,857,682
Customer relationships	1,540,447
Dispensary licenses	11,790,274
Cultivation license	100,000
Goodwill	28,541,323
Accounts payable and accrued liabilities	(1,980,437
Total assets and liabilities acquired	49,105,048
Cash deposits on closing date	9,009,800
Considerations payable	1,143,873
Promissory note payable	30,000,000
Common shares issued	8,951,375
Total consideration	49,105,048

All values are in US Dollars.

p. 10
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

ACQUISITION OF SILVER STATE (continued)

The Company is required to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values of the net assets acquired is recorded as goodwill.

ACQUISITION OF MEGAWOOD ENTERPRISES

On January 23, 2019, the Company acquired all shares of Megawood Enterprises, Inc., a licensed cannabis retail operation located in Portland, Oregon for total consideration of $794,888 comprised of consideration paid/payable of $650,000, closing working capital deficit of $30,112, and a convertible promissory note for $175,000.

The purchase price and the allocation of the purchase price is as follows:

****	- -
Cash	38,570
Inventory	46,162
Other assets	10,705
Property and equipment	40,983
Right-of-use asset	221,007
Lease liability	(221,007
Dispensary license	50,000
Goodwill	689,328
Accounts payable and accrued liabilities	(80,860
Total assets and liabilites acquired	794,888
Cash consideration paid	280,000
Considerations payable	231,395
Convertible promissory note	175,000
Advances to vendor cancelled upon closing	138,605
Closing working capital deficit receivable	(30,112
Total consideration	794,888

All values are in US Dollars.

p. 11
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

At January 31, 2020, it was determined that the goodwill amounts for Megawood were impaired and should be written off. The Company has written off $689,328 of goodwill in relation to Megawood for the year ended January 31, 2020 (Note 13).

ACQUISITON OF ECO FIRMA FARMS

On June 13, 2018, the Company acquired all membership units of EFF, a licensed recreational cannabis cultivation operation located outside of Portland, Oregon for total consideration of $7,849,684 comprised of assumed liabilities of $3,944,049, a convertible promissory note for $2,000,000 and a share payment note for $1,905,635.

ACQUISITON OF ECO FIRMA FARMS (continued)

The purchase price and the allocation of the purchase price is as follows:

****	- -
Cash	65,572
Receivables	122,840
Inventory	723,170
Biological assets	184,617
Other assets	70,120
Property and equipment	1,736,628
Right-of-use asset	3,689,418
Lease liability	(3,689,418
Cultivation license	120,000
Goodwill	5,160,741
Accounts payable and accrued liabilities	(334,004
Total assets and liabilites acquired	7,849,684
Liabilities assumed	3,944,049
Convertible promissory note	2,000,000
Share payment note	1,905,635
Total consideration	7,849,684

All values are in US Dollars.

On June 13, 2018, in conjunction with the acquisition of EFF, the Company issued a share payment note in the amount of $1,905,635 without interest, by the allotment and issuance of 2,142,000 common shares of C21, any time after October 15, 2018. The Company recognized the share payment note within equity.

On June 13, 2018, in conjunction with the acquisition of EFF, the Company issued a convertible promissory note for $2,000,000 maturing June 13, 2021. The value of the financial and derivative liability component was determined at the date of issuance in the amounts of $1,606,990 and $393,010 respectively (Note 20). Subsequent to the year ended January 31, 2019, one of the vendors that sold EFF, converted their portion of the convertible note to 977,479 common shares.

p. 12
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

An earn-out amount was contemplated in the purchase agreement and amendment to the purchase agreement, in which the Company agreed to deliver to the vendors one common share of C21, at a deemed issue price of $1.00 per share if the EBITDA (earnings before interest, taxes, depreciation and amortization) earned by the Company if upon satisfying the agreed upon amounts ("Earn Out") and average wholesale flower prices were in excess of $1,400 per pound. Management has determined that the Earn Out has $nil value.

At January 31, 2019, it was determined that the goodwill amounts for EFF were impaired and should be written off. The Company has written off $5,160,741 of goodwill in relation to EFF for the year ended January 31, 2019

RESTRICTED CASH

The Company has cash on deposit with the Alberta Energy Regulator ("AER") under the AER's Liability Management programs to cover potential liabilities relating to its wells. The required security deposit with the AER is determined based on a monthly licensee management rating assessment.

RECEIVABLES

****		April 30, 2020			January 31, 2020
Taxes receivable	$	19,972		$	22,014
Trade receivable		438,936			423,083
Allowance for doubtful accounts		(1,975	)		(1,975	)
****	$	456,933		$	443,122

All of the Company's trade and other receivables have been reviewed for indicators of impairment. Accounts receivable more than 90 days past due totaled $61,500 at April 30, 2020 (January 31, 2020 - $40,911).

BIOLOGICAL ASSETS

The Company's biological assets consist of cannabis plants. The continuity for biological assets for the three months ended April 30, 2020 and year ended January 31, 2020, was as follows:

Balance, January 31, 2019	$	1,870,540
Acquired biological assets		75,499
Fair value adjustment on biological assets		1,243,340
Increase in biological assets due to capitalized costs		7,615,455
Transferred to inventory upon harvest		(9,396,563	)
Balance, January 31, 2020	$	1,408,271
Fair value adjustment on biological assets		2,238,088
Increase in biological assets due to capitalized costs		328,946
Transferred to inventory upon harvest		(2,580,968	)
Balance April 30, 2020	$	1,394,337

Biological assets are valued in accordance with IAS 41 - Agriculture ("IAS 41") and are presented at their fair values less costs to sell up to the point of harvest. The Company's biological assets are primarily cannabis plants, and because there is no actively traded commodity market for plants or dried product, the valuation of these biological assets is obtained using valuation techniques where the inputs are based upon unobservable market data (Level 3).

The valuation of biological assets is based on a market approach where fair value at the point of harvest is estimated based on selling prices less the costs to sell at harvest. For in process biological assets, the fair value at point of harvest is adjusted based on the stage of growth. As at April 30, 2020, on average, the biological assets were 50% complete as to the next expected harvest date.

p. 13
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

The significant unobservable inputs and their range of values are noted in the table below:

			Effect on Fair Value as of April 30:
Significant Inputs and Assumptions	Range of Inputs	Sensitivity	2020	2019
Selling Price Per	$0.15 to $9.58	Increase 5%	69,450	78,829
Gram		Decrease 5%	(69,450)	(78,830)
Estimated Yield Per	60.59 to 848.11 grams	Increase 5%	68,711	77,988
Cannabis Plant		Decrease 5%	(68,711)	(77,990)

During the three months ended April 30, 2020, the Company's biological assets produced 637,220 grams (three months ended April 30, 2019 - 974,601 grams).

INVENTORY

****		April 30, 2020		January 31, 2020
Finished goods	$	3,554,069	$	3,878,754
Work in progress		2,371,589		2,313,089
****	$	5,925,658	$	6,191,843

Inventories expensed to cost of sales during the three months ended April 30, 2020 was $5,237,254 (2019 - $4,439,871). Included in inventory expensed to cost of sales during the three months ended April 30, 2020 were fair value adjustments recognised which increased cost of sales by $nil (2019 - $452,936). This one-time non-cash charge is related to the fair value of inventory acquired in the Silver State acquisition which closed January 1, 2019. This inventory was fully sold during the first six months of the year ended January 31, 2020.

In addition, at April 30, 2020, inventories included a gain on fair value adjustments of biological assets of $328,946 (April 30, 2019 - loss on fair value adjustments of biological assets of $452,936).

PROPERTY AND EQUIPMENT

****		Land and building			Leasehold improvements			Furniture & fixtures			Computer equipment			Machinery & equipment			Total
Cost
Balance, January 31, 2019	$	-		$	1,459,795		$	478,864		$	96,785		$	429,664		$	2,465,108
Assets from acquisition		-			522,279			50,388			25,846			646,507			1,245,020
Additions		4,675,389			97,956			12,350			-			560,328			5,346,023
Impairment		(3,305,176	)		(709,064	)		(125,282	)		-			-			(4,139,522	)
Balance, January 31, 2020		1,370,213			1,370,966			416,320			122,631			1,636,499			4,916,629
Additions		1,330,000			7,659			-			-			29,962			1,367,621
Disposals		-			-			(1,332	)		(327	)		-			(1,659	)
Balance, April 30, 2020	$	2,700,213		$	1,378,625		$	414,988		$	122,304		$	1,666,461		$	6,282,591
Accumulated Depreciation
Balance, January 31, 2019	$	-		$	(301,583	)	$	(65,074	)	$	(7,619	)	$	(8,822	)	$	(383,098	)
Depreciation expense		(128,225	)		(214,331	)		(88,667	)		(52,324	)		(215,853	)		(699,400	)
Balance, January 31, 2020		(128,225	)		(515,914	)		(153,741	)		(59,943	)		(224,675	)		(1,082,498	)
Depreciation expense		(25,945	)		(40,734	)		(12,794	)		(6,200	)		(53,819	)		(139,492	)
Balance, April 30, 2020	$	(154,170	)	$	(556,648	)	$	(166,535	)	$	(66,143	)	$	(278,494	)	$	(1,221,990	)
Carrying amount, Jan. 31, 2020	$	1,241,988		$	855,052		$	262,579		$	62,688		$	1,411,824		$	3,834,131
Carrying amount, Apr. 30, 2020	$	2,546,043		$	821,977		$	248,453		$	56,161		$	1,387,967		$	5,060,601
p. 14
---
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

Total depreciation expense for the three months ended April 30, 2020 was $139,492 (2019 - $164,617). Of the total expense, $73,109 was allocated to inventory (2019 - $116,619). Impairment of real estate assets in Canby, Oregon has been identified by way of an appraisal obtained in October 2019. The Company is evaluating this asset as part of its restructuring and integration of the Oregon assets.

p. 15
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

INTANGIBLE ASSETS AND GOODWILL

		Licenses			Branding			Customer relationships			Start up costs			Total
Cost		****			****			****			****			****
Balance, January 31, 2019	$	12,060,274		$	-		$	1,540,447		$	7,783		$	13,608,504
Additions from acquisitions		1,071,750			1,331,804			1,174,468			-			3,578,022
Impairment of intangibles		(428,626	)		(391,759	)		(715,875	)		-			(1,536,260	)
Balance, January 31, 2020 and April 30, 2020	$	12,703,398		$	940,045		$	1,999,040		$	7,783		$	15,650,266
Accumulated Amortization		****			****			****			****			****
Balance, January 31, 2019	$	(214,171	)	$	-		$	(25,674	)	$	(79	)	$	(239,924	)
Amortization expense		(2,228,051	)		(33,295	)		(443,641	)		(729	)		(2,705,716	)
Balance, January 31, 2020		(2,442,222	)		(33,295	)		(469,315	)		(808	)		(2,945,640	)
Amortization expense		(186,996	)		13,378			(246,732	)		-			(420,350	)
Balance, April 30, 2020	$	(2,629,218	)	$	(19,917	)	$	(716,047	)	$	(808	)	$	(3,365,990	)
Carrying amount, January 31, 2020	$	10,261,176		$	906,750		$	1,529,725		$	6,975		$	12,704,626
Carrying amount, April 30, 2020	$	10,074,180		$	920,128		$	1,282,993		$	6,975		$	12,284,276

Total amortization expense from intangible assets for the three months ended April 30, 2020 was $420,350 (2019 - $717,136). Of the total expense, $21,740 was allocated to inventory (2019 - $11,000).

The continuity of goodwill for the three months ended April 30, 2020 and year ended January 31, 2020 is as follows:

		Phantom Farms (Oregon)			Silver State Companies (Nevada)		Megawood Enterprises (Oregon)			Swell Companies (Oregon)			Total
Balance, January 31, 2019	$	-		$	28,541,323	$	689,328		$	-		$	29,230,651
Additions from acquisitions		8,009,248			-		-			13,676,649			21,685,897
Impairment of Goodwill		(8,009,248	)		-		(689,328	)		(13,676,649	)		(22,375,225	)
Balance, January 31, 2020 and April 30, 2020	$	-		$	28,541,323	$	-		$	-		$	28,541,323

As a result of capitalized goodwill, the Company tested each of the cash-generating units ("CGUs") for impairment at April 30, 2020 and January 31, 2020.

At January 31, 2020, the estimated recoverable amount of the Oregon geographic CGU was lower than the segment's carrying value. The Company recognized an impairment loss for the Oregon CGU totaling $22,375,225 of goodwill, and $1,536,260 of intangibles; this loss has been treated as Impairment of goodwill and intangible assets on the Consolidated Statement of Loss and Comprehensive Loss.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

****		April 30, 2020		January 31, 2020
Accounts payable	$	879,615	$	1,136,955
Accrued liabilities		1,225,205		1,449,286
Interest payable		831,478		902,033
	$	2,936,298	$	3,488,274
p. 16
---
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

LEASE LIABILITIES AND RIGHT-OF-USE ASSETS

Under IFRS 16 - Leases, the Company assesses whether a contract is, or contains, a lease. For contracts that are, or contain, leases, the Company recognizes a right-of-use asset and lease liability at the commencement date. If the contract does not contain a lease, then the contract is classified as a service that is not reported on the statement of financial position.

The Company has identified ten contracts executed by the Company and its wholly owned subsidiaries that are leases as defined under IFRS 16. In analyzing the identified agreements, the Company applied the lessee accounting model pursuant to IFRS 16 and considered all of the facts and circumstances surrounding the inception of the contract (but not future events that are not likely to occur). Lease liabilities were calculated with discount rates ranging from 10-20%.

Based on all the facts and circumstances at the inception of the contract, the Company has determined that all identified agreements contain a lease as defined by IFRS 16, including:

Entity Name/Lessee	Asset	Contains a lease?	Useful life (years)
C21 Investments Inc.	Office Suite	Yes	5
Swell Companies, LTD	Land/Building	Yes	5
Silver State Cultivation LLC	Land/Building	Yes	5
Silver State Relief LLC (Sparks)	Land/Building	Yes	5
Silver State Relief LLC (Fernley)	Land/Building	Yes	5
Megawood Enterprises Inc.	Land/Building	Yes	5
Phantom Distribution, LLC	Land/Building	Yes	5
63353 Bend, LLC	Land/Building	Yes	5
20727-4 Bend, LLC	Land/Building	Yes	5
4964 BFH, LLC	Land/Building	Yes	5

The financial statement effects concerning lease liabilities are as follows:

Maturity Analysis - contractual undiscounted cash flows
Less than one year	$	1,620,775
One to five years		4,489,711
Total undiscounted lease liabilities at April 30, 2020	$	6,110,486
Lease liabilities included in the statement of financial position		****
Current	$	1,080,065
Non-current		3,585,203
Balance, April 30, 2020	$	4,665,268
Amounts recognized in profit or loss		****
Interest on lease liabilities	$	83,699
Total cash outflow for leases	$	447,327
p. 17
---
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

LEASE LIABILITIES AND RIGHT-OF-USE ASSETS (continued)

The financial statement effects concerning right-of-use assets are as follows:

Cost
Balance, January 31, 2019	$	7,861,107
Right-of-use additions		3,386,237
Adjustment*		(927,300	)
Disposal**		(4,197,087	)
Balance, January 31, 2020 and April 30, 2020	$	6,122,957
Accumulated Amortization
Balance, January 31, 2019	$	(116,496	)
Disposal		230,685
Amortization expense		(1,576,459	)
Balance, January 31, 2020		(1,462,270	)
Amortization expense		(399,189	)
Balance, April 30, 2020	$	(1,861,458	)
Carrying Amount, January 31, 2020	$	4,660,688
Carrying Amount, April 30, 2020	$	4,261,499
*During the year ended January 31, 2020, the Company entered into amending lease agreements on six leases resulting in adjustments to ROU assets and lease liabilities of $927,300. The capitalisation rate was lowered on all six leases.
---
**During the year ended January 31, 2020, the Company derecognized ROU assets and lease liabiltiies of $3,800,000 on acquisition of land and building that was subject to lease. The Company terminated another $397,087 in leases during the same year resulting in decreases in lease liabilities and ROU assets. Accumulated amortization in these lease disposals of $230,685 was adjusted on disposal.

Total depreciation expense for the three months ended April 30, 2020 was $399,189 (2019 - $275,287). Of the total expense, $375,230 was allocated to inventory (2019 - $nil).

LONG TERM DEBT

****		Mortgage on building			Equipment and Vehicle loans			Total
Balance, January 31, 2020	$	496,384		$	123,952		$	620,336
Interest		5,582			47,845			53,427
Payments		(9,338	)		(27,509	)		(36,847	)
Balance, April 30, 2020	$	492,628		$	144,292		$	636,920
Current portion	$	23,885		$	124,529		$	148,414
Long-term portion	$	468,743		$	19,763		$	488,506

CONVERTIBLE DEBENTURES AND PROMISSORY NOTES

Convertible debentures and convertible promissory notes are compound financial instruments that are accounted for based on their components of financial liability and equity. The financial liability component represents the Company's future obligation to pay coupon interest and principal. The liability component is initially measured at its net present value and subsequently measured at its amortized cost. After the net present value of the financial liability is determined, any residual amount is reported as an equity instrument at the convertible debentures' issuance date.

Transaction costs related to the issuance of convertible notes are apportioned to their respective financial liability and equity components in proportion to the allocation of proceeds as a reduction to the carrying amount of each component.

p. 18
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

CONVERTIBLE DEBENTURES AND PROMISSORY NOTES (continued)

When valuing the financial liability component of the convertible notes, the Company used specific interest rates assuming no conversion features existed. The resulting liability component is accreted to its face value over the convertible note's term until its maturity date.

The following is the continuity of the Company's convertible debentures issued in Canadian dollars. All below disclosure is denominated in U.S. dollars:

Convertible debentures
****		December 31, 2018			January 30, 2019			Total
****		issuance			issuance
Balance, January 31, 2019	$	3,181,800		$	6,977,853		$	10,159,653
New issuances		265,146			388,486			653,632
Conversions		(1,546,384	)		(2,993,607	)		(4,539,991	)
Foreign exchange gain		8,318			67,403			75,721
Interest		322,348			559,398			881,746
Accretion expense		186,664			170,385			357,049
Interest paid-cash		(268,503	)		(452,052	)		(720,555	)
Balance, January 31, 2020		2,149,389			4,717,866			6,867,255
Interest		70,875			110,856			181,731
Accretion expense		39,947			34,836			74,783
Foreign exchange gain		(109,196	)		(227,476	)		(336,672	)
Balance, April 31, 2020	$	2,151,015		$	4,636,082		$	6,787,097

The following transactions occurred during the year ended January 31, 2020:

(a) 359 warrants (2019 - nil) were exercised in connection with the convertible debentures issued on December 31, 2018, resulting in gross proceeds of C$359,000 and of those, 250 warrant debentures (2019 - nil) were converted into common shares of the Company. At January 31, 2020, 2,315 warrant were available to be exercised (2019 - 2,674).

(b) 526 warrants (2019 - nil) were exercised in connection with the convertible debentures issued on January 30, 2019, resulting in gross proceeds of C$526,000 and of those, 487 warrants debentures (2019 - nil) were converted into common shares of the Company. At January 31, 2020, 4,664 warrant were available to be exercised (2019 - 5,190).

p. 19
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

CONVERTIBLE DEBENTURES AND PROMISSORY NOTES (continued)

The following is a continuity of the Company's convertible promissory notes denominated in U.S. dollars:

Convertible promissory notes
****		June 13, 2018			January 23, 2019			May 24, 2019		Total
		issuance			issuance			issuance
Balance, January 31, 2019	$	1,670,830		$	175,000		$	-	$	1,845,830
Issued		-			-			1,000,000		1,000,000
Conversion		(660,647	)		-			-		(660,647	)
Interest		48,600			-			69,041		117,641
Accretion expense		77,282			-			-		77,282
Balance, January 31, 2020		1,136,065			175,000			1,069,041		2,380,106
Payment		-			(175,000	)		-		(175,000	)
Interest		11,965			-			24,658		36,623
Accretion expense		19,936			-			-		19,936
Balance, April 30, 2020	$	1,167,966		$	-		$	1,093,699	$	2,261,665
Current portion	$	-		$	-		$	1,093,699	$	1,093,699
Long-term portion	$	1,167,966		$	-		$	-	$	1,167,966

On June 13, 2018, the Company issued a convertible promissory note to the vendor that sold Eco Firma Farms, LLC to the Company in the principal amount of $2,000,000. The convertible note is convertible at a conversion price of $1.00 per share and $0.825 per conversion share dependent upon the vendor. The convertible note accrues interest at a rate of 4% per annum, compounded annually, and is fully due and payable on June 13, 2021, and subsequent to year ended January 31, 2019, one vendor converted their portion of the convertible note to 977,479 common shares. On issuance, the Company determined the conversion feature was a derivative liability. The value of the conversion feature as at April 30, 2020 was $nil (January 31, 2020 - $nil).

On January 23, 2019, the Company issued a convertible promissory note to the vendor that sold Megawood Enterprises, Inc. to the Company in the principal amount of $175,000. The convertible note is convertible into 35,000 common shares of the Company at a conversion price of C$5.00 per conversion share and may be converted at any time between October 24, 2019 and January 24, 2020. On issuance, the Company determined the conversion feature was a derivative liability. The value of the conversion feature as at April 30, 2020 was $nil (January 31, 2020 - $nil). On February 21, 2020, the Company repaid the convertible promissory note with a cash payment of $130,000 and the issuance of 95,849 common shares (Note 20).

On May 24, 2019, the Company issued a two year unsecured convertible promissory note to a debtor of Swell Companies in the principal amount of $1,000,000. The convertible note accrues interest at 10% per annum compounded annually and payable at maturity. The holder of the note can accelerate payment to the first anniversary date of the note and therefore this is classified as a current liability. The note is convertible into common shares of the Company at a conversion price of $1.56 per share and may be converted at the maturity date.

p. 20
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

CONVERTIBLE DEBENTURES AND PROMISSORY NOTES (continued)

The following is a continuity of the Company's promissory notes denominated in U.S. dollars:

Promissory notes payable
****		January 1, 2019			February 4, 2019			Total
		issuance			issuance
Balance, January 31, 2019	$	30,000,000		$	-		$	30,000,000
Issued		-			290,000			290,000
Payments		(8,800,000	)		(290,000	)		(9,090,000	)
Balance, January 31, 2020		21,200,000			-			21,200,000
Payments		(1,800,000	)					(1,800,000	)
Balance, April 30, 2020	$	19,400,000		$	-		$	19,400,000

On January 1, 2019, the Company issued a promissory note to the vendor that sold Silver State to the Company (Sonny Newman) in the principal amount of $30,000,000. The note is payable in the following principal instalments: $3,000,000 on April 1, 2019, $6,000,000 on each of July 1, 2019, October 1, 2019, January 1, 2020, and April 1, 2020, and $3,000,000 on July 1, 2020. The note accrues interest at a rate of 10% per annum. The note is secured by the all of the outstanding membership interests, and a security interest in all of the assets, of Silver State.

On July 1, 2019 the terms of the promissory note payable for the acquisition of Silver State were amended to call for immediate payment of $2,000,000 plus accrued interest on July 1, 2019 followed by payments of $800,000 plus accrued interest on the first of each of August, September, October, November, and December 2019.

Effective November 21, 2019 and June 25, 2020, Mr. Newman and the Company agreed to further amend the terms of the secured promissory note due to Mr. Newman. The December 1, 2019 principal payment of $800,000 was cancelled and the monthly principal payments thereafter were reduced to $600,000 per month. Further, the annual interest rate on the note was reduced from 10% to 9.5%. The remaining balance on the note is due and payable on January 1, 2021. This modification resulted in a gain of $nil. For the three months ended April 30, 2020, interest expense was $452,252 (2019 - $706,849) and interest paid was $488,378 (2019 - $750,000).

CONSIDERATION PAYABLE

The following table reflects the continuity of consideration payable:

Balance, January 31, 2019	$	1,375,268
Swell Companies acquisition - May 25, 2019 (Note 4)		846,256
Consideration paid-cash		(1,375,268	)
Balance, January 31, 2020 and April 30, 2020	$	846,256
Current portion	$	846,256
Long term portion	$	-

RECLAMATION OBLIGATION

The Company has recorded a decommissioning provision in connection with estimated reclamation costs on a previously written off property. The obligation is recognized based on the estimated future reclamation costs. The Company had two wells in Alberta which were determined to be uneconomic and costs have been incurred to plug these wells. Reclamation and remediation work is still required to bring the site back to its natural state.

p. 21
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

DERIVATIVE LIABILITY

The following reflects the continuity of derivative liability:

Balance, January 31, 2019	$	23,097
On acquisition February 4, 2019		3,748,377
On acquisition May 24, 2019		4,707,370
Fair value adjustment on derivative liabilities		(4,779,693	)
Balance, January 31, 2020		3,699,151
Fair value adjustment on derivative liabilities		(264,802	)
Balance, April 30, 2020	$	3,434,350

Upon the February 4, 2019 acquisition of Phantom Farms the vendors can earn up to 4,500,000 'earn out' shares over a period of seven years. The conditions are based on the Company's common shares exceeding certain share prices during the period. The liability is derived using a Monte Carlo simulation.

Upon the May 24, 2019 acquisition of Swell Companies the vendors can earn up to 6,000,000 'earn out' shares over a period of seven years.The conditions are based on C21 common shares exceeding certain share prices during the period.The liability is derived using a Monte Carlo simulation.

Inputs into the calculation of fair value adjustment are as follows:

****	April 30,	January 31,	May 24,	February 4,	January 31,
	2020	2020	2019	2019	2019
Discount rate	0.30%	1.36%	2.50%	2.19%	1.91%
Expected life in years	5.84	6.14	7.00	7.00	2.50
Expected stock volatility	100%	100%	100%	100%	100%
Expected volatility of foreign exchange	5.29%	5.29%	5.29%	5.84%	5.84%

SHARE CAPITAL AND RESERVES

Share capital consists of one class of fully paid common shares, with no par value. The Company is authorized to issue an unlimited number of common shares. All shares are equally eligible to receive dividends and repayment of capital and represent one vote at the Company's shareholders' meetings.

The following table reflects the continuity of share capital from January 31, 2019 to April 30, 2020:

	Number of Shares		Amount
Balance, January 31, 2019	58,505,255	$	52,923,983
Shares issued - acquisition of Phantom Farms (i)	2,670,000		2,507,138
Shares issued - conversion of promissory note (ii)	977,479		660,647
Shares issued - warrant exercises (iii)	915,545		1,018,748
Shares issued - option exercises (iv)	80,000		77,980
Shares issued - acquisition of Swell (v)	8,281,905		4,927,178
Shares issued - acquisition of EFF building (vi)	3,983,886		4,136,646
Shares issued - partial settlement of EFF share payment note (vii)	368,688		368,688
Shares issued - private placement (viii)	5,589,493		4,895,379
Shares issued - conversion of debentures (ix)	8,016,388		4,539,991
Share issue costs	-		(28,110	)
Balance, January 31, 2020	89,388,639		76,028,268
Shares issued - acquisition of Phantom Farms (x)	7,132,041		2,582,903
Shares issued - Megawood (xi)	95,849		38,415
Balance, April 30, 2020	96,616,529	$	78,649,586
p. 22
---
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

SHARE CAPITAL AND RESERVES (continued)

(i) On February 4, 2019, the Company issued 2,670,000 shares as consideration for the purchase of Phantom Farms (Note 3).

(ii) On February 7, 2019, the Company issued 977,479 shares to a vendor of EFF upon conversion of a portion of the convertible promissory note payable.

(iii) During the year ended January 31 ,2020, the Company issued 915,545 shares upon the exercise of warrants.

(iv) During the year ended January 31, 2020, the Company issued 80,000 shares upon the exercise of stock options.

(v) On May 24 and December 27, 2019, the Company issued 1,266,667 shares and 7,015,238 shares, respectively, as consideration for the purchase of Swell Companies (Note 4).

(vi) On May 10, 2019, the Company issued 3,983,886 shares as consideration for the purchase of the building and land that EFF was previously leasing.

(vii) On June 12, 2019 the Company issued 368,688 shares to a vendor of EFF for a partial payment of the share payment note.

(viii) On May 28, 2019, the Company completed a non-brokered private placement financing of 5,589,493 shares at C$1.38, for total gross proceeds of C$7,713,500. Each unit is comprised of one common share of the Company and one half of one common share purchase warrant. Each warrant is exercisable for one additional common share of the Company at an exercise price of C$1.83 per warrant for a period of one year.

(ix) During the year ended January 31, 2020 the Company issued 8,016,389 shares upon the conversion of debentures.

(x) On February 19, 2020, the Company completed the restructuring of the purchase of Phantom Farms, including SDP. The restructuring terms of the purchase agreement regarding the real estate assets of SDP group resulted in the Company electing to purchase the real estate of the Phantom Farms outdoor grow (two parcels), and SDP receiving 7,132,041 shares of C21 with a fair value of $2,582,903.

(xi) On February 21, 2020, the Company repaid the convertible promissory note with a cash payment of $130,000 and the issuance of 95,849 common shares with a fair value of $38,415 (Note 17).

Commitment to issue shares

The Company issued a promissory note payable to deliver 2,142,000 shares to the vendors of EFF in the amount of $1,905,635, without interest, any time after October 15, 2018. As at April 30, 2020 shares issued pursuant to this commitment total 676,193 shares.

The Company committed to issue 424,688 shares valued at $424,688 to the vendors of Swell Companies on October 24, 2020.

p. 23
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

SHARE CAPITAL AND RESERVES (continued)

Warrants

The following summarizes the Company's warrant activity:

Warrants outstanding
	Warrantsoutstanding		Weighted average exercise price <br>- C$ -	Weighted average remaining life (years)
Balance January 31, 2019	5,154,045		2.05	0.86
Issued - Phantom Farms (Note 3)	1,700,000		1.50	-
Issued - Swell Companies (Note 4)	1,200,000		1.50	-
Issued - Private Placement (xvii)	2,794,748		1.83	-
Exercised	(915,045	)	1.06	-
Expired	(4,239,000	)	2.27	-
Balance, January 31, 2020	5,694,748		1.66	0.74
Balance, April 30, 2020	5,694,748		1.66	0.49

As at April 30, 2020, the following warrants were outstanding and exercisable:

Expiry Date	Exercise Price <br>- C$ -	Number of Warrants
February 5, 2021	1.50	1,700,000
May 23, 2021	1.50	1,200,000
May 29, 2020	1.83	2,794,748
		5,694,748

On May 28, 2020, the Company extended the expiry date of the C$1.83 warrants due to expire on May 29, 2020 to expire on May 29, 2021, all other terms remain the same.

Stock options

The Company is authorized to grant options to executive officers and directors, employees and consultants, enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. The exercise price of each option equals the market price of the Company's shares as calculated on the date of grant. The options can be granted for a maximum term of 10 years. Vesting is determined by the Board of Directors.

The Company adopted a Restricted Stock Unit plan (the "Plan") on July 17, 2018 but has not issued any units under the Plan. The Plan allows for up to 750,000 total units to be issued, adjustable upon approval by the compensation committee, but not to exceed 10% of common shares outstanding.

On February 6, 2019, the Company granted incentive stock options to purchase an aggregate of 710,000 common shares of the Company at an exercise price of C$1.11 vesting over a 1-year period, expiring at close of business on February 5, 2022. Value at grant date determined with the following assumptions: life of 3 years, volatility of 100%, risk free rate of return 1.82%, dividend yield of 0%, and forfeiture rate of 0%.

On October 10, 2019, the Company granted incentive stock options to purchase an aggregate of 1,020,000 common shares at exercise prices of C$1.00, C$1.11 and C$1.38 vesting over a 1-year period, expiring after 3 and 5 year periods. Value at grant date determined with the following assumptions: life of 3 or 5 years, volatility of 100%, risk free rate of return 1.48%, dividend yield of 0%, and forfeiture rate of 0%.

On January 24, 2020, the Company granted incentive stock options to purchase an aggregate of 100,000 common shares at an exercise prices of C$0.80 vesting over a 1-year period, expiring at close of business January 24, 2023.Value at grant date determined with the following assumptions: life of 3 years, volatility of 100%, risk free rate of return 1.46%, dividend yield of 0%, and forfeiture rate of 0%.

p. 24
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

SHARE CAPITAL AND RESERVES (continued)

During the three months ended April 30, 2020, nil (2019 - 80,000) options were exercised for proceeds of $nil (2019 - $39,028).

Details of the Company's stock option activity are as follows:

Options outstanding and exercisable
****	Options outstanding and exercisable		Weighted average exercise price <br>- C$ -	Weighted average remaining life (years)
Balance January 31, 2019	2,520,000		2.41	2.30
Granted	1,830,000		1.14	-
Exercised	(80,000	)	0.65	-
Expired/Cancelled	(1,015,000	)	2.28	-
Balance, January 31, 2020	3,255,000		1.78	2.18
Expired/Cancelled	(20,000	)	1.38	-
Balance April 30, 2020	3,235,000		1.78	1.93

As at April 30, 2020, the following stock options were outstanding and exercisable:

Expiry Date	Exercise Price - C$ -	April 30, 2020Outstanding	April 30, 2020 Exerciseable
October 15, 2020	0.65	325,000	325,000
June 25, 2021	2.80	1,350,000	1,350,000
February 5, 2022	1.11	460,000	460,000
October 9, 2022	1.38	500,000	250,000
January 24, 2023	0.80	100,000	50,000
October 9, 2024	1.00	500,000	250,000
****		3,235,000	2,685,000

GENERAL AND ADMINISTRATIVE EXPENSE

General and administration expenses for the three months ended April 30, 2020 and 2019 were comprised of the following:

****		2020		2019
Salaries and wages	$	877,777	$	1,281,217
Professional Fees and consulting		288,753		177,635
Accounting and legal		129,455		203,807
Travel and entertainment		36,694		118,477
Foreign exchange		-		25,165
License fees, taxes and insurance		243,261		384,883
Office Facilities and administrative		119,624		170,712
Shareholder Communications		-		480
Transfer agent and Filing Fees		4,869		7,573
Other		66,096		127,150
****	$	1,766,529	$	2 ,497,099

SEGMENTED INFORMATION

The Company defines its major geographic operating segments as Oregon and Nevada. Due to the jurisdictional cannabis compliance issues ever-present in the industry, each state operation is by nature operationally segmented.

p. 25
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

SEGMENTED INFORMATION (continued)

Key decision makers primarily review revenue, cost of sales expense, and gross margin as the primary indicators of segment performance. As the Company continues to expand via acquisition, the segmented information will expand based on management's agreed upon allocation of costs beyond gross margin.

Segmented operational activity and balances are as follows:

April 30, 2020		Oregon			Nevada			Corporate			Consolidated
Total revenue	$	1,032,640		$	7,113,184		$	-		$	8,145,824
Gross profit (loss)		(168,806	)		3,406,322			-			3,237,516
Operating expenses:
General and administration		(491,124	)		(714,680	)		(560,725	)		(1,766,529	)
Sales, marketing, and promotion		(16,593	)		(57,339	)		(931	)		(74,863	)
Depreciation and amortization		(28,093	)		(433,378	)		(27,481	)		(488,952	)
Share based compensation		-			-			(35,750	)		(35,750	)
Restructuring		(1,481,560	)		-			-			(1,481,560	)
Interest, accretion, and other		(85,768	)		8			(503,375	)		(589,135	)
Net profit (loss) before taxes	$	(2,271,944	)	$	2,200,933		$	(1,128,262	)	$	(1,199,273	)
Assets	$	10,259,000		$	22,360,050		$	27,301,640		$	59,920,690
Liabilities	$	3,025,617		$	3,763,846		$	38,554,396		$	45,343,859
April 30, 2019		Oregon			Nevada			Corporate			Consolidated
Total revenue	$	661,903		$	7,095,119		$	-		$	7,757,022
Gross profit (loss)		(634,290	)		3,498,505			-			2,864,215
Operating expenses		(440,256	)		(1,752,520	)		(1,903,792	)		(4,096,568	)
Other losses		(129	)		( 23,901	)		(1,487,445	)		(1,511,475	)
Net profit (loss) before taxes	$	(1,074,675	)	$	1,722,084		$	(3,391,237	)	$	(2,743,828	)
Assets	$	20,018,608		$	54,128,963		$	8,136,094		$	82,283,665
Liabilities	$	7,477,758		$	5,269,352		$	46,876,887		$	59,623,997

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

Non-cash transactions during the three months ended April 30, 2020

There were interest payments of $488,378.
No income taxes were paid.
The Company issued 7,132,041 common shares valued at $2,582,903 to complete the restructuring of the purchase of Phantom Farms, including SDP.
The Company issued 95,849 common shares value at $38,415 as partial repayment of the $175,000 convertible promissory note related to the Megawood acquisition.

Non-cash transactions during the three months ended April 30, 2019

There were interest payments of $755,740.
No income taxes paid were paid.
The Company issued 2,670,000 common shares valued at $2,501,827 for the acquisition of Phantom Farms.
The Company issued 512,500 common shares valued at $267,202 upon the conversion of debentures.
The Company issued 977,479 common shares valued at $719,175 upon the conversion of a portion of convertible promissory note.

p. 26
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

TAXATION

The Company reconciles the expected tax expense at the U.S. statutory tax rate of 21% to the amount recognized in the statement of loss and comprehensive loss.

Since the Company operates in the United States cannabis industry, the Company is subject to U.S. Internal Revenue Code section 280E for U.S. federal income tax purposes; and therefore, is subject to the disallowance of ordinary and necessary business deductions for income tax purposes pursuant to section 280E. Consequently, the Company is only allowed to deduct 1) direct production costs and indirect production costs incident to and necessary for production and 2) costs incurred to purchase goods that are resold, including transportation or other necessary charges incurred in acquiring possession of the goods. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC section 280E. However, the State of Oregon does not conform to IRC section 280E and thus the Company deducts all operating expenses on its Oregon corporate tax return. Additionally, the State of Nevada does not assess income tax and therefore no income tax provision for Nevada has been calculated.

COMMITMENTS

The Company and its subsidiaries are committed under lease agreements with third parties and related parties, for land, office space, and equipment in Nevada, Oregon and British Columbia, as well as consulting agreements. At April 30, 2020, the Company has the following future minimum payments:

		Third Parties		Related Parties		Total
2021	$	238,850	$	1,071,144	$	1,309,994
2022		527,321		1,128,192		1,655,513
2023		532,961		1,128,192		1,661,153
2024		374,513		1,053,192		1,427,705
2025		80,414		-		80,414
Thereafter		457,428		-		457,428
	$	2,211,487	$	4,380,720	$	6,592,207

FINANCIAL RISK MANAGEMENT

Capital Management

The Company's objectives when managing its capital are to ensure there are sufficient capital resources to continue operating as a going concern and maintain the Company's ability to ensure sufficient levels of funding to support its ongoing operations and development. The purpose of these objectives is to provide continued returns and benefits to the Company's shareholders. The Company's capital structure includes items classified in debt and shareholders' equity.

The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business considering changes in economic conditions and the risk characteristics of the Company's underlying assets.

At April 30, 2020, the Company is not subject to externally imposed capital requirements, with the exception of restricted cash posted as a deposit.

Fair value

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

p. 27
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

FINANCIAL RISK MANAGEMENT (continued)

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 - Inputs that are not based on observable market data.

The following table shows the carrying amounts of financial assets and financial liabilities by category:

****		April 30, 2020		January 31, 2020
Financial assets at amortized cost^(1)^	$	1,815,426	$	3,565,721
Financial liabilities at amortized cost^(^^2^^)^	$	32,793,956	$	35,402,227
Financial liabilities at fair value through profit or loss^(^^3^^)^	$	3,434,350	$	3,699,152

(1) Includes cash, restricted cash and receivables

(2) Includes accounts payable and accrued liabilities, promissory note, convertible promissory note, convertible debtentures, consideration payable, and debt

(3) Includes derivative liability

RELATED PARTY TRANSACTIONS

Balances due to related parties included in accounts payable, accrued liabilities, and promissory note payable at April 30, 2020 and January 31, 2020:

****		April 30, 2020		January 31, 2020
Due to the President and CEO	$	19,625,759	$	21,713,910
Due to directors and officers of the Company		5,672		1,476
Due to the CFO of the Company		218		64
	$	19,631,649	$	21,715,450

The Company had the following transactions with related parties during the three months ended April 30, 2020 and 2019:

****		2020		2019
Consulting fees paid to a director	$	-	$	38,310
Amounts paid to CEO or companies controlled by CEO		1,988,378		-
Salary paid to directors and officers		109,080		368,434
Note and interest payments to significant shareholder		-		3,750,000
Rents Paid to Significant Shareholder		-		293,000
****	$	2,097,458	$	4,449,744

On February 4, 2019, the Company acquired Phantom Farms, of which, a Director of the Company is a principal owner, the Company paid $10,539,260 (Note 3). A second agreement signed contemporaneously involving the real estate of Phantom Farms was entered into the by the Company, this agreement was restructured as at February 12, 2020 with the payment by the Company of 7,132,041 common shares (Note 20).

On February 6, 2019, a director was granted a total of 190,000 stock options to purchase common shares exercisable on or before February 5, 2022, at an exercise price of C$1.11 per share. In connection to these options, the Company recorded a share-based compensation expense of C$126,113.

p. 28
C21 INVESTMENTS INC.<br>NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>For the three months ended April 30, 2020 and 2019<br>(Expressed in U.S. dollars) - Unaudited
---

SUBSEQUENT EVENTS

On May 28, 2020, the Company extended the expiry date of the C$1.83 warrants due to expire on May 29, 2020 to expire on May 29, 2021, all other terms remain the same.

On June 29, 2020 the Company announced that the Company and its CEO agreed to:

Extend the Maturity date of the January 1, 2019 Promissory Note (Note 17) held by the CEO to January 1, 2021, on the existing terms and conditions
Extend the term of the lease of the Fernley premises to July 1, 2023 on the existing terms and conditions including the option to purchase.
Extend the CEO's employment for a term of three years.

p. 29

C21 Investments Inc.: Exhibit 99.2 - Filed by newsfilecorp.com

C21 INVESTMENTS INC.

Management's Discussion and Analysis<br><br> <br>For the three months Year Ended April 30, 2020<br><br> <br>(Expressed in U.S. Dollars)

GENERAL

C21 Investments Inc. (the "Company" or "C21") was incorporated in the Province of British Columbia under the Company Act (British Columbia) on January 15, 1987 as Empire Creek Mines Inc. On May 11, 1987, the Company changed its name to Curlew Lake Resources Inc. Effective November 24, 2017, the Company changed its name to C21 Investments Inc. On June 15, 2018, the Company's common shares were delisted from the TSX Venture Exchange and on June 18, 2018, the common shares commenced trading on the Canadian Securities Exchange ("CSE") under the symbol CXXI. The Company registered its common shares in the United States ("U.S.") and on May 6, 2019, its common shares were cleared by FINRA for trading on the OTC Markets platform under the U.S. trading symbol CXXIF. On August 23, 2019 the Company announced it had been approved and upgraded for trading on the OTCQB Venture Market.

This Management's Discussion and Analysis ("MDA") covers the operations of the Company for the 3 months ended April 30, 2020 and 2019. The MDA should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes for the years ended January 31, 2020, 2019 and 2018. All inter-company balances and transactions have been eliminated upon consolidation. The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Financial information presented in this MD&A is presented in United States dollars ("$" or "US$"), unless otherwise indicated.

Additional information related to the Company is available for viewing on SEDAR at www.sedar.com or the Company website at www.cxxi.ca.

FORWARD LOOKING STATEMENTS

This Management's Discussion and Analysis includes "forward-looking information" and "forward-looking statements" within the meaning of Canadian securities laws and United States securities laws. All information, other than statements of historical facts, included in this MDA that addresses activities, events or developments that the Company expects or anticipates will or may occur in the future is forward-looking information. Forward-looking information includes, among other things, information regarding: statements relating to the business and future activities of, and developments related to, the Company, including such things as the impact of the COVID-19 pandemic with reductions of operating (including marketing) and capital expenses and revenues, future business strategy, competitive strengths, goals, expansion and growth of the Company's business, operations and plans, including information concerning the completion and timing of the completion of contemplated acquisitions, expectations whether such proposed transactions will be consummated on the current terms or otherwise and contemplated timing, expectations and effects of such proposed transactions, including the potential number and location of cultivation and production facilities and dispensaries or licenses therefor to be acquired and markets to be entered into by the Company as a result of completing such proposed acquisitions, expectations regarding the markets to be entered into by the Company as a result of completing such proposed acquisitions, such as the growth to be experienced by such new markets, the ability of the Company to successfully achieve its business objectives as a result of completing such proposed acquisitions, estimates of future cultivation, manufacturing and extraction capacity, expectations as to the development and distribution of the Company's brands and products, the expansion into additional U.S. and international markets, any potential future legalization of adult-use and/or medical cannabis under U.S. federal law, expectations of market size and growth in the United States and the states in which the Company operates or contemplates future operations and the effect such growth will have on the Company's financial performance, expectations for other economic, business, regulatory and/or competitive factors related to the Company or the cannabis industry generally, and other events or conditions that may occur in the future.

Readers are cautioned that forward-looking information and statements are based on reasonable assumptions, estimates, analysis and opinions of management of the Company at the time they were provided or made in light of their experience and their perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information and statements.

Forward-looking information and statements are not a guarantee of future performance and are based upon a number of estimates and assumptions of management at the date the statements are made including among other things assumptions about: the contemplated acquisitions and dispositions being completed on the current terms and current contemplated timeline; development costs remaining consistent with budgets; ability to manage anticipated and unanticipated costs; favorable equity and debt capital markets; the ability to raise sufficient capital to advance the business of the Company; favorable operating and economic conditions; political and regulatory stability; obtaining and maintaining all required licenses and permits; receipt of governmental approvals and permits; sustained labor stability; favorable production levels and costs from the Company's operations; the pricing of various cannabis products; the level of demand for cannabis products; the availability of third party service providers and other inputs for the Company's operations; and the Company's ability to conduct operations in a safe, efficient and effective manner; expectations regarding the Company's consolidation, integration and optimization of its Oregon assets; the ability of the Company to restructure and service its secured debt; the availability of securitized debt financing on terms acceptable to the Company, or at all;  and the ability of the Company's operations to perform and continue in the ordinary course in light of the COVID-19 pandemic. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks, uncertainties, contingencies and other factors that could cause actual performance, achievements, actions, events, results or conditions to be materially different from those projected in the forward-looking information and statements. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

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Risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information and statements include, among others, risks relating to U.S. regulatory landscape and enforcement related to cannabis, including governmental and environmental regulation, public opinion and perception of the cannabis industry, risks related to the ability to consummate the proposed acquisitions on the proposed terms and the ability to obtain requisite regulatory approvals and third party consents and the satisfaction of other conditions, risks related to reliance on third party service providers, the limited operating history of the Company, risks inherent in an agricultural business, risks related to proprietary intellectual property, risks relating to financing activities, risks relating to the management of growth, increasing competition in the industry, risks associated to cannabis products manufactured for human consumption including potential product recalls, reliance on key inputs, suppliers and skilled labor (the availability and retention of which is subject to uncertainty), cybersecurity risks, ability and constraints on marketing products, fraudulent activity by employees, contractors and consultants, risk of litigation and conflicts of interest, and the difficulty of enforcement of judgments and effect service outside of Canada, risks related to future acquisitions or dispositions, limited research and data relating to cannabis, risks and uncertainties related to the impact of the COVID-19 pandemic and the impact it may have on the global economy and retail sector, particularly the cannabis retail sector in the states in which the Company operates, risks and uncertainties relating to the Company's President and CEO, Sonny Newman, being the Company's major lender holding security over the Company's principal operating assets in Nevada, as well as those risk factors discussed elsewhere herein, including under "Risk Factors".

Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward-looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward-looking information and statements.

The Company may elect to update such forward-looking information and statements at a future time, it assumes no obligation for doing so except to the extent required by applicable law.

The forward-looking statements or information contained in this Management's Discussion and Analysis are made as of April 30, 2020 and August 13, 2020.

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DESCRIPTION OF BUSINESS

The Company is a vertically integrated cannabis company that cultivates, processes, distributes and sells quality cannabis and hemp-derived consumer products in the United States. The Company is focused on value creation through the disciplined acquisition and integration of core retail, manufacturing, and distribution assets in strategic markets, leveraging industry-leading retail revenues together with high-growth potential, multi-market branded consumer packaged goods ("CPG").

The Company focuses on scalable opportunities in key markets that take advantage of its core competencies, including: (i) retail operational excellence and expanding its retail footprint through value-add acquisitions in existing markets, and ii) branded CPG expansion through both captive retail and developing wholesale channels. The Company focuses on acquiring businesses that provide immediate contribution to overall profitability, or have a path to profitability within twelve months, where it can leverage existing assets, brands, and domain expertise.

The Company currently holds licenses in Oregon and Nevada that span the entire cannabis supply chain within each market.

The Company is operated by a management team that has significant professional experience, including deep experience both within the cannabis industry and other fast-paced growth industries like technology, healthcare, and venture capital. The Company's management team also includes experts from more traditional industries like forestry, manufacturing, real estate, and capital markets.

On July 9, 2019, the Company announced that Sonny Newman had been appointed President and Chief Executive Officer ("CEO"), succeeding Robert Cheney, who remains on the Company's Board of Directors. On June 29, 2020, the Company announced that Mr. Newman had agreed to extend his term of employment for an additional three (3) years.

ACQUISITION PROCESS

Since the Company changed its focus to the cannabis market on January 29, 2018, the Company has aggressively grown its business, completing five acquisitions in Nevada and Oregon in 2018 and 2019, and thereafter thoughtfully improved upon its Nevada operations and optimized its operations in Oregon.

As of April 30, 2020, the Company has closed its acquisitions of Silver State Relief LLC (retail) and Silver State Cultivation LLC (cultivation and extraction) located in Nevada, and Eco Firma Farms LLC (cultivation), Megawood Enterprises Inc (retail), Phantom Venture Group, LLC and Phantom Brands, LLC (cultivation, extraction and wholesale) and Swell Companies Limited (extraction and wholesale) located in Oregon.

In the current phase of C21's acquisition plan, the Company is focused primarily on improving and expanding its retail footprint in Nevada and continuing to integrate and optimize its Oregon assets. The Company may also entertain strategic opportunities in other jurisdictions, as such opportunities may arise.

COMPLETED ACQUISITIONS

Silver State Cultivation LLC and Silver State Relief LLC - Nevada, USA

On January 15, 2019, the Company completed the acquisition of 100% of the membership interests of both Silver State Relief LLC and Silver State Cultivation LLC (collectively "Silver State"), which are Nevada limited liability companies. The acquisition was made effective January 1, 2019. Silver State operates indoor cannabis cultivation and processing in a licensed facility in Sparks, Nevada, and owns two retail licenses that operate cannabis dispensaries in Sparks and Fernley, Nevada.

In consideration for 100% of the membership interests **** of Silver State, the Company paid total consideration of $49,105,048, which included a secured promissory note to the vendor, Sonny Newman, for $30,000,000 (the "Newman Note").

Mr. Newman was subsequently engaged by the Company to act as its President and Chief Executive Officer.

Promissory Note to Silver State Vendor

Effective November 21, 2019, Mr. Newman and the Company agreed to amend the terms of the Newman Note, with a remaining principal balance of $21.8m. The December 1, 2019 principal payment of $800,000 was cancelled and the principal monthly payments thereafter were reduced to $600,000 per month. Further, the annual interest rate on the note was reduced from 10% to 9.5%. The remaining balance on the note was then due and payable on July 1, 2020.

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Effective June 25, 2020, Mr. Newman and the Company agreed to further amend the terms of the Newman Note, with the remaining principal balance of $18.2m. The maturity date of the Note was extended from July 1, 2020 to January 1, 2021, and all other terms of the Newman Note remained the same, including the monthly payment obligations of principal and interest.

Following the August 1, 2020 payment, the principal balance owing under the Newman Note is $17.0m.

Silver State buildings

The Silver State businesses operate in three buildings, a cultivation/production warehouse and a dispensary, both located in Sparks, Nevada. The third building is the Fernley dispensary in Fernley, Nevada, which opened on January 15, 2019. The Company has the option, exercisable during the term of its leases, to acquire all three of the real estate assets of Silver State including: the land and 158,000 square-foot building ("Stanford Way") located in Sparks, Nevada that houses its cultivation and extraction facility; the land and 7,400 square foot retail dispensary building ("Greg Street") located in Sparks, Nevada, servicing more than 30,000 customers per month; and the 6,000 square foot dispensary and land located in Fernley, Nevada ("Fernley"), servicing more than 15,000 customers per month. The option price for Stanford Way is $12,700,000, payable in cash or common shares of the Company at $3.50 per common share, at the election of the landlord. The option price for Greg Street is $3.3m, payable in cash. The option price for Fernley is $2,228,000, payable in cash.

Megawood Enterprises Inc - Oregon, USA

On January 23, 2019, the Company completed the acquisition of 100% of the common shares of Megawood Enterprises Inc ("Pure Green"), an Oregon corporation, which includes its retail location at 3738 Sandy Blvd. NE, Portland, OR. In consideration for 100% of the common shares of Pure Green, the Company paid total consideration of $794,888.

At January 31, 2020, it was determined that the goodwill amounts for Pure Green were impaired and should be written off. The Company has written off all the goodwill in relation to Pure Green ($689,328) for the year ended January 31, 2020.

On February 28, 2020, the Company restructured the final payment due to the vendors of Pure Green. The final payment consisted of a cash payment of $130,000 and the issuance of 95,849 common shares of the Company at a deemed price of C$0.6225/share.

The Pure Green operations were temporarily shut down in March 2020 due to the COVID-19 pandemic. The Pure Green store is currently under third-party management pursuant to a management agreement dated June 1, 2020, whereby the management company has assumed all leasehold liabilities and costs at the facility including the triple net real property lease.

Phantom Venture Group, LLC and Phantom Brands, LLC - Oregon, USA

On February 4, 2019, the Company completed its acquisition of 100% of the membership interests of Phantom, which encompasses the following limited liability companies: Phantom Venture Group, LLC, Phantom Distribution, LLC, 63353 Bend, LLC, 20727‐4 Bend, LLC, 4964 BFH, LLC, and Phantom Brands, LLC (collectively "Phantom"). Phantom operates two outdoor cannabis cultivation facilities totaling 80,000 square feet in southern Oregon. Phantom also operates a 5,600 square foot facility which includes a wholesale distribution warehouse and an extraction laboratory and a 7,700 square foot state-of-the-art indoor grow facility in Central Oregon.

In consideration for 100% of the membership interests of Phantom, the Company paid total consideration of $10,539,260 as follows:

(i) cash deposits on closing of $3,200,000

(ii) a promissory note for $290,000;

(iii) issuance of 2,670,000 common shares of the Company valued at C$1.23/common share;

(iv) issuance of 1,700,000 share purchase warrants of C21, each warrant exercisable for one common share at a price of C$1.50/common share; and,

(v) issuance of earnout shares of up to a maximum of 4,500,000 common shares of C21, to be issued over a period of seven years, contingent upon the achievement of certain stock price targets of C21 or change of control of C21 at certain stock price valuation targets (50% of the earnout shares issuable upon change of control of the Company at a valuation of C$3.00/common share or more; 100% of the earnout shares issuable upon change of control of the Company at a valuation of at least C$5.00/common share).

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In an agreement signed contemporaneously, the Company committed to purchase SDP Development Group, LLC ("SDP") on October 15, 2020, which owned six real estate properties used in connection with Phantom Farms' cannabis cultivation, processing and wholesale distribution operations. The aggregate purchase price was $8,010,000 payable in cash, or, at the election of the vendors, in whole or in part by the issue of 2,670,000 shares at a deemed price of $3.00 per common share. Subsequently, the Company and SDP agreed to modify the terms of the SDP agreement as well as modify the leases subject to Phantom Farms' operations. On February 12, 2020, the parties agreed to the following modified terms: the Company purchased two Southern Oregon farms, constituting over 60 acres of real property housing the two outdoor cannabis cultivation facilities totaling 80,000 square feet of canopy, rent reduction on the three Phantom properties in Central Oregon to 7% of an agreed value (a reduction of the Company's total forward lease obligations in Phantom Farms locations by $370,000 per year), and a release from the obligation to purchase the sixth property in Southern Oregon. In exchange, the SDP vendors received 7,132,041 common shares of the Company at a deemed issue price of CAD$0.804 per share.

Two former owners of Phantom are among the members of SDP and were subsequently hired by the Company. Skyler Pinnick, Chief Marketing Officer and Board member, and Russell Rotondi, the Company's general counsel.

Swell Companies Limited - Oregon, USA

On May 24, 2019, the Company completed its acquisition of 100% of the common shares of Swell Companies Limited ("Swell"), an Oregon corporation. Swell is a processor and wholesaler of THC and CBD products. Swell is recognized as a leader in the extraction and manufacturing of THC and CBD derived products. Swell's commitment to quality, innovation, and execution has established Swell as an early and dominant player in the competitive Oregon market. Raw oil, encapsulates and vape pens are distributed under its in-house brands: Dab Society Extracts and Hood Oil. The capacity of Swell's processing facility is 350,000 grams of high-quality raw oil per month.

In consideration for 100% of the common shares of Swell, the Company paid or agreed to pay total consideration of $18,812,683 as follows:

(i) cash deposits on closing of $5,050,000;

(ii) liabilities assumed of $1,070,907;

(iii) $1,000,000 in the form of a 2-year convertible note at 10% interest, upon close;

(iv) 1,266,667 common shares of C21 on closing;

(v) 1,200,000 warrants to purchase common shares of C21 with an exercise price of C$1.50/common share;

(vi) 456,862 common shares issuable on November 24, 2020;

(vii) 2,450,000 common shares issuable on May 24, 2021. Upon the vendors' election, up to $5 million in cash to be received 24 months from the closing date if the average closing price of the Company's shares over the 15 trading days immediately preceding the payment date is less than C$3.75 per share. If the vendors elect to take cash, common shares issuable would be reduced to 783,333; and,

(viii) issuance of up to a maximum of 6,000,000 earn out common shares, to be issued over a period of seven years, contingent upon the achievement of certain stock price targets of C21, and 50% of the earnout shares issuable upon change of control of C21 and 100% of the earnout shares issuable upon change of control of C21 at a C21 valuation of at least C$5.00/common share.

During the year, the Company finalized an agreement with the former owners of Swell Companies Limited (the "Swell Vendors") to amend the terms of the Company's forward-cash obligations to the Swell Vendors. Pursuant to the terms of the amended agreement: (a) the cash sum due to the Swell Vendors through September 2019 under the original agreement, in the amount of $850,000, would be paid by the Company on or before November 15, 2019; and (b) the sum of $7,350,000 due to the Swell Vendors on May 24, 2021 under the original agreement (vii above), including the Swell Vendors' option to receive $5m of such sum in cash, was satisfied in full by the issuance of 7,015,238 common shares of C21 at a deemed issue price of $1.047 per share. The shares were issued into escrow December 27, 2019 to be released as follows: (a) twenty-five percent (25%) four-months-and-a-day from the date of issue; and (b) the remainder of the shares in three equal instalments of one-third every four months thereafter. Effective November 15, 2019, the parties executed an amendment with respect to the cash payment of $850,000, by which the maturity date was extended from November 15, 2019 to on or before July 1, 2020 with interest accruing from November 15, 2019 at 9.5%. Effective June 30, 2020, the parties executed a further amendment with respect to the cash payment of $850,000, by which the maturity date was extended from July 1, 2020 to on or before January 1, 2021, with all other terms to remain unchanged.

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The Swell facility is currently under third-party management pursuant to a management agreement dated June 1, 2020 whereby the management company has assumed all leasehold liabilities and costs at the facility including the triple net real property lease.

At January 31, 2020, it was determined that the goodwill amounts for Swell were impaired and should be written off. The Company has written off $13,676,649 of goodwill in relation to Swell for the year ended January 31, 2020.

Eco Firma Farms LLC - Oregon, USA

On June 13, 2018, the Company completed the acquisition of 100% of the membership interests of Eco Firma Farms LLC ("EFF"), an Oregon limited liability company (former subsidiary of Proudest Monkey Holdings LLC), which owned and operated a cannabis production facility, and related assets, in Oregon. On June 28, 2018 and July 6, 2018, the Company announced certain post-closing adjustments with respect to the acquisition of EFF. In consideration for 100% of the membership interests of EFF, the Company paid total consideration of $7,849,684.

The vendors of Eco Firma Farms LLC can also earn up to 6,500,000 common shares of C21, at a deemed issue price of $1.00/common share, over a maximum seven-year period, if the EBITDA earned by the Company in relation to EFF satisfies certain agreed upon amounts ("EFF Earn Out"). Management has determined that the EFF Earn Out has no value.

On December 28, 2018, the Company restructured certain real estate rights connected with its EFF operations. Under the restructured arrangement, for a $3.8m purchase price, the Company formally acquired the real estate assets housing EFF's cultivation operations under a vendor finance arrangement that converted rental payments into mortgage interest payments. As part of the restructuring, two of the vendors of EFF agreed, among other things, to assign the rights to their 39.25% share of the EFF Earn Out to a wholly owned subsidiary of the Company.

At January 31, 2019, it was determined that the goodwill amounts for EFF were impaired and the Company wrote off $5,160,741 of goodwill in relation to EFF.

On May 10, 2019, the Company issued 3,983,886 common shares (the common shares were issued subject to escrow release in four consecutive monthly installments of 25% each commencing on September 14, 2019), at a deemed price of $0.825/common share, to settle the $3.8m purchase price for the real property used in EFF's operations, in addition to assuming the $513,294 balance under the first mortgage for the property.

At October 31, 2019 the Company has determined that the EFF real estate assets were impaired and the Company wrote off $4,139,522 of value from these assets.

Cultivation activities at the EFF facility were temporarily shuttered in October 2019. The EFF facility is currently under third-party management pursuant to a management agreement dated June 15, 2020, whereby the management company has assumed all costs at the facility including real property taxes and costs.

Restructure of Oregon Operations

With the closing of the final two Oregon acquisitions early in the 2020 fiscal year, the Company was able to move forward in the second half of 2019 with the integration, restructuring and optimization of the Oregon operations. By November 2019, the Company had reduced its aggregate annual run-rate through cost reductions in excess of $6 million. The Company centralized its processing and distribution business in Central Oregon at the Phantom Farms facilities. The indoor and outdoor cultivation, processing and wholesale distribution operations of Phantom Farms have been expanded and streamlined. The production of Hood Oil branded consumer packaged goods has been moved to the Phantom facilities with the shuttering of the processing operation in Portland in March 2020. The Pure Green dispensary was closed in March 2020 due to the COVID-19 pandemic. The Company has signed management agreements at the EFF, Swell and Pure Green facilities to further drive down costs, limit liability and seek to monetize redundant assets. Staffing levels in Oregon have been reduced from 86 in June 2019 to 22 in August 2020.

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COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. While the ultimate severity of the outbreak and its impact on the economic environment is uncertain, the Company is monitoring this closely. The Company's priority during the COVID-19 pandemic is protecting the safety of its employees and customers and it is following the recommended guidelines of applicable government and health authorities. Despite being deemed as an essential retailer in its core markets, the Company has experienced a negative impact on sales in certain markets. Certain markets, such as Nevada, experienced a greater impact on sales due to reduced foot traffic in certain locations. Other markets, such as Oregon, have not been significantly impacted by COVID-19. To date, the Company has modified store operations in certain locations, with an increased focus on direct-to-consumer delivery and enabling a curbside pickup option for its customers.

SHARE CAPITAL

The Company is authorized to issue an unlimited number of common shares. As of April 30, 2020, there were 96,616,531 common shares issued and outstanding. The holders of the common shares are entitled to one vote per share at all meetings of the shareholders of the Company. The holders of common shares are also entitled to dividends, if and when declared by C21's Board of Directors (the "Board") and the distribution of the residual assets of the Company in the event of a liquidation, dissolution or winding up of the Company.

On February 23, 2018, the Company's Board of Directors adopted a 10% rolling stock option plan (the "Option Plan"). A total of 505,000 options outstanding were issued under the Option Plan on inception as they were carried-forward from an older plan that was cancelled. The Option Plan provides that, subject to the requirements of the CSE, the aggregate number of common shares reserved for issuance pursuant to options granted under the Option Plan will not exceed 10% of the number of common shares of the Company that are issued and outstanding from time to time, less the aggregate number of common shares then reserved for issuance pursuant to any other equity compensation arrangement. The Company is authorized to grant options to executive officers and directors, employees and consultants, enabling them to acquire up to 10% of the issued and outstanding common shares of the Company, on a fully diluted basis. The exercise price of each option normally equals the market price of the Company's shares as calculated on the date of grant. The options can be granted for a maximum term of 10 years. Vesting is determined by the Board.

The Option Plan is administered by the Board, which has full and final authority with respect to the granting of all options thereunder subject to express provisions of the Option Plan. Options may be granted under the Option Plan to such directors, officers, employees, consultants or management company employees of the Company and its subsidiaries as the Board may from time to time designate. The Option Plan is used to provide share purchase options to be granted in consideration of the level of responsibility of the executive as well as his or her impact or contribution to the longer-term operating performance of the Company. In determining the number of options to be granted to the executive officers, the Board will take into account the number of options, if any, previously granted to each executive officer, and the exercise price of any outstanding options to ensure that such grants were in accordance with the policies of CSE, and closely aligned the interests of the executive officers with the interests of shareholders. The directors of the Company will also be eligible to receive stock option grants under the Plan, and the Company will apply the same process for determining such awards to directors as with executives.

The exercise prices shall be determined by the Board, but shall not, in any event, be less than the greater of the closing market price of the listed security on the CSE on the trading day prior to the date of grant, and the closing market price on the date of grant, of the Options. The Option Plan complies with Section 2.25 of National Instrument 45-106 - Prospectus Exemptions and provides that the number of common shares which may be reserved for issuance on a yearly basis to any one related person upon exercise of all stock options held by such individual may not exceed 5% of the issued common shares calculated at the time of grant.

As of April 30, 2020, there were 3,235,000 options outstanding to purchase common shares of which 2,685,000 had vested. As of April 30, 2020, there were 5,694,748 warrants outstanding to purchase common shares.

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On July 17, 2018, the Company adopted a Restricted Share Unit Plan under which it authorized the Company's compensation committee to grant restricted share units ("RSU") entitling a holder to receive one common share, as a discretionary payment in consideration of past services to the Company or as an incentive for future services, to both eligible employees and eligible contractors. As of April 30, 2020, there were no RSUs outstanding to purchase common shares.

On May 27, 2020, the Company extended the time period for exercise of 2,794,746 warrants at a price of CDN$1.83 per share for one year. The subject warrants were originally issued pursuant to a non-brokered private placement financing completed by the Company on May 29, 2019. The warrants were scheduled to expire on May 28, 2020; the new expiry date is May 28, 2021. All other terms and conditions of the warrants remain the same.

EMPLOYEES

With the closing of the latest acquisition in May 2019, and the lack of availability of financing at that time in the public markets, the Company commenced a restructuring and integration of its operations, at which time the employee count was two-hundred and ten (210). As of the date of this report, the Company employs one-hundred and sixteen (116) FTE's, including seven (7) in corporate positions.

The Company's employees are highly talented individuals who have educational achievements ranging from Ph.D., Masters, and undergraduate degrees in a wide range of disciplines, as well as staff who have been trained on the job to uphold the highest standards as set by the Company. The Company hires and promotes individuals who are best qualified for each position, priding itself on using a process that identifies people who are trainable, cooperative and share the Company's core values.

The Company takes all reasonable steps to ensure staff are appropriately informed and trained to ensure a culture of health, safety, and continuous improvement, especially during these difficult times for public health and safety due to the COVID-19 pandemic. Wherever possible, the Company will continue to adopt generally accepted health and safety best practices from non-cannabis-related industries and follows all health and safety guidelines issued by the United States Centers for Disease Control ("CDC") and all orders from relevant provincial, state and local jurisdictions and authorities.

CULTIVATION AND PROCESSING

The Company currently operates four cultivation facilities, totaling 105,000 square feet of active canopy yielding over 12,500 pounds of quality cannabis flower annually. The Company also currently operates two (2) processing facilities, with approximately 365,000 grams per month of raw oil extraction capability.

Through Silver State in Nevada, the Company operates indoor cultivation and processing with 11,104 square feet of active canopy and 1,200 square feet dedicated to volatile extraction. Silver State produces approximately 5,100 pounds of flower (2700 pounds) and trim (2400 pounds) annually which is primarily sold within the Company's Silver State dispensaries, with plans to expand production for future captive retail and wholesale distribution under the Silver State and partner brands. The Company has expanded Silver State's extraction capacity to support branded CPG expansion in both captive retail and wholesale channels. Hood Oil cartridges were released to the Nevada market in June 2019. In the three months ended April 30, 2020, Hood Oil sold 33,375 units, generating $761,964 in revenue. Phantom Farms pre-rolls were released to the wholesale market in September 2019 followed by Phantom flower strains and a new Phantom Farms CBD product line. The Company's Oregon brands made up 13 of the top 15 SKUs sold at Silver State Relief in July 2020.

Through Phantom in Southern Oregon, the Company operates outdoor and greenhouse active canopy totaling 80,000 square feet. Phantom also operates a 7,700 square foot state-of-the-art indoor grow facility in central Oregon, with 5,000 square feet of active canopy. Phantom cultivates cannabis using sustainable practices and volcanic filtered water in both its indoor and outdoor facilities and produces over 24 strains of cannabis, including some with award winning genetics. Phantom operates a 5,600 square foot facility which includes an extraction laboratory with a 90-liter supercritical CO2 system and a wholesale distribution warehouse in central Oregon.

Through EFF in Oregon, the Company owns an indoor cannabis cultivation facility with 3,000 square feet of available canopy. In October 2019, the Company temporarily halted operations at the EFF facility to streamline Oregon operations due to both economic and regulatory factors. The EFF facility is currently under third-party management pursuant to a management agreement dated June 15, 2020 whereby the management company has assumed all leasehold liabilities and costs at the facility, and the Company is evaluating the potential sale of the cultivation license, the building and the fixtures contained therein.

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Through Swell in Oregon, the Company has a 10,000 square foot volatile and non-volatile extraction facility together with expansion rights for an additional adjacent 12,000 square feet. In April 2020, the Company temporarily shuttered the Swell facility and consolidated its processing and wholesale operations with the Phantom processing and wholesale operations in Central Oregon. The Swell facility is currently under third-party management pursuant to a management agreement dated June 1, 2020 whereby the management company has assumed all leasehold liabilities and costs at the facility, and the Company is evaluating the potential sale of the processing and wholesale licenses.

RETAIL

Through Silver State in Nevada, the Company operates two dispensaries, an 8,000-square foot retail dispensary, located in Sparks, and a 6,000-square foot dispensary located in Fernley, collectively servicing a total of more than 111,500 recreational and medical cannabis customers during the three months ended April 30, 2020, with over 700 SKUs in each store and averaging more than $61.93 per transaction. Consistent quality, market-leading pricing, and superior customer service translate to industry-leading sales per square foot ($2,721/sq. ft. in FY2021-Q1). Likewise, because of its substantial purchasing leverage, Silver State consistently offers customers among the lowest prices within the state. The Sparks dispensary captured 29.6% of Washoe County, Nevada sales during the three months ended April 30, 2020.

On March 17, 2020 Nevada State Governor, Steve Sisolak announced the closure of all non-essential business starting at noon on March 18, 2020 for 30 days as part of the State's response to curb the threat of the spread of COVID-19. This shutdown was extended until June 1, 2020. On April 30, 2020 all retail cannabis dispensaries in Nevada were allowed to offer online ordering with curbside pick-up in addition to delivery and on May 7, 2020, as part of the State of Nevada's COVID-19 reopening plan, all dispensaries were allowed to reopen to the general public at significantly reduced number of customers allowed in the facility at the same time. All dispensaries are allowed to have a maximum of 50% of the dispensary location's fire rated occupancy level or 10 customers, whichever is less. The Company anticipates that the ongoing COVID-19 pandemic will continue to pose a potential material impact on its business in FYE2021 from reduction in tourism in Washoe County, the continued reduction in allowed customer traffic and potential additional business closures or shutdowns.

Through Pure Green in Oregon, the Company has a 3,000 square foot retail dispensary located in Portland's vibrant Hollywood District. In March 2020, the Company temporarily shuttered the dispensary due to the COVID-19 pandemic. As of the date of this report, the dispensary is scheduled to re-open imminently pursuant to the aforementioned management agreement. As such, the Company is evaluating the potential sale of the retail license and assignment of the leasehold liabilities at the Pure Green dispensary.

BRANDING AND MARKETING

The Company utilizes consistent branding and messaging across its retail and wholesale channels under Phantom Farms, Hood Oil, Silver State Relief, Dab Society Extracts and Pure Green. The Company currently sells over 800 distinct SKUs, including the following product categories: CO2 vaporizer pens, live resin vaporizer pens, distillate vaporizer pens, live resin extract, cured resin extract, bulk flower, packaged flower, pre-rolls, CBD cured resin vaporizer pens, CBD CO2 vaporizer pens, and CBD cured resin extracts.

BANKING AND PROCESSING

In Oregon, the Company deposits funds from its operations into its credit union accounts at Salal Credit Union (Washington State) and Maps Credit Union (Oregon). In Nevada, the Company deposits funds from its operations into its credit union accounts held at Partner Colorado Credit Union through Safe Harbor Private Banking services. The Company is fully transparent with its credit union partners regarding the nature of its business and the credit unions remain supportive of the Company's growth plans.

PRODUCT SELECTION AND OFFERINGS

Product selection decisions are currently made by the Company's buyers, who negotiate with potential vendors across all product categories including packaged and wholesale flower, vaporizer pens, cured extracts, edibles and pre-rolls. The Company bases its product selection decisions on product quality, margin potential, and scalability.

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The Company's branded CPG and flower-based products are sold primarily through captive retail and wholesale channels in Oregon and Nevada. The Company's retail locations in Oregon and Nevada also offer third party branded CPG and flower-based products including a wide variety of THC and CBD based products, including vaporizer pens, cured resin extracts, bulk flower, packaged flower, pre-rolls, edibles, tinctures, and topicals.

IN-STORE PICKUP, CURBSIDE DELIVERY AND DELIVERY

In addition to traditional point-of-sale retail as modified due to COVID-19, the Company's Nevada retail locations offer in-store pickup, curbside delivery and delivery utilizing the leading third-party service providers, a leading cannabis sales and fulfillment web-based application. The Company actively monitors the continued growth of a number of cannabis web-based sales and fulfillment platforms and is well poised to utilize strategic third-party service providers during the ongoing pandemic.

INVENTORY MANAGEMENT

The Company has comprehensive inventory management procedures, which are compliant with all applicable state and local laws, regulations, ordinances, and other requirements. These procedures ensure strict controls over the Company's cannabis flower and CPG inventory from its production, processing and distribution licensees through to ultimate sale to end consumers (or rare cases disposal as cannabis waste). Such inventory management procedures also include strong quality control and quality assurance measures to prevent in-process contamination and maintain the safety and quality of the products. The Company is committed to supplying safe, consistent, and high-quality cannabis flower and CPG products at a value-oriented price.

COMPETITION

Across a modified and strategic cannabis value chain, the Company expects to continue to vigorously compete with other licensees in Oregon and Nevada. Because Oregon is an "open" license state (arguably one of the more free-market states with respect to both barriers to entry and regulation), the competitive landscape has been challenging since the inception of recreational cannabis. Nevada is a "limited" license state, therefore competition to date has been less challenging and the broader market dynamics are more favorable. While many of the Company's direct competitors continue to be small-scale local operators, market rationalization through consolidation is increasingly a trend. Of note is the increased participation of multi-state operators with national growth aspirations in both the Oregon and Nevada marketplaces. As more U.S. jurisdictions pass state legislation allowing the recreational use and sale of cannabis, the Company is assured an increased level of competition in U.S. markets. These increasingly competitive U.S. markets may adversely affect the financial condition and operations of the Company.

See "Industry Background and Trends" and "Risk Factors - Competition" below.

INTELLECTUAL PROPERTY

The Company has developed numerous proprietary genetics, processes, technologies and products. These assets include genetics, ERP and other software applications, cultivation and extraction technologies, as well as consumer brands. Whenever available and appropriate, the Company undertakes reasonable intellectual property protections to secure these assets.

To date, absent the availability of customary federal patent, trademark, and copyright protections for cannabis applications, the Company has relied on non-disclosure/confidentiality arrangements, common law trade secrets, and state-based trademark protections. The Company actively monitors and responds to all potentially material intellectual property infringements and maintains strict standards and controls regarding the use and dissemination of its intellectual property.

In addition, the Company owns and operates the following website domains: www.cxxi.ca, www.phantom-farms.com, www.silverstaterelief.com, www.dabsocietyextracts.com, and c21supply.co, along with numerous social media accounts across all major platforms.

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SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for the most recently prepared quarters:

SUMMARY OF QUARTERLY RESULTS
		30-Apr-20		31-Jan-20		31-Oct-19		31-Jul-19
Total assets	$	59,920,690	$	61,450,085	$	88,350,852	$	94,829,941
Working capital (deficiency)	$	(26,888,165)	$	(26,954,549)	$	(22,183,831)	$	(14,712,253)
Shareholders' equity (deficiency)	$	14,576,831	$	13,579,554	$	30,770,235	$	35,575,028
Revenue	$	8,145,824	$	9,512,225	$	10,576,555	$	9,859,293
Net income (loss)	$	(1,789,263)	$	(21,307,833)	$	(5,155,945)	$	(2,964,862)
Net income (loss) per share		(0.02)		(0.25)		(0.06)		(0.04)
		30-Apr-19		31-Jan-19		31-Oct-18		31-Jul-18
Total assets	$	82,283,665	$	77,433,026	$	28,195,344	$	32,986,053
Working capital (deficiency)	$	(26,925,929)	$	(13,316,122)	$	16,198,947	$	19,760,429
Shareholders' equity (deficiency)	$	(40,513,179)	$	21,086,613	$	21,809,710	$	25,461,138
Revenue	$	7,757,022	$	2,178,233	$	301,243	$	106,035
Net income (loss)	$	(3,126,993)	$	(11,632,816)	$	(3,479,106)	$	(7,420,674)
Net income (loss) per share		(0.05)		(0.38)		(0.19)		(0.46)

During the three months ended April 30, 2020, revenues decreased compared to Q3 and Q4 2020 primarily due to the effects of the COVID-19 pandemic on the business results in Nevada. Revenue decreased in Oregon due to the pandemic, but also due to the integration, restructuring and closing of redundant assets of the business that commenced in Q3 2020. The Company's limited operating history within the cannabis industry is the primary driver for the large fluctuation of operational results quarter over quarter of the prior year. Cannabis operations commenced on June 13, 2018 with the completion of C21's acquisition of EFF. Prior to this date, the company was inactive operationally as management prepared for its new focus on cannabis and listing on the CSE.

Quarterly adjusted operating earnings

	FYE 2021		Quarters ended FYE 2020
(US 000's)	Q1		Q4		Q3		Q2		Q1
Revenue	8,146	$	9,512	$	10,577	$	9,859	$	7,757
Cost of sales before FV adjustments*	5,237		5,544		6,153		5,488		4,440
Gross profit	2,909		3,968		4,423		4,371		3,317
GP%	36%		42%		42%		44%		43%
Operating expenses	2,366		2,832		3,263		4,313		4,097
Income from operations	542		1,136		1,160		58		(779	)
Add back: Depreciation and amortisation	489		512		957		889		1,047
Share based compensation	36		153		94		61		185
Adjusted operating earnings	1,067		1,802		2,212		1,008		452

All values are in US Dollars.

The above table presents quarterly Adjusted operating earnings excluding FV adjustments, depreciation and share based compensation expense. This also excludes all items below the "Income (loss) before undernoted items" on the income statement. See "Non-IFRS measures" below.

*FYE 2020 excludes a $4,000,000 one-time non-cash charge related to the fair value of inventory acquired as part of the Silver State acquisition which closed on January 1, 2019. This inventory was fully sold during the first six months of the year ended January 31, 2020.

FISCAL YEAR 2021 NEVADA OPERATIONS UPDATE

Despite the ongoing pandemic and COVID-19 business disruptions, our Q1 FY2021 Nevada dispensary revenues were approximately 88% of Q4 levels and 98% of Q1 FY2020. This strong performance is attributed to a loyal customer base, which has enabled the Company and its Silver State dispensaries to fare better than many in-state peers who are more reliant on tourist traffic. In the three months ended July 31, 2020, the Silver State dispensaries set a collective retail revenue record for a quarter and averaged over $63.00 per transaction. In July 2020, the dispensaries experienced a record run rate which eclipsed its previous record month of June 2020, generating $98,500 in revenue per day. The run rate for July 2020 was 28% higher than the monthly average of Q1 FY2021.

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Nevada dispensary statistics

Nevada dispensary statistics in the table below illustrate the growth of the business in the past 18 months, which includes the vape crisis and some seasonality in Q4. The first six months of the FY2021 have been affected by the COVID-19 pandemic, specifically six weeks of delivery only in Q1. The spike in $/transaction illustrates the desire of consumers to spend less time in the stores. July 2020 achieved record sales of $98,500 per day.

	Year ended January 31, 2021								Year ended January 31, 2020
		July		June		May		Q1		Q4		Q3		Q2		Q1
$/transaction	$	59.4	$	62.0	$	70.7	$	61.7	$	47.3	$	48.2	$	48.9	$	50.0
Sales$000/day	$	98.5	$	96.5	$	83.3	$	76.8	$	87.4	$	90.4	$	85.0	$	78.3

FAIR VALUE ADJUSTMENT TO BIOLOGICAL ASSETS

During FY2021-Q1 the Company recorded a net gain on fair value adjustments on biological assets of $328,946. Based on review of peer issuers, effective July 1, 2019 the Company changed its input price used to calculate the FMV of biological assets for its Nevada operations to use prices quoted by NDOT (Nevada Department of Taxation) in an effort to align with peer issuers and reduce estimation uncertainty and judgment. The Company notes that it sells the majority of its Cannabis biological produce through owned retail channel at Silver State Relief which realizes significant premiums over the wholesale prices used to value biological assets for presentation on the Company's balance sheet.

ADJUSTED EBITDA

Adjusted EBITDA is a non‐IFRS financial measure, and as such there is no standardized definition for the term. The Company's adjusted EBITDA included below is unlikely to be comparable to similar measures presented by other issuers. See "Non‐IFRS Measure" below for additional information.

Due to adoption of IAS 16 which requires the Company to capitalize most ordinary property leases, the Company must characterize most of its lease payments as amortization on the statement of loss and comprehensive loss. The Company deducts rent classified as lease amortization and included in depreciation and amortization, to maintain the spirit of this metric in reflecting the Company's ongoing operational performance.

ADJUSTED EBITDA
April 30, 2020		Oregon			Nevada			Corporate			Consolidated
Income (loss) before income taxes	$	(2,271,944	)	$	2,200,933		$	(1,128,262	)	$	(1,199,273	)
Adjustments
Net impact, fair value on biological assets		177,937			(506,883	)		-			(328,946	)
Depreciation and amortization		28,093			433,378			27,481			488,952
Rent expense classified as lease amortization		(11,699	)		(115,090	)		(23,495	)		(150,284	)
Fair value changes on derivative instruments		-			-			(264,802	)		(264,802	)
Share based compensation		-			-			35,750			35,750
Interest expense, net		83,028			20,540			673,652			777,220
Accretion		-			-			94,719			94,719
Restructuring costs		1,481,560			-			-			1,481,560
Impairments & other		2,740			(20,579	)		(163	)		(18,002	)
Adjusted EBITDA	$	(510,286	)	$	2,012,300		$	(585,120	)	$	916,894
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Non-IFRS Measures

Adjusted EBITDA and Adjusted operating earnings are supplemental, non-GAAP financial measures. The Company defines EBITDA as earnings before depreciation and amortization (excluding rent classified as lease amortization), income taxes, and interest. Additionally, the Company's Adjusted EBITDA and Adjusted operating earnings presented above excludes fair value adjustments, accretion, impairment charges, one-time transaction costs and all other non-cash items. The Company has presented Adjusted EBITDA because C21's management believes it is a useful measure for investors when assessing and considering C21's ongoing continuing operations and prospects for the future. Furthermore, Adjusted EBITDA is a commonly used measurement in the financial community when evaluating the market value of companies considered to be in similar businesses. Adjusted EBITDA is not a measure of performance calculated in accordance with IFRS, and it should not be considered in isolation of, or as a substitute for, the measurement of the Company's performance prepared in accordance with IFRS. Adjusted EBITDA, as calculated and reconciled in the table above, may not be comparable to similarly titled measurements used by other issuers and is not necessarily a measure of C21's ability to fund its cash needs.

CONTRACTUAL OBLIGATIONS

The following table includes the Company's obligations to make future payments for each of the next five years that represent contracts and other commitments that are known and committed:

CONTRACTUAL OBLIGATIONS
	Carrying amount	Contractual cash<br>flows	Under 1 year	1-3 years	3-5 years	More than 5<br>years
As at April 30, 2020
Trade and other payables	$ 2,936,298	$ 2,936,298	$ 2,936,298	$ -	$ -	$ -
Finance lease payments (1)	4,665,268	6,110,486	1,620,775	3,319,486	1,103,614	66,611
Convertible debt (2)	9,048,762	9,048,762	7,880,796	1,167,966	-	-
Consideration payable (3)	846,256	846,256	846,256	-	-	-
Notes and other borrowings (4)	20,036,920	20,036,920	19,548,414	91,486	91,486	445,992
Total	$ 37,533,504	$ 38,978,722	$ 32,832,539	$ 4,578,938	$ 1,195,100	$ 512,603

(1) Amounts in the table reflect minimum payments due for the Company's leased facilities and certain leased equipment under various lease agreements and purchase agreements.

(2) Amounts in the table reflect the contractually required principal payments payable under various convertible note and convertible debenture agreements.

(3) Amounts in the table reflect the contractually required consideration due to vendors under the purchase agreement for the acquisition of Swell Companies.

(4) Amounts in the table reflect the contractually required principal payments payable under a promissory note issued to the vendor that sold Silver State to the Company, and miscellaneous debt.

RELATED PARTY TRANSACTIONS

During the three months ended April 30, 2020, the Company entered in the related party transactions as described below. Balances due to related parties included in accounts payable, accrued liabilities, and promissory notes payable at the periods ended:

		2020-04-30		2020-01-31
Due to the President and CEO	$	19,625,759	$	21,713,910
Due to Directors of the Company		5,672		1,476
Due to the CFO of the Company		218		64
	$	19,631,649	$	21,715,450
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The Company had the following transactions with related parties during the periods ended:

		YTD		Year
		2020-04-30		2020-01-31
Consulting fees paid to a director	$	-	$	38,310
Amounts paid to CEO or companies controlled by CEO		1,988,378		13,039,739
Salary paid to directors and officers		109,080		1,131,201
Share Compensation including warrants and stock options for directors and officers		-		95,613
Convertible debenture interest paid to directors and officers		-		27,230
	$	2,097,458	$	14,332,093

ADDITIONAL INFORMATION

LEGAL PROCEEDINGS

A complaint was filed in the Oregon State Circuit Court for Clackamas County, on April 29, 2019, by two current owners of Proudest Monkey Holdings, LLC (the former sole member of EFF) (the "Plaintiffs"), alleging contract, employment, and statutory claims with an amount in controversy of $1,837,500 against the Company, its wholly-owned subsidiaries 320204 US Holdings Corp, EFF, Swell Companies Limited, and Phantom Brands LLC, in addition to three directors, two officers, and one former employee. The Company and the other defendants wholly denied the allegations and claims made in the lawsuit and is defending the lawsuit. On June 21, 2019, the Company filed Oregon Rule of Civil Procedure (ORCP) 21 motions to dismiss all of the Plaintiffs' claims against it, its wholly-owned subsidiaries, and other defendants; on May 6, 2020, the court granted the Company's Rule 21 motion in its entirety to dismiss all of Plaintiffs' claims pursuant to Oregon Rules of Civil Procedure 21A(1). The parties have agreed on a form of judgment of dismissal and await a judgment of dismissal to be entered. Once that occurs, the Company will prepare and submit a petition to recover the costs and attorney fees incurred by the Company as the prevailing party in the matter. Whether that petition is granted, and the amount of costs and fees awarded, if any, cannot be guaranteed or predicted.

On or about September 13, 2019, the Company delivered a notice to the Plaintiffs of alleged breach and default under the purchase and sale agreement, due to unlawful, intentional acts and material misrepresentations before and after the completion of the purchase. As a result of such breach, the Company denied the Plaintiffs' tender of their share payment notes in connection with the agreement. On or about October 14, 2019, Proudest Monkey Holdings, LLC ("PMH") and one of its current owners, sued the Company in the Supreme Court of British Columbia to compel the issuance and delivery of the subject shares, including interests and costs. In connection with the Oregon lawsuit, the Company conducted an internal investigation regarding malfeasance by the Plaintiffs (discussed more fully below under Oregon Compliance). On November 8, 2019, the Company responded and counterclaimed for general, special and punitive damages, including interest and costs, related to breach of contract, repudiation of contract, breach of indemnity and fraudulent and negligent misrepresentation by the Plaintiffs. The Company's counterclaims included the malfeasance discovered during the internal investigation. Plaintiffs' filed a response to the Company's counterclaims on or about June 5, 2020 and the parties have stipulated to a form of amended pleading which includes the joinder of additional parties, an owner of PMH as a plaintiff and EFF as a defendant, and additional contract and equitable claims and damages, similar to those alleged by the Plaintiffs in the Oregon lawsuit (breach of contract, indemnity, unjust enrichment and wrongful termination claims). This action is at the pleading stage and it is too early to predict its resolution.

On or about May 30, 2019, Wallace Hill filed a civil claim in the Supreme Court of British Columbia alleging breach of contract and entitlement to 1,800,000 common shares of the Company, fully vested by March 1, 2019, and damages due to the lost opportunity to sell those shares after such date for a profit. On June 23, 2019, the Company circulated a letter to Wallace Hill terminating the agreement and accepting Wallace Hill's repudiation of the agreement based on Wallace Hill's previously published defamatory comments and termination of the agreement. Also, on June 23, 2019, the Company filed its response to the civil claim denying all claims and filed counterclaims alleging breach of contract, a declaratory judgment of termination of the agreement, defamation and an injunction from further defamatory comments. This action remains at the beginning of the discovery phase and it is too early to predict its resolution.

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OFF-BALANCE SHEET ARRANGEMENTS

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

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL INFORMATION

The Company's financial statements and the other financial information included in this MDA are the responsibility of the Company's management and have been examined and approved by the Board. The accompanying audited financial statements are prepared by management in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board, and include certain amounts based on management's best estimates using careful judgment. The selection of accounting principles and methods is management's responsibility.

Management recognizes its responsibility for conducting the Company's affairs in a manner that complies with the requirements of applicable laws and established financial standards and principles and maintains proper standards of conduct in its activities. The Board supervises the financial statements and other financial information through its audit committee, which is comprised of a majority of non-management directors.

The audit committee's role is to examine the financial statements and recommend that the Board approve them, to examine the internal control and information protection systems, and all other matters relating to the Company's accounting and finances. To do so, the audit committee meets annually with the external auditors, with or without the Company's management, to review their respective audit plans and discuss the results of their examination. This committee is responsible for recommending the appointment of the external auditors or the renewal of their engagement.

ACCOUNTING POLICIES AND ESTIMATES

The Company's unaudited interim condensed consolidated financial statements for the three months ended April 30, 2020 were authorized for issuance on August 12, 2020 by the Board.

BASIS OF PRESENTATION

The Company's consolidated financial statements for the three months ended April 30, 2020 have been prepared on an accrual basis and are based on historical costs, except for certain financial instruments and biological assets classified as fair value through profit or loss. The financial statements are presented in U.S. dollars unless otherwise noted. Amounts in comparative periods may have been reclassified to conform with the current year's presentation.

The accompanying consolidated financial statements as at and for the three months ended April 30, 2020, incorporate the accounts of the Company and its wholly-owned subsidiaries as defined in IFRS 10 - Consolidated Financial Statements. All consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements (i.e., from the date of their acquisition). All intercompany balances and transactions are eliminated upon consolidation.

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The following are the Company's wholly owned subsidiaries that are included in C21's consolidated financial statements as at and for the year ended April 30, 2020:

	Country of	Percentage	Functional
Name of Subsidiary	Incorporation	Ownership	Currency	Principal Activity
320204 USHoldings Corp.	USA	100%	USD	Holding Company
320204 Oregon Holdings Corp.	USA	100%	USD	Holding Company
320204 Nevada Holdings Corp.	USA	100%	USD	Holding Company
320204 Re Holdings,LLC	USA	100%	USD	Holding Company
Eco Firma Farms LLC	USA	100%	USD	Cannabis producer
Silver State Cultivation LLC	USA	100%	USD	Cannabis producer
Silver State Relief LLC	USA	100%	USD	Cannabis retailer
Swell Companies LTD	USA	100%	USD	Cannabis processor,distributor
Megawood Enterprises Inc.	USA	100%	USD	Cannabis retailer
Phantom Venture Group,LLC	USA	100%	USD	Holding Company
Phantom Brands,LLC	USA	100%	USD	Holding Company
Phantom Distribution,LLC	USA	100%	USD	Cannabis distributor
63353 Bend,LLC	USA	100%	USD	Cannabis producer
20727-4 Bend,LLC	USA	100%	USD	Cannabis processor
4964 BFH,LLC	USA	100%	USD	Cannabis producer
Workforce Concepts 21,Inc.	USA	100%	USD	Payroll and benefits services

SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

Business Combinations

Judgment is used in determining whether the Company's acquisition is considered a business combination or an asset acquisition. Additionally, judgement is required to assess whether any amounts paid on the achievement of agreed upon milestones represents contingent consideration or compensation for post-acquisition services. Judgment is also required to assess whether contingent consideration arising from an acquisition should be classified as a liability or equity. Contingent consideration classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement by the Company is accounted for within equity. Contingent consideration classified as a liability is remeasured at subsequent reporting dates in accordance with IAS 39 - Financial Instruments: Recognition and Measurement, or IAS 37 - Provisions, Contingent Liabilities and Contingent Assets.

Impairment of Long-Lived assets

When there are indications that an asset may be impaired, the Company is required to estimate the asset's recoverable amount. The recoverable amount is the greater of value-in-use and fair value less costs of disposal. Determining the value-in-use requires the Company to estimate expected future cash flows associated with the assets and a suitable discount rate in order to calculate present value.

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Biological Assets and Inventories

In calculating the value of the biological assets and inventory, management is required to make a number of estimates, including estimating the stage of growth of cannabis up to the point of harvest, harvesting costs, selling costs, sales price, wastage and expected yields for the cannabis plant. In calculating final inventory values, management is required to determine an estimate of spoiled or expired inventory and compare the inventory cost versus net realizable value.

Effective July 1, 2019, the Company began utilizing the Nevada Department of Taxation ("NDOT") determined wholesale fair market value for the period of future sales in order to calculate the expected selling price of its biological assets at its Nevada operations. Previously, the Company relied on observational inputs in the Nevada market, but the Company believes the NDOT observed values are more consistent and has observed peer issuers adopting the same valuation input.

The Company's estimates are, by their nature, subject to change. Changes in the anticipated yield or quality will be reflected in future changes in the gain or loss on biological assets.

Fair Value Measurements

Certain assets and liabilities held by the Company are measured at fair value. In estimating fair value, the Company uses market-observable data to the extent that such data is available. In certain situations where Level 1 inputs are not available, the Company engages qualified, third-party valuators to perform the valuation.

Estimated useful lives and depreciation and amortization of property, equipment and intangible assets

The Company's depreciation and amortization of property, equipment and intangible assets are dependent on the estimation of the assets' useful lives, which requires management to exercise judgment. The Company's assessment of any impairment of assets is dependent on its estimation of recoverable amounts that consider various factors, including market and economic conditions and the assets' useful lives.

Income Taxes

Judgement is required in determining whether deferred tax assets are recognized in the statement of financial position. Deferred tax assets, including those arising from unutilized tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods, in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the date of the statement of financial position could be impacted. The Company has not recorded any deferred tax assets for the years presented.

Share-based Compensation

The Company uses the Black-Scholes option pricing model to measure share-based compensation. The Company's estimate of share-based compensation is dependent on measurement inputs including the share price on measurement date, exercise price of the option, volatility, risk-free rate, expected dividends, and the expected life.

NEW ACCOUNTING STANDARDS ADOPTED

Effective for February 1, 2019, the Company adopted IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments ("IFRIC 23"). IFRIC 23 clarifies application of recognition and measurement requirements in IAS 12 - Income Taxes when there is uncertainty over income tax treatments. IFRIC 23 specifically addresses the following: (i) whether the Company considers uncertain tax treatments separately; (ii) the assumptions the Company makes concerning the examination of tax treatments by relevant tax authorities; (iii) how the Company determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and, (iv) how the Company considers changes in facts and circumstances. The standard is effective for annual periods beginning on or after January 1, 2019. The Company has applied IFRIC 23 retrospectively on adoption and determined that it is probable that the relevant tax authorities would accept the tax treatments and positions used in the Company's consolidated financial statements. IFRIC 23 did not impact the Company's classification and measurement of deferred tax assets or deferred tax liabilities and thus opening equity of the Company was not restated. Based on the Company's assessment, the adoption of IFRIC 23 did not have a material impact on its consolidated financial statements for the year ended January 31, 2020 or the three months ended April 30, 2020.

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FINANCIAL RISK MANAGEMENT

The Board approves and monitors the risk management processes of the Company, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

CREDIT RISK

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company's primary exposure to credit risk is on its cash held in bank accounts, accounts receivable, and its notes receivable from acquisition targets. The Company's cash is deposited in bank accounts held with a major bank in Canada, a trust company in Canada, and three credit unions in Oregon, Washington and Colorado; and accordingly, there is a concentration of credit risk. This risk is managed by using a major bank that is a high credit quality financial institution as determined by rating agencies. The Company's notes receivables are placed with acquisition targets that are under definitive agreements, in which closing is based primarily on receipt of regulatory approval. If an unlikely event occurred which delayed regulatory approval for an extended period of time or permanently, the risk of default on these notes would be increased based on the liquidity of the acquisition targets.

LIQUIDITY RISK

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. The Company's ability to continue as a going concern is dependent on management's ability to raise required funding through future equity or debt issuances. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board are actively involved in the review, planning and approval of significant expenditures and commitments.

The Company's consolidated financial statements for three months ended April 30, 2020 have been prepared on a going concern basis, which assumes that the Company will be able to continue its operations and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

Further, there remains uncertainty about the U.S. federal government's position on cannabis with respect to cannabis-legal states. A change in its enforcement policies could impact the ability of the Company to continue as a going concern and have a material adverse impact on the business.

INTEREST RATE RISK

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not subject to any interest rate volatility as its long-term debt instruments and convertible notes are carried at a fixed interest rate throughout their term.

CAPITAL MANAGEMENT

The Company's objectives when managing its capital are to ensure there are enough capital resources to continue operating as a going concern and maintain the Company's ability to ensure sufficient levels of funding to support its ongoing operations and development. The purpose of these objectives is to provide continued returns and benefits to the Company's shareholders. The Company's capital structure includes items classified in debt and shareholders' equity.

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The Board does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business considering changes in economic conditions and the risk characteristics of the Company's underlying asset.

The Company works with its capital advisors, Eight Capital Corp. based in Toronto, Canada, and CB1 Capital based in New York, to identify the best strategic options to execute our corporate growth plans, as well as increasing financial flexibility in managing our debt.

U.S. INDUSTRY BACKGROUND AND REGULATORY ENVIRONMENT

INDUSTRY BACKGROUND AND TRENDS

The emergence of the legal cannabis sector in the United States, both for medical and adult use, has been rapid as more states adopt regulations for its production and sale. Today 60% of Americans live in a state where cannabis is legal in some form and almost a quarter of the population lives in states where it is fully legalized for adult use.

The use of cannabis and cannabis derivatives to treat or alleviate the symptoms of a wide variety of chronic conditions has been generally accepted by a majority of citizens with a growing acceptance by the medical community as well. A review of the research, published in 2015 in the Journal of the American Medical Association, found evidence that cannabis can treat pain and muscle spasms. The pain component is particularly important, because other studies have suggested that cannabis can replace patients' use of highly addictive, potentially deadly opiates - meaning cannabis legalization literally improves lives.

Polls throughout the United States consistently show overwhelming support for the legalization of medical cannabis, together with strong majority support for the full legalization of recreational adult-use cannabis. It is estimated that 94% of U.S. voters support legalizing cannabis for medical use. In addition, 66% of the U.S. public supports legalizing cannabis for adult recreational use. These are large increases in public support over the past 40 years in favor of legalized cannabis use.

Notwithstanding that 34 states and the District of Columbia have now legalized adult-use and/or medical cannabis, cannabis remains illegal under U.S. federal law with cannabis listed as a Schedule I drug under the U.S. Federal Controlled Substances Act of 1970 ("CSA").

Currently the Company only operates in the states of Oregon and Nevada. The Company may expand into other states within the United States that have legalized cannabis use either medicinally or recreationally and expand internationally.

FEDERAL REGULATORY ENVIRONMENT

Under U.S. federal law, marijuana is currently a Schedule I drug. The CSA has five different tiers or schedules. A Schedule I drug means the U.S. Drug Enforcement Agency ("DEA") considers it to have a high potential for abuse, no accepted medical treatment, and lack of accepted safety for the use of it even under medical supervision. Other Schedule I drugs are heroin, LSD and ecstasy. The Company believes the CSA categorization as a Schedule I drug is not reflective of the medicinal properties of marijuana or the public perception thereof, and numerous studies show cannabis is not able to be abused in the same way as other Schedule I drugs, has medicinal properties, and can be safely administered. Additionally, while some studies show cannabis is less harmful than alcohol, alcohol is not classified under the CSA.

Thirty-four (34) states and the District of Columbia, have now legalized adult-use and/or medical marijuana. The federal government sought to provide guidance to enforcement agencies and banking institutions with the introduction of the U.S. Department of Justice Memorandum drafted by former Deputy Attorney General James Michael Cole in 2013 (the "Cole Memo") and U.S. Department of the Treasury Financial Crimes Enforcement Network ("FinCEN") guidance in 2014.

The Cole Memo offered guidance to federal enforcement agencies as to how to prioritize civil enforcement, criminal investigations and prosecutions regarding marijuana in all states. The memo put forth eight prosecution priorities:

preventing the distribution of marijuana to minors;
preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;
preventing the diversion of marijuana from states where it is legal under state law in some form to other states;

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preventing the state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
preventing the violence and the use of firearms in the cultivation and distribution of marijuana;
preventing the drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and,
preventing marijuana possession or use on federal property.

In January 2018, the then United States Attorney General, Jeff Sessions, by way of issuance of a new U.S. Department of Justice Memorandum (the "Sessions Memo"), rescinded the Cole Memo and thereby created a vacuum of guidance for U.S. enforcement agencies and the U.S. Department of Justice ("DOJ").

Due to the CSA categorization of marijuana as a Schedule I drug, U.S. federal law makes it illegal for financial institutions that depend on the Federal Reserve's money transfer system to take any proceeds from marijuana sales as deposits. Banks and other financial institutions could be prosecuted and possibly convicted of money laundering for providing services to cannabis businesses under the U.S. Currency and Foreign Transactions Reporting Act of 1970 ("Bank Secrecy Act"). Under U.S. federal law, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering or conspiracy.

While there has been no change in U.S. federal banking laws to account for the trend towards legalizing medical and recreational marijuana by U.S. states, FinCEN has issued guidance advising prosecutors of money laundering and other financial crimes not to focus their enforcement efforts on banks and other financial institutions that serve marijuana-related businesses, so long as that business is legal in their state and none of the federal enforcement priorities are being violated (such as keeping marijuana away from children and out of the hands of organized crime). The FinCEN guidance also clarifies how financial institutions can provide services to marijuana-related businesses consistent with the Bank Secrecy Act obligations, including thorough customer due diligence, but makes it clear that they are doing so at their own risk.

The customer due diligence steps include:

verifying with the appropriate state authorities whether the business is duly licensed and registered;
reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;
requesting from state licensing and enforcement authorities available information about the business and related parties;
developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers);
ongoing monitoring of publicly available sources for adverse information about the business and related parties;
ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and,
refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. With respect to information regarding state licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state licensing authorities, where states make such information available.

Due to the fear by financial institutions of being implicated in or prosecuted for money laundering, cannabis businesses are often forced into becoming "cash-only" businesses. As banks and other financial institutions in the U.S. are generally unwilling to risk a potential violation of federal law without guaranteed immunity from prosecution, most refuse to provide any kind of services to cannabis businesses. Despite the attempt by FinCEN to legitimize cannabis banking, in practice its guidance has not made banks much more willing to provide services to cannabis businesses. This is because, as described above, the current law does not guarantee banks immunity from prosecution, and it also requires banks and other financial institutions to undertake time-consuming and costly due diligence on each cannabis business they take on as a customer. Recently, some banks that have been servicing cannabis businesses have been closing accounts operated by cannabis businesses and are now refusing to open accounts for new cannabis businesses for the reasons enumerated above.

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The few credit unions who have agreed to work with cannabis businesses are limiting those accounts to no more than 5% of their total deposits to avoid creating a liquidity risk. Since the federal government could change the banking laws as it relates to cannabis businesses at any time and without notice, these credit unions must keep sufficient cash on hand to be able to return the full value of all deposits from cannabis businesses in a single day, while also servicing the need of their other customers.

The U.S. Treasury Department has publicly stated they were not informed of the then Attorney General Jeff Sessions' desire to rescind the Cole Memo and do not have a desire to rescind the FinCEN guidance for financial institutions. Multiple legislators believe that Attorney General Jeff Sessions' rescinding of the Cole Memo invites an opportunity for Congress to pass more definitive protections for cannabis businesses in states with legal cannabis programs.

Because the DOJ memorandums serve as discretionary agency guidance and do not constitute a force of law, cannabis related businesses have worked to continually renew the Rohrabacher Blumenauer Appropriations Amendment (originally the Rohrabacher Farr Amendment) that has been included in federal annual spending bills since 2014. This amendment restricts the DOJ from using federals funds to prevent states with medical cannabis regulations from implementing laws that authorize the use, distribution, possession or cultivation of medical cannabis. In 2017, Senator Patrick Leahy (D-Vermont) introduced a parity amendment to H.R.1625 - a vehicle for the Consolidated Appropriations Act of 2018, preventing federal prosecutors from using federal funds to impede the implementation of medical cannabis laws enacted at the state level, subject to Congress restoring such funding ("Leahy Amendment").

Notwithstanding the foregoing, there is no guarantee that the Trump administration will not change the stated policy of the previous administration regarding the low-priority enforcement of U.S. federal laws that conflict with state laws. The Trump administration and U.S. Congress could decide to enforce U.S. federal laws vigorously.

An additional challenge to cannabis-related businesses is that the provisions of the U.S. Internal Revenue Code (the "Code"), Section 280E, are being applied by the Internal Revenue Service ("IRS") to businesses operating in the medical and adult use cannabis industry. Section 280E of the Code prohibits cannabis businesses from deducting their ordinary and necessary business expenses, forcing them to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a cannabis business depends on how large its ratio of non-deductible expenses is to its total revenues. Therefore, businesses in the legal cannabis industry may be less profitable than they would otherwise be.

Another aspect of federal law is that it provides that cannabis and cannabis products may not be transported across state lines in the United States. As a result, all cannabis consumed in a state must be grown and produced in that same state. This dynamic could make it more difficult for the Company, in the short term, to maintain a balance between supply and demand. If excess cultivation and production capacity is created in any given state and this is not matched by increased demand in that state, then this could exert downward pressure on the retail price for the products the Company sells. If too many retail licenses are offered by state authorities in any given state, then this could result in increased competition and exert downward pressure on the retail price for the products the Company sells. On the other hand, if cultivation and production in a state fails to match growing demand then, in the short term, there could be insufficient supply of product in a state to meet demand and while the Company may be able to raise its prices there could be inadequate product availability in the short term, causing the Company's revenue in that state to fall.

Progressive federal legislation has been both introduced in the U.S. House of Representatives and received positive votes in 2019. In March 2019, the U.S. House Financial Services Committee approved an updated version of the Secure and Fair Enforcement (SAFE) Banking Act, which would serve as landmark legislation for the industry and proposed certain protections for banks in the United States against criminal and civil liabilities for serving legitimate cannabis companies that operate in compliance with applicable state law. On September 25, 2019, the full U.S House of Representatives passed H.R. 1595, the SAFE Banking Act of 2019, by a vote of 321 to 103. This bill generally prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate marijuana-related business. The Company believes this progressive banking reform for the U.S. cannabis industry reflects a positive trajectory not only for marijuana banking reform but for progressive legislation more generally. As of the date of this MDA, the prospects of the SAFE Banking Act of 2019 passing the Senate and being signed into law are unclear.

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Further, the Marijuana Opportunity Reinvestment and Expungement Act, also known as the MORE Act, is a proposal to legalize cannabis and expunge prior cannabis related convictions. On November 20th, 2019 the MORE Act was passed by the House Judiciary Committee by a vote of 24 to 10. If it is not claimed by another committee for review, the Act could move to a floor vote in the U.S. House of Representatives. The Company continues to monitor the MORE Act.

The following sections describe the legal and regulatory landscape in Oregon and Nevada, states in which the Company operates. The Company believes that its operations are in full compliance with all applicable state laws, regulations and licensing requirements. Nonetheless, for the reasons described above and the risks further described under the heading "Risk Factors" herein, there are significant risks associated with the business of the Company. Readers are strongly encouraged to carefully read all of the risk factors contained under the heading "Risk Factors" herein.

OREGON REGULATORY ENVIRONMENT

Oregon Summary

Oregon has both medical and adult-use marijuana programs. In 1998, Oregon voters passed a limited, noncommercial patient/caregiver medical marijuana law with an inclusive set of qualifying conditions that included chronic pain. In 2013, the legislature passed, and governor signed, House Bill 3460 to create a regulatory structure for existing unlicensed medical marijuana dispensaries. However, the original regulations created by the Oregon Health Authority ("OHA") after the passage of House Bill 3460 were minimal and only regulated storefront dispensaries, leaving cultivators and manufacturers within the unregulated patient/caregiver system.

On June 30, 2015, Oregon Governor Kate Brown signed House Bill 3400 into law, which improved on the existing regulatory structure for medical marijuana businesses and created a registration process for processors. In November of 2014, Oregon voters passed Measure 91, "Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act", creating a regulatory system for individuals 21 years of age and older to purchase marijuana for personal use from licensed marijuana businesses.

The OHA registers and regulates medical marijuana businesses and OLCC licenses and regulates adult-use marijuana businesses. There are six (6) distinct types of license types available for medical and adult-use businesses: Producer (cultivation), Processing (manufacturing), Wholesale, Retail, Laboratory (testing), and Research. Vertical integration between cultivation, processing, and retail is permissible, but not required, for both medical and adult-use.

The law does not impose a limit on the number of licenses. Local governments may enact local ordinances and rules to place reasonable zoning and time, place and manner restrictions, including restrictions on the number of both medical and adult-use marijuana businesses, on licensees within their jurisdiction. Further, House Bill 3400 also allowed for a "local option," to permit local city councils and county commissions to pass an ordinance prohibiting adult-use marijuana businesses if a subject jurisdiction voted against Measure 91 by greater than fifty-five percent (55%), and if after December 2015, such ordinance were then referred to the voters in the next general election. Approximately 80 Oregon cities and 16 counties prohibit adult-use marijuana businesses. Subsequent bills passed during the 2016 legislative session removed the two-year residency requirement that existed within House Bill 3400.

On October 4, 2019, Oregon Governor Kate Brown issued an executive order calling for a 180-day ban on sales of all flavored vaping products containing nicotine or THC. The executive order lasts for six months and calls for state agencies to develop a plan for warning labels, ingredient disclosures, product safety testing and a campaign to discourage vaping. The OLCC then promulgated emergency rules to enforce the 180-day ban under OAR 845-025-2805 ("Prohibited Vapor Product Sales and Manufacture"), effective October 15, 2019. In response to the ban, on October 29th, 2019 an Oregon distribution licensee filed a Motion to Stay Enforcement of the Temporary Rules. On November 14, 2019 the Motion was Granted, resulting in an immediate stay of OAR 845-025-2805. This motion prompted the OLCC to announce on November 15th, 2019 that until the judicial review is complete, licensees are not prohibited from processing, transferring, and selling products previously banned under OAR 845-025-2805.

As a wholesaler of vaping products, the Company immediately halted sales and accepted returns from dispensaries of product affected by the then-current ban. Sales of the Company's vape products were temporarily negatively affected during the ban.

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Oregon Regulatory Framework

Oregon Revised Statutes Chapter 475 B (Cannabis Regulation) provides the regulatory framework for both the recreational and medical cannabis industries in Oregon. The OLCC implementation of the recreational cannabis statutes are found in Oregon Administrative Rules Chapter 845, Division 25. The Oregon Medical Marijuana Program ("OMMP") implementation of the medical cannabis statutes are found in Oregon Administrative Rules Chapter 333, Division 8. Chapter 333, Division 7 provides the packaging, labelling and dosage limits for both programs, and Chapter 333, Division 64 governs the accreditation of laboratories for testing.

Both the OLCC and the OMMP rules include licensing requirements and materials, as well as criteria for approval or denial of license applications.

Oregon Licensing Requirements

Licenses issued by OLCC may be renewed annually so long as the licensee meets the requirements of the law and pays the renewal fee. There is no maximum number of licenses per owner, except for cultivation licenses located at the same address.

Applicants must demonstrate (and license holders must maintain) that: (i) they are registered with the Oregon Secretary of State to do business in Oregon; (ii) they have the operational expertise required by the individual license type, demonstrated by submission of an operation plan; (iii) they have the documented ability to secure the premises, as well as resources and personnel necessary to operate the license; (iv) they have the ability to maintain accountability of all cannabis and cannabinoid products and by-products via the state mandated "seed-to-sale" Cannabis Tracking System ("CTS") software, to prevent diversion or unlawful access to these materials; (v) all applicants, owners and those with the requisite control have passed background screening, inclusive of fingerprinting; and (vi) they comply with all local ordinances, including local land use and planning in the development of the licensed site.

Oregon Security Requirements

A licensee must always maintain a fully operational alarm and video monitoring system. Commercial grade, non-residential door locks and steel doors are required on every external door. The alarm system must detect unauthorized entry into the licensed premises. The 24-hour video surveillance system must record at a high-resolution format approved by the OLCC and have camera coverage which covers all areas of the facility without any blackout areas, including camera coverage requirements for ingress and egress. Video footage must be backed-up for a minimum of 90 days and be available upon request. Additionally, the camera system must have the ability to print still photos.

Oregon Transportation and Storage Requirements

Recreational and medicinal cannabis and cannabis products must be stored in a secured, locked room or vault. Vaults that are large enough to allow a person to walk in must have cameras inside so that there is no blind spot. Smaller safes must be bolted to the floor. When products are transferred between licensees, they must first be fully manifested through the state mandated "seed-to-sale" CTS. This written manifest must include: (i) departure date and time, (ii) name, address, and license number of the originating licensee, (iii) name, address, and license number of the recipient, (iv) quantity and form of any cannabis or cannabis delivery device being transported, (v) arrival date and time, (vi) delivery vehicle make and model and license plate number; and (vii) name and signature of the employee delivering the product. A copy of this manifest is provided to the receiving licensee for their verification. Upon receiving the transfer, the licensee must immediately verify the shipment versus the manifest and accept it electronically within the "seed-to-sale" CTS. This completes the inventory transfer. OLCC licensees must maintain these records for a minimum of three years. During transport, all product is packaged individually by order, and maintained within a locked receptacle within the vehicle. All deliveries must be completed within 24 hours.

OLCC Department Inspections

The OLCC conducts announced and unannounced inspections of all licensed facilities to determine compliance with laws and rules. The OLCC will inspect a licensee upon receiving a complaint or notice that the licensee has violated any existing rules. The OLCC will also conduct an annual license renewal inspection at the time of application approval. Inspections can cover all records, personnel, equipment, security and operational methodologies.

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Oregon Compliance

The Company is currently licensed to operate cultivation, processing, distribution and retail operations within Oregon. To date, the Company has not experienced any compliance or enforcement actions against the above-mentioned licenses, and the Company has not been served any notices of non-compliance by any state regulatory body. As the result of a recent internal investigation, though, the Company uncovered unlawful activity by two former (pre-closing) owners and employees of EFF at the EFF facility involving the EFF cultivation license. Our investigation concluded that this activity started pre-closing and continued for a period of time post-closing without the knowledge of Company management. The Company immediately self-reported the activity to the OLCC after completing its internal investigation and concluding that the activity was in violation of the applicable Oregon rules and regulations. The Company is fully cooperating with the agency's review of the subject activity. The employees who still worked at EFF and are believed to have directed the activity were promptly terminated. The Company has no reason to conclude that this or any other unlawful activity is still occurring. It is uncertain whether a formal investigation or enforcement action will follow against the EFF license.

The Company maintains credit union banking relationships in Oregon which provide the Company the ability to safely and lawfully pay for any and all expenses that should arise from the day to day operations of its license. The Company monitors all licensed activities and performs site visits in order to validate compliance with local statutes. This monitoring includes but is not limited to "seed-to-sale" CTS records and accuracy, standard operating procedures, required signage and public health warnings, local permitting and zoning, license approvals and renewals, and all communication with regulatory bodies. Each employee is instructed on the most recent standard operating procedures. All sites have 24-hour video surveillance of the entire premises. The Company also utilizes the state-mandated CTS system in all jurisdictions in which it operates. State inspections, for any reason, including initial application, renewal or change of ownership, have not resulted in any compliance related issues to date.

NEVADA REGULATORY ENVIRONMENT

Nevada Summary

Nevada has a medical marijuana program and passed an adult-use (21 and older) legalization through the ballot box in November 2016. In 2000, Nevada voters passed a medical marijuana initiative allowing physicians to recommend cannabis for an inclusive set of qualifying conditions, including severe pain and created a limited non-commercial medical marijuana patient/caregiver system. Senate Bill 374, which passed the legislature and was signed by the Governor in 2013, expanded this program and established a for-profit regulated medical marijuana industry.

The Nevada Division of Public and Behavioral Health licensed medical marijuana establishments up until July 1, 2017 when the state's medical marijuana program merged with adult-use marijuana enforcement under the Nevada Department of Taxation ("NDOT"). In 2014, Nevada accepted medical marijuana business applications and a few months later the Division approved 182 cultivation licenses, 118 licenses for the production of edibles and infused products, 17 independent testing laboratories, and 55 medical marijuana dispensary licenses. The number of dispensary licenses was then increased to 66 by legislative action in 2015. The application process is merit-based, competitive, and is currently closed. Nevada residency is not required to own or invest in a Nevada medical cannabis business. In addition, vertical integration is neither required nor prohibited. Nevada's medical law includes patient reciprocity, which permits medical patients from certain other states to purchase medical marijuana from Nevada dispensaries. Nevada also allows for dispensaries to deliver medical marijuana to patients.

Under Nevada's adult-use marijuana law, the NDOT licenses marijuana cultivation facilities, product manufacturing facilities, distributors, retail stores and testing facilities. After merging medical and adult-use marijuana regulation and enforcement, the single regulatory agency is now known as the Marijuana Enforcement Division of the NDOT. Until November 2018, applications to the NDOT for adult-use establishment licenses were being accepted from existing medical marijuana establishments and existing liquor distributors for the adult-use distribution license.

In February 2017, the NDOT announced plans to issue "early start" adult use marijuana establishment licenses in the summer of 2017. These licenses, beginning on July 1, 2017, allowed marijuana establishments holding both a retail marijuana store and dispensary license to sell their existing medical marijuana inventory as either medical or adult-use marijuana, and expired 90 days after January 1, 2018 (per Sec. 24 of LCB File No. T002-17). Starting July 1, 2017, medical and adult-use marijuana have incurred a 15% excise tax on the first wholesale sale (calculated on the fair market value) and adult-use cannabis have incurred an additional 10% special retail marijuana sales tax in addition to any general state and local sales and use taxes.

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On January 16, 2018, the Marijuana Enforcement Division of the NDOT issued final rules governing its adult-use marijuana program, pursuant to which up to sixty-six (66) permanent adult-use marijuana dispensary licenses will be issued. Existing adult-use marijuana licensees under the "early start" regulations must re-apply for licensure under the permanent rules in order to continue adult-use sales.

In May of 2019, Governor Steve Sisolak signed into law Senate Bill 32, that increases transparency in the licensing process by releasing certain information about license applicants, as well as methods used to issue licenses. In June 2019, Governor Sisolak approved Assembly Bill 132 making Nevada the first state to ban employers from refusing to hire job applicants who test positive for marijuana during the hiring process.

As of August 23, 2019, as a result of discrepancies discovered in the application process by the State of Nevada, a court issued a partial preliminary injunction against the State of Nevada from moving forward with the numerous holders of provisional licenses awarded under the December 5, 2018, provisional license awards. In addition to the preliminary injunction, the State of Nevada and various intervenors remain subject to ongoing litigation.

In early 2019, Nevada legislature passed Nevada Assembly Bill 533, which authorized the formation of the Cannabis Compliance Board (the "CCB") to be vested with the authority to license and regulate persons and establishments engaged in cannabis activities within Nevada. The executive director of the CCB was appointed on September 30, 2019, by Nevada Governor Sisolak. As of March 1, 2020, three of the five members of the CCB had been appointed. Pursuant to AB533, the CCB is mandated with studying the feasibility and safe implementation of licensing for lounges, in addition to their general authority and oversight of cannabis operations in Nevada.

Nevada Regulatory Framework

Nevada Revised Statutes Chapter 453D provides a regulatory framework that outlines the function of the NDOT Marijuana program including licensing and enforcement guidelines that guide the NDOT.

Nevada Licensing Requirements

Licenses issued by NDOT can be renewed annually so long as the licensee continues to demonstrate compliance with local and state law and pays the renewal fee. Dispensary/Retail store licenses have a set statutory "cap" (per NRS 453D.210 & NRS 453A.324), other license types do not. Moreover, statutory license caps can only be changed by the Nevada legislature, which meets bi-annually. Marijuana businesses in Nevada may also be governed by local ordinances, which can include caps on the number of marijuana businesses, zoning limitations, and additional screening of business owners and investors. Applicants must demonstrate (and license holders must maintain) that: (i) they are registered with the Nevada Secretary of State to do business in Nevada, (ii) they have contributed to the advancement of the State of Nevada via regular tax payments, (iii) they do not have interests in the Casino or Alcohol industries, (iv) they have the operational expertise required by the individual license type, demonstrated by submission of an operation plan, (v) they have the ability to secure the premises, resources, and personnel necessary to operate the license, (vi) they have the ability to maintain accountability of all cannabis and cannabinoid products and by-products via the state mandated "seed-to-sale" CTS to prevent diversion or unlawful access to these materials, (vii) they have the financial ability to maintain operations for the duration of the license, (viii) all owners have passed background screening, inclusive of fingerprinting, and (ix) all local land use, zoning, and planning notices have been followed in the development of the licensed site.

Nevada Security Requirements

A licensee must maintain a fully operational alarm and video monitoring system at all times. The alarm system must secure all points of ingress and egress and be equipped with motion detectors. The 24-hour video surveillance system must record at a high-resolution format approved by the NDOT and have camera coverage which covers all areas of the facility without any blind spots. Video footage must be backed-up for a minimum of 30 days in hard-form. Cultivation and product manufacturing sites are not open to the public.

Nevada Transportation and Storage Requirements

Cannabis and cannabis goods must be stored in a lockable safe or vault at any time that employees are not on location. Any storage container that is large enough to allow an employee to walk into it must have cameras placed inside. Goods to be transported to another licensee must be fully manifested via the state mandated "seed-to-sale" CTS prior to being transported.

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Nevada Department of Taxation Inspections

The NDOT conducts announced and unannounced inspections of all licensed facilities to determine compliance with laws and rules. The NDOT will inspect a licensee in the event of a complaint indicating that the licensee has or is actively violating existing statute. The NDOT will also inspect at the time of any premise's modification, as well as at the time of annual renewal.

Nevada Product Testing and Packaging Requirements

Both medical and adult-use marijuana and marijuana products are subject to stringent testing and packaging requirements. Before usable marijuana, concentrated marijuana, or marijuana products may be packaged for further processing or for transfer to a dispensary or retail store, an independent testing laboratory licensed by the NDOT must collect samples from each homogenized lot or production run for testing. These samples are tested by the independent testing laboratory for compliance with specified limits on contaminants such as yeast and mold, heavy metals and pesticides, and microbes. Testing is also done to determine the potency of the sample. Cultivation and product manufacturing facilities are also subject to random quality assurance compliance testing at the discretion of the NDOT. Generally, if a sample fails any of the tests conducted by the testing laboratory, the entire lot or production run must be destroyed.

All marijuana or marijuana products intended to be sold to consumers must be individually packaged, sealed, and labeled. Edible products must be packaged in opaque, child-resistant containers. Depending on the type of marijuana product, the NDOT places limit on the amount of THC that a single package of marijuana may contain or the number of ounces of product a package may contain. All packages of marijuana or marijuana product sold to consumers must have detailed labels that include, inter alia, various warnings about the effects and risks of marijuana use; the name, license number, and contact information of the dispensary or retail store conducting the sale; the name and license number of the cultivation or product manufacturing facility that harvested or produced the marijuana or marijuana product; the potency levels of the marijuana or marijuana product; and the date the marijuana or marijuana product was harvested or produced.

RISK FACTORS

The following are certain factors relating to the business and securities of the Company. The Company will face a few challenges and significant risks in the development of its business due to the nature of and present stage of its business. These risks and uncertainties are not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or currently deemed immaterial by the Company, may also impair the operations of or materially adversely affect the securities of the Company. If any such risks occur, the Company's shareholders could lose all or part of their investment and the business, financial condition, liquidity, results of operations and prospects of the Company could be materially adversely affected. Some of the risk factors described herein are interrelated and, consequently, readers should treat such risk factors.

The acquisition of any of the securities of the Company is speculative, involving a high degree of risk and should be undertaken only by persons whose financial resources are enough to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in the securities of the Company should not constitute a major portion of a person's investment portfolio and should only be made by persons who can afford a total loss of their investment.

OPERATIONAL RISKS

Risks Associated with Acquisitions

As part of the Company's overall business strategy, the Company may pursue select strategic acquisitions which would provide additional product offerings, vertical integrations, additional industry expertise, and a stronger industry presence in both existing and new jurisdictions. Future acquisitions may expose the Company to potential risks, including risks associated with (a) the integration of new operations, services and personnel; (b) unforeseen or hidden liabilities; (c) the diversion of resources from the Company's existing business and technology; (d) potential inability to generate sufficient revenue to offset new costs; (e) the expenses of acquisition; or (f) the potential loss of or harm to relationships with both employees and existing users resulting from its integration of new business. In addition, any proposed acquisitions may be subject to regulatory approval.

While the Company intends to conduct reasonable due diligence in connection with such strategic acquisitions, there are risks inherent in any acquisition. Specifically, there could be unknown or undisclosed risks or liabilities of such entities or assets for which the Company is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect the Company's financial performance and results of operations. The Company could encounter additional transaction and integration related costs or other factors such as the failure to realize all of the benefits from the acquisition. All of these factors could cause dilution to the Company's revenue per share or decrease or delay the anticipated accretive effect of the acquisition and cause a decrease in the market price of C21's common shares.

p. 27

U.S. Federal Regulation

The Company will be affected by a number of operational risks and may not be adequately insured for certain risks, including: labor disputes, catastrophic accidents, fires, blockades or other acts of social activism, changes in the regulatory environment, impact of non-compliance with laws or regulations, natural phenomena, such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the foregoing risks and hazards will not result in damage to, or destruction of, the Company's properties, grow facilities and extraction facilities, personal injury or death, environmental damage, adverse impacts on the Company's operations, costs, monetary losses, potential legal liability and adverse governmental action, any of which could have an adverse impact on the Company's future cash flows, earnings and financial condition.

The Company is currently aware of 34 states of the United States, plus the District of Columbia, Puerto Rico and Guam, that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Many other states are considering similar legislation. Additionally, the sale and adult-use of recreational cannabis is legal in the following U.S. states: Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Washington and Illinois. Conversely, under the CSA, cannabis currently remains a Schedule I controlled substance under U.S. federal law, which means the DEA believes marijuana has a high potential for abuse, no accepted medical treatment, and lack of accepted safety for the use of it, even under medical supervision. As a result, marijuana related activities including, the cultivation, manufacture, import, export, distribution, possession and use of marijuana, remains illegal under U.S. federal law.

Currently, the Company engages in the manufacture, distribution, possession and sale of cannabis in the U.S. medical and recreational cannabis markets, and therefore the enforcement of U.S. federal laws is a significant risk to the Company. Unless and until the U.S. Congress amends the CSA (or the DEA reschedules or de-schedules cannabis), there is a risk that U.S. federal authorities, including the United States Attorney's Office for the District of Oregon and the District of Nevada, may enforce current federal law, and the Company may be deemed to be possessing, manufacturing, and trafficking marijuana in violation of U.S. federal law. Such activities also may serve as the basis for the prosecution of other crimes, such as those prohibited by the money laundering statutes, the unlicensed money transmitter statute, and the Bank Secrecy Act. Additionally, the Company may be deemed to be facilitating the sale or distribution of drug paraphernalia in violation of U.S. federal law with respect to the Company's current or proposed business operations. As to the timing or scope of any such potential amendments to the CSA, there can be no assurances to when or if any potential amendments will be enacted. Active enforcement of the current federal statutory laws and regulatory rules regarding cannabis may thus directly and/or indirectly and adversely affect the Company's future operations, cash flows, earnings, and financial condition.

The Company could face (i) seizure of its cash and other assets used to support or derived from its cannabis subsidiaries; and (ii) the arrest of its employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis. Additionally, as has recently been affirmed by U.S. Customs and Border Protection, employees, directors, officers, managers and investors of the Company who are not U.S. citizens face the risk of being barred from entry into the United States for life.

Variation in Regulation

Individual U.S. state laws do not always conform to U.S. federal regulatory standards, or to other U.S. state laws. A number of states have decriminalized marijuana to varying degrees, other states have created exemptions specifically for medical cannabis, and several have both decriminalized and/or created medical marijuana exemptions. Several states have also legalized the recreational use of cannabis. Variations exist among states that have legalized, decriminalized or created medical marijuana exemptions. For example, Oregon and Colorado have limits on the number of marijuana plants that can be home grown. In most states, the cultivation of marijuana for personal use continues to be prohibited except for those states that allow small-scale cultivation by the individual in possession of a medical marijuana license or that person's caregiver. Even in those states in which the use and commercialization of marijuana has been legalized, its use remains a violation of U.S. federal law.

p. 28

Although the Company's activities are in compliance with applicable state and local law, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company. Any such proceedings brought against the Company may adversely affect the Company's operations and financial performance.

As a result of the conflicting views between individual state governments and the U.S. federal government regarding cannabis, investments in U.S. cannabis businesses are subject to inconsistent legislation and regulation. The response to this inconsistency was addressed in August 2013 when then U.S. Deputy Attorney General, James Cole, authorized the Cole Memo addressed to all United States Attorneys acknowledging that, notwithstanding the designation of cannabis as a controlled substance at the federal level in the U.S., several U.S. states have enacted laws relating to cannabis for medical purposes. The Cole Memorandum outlined certain priorities for the U.S. Department of Justice relating to the prosecution of cannabis offenses. In particular, the Cole Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form, and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis, that conduct in compliance with those laws and regulations is less likely to be a priority at the federal level.

Since 2014, the U.S. Congress has annually passed appropriations bills that include the Rohrabacher Blumenauer Appropriations Amendment (originally the Rohrabacher Farr Amendment), also known as the Leahy Amendment. The Leahy Amendment prohibits federal budget resources from being used to enforce U.S. federal controlled substances laws that conflict with U.S. state medical cannabis programs. However, on January 4, 2018, Jeff Sessions, the U.S. Attorney General at the time, issued the Sessions Memo to all United States Attorneys, which rescinded the Cole Memo in its entirety. The Sessions Memo provided that in deciding which marijuana activities to prosecute under U.S. federal laws, prosecutors should follow the same well-established principles that govern all U.S. federal prosecutions. Following the release of the Sessions Memo, the fate of state-legal cannabis is uncertain, and the risk of prosecution varies from state to state based on the posture, priorities and resources of each United States Attorney's Office for each applicable state.

While the Sessions Memo introduced some uncertainty regarding U.S. federal law enforcement, the cannabis industry continues to experience growth in legal medical and adult-use cannabis markets within the United States. On November 7, 2018, U.S. Attorney General Jeff Sessions resigned, and Matthew Whitaker was the acting U.S. Attorney General until William Barr was appointed as the U.S. Attorney General on February 14, 2019. On April 10, 2019, the U.S. Senate Appropriations Subcommittee met to discuss the DOJ's 2020 budget, in response to a question about William Barr's position on the proposed Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. Attorney General Barr stated: "Personally, I would still favor one uniform federal rule against marijuana . . . but if there is not sufficient consensus to obtain that then I think the way to go is to permit a more federal approach so states can, you know, make their own decisions within the framework of the federal law. So we're not just ignoring the enforcement of federal law".

The STATES Act, if passed, would permit U.S. states to determine their own approach to marijuana regulation. Attorney General Barr has said that this U.S. legislation is being reviewed by his office and that he would "much rather [implement] the approach taken by the STATES Act than where we currently are". It is unclear, however, what impact this development will have on U.S. federal enforcement policy regarding cannabis activities. Further, even if the Company operates cannabis-related activities in compliance with U.S. state laws, the United States Attorney's Office for a given state can determine that such activities are in contravention of federal law and initiate prosecution against the Company. While there is a risk that a given state's U.S. Attorney's Office, and the DOJ, may seek to enforce U.S. federal drug laws against cannabis use and commercialization that is permitted under state law, the Leahy Amendment remains in force; and thus, prevents U.S. Department of Justice budgetary resources from being allocated to enforce federal law against medical cannabis businesses. The fiscal year 2019 U.S. federal budget included the Leahy Amendment, which remains in effect until September 30, 2019; upon which the Leahy Amendment may or may not be included in the omnibus appropriations package or as a continuing budget resolution.

Given the conflict of laws and regulations, there is no certainty as to how the DOJ, Federal Bureau of Investigation and other government agencies will handle cannabis matters in the future. There can be no assurance that the Trump Administration would not change the current enforcement policies, priorities and resources and choose to enforce the subject federal laws. The Company regularly monitors ongoing developments in this regard.

p. 29

Violations of any laws and regulations could result in significant fines, penalties, administrative sanctions, forfeiture, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on the Company, including its reputation and ability to conduct business, its title (directly or indirectly) to cannabis licenses in the United States, the listing of its securities on various stock exchanges, its financial position, its operating results, and profitability or liquidity or the market price of its publicly traded shares. In addition, it is difficult for the Company to estimate the time or resources that would be needed for the investigation of any such matters or the final resolution of such matters because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested and degree of enforcement by the applicable authorities involved, and such time or resources could be substantial.

As a company listed on the CSE, the Company accesses the Canadian capital markets on a public and private basis, and any capital raised may be utilized for the ongoing operations of its U.S. holdings that operate in the U.S. cannabis industry. There is no assurance that the Company will be successful, in whole or in part, in raising funds, particularly if the U.S. federal authorities change their position toward enforcing the CSA. Further, access to funding from residents, citizens, venture capital, private equity and banks in the United States may be limited due to their unwillingness to be associated with activities that violate U.S. federal laws. Notwithstanding the above, the SAFE Banking Act of 2019, discussed above, would be a positive development for the industry and access to move affordable banking and lending.

Change of Cannabis Laws

Local, state and federal marijuana laws and regulations in the United States are broad in scope and subject to evolving interpretations, which could require the Company to incur substantial costs associated with compliance or alter certain aspects of its business plan. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of the Company's business plan and result in a material adverse effect on certain aspects of the Company's planned operations. Furthermore, it is possible that regulations may be enacted in the future that will be directly applicable to certain aspects of the Company's marijuana business. The Company cannot predict the nature of any future laws, rules, regulations, resolutions, declarations, policy positions, interpretations or applications, nor can it determine what affect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on the Company's business.

Further, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. If the federal government begins to enforce federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing applicable state laws are repealed or curtailed, the Company's business, results of operations, financial condition and prospects would be materially adversely affected.

The Company is aware that multiple states are considering special taxes or fees on businesses in the marijuana industry. It is a potential yet unknown risk at this time that other states are in the process of reviewing such additional fees and taxation. This could have a material adverse effect on the Company's business, results of operations, financial condition and prospects.

Beginning in September 2019, the United States media began reporting on potential vape related illnesses and death based on conditions resembling pneumonia, that consumers of nicotine and THC vaping products were experiencing. Vaping product sales are a material source of revenue for the Company. As of Tuesday, October 29, 2019, the CDC announced that 37 people had died and another 1,888 had been reported as experiencing symptoms that could possibly be linked to the vaping products. Although there has been no conclusive medical or scientific determination as to the cause of the subject conditions, management believes that the Company's products do not contain any of the components or chemicals, including but not limited to vitamin E acetate, which are presently implicated as possible sources of the condition, and which were identified by the CDC based on laboratory findings released on November 8, 2019. Out of an abundance of caution, governors of certain US states took precautionary, short-term actions until a more conclusive link between vaping products and the condition is determined; as mentioned herein, Oregon was one of those states until the State was forced to lift its ban by court order.

p. 30

Compliance Risks

The Company's investments operate in a new industry which is highly regulated, highly competitive and evolving rapidly. As such, new risks may emerge, and management may not be able to predict all such risks. The Company's investments incur ongoing costs and obligations related to regulatory compliance. Failure to comply with regulations may result in additional costs for corrective measures, penalties or in restrictions of operations. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of the Company.

Further, the Company may be subject to a variety of claims and lawsuits. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect its ability to conduct its business.

Litigation and other claims are subject to inherent uncertainties and management's view of these matters may change in the future. A material adverse impact on the Company's financial statements could also occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

The cannabis industry is subject to extensive controls and regulations, which may significantly affect the financial condition of market participants. The marketability of any product may be affected by numerous factors that are beyond the control of the Company and which cannot be predicted, such as changes to government regulations, including those relating to taxes and other government levies which may be imposed. Changes in government levies, including taxes, could reduce the Company's earnings on investments and could make future capital investments or the Company's investments' operations uneconomic.

The cannabis industry is also subject to numerous legal challenges, which may significantly affect the financial condition of market participants in the industry, such as the Company, which cannot be readily predicted.

Regulatory scrutiny of the Company's industry may negatively impact its ability to raise additional capital

The Company's business activities rely on newly established and/or developing laws and regulations. These laws and regulations are rapidly evolving and subject to change with minimal notice. Regulatory changes may adversely affect the Company's profitability or cause it to cease operations entirely. The cannabis industry may come under the scrutiny or further scrutiny by the U.S. Food and Drug Administration, Securities and Exchange Commission, the DOJ, the Financial Industry Regulatory Authority or other federal, applicable state or nongovernmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or nonmedical purposes in the United States.

It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any proposals will become law. The regulatory uncertainty surrounding the Company's industry may adversely affect the business and operations of the Company, including without limitation, the costs to remain compliant with applicable laws and the impairment of its ability to raise additional capital, which could reduce, delay or eliminate any return on investment in the Company.

The Company's investments in the U.S. are subject to applicable anti-money laundering laws and regulations

The Company is subject to a variety of laws and regulations domestically and in the United States that involve money laundering, financial record keeping and proceeds of crime, including the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended and the rules and regulations thereunder, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States and Canada.

In the event that any of the Company's operations, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations in the United States were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize the ability of the Company to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while there are no current intentions to declare or pay dividends on C21's common shares in the foreseeable future, in the event that a determination was made that the Company's proceeds from operations (or any future operations or investments in the United States) could reasonably be shown to constitute proceeds of crime, the Company may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.

p. 31

The Company's investments and any proceeds thereof may be considered proceeds of crime since cannabis remains illegal federally in the United States. This restricts the ability of the Company to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while the Company has no current intention to declare or pay dividends on its shares in the foreseeable future, the Company may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time in response to factors outside of the Company's control.

The Company may have difficulty accessing the services of banks and processing credit card payments in the future, which may make it difficult to operate. To mitigate this risk, the Company has established banking relations with three private credit unions in states where cannabis has been legalized at the state level, including Partners Colorado Credit Union (Colorado), Salal (Washington State) and Maps (Oregon). Through these private credit unions, the Company is able to access bank services to support its Oregon and Nevada cannabis operations.

In February 2014, the FinCEN issued a memorandum providing guidance (which is not law) to banks seeking to provide services to cannabis-related businesses (the "FinCEN Memo"), including burdensome due diligence expectations and reporting requirements. The FinCEN Memo states that in some circumstances, it is permissible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. However, most banks and other financial institutions do not feel comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which could be revoked at any time by the Trump Administration. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses.

However, as mentioned above, in March 2019, the U.S. House Financial Services Committee approved an updated version of the SAFE Banking Act, which proposed certain protections for banks in the United States against criminal and civil liabilities for serving legitimate cannabis companies that operate in compliance with applicable state law. The prospects of the U.S. Congress passing the SAFE Banking Act are uncertain as of the date of this MDA.

Accordingly, the Company may have limited or no access to banking or other financial services in the U.S. in the future and may have to operate the Company's U.S. business on a cash-only basis. The inability, onerous limitations or restrictions on the Company's ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments, may make it difficult for the Company to operate and conduct its business as planned.

The Company's investments in the United States may be subject to heightened scrutiny

The Company's existing interests in the United States cannabis market, and any future interests, may become the subject of heightened scrutiny by regulators, stock exchanges, clearing agencies or other authorities in Canada. As a result, the Company may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Company's ability to invest in the United States or any other jurisdiction.

Given the heightened risk profile associated with cannabis in the United States, it was previously reported by certain publications in Canada that the Canadian Depository for Securities Limited may implement policies that would see its subsidiary, CDS Clearing and Depository Services Inc. ("CDS"), refuse to settle trades for cannabis issuers that have investments in the United States. The TMX Group, the owner and operator of CDS, subsequently issued a statement on August 17, 2017, reaffirming that there is no CDS ban on the clearing of securities of issuers with cannabis-related activities in the United States, despite media reports to the contrary, and that the TMX Group was working with regulators to arrive at a solution that will clarify this matter, which would be communicated at a later time.

On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group announced the signing of a Memorandum of Understanding (the "TMX MOU") with Aequitas NEO Exchange Inc., the CSE, the Toronto Stock Exchange and the TSX Venture Exchange. The TMX MOU outlines the parties' understanding of Canada's regulatory framework applicable to the rules, procedures and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the United States.

p. 32

The TMX MOU confirms, with respect to the clearing of listed securities, that CDS relies on the exchanges to review the conduct of listed issuers. As a result, there is no CDS ban on the clearing of securities of issuers with cannabis-related activities in the United States. However, there can be no guarantee that this approach to regulation will continue in the future. If such a ban were to be implemented, it would have a material adverse effect on the ability of holders of common shares to make and settle trades. In particular, the common shares would become highly illiquid and until an alternative was implemented investors would have no ability to affect a trade of common shares through the facilities of a stock exchange.

The following chart is a summary of the Company's material assets and investments. References to "Direct", "Indirect" or "Ancillary" classifications of each asset or investment have the meanings ascribed thereto in the Staff Notice. All of the Company's investments that give C21 "Direct", "Indirect" and "Ancillary" involvement in the U.S. marijuana industry are included in this chart.

Asset Name and
Acquisition/Formation		Asset Type, Jurisdiction and
Date	Description of Asset	Classification
320204 US Holdings Corp.	Holding company	Type of investment: 100% equity position
Formed: April 12, 2018		Jurisdiction: Delaw are
		Classification: Direct
Eco Firma Farms LLC	Cultivation facility	Type of investment: 100% equity position
Acquired: June 13, 2018		Jurisdiction: Oregon
		Classification: Direct
320204 Oregon Holdings Corp.	Holding company	Type of investment: 100% equity position
Formed: August 27, 2018		Jurisdiction: Oregon
		Classification: Direct
Workforce Concepts 21, Inc.	Payroll and benefits servicing company	Type of investment: 100% equity position
Formed: August 27, 2018		Jurisdiction: Oregon
		Classification: Direct
320204 Nevada Holdings Corp.	Holding company	Type of investment: 100% equity position
Formed: August 28, 2018		Jurisdiction: Nevada
		Classification: Direct
Silver State Relief LLC	Retail dispensary facilities	Type of investment: 100% equity position
Acquired: January 1, 2019		Jurisdiction: Nevada
		Classification: Direct
Silver State Cultivation LLC	Cultivation and processing facility	Type of investment: 100% equity position
Acquired: January 1, 2019		Jurisdiction: Nevada
		Classification: Direct
Megaw ood Enterprises Inc	Retail dispensary facility	Type of investment: 100% equity position
Acquired: January 24, 2019		Jurisdiction: Oregon
		Classification: Direct
Phantom Distribution, LLC	Wholesale facility	Type of investment: 100% equity position
Acquired: February 4, 2019		Jurisdiction: Oregon
		Classification: Direct
Phantom Brands, LLC	Holding company	Type of investment: 100% equity position
Acquired: February 4, 2019		Jurisdiction: Oregon
		Classification: Direct
Phantom Venture Group, LLC	Holding company	Type of investment: 100% equity position
Acquired: February 4, 2019		Jurisdiction: Oregon
		Classification: Direct
63353 Bend, LLC	Cultivation facility	Type of investment: 100% equity position
Acquired: February 4, 2019		Jurisdiction: Oregon
		Classification: Direct
20727‐4 Bend, LLC	Cultivation facility	Type of investment: 100% equity position
Acquired: February 4, 2019		Jurisdiction: Oregon
		Classification: Direct
4964 BFH, LLC	Cultivation facility	Type of investment: 100% equity position
Acquired: February 4, 2019		Jurisdiction: Oregon
		Classification: Direct
Sw ell Companies Limited	Processing and w holesale facility	Type of investment: 100% equity position
Acquired: May 24, 2019		Jurisdiction: Oregon
p. 33
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Through its subsidiaries, C21 is licensed by the Oregon Liquor Control Commission to cultivate and distribute wholesale and retail recreational and medicinal cannabis products in Oregon.

Through its subsidiaries, the Company is also licensed by the State of Nevada Department of Taxation to cultivate and distribute wholesale and retail recreational and medicinal cannabis products in Nevada.

The states of Oregon and Nevada have issued the following licenses to C21's wholly owned U.S. subsidiaries:

Subsidiary	Licenses
Eco Firma Farms LLC	Oregon Producer: 020-10026114352
Megawood Enterprises Inc (Pure Green)	Oregon Retail: 050-101353460C5
Phantom Distribution, LLC	Oregon Wholesaler: 060-101354498B7
63353 Bend, LLC	Oregon Producer: 020-10135419332
20727‐4 Bend, LLC	Oregon Processor: 030-100668460AF
4964 BFH, LLC	Oregon Producer: 020-101354208B5
	Oregon Producer: 020-1013549B0D0
Swell Companies Limited	Oregon Processor: 030-1001935FB2C
	Oregon Wholesaler: 060-10043793AD8
Silver State Cutivation LLC	Nevada Medical & Recreational Cultivation:
	C00l -87780384583047744472 / 1017783233-002
	RC00l -95697016138994411312 / 1017783233-002
Silver State Relief LLC	Nevada Medical & Recreational Retail:
	D002 -38695553096347542299 / 1017825203-001
	RD002-11443721033142554219 / 1017825203-001

See "Oregon Regulatory Environment" and "Nevada Regulatory Environment" for additional discussion on licenses. The enforcement of relevant U.S. laws related to cannabis is a significant risk.

The following table is a summary of C21's balance sheet exposure to U.S. cannabis-related activities as of April 30, 2020:

		Operating		Non-Controlling
		Subsidiaries		Investments		Total
Current Assets	$	9,729,130	$	-	$	9,729,130
Non-current Assets		50,191,560		-		50,191,560
Total Assets	$	59,920,690	$	-	$	59,920,690
Current Liabilities	$	36,617,295	$	-	$	36,617,295
Non-Current liabilities		8,726,564		-		8,726,564
Total Liabilities	$	45,343,859	$	-	$	45,343,859
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Goodwill and intangibles related to the acquisition of U.S. based subsidiaries are included within the noncurrent asset totals above.

The following represents the portion of certain assets on C21's consolidated balance sheet that pertain to U.S. Cannabis activity as of April 30, 2020:

Inventory and Biological assets: 100%
Property plant & equipment: 99%
Intangible assets and goodwill: 100%
Notes receivable and deposits: 99%

The following is a summary of operating activity from U.S. cannabis-related activities for the three months ended April 30, 2020:

Unfavorable Publicity or Consumer Perception

The Company believes the adult-use and medical marijuana industries are highly dependent upon consumer perception regarding the safety, efficacy and quality of the marijuana produced. Consumer perception can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of marijuana products. There can be no assurance that future scientific research or findings, regulatory investigations, litigation, media attention or other publicity will be favorable to the marijuana market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory investigations, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or other publicity could have a material adverse effect on the demand for adult-use or medical marijuana and on the business, results of operations, financial condition, cash flows or prospects of the Company. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of marijuana in general, or associating the consumption of adult-use and medical marijuana with illness or other negative effects or events, could have such a material adverse effect. There is no assurance that such adverse publicity reports, findings or other media attention will not arise.

Public opinion may result in a significant influence over the regulation of the cannabis industry in Canada, the United States or elsewhere. A negative shift in the public's perception of cannabis in the United States, or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause state jurisdictions to abandon initiatives or proposals to legalize medical cannabis, thereby limiting the number of new state jurisdictions into which the Company could expand. Any limits on future expansion may have a material adverse effect on the Company's business, financial condition, and results of operations.

State and local laws and regulations may heavily regulate brands and forms of cannabis products and there is no guarantee that the Company's proposed brands and products will be approved for sale and distribution in any state

States generally only allow the manufacture, sale and distribution of cannabis products that are grown in that state and may require advance notice of such products. Certain states and local jurisdictions have promulgated certain requirements for approved cannabis products based on the form of the product and the concentration of the various cannabinoids in the product. While the Company intends to follow the guidelines and regulations of each applicable state and local jurisdiction in preparing products for sale and distribution, there is no guarantee that such products will be approved to the extent necessary. If the products are approved, there is a risk that any state or local jurisdiction may revoke its approval for such products based on changes in laws or regulations or based on its discretion or otherwise.

Security Risks

The business premises of the Company are a target for theft. While the Company has implemented security measures and continues to monitor and improve its security measures, its cultivation, processing and dispensary facilities could be subject to break-ins, robberies and other breaches in security. If there was a breach in security and the Company fell victim to a robbery or theft, the loss of cannabis plants, cannabis oils, cannabis flowers, cultivation and processing equipment, and cash could have a material adverse impact on the business, financial condition, results of operation and property of the Company.

As the Company's business involves the movement and transfer of cash which is collected from third parties or deposited into its bank, there is a risk of theft or robbery during the transport of cash. The Company engages security firms to provide armed guards and security in the transport and movement of large amounts of cash. While the Company has taken robust steps to prevent theft or robbery of cash during transport, there can be no assurance that there will not be a security breach during the transport and the movement of cash involving the theft of product or cash.

p. 35

Banking

Since the use of cannabis is illegal under U.S. federal law, there is a strong argument that banks cannot accept for deposit funds from businesses involved with the cannabis industry. Consequently, businesses involved in the cannabis industry often have difficulty finding a bank willing to accept their business. The inability to open bank accounts may make it difficult to operate the Company's cannabis business. Currently in the states of Oregon and Nevada, private credit union banks are being used for all banking needs. Through these private credit union banks, the Company can access comprehensive banking services including cash management checking accounts, ACH transfer processing, cash pick-up and delivery services, debit card and credit card processing, online banking, and processing of bank wires and transfers.

Liability, Enforcement, Complaints, etc.

The Company's participation in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against the Company. Litigation, complaints and enforcement actions involving the Company could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on the Company's future cash flows, earnings, results of operations and financial condition.

Operation Permits and Authorizations

The Company may not be able to obtain or maintain the necessary licenses, permits, authorizations or accreditations, or may only be able to do so at great cost, to operate its marijuana business. In addition, the Company may not be able to comply fully with the wide variety of laws and regulations applicable to the marijuana industry. Failure to comply with or to obtain the necessary licenses, permits, authorizations or accreditations could result in restrictions on the Company's ability to operate the marijuana business, which could have a material adverse effect on the Company's business. Further, should any state in which the Company considers a license important not grant, extend or renew such license or should it renew such license on different terms or decide to grant more than the anticipated number of licenses, the business, financial condition and results of operations of the Company could be materially adversely affected.

Environmental Risk and Regulation

The Company's operations are subject to environmental regulation in the various jurisdictions in which it operates. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors (or the equivalent thereof) and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company's operations.

Government approvals and permits are currently, and may in the future, be required in connection with the Company's operations. To the extent such approvals are required and not obtained, the Company may be curtailed or prohibited from its current or proposed production, manufacturing or sale of marijuana or from proceeding with the development of its operations as currently proposed.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. The Company may be required to compensate those suffering loss or damage by reason of its operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing the production or manufacturing of marijuana, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in expenses, capital expenditures or production or manufacturing costs or reduction in levels of production or manufacturing or require abandonment or delays in development.

The Company's limited operating history makes evaluating its business and prospects difficult

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The Company has a limited operating history on which to base an evaluation of its business, financial performance and prospects. As such, the Company's business and prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the early stage of development. As the Company is in an early stage and is introducing new products, the Company's revenues may be materially affected by the decisions, including timing decisions, of a relatively consolidated customer base. The Company has had limited experience in addressing the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving industries such as the marijuana industry. There can be no assurance that the Company will be successful in addressing these risks, and the failure to do so in any one area could have a material adverse effect on the Company's business, prospects, financial condition and results of operations.

The Company is dependent upon existing management, its key research and development personnel and its growing and extraction personnel, and its business may be severely disrupted if it loses their service

The Company's future success depends substantially on the continued services of its executive officers, its key research and development personnel and its key growing and extraction personnel. If one or more of its executive officers or key personnel were unable or unwilling to continue in their present positions, the Company might not be able to replace them easily or at all. In addition, if any of its executive officers or key employees joins a competitor or forms a competing company, the Company may lose know-how, key professionals and staff members. These executive officers and key employees could compete with and take customers away.

Available Talent Pool

As the Company grows, it will need to hire additional human resources to continue to develop the business. However, experienced talent is difficult to source, and there can be no assurance that the appropriate individuals will be available or affordable to the Company. Without adequate personnel and expertise, the growth of the Company's business may suffer.

The Company may be exposed to infringement or misappropriation claims by third parties, which, if determined adversely to the Company, could subject the Company to significant liabilities and other costs

The Company's success may likely depend on its ability to use and develop new extraction technologies, recipes, know-how and new strains of marijuana without infringing the intellectual property rights of third parties. The Company cannot assure that third parties will not assert intellectual property claims against it. The Company is subject to additional risks if entities licensing to its intellectual property do not have adequate rights in any such licensed materials. If third parties assert copyright or patent infringement or violation of other intellectual property rights against the Company, it will be required to defend itself in litigation or administrative proceedings, which can be both costly and time consuming and may significantly divert the efforts and resources of management personnel. An adverse determination in any such litigation or proceedings to which the Company may become a party could subject it to significant liability to third parties, require it to seek licenses from third parties, to pay ongoing royalties or subject the Company to injunctions prohibiting the development and operation of its applications.

The Company may need to incur significant expenses to enforce its proprietary rights, and if the Company is unable to protect such rights, its competitive position could be harmed

The Company regards proprietary methods and processes, domain names, trade names, trade secrets, recipes and other intellectual property as critical to its success. The Company's ability to protect its proprietary rights is critical for the success of its business and its overall financial performance. The Company has taken certain measures to protect its intellectual property rights. However, the Company cannot assure that such measures will be sufficient to protect its proprietary information and intellectual property. Policing unauthorized use of proprietary information and intellectual property is difficult and expensive. Any steps the Company has taken to prevent misappropriation of its proprietary technology may be inadequate. The validity, enforceability and scope of protection of intellectual property in the marijuana industry is uncertain and still evolving. In particular, the laws and enforcement procedures in some developing countries are uncertain and may not protect intellectual property rights in this area to the same extent as do the laws and enforcement procedures in Canada, the United States and other developed countries.

Competition

There can be no assurance that significant competition will not enter the marketplace and offer some number of similar products and services or take a similar approach. An increase in the companies competing in this industry could limit the ability of the Company to expand its operations. Current and new competitors may be better capitalized, have a longer operating history, have more expertise and be able to develop higher quality equipment or products, at the same or a lower cost. The Company cannot provide assurances that it will be able to compete successfully against current and future competitors. Such competition could have a material adverse effect on the growth potential of the Company's business by effectively dividing the existing market for its products. In addition, despite Canadian federal and U.S. state-level legislation of marijuana, illicit or "black market" operations remain abundant and present substantial competition to the Company. In particular, illicit operations, despite being largely clandestine, are not required to comply with the extensive regulations that the Company must comply with to conduct business and, accordingly, may have significantly lower costs of operations.

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No Assurance of Profitability

The Company cannot give assurances that it will not incur losses in the future. The limited operating history makes it difficult to predict future operating results. The Company is subject to the risks inherent in the operation of a new business enterprise in an emerging and uncertain business sector, and there can be no assurance that the Company will be able to successfully address these risks.

Management of Growth

The Company may experience a period of significant growth in the number of personnel that will place a strain upon its management systems and resources. Its future will depend in part on the ability of its officers and other key employees to implement and improve financial management controls, reporting systems and procedures on a timely basis and to expand, train, motivate and manage the workforce. The Company's current and planned personnel, systems, procedures and controls may be inadequate to support its future operations.

General Economic Trends

Any worldwide economic slowdown and tightening of credit in the financial markets may impact the business of the Company's customers, which could have an adverse effect on the Company's business, financial condition, or results of operations. Adverse changes in general economic or political conditions in the United States and elsewhere could adversely affect the Company's business, financial condition, results of operations and property.

Asset Location and Legal Proceedings

Substantially all of the Company's assets are located outside of Canada, and certain of its directors are resident outside of Canada, and their assets are outside of Canada. Serving process on those directors may prove to be difficult or excessively time consuming. Additionally, it may be difficult to enforce a judgment obtained in Canada against the Company, its subsidiaries and any directors and officers residing outside of Canada.

Market Acceptance

The Company's ability to gain and increase market acceptance of its products depends on its ability to educate the public on the benefits of its marijuana products. It also requires the Company to establish and maintain its brand name and reputation. In order to do so, substantial expenditures on product development, strategic relationships and marketing initiatives may be required. There can be no assurance that these initiatives will be successful, and their failure may have an adverse effect on the Company's operations.

Product Liability

As a manufacturer and distributor of products designed to be ingested by humans, the Company faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury. This is particularly true in light of the United States media news, beginning in September 2019, regarding potential vaporizer (vape) related illnesses and deaths. The Company closely monitors the news reports on this topic, including results from the investigations being conducted by the CDC, and put out a statement over its social media feed on September 11, 2019 confirming its commitment to consumer safety, discussing the rigorous quality control and testing of its products, and explaining that none of its vape products are manufactured with vitamin E acetate, or any other additives, thickeners or agents. The Company further disclosed its complete ingredient list for all of its vape products. In addition, the manufacture and sale of marijuana involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of marijuana alone or in combination with other medications or substances could occur. As a manufacturer, distributor and retailer of adult-use and medical marijuana, or in its role as an investor in or service provider to an entity that is a manufacturer, distributor and/or retailer of adult-use or medical marijuana, the Company may be subject to various product liability claims, including, among others, that the marijuana product caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company's reputation with its clients and consumers generally, and could have a material adverse effect on the business, results of operations, financial condition or prospects of the Company. There can be no assurances that the Company will be able to maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to maintain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of the Company's potential products or otherwise have a material adverse effect on the business, results of operations, financial condition or prospects of the Company.

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Insurance Coverage

The Company will require insurance coverage for a number of risks, including business interruption, environmental matters and contamination, personal injury and property damage. Although the Company believes that the events and amounts of liability covered by its insurance policies will be reasonable, considering the risks relevant to its business, and the fact that agreements with users contain limitations of liability, there can be no assurance that such coverage will be available or sufficient to cover claims to which the Company may become subject. If insurance coverage is unavailable or insufficient to cover any such claims, the Company's financial resources, results of operations and prospects could be adversely affected. Further, because the Company is engaged in the cannabis industry, there may be additional difficulties and complexities associated with such insurance coverage that could cause the Company to suffer uninsured losses, which could adversely impact the Company's business, results of operations and profitability.

Tax Risk

The provisions of Code section 280E are being applied by the IRS to businesses operating in the U.S. medical and adult-use marijuana industry. Section 280E provides that no deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the CSA) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

Even though several states have medical and adult-use marijuana laws, the IRS is applying section 280E to deny business deductions. Businesses operating legally under state law argue that section 280E should not be applied because Congress did not intend the law to apply to businesses that are legal under state law. The IRS asserts that it was the intent of Congress to apply the provision to anyone "trafficking" in a controlled substance, as defined under Federal law (as stated in the text of the statute). This, section 280E is at the center of the conflict between Federal and state laws with respect to medical and retail marijuana which applies to the business conducted by the Company.

Results of Future Clinical Research

Research in Canada, the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids (such CBD and THC) remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC). Although the Company believes that the articles, reports and studies to date support its beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Given these risks, uncertainties and assumptions, investors should not place undue reliance on such articles, reports and studies. Future research studies and clinical trials may draw opposing conclusions to those stated herein or reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabis, which could have a material adverse effect on the demand for the Company's products with the potential to lead to a material adverse effect on the Company's business, financial condition, results of operations or prospects.

Vulnerability to Rising Energy Costs

Adult-use and medical marijuana growing operations consume considerable energy, making the Company potentially vulnerable to rising energy costs. Rising or volatile energy costs may adversely impact the business, results of operations, financial condition or prospects of the Company.

p. 39

Risks Inherent in an Agricultural Business

Adult-use and medical marijuana are agricultural products. There are risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks. Although the products are usually grown indoors under climate-controlled conditions, with conditions monitored, there can be no assurance that natural elements will not have a material adverse effect on the production of the Company's products.

Electronic Communication Security Risks

A significant potential vulnerability of electronic communications is the security of transmission of confidential information over public networks. Anyone who is able to circumvent the Company's security measures could misappropriate proprietary information or cause interruptions in its operations. The Company may be required to expend capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches.

Currency Fluctuations

Due to the Company's present operations in the United States, and its intention to continue future operations outside Canada, the Company is expected to be exposed to significant currency fluctuations. All or substantially all of the Company's revenue will be earned in U.S. dollars, but operating expenses are incurred in both U.S. and Canadian dollars. The Company does not have currency hedging arrangements in place, and there is no expectation that the Company will put any currency hedging arrangements in place in the future. Fluctuations in the exchange rate between the U.S. dollar and Canadian dollar may have a material adverse effect on the Company's business, financial condition and operating results. The Company may, in the future, establish a program to hedge a portion of its foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. However, even if the Company develops a hedging program, there can be no assurance that it will effectively mitigate currency risks.

The size of the Company's target market is difficult to quantify, and investors will be reliant on their own estimates on the accuracy of market data.

Because the cannabis industry is in an early stage with uncertain boundaries, there is a lack of information about comparable companies available for potential investors to review in deciding about whether to invest in the Company and, few, if any, established companies whose business model the Company can follow or upon whose success the Company can build. Accordingly, investors will have to rely on their own estimates in deciding about whether to invest in the Company. There can be no assurance that the Company's estimates are accurate or that the market size is sufficiently large for its business to grow as projected, which may negatively impact its financial results.

Global Pandemic and Public Health Crisis

In March 2020, the World Health Organization (the "WHO") declared the coronavirus contagious disease outbreak and related adverse public health developments ("COVID-19") a global pandemic. COVID-19's effect on the United States and broader global economy may have a significant negative effect on the Company. While the precise impact of COVID-19 on the Company remains unknown and not possible to predict, rapid spread of COVID-19 may have a material adverse effect economic activity in the United States and global economic activity, and can result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company.

RISKS ASSOCIATED WITH THE SECURITIES OF THE COMPANY

Additional Issuances of Securities May Result in Dilution

The Company may issue additional securities in the future, which may dilute a shareholder's holdings in the Company. The Company's articles permit the issuance of an unlimited number of common shares, and the Company's shareholders will have no pre-emptive rights in connection with such further issuances. C21's Board has discretion to determine the price and the terms of further issuances. Moreover, additional common shares will be issued by the Company on the exercise, conversion or redemption of certain outstanding securities of the Company in accordance with their terms. The Company may also issue common shares to finance future acquisitions. The Company cannot predict the size of future issuances of common shares or the effect that future issuances and sales of common shares or other securities will have on the market price of its common shares. Issuances of a substantial number of additional common shares, or the perception that such issuances could occur, may adversely affect prevailing market prices for the common shares. With any additional issuance of common shares, investors will suffer dilution and the Company may experience dilution in its revenue per share.

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Resale of Common Shares

There can be no assurance that the publicly traded price of the Company's common shares will be high enough to create a positive return for investors. Further, there can be no assurance that the common shares will be sufficiently liquid so as to permit investors to sell their position in the Company without adversely affecting the stock price. In such event, the probability of resale of the common shares would be diminished.

As well, the continued operations of the Company will be dependent upon its ability to procure additional financing in the short term and to generate operating revenues in the longer term. There can be no assurance that any such financing can be obtained or that revenues can be generated. If the Company is unable to obtain such additional financing or generate such revenues, investors may be unable to sell their common shares and any investment in the Company may be lost.

Price Volatility of Publicly Traded Securities

The market price of C21's common shares cannot be predicted and has been and may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company's control. This volatility may affect the ability of shareholders or holders of other securities to sell their securities at an advantageous price. Market price fluctuations in the securities may be due to the Company's operating results failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts' estimates, adverse changes in general market conditions or competitive, regulatory or economic trends, adverse changes in the economic performance or market valuations of companies in the industry in which the Company operates, acquisitions, dispositions, strategic partnerships, joint ventures, capital commitments or other material public announcements by the Company or its competitors or government and regulatory authorities, operating and share price performance of the companies that investors deem comparable to the Company, addition or departure of the Company's executive officers and other key personnel, along with a variety of additional factors. These broad market fluctuations may adversely affect the market price of the Company's securities.

Financial markets have at times historically experienced significant price and volume fluctuations that have particularly affected the market prices of equity and convertible securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of C21's common shares and other securities may decline even if the Company's operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue or arise, the Company's operations may be adversely impacted, and the trading price of the common shares and other securities may be materially adversely affected.

Limited Market for Securities

Notwithstanding that the Company's common shares are listed on the CSE, there can be no assurance that an active and liquid market for such securities will develop or be maintained and securityholders may find it difficult to resell any securities of the Company.

Additional Financing will be Required

The continued development of the Company will require additional financing. There is no guarantee that the Company will be able to achieve its business objectives. The Company intends to fund its business objectives by way of additional offerings of equity and/or debt financing. The failure to raise or procure such additional funds could result in the delay or indefinite postponement of current business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company. If additional funds are raised by offering equity securities or convertible debt, existing shareholders could suffer significant dilution. Any debt financing secured in the future could involve the granting of security against assets of the Company and also contain restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and to pursue business opportunities, including potential acquisitions. The Company will require additional financing to fund its operations until positive cash flow is achieved.

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Dividends

The Company has not paid dividends to shareholders in the past and does not anticipate paying dividends in the foreseeable future. The Company expects to retain its earnings to finance growth, and where appropriate, to pay down debt.

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C21 Investments Inc.: Exhibit 99.3 - Filed by newsfilecorp.com

This is an unofficial consolidation of Form 52-109FV2 *Certification of Interim Filings Venture Issuer Basic Certificate ***** reflecting amendments made effective January 1, 2011 in connection with Canada's changeover to IFRS. The amendments apply for financial periods relating to financial years beginning on or after January 1, 2011. This document is for reference purposes only and is not an official statement of the law.

Form 52-109FV2

Certification of Interim Filings

Venture Issuer Basic Certificate

I, Sonny Newman, Chief Executive Officer of C21 Investments Inc., certify the following:

Review: **** I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of C21 Investments Inc. (the "issuer") for the interim period ended April 30, 2020.
No misrepresentations: **** Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

*3. ***** Fair presentation: **** Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Date: August 13, 2020

SIGNED: "Sonny Newman"

Sonny Newman, Chief Executive Officer

NOTE TO READER

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of

i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

The issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

C21 Investments Inc.: Exhibit 99.4 - Filed by newsfilecorp.com

Form 52-109FV2

Certification of Interim Filings

Venture Issuer Basic Certificate

I, Michael Kidd, Chief Financial Officer of C21 Investments Inc., certify the following:

Review: **** I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of C21 Investments Inc. (the "issuer") for the interim period ended April 30, 2020.
No misrepresentations: **** Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Date: August 13, 2020

SIGNED: "Michael Kidd"

Michael Kidd, Chief Financial Officer

NOTE TO READER

ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

C21 Investments Inc 6-K, filed Aug 13, 2020

About this 6-K