GTEC Announces Amendments to Acquisition Agreements, Completion of Grey Bruce Farms Harvests and Satisfaction of Milestones
Kelowna, BC – March 17, 2019 – GTEC Holdings Ltd. (TSX-V:GTEC) (OTC:GGTTF) (FRA:1BUP) (“GTEC” or the “Company”) is pleased to announce that Norton Singhavon, Founder, Chairman and CEO, has agreed to waive a portion of his entitlement to further payments (the “Payments Waiver”) in connection with GTEC’s acquisition of 1118157 B.C. Ltd. (“1118”), GreenTec Bio-Pharmaeuticals Corp. (“GBP”) and Grey Bruce Farms Incorporated (“GBF”). The Company has also secured agreements with certain other vendors of 1118, GBP and GBF to reduce their milestone entitlements and all vendors have agreed to increase the floor price of common shares in the capital of the Company (the “Common Shares”) to be issued in connection with milestone payments still payable.
This Payments Waiver and various amending agreements will not only reduce shareholder dilution, it will improve the Company’s balance sheet while aligning with shareholders’ interests during the current sector downturn. The Company is focused on maximizing shareholders returns by strengthening the balance sheet, achieving its production and sales targets, and growing the Company through internal investment.
Amendment to 1118157 B.C. Ltd. Share Purchase Agreement
The Company entered into an amending agreement on March 13, 2020 (the “1118 Amending Agreement”) with the vendors of 1118 amending certain terms and conditions of a share purchase agreement dated November 22, 2017 among GreenTec Holdings Ltd. and the vendors of 1118, as assumed by the Company (the “1118 SPA”).
Pursuant to the 1118 Amending Agreement, the 1118 vendors, being Norton Singhavon and Michael Blady, have agreed to waive all entitlement to the remaining milestone payments otherwise due under the 1118 SPA. Mr. Singhavon waived his entitlement to $350,000 (payable in Common Shares) of remaining milestone payments and Mr. Blady waived his entitlement to $150,000 (payable in Common Shares) of remaining milestone payments. As a result of the 1118 Amending Agreement, the Company owes no further payments in respect of the acquisition of 1118.
Since Mr. Singhavon and Mr. Blady were vendors of 1118, the 1118 Amending Agreement is considered a related party transaction within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI – 61-101”). However, the 1118 Amending Agreement is exempt from minority approval, information circular and formal valuation requirements pursuant to Sections 5.5(a) and 5.7(1)(a) of MI 61-101, as neither the fair market value nor the consideration paid in connection with the 1118 Amending Agreement exceeds 25% of the Company’s market capitalization.
Amendment to GreenTec Bio-Pharmaceuticals Share Purchase Agreement
The Company also entered into an amending agreement on March 13, 2020 (the “GBP Amending Agreement”) with the vendors of GBP amending certain terms and conditions of a share purchase agreement dated November 15, 2017 among GreenTec Holdings Ltd. and the vendors of GBP, as assumed by the Company (the “GBP SPA” and together with the GBP Amending Agreement, the “GBP Agreement”). Norton Singhavon, the CEO of the Company, was one of the GBP vendors.
Pursuant to the GBP Amending Agreement, the GBP vendors have agreed to reduce their entitlement to a portion of the purchase price such that the remaining payment obligations (payable in Common Shares) of the Company in connection with the GBP acquisition are reduced by $5,750,000. In addition to reducing the purchase price, the GBP vendors have agreed to restructure the remaining milestones and raise the floor price of the Common Shares to be issued in connection with the new milestones to a deemed price per share equal to the greater of (A) the 10-day volume-weighted average trading price of the Common Shares, and (B) $1.00.
Since Mr. Singhavon was a vendor of GBP, the GBP Amending Agreement is considered a related party transaction within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI – 61-101”). However, the GBP Amending Agreement is exempt from minority approval, information circular and formal valuation requirements pursuant to Sections 5.5(a) and 5.7(1)(a) of MI 61-101, as neither the fair market value nor the consideration paid in connection with the GBP Amending Agreement exceeds 25% of the Company’s market capitalization.
Amendment to Grey Bruce Farms Share Purchase Agreement
The Company also entered into an amending agreement on March 13, 2020 (the “GBF Amending Agreement”) with the vendors of GBF amending certain terms and conditions of a share purchase agreement dated September 15, 2017 among GreenTec Holdings Ltd. and the vendors of GBF, as assumed by the Company (together with the GBF Amending Agreement, the “GBF Agreement”).
Among other things, the GBF Amending Agreement raised the floor price of the Common Shares to be issued to the vendors of GBF (excluding Mr. Singhavon) in connection with the completion of the first five harvests and upon GBF obtaining either a medical sales or processing licence from Health Canada (the “Remaining Milestones”), to a deemed price per share equal to the greater of (A) the 10-day volume-weighted average trading price of the Common Shares, and (B) the last commercial financing undertaken by GTEC (currently, $0.55).
In lieu of an entitlement to $1,787,500 (payable in Common Shares) of the purchase price payable in connection with the remaining milestones under the GBF Agreement, Mr. Singhavon will now accept a reduced milestone payment of $1,000,000 in Common Shares upon GBF achieving 1,500kg in aggregate cannabis sales (the “Cannabis Sales Milestone”). The Cannabis Sales Milestone represents a $787,500 reduction of Mr. Singhavon’s pro rata entitlement to any outstanding milestone payments. Mr. Singhavon has also agreed to raise the floor price of the Common Shares to be issued in connection with the Cannabis Sales Milestone to a deemed price per share equal to the greater of (A) the 10-day volume-weighted average trading price of the Common Shares, and (B) $1.00. As a result, Mr. Singhavon will be issued 1,000,000 Common Shares in connection with the Cannabis Sales Milestone. In consideration for entering into the GBF Amending Agreement the Company has agreed to pay to the vendors of GBF a one-time cash payment of an aggregate of $25,010, of which Mr. Singhavon will receive $10.00 in total.
Since Mr. Singhavon was a vendor of GBF, the GBF Amending Agreement is considered a related party transaction within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI – 61-101”). However, the GBF Amending Agreement is exempt from minority approval, information circular and formal valuation requirements pursuant to Sections 5.5(a) and 5.7(1)(a) of MI 61-101, as neither the fair market value nor the consideration paid in connection with the GBF Amending Agreement exceeds 25% of the Company’s market capitalization.
Satisfaction of Grey Bruce Farms Harvest Milestones
On November 4, 2019 and December 23, 2019 GBF completed its first and second harvests, respectively, satisfying two harvest milestones under the GBF Agreement. The Company intends to issue an aggregate of $210,000 of Common Shares to satisfy required milestone payments. Accordingly, the Company intends to issue an aggregate of 381,818 Common Shares to the arm’s length vendors of GBF, at a deemed price of $0.55 per share.
The GBF Amending Agreement and the issuance of Common Shares pursuant thereto are subject to final approval of the TSX Venture Exchange (“TSXV”). The Common Shares will be subject to a statutory hold period of four months and one day from the date of issuance thereof.
Extending Investor Relations Services
GTEC has extended its engagement with Oak Hill Financial (“Oak Hill”) by way of a renewal agreement (the “Renewal Agreement”) dated February 20, 2020, to provide business advisory and investor relations services (the “Services”). The parties originally entered into a consulting agreement dated February 28, 2019 (the “Agreement”) and all services are provided in accordance with TSXV policies and applicable securities laws and regulations.
Pursuant to the Agreement, Oak Hill will continue to provide the Services to the Company for another 6 months. As consideration for the Services, the Company will issue to Oak Hill 60,000 options (“Options”) to purchase Common Shares. The Options will be exercisable at a price of $0.16 per share for a term of two years and will vest quarterly in four equal instalments, with the first instalment vesting on the date of grant. Oak Hill currently holds 100,000 Options of the Company. Oak Hill reserves the right to acquire any additional securities of the Company. The Renewal Agreement is subject to approval of the TSXV.
About GTEC
GTEC Holdings Ltd. is a specialized cannabis company which produces and distributes highly sought-after ultra-premium cannabis products in Canada. The Company has four licensed and operational assets and is currently distributing cannabis through medical and recreational sales channels. GTEC’s products are currently achieving amongst the highest gross margins and retail pricing within its sector in Canada (A).
GTEC’s exclusive cultivar collection includes rare and unique cultivars, which are not currently available from other Licenced Producers. GTEC’s premium and ultra-premium product portfolio include: BLK MKT™, Tenzo™, GreenTec™, Cognōscente™ and Treehugger™.
The Company wholly owns operations in BC, Alberta and Ontario, and is licensed by Health Canada for the following: sales into recreational supply chains, direct sales to medical patients, extraction, and analytical testing.
GTEC is a publicly traded corporation, listed on the TSX Venture Exchange (GTEC), OTCQB Venture Market (GGTTF) and Frankfurt Stock Exchange (1BUP). The Company’s headquarters is based out of Kelowna, British Columbia. To learn more about the company or to request our most recent corporate presentation, please visit our website at www.gtec.co
For additional information, please contact:
GTEC Holdings Ltd.
1-800-351-6358
contact@gtec.co
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties, delay or failure to receive board, shareholder or regulatory approvals, where applicable, and the state of the capital markets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. For instance, there can be no assurance that: shareholders returns will be maximized, that the balance sheet will continue to strengthen, that production and sales targets will be achieved; that the Company’s products will continue achieving amongst the highest gross margins and retail pricing within its sector in Canada; or that the TSXV will approve any of the Amending Agreements referenced above, or the Renewal Agreement, or the issuance of shares to the arm’s length vendors of GBF;. Accordingly, readers should not place undue reliance on forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Note (A): This analysis is based on the most recently available Financial Statements on SEDAR from publicly listed Licenced Producers (including GTEC), as of November 19, 2019. Companies included, were those listed on New Cannabis Ventures Canadian Cannabis LP Index, that currently produce in a; greenhouse, indoor operation, or a combination of both, with quarterly sales greater than $1 million. Those with outdoor operations were excluded from the analysis. Based on the analysis GTEC had the third highest gross margin in the sector, and the no.1 highest based on those solely with indoor operations.