GTEC Reports Fourth Quarter and Fiscal 2019 Results

Kelowna, BC – March 17, 2019 – GTEC Holdings Ltd. (TSX-V:GTEC) (OTCQB: GGTTF) (FRA: 1BUP) (“GTEC” or the “Company”) a multi-licence producer of premium indoor cultivated cannabis is pleased to report its Fourth Quarter and Fiscal year ended November 30, 2019.

Key financial highlights of the Fourth Quarter of Fiscal 2019

• Revenue increased to $2.4 million for the fiscal year end 2019. For the fourth quarter of 2019, revenue increased to $1.15 million, an 11% increase over the third quarter, from the sale of 280 kilograms (“KG”) of cannabis. (Q4 revenues were solely from the Company’s Alberta Craft Cannabis facility and the first harvest from Grey Bruce)
• Weighted average selling prices of the Fourth quarter 2019 consisted of:
  • $5.25 per gram – B2B wholesale flower
  • $9.25 per gram – recreational sales
  • $2.50 per gram – secondary products (trim and popcorn)
• Gross margin of $1.07 million, or 45% for the fiscal year 2019. For the fourth quarter of 2019, gross margin of $290,000, or 26%, compared to $639,000, or 62% of revenue for the third quarter of 2019.  This decrease was due to Grey Bruce and Tumbleweed entering into production, which resulted in their respective operational costs being captured into the Company’s overall COGS, as well as, an increase in labour and packaging related to recreational CPG sales. Management anticipates this to stabilize in the following quarter
• Operating expenses were reduced by 11% for the fiscal year 2019, compared to fiscal 2018 (excluding depreciation, amortization and share based payments). For the fourth quarter 2019, operating expenses were reduced 36% from $1.47 million to $935,000 (excluding depreciation, amortization and share based payments), as a result of management’s determination in implementing strict internal finance protocols

“In fiscal 2019 we successfully executed all of the Company’s licensing initiatives. With three operational licensed facilities cultivating our unique and premium genetics, the Company is well positioned to continue achieving strong quarterly sales growth,” said Norton Singhavon, Founder, Chairman and CEO of GTEC. “During the fourth quarter of fiscal 2019, the Company successfully launched its recreational CPG format sales, which resulted in overwhelming demand for our products. As we move into fiscal 2020, management is committed to operating in a disciplined and fiscally responsible manner in order to drive the Company into profitability.”

Key operating highlights of the Fourth Quarter of Fiscal 2019

• Launched recreational CPG cannabis products; BLK MKT™ and Tenzo™, with unique cultivars
• Initial recreational product launch of 24 KG shipped into the Provinces of British Columbia and Saskatchewan, with an average weighted selling price of $9.25 per gram
• Sold all cannabis that was ready for sale, while maintaining favourable selling prices
• Produced and harvested 727 KG of dried cannabis during fiscal 2019; of which 434 KG of dried cannabis was produced and harvested during the fourth quarter 2019
• Divested its equity stake in Cannabis Cowboy Inc. for $5 million
• Commenced the extraction of secondary products (trim and popcorn) into distillate oil, which has been sold to its wholesale partners

Key subsequent events of the Fourth Quarter of Fiscal 2019

• Sold over 390 KG of cannabis during First Quarter of Fiscal 2020, which consisted of:
  • 123 KG of recreational CPG cannabis, at an average selling price of $9.42 per gram
  • 267 KG of B2B wholesale flower, at an average selling price of $4.77 per gram
  • Total weighted average selling price of $6.24 per gram
• Packaged and sold over 53,000 units of recreational CPG cannabis in B.C. and Saskatchewan
• Estimated production was 501 KG of cannabis during the first quarter of 2020, at an estimated average cash cost of between $2.10 – $2.85 per gram
• Completed two early payments, in aggregate of $1.3 million toward its $5 million senior secured convertible debenture
• Three licensed cultivation facilities, totaling approximately 39,000 square feet, are now operating at full capacity, with the second quarter of 2020 harvests expected to drive increased revenue growth in the second and third quarter of 2020
• Completed the successful transition from commercial cultivars to unique premium cultivars, with the final harvests of the commercial cultivars occurring in the first quarter of 2020, which allows the Company to enter the second quarter of 2020 solely producing unique premium cultivars
• The Company has increased the average selling prices and gross margins by transitioning from bulk B2B cannabis sales to CPG cannabis sales (via Provincial sales channels)
• Grey Bruce Farms was issued its Standard Processing licence, which allows Grey Bruce to package cannabis in CPG format for sales into the Provincial sales channels. This is in addition to the Company’s existing Standard Processing licence at its Alberta Craft and Tumbleweed facility
• Launched single gram SKUs for BLK MKT™ cultivars in B.C. and Saskatchewan, with an increased selling price per gram over its 3.5 gram SKUs
• Launched Tenzo™ (Purple Punch 2.0 and Dosi-Pie) in B.C. and Saskatchewan
• Commenced small-scale test harvests of new cultivars which are highly sought-after in other mature markets, to determine viability for commercial CPG production
• Recently approved as a Licensed Supplier in the Province of Manitoba
• Entered into a non-binding term sheet with Trichome Financial for a $4.5 million debt financing, for the purpose of repayment of the Company’s existing senior secured loan (maturing June 11, 2020) and general working capital purposes

The management discussion and analysis for the period and the accompanying financial statements and notes are available under the Company’s profile on SEDAR at GTEC’s SEDAR profile.

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 exclusive cultivar collection includes rare and unique phenotypes, which are not currently available from other Licenced Producers. GTEC’s premium and ultra-premium product portfolio includes; BLK MKT, ^TM Tenzo ^TM, GreenTec ^TM, Cognōscente ^TM and Treehugger ^TM.

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, bulk sales to other Licenced Producers, 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 located in Kelowna, British Columbia.

To view more about the company or to request our most recent corporate presentation, please visit our website at www.gtec.co

On behalf of the board,

Norton Singhavon
Founder, Chairman & CEO

Michael Blady
Co-Founder & Vice President

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 such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. For instance and among other things, there can be no assurance that the Company will achieve strong quarterly sales growth maintain full production capacity or realize increased revenue growth or increases in average selling price and gross margins in 2020. Accordingly, readers should not place undue reliance on forward-looking statements, which speak only as of the date of this news release. 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.

This news release refers to certain financial performance measures that are not defined by and do not have a standardized meaning under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. These non-IFRS financial performance measures are defined in the MD&A. Non-IFRS financial measures are used by management to assess the financial and operational performance of the Company. The Company believes that these non-IFRS financial measures, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the Company’s operating results, underlying performance and prospects in a similar manner to the Company’s management. As there are no standardized methods of calculating these non-IFRS measures, the Company’s approaches may differ from those used by others, and accordingly, the use of these measures may not be directly comparable. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.