GTEC Holdings Ltd.
The firm previously invested $4 million in Cannabis Cowboy, which initially planned to launch and develop up to 27 recreational cannabis outlets in Alberta. It has now received its investment back in the form of a $4 million loan payment, which will strengthen its balance sheet.
This was made possible by Cannabis Cowboy selling eight proposed cannabis retail stores to ambitious retail chain Fire & Flower Holdings
In return for the divestment of its 25% stake, GTEC has received $800,000 worth of shares in Fire & Flower, and a $200,000 Promissory Note to be repaid in cash. This Promissory Note has a two-year term and bears an interest rate of 8% per annum, secured against Cannabis Cowboy’s BC assets.
“This transaction exemplifies our dedication to strengthening our balance sheet with a disciplined and non-dilutive approach while realizing profits from non-core assets,” said Norton Singhavon, founder, chairman and chief executive at GTEC. “This strategy demonstrates management’s commitment to be aligned with our shareholders. We are confident that the strengthened balance sheet will accelerate the development of our core cultivation business and accelerate our transition to profitability.”
The plan is to increase its annual production output from its current 4,000 kg capacity to approximately 9,000 kg in 2020.
We see this as an intelligent move that supports the company’s statement that they will not raise further capital below the latest funding round. By divesting non-core assets and focusing instead on producing premium cannabis, GTEC is better positioning itself to thrive in the years ahead.
2019 has been set-up as a year of execution for GTEC and the additional $4 million of cash on the balance sheet – with the repayment of the promissory note – should help it achieve its ambitious plans.
Fire & Flower’s network of dispensaries has grown to 38 with this purchase. Convenience store giant Alimentation Couche-Tard Inc. bought a 9.9% stake in the business for an initial investment of $26 million earlier this year, and it has been on a major expansion drive ever since, with plans to increase its estate to 135 stores by fiscal 2021.
GTEC is a Market Awareness client of Capital 10X.
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