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GTEC Holdings Ltd
Symbol GTEC
Shares Issued 126,684,777
Close 2020-03-17 C$ 0.09
Recent Sedar Documents

GTEC CEO to waive part of entitlement in acquisition

2020-03-17 16:40 ET - News Release

An anonymous director reports

GTEC ANNOUNCES AMENDMENTS TO ACQUISITION AGREEMENTS, COMPLETION OF GREY BRUCE FARMS HARVESTS AND SATISFACTION OF MILESTONES

Norton Singhavon, founder, chairman and chief executive officer of GTEC Holdings Ltd., has agreed to waive a portion of his entitlement to further payments in connection with GTEC's acquisition of 1118157 B.C. Ltd., GreenTec Bio-Pharmaceuticals Corp. (GBP) and Grey Bruce Farms Inc. (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 to be issued in connection with milestone payments still payable.

This payment waiver and various amending agreements will not only reduce shareholder dilution, but 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 expanding the company through internal investment.

Amendment to 1118157 B.C. share purchase agreement

The company entered into an amending agreement on March 13, 2020, with the vendors of 1118 amending certain terms and conditions of a share purchase agreement dated Nov. 22, 2017, among GreenTec Holdings Ltd. and the vendors of 1118, as assumed by the company.

Pursuant to the 1118 amending agreement, the 1118 vendors, being Mr. 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). 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 per cent 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, with the vendors of GBP amending certain terms and conditions of a share purchase agreement dated Nov. 15, 2017, among GreenTec Holdings and the vendors of GBP, as assumed by the company. Mr. Singhavon 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 $5.75-million. 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.

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). 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 per cent 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, with the vendors of GBF amending certain terms and conditions of a share purchase agreement dated Sept. 15, 2017, among GreenTec Holdings and the vendors of GBF, as assumed by the company.

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, 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, 55 cents).

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. Signhavon will now accept a reduced milestone payment of $1-million in common shares upon GBF achieving 1,500 kilograms in aggregate cannabis sales. 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. As a result, Mr. Singhavon will be issued one million 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 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). 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 per cent of the company's market capitalization.

Satisfaction of Grey Bruce Farms harvest milestones

On Nov. 4, 2019, and Dec. 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 55 cents per share.

The GBF amending agreement and the issuance of common shares pursuant thereto are subject to final approval of the TSX Venture Exchange. 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 by way of a renewal agreement dated Feb. 20, 2020, to provide business advisory and investor relations services. The parties originally entered into a consulting agreement dated Feb. 28, 2019, and all services are provided in accordance with TSX Venture Exchange policies and applicable securities laws and regulations.

Pursuant to the agreement, Oak Hill will continue to provide the services to the company for another six months. As consideration for the services, the company will issue to Oak Hill 60,000 options to purchase common shares. The options will be exercisable at a price of 16 cents 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 TSX-V.

About GTEC Holdings Ltd.

GTEC Holdings is a specialized cannabis company which produces and distributes highly sought-after ultrapremium 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.

Note (A): This analysis is based on the most recently available financial statements on SEDAR from publicly listed licensed producers (including GTEC) as of Nov. 19, 2019. Companies included were those listed on the 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.

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