(TheNewswire)
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- Revenue growth of 59%,resulting in revenues of $2.4 million
- SG&A decreased by 31% to $884,000 (C)
- Average selling price increased by 13% to$8.84
- Gross Margin (A) maintained at 70%
- Adjusted EBITDA of $560,000 (D)
- Adjusted EBITDA margin of 23%
Kelowna, BC - TheNewswire - October 30, 2020 -GTEC Holdings Ltd. (TSXV:GTEC) (OTC:GGTTF) (FRA:1BUP)(" GTEC ", the " Company " or "GTEC Cannabis Co." ) is pleased to report its Third Quarter financial results for the period ended August 31,2020 .
KeyFinancial Highlights of Q3 2020
Allfigures are compared to the Company's most recent fiscal quarter (Q22020)
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- Revenue of $2.4 million, compared to $1.5 million, anincrease of $900,000 or 59%, from the sale of 279 kilograms(" KG ") of cannabis.
- Gross margin (A) dollars of $1.44 million (net of excise tax) ,compared to $873,000, an increase of $567,000 or65% , while grossmargin (A) percentage was sustained at 70%.
- Recreational cannabis sales accounted for 96% oftotal sales, compared to 83 %.
- Overall weighted average selling price increased by13% or $1.01 to $8.84 per gram, resulting in the Company's fourthconsecutive quarterly increase.
- Recreational weighted average selling price increasedby 3% or $0.28 to $9.29 per gram.
- Cash cost of production increased by 30% or $0.48 to$2.07 per gram (B) , as a result of certain harvests notachieving target yield weights during the COVID-19 pandemic, due topersonnel limitations and travel restrictions. The Company isconfident that these issues have been fully resolved.
- SG&A of $884,000 (C) , compared to$1.28 million, a decrease of $395,000 or 31%.
- Adjusted EBITDA positive of $560,000 (D) , compared toadjusted EBITDA loss of $406,000, an increase of $966,000 or 238%,with an Adjusted EBITDA margin of 23%.
"When GTEC became a publicly listed issuer two years ago, wehad a mandate to become a profitable organization during the fiscal2020 year. In a relatively short time, we have delivered resultsdemonstrating our near-term profitability, the pursuit of operationalexcellence and growth trajectory," saidNorton Singhavon, Founder and CEO of GTEC. " We remain committed to operating in afocused and disciplined manner, while driving increases to ourrevenues through the expansion of our national distribution strategy,introducing new and unique cultivars, and innovating new productdevelopment."
Q3 Investor Fact Sheet
GTEC has published a one-page Investment Overview,which summarizes the Company's key highlights and metrics. Thedocument can be accessed at https://www.gtec.co/investor-fact-sheet
Key Corporate Highlights of Q32020
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- BLK MKT (TM) continues to be one of the top selling brands in B.C., and continuesto be the highest priced single gram product offered on BC Cannabis Stores .
- Launched BLK MKT TM andTenzo TM products in Ontario .
- Received first purchase orders from Manitobaretailers - via the Liquor, Gaming and Cannabis Authority of Manitoba(" LCGA ").
- 3PL Ventures Inc. ( " 3PL " ) is in the finalstages of completing construction and is in the process of preparing the evidence package fora Standard Cultivation licence from Health Canada. The 3PL facility is a purpose-built indoor cultivationfacility located in Vernon B.C., and is approximately 60,000 sq.ft.
- Made substantial progress reducing corporateoverheads in Q3 (as compared to the previous quarter) and the Companyremains focused on continuing to reduce overhead expenses inQ4.
Key Subsequent Events of Q3 2020
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- Grey Bruce Farms Inc. and Tumbleweed Farms Corp.received the necessary approvals from Health Canada for Provincialsales-related licence amendments. As a result, all three of theCompany's licensed cultivation facilities are now authorized to sellrecreational packaged cannabis into Provinces and Territories. TheCompany believes that this will play an instrumental role indecreasing COGS, improving logistical/geographical efficiencies, aswell as streamlining its recreational cannabis packagingprocesses.
- Increased itscredit facility with NFS Leasing Canada Ltd. by $2.3 million, with alower interest rate than its existing credit facility (further details are provided later inthis news release).
- Received initial funding from the Canadian EmergencyWage Subsidy (" CEWS ") provided by the Government ofCanada.
- Amended its unsecured Convertible Promissory notewith Invictus MD Strategies Corp. (further details are provided later inthis news release).
- Sold a commercial property, which was not beingutilized by operations for total gross proceeds of $1 million.
- Made an early principal repayment to NFS LeasingCanada Ltd. of $330,917, reducing the $3.95 million credit facility to$3.6 million.
- Secured eight additional cannabis product listings atthe Ontario Cannabis Store (" OCS ").
- Signed a Cannabis Purchase and Sales Agreement withthe Yukon Liquor Corporation and received first two purchase ordersfrom the Yukon territory.
Quarterly Comparative Analysis
(Expressed in thousands of CanadianDollars)
--------------------------------------------------------------------- | Three-months ended |% Change|Aug |May |Feb |Nov | | |Q2– Q3 |31-20 |31-20 |29-20 |30-19 | | |2020 |Q3 2020|Q2 2020|Q1 2020|Q4 2019| |-------------------------------------------------------------------| |Total Gross Revenue |59% |2,400 |1,507 |2,354 |1,149 | |-------------------------------------------------------------------| |Total Net Revenue |66% |2,071 |1,246 |2,331 |1,128 | |-------------------------------------------------------------------| | Recreational Sales |92% |1,988 |1,034 |1,119 |102 | |-------------------------------------------------------------------| | B2B Wholesale Sales |-61% |83 |212 |1,212 |1,026 | |-------------------------------------------------------------------| |Gross Margin(A)($) |65% |1,444 |873 |965 |290 | |-------------------------------------------------------------------| |Gross Margin(A)% |0% |70% |70% |41% |26% | |-------------------------------------------------------------------| |SG&A |-33% |1,161 |1,724 |1,658 |1,872 | |-------------------------------------------------------------------| |Net Income |110% |19 |(197) |(815) |(2,571)| |(Loss) from | | | | | | |Operations | | | | | | |-------------------------------------------------------------------| |Adjusted EBITDA(D) |238% |560 |(406) |5 |(646) | |-------------------------------------------------------------------| |Adjusted EBITDA Margin(D) |185% |23% |-27% |0% |-57% | |-------------------------------------------------------------------| |Sales (KG) |52% |279 |183 |391 |280 | |-------------------------------------------------------------------| |Cash cost of Production(B)|30% |$2.07 |$1.59 |$2.22 |$2.97 | |-------------------------------------------------------------------| |Average Selling Price |13% |$8.84 |$7.83 |$6.24 |$5.89 | ---------------------------------------------------------------------A copy of the Management Discussion & Analysis andFinancial Statements for the Third Quarter of Fiscal 2020 can bedownloaded from GTEC's SEDAR profile .
Note (A) Gross margin before fair valueadjustments. Please refer to the Company's Q3 2020 Financial Statements and MD&A for definitions and areconciliation to IFRS.
Note (B) Cash cost of production is a financialperformance measure used by the Company, which is not defined by anddoes not have any standardized meaning under IFRS. The Companybelieves that these non-IFRS financial measures, in addition toconventional measures prepared in accordance with IFRS, enableinvestors to evaluate the Company's operating results, underlyingperformance and prospects in a similar manner to the Company'smanagement. As there are no standardized methods of calculating thesenon-IFRS measures, the Company's approaches may differ from those usedby others, and accordingly, the use of these measures may not bedirectly comparable. Accordingly, these non-IFRS measures are intendedto provide additional information and should not be considered inisolation or as a substitute for measures of performance prepared inaccordance with IFRS. Please refer to the Company's Q3 2020 MD&A for definitions and a reconciliation to IFRS.
Note (C) Operating expenses exclude non-cashitems, such as depreciation and amortization and share based payments.Please refer to the Company's Q3 2020 Financial Statements andMD&A for definitions and a reconciliation to IFRS.
Note (D ) Adjusted EBITDA is a non-IFRS measure andthe Company calculates adjusted EBITDA from continuing operations asnet income (loss) before interest expense, income taxes, depreciationand amortization , unrealized gain (loss) on changes in fair value ofbiological assets, equity loss on investment in associate, loss onsale of assets, investment loss and share based payments. Managementdetermined that the exclusion of the fair value adjustment is analternative representation of performance. The fair value adjustmentis a non-cash gain (loss) and is based on fair market value less costto sell. The most directly comparable measure to adjusted EBITDA(excluding fair value adjustment to biological assets and inventory)calculated in accordance with IFRS is net income (loss) fromcontinuing operations. Please refer to the Company's Q3 2020 MD&A for definitions and a reconciliation of AdjustedEBITDA to net income (loss) from continuing operations.
NFS Credit Facility
The Company is pleased to announce that the Company hasclosed a non-brokered senior secured debt financing of CAD $2,300,000(the " Financing ") with NFS Leasing Canada Ltd.(" NFS "), further increasing its existing $3,619,000 credit facility with NFS (previouslyannounced on June 9, 2020 ). Proceeds from the Financing will be used by GTEC asworking capital to execute on its near-term strategicinitiatives.
The Financing was completed pursuant to a seniorsecured promissory note (the " Note ") in theamount of $2,300,000 for a term of 36 months. Interest-only paymentsare required for the first year, with the initial payment commencingon December 1, 2020, and blended payments of principal and interestcommencing in year two, until the Note is fully repaid at the end ofthe three-year term. The Note will bear an annual interest rate of16%, and assuming GTEC does not exercise any rights of repayment, thetotal cost of borrowing would yield an average annualized rate of11.7%.
" GTEC's continued growth is veryexciting," said DavidDenniss, Vice President Business Development, NFS Leasing, Canada." We specialize in creating customized financing solutions exactlylike this and are pleased to be a trusted partner for GTEC once againto support their opportunity for growth. "
In connection with the Financing, certain securityinterests have been granted to NFS through general securityagreements, pledges and mortgages on certain real and other propertyowned by GTEC and its wholly-owned subsidiaries.
Subject to final acceptance by the TSX Venture Exchange(the " TSXV "), GTEC will issue a total number of common shares toNFS equal to C$230,000 based on the closing share price of GTEC, onthe day prior to this announcement, being $0.095. GTEC intends toissue 2,421,052 common shares in the capital of GTEC, which will besubject to a three-year release schedule, with 403,508 shares beingreleased each six-month period. GTEC will also issue, subject to finalacceptance by the TSXV, a total of 6,900,000 common share purchasewarrants of GTEC (the "Warrants") to NFS. The Warrants willexpire three years from date of issuance. The exercise price of theWarrants will be as follows: (1) 2,300,000 Warrants at an exerciseprice of $0.10; (2) 2,300,000 Warrants at an exercise price of $0.15;and (3) 2,300,000 Warrants at an exercise price of $0.25. No otherbroker fees or broker warrants were issued in connection with theFinancing.
Amendment of Invictus MD Strategies$2.5 million unsecured Convertible Promissory Note
The Company has amended its unsecuredConvertible Promissory Note (" Invictus Note ") with Invictus MD Strategies, which wasto mature on October 19, 2020. The principal amendments to the termsof the Invictus Note are as follows:
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- Extended Maturity Date to February 28,2022.
- GTEC to make a principal payment of$510,000 on October 30, 2020; with certain payments thereafter beinginterest-only and other payments being blended principal plusinterest, such that the Invictus Notewill be fully repaid upon the new Maturity Date.
- Annual interest rate to increase from8% to 10% on the remaining principal balance of $1.99million.
- the price of the conversion to sharesof the Company has been reduced from $1.50 to: (i) $0.35 per share onthe first $250,000 of the outstanding principal balance; and (ii)$0.55 per share on the remaining principal balance outstanding at thetime of conversion.
- The Invictus Notewill remain unsecured.
Annual General and Special Meeting ofShareholders
The Company also announces that an annual general andspecial meeting (the " Meeting ") of shareholders will be held onNovember 18, 2020 at 2:00 p.m. (Pacific time). At the Meeting,shareholders will be asked to consider resolutions to fix the numberof directors, re-elect the current board of directors, re-appointManning Elliott LLP, Chartered Professional Accountants, as theauditor of the Company for the ensuing year and re-approve theCompany's existing rolling ten-percent incentive stock optionplan.
Shareholders will also be asked to ratify theimplementation of a restricted share unit plan (the " RSU Plan ") and adeferred share unit plan (the " DSU Plan "). TheRSU Plan, and the DSU Plan, have been adopted by the board ofdirectors, and are intended to provide the Company with an additionalmechanism for the equity compensation of officers, directors,employees and consultants. The maximum number of common sharesavailable for issuance under both the RSU Plan, and the DSU Plan, willbe limited to 6,915,107 common shares, representing five percent ofthe current outstanding share capital of the Company.
Implementation of the RSU Plan, and the DSU Plan,remains subject to ratification by shareholders at the Meeting, andthe final approval of the TSX Venture Exchange. In accordance with thepolicies of the TSX Venture Exchange, the Company is required toobtain disinterested shareholder approval for the implementation ofthe RSU Plan, and the DSU Plan. At the meeting, shareholders who mayreceive restricted share units, or deferred share units, will beexcluded from voting on the resolutions to ratify implementation ofthe RSU Plan and the DSU Plan.
Further information concerning the Meeting, and thematters to be considered, including the full text of the RSU Plan andthe DSU Plan, will be made available in the management informationcircular prepared by the Company. A copy of the circular can beaccessed from the Company's website ( www.gtec.co ) or under the Company'sprofile on SEDAR ( www.sedar.com ).
GTEC Cannabis Co cultivates, markets, and distributesthe high-end cannabis products that consumers desire. The Company hasfour operational facilities licenced by Health Canada and is currentlydistributing cannabis through medical and recreational saleschannels.
GTEC's quality product offering is crafted from rareand unique cultivars, which are currently not being produced by otherLicenced Producers. GTEC's recreational cannabis brands includes; BLK MKT (TM) , Tenzo (TM) ,Cognoscente(TM) and Treehugger(TM), which retails in the Provinces ofB.C., Ontario, Saskatchewan and Manitoba. The Company's medicalcannabis brand, GreenTec(TM), is distributed nationally to qualifiedpatients through its medical partners; CannMart and CannaFarms .
GTEC is a publicly traded corporation, listed on theTSX Venture Exchange (GTEC), OTCQB Venture Market (GGTTF) andFrankfurt Stock Exchange (1BUP). The Company's headquarters is locatedin Kelowna, B.C. and has operations in B.C., Alberta andOntario.
To learn more about the Company or to access the mostrecent Corporate Presentation, please visit our website at www.gtec.co
For additional information, please contact:
GTEC Cannabis Co.
1-800-351-6358
contact@gtec.co
Neither the TSX Venture Exchange norits Regulation Services Provider (as that term is defined in thepolicies of the TSX Venture Exchange) accepts responsibility for theadequacy or accuracy of this release.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
Thisnews release includes certain "forward-looking statements"under applicable Canadian securities legislation. Forward-lookingstatements are necessarily based upon a number of estimates andassumptions that, while considered reasonable, are subject to knownand unknown risks, uncertainties, and other factors which may causethe actual results and future events to differ materially from thoseexpressed or implied by such forward-looking statements. Such factorsinclude, but are not limited to: general business, economic,competitive, political and social uncertainties; delay or failure toreceive board, shareholder or regulatory approvals, where applicable,and the state of the capital markets. There can be no assurance thatsuch statements will prove to be accurate, as actual results andfuture events could differ materially from those anticipated in suchstatements. For instance and among other things, there is a risk thatthe COVID-19 pandemic may disrupt the Company's operations, those ofthe Company's suppliers and distribution channels and negativelyimpact the use of the Company's products; there can be no assurancethat the Company will maintain adequate capital resources andliquidity, including but not limited to, availability of sufficientcash flow, will continue to reduce overhead, execute the Company'sbusiness plan (either within the expected timeframe or at all); or anyassurances regarding the potential effects of judicial or otherproceedings on the Company's business or financial condition, theresults of operations and cash flows; the volatility in and/ordegradation of general economic, market, industry or businessconditions; or compliance with applicable environmental, economic,health and safety, energy and other policies and regulations and inparticular health concerns with respect to the use of cannabis; theanticipated effects of actions of third parties such as competitors,activist investors or federal, provincial, territorial or localregulatory authorities, self-regulatory organizations, plaintiffs inlitigation or persons threatening litigation; changes in regulatoryrequirements in relation to the Company's business and products.Accordingly, readers should not place undue reliance onforward-looking statements, which speak only as of the date of thisnews release. The Company disclaims any intention or obligation toupdate or revise any forward-looking statements, whether as a resultof new information, future events or otherwise, except as required bylaw.
This news release refers to certainfinancial performance measures that are not defined by and do not havea standardized meaning under International Financial ReportingStandards ("IFRS") as issued by the International AccountingStandards Board. These non-IFRS financial performance measures aredefined in the MD&A. Non-IFRS financial measures are used bymanagement to assess the financial and operational performance of theCompany. 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 theCompany's management. As there are no standardized methods ofcalculating these non-IFRS measures, the Company's approaches maydiffer from those used by others, and accordingly, the use of thesemeasures may not be directly comparable. Accordingly, these non-IFRSmeasures are intended to provide additional information and should notbe considered in isolation or as a substitute for measures ofperformance prepared in accordance with IFRS.
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