GreenTec Holdings “GTEC” : Analysis & Overview

GreenTec Holdings “GTEC”

The last three years in Canada have been historic. In terms of economic, social and political impact. All due to the proposed legalization of cannabis. The legalization of cannabis for recreational and currently medical use has created a multibillion dollar opportunity in Canada. In the past few years we have seen well managed and dedicated companies grow into multibillion dollar operations. For example Canopy Growth Corp and Aurora Cannabis.

These companies plus other older licensed producers are established and have ambitious expansion plans underway or nearly complete. These Licensed producers however are currently trading at very high valuations and are not as attractive as undervalued licensed producers in the space.

 

As a long term investor I look for companies that have experienced & passionate management, strong insider investment and realistic goals/plans.

Over the course of my research and observations I have found a few undervalued and overlooked plays in the industry. For example Harvest One (HVST), Invictus MD (IMH) and Emerald Health (EMH). Also smaller plays like Canada House Wellness Group (CHV), Matica Enterprises (MMJ), Quadron Cannatech (QCC) and Umbral (UMB). With all these cannabis plays out there not mentioning the potential IPO’s coming up (ex. TGOD & GTEC) an investor can get lost in a vast ocean of information.

 

My interest peaked in GreenTec Holdings (“GTEC”) when I saw the assets, future plans and their management team. On paper the whole company looked potentially amazing what furthered my curiosity more was that no one was talking about these guys. This encouraged me do to more research on this company and share it with the wider general public for discussion.

 

GTEC is an efficiently organized and focused company. The company was formed in early 2017 and is a Canadian owned company operating out of British Columbia. It was formed by the management team behind Doventi Capital, and included some of the Doventi funded assets.The GTEC team has been involved in many aspects of the industry from financing, to operating and optimizing numerous Licensed Producers, with a proven track record of successfully building and listing multiple legal cannabis companies on the CSE & TSX.V

 

Mission Statement

“Our mission is identifying and consolidating Licensed Producers of craft cannabis under Health Canada’s Access to Cannabis for Medical Purposes Regulations (“ACMPR”).”

 

 

The company is composed of a very diverse and highly skilled set of individuals who have expert level experience and knowledge in their respective areas. GTEC’s board and staff are comprised of Venture Capitalists, PhD Scientists, University PhD Professors, former Law Enforcement expert, Senior Cultivation and Horticulture Experts who have operated licensed growing operations. If you dive deeply into the management team, you will see that the GTEC team was extremely involved in building Invictus MD, as well as operating ‘In The Zone’, (now OGBC) which is a wholly owned subsidiary of the Cronos Group.

 

GTEC is working hard to build a successful and profitable company for its shareholders. One thing that stood out to me was their advisory team. The advisory team has two very key members:

·         Paul Rosen (Co-Founder of MJN.V)

·         Dan Kriznic (CEO of IMH).

With this kind of mentorship and guidance GTEC has the potential to be a great company like Cronos Group (MJN) and Invictus MD (IMH).

 

Supply is projected to lagging well into 2021, this a positive factor in terms of investment merit. The estimates for consumption lie conservatively around 600,000 – 700,000 KG annually for 2018-2019, ramping up to 800,000 to 1 million KG by 2021. If we looked at the total production capacity of the dozen major operational producers, we see that they are currently producing 400,000 – 550,000 KG annually, with a large majority of this supply not being available for market until late 2019 – 2020.

The larger companies in the sector are the most fully valued, relative to production. The larger companies attract the most media coverage and generally are the most overvalued ones. The market knows that there are always more opportunities for a great R.O.I in smaller less popular producers, as we all have seen with the rise of many up and comers in the Canadian Cannabis Industry.

Overall the window of opportunity is closing to set up competitive licensed operations, and GTEC is strategically placed to build out and be ready for the recreational market in July 2018. Along with a few other publicly traded companies who have facilities being completed within the same timeframe as GTEC.

 

 

Assets

 

In the regards to assets GTEC has accumulated a very impressive collection. The company is still working diligently to generate more accretive value. From the collection of assets and the ambitious plans management is pursuing you can clearly see a unique bi-coastal LP in the making with well diversified assets being managed and operated by an experienced and diverse team.

 

  1. GreenTec Bio-Pharmaceuticals (BC)

       GTEC’s flagship subsidiary, 100% Ownership.

       10,000 KG / year production capacity once complete.

       GreenTec is currently in construction of its 80,000 square foot “ACMPR” facility.

       GreenTec also has expansion capabilities for a 2nd site located on 160 acres in the North Okanagan, as well as a 3rd site located on 35 acres on the Trans-Canada Highway in Revelstoke, BC.

                                          i.    And recently announced that GTEC Holdings will be purchasing 300 acres in the Okanagan area in June of 2018.

 

  1. Grey Bruce Farms (Ontario)

       Wholly own subsidiary of GTEC Holdings.

       Currently in construction of its 30,000 square foot boutique craft cannabis ACMPR production facility.

       Located in Grey Bruce County, Ontario on 6 acres. 

 

  1. Tumbleweed Farms (BC)

       Wholly own subsidiary of GTEC Holdings.

       Currently in construction of its 10,000 square foot boutique craft cannabis ACMPR production facility.

       Located in Chase, BC on 22 acres.

       Easy access to Trans-Canada Highway for shipping of product to key locations.

 

  1. Zen Labs (BC)

       Wholly owned.

       Fully operating environmental & microbial analytical testing laboratory.

       Located in Kelowna, BC.

       Zen Labs is in the process of obtaining an extraction license.

       Zen Labs aims to refine and produce for the GTEC group of companies once extraction license is available.

 

   5.    Issued an exclusive binding LOI on Project Craft Co.

                                    

       A late stage applicant under the ACMPR

       Operational 14,000 sq ft facility.

       Received its Cultivation License from the Office of Medical Cannabis in 2017.

       Current capacity is 1,300 KG/annum.

       Expansion capabilities available. 

         

 

This growing list of companies is a clear indication of the dedication this team has to building up a solid portfolio of successful companies. The CEO and executive team at GTEC has shown excellent skill and promise when it comes to acquisitions and the evidence speaks for itself.

 

 

 

GTEC has a Binding Exclusive letter of intent for Project Craft Co, which is expected to close on January 31st, 2018. The terms of the transaction are to acquire 100% of ‘PCC’ based on the terms as follows:

 

·         Cash payment of $6 million CDN to the vendors

·         Issuing to the vendors 18,000,847 common shares of GTEC at an implied value of $0.4722 equal to $8,500,000

·         Upon receiving a Sales License, issuing to the vendors a number of common shares of GTEC as is equal to CAD $1,500,000, based on the volume weighted average trading price of GTEC (3) days prior a Sales License being granted by Health Canada.

·         Total aggregate cost being $16 M CAD

·         Part of the LOI also allows for the PCC principals to bring qualified investors within their network to participate in GTEC’s recent financing for up to $3MM.

·         Total transaction value at closing of $14.5MM, and once a Sales License is issued by Health Canada, bringing the total acquisition cost to $16MM

 

 

Comparing this to other deals inked across the industry you can see GTEC is negotiating some very strategically beneficial deals.

 

·         In the start of November 2017, Cannabis Wheaton Income Corp announced late last week it has acquired RockGarden in an all-stock deal. Under the agreement, RockGarden’s shareholders will receive up to 27.5 million shares of Cannabis Wheaton (TSX: CBW). Based on the closing price of $1.01 CAD on Nov 1st 2017 the deal potentially cost CBW $27.5 M CAD.

 

o   RockGarden is a privately owned licensed producer of cannabis pursuant to the ACMPR. On August 25th 2017 RockGarden was granted a cultivation license.

 

·         In late November 2017, Aurora Cannabis (ACB) announced that it has agreed to acquire H2 Biopharma Inc. for an initial payment of $10 M CAD. The total contingent consideration for the acquisition of H2, including closing and milestone payments, is $25 M CAD.

 

o   H2 Biopharma is a late stage ACMPR applicant based in Lachute, Quebec awaiting cultivation and sales license.

 

 Looking at GTEC objectively brings me to compare it with Cronos group or Invictus MD. In the case Cronos Group (MJN.V), MJN took Peace naturals and ITZ and turned them around into efficient, lean and profitable operations. GTEC has the same mentality and if they execute properly they will be on the same level as Cronos Group and Invictus MD. In fact, GTEC’s Senior Operations Manager, David G. Buckle played an integral role with Cronos’ ITZ asset obtaining its sales license and turning into an operational and cash flow generating asset. If you like what Cronos and Invictus has done in the sector, then definitely pay attention to GTEC.

 

“Over the last three months, our team has been striving to accomplish milestones and targets we have set out internally and to our shareholders. This LOI with Project CraftCo will play a pivotal and strategic role in GTEC’s future stake hold within the Canadian market and internationally. The acquisition will allow GTEC the opportunity to provide the Canadian market with cannabis much sooner than originally anticipated. It will also allow GTEC to utilize the 23,000,000 square feet of expansion capabilities sooner than expected”

Norton Singhavon, Chairman & CEO of GTEC

 

 

 

 

Projected Revenues & Time Line

 

Projection of Revenues

 

Cautionary Note: Forward-Looking Information.

 

1.    GreenTec Bio-Pharmaceuticals Corp Phase1= $12,000,000 CAD [1500 kg x $8,000 per]

2.    GreenTec Bio-Pharmaceuticals Corp Phase 2 (early stage operational)

3.    Zenalytic Laboratories = $2,000,000 CAD

4.    Tumble Weed Farms = $6,600,000 CAD [1100 kg x $6,000 per]

5.    Grey Bruce Farms = $9,000,000 CAD [1500 kg x $6,000 per]

6.    Project Craft Co = $10,400,000 CAD

7.    Falcon Ridge Farms = $10,000,000 CAD

 

 

 TOTAL PROJECTED REVENUES: $50,000,000 CAD

 

 

The Company confidently believes that it is on schedule to have all utilities, foundation, and construction of exterior buildings in Q1 2018, then will continue construction on the interiors over Q2. Expecting to be cultivating by late Q2 of 2018 and have their first harvests in all three facilities in time for recreational adult use, which the Canadian Federal government has stated to occur no later than July 1st, 2018.

 

 

Capital Raises and Private placement information

 

To date GTEC has closed both tranches of its private placements and has raised over of $15,000,000. The first tranche was a non-brokered private placement which raised a total of $ 4,672,875.00 and the second tranche which raised another $10.75 M. Proceeds from the Offering(s) will be used for initial construction costs, public listing costs, acquisition costs and general working capital for the Company.

 

Operational Updates & Progress

  • Closed both tranches of the private placement.
  •  Initiated construction permitting, and engineering process on GTEC Bio-Pharmaceuticals “GTEC BP”.
  • Acquired 100% of Grey Bruce Farms (a late stage applicant in Ontario, under the ACMPR)
  • Acquired 100% of Tumbleweed Farms “TWF” (formerly known as BC Acquisition Target), (a late stage applicant under Health Canada’s ACMPR). Located on 22 acres in Chase, BC, in which the TWF also owns the land
  • Issued an exclusive binding LOI on Falcon Ridge Farms (a late stage applicant under the ACMPR)
  • Accepted offer to purchase 300 acres in the Okanagan BC, expected to close June 2018, totaling the GTEC footprint to over 545 acres or 23,000,000 square feet
  • Continuing construction on Tumbleweed Farms and GreenTec Bio-Pharmaceuticals
  • Completed re-branding of GTEC, along with the launch of our website
  • Appointed Mr. David Lynn as Senior Vice-President of Marketing. David Lynn formerly served as the President & CEO of Sun-Rype Products. During his tenure at Sun-Rype, David achieved record net sales and EBITDA while taking Sun-Rype from a $13 million EBITDA loss to a $15 million EBITDA profit in his first year.

Disclosure: I Intend to buy and hold GTEC stock when publicly listed, I intend to participate in private placements . I also own the mentioned securities : UMB, CHV, WEED & MJN. No compensation was received for this piece or will be received. 

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