Besides the agreed development of a new 240,000 square foot indoor cultivation facility in Vernon, B.C., both companies will also form 3PL Ventures, of which GTEC Holdings will initially own 49 percent while F-20 Ventures will own 51 percent.
Through one of its subsidiaries, GTEC Holdings says it will apply for, and transfer, the licensing necessary to certify 3PL Ventures as a LP. F-20 Developments will also sell GTEC Holdings an additional one percent of 3PL Ventures once the license transfer is complete, bringing the JV under equal ownership by both parties.
The JV company will also be applying for a Dealers License which will allow it to import and export cannabis-related materials internationally.
Norton Singhavon, Chairman and CEO of GTEC Holdings, said “with this joint venture, GTEC will be operating over 120,000 sq ft. of cultivation space once construction is completed. Initial feedback from consumers and Provincial supply chains is validating the demand for premium craft cannabis in Canada and internationally.”
A look inside the deal
As previously mentioned, the proposed facility will be situated in Vernon, B.C. F-20 Ventures will fund the majority of construction in phase one of development to the tune of $9 million with GTEC Holdings committing $1 million.
Three of the company’s subsidiaries, GreenTec Bio-Pharmaceuticals, Zen Labs and Spectre Labs are located less than an hour’s drive away in nearby Kelowna B.C.
Development of the facility was to initially involve the development 60,000 square feet with a subsequent phase-two build out which would then add an additional 180,000 square feet.
Since June, GTEC Holdings and its partner have completed the facility’s design. GTEC Holdings aims to build the facility as originally designed, but both parties have learned that building out 134,000 square feet for phase-two would not require a rezoning application.
In return for F-20 Developments’ services, GTEC Holdings has agreed to offer its partner shares as payment. There is a caveat, however: the amount of GTEC Holdings shares issues corresponds with the number of milestones reached in the facility’s development.
GTEC Holdings will issue $1.25 million in shares, divvied up according to three separate milestones, upon the full execution of the following legally binding agreements:
- Such number of Consideration Shares with an aggregate GTEC Share Value of $416,666.67 upon the issuance of a building permit by the respective Municipality in respect to the improvements to the Production Facility, in accordance with the requisite building plans and specifications;
- Such number of Consideration Shares with an aggregate GTEC Share Value of $416,666.67 upon the substantial completion of the Production Facility, in accordance with the requisite building plans and specifications, for the purposes of submitting an evidence package to Health Canada including, without limitation, installation of equipment required by Health Canada, security system, storage areas, and HVAC (“Substantial Completion”); and
- Such number of Consideration Shares with an aggregate GTEC Share Value of $416,666.67 upon Health Canada confirming there are no deficiencies with respect to the Production Facility including construction thereof and security systems therefor.
Whether or not these development milestones are met, GTEC Holdings must issue 100 percent of the $1.25 million in shares if F-20 Developments:
- funds 3PL Ventures through a shareholder loan of at least $5 million and the JV expends $5 million of more in the facility’s construction; or
- or if GTEC Holdings does not submit the final evidence package addressing the facilities deficiencies as required by Health Canada within 90 days of the facility’s completion.
Currently trading at $0.83, the company’s focus on premium craft cannabis shows a grasp of basic business fundamentals now that we know the slim profit margins for mid-range growers. With its sub-$73 million market cap, we believe GTEC Holdings is undervalued.
Full disclosure: GTEC Holdings is an Equity Guru marketing client.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.