GTEC Holdings Ltd. has closed a non-brokered senior secured debt financing of $3.95-million with NFS Leasing Canada Ltd. The proceeds from the financing will be used by GTEC to repay an existing senior secured convertible debenture and to reinforce the future growth of the company.
"In these dynamic and challenging times, we are pleased to settle our maturing debt obligations to MMCAP. We would like to thank MMCAP for supporting the growth of our organization from the outset," said Norton Singhavon, Founder and Chief Executive Officer of GTEC. "The NFS financing will allow us to redeploy our cash-flow from operations back into the Company, further fostering our trajectory of growth. We look forward to building our relationship with NFS as we continue to execute on our strategy to become a leading producer of highly-sought after cannabis products."
"At NFS Leasing we can appreciate the steps that GTEC is taking to advance their opportunity for rapid growth," said David Denniss, Vice President Business Development, NFS Leasing, Canada. "We are pleased to provide a solution to assist in their next phase of growth and look forward to a long-term relationship and continued success."
MMCAP Loan Repayment
As part of the Financing, GTEC has completed a payout of its existing senior secured convertible debenture with MMCAP Canadian Fund LP, which had a principal balance of $3.7 million maturing on June 11, 2020. The MMCAP Debenture, including the principal balance and any accrued interest was fully repaid on June 8, 2020.
New Debt Facility Terms
The Financing was completed pursuant to a promissory note providing for a senior secured loan in the amount of $3,950,000 for a term of 36 months.
Interest-only payments are required for the first year, with the initial payment commencing on July 1, 2020 and amortization payments towards the principal balance commence in year two until the end of the three-year term, such that the principal amount owing is repaid incrementally over the second and third years of the term . The Financing will bear an annual interest rate of 18% and assuming GTEC does not complete an early prepayment of the loan, the total cost of borrowing would yield an average annualized rate of 13.24%. The loan does include early repayment options for GTEC.
In connection with the Financing, certain security interests have been granted to NFS through general security agreements and mortgages on certain real property owned by GTEC and its wholly owned subsidiaries.
Bonus Shares Issuance
Subject to final acceptance by the TSX Venture Exchange, GTEC will issue a total number of common shares to NFS equal to $395,000 based on the closing share price of GTEC, on the day prior to this announcement, being $0.185 per share. GTEC intends to issue 2,135,135 common shares in the capital of GTEC, which will be subject to a three-year release schedule, with 355,856 shares being released each six-month period. No other broker fees or brokers warrants were issued in connection with the Financing.
Update on Transaction with Trichome Financial
GTEC and Trichome Financial agreed to mutually terminate the term sheet announced on March 17, 2020. GTEC and Trichome Financial continue to discuss valuable business opportunities together. "We believe GTEC is well positioned in the marketplace, and we wish Norton and his team great success," said Michael Ruscetta, chief executive officer of Trichome Financial.
Share Cancellation
GTEC also announces that in connection with the previously announced acquisition of 1203648 B.C. Ltd. (RetailCo), the Company will return to treasury and cancel 1,719,167 common shares in the Company. The Shares were cancelled pursuant to the terms of an escrow agreement entered into on closing of the Acquisition, which provided for cancellation in the event certain municipal and provincial approvals were not obtained within 12 months of the closing date.
The TSX Venture Exchange has accepted for filing the company's proposal to issue 2,135,135 bonus shares to an arm's-length lender at a deemed price of 18.5 cents in consideration of a $3.95-million loan.