A Vertically-Integrated Entry into Canada’s Cannabis Market
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GreenTec Holdings (TSXV:GTEC) is a Canadian company with a multi-pronged approach to entering the premium cannabis market with a diverse range of products. GTEC’s wholly-owned holdings are at various stages of Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR) licensing process and specialize in cannabis cultivation, extraction, processing and testing. Once the appropriate licenses have been obtained, GTEC will begin the first phase of its operations. Within two to three years, the company hopes to increase its production to a rate of 50,000 kilograms of cannabis annually.
As part of their vertical-integration model, GTEC has applied for retail locations throughout Western Canada with the intent to capture a share of the retail and wholesale cannabis markets. Working with its wholly-owned holdings, GTEC has six unique brands to offer consumers and intends to expand their product line to include oils and edibles once Health Canada passes the regulatory framework for these products. In addition to offering these brands in Canada, GTEC is also targeting the European cannabis market, where their products can be sold at a significant markup.
GTEC has also formed partnerships within the cannabis space to ensure that they are bringing the best products to the market and that they are getting their brands onto the shelves. The company has formed distribution partnerships with Namaste Technologies Inc. (TSXV:N) and Pack4U Holdings Ltd., a company dedicated to providing pharmacies with medical cannabis products, providing GTEC with an online and pharmacological presence.
GTEC’s agreements with TheraProducts Canada and Integrated Cannabis Company (CSE:ICAN) will be focused on bring new products to the market. With TheraProducts, GTEC will be developing a water soluble, odor and taste-free powder that can be added to food and beverage products with the patent-pending OLEO™ microencapsulation technology. Through their partnership with Integrated Cannabis, the two companies will be developing advanced delivery systems and formulations for the medical and recreation cannabis markets.
GTEC has a wealth of experience in multiple aspects of the cannabis sector to draw upon: its management team was integral in the creation of Invictus MD Strategies (TSXV:GENE), and current members of GTEC’s operations team were previously contracted by industry leader Cronos Group (TSX:CRON) to acquire sales licensing for one of their operations.
- Seven different subsidiaries give GTEC access to every facet of the industry.
- Six premium-quality cannabis brands targeting specific consumer segments.
- GreenTec brand continues to be the number one selling product on CannMart.
- Targeting the premium market reduces market value capitulation in a potentially flooded market.
- Retail partnerships will help provide up to 80 percent of shelf space for GTEC products.
- Retail partnerships in Alberta, Saskatchewan, BC and Manitoba.
- Distribution partnerships in place with Namaste and Pack4U.
- Product development partnerships in place with TheraProducts and Integrated Cannabis.
- Management team with history of growing and consolidating licensed producers–maintains relations with many key industry players.
- Management raised over $30 million in capital within 12 months.
Canadian Cannabis Market
According to a report released by Deloitte, Canadians are expected to spend approximately $7.17 billion on cannabis products in 2019. Most of this growth can be attributed to the numerous products that cannabis companies are providing consumers, with edibles capturing a lot of the market. Research also shows that many consumers are buying cannabis to help relax, sleep and relieve pain.
Alberta Craft Cannabis
Formerly GrenEx Pharms, Alberta Craft Cannabis (ACC) is GTEC’s key subsidiary in the province of Alberta, Canada. ACC was the first Health Canada license to be granted in Edmonton, Alberta. GTEC announced it had acquired the company in early 2018.
With a 14,000 square foot facility already in production, Alberta Craft Cannabis is already capable of growing 1,300 kilograms of cannabis annually. The facility was issued an ACMPR cultivation license by Health Canada in September 2017 and received its updated license in November 2018. The updated license gives GTEC the ability to engage in B2B sales with its partners and other qualified license holders in Canada. GTEC projects revenues from Alberta Craft Cannabis to reach C$10.4 million.
In March 2019, the company completed its first harvest of the year and is now operating at full capacity. GTEC expects ACC to exceed its annual output of 1,300 kilograms as harvests are producing higher yields than originally projected. GTEC also announced that the company was experiencing a significant demand for its premium tiered flower which is being sold to multiple licensed producers on a B2B basis.
Grey Bruce Farms
Located in Kincardine, Ontario, Grey Bruce Farms is a wholly-owned subsidiary of GTEC. The company has submitted its production license application under ACMPR regulation and is awaiting pre-licensing inspection, one of the final stages of becoming a licensed producer of medicinal cannabis.
Grey Bruce Farms’ boutique craft cannabis production facility boasts 15,000 square feet of cannabis cultivation space and has expansion capabilities of up to 500,000 square feet. GTEC hopes to begin production in the near term at a projected rate of 1,500 kilograms of cannabis annually. The company submitted its evidence package to Health Canada in May 2019 and expects to receive its cultivation license in the near term.
GTEC currently owns the facility and real estate clear title. The on-site master grower in charge of cultivation has over 25 years of expertise. Grey Bruce Farms’ staff also includes a quality assurance expert charged with ensuring the company’s stringent standards and an experienced facility designer to oversee construction.
In nearby Chase, British Columbia, Tumbleweed Farms is a late-stage ACMPR applicant with 10,000 square feet of boutique craft cannabis production space nestled on a 22-acre parcel of land. The company’s wholly-owned real estate was acquired in 2017.
The facility is built out of pre-fabricated steel, allowing for a quick and relatively inexpensive purpose-built facility. The exterior is now complete and the work has shifted to outfitting the interior to GTEC’s exacting specifications. The company is targeting 1,000 kilograms of cannabis production annually and completed construction on the facility in January 2019. Tumbleweed Farms also possesses expansion capabilities of one million square feet with the option of increasing that number to eight million square feet, if they choose.
Tumbleweed Farms has submitted its evidence package to Health Canada and expects to receive its standard cultivation license in the near term.
To prepare for commercial production, GTEC has acquired cannabis genetics for the cultivation of premium quality cannabis.
One of GTEC’s highest priorities is the development of its wholly-owned GreenTec Bio-Pharmaceuticals subsidiary, a late-stage ACMPR applicant. GreenTec Bio-Pharmaceuticals will initially produce 1,500 kilograms of cannabis annually but has the capacity to produce up to 10,000 kilograms of cannabis annually.
GreenTec Bio-Pharmaceuticals is located in Kelowna, British Columbia. The company is a late-stage ACMPR applicant and is in the midst of constructing an 80,000-square foot production facility for cannabis cultivation. GTEC expects to complete construction on its facility by the end of the year.
The operation also has the potential to establish a 160-acre satellite facility in the north Okanagan and a 35-acre facility on the Trans-Canada Highway.
In July 2018, GTEC formed a partnership with F-20 Developments Corp., a private company involved in financing and constructing licensed cultivation facilities in North America, to develop a 240,000-square-foot indoor cultivation facility in Vernon, British Columbia. At the time the agreement was signed, F-20 had already secured a property with an existing 60,000-square-foot building that the company was retrofitting as part of its Phase 1 development plan. Phase 2 will consist of building out a secondary purpose-built 180,000-square-foot facility.
GTEC expects the facility to be constructed and ready for licensing by the end of 2019.
Lab and Extraction Facilities
Zen Labs is a full-service chemical and microbiological diagnostics laboratory for soil, water and cannabis. Zen Labs received their dealer’s license in July 2018 and is now able to perform analytical testing on cannabis and specific cannabinoids as well as process cannabis flower into cannabis oil. Zen Labs will analyze cannabinoid profiles, moisture content, heavy metals, microbials, aflatoxins, pesticides and other contaminants as per the regulations set out by Health Canada’s ACMPR, for licensed producers, production for own medical purposes, production by a designated person and individuals who are authorized for personal medical consumption. Zen Labs also intends to be able to conduct full analytical testing on terpene profiling and residual solvents for authorized clients.
GTEC’s final Kelowna-based subsidiary is Spectre Labs, which will be focused on cannabis oil extraction. Spectre is currently in the process of acquiring its dealer’s license. GTEC is currently developing the facility in a phased approach and it will serve as a GMP-grade facility with extraction, formulation, compounding and exporting capabilities that will support the company’s licensed producers and the global medical market. Spectre will also be able to manufacture edible products once the regulatory framework has been approved and incorporated by Health Canada.
Once operational, the facility will be able to produce up to 24,500 grams of cannabis oil per day or 8,500 kilograms per annum. GTEC can increase the facility’s production capacity in future phased development.
As part of GTEC’s vertical-integration strategy, the company has secured retail locations in British Columbia, Alberta and Saskatchewan. In Alberta, GTEC has acquired a 25 percent interest in Cannabis Cowboy Inc., a Calgary-based medical cannabis counselling organization that provides safe and reasonable clinic access to patients registered with the ACMPR.
Cannabis Cowboy has also developed a recreational cannabis brand and will be developing up to 30 turnkey retail locations in Alberta by converting its medical consulting clinics. Ten of those clinics are operational and the company expects to have the remaining locations operational within the next year. In addition to their agreement with Cannabis Cowboy, GTEC, through its subsidiary ACC, will also be pursuing a provincial supply agreement with the Alberta Gaming Liquor and Cannabis Commission (AGLC).
The company has also secured a retail location in British Columbia and has the intention of applying for a total of eight locations within the province. GTEC acquired 4,000-square-feet of retail space in one of Vancouver’s most affluent and diverse neighborhoods. The area receives significant foot and vehicle traffic. The retail store was previously licensed to operate and sell medical cannabis and will operate under the storefront name, Cake Cannabis Co.
Finally, GTEC has a passed the initial screen processes in order to be entered into the lottery for a retail location in Manitoba. The company intends to open seven retail location in the province.
GreenTec Retail Saskatchewan
In Saskatchewan, GTEC has a 75 percent stake in a retail initiative that includes a cannabis store in Nipawin and an e-commerce fulfillment center in Saskatoon. The company is in the process of finalizing the construction of both of these facilities.
GTEC and BATC Investments Inc. have entered into an option agreement to form a joint venture company named GreenTec Retail SK Inc. (GreenTec SK). Under the terms of the agreement, both companies will identify, secure and develop cannabis retail opportunities in Saskatchewan through the joint venture company. BATC has the option to require GTEC to repurchase its interest in GreenTec SK after the first retail store has been open for business for six months.
The company has developed a line of six premium-quality craft cannabis brands that will target specific consumer segments. Each brand has been trademarked. The six brands are:
- BLK MKT, which will pay homage to cannabis prohibition and will use cannabis strains high in THC;
- Cognoscente, which will target those who are looking for excellence in flavor, aroma and terpene profiles;
- TENZO, a balanced lifestyle brand that will offer a diverse portfolio of effects;
- Tree Hugger, a line of organic cannabis that offers an environmentally-friendly product;
- FN, a specialty brand that will celebrate and target the First Nation communities through the company’s First Nations partners; and
- GreenTec, the company’s flagship medical cannabis brand that is designed to aid and support patients with various ailments.
Agreements and Partnerships
In July 2018, GTEC formed a joint venture partnership with TheraProducts Canada, to develop and commercialize cannabis-based products use the patent-pending OLEO™ microencapsulation technology, which seals cannabis oil distillates and isolates before converting them into a water soluble, odor and taste-free powder that can be added to food and beverage products. GTEC will be responsible for supplying and converting cannabis oils into OLEO-based products, while TheraProducts provides the equipment and intellectual property (IP) required.
Namaste and Cannmart
GTEC has signed a supply agreement with Namaste and its subsidiary CannMart Inc., where CannMart will purchase cannabis flower and oil from GTEC for resale on CannMart’s online platform. Namaste has developed a strong supply chain through various licensed producers and its e-commerce platform and technology will continue to drive innovation in the medical cannabis space. GTEC completed its first sales of cannabis to CannMart in December 2018.
In September 2018, GTEC entered into a binding letter agreement with Pack4U Holdings Ltd., a company dedicated to providing pharmacies with medical cannabis products. GTEC will be the exclusive supplier of cannabis for Pack4U’s distribution network, which includes companies such as McKesson, Cardinal Health and AmerisourceBergen. Additionally, Pack4U will list GTEC and its wholly-owned subsidiaries as its exclusive wholesale supplier.
GTEC will also be collaborating with Integrated Cannabis, a health and lifestyle products company that is developing advanced delivery systems and formulations. The two companies will be developing and marketing a line of novel spray products containing both CBD and THC for the Canadian recreational and medical markets.
“We are very excited to be working with Integrated Cannabis and their unique line of the X-SPRAY™ products. As we continue to push towards positioning ourselves as a preeminent cannabis company it is critical to diversify our product offering with formulations that are both novel and offer alternative delivery methods,” said GTEC CEO Norton Singhavon.
GTEC finalized their agreement with Invictus for an unsecured convertible loan of up to $2 million. The proceeds of the loan will be used for the expansion and development of GTEC’s retail presence in Canada. Invictus will retain for a period of two years from the date that GTEC or one of its subsidiaries receives its first sales license the right of first refusal of up to 30 percent on any third-party supply agreements the company and its subsidiaries sign.
Norton Singhavon—Founder, Chairman and CEO
Norton Singhavon currently serves as the founder and executive chairman of Doventi Capital. He has extensive experience at the senior management level of capital investments and has been involved in several large acquisitions, consolidations, and start-ups in Canada’s legal cannabis sector, both private and public. As an investor and advisor to numerous companies in Canada’s ACMPR sector, he has been responsible for internally deploying over $45 million into the legal cannabis sector and has been involved in another $65 million in public M&A ACMPR transactions.
He is also an advisor to, and an early-stage investor in, Invictus MD. As an experienced corporate leader, he has facilitated in regulatory matters, corporate matters, raising capital privately and publicly, as well as strategic corporate development within the public markets.
Michael Blady—Co-Founder and VP
Michael Blady formerly served as a director of Invictus. He is also an advisor to Doventi Capital. Michael holds degrees in kinesiology and geology from Simon Fraser University. As a venture capitalist, he has been involved since 2009 in the start-up and senior management of numerous public companies as well as performing the role of consultant and advisor. In his recent role as director and senior executive of Invictus, Michael helped oversee the acquisition, management and growth of a diverse portfolio of cannabis-centric businesses owned by Invictus. These businesses include manufacturing hydroponic equipment, laboratory testing and services, cultivation, media, marketing and biopharmaceutical applications. Michael has been directly involved in raising more than $65 million of capital in the cannabis sector.
David Lynn—Chief Operating Officer
David Lynn formerly served as the President & CEO of Sun-Rype Products. During his tenure at Sun-Rype, he 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. Previous to Sun-Rype, he served as the senior VP of marketing at Saputo Canada, where he oversaw the consumer marketing strategy for the largest division of the company.
He has successfully lobbied federal and provincial governments on regulatory and policy issues including working with BC Liquor Policy Review and the Liquor Control and Licensing Branch (LCLB) to modernize liquor regulations in BC. With some provinces already electing to control distribution and sales in the future adult-use market through their provincial liquor control board, his extensive background will be a tremendous asset in navigating through the complex and diverse federal and provincial regulations. His lengthy tenure with publicly traded companies on the TSX will be immensely beneficial in guiding GTEC’s future growth. He holds a Bachelor of Commerce (Marketing, Honours) and Master of Business Administration (Finance) from the University of British Columbia.
Jeremy Wright currently serves as the president & CEO of Seatrend Strategy Group. He has significant experience serving as a director of Demetra Minerals, Budly Software, and Pacific Community Resources Society, and previously serving as a director with PreveCeutical Medical, and the Canadian Freestyle Ski Association. Additionally, Jeremy currently serves as the CFO for several public and private companies including: Centurion Minerals, Demetra Minerals, and Portofino Resources, and was previously the CFO for PreveCeutical Medical.
Jeremy is a chartered professional accountant (Certified Management Accountant). He has extensive negotiation training, including the University of British Columbia’s Sauder School programs: “Advanced Negotiation Skills” and “Strategies, Skills and Tactics of Negotiation”. He also holds a Bachelor of Arts, with honors in Environmental Economics from Brock University.
David Buckle—VP Operations
David Buckle is the former senior grower at In The Zone (currently known as Original BC), a licensed producer under the ACMPR. He was responsible for: overseeing the junior growing team; developing a cultivation regiment that would ensure satisfaction to Health Canada’s QA/QC standards; overseeing harvests; and all over general cultivation duties. He was integral to establishing the first three harvests for In The Zone, which played a pivotal role in them acquiring their sales license from Health Canada. He also serves on the advisory board of Doventi Capital.
Stefan Sarachie—Director of Quality Assurance
Stefan Sarachie is a quality management specialist with 17 years of experience in the food and beverage industry. His areas of expertise include the development and implementation of food safety, quality assurance, quality control and quality system programs. He has extensive knowledge of Health Canada, CFIA (Canadian Food Inspection Agency), FDA, USDA (United States Department of Agriculture), FSMA (Food Safety Modernization Act) and EU regulations.
Prior to joining GreenTec, he worked at Sun-Rype Products, where he developed, implemented and maintained food safety and quality programs as required by government regulations, customer requirements and SQF (Safe Quality Foods) Certification for GFSI (Global Food Safety Initiative).
Lawrence Law—Global Marketing & Branding Director
At Diageo, Lawrence Law was the Global Brand Director for Johnnie Walker’s blue label and super premium portfolio. He was accountable for building a premium brand strategy, revenue performance and growth of Johnnie Walker’s luxury portfolio globally. During his 10-year tenure at Diageo, he spearheaded multiple pioneering marketing and product innovations including Johnnie Walker’s luxury retail experiences, digital product personalization and the Casks of Distinction single malts program.
He brings a vast amount of advisory experience working with clients from all sectors including banking, automotive, technology and luxury sectors, where he built a broad range of deep marketing skills across multi categories and business functions. The future adult-use market can pivot into many different directions including opportunities and partnerships in the pharmaceutical, alcohol, and tobacco space. His wide range of sector experience, especially in a highly regulated and competitive market, will be vital in shaping GTEC’s branding strategy.
Aaron Dow serves on the advisory board of Doventi Capital Fund II L.P. He practices law as a solicitor at Farris, Vaughan, Wills & Murphy LLP in Kelowna. He specializes in the areas of corporate and commercial law, real estate, bank lending, and wills and estates. He holds an undergraduate degree in science as well as a law degree, both from the University of Victoria. He also currently sits on the board of directors of the Metro Up Financial Literacy Society and is a member of both the Canadian Bar Association and the Kelowna Bar Association.
Derek Sanders is a partner at Spence Valuation Group, where he specializes in business valuation, mergers and acquisitions and financial litigation support. Prior to joining SVG, he worked for national firms in valuations, transaction advisory and audit roles, in London, Kelowna and Vancouver. He has extensive experience in the valuation of privately-held companies for purchase & sales transactions, shareholder disputes, corporate reorganizations and estate freezes. He is a chartered professional accountant (CPA), a chartered business valuator (CBV) and a chartered financial analyst (CFA).
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