- Significant revenue growth of 267%, resulting in record revenues of $8.8 million
- Increased production by 269%
- Substantial reduction of operating expenses by 40% or $2.7 million (C)
- Net income from operations of $282,000, compared to a net loss of $8.3 million
- Adjusted EBITDA of -$206,000 (D), a 96% improvement from -$5.7 million
Kelowna, BC – March 3, 2021 – GTEC Holdings Ltd. (TSXV:GTEC) (OTCQB: GGTTF) (FRA: 1BUP) (“GTEC”, the “Company” or “GTEC Cannabis Co.”) a multi-licensed producer of handcrafted, high quality cannabis, is pleased to report its fourth quarter and fiscal 2020 financial results.
During fiscal 2020, the Company’s core focus was to establish relevant market share within the premium category through its BLK MKTTM and TenzoTM brands, while concurrently reducing corporate overheads. As a result, Management believes it is well positioned to continue driving revenue growth and cost efficiencies going forward.
Key Financial Highlights of Fiscal 2020
(for the period ended November 30, 2020)
All figures are in Canadian dollars and compared to the Company’s Fiscal 2019 year-end results
- Gross Revenue of $8.8 million, compared to $2.4 million, an increase of $6.4 million or 267% year over year
- Gross margin(A) dollars of $4 million (net of excise tax), compared to $1.07 million, an increase of $2.9 million or 272%, while overall gross margin(A) percentage increased from 45% to 50% (including both B2B sales and recreational sales)
- Recreational cannabis sales accounted for 79% of total sales, compared to 4%
- Overall weighted average selling price increased by $2.09 or 43% to $6.90 per gram (with recreational cannabis average being $8.67, including excise tax)
- Cash cost of production(B) was $1.96 per gram, compared to $2.62, a decrease of $0.66 or 25%
- Production increased by 269% to 2,685 KG compared to 727 KG in fiscal 2019
- Operating expenses(C) of $4.0 million, compared to $6.7 million, a decrease of $2.7 million or 40%, as the Company strives to maximize profitability
- Net income from operations of $282,000 compared to a net loss of $8.3 million, an increase of $8.58 million or 103%
- Adjusted EBITDA loss of $206,000, compared to adjusted EBITDA loss of $5.7 million, an increase of 96%
“The 2020 fiscal year was a transformational year during which we became a relevant and meaningful player within the premium cannabis category,” said Norton Singhavon, Founder and CEO of GTEC. “Within a relatively short time frame, we have built and established brands that resonate with our target consumers, while concurrently delivering significant reductions in corporate overheads and divesting of non-performing assets. We remain committed to executing our strategy of becoming a leading premium cannabis company in North America, while operating in a fiscally disciplined manner.”
Key Highlights of Fiscal 2020
- Launched recreational brand BLK MKT™ in the Province of BC at the end of Fiscal 2019 with significant follow-on demand in Fiscal 2020, and commenced sales in the Province of Ontario at the end of Q3 2020.
- Significantly increased its product listings from two listings in one Province, to over 70 listings across five Provinces
- Established BLK MKT™ as a top selling premium cannabis brand in Canadian Provinces where sold
- Completed the construction of its 3PL Ventures cultivation facility, which is a purpose-built indoor cultivation facility with approximately 60,000 sq. ft. of operating space. The facility will be GTEC’s largest facility and is expected to increase production capacity to approximately 10,000 KG annually
- Grey Bruce Farms Inc. and Tumbleweed Farms Corp. received the necessary approvals from Health Canada for Provincial sales-related licence amendments. As a result, all three of the Company’s licensed cultivation facilities are now authorized to sell recreational packaged cannabis into Provinces and Territories
- Amended its unsecured Convertible Promissory Note with Invictus MD Strategies Corp.
- Made an early principal repayment to NFS Leasing Canada Ltd. of $330,000, reducing the credit facility to $3.6 million
- Sold a commercial property, which was not being utilized by operations for total gross proceeds of $1 million
- Repaid its MMCAP Senior Secured Convertible Debentures of $5 million
Key Subsequent Events of Fiscal 2020
- BLK MKTTM Cherry Punch (3.5 gram) was the #1 selling premium product for the month of December 2020 in Ontario
- In December, the Company launched BLK MKTTM and TenzoTM pre-rolls with significant follow-up demand
- Launched GreenTecTM Medical Cannabis e-commerce website, allowing the Company to sell products directly to registered patients
- On February 19, 2021, 3PL submitted an application to Health Canada, in order to obtain a Standard Cultivation Licence, under the Cannabis Act & Regulations
- Tumbleweed Farms Corp. (‘TWF’) signed an agreement with Habitat Craft Cannabis Ltd. (‘Habitat’) under which TWF will provide co-pack and sales services to Habitat, commencing in Q2 F2021
- On March 1, 2021, Grey Bruce Farms Inc. executed an export deal with an international cannabis company, allowing GTEC to enter the global cannabis market. Additional details will be provided in a news release within the coming days
- The Company previously ran small scale tests of new cultivars (currently not available in the legal Canadian market), which have moved into commercial production and will be available within the retail supply chain over the coming weeks and months
- Announced the launch of the first blunt in the Canadian cannabis market, under the BLK MKT TM brand and BLNT sub-brand
- Divested of its last remaining retail asset for gross proceeds of $500,000.
- Repaid its Unsecured Convertible Promissory Note of $2 million, eliminating its debt with Invictus MD Strategies Corp.
Annual and Quarterly Comparative Analysis
|Three-months ended||% Change||Year-End||Year-End||Q4||Q4|
|2019 – 2020||2020||2019||2020||2019|
|Total Gross Revenue||270%||8,804||2,382||2,542||1,149|
|Total Net Revenue||235%||7,907||2,361||2,258||1,128|
|B2B Wholesale Sales||-19%||1,837||2,279||311||1,046|
|Gross Margin(A) ($)||272%||3,969||1,068||686||290|
|Gross Margin(A) %||11%||50%||45%||30%||26%|
|Net Income (Loss) from Operations||103%||282||(8,299)||1,277||(2,571)|
|Adjusted EBITDA Margin(D)||99%||-2%||-239%||-10%||-56%|
|Cash cost of Production(B)||-25%||$1.96||$2.62||$1.74||$2.97|
|Average Selling Price||43%||$6.90||$4.81||$6.14||$4.10|
Impairment charge of Alberta Craft Cannabis (non-cash)
During fiscal 2020, the Company impaired the infinite life asset and goodwill at Alberta Craft Cannabis (“ACC”) by $8.38 million (which is considered a non-cash expense). The impairment was made to bring the asset and goodwill to its fair market value based upon a discounted cash flow model of the associated sales anticipated to be generated. The Company notes that the original strategic motivation for the ACC acquisition was to expedite its speed to market, via the acquisition of an existing Health Canada-licensed facility. In this regard, the Company remains confident that this acquisition played an instrumental role in accelerating its development of cultivation systems, B2B sales, brand launches and product listings with Provincial liquor boards.
A copy of the Management Discussion & Analysis and Financial Statements for Q4 2020 and Fiscal 2020 can be downloaded from GTEC’s SEDAR profile.
Note (A) Gross margin before fair value adjustments. Please refer to the Company’s Q4 2020 and Fiscal 2020 Financial Statements and MD&A for definitions and a reconciliation to IFRS.
Note (B) Cash cost of production is a financial performance measure used by the Company, which is not defined by and does not have any standardized meaning under IFRS. 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 the Company’s management. As there are no standardized methods of calculating these non-IFRS measures, the Company’s approaches may differ from those used by others, and accordingly, the use of these measures may not be directly comparable. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Please refer to the Company’s Q4 2020 and Fiscal 2020 MD&A for definitions and a reconciliation to IFRS.
Note (C) Operating expenses exclude non-cash items, such as depreciation and amortization and share based payments. Please refer to the Company’s Q4 2020 and Fiscal 2020 Financial Statements and MD&A for definitions and a reconciliation to IFRS.
Note (D) Adjusted EBITDA is a non-IFRS measure and the Company calculates adjusted EBITDA from continuing operations as net income (loss) before interest expense, income taxes, depreciation and amortization , unrealized gain (loss) on changes in fair value of biological assets, equity loss on investment in associate, loss on sale of assets, investment loss and share based payments. Management determined that the exclusion of the fair value adjustment is an alternative representation of performance. The fair value adjustment is a non-cash gain (loss) and is based on fair market value less cost to 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) from continuing operations. Please refer to the Company’s Q4 2020 and Fiscal 2020 MD&A for definitions and a reconciliation of Adjusted EBITDA to net income (loss) from continuing operations.
About GTEC Cannabis Co
GTEC Cannabis Co cultivates, markets, and distributes the high-end cannabis products that consumers desire. The Company has four operational facilities licenced by Health Canada and is currently distributing cannabis through medical and recreational sales channels.
GTEC’s quality product offering is crafted from unique cultivars, which are currently not being produced by other Licenced Producers. GTEC’s recreational cannabis brands includes; BLK MKT™, Tenzo™, Cognōscente™ and Treehugger™, which retails in the Provinces of B.C., Ontario, Saskatchewan and Manitoba. The Company’s medical cannabis brand, GreenTec™, is distributed nationally to qualified patients through its GreenTec Medical website and various licensed partners.
GTEC is a publicly traded corporation, listed on the TSX Venture Exchange (GTEC), OTCQB Venture Market (GGTTF) and Frankfurt Stock Exchange (1BUP). The Company’s headquarters is located in Kelowna, B.C. and has operations in B.C., Alberta and Ontario.
To learn more about the Company or to access the most recent Corporate Presentation, please visit our website at www.gtec.co
For additional information, please contact:
GTEC Cannabis Co.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This news release includes certain “forward-looking statements” and “forward-looking information” under applicable Canadian securities legislation (collectively, “forward -looking statements”). Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and the performance of our investments. These forward-looking statements are generally identified by their use of such terms and phrases as “intend,” “goal,” “strategy,” “estimate,” “expect,” “project,” “projections,” “forecasts,” “plans,” “seeks,” “anticipates,” “potential,” “proposed,” “will,” “should,” “could,” “would,” “may,” “likely,” “designed to,” “foreseeable future,” “believe,” “scheduled” and other similar expressions. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals, where applicable, and the state of the capital markets. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. For instance and among other things, there is a risk that the COVID-19 pandemic may disrupt the Company’s operations, those of the Company’s suppliers and distribution channels and negatively impact the use of the Company’s products; there can be no assurance that the Company will maintain adequate capital resources and liquidity, including but not limited to, availability of sufficient cash flow, continue to reduce overhead, execute the Company’s business plan (either within the expected timeframe or at all); or any assurances regarding the potential effects of judicial or other proceedings on the Company’s business or financial condition, the results of operations and cash flows; the volatility in and/or degradation of general economic, market, industry or business conditions; or compliance with applicable environmental, economic, health and safety, energy and other policies and regulations and in particular health concerns with respect to the use of cannabis; the anticipated effects of actions of third parties such as competitors, activist investors or federal, provincial, territorial or local regulatory authorities, self-regulatory organizations, plaintiffs in litigation or persons threatening litigation; changes in regulatory requirements in relation to the Company’s business and products. Accordingly, readers should not place undue reliance on forward-looking statements, which speak only as of the date of this news release. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This news release refers to certain financial performance measures that are not defined by and do not have a standardized meaning under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. These non-IFRS financial performance measures are defined in the MD&A. Non-IFRS financial measures are used by management to assess the financial and operational performance of the Company. 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 the Company’s management. As there are no standardized methods of calculating these non-IFRS measures, the Company’s approaches may differ from those used by others, and accordingly, the use of these measures may not be directly comparable. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.