Only days after saying that it will be selling cannabis flowers and oils to Cannmart, a unit of Namaste (TSX-V:N)(OTCPK:NXTTF), GTEC Holdings (TSX-V:GTEC)(OTCPK:GGTTF) said that it will be getting a strategic investment from Invictus MD Strategies (TSX-V:GENE)(OTCQX:IVITF) to expand its footprint in Western Canada and Ontario.
The companies disclosed Thursday morning that they have signed a binding letter of intent spelling out the terms for which Invictus will put up to $6.0 million into GTEC, as well as have the option to fill future GTEC cannabis purchase orders.
Per the deal, Invictus will initially provide GTEC with a non-revolving unsecured convertible loan of up to $2.0 million at an interest rate of prime plus 5%. At its discretion, Invictus can convert the loan into common shares of GTEC at a conversion price of $1.50 per GTEC share.
The LOI also has provisions for Invictus to increase the loan amount to as much as $6.0 million if both companies agree to do so. The debt facility has an initial term of two years from the time of the first draw, but also can be extended by mutual consent of the companies.
GTEC says it will use the cash for working capital and to continue executing on its business plans to have at least 15 of its Cannabis Cowboy retail stores in Alberta by October 17, the day that recreational marijuana becomes legal in Canada, as well as one location in Saskatchewan and an online store.
The agreement also gives Invictus first right of refusal to fill up to 30% of international or domestic purchase orders for which GTEC or its subsidiaries are looking to have filled.
Invictus, who has rock legend Gene Simmons on its team, currently has two licensed cannabis production facilities in Canada, with a third application awaiting approval from Health Canada. The company has about 100,000 square feet of cannabis growing capacity today and intentions to expand that to one million square feet by the end of next year.
Invictus has several brands in its portfolio, including Dukes, Zooey, Sterling & Hunt, and Sinister.
Toronto-listed shares of Invictus closed ahead by 15.0% on Wednesday at $1.61. Meanwhile, shares of GTEC rose 5.5% to $0.96.
