Excitement continues to build in anticipation for Canada’s recreational cannabis laws to take effect on October 17, 2018. Canada will become the second country in the world to fully legalize cannabis use and production for recreational purposes pushing cannabis companies across the G-7 nation to up the ante on all aspects of the business. It seems you cannot get through a 24-hour news cycle without a major announcement about a “game-changing” or “history-making” cannabis deal. This summer has been hot for the cannabis industry, especially in Canada.
Major alcohol companies are taking notice that sales are down by 15 percent in American states where recreational use is legal. Large companies like Constellation Brands (NYSE: STZ) (STZ.B), Molson Coors Brewing Company (NYSE: TAP) (TSX: TPX), and Heineken (OTCQX: HEINY) are investing billions of dollars into cannabis companies.
The energy around the cannabis industry is even drawing major market players like Coca-Cola (NYSE: KO), who was initially reported to be in talks with cannabis company, Aurora Cannabis (TSX: ACB) (OTCQB: ACBFF), to produce CBD beverages. However, Coke has since clarified the media hype with the following statement:
“We have no interest in marijuana or cannabis. Along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world. The space is evolving quickly. No decisions have been made at this time.”
Industry’s summer of rapid ascent also includes cannabis producer Tilray, Inc. (NASDAQ: TLRY) valuation of over $1 billion as it became the first cannabis company to trade on the Nasdaq exchange in July. Tilray had and continues to have stock analyst predicting the dreaded investment bubble even as the company continues to see gains.
Investors are anticipating the continuation of the cannabis industry’s glorious summer into the fall months and in preparation for the emerging adult use market. GTEC Holdings Ltd. (TSXV: GTEC) (OTC Pink: GGTTF) has made deals and received license expansions that positions them to be competitive in the Canadian and international cannabis markets.
GTEC Works With the So-Called “Amazon of the Cannabis Industry”
On August 27, 2018, GTEC announced that they had entered into a supply agreement with Namaste Technologies Inc (TSXV: N) (OTCQB: NXTTF). As part of the terms of the agreement Namaste’s wholly owned subsidiary, CannMart, Inc. will purchase cannabis flower and oil to sell on their e-commerce site.
The addition of the e-commerce site helps GTEC diversify their partnership portfolio and is part of the company’s long-term strategy to expand patient and cannabis consumer reach. Norton Singhavon, Chairman and CEO of GTEC, expressed his excitement about the deal in a statement released by the company.
Singhavon said, “GTEC is actively pursuing long-term supply agreements with Licensed Producers whose core competencies are complementary to our own. Accordingly, we are very excited about our partnership with CannMart and Namaste. We believe that GreenTec’s ability to cultivate and market high-quality craft cannabis provides an excellent fit with CannMart’s packaging and distribution capabilities, and Namaste’s ability to develop a robust network of medical cannabis patients”
The supply agreement was announced prior to the investigation into Namaste by Quebec’s Minister of Health because of medical patient recruitment techniques the company allegedly employed during a party in the province. While this news was the catalyst for the cannabis industry darling, Tilray, to sever ties with the cannabis technology company, Namaste continues to press on.
Since the Tilray news broke the company announced they have acquired Access Fulfillment a UK-based pharmaceutical distribution company that will operate distribution for Namaste’s cannabis and hemp products.
Namaste’s Access Fulfillment acquisition to help GTEC enter the medical cannabis market in the UK. We will have to keep an eye on this one.
Loan From Invictus Helps GTEC Expand the Retail Footprint and Avoid Product Shortages
GTEC is also looking to expand its retail footprint. On August 30, 2018, the company announced that they had received a loan facility for up to $2 million from Invictus MD Strategies Corp. (TSXV: GENE) (OTCQX: IVITF). According to a statement by the company, GTEC is planning to use the proceeds to focus on retail expansion in Western Canada and Ontario. This includes at least 15 Cannabis Cowboys cannabis stores in Alberta and one in Saskatchewan to service the recreational cannabis market.
The terms of the loan include a prime plus 5 percent interest rate. Any time up to one business day prior to the Maturity Date, the principal and accrued interest of the loan can be converted into common shares of GTEC at a price of $1.50 per share. The loan facility could increase to $6 million through a mutual agreement between Invictus and GTEC. The terms of the deal also give Invictus first right of refusal up to 30% of any cannabis orders placed by GTEC.
Not only does the agreement help GTEC’s retail expansion, but it also prepares the company for the predicted cannabis shortage that the recreational launch could bring. Cannabis businesses in states like Nevada saw cannabis shortages within days of launching their recreational programs. Invictus deal with GTEC aligns with the company’s plans to prevent shortages from happening. Invictus Chairman and CEO, Dan Kriznic, said “[w]e are actively working to establish new channels that will enhance our sales network and ensure retailers maintain adequate supply of high-quality cannabis as the adult recreational market evolves over time.”
GTEC Receives Greenlight For Cannabis Oil Extraction
In addition to its partnership with Invictus, GTEC is preparing internally to expand cannabis products. The company announced on September 7, 2018, that their wholly owned subsidiary, Zen Labs received approval from Health Canada for cannabis oil extraction under its expanded scope dealer’s license.
Cannabis oil production gives the company an opportunity to enter the world of cannabis-infused products, which appears to have a bright future in the industry. According to HTF Market Intelligence, the cannabis edible market is projected to increase at a compound annual growth rate (CAGR) of more than 25% between 2018 and 2022 which may be driving major beverage and alcohol companies to partner with cannabis companies.
This license positions the GTEC for partnership opportunities with beverage and alcohol companies which is by design. As part the statement released by GTEC, Singhavon said “given the recent surge of interest in our industry from global alcoholic beverage companies, we are very excited to now be licensed to produce cannabis oils and expand our own value add product offerings. Furthermore, the amendments to the Dealer’s License illustrate successful execution of GTEC’s vertical integration strategy.”
Initially, the Zen Labs dealer’s license was only for laboratory work for the industry. Even with the added oil extraction feature to the license, the company plans to continue to function as a laboratory, performing to tests on cannabis, soil, and water for contaminates outlined by Health Canada’s ACMPR.
Overall, there is no doubt that we a living through one of the most historically significant legalizations since the end of the U.S. alcohol prohibition. With all the anticipation and excitement surrounding the legal cannabis industry, GTEC Holdings is quietly positioning to be a formidable player in the global legal marijuana market.
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