GTEC Holdings (TSXV: GTEC) and Trichome Financial (CSE: TFC) have entered a non-binding term sheet for a senior secured debt financing of $4.5 million as of March 13. The proceeds of the offering, upon closing, will be used to repay the currently outstanding $3.7 million in secured convertible debentures which come due June 11, 2020.
Under the terms of the term sheet, GTEC will will borrow the $4.5 million from that of Trichome for a period of 24 months, at an interest rate of 9.5% per annum, paid monthly. The company will be required to make debt repayments beginning on the first anniversary of the loan of $100,000 per month. An undisclosed one-time setup fee and original issue discount will also be applied to the financing.
Additionally, upon closing GTEC is to issue Trichome shares of the company that amount to 16.05% warrant coverage for the net loan amount. The shares will be issued at the lower of i) the closing price on the date of signing the term sheet, which was $0.09, and ii) the closing price of GTEC on the last trading day prior to closing the agreement. A maximum of 11,000,000 common shares will be issued in connection with the financing.
Proceeds from the loan will be used to pay down the $3.7 million in currently outstanding convertible debentures due June 11, with any remaining funds going towards general working capital. The company notes that it has previously iterated that it has no need to borrow funds to pay down the debenture when it comes due, however that is contingent on the sale of non-core assets which include the Vancouver retail location as well as the firms Kelowna warehouse, as well as receiving currently outstanding accounts receivable and a significant GST refund that is currently pending.
The company also identified that its dependent on the product and sale of its cannabis products, and the pending COVID-19 pandemic poses a risk to those sales in the event of a government imposed shutdown of non-essential services, and that the financing was a means of desrisking its operation.
GTEC Holdings last traded at $0.09 on the TSX Venture.
Information for this briefing was found via Sedar and GTEC Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
