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Namaste Technologies Inc.

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Namaste Technologies Reports First Quarter 2020 Financial Results

~Company reports 16% year over year net revenue growth and significant improvement in bottom line compared to the same period last year~

TORONTO, June 10, 2020 /PRNewswire/ - Namaste Technologies Inc. ("Namaste" or the "Company") (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF), an online platform for cannabis products, accessories, and responsible education, today reported its financial results for the first quarter ended February 29, 2020. All financial figures are in Canadian dollars unless otherwise indicated.

Namaste's first quarter results reflect the work begun in 2019 and the Company's transition to a more strategic position within the value chain. On a year over year basis for the quarter ended February 29, 2020, revenue increased and net loss decreased significantly. On a sequential basis, revenue, gross margin and the bottom line significantly improved. Equally as important to note on the revenue growth is the fact that it was accomplished while revenue-generating, but non-core, business assets were exited during 2019.

CannMart Inc., a wholly owned subsidiary of Namaste Technologies, ("CannMart") continues to attract premium brands, value added suppliers, and provincial agencies thanks to its expertise in e-commerce, production, packaging, and distribution in this highly competitive and regulated industry. As reflected in the Q1 2020 results, CannMart's expanded product catalogue grew in both its business to business ("B2B") and business to consumer ("B2C") channels. CannMart continues to strengthen its competitive position in the Cannabis 2.0 marketplace as the industry shifts into consumer packaged goods.

First quarter highlights:

  • Recorded Net Revenues of $5.3 million, a 16% increase over the same period ended February 28, 2019, and the highest quarterly revenue in two years.
  • CannMart, Namaste's core growth engine, net segment revenue increased by approximately 798% to $1.3 million, excluding excise tax, over the comparable period in 2019.
  • On a sequential basis, CannMart's revenue increased 258% from Q4 2019 to Q1 2020
  • Reported Net loss of $7.4 million compared to $10.3 million in the same quarter last year. The improvement reflects the restructuring efforts in 2019 and resulting business improvements in 2020.
  • CannMart continues to increase the number and variety of products carried on the CannMart website and available through its B2B channels such as:
    • Premium craft cannabis brand Kief, a pure craft cannabis company in which Namaste holds a minority position and certain product purchasing rights, and
    • Award winning Phyto Extractions, an established legacy brand in the Canadian marketplace offering unique products such as cannabis vaporizing pen cartridges and batteries; cannabis capsules; and cannabis tincture bottles and jars.
  • CannMart signed a new supply agreement with Alberta Gaming, Liquor & Cannabis (AGLC), representing the fifth provincial government customer for Namaste. According to the AGLC there are 465 retail locations in the province, more licensed retailers than in any other province.

"The changes in strategy and corporate structure made during 2019 are starting to reflect a positive impact in our financial results," said Meni Morim, CEO of Namaste. "Namaste's revenues jumped this quarter to the highest level since the first quarter of 2018 with a significant contribution from CannMart, an impressive feat taking into account some exits from non-core businesses during 2019. We are gaining traction in the B2B segment with one early customer, with whom we passed the Proof of Concept stage, driving the majority of CannMart's revenue growth. These are initial, yet strong signals of traction, as CannMart generated in this quarter alone, 164% of the revenue generated by CannMart in the entire year of 2019. CannMart is seeing significant growth in its operations as we enter new markets with new and well-known brands and a growing number of distribution channels."

"We firmly believe in the future of the legal cannabis industry and our value proposition as a leader in development, manufacturing and distribution of consumer packaged goods. As manufacturers of cannabis products continue to expand, brands will become the major driver for product differentiation and ultimately sales. As evidenced by the strategic relationships with brands like IGNITE and Phyto Extractions, we are aligning with major brands to help build their customer base within the legal Canadian cannabis market."

"The Cannabis 2.0 market is still in its infancy.  However, we expect this market to gain momentum as new and innovative products and brands are introduced. This market features higher gross margins and a larger addressable customer base than leaf-based products and is an important addition to our product offerings. Major brands understand the value that we offer and trust us to represent them."

Summary of Consolidated Financial Results

Net revenue for the first quarter ended February 29, 2020 was $5.3 million, an improvement of 16% compared to $4.6 million for the first quarter of 2019. Gross margin as a percentage of net revenue (before inventory adjustment) for the quarter ended February 29, 2020 was 14% compared to 17% for the previous period. As illustrated on the chart below, cannabis revenue is demonstrating strong growth and becoming a major component of total revenues.

https://mma.prnewswire.com/media/1178766/Revenue_Shifting_towards_Cannabis.jpg?p=original

Revenue Shifting towards Cannabis (CNW Group/Namaste Technologies Inc.)

Adjusted EBITDA for the first quarter ended February 29, 2020 was a loss of $6.0 million, compared to a loss of $5.1 million for the first quarter ended February 28, 2019. Net loss for the first quarter ended February 29, 2020 was $7.4 million compared to $10.3 million in the same period last year. The improvement in the net loss is primarily attributed to decreases in share-based compensation and restructuring and other non-recurring expenses.

The Company has taken a conservative approach and made provisions against financial assets including but not limited to accounts receivable and deposits. These non-cash, conservative measures represent approximately $0.9 million of the $7.4 million loss.

For further details, the complete Financial Statements for the first quarter ended February 29, 2020 and the related Management's Discussion & Analysis can be accessed on the Company's SEDAR profile at www.sedar.com.

COVID-19 UPDATE

Covid-19 is an unprecedented challenge for the global community. In response to this serious health risk, management employed procedures to mitigate its effects on the business and ensure the health and safety of its employees, vendors, partners and customers as the first quarter was coming to a close. Although these challenges still persist, management believes that appropriate actions have been taken and the business is well positioned to operate with limited disruption.

NON IFRS FINANCIAL MEASURES

Management evaluates the Company's performance using a variety of measures, including "EBITDA" and "Adjusted EBITDA". The non-IFRS measures discussed below should not be construed as an alternative to other financial measures determined in accordance with IFRS. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies.

The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company.

Management uses these and other non-IFRS financial measures to exclude the impact of certain expenses recognized under IFRS when analyzing underlying operating performance and cash impact. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis. The exclusion of certain items does not imply they are non-recurring.



Q1, 2020


Q1, 2019

Net loss

$

(7,391,664)

$

(10,278,966)

Income tax


24,568


(93,293)

Depreciation and amortization


726,281


666,213

EBITDA


(6,640,815)


(9,706,046)

Other income 


160,073


424,288

Restructuring and other costs


-


(3,579,500)

Impairment of investment in associate


(578,267)


-

Share of associates' loss, net of tax  


(189,244)


-

Share-based compensation


(35,811)


(1,403,536)

Adjusted EBITDA

$

(5,997,566)

$

(5,147,298)

(i) Current and deferred income taxes, depreciation and amortization, and share-based compensation were excluded from the Adjusted EBITDA calculation as they do not represent cash expenditures.


(ii) Other income consisting of gain on disposal of subsidiary, interest income, realized gain on disposition of AFS investments, unrealized gain on derivatives and other miscellaneous non-recurring income were excluded from Adjusted EBITDA calculation.


(iii) Non-recurring costs related to restructuring and legacy issues were excluded from Adjusted EBITDA calculation.


(iv) Share of associates loss, net of tax, is excluded due to lack of control.

About Namaste Technologies Inc.
With headquarters in Toronto, ON, and offices in both B.C. and around the globe, Namaste Technologies is a leading online platform for cannabis products, accessories, and responsible education. The company's 'everything cannabis store', CannMart.com, provides customers with a diverse selection of hand-picked products from a multitude of federally-licensed cultivators, all on one convenient site. Namaste's global technology and continuous innovation address local needs in a burgeoning cannabis industry requiring smart solutions.

Information on the Company and its many products can be accessed through the links below:

NamasteTechnologies.com
NamasteMD.com
Cannmart.com
NamasteVapes.ca

Everyonedoesit.ca

FORWARD-LOOKING INFORMATION – This news release contains "forward-looking information" within the meaning of applicable securities laws. All statements contained herein that are not historical in nature contain forward-looking information. Forward-looking information can be identified by words or phrases such as "may", "expect", "likely", "should", "would", "plan", "anticipate", "intend", "potential", "proposed", "estimate", "believe" or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions "may" or "will" happen. The forward-looking information contained herein is made as of the date of this press release and is based on assumptions management believed to be reasonable at the time such statements were made, including management's perceptions of Namaste's standing in the online marketplace for cannabis products, the Company's transition into a growth phase with a focus on increasing revenues and gross margins while reducing costs, the Company's goal of becoming a leading procurement, processing and distribution company focusing on the Canadian cannabis market, Namaste's beliefs regarding the quality of its management, the strides the Company has taken in its operations and the quality of the brands offered by CannMart, the Company's focus on growing the business profitably, reducing operational burn and continuing to master the mechanism of moving cannabis into the market, safely and reliably and the results of operations, operational matters, historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. While we consider these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. By their nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking information in this press release. Such factors include, without limitation: risks relating to the Company's ability to execute its business strategy and the benefits realizable therefrom, risks specifically related to the Company's international operations, and risks relating to the market price of Namaste common shares. Additional risk factors can also be found in the Company's current MD&A which has been filed under the Company's SEDAR profile at www.sedar.com. Readers are cautioned not to put undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

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 or has in any way approved or disapproved of the contents of this press release.

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SOURCE Namaste Technologies Inc.

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