Namaste Technologies Reports Third Quarter 2020 Financial Results

~Company reports a 49% Q3 year-over-year increase in net revenue for 2020 third quarter revenue~

TORONTO, Oct. 29, 2020 /CNW/ - 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 third quarter ended August 31, 2020. All financial figures are in Canadian dollars unless otherwise indicated.

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

Namaste's third quarter results continue to build on the revenue growth success on a year-over-year basis as the Company solidifies its position within the cannabis value chain. Namaste's wholly-owned subsidiary, CannMart Inc. ("CannMart"), through its distribution channels, continues to make a significant contribution to Namaste's revenue stream as the Company seeks to expand product lines, improve operational efficiencies, grow revenue, and increase gross margins. In this third quarter, the Company continued to drive internal changes, improvements, and investments to strengthen its foundation for long term growth. As a result of these efforts, and subsequent to quarter end, the Company launched VendorLink, a proprietary platform that connects consumers with cannabis brands, vendors, and retailers forming a true cannabis marketplace experience.

Third Quarter Highlights

• Net Revenue increased 49%, to $5.6 million in the third quarter ended August 31, 2020 compared to $3.8 million in the same period last year.
  
  
• The net segment revenue for CannMart, Namaste's core growth engine, increased approximately 1586% to $2.3 million in the third quarter ended August 31, 2020 compared to the comparable period in 2019, excluding excise tax.
  
  
• Cannabis revenue represented 40.6% of net consolidated revenues for the third quarter ended August 31, 2020 versus 3.6% for the third quarter ended August 31, 2019.
  
  
• Reported third quarter ended August 31, 2020 net loss of $7.8 million compared to $14.7 million in the same quarter last year. The improvement reflects, in part, CannMart Inc.'s introduction of new distribution channels, restructuring efforts, and resulting business improvements. Included in the net loss for the third quarter ended August 31, 2020 was $1.7 million in unrealized, non-cash, foreign exchange losses.

Subsequent to the end of the third quarter, the Company introduced:

• VendorLink, a proprietary scalable platform for brands and vendors to upload and sell their cannabis accessories products through CannMart.com; and
  
  
• The facilitation of online recreational sales by a licensed retailer in Saskatchewan.

"We continue to make progress shifting our sales to cannabis as CannMart posted another quarter with significant year-over-year growth of revenue in the third quarter of 2020 versus the same quarter last year," said Meni Morim, CEO of Namaste. "CannMart's distribution channels continue to make a significant contribution to Namaste's revenue stream. The work completed in the third quarter of 2020 around internal changes, improvements, and investments to strengthen its foundation for long term growth including the successful launch of VendorLink, our proprietary scalable platform for brands and vendors to upload and sell their cannabis accessories products through CannMart.com."

"Furthermore, the launch of VendorLink which facilitates sales of licensed retailers' recreational cannabis products available through CannMart.com in the province of Saskatchewan marks an important milestone," added Morim.

Summary of Consolidated Financial Results

Net revenue for the third quarter ended August 31, 2020 was $5.7 million, an improvement of 49% compared to $3.8 million for the third quarter of 2019. Gross margin as a percentage of net revenue (before inventory adjustment) for the third quarter ended August 31, 2020 was 9.7% compared to 20.7% for the same period last year. As illustrated on the chart below, cannabis revenue is demonstrating strong growth on a year-over-year basis and becoming a major component of total revenues.

Operating expenses decreased $999,458 or 13% for the third quarter ended August 31, 2020 in comparison to the same period last year. The change reflects a decrease in professional fees and share based compensation offset by an increase in salaries and office and general costs.

Adjusted EBITDA for the third quarter ended August 31, 2020 was a loss of $5.4 million, compared to a loss of $5.7 million for the third quarter ended August 31, 2019. Net loss for the third quarter ended August 31, 2020 was $7.8 million compared to $14.7 million in the same period last year. The improvement in the net loss is primarily attributed to a decrease in restructuring and impairment charges offset with an increased foreign exchange loss.

During the nine months ended August 31, 2020, the Company's cash and cash equivalents position declined by $24.2 million resulting in $13.6 million cash on hand at the end of the third quarter. Approximately, $14.9 million was used to fund operating losses, while the remainder primarily reflects the Company's investment in inventory and property and equipment ("P&E"). The increased investment in inventory was in preparation for this year's Black Friday and Cyber Monday and to further support the continued growth in cannabis revenue. The P&E primarily represents leasehold improvements for a dedicated facility designed specifically to produce oil, extract, and other products allowing the Company greater control over its input costs while driving increased margins.

For further details, the complete Financial Statements for the third quarter ended August 31, 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 continues to be an unprecedented challenge for the global community. In response to this very serious health risk, management employed procedures to mitigate its effects on the business and ensure the continued 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.

		Three months ended				Nine months ended
	Notes	31-Aug-20		31-Aug-19		31-Aug-20		31-Aug-19
Net loss		$	(7,833,495)	$	(14,652,118)	$	(20,067,532)	$	(33,562,925)
Income tax	(i)	45,309		(51,582)		78,057		(217,354)
Depreciation and amortization	(i)	453,662		513,003		1,686,131		1,687,557
EBITDA		(7,334,524)		(14,190,697)		(18,303,345)		(32,092,722)
Other income	(ii)	(235,487)		(304,329)		(513,612)		(1,060,074)
Impairment of goodwill	(iii)	-		-		322,887		-
Share-based compensation	(iii)	422,349		683,438		601,030		3,265,647
Restructuring and other costs	(iii)	-		2,368,737		(1,300,000)		9,294,840
Impairment loss on loans receivable	(iii)	-		3,578,400		-		3,578,400
Impairment of investment in associate	(iii)	-		-		1,016,127		-
Share of associates' loss, net of tax	(iv)	-		1,464,565		329,652		1,561,667
Foreign exchange	(i)	1,737,576		680,378		893,998		368,040
Adjusted EBITDA		$	(5,410,086)	$	(5,719,508)	$	(16,953,263)	$	(15,084,202)

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

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

(iii)  Non-recurring costs related to restructuring, impairment 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.

Headquartered in Toronto, Canada, Namaste Technologies is a leading online platform for cannabis products, accessories, and responsible education. The Company's 'everything cannabis store', CannMart.com, provides medical customers with a diverse selection of hand-picked products from a multitude of federally-licensed cultivators, all on one convenient site. The Company also distributes licensed and in-house branded cannabis and cannabis derived products to recreational consumers in Canada through a number of provincial government control boards and retailing bodies and facilitates licensed cannabis retailer sales online in Saskatchewan. 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

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, including, without limitation, statements related to the Company seeking to expand product lines, improve operational efficiencies, grow revenue, and increase gross margins, 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 continued transition into a growth phase with a focus on increasing revenues and gross margins while reducing costs, Namaste's beliefs regarding the quality of its management, the Company's continued focus on growing the business profitably, increasing revenues and reducing operational burn, the expected demand for Cannabis 2.0 products and the expected growth of that market, the Company's ability to add to its product line, 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 its 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 operations, and risks relating to the market price of Namaste's common shares. Additional risk factors can also be found in the Company's current MD&A and annual information form, both of which have 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.

SOURCE Namaste Technologies Inc.

Incite Capital Markets, Eric Negraeff / Darren Seed, Meni Morim, CEO, Namaste Technologies Inc., Ph: 604.493.2004, Email: [email protected]