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Does Namaste Technologies (N.V) buying the rest of CannMart labs signal a turnaround?

CannMart
11/19/2020

Namaste Technologies (N.V) is looking to buy out the rest of CannMart labs from their owners MKD Holdings and JLLS Holdings in an all-share deal for approximately $4 million.

Namaste originally acquired a controlling 51% interest in CannMart Labs in May of 2018, contingent with a deal to finance their extraction facility in Etobicoke, Ontario. The facility is purposefully designed to meet EU Good Manufacturing Practices (EU-GMP) certification requirements.

“Acquiring the remaining interest in CannMart Labs is another important milestone achieved in establishing Namaste as a leading company within the Canadian cannabis sector. CannMart Labs is in the final stage of its application for an important processing licence from Health Canada. It has installed state-of-the-art extraction technology in its facility, which when granted a licence, will be able to produce an array of cannabis products including shatter and live resin, as well as future distillate products such as vape cartridges, gel capsules, tinctures and edibles,” said Meni Morim, chief executive officer of Namaste.

Not much has been going right for Namaste this year as indicated by their chart.

Source: stockwatch.com

But one of the moving parts of their machine doing its job without making too much of a fuss has been CannMart, and it makes sense that Namaste would decide to take a firm grasp of this property. They seem to be an integral part of Namaste’s rebuild in the post-manbun years, getting licensed from Ignite International brands to use their trademarks and getting the nod from the Alberta Gaming, Liquor and Cannabis, as well as the Ontario Cannabis Retail corporation to start selling cannabis 2.0 products.

Also giving them a platform by which their marketplace can connect brands, vendors and customers directly. It’s illegal as per the Cannabis Act for cannabis companies to advertise their products, but this is particularly useful for companies dealing in peripherals and accessories, such as Vendorlink’s first customer, Canada Puffin, a hardware company focused on hand blown glass, natural maple pipes and other accessories.

Transaction terms include the remaining interest in exchange for an all share deal of $4,034,000. The first tranche is $1,608,500 sold in shares at the seven day volume weighted average price of the day of closing, and the remainder will be $2,42,500 payable over the next nine fiscal quarters beginning Feb. 28, 2021.

Transaction Highlights:

  • Namaste to acquire remaining 49% of CannMart Labs to 100% ownership
  • CannMart Labs facility in Ontario is completed for BHO extraction using leading extraction technology, making it one of only a few facilities in Canada with such capabilities
  • Application in final phase for a processing licence from Health Canada
  • Set to produce in-house branded Cannabis 2.0 products for medical channel customers at CannMart.com and recreational customers across Canada through sister company CannMart Inc.’s network of provincial sales partners
  • Cannabis 2.0 products initially planned include shatter and live resin with capabilities to expand future distillate product offerings to vape cartridges, gel capsules, tinctures and edibles

All share deals are generally a necessary evil in some cases, but they should generally be avoided to avoid thinning out the value of the paper. But Namaste has a bit of a different approach.

“This transaction is advantageous to Namaste shareholders as the Vendors will continue to provide management services and will receive earn-out payments in the form of Namaste common shares or cash only upon the successful achievement of certain revenue and gross profit targets and if the targets are met, the cash payment option allows Namaste to minimize dilution associated with the acquisition. We are working hard towards receiving our processing licence from Health Canada and look forward to producing in house branded Cannabis 2.0 products, for our medical channel customers at CannMart.com and recreational consumers across Canada through our network of provincial sales partners,” said Morim.

We’ll see. Their next set of financial statements should be interesting.

—Joseph Morton

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