Namaste Technologies (NXTTF) stock has
endured a lot of self-inflicted pain in the past months, as
scandals, firings, loss of an auditor, and a plummeting share price
has left investors and shareholders wondering if it can survive
over the long term.
This is unfortunate because the business model
itself, of building an e-commerce platform that sells a variety of
accessories into the cannabis market, along with an app that was
built to serve medical cannabis patients, had a lot of
Now the company has devolved into battling to
regain legitimacy and viability, even as it appears to be continue
to struggle to find its way.
While the market is familiar with the negative
events surrounding the company, I think the real issue going
forward is the uncertainty associated with not knowing anything
about the performance of the company since its last earnings
Last known numbers
In its last earnings release for the fourth
fiscal quarter of 2018, Namaste generated net revenue of $3.9
million, essentially flat year-over-year.
Revenue in its vaporizer business showed no
growth in the reporting period. Its CannMart segment generated
$32,000 in sales in the quarter, and its NamasteMD generated sales
Gross profit in the quarter was $930,000, with
the company losing $8.7 million after its operating expenses were
While on the surface these numbers do look
abysmal, there are a couple of things that need to be taken into
consideration. For example, with its vape business, it divested of
its holdings in the U.S., which was a major reason for the
low-growth story that unfolded. That's not to say it has been
growing strong, only that the numbers weren't as bad as the appear,
once adjusting for the loss of U.S. sales.
As for CannMart, in the quarter of the earnings
report it had only started selling several weeks before, so it
didn't have an impact on the quarterly numbers. They should improve
in the next report, whenever it is released.
CannMart has a lot of potential, based upon a
wide production selection, quality customer service, and same-day
delivery. It don't think the market is even pricing in CannMart at
this time because of the overwhelmingly bad news associated with
its prior management. That has changed, and if current management
is able to regain confidence of shareholders through trust and
performance, it should be a solid catalyst for the company.
Lack of visibility the major
The company recently stated the "audit of the
2018 Annual Financial Statements is nearly completed." It said it
expects "its Annual Filings and interim financial statements for
the three-month period ended February 28, 2019, will be filed on or
before May 31, 2019."
It doesn't appear it'll provide by the end of
May, but it does point to the real issue Namaste faces: the lack of
visibility concerning its performance since mid-2018.
Until it releases its financial statements, it's
impossible to know what has happened to the company since it put
its major management issues behind it. That will continue to
dominate the market sentiment toward the company until they are
That suggests to me the company will remain in
limbo until there is clarity concerning its performance, and
whether or not is has been increasing sales on its e-commerce
platforms, and whether or not it has been able to improve margin
and earnings while presumably boosting revenue.
With a cloud still hanging over the company, its
major task in the near term is to rebuild trust and prove it has a
viable business model it can leverage to sustainable growth.
Namaste management has a monumental task ahead of
it. It not only must work on growing revenue and becoming more
efficient, but just as importantly, regain the trust of
shareholders and the general market, that it isn't simply pumping
up the stock without management commitment and the business model
to warrant it.
My view is the company does have a potentially
solid business model, and its decision to build out an e-commerce
platform to sell cannabis-related products has a chance to do very
well. If it isn't able to deliver, other companies will, as the
e-commerce model aligns with consumer demand.
Namaste did receive the first no-cultivation
ACMPR sales-only license from Canada, and that's positioned it
provide the services it offers. That gives it the right to sell
medical cannabis on its CannMart site.
I don't believe Namaste is a fraudulent business
as some have suggested, as it has a business model that makes
sense. But until it releases its financial statements and shows it
has the ability to leverage its e-commerce platforms efficiently,
it's going to struggle to attract investors, or gain support for
its share price.
As the company stands today, it's a toss of the
dice which way it'll go.
To read more on the nitty gritty of whatâs going
on in the rising cannabis industry, click here.
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