Namaste Technologies Inc. (TSXV: N) (OTCMKTS: NXTTF) continues to see its troubles compounded following the recent scandal involving the company’s founder and former CEO Sean Dollinger. On Wednesday the company confirmed that its auditor PricewaterhouseCoopers, LLP resigned and will no longer be acting as the company’s auditor. Namaste said it was in advanced discussions with potential successor auditors, one of whom is in the final stages of its client acceptance process.
As a result of this situation, the company said it would probably be unable to file its financial statements that are due by March 31, 2019.
Irregular Advertising in Brazil
Namaste also noted that the National Heath Surveillance Agency (Anvisa) in Brazil advised the company that it has identified irregular online advertising of certain tobacco products on a website operated by Namaste and have advised that they are proposing to commence administrative proceedings in relation to same. As a result, Namaste is “temporarily suspending the sale of all of its products in Brazil pending a full compliance review with external counsel and other advisors. Sales of such products in Brazil are expected to represent approximately 8% of Namaste’s estimated revenue globally for the 15 months ended November 30, 2018.”
Suspension of Businesses
Namaste said it was reviewing all of its initiatives and as a result decided to let some of them go. These include the introduction of Namaste Café, a cook book and the H.E.A.L. product line in relation to its previously announced franchise distribution model. In addition, Namaste said it has “provided formal written notice of the termination of its agreement with ORH Marketing Ltd., in accordance with its terms. Management believes that the termination of these marketing and related initiatives can be achieved with minimal business disruption, and is expected to result in annual cash savings of approximately $3 million, which is net of expected transition costs.”
Somehow, in the middle of all this corporate mess, Namaste announced that it was acquiring 49% of the issued and outstanding shares of Calgary, AB-based Choklat Inc. for $1.5 million in cash.
According to the statement, Choklat is a chocolate manufacturer with existing sales through its online eCommerce site and through a network of distributors across Canada. Choklat has recently entered into a supply relationship with Sobeys and already has product in 25 stores in Alberta with a goal to roll out in Western Canada and beyond in the coming months. As part of the acquisition, Namaste will be appointing a member to the Board of Choklat.
“Choklat is a great acquisition for us with a vast offering of existing products that can be easily infused with THC or CBD and sold as edibles,” said Meni Morim, Interim CEO of Namaste Technologies Inc. “Their small batch manufacturing model is a great fit within the new proposed regulations for edible cannabis products. This transaction provides the security of supply and manufacturing for our medicinal cannabis customers and provides capacity for the recreational market in the event proposed regulations are passed.”
“Almost two years ago I used my own prescription to personally research the concept of infusing chocolate and sugar with cannabis,” said Brad Churchill, Choklat Founder, and CEO. “As one of the only chocolate makers in Canada I had access to equipment and processes that other chocolatiers and confectioners don’t have. My research led me to discoveries which, when legal, will allow us to infuse both THC and CBD into chocolate and sugar in such a way that there is absolutely no discernible “weed” flavour or smell, and with a dosage accuracy that is almost pharmaceutical grade.”