Expenses are up, and revenue is down as Namaste Technologies Inc. (TSXV: N) (OTCMKTS: NXTTF) tries to put the troubles of the past few months behind it. Yesterday the company released its financial statements for the three and six month periods ending on May 31, 2019.
Revenue for the quarter was $3.99 million, compared to $4.06 million during the same period in the previous year. For the six month period, revenue was $8.5 million, down from $9.6 million. The net loss for the quarter was $8.6 million. For the six month period, the net loss was $18.91 million, representing a year-over-year increase of $7.47 million.
For the six month period, selling, general and administrative expenses rose from $14.71 million in the previous year to $21.57 million. A significant contributing factor to Namaste’s rising expenses and decreased revenue was a combination of toxic news and legal issues involving its former CEO, Sean Dollinger.
Last October, the company came under a short-seller attack by Citron Research, which among other accusations, claimed that Dollinger, who was then CEO of Namaste, lied to shareholders. Dollinger claimed to have sold Dollinger Enterprises US, a subsidiary of Namaste, to an arm’s length party, when in fact he had sold it to company insiders.
Consequently, Namaste hired a special investigator to examine Citron’s claims, which ultimately led to Dollinger’s ousting and a $1.9 million bill for the investigation. Further compounding the scandal was news that its auditor PricewaterhouseCoopers, LLP resigned as well as claims of “irregular advertising” by the Brazilian government. As a result of losing its auditor, the company was also late in filing its financial statements; placing the proverbial cherry on top of this scandal-ridden sundae.
Nevertheless, Namaste has endured and ended the second quarter with positive working capital of $63.3 million and was able to acquire a 49% stake in Calgary, AB-based Choklat Inc. and as well as increase its equity position in Pineapple Express Delivery Inc. to 49%.
In a statement, Namaste’s interim CEO Meni Morim expressed confidence in the company’s short-term outlook.
“We have improved the Company’s foundations to build the world’s most customer-focused cannabis marketplace,” said Morim. “From here, we are reprioritizing and refining our investments towards scalability, gaining market share and working capital management. We expect to see these results take shape over the next three to six months with a balanced approach between working capital optimization and the right investments to help the company grow.”