Namaste Technologies Inc.
Consolidated
Financial Statements
For the years ending August 31, 2017 and 2016
Expressed in Canadian dollars
(Audited)
Table of Contents
Page
Management Responsibility
Independent Auditor’s Report
Consolidated Financial Statements
Consolidated Statements of Financial position ........................................................................................... 1
Consolidated Statements of Loss ............................................................................................................. 2
Consolidated Statements of Comprehensive Loss …………………………………………………………..…. 3
Consolidated Statements of Changes in Equity .......................................................................................... 4
Consolidated Statements of Cash Flows .................................................................................................... 5
Notes to the Consolidated Financial Statements ................................................................................................. 6
Management’s Responsibility
To the Shareholders of Namaste Technologies Inc.:
The accompanying audited consolidated financial statements (“financial statements”) of Namaste Technologies Inc. and
all the information in the management discussions and analysis (“MD&A”) are the responsibility of management and are
approved by the Board of Directors.
The financial statements have been prepared by management in accordance with International Financial Reporting
Standards. When alternative accounting methods exist, management has chosen those it considers most appropriate in
the circumstances.
The significant accounting policies used are described in Note 3 to the financial statements. Certain amounts in the financial
statements are based on estimates and judgments. Management has determined such amounts on a reasonable basis to
ensure that the financial statements are presented fairly, in all material respects. Management has prepared the financial
information presented elsewhere in the MD&A and has ensured that it is consistent with that in the financial statements.
The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for establishing and
maintaining disclosure controls and procedures and internal control over financial reporting. The CEO and the CFO have
supervised an evaluation of the effectiveness of the Company’s internal control over financial reporting, as at August 31,
2017. As at August 31, 2017, management identified material misstatement from the prior year. During the uncovering of
these misstatements, management identified internal control weaknesses over financial reporting. These weaknesses will
be improved during the course of the fiscal year.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is
ultimately responsible for reviewing and approving the financial statements. The Board of Directors carries out this
responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of Directors, and all of its members are independent directors. The Audit
Committee meets periodically with management to discuss disclosure controls and procedures, internal control over
financial reporting, management information systems, accounting policies, auditing and financial reporting issues, to satisfy
itself that each party is properly discharging its responsibilities, and to review the financial statements, the Management’s
Discussion and Analysis and the independent auditor’s report. The Audit Committee reports its findings to the Board of
Directors for consideration when approving the financial statements for issuance to the shareholders. The Audit Committee
also considers, for review by the Board of Directors and approval by the shareholders, the engagement or reappointment
of the independent auditor, and reviews and approves the terms of its engagement as well as the fee, scope and timing of
its services.
The financial statements have been audited, on behalf of the shareholders, by MNP, the independent auditor, in
accordance with Canadian generally accepted auditing standards. The independent auditor has full and free access to the
Audit Committee and may meet with or without the presence of management.
January 7, 2018
(Signed) Sean Dollinger (Signed) Philip van den Berg
President and Chief Executive Officer Chief Financial Officer
Independent Auditor’s Report
Independent Auditors’ Report
To the Shareholders of Namaste Technologies Inc.:
We have audited the accompanying consolidated financial statements of Namaste Technologies Inc., and its subsidiaries, which comprise the consolidated statements of financial position as at August 31, 2017 and August 31, 2016, and the consolidated statements of loss and other comprehensive loss, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Namaste Technologies Inc., and its subsidiaries, as at August 31, 2017, August 31, 2016 and their financial performance and their cash flows for the years then ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Restated Comparative Information:
Without qualifying our opinion, we draw attention to Note 3.20 in the consolidated financial statements which explains that certain comparative information previously reported in the Company's consolidated financial statements as at and for the year ended August 31, 2016 have been restated.
Montréal, Québec
1
January 8, 2018
1 CPA auditor, CA, public accountancy permit No. A122514
Namaste Technologies Inc. Consolidated Statements of Financial Position
As at August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
Approved on behalf of the Board of Directors on January 7, 2018:
(Signed) Sean Dollinger
(Signed) Philip van den Berg
Director Director
August 31, 2017August 31, 2016 -
Restated
Assets
Current
Cash 1,132,770 113,665
Receivables Note 6 303,230 40,694
Inventory Note 8 2,497,884 943,306
Prepaids and deposits Note 7 667,912 91,946
Tax receivable Note 16 170,822 -
Corporate taxes receivable 15,009 31,881
Due from related parties Note 10 81,612 6,531
Total current assets 4,869,239 1,228,023
Long-term
Intangibles Note 5 6,227,711 892,342
Goodwill Note 5 2,827,420 1,990,716
Total long-term assets 9,055,131 2,883,058
Total assets 13,924,370 4,111,081
Liabilities
Current
Accounts payable and accrued liabilities Note 9 777,402 567,148
Loan payable Note 13 94,981 -
Earn-outs payable Note 4 489,230 398,092
Due to related parties Note 10 552 226,317
Total current liabilities 1,362,165 1,191,557
Long-term
Loan payable Note 13 284,943 -
Earn-outs payable Note 4 - 1,232,935
Deferred tax liability Note 16 749,868 -
Total long-term liabilities 1,034,811 1,232,935
Shareholders' equity
Share capital Note 11 21,637,191 1,929,133
Deferred share issuance Note 4 1,190,636 595,831
Warrant and option reserve Note 11 6,354,364 872,317
Contributed surplus 1,798,564 250,061
Accumulated other comprehensive income (299,016) (163,672)
Retained earnings deficit (19,154,345) (1,797,081)
Total shareholders' equity 11,527,394 1,686,589
Total shareholders' equity & liabilities 13,924,370 4,111,081
Namaste Technologies Inc. Consolidated Statements of Loss
For the twelve months ended August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
August 31, 2017August 31, 2016 -
Restated
Sales 10,981,414 3,488,902
Cost of goods sold 9,603,286 2,368,428
Gross profit 1,378,128 1,120,474
Operating expenses
Selling expenses Note 15 3,119,285 748,291
Administration expenses Note 15 6,687,474 2,390,060
Other expenses Note 15 513,340 225,982
Impairment of goodwill and intangibles Note 5, 15 9,187,428 -
Total operating expenses 19,507,527 3,364,333
Loss before other income and income taxes (18,129,399) (2,243,859)
Other income 771,799 91,548
Loss before income taxes (17,357,600) (2,152,311)
Income tax expense (benefit)
Current Note 16 163,843 -
Deferred Note 16 (164,179) -
Net loss (17,357,264) (2,152,311)
Net loss per share, basic and diluted: $(0.12) $(0.04)
Weighted average number of outstanding common
shares, basic and diluted: 140,038,698 53,458,671
Namaste Technologies Inc. Consolidated Statements of Comprehensive Loss
For the twelve months ended August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
August 31, 2017August 31, 2016 -
Restated
Net loss (17,357,264) (2,152,311)
Other comprehensive income
Cumulative translation adjustment (135,344) (160,244)
Net comprehensive loss for the year (17,492,608) (2,312,555)
Namaste Technologies Inc. Consolidated Statements of Changes in Shareholders’ Equity
As at August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
Statement of change in equity - year ending August 31, 2016 - restated
Common
shares
Common
shares $
Deferred
shares $
Options and
warrants $
Accumulate
d OCI $
Contributed
surplus $
Retained
earnings $Total $
Shareholders equity August 31, 2015 - as reported - - - - (3,428) - 355,230 351,802
Shares issued on business Combination Note 1 36,218,202 - - - - - - -
Shares retained by Next Gen shareholders Note 1 8,310,301 498,618 - - - - - 498,618
Share issuance Note 12 23,323,794 1,640,349 - - - - - 1,640,349
Deferred shares Note 5 - - 595,831 - - - - 595,831
Options and warrants issued Note 12 - - - 872,317 - - - 872,317
Share issuance costs - (209,834) - - - - (209,834)
Forgiveness of related party amounts - - - - - 250,061 - 250,061
Net loss - - - - - - (2,152,311) (2,152,311)
Other comprehensive loss - - - - (160,244) - - (160,244)
Shareholders equity August 31, 2016 - restated 67,852,297 1,929,133 595,831 872,317 (163,672) 250,061 (1,797,081) 1,686,589
Namaste Technologies Inc. Consolidated Statements of Changes in Shareholders’ Equity
As at August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
Statement of change in equity - year ending August 31, 2017
Common
shares
Common
shares $
Deferred
shares $
Options and
warrants $
Accumulate
d OCI $
Contributed
surplus $
Retained
earnings $Total $
Shareholders equity August 31, 2016 - restated 67,852,297 1,929,133 595,831 872,317 (163,672) 250,061 (1,797,081) 1,686,589
Share issuance Note 12 71,176,927 8,875,804 - 5,561,188 - - - 14,436,992
Issuance costs 600,000 (2,414,593) - 1,200,538 - - - (1,214,055)
Shares issued to acquire VaporSeller Note 5, 12 3,400,000 405,100 (405,100) - - - - -
Shares issued to acquire URT1 Note 5, 12 15,784,754 5,501,358 - - - - - 5,501,358
Shares issued to acquire Australian VaporizersNote 5, 12 1,988,182 576,573 - - - - - 576,573
Shares issued to acquire CannMart Note 5, 12 8,668,515 2,500,000 - - - - - 2,500,000
Share issued on convertible debenture 2,804,443 400,000 400,000
Deferred shares Note 5, 12 - - 1,000,000 - - - - 1,000,000
Net loss - - - - - - (17,357,264) (17,357,264)
Shares issued on exercise of options and warrantsNote 12 10,181,362 2,994,170 (95) (1,279,679) - - - 1,714,396
Share-based compensation Note 12 2,219,214 599,188 - - - 1,548,503 - 2,147,691
Shares issued for services 1,040,222 270,458 - - - - - 270,458
Other comprehensive loss - - - - (135,344) - - (135,344)
Shareholders equity August 31, 2017 185,715,916 21,637,191 1,190,636 6,354,364 (299,016) 1,798,564 (19,154,345) 11,527,394
Consolidated Annual Statements of Cash Flow
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
August 31, 2017August 31, 2016 -
Restated
Net loss (17,357,264) (2,152,311)
Adjustments for:
Share based compensation 2,147,691 277,826
Foreign exchange gain (79,233) (160,244)
Non-cash listing costs - 570,350
Other non-cash income (696,011) (91,548)
Depreciation 12,794 -
Shares issued for services 270,458 -
Deferred tax recovery (164,179) -
Amortization of intangible assets 430,029 -
Impairment of goodwill and intangibles 9,187,428 -
Cashflow used in operating activities before changes in working capital (6,248,287) (1,555,927)
Changes in non-cash working capital Note 19 (1,577,103) (136,408)
Cash provided by (used for) the following activities (7,825,390) (1,692,335)
``
Financing activities
Change in related party balances (300,846) 340,235
Long-term debt payment (137,301) -
Earn-out payment (661,750) -
Proceeds from issuance of share capital 14,436,992 1,358,783
Share issuance costs (1,214,055) -
Issuance of convertible debenture 400,000 -
Proceeds from exercise of warrants and options 1,714,396 594,491
Cash flows from financing activities 14,237,436 2,293,509
Investing activities
Investment in asset and business acquisitions (5,392,941) (656,200)
Cash flows used in investing activities (5,392,941) (656,200)
Decrease in cash resources 1,019,105 (55,026)
Cash resources, beginning of the year 113,665 168,691
Cash resources (deficiency), end of the year 1,132,770 113,665
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
11
1. Nature of operations and background information
Namaste Technologies Inc. (“Namaste” or the “Company”) is an e-commerce business that distributes vaporizers and
accessories for aromatherapy purposes. Namaste is an entity formed under the British Columbia Business Corporations
Act. The Company is a reporting issuer in British Columbia, Alberta and Ontario, listed (since February 19, 2014) on the
Canadian Securities Exchange (“CSE”) under the trading symbol “N”.
The Company’s head office is located at Suite 2300, Bentall 5, 550 Burrard Street, Vancouver, British Columbia, V6C 2B5,
Canada.
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”), and, in the opinion of management,
include all adjustments necessary for fair presentation.
These consolidated financial statements were approved and authorized by the Board of Directors of the Company on
January 7, 2018.
On February 26, 2016, the Company entered in to a three-cornered amalgamation of 9558039 Canada Inc. (“Dollinger
Canada”), an incorporated entity that was comprised of a vaporizer and accessories division (the “Division”) formerly
included in the operations of Dollinger Enterprises USA Inc. (“Dollinger USA”), Next Gen Metals Inc. (“Next Gen”), an
incorporated public entity listed on the CSE, and Green Rush Analytical Laboratories Inc. (“Green Rush”), a wholly owned
subsidiary of Next Gen. The consolidated statement of financial position gives effect to the Transaction as closed on
February 26, 2016.
Going concern
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to a going concern which
assumes that the Company will be able to continue its operations and will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable future. The ability of the Company to continue as a going
concern is dependent on generating profitable operations, raising additional financing, and developing its products and
services.
As at August 31, 2017, the Company has an accumulated deficit of $19,154,345 (August 31, 2016 - $1,797,081), a working
capital surplus of $3,507,074 (August 31, 2016 - $36,466), and is not yet generating positive cash flows from operations.
The accumulated deficit increased in fiscal 2017 primarily due to non-cash charges that were incurred during the period,
but were not incurred in the prior period. These costs included an inventory write-down of $601,902, share-based
compensation of $2,147,691, amortization of intangibles of $430,209, and impairment of goodwill and intangibles of
$9,187,428.
Historically, management has been successful in obtaining sufficient funding for operating and capital requirements.
Subsequent to year end, the Company completed a successful private placement whereby a total of 14,409,000 Units of
the Company were issued and sold, at a price per Unit of $0.25, for total gross proceeds of $3,602,250 (see Note 20). Also,
on December 7, 2017 the Company announced that it exercised its right under a warrant indenture agreement and thereby
accelerated the expiry of warrants issued under that agreement which was anticipated to yield further funding for the
Company. Furthermore, due to the Company’s strong growth, sales have increased in line with expectations as more traffic
is driven through our online sales platforms. Management has also undertaken steps to decrease various overhead costs
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
12
and has actively entered a new market for the distribution of cannabis products which it anticipates will present high growth
opportunities. There is, however, no assurance that the Company will be able to generate profits from operations or that
additional future funding will be available to the Company, or that such funding will be available on terms which are
acceptable to the management of the Company.
These financial statements do not reflect any adjustments to the carrying values of assets and liabilities and the reported
amounts of expenses and balance sheet classifications that would be necessary if the going concern assumption was not
appropriate and such adjustments could be material.
2. Basis of preparation
2.1. Basis of presentation
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.
The consolidated financial statements are presented in Canadian dollars, which is the Company’s presentation
currency.
The functional currencies of the Group are as follows:
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The
areas where significant judgments and estimates have been made in preparing the consolidated financial statements
and their effect are disclosed below.
The consolidated financial statements have been prepared on the historical cost basis except for certain non-current
assets and financial instruments, which are measured at fair value, as explained in the accounting policies in Note 3.
2.2. Use of management estimates, judgments and measurement uncertainty
The preparation of these consolidated financial statements requires management to make judgments and estimates
and form assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial
statements and reported amounts of revenues and expenses during the reporting period. Such estimates primarily
relate to unsettled transactions and events as at the date of the consolidated financial statements. On an ongoing
basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenues, and expenses.
Management uses various factors it believes to be reasonable under the given circumstances as the basis for its
Functional currencies
Currency
Namaste Technologies Inc. Canadian
Canadian
Dollinger Enterprises US Ltd. United States
Namaste Bahamas Inc. United States
Australian Vaporizers Pty Ltd. Australian
CannMart Inc. Canadian
Next Gen USA Inc. United States
Namaste Technologies Holdings Inc.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
13
judgments and estimates. Actual outcomes differ from these estimates under different assumptions and conditions.
The critical judgements and significant estimates in applying accounting policies that have the most significant effect
on the amounts recognized in the consolidated financial statements are:
Key judgements include:
• Going concern
• Impairment of non-financial assets. Non-financial assets include property, plant and equipment and Intangible
assets. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs
of disposal calculation is based on available data from binding sales transactions in an arm’s length transaction
of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use
calculation is based on a discounted cash flow model. The recoverable amount is most sensitive to the discount
rate.
• The determination of whether a transaction meets the definition of a business combination
• The determination of cash generating units (“CGU”s). The determination of CGUs requires judgment in
determining the lowest level for which there are largely independent cash inflows generated by the asset group
level. This determination could have an impact on the results of impairment testing and, as appropriate, on the
impairment charge recorded in the consolidated statements of net income and comprehensive income.
Key sources of estimation uncertainty include:
• The value of inventory write-down
• The fair value of deferred taxes (Note 15)
• The estimated impact of new and revised standards
• Allowance for doubtful accounts (Note 6)
• The measurement of the purchase price allocation and the fair value of the consideration paid in a business
combination (Note 4)
• The measurement of the value of intangibles and goodwill (Note 5)
• Allowance for doubtful accounts. The Company makes an assessment of whether accounts receivable is
collectible from customers. Accordingly, we establish an allowance for estimated losses arising from non-
payment and other sales adjustments, taking into consideration customer credit-worthiness, current economic
trends and past experience. If future collections differ from estimates, future earnings would be affected.
• Useful lives of equipment. The Company estimates the useful lives of property, plant and equipment based on
the period over which the assets are expected to be available for use. The estimated useful lives of property,
plant and equipment are reviewed periodically and are updated if expectations differ from previous estimates
due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the
relevant assets. In addition, the estimation of the useful lives of property, plant and equipment are based on
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
14
internal technical evaluation and experience with similar assets. It is possible, however, that future results of
operations could be materially affected by changes in the estimates brought about by changes in factors
mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes
in these factors and circumstances. A reduction in the estimated useful lives of the property, plant and equipment
would increase the recorded expenses and decrease the non-current assets.
• Share-based payment transactions and warrants. The Company measures the cost of equity-settled transactions
with employees and directors by reference to the fair value of the equity instruments at the date at which they
are granted. Estimating fair value for share-based payment transactions requires determining the most
appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also
requires determining and making assumptions about the most appropriate inputs to the valuation model including
the expected life, volatility, dividend yield of the share option and forfeiture rate. Similar calculations are made in
order to value warrants. Such judgments and assumptions are inherently uncertain. Changes in these
assumptions affect the fair value estimates.
• Useful lives of intangible assets.
• Fair value of financial instruments. The estimated fair value of financial assets and liabilities, by their very nature,
are subject to measurement uncertainty. The Company uses consistent valuation methodologies by third party
experts to determine the fair value of financial assets and liabilities such as purchase options and convertible
debentures held at fair value. Refer to Note 14 for information on methodology and key assumptions. Determining
the fair value of intangible assets acquired in asset purchases requires management to make assumptions and
estimates about future events. The methodology used to determine the fair value of the intangible assets at date
of acquisition is the same as that used to determine fair value less costs of disposal for purposes of annual
impairment testing.
2.3. New standards and interpretations to be adopted in future periods
At the date of authorization of these consolidated financial statements, the IASB and IFRS Interpretations Committee
(IFRIC) have issued the following new and revised Standards and Interpretations which were either effective during
the fiscal year or are not yet effective as indicated and which the Company has not early adopted. However, the
Company is currently assessing what impact the application of these standards or amendments will have on the
consolidated financial statements.
International Accounting Standards (“IAS”) 1 “Presentation of Financial Statements” was amended by the IASB in
December 2014. The amendments are designed to further encourage companies to apply professional judgement in
determining what information to disclose in their financial statements. For example, the amendments make clear that
materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the
usefulness of financial disclosures. Furthermore, the amendments clarify that companies should use professional
judgement in determining where and in what order information is presented in the financial disclosures. The effective
date is for annual periods beginning or after January 1, 2016. Entities may still choose to apply IAS 1 immediately, but
are not required to do so. This application of this amendment had no impact on the Company.
IAS 7 Statement of Cash Flows has been revised to incorporate amendments issued by the IASB in January 2016.
The amendments require entities to provide disclosures that enable users of financial statements to evaluate changes
in liabilities arising from financing activities. The amendments are effective for annual periods beginning on or after
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
15
January 1, 2017.
IFRS 9 “Financial Instruments” was issued in final form in July 2014 by the IASB and will replace IAS 39 “Financial
Instruments: Recognition and Measurement”. IFRS 9 uses a single approach to determine whether a financial asset
is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based
on how an entity manages its financial instruments in the context of its business model and the contractual cash flow
characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of
financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment
method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 also includes requirements relating
to a new hedge accounting model, which represents a substantial overhaul of hedge accounting which will allow
entities to better reflect their risk management activities in the financial statements. The most significant improvements
apply to those that hedge non-financial risk, and so these improvements are expected to be of particular interest to
non-financial institutions. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, however early
adoption is permitted.
IFRS 15 Revenue from Contracts with Customers. In May 2014, the IASB issued IFRS 15, Revenue from Contracts
with Customers. IFRS 15 specifies how and when to recognize revenue as well as requiring entities to provide users
of financial statements with more informative, relevant disclosures. The standard supersedes IAS 18, Revenue, IAS
11, Construction Contracts, and a number of revenue-related interpretations. Application of the standard is mandatory
for all IFRS reporters and it applies to nearly all contracts with customers: the main exceptions are leases, financial
instruments and insurance contracts. IFRS 15 must be applied in an entity’s first annual IFRS financial statements for
periods beginning on or after January 1, 2018, with early adoption permitted.
IFRS 16 - Leases replaces IAS 17, Leases. The new model requires the recognition of almost all lease contracts on
a lessee’s statement of financial position as a lease liability reflecting future lease payments and a “right-of-use asset”
with exception for certain short-term leases and leases of low-value assets. In addition, the lease payments are
required to be presented on the statement of cash flow within the operating and financing activities for the interest and
principal portions, respectively. IFRS 16 is effective for annual period beginning on or after January 1, 2019, with early
adoption permitted if IFRS 15, Revenue of Contracts with Customers, is also applied. The Company has yet to
evaluate the impact of this new standard.
IFRIC 22 Foreign Currency Transactions and Advance Consideration issued by the IASB in December 2016, provides
guidance on the issue of the "date of the transaction" for the purpose of determining the exchange rate at the time of
the transaction, to apply to transactions that are within the scope of IAS 21, Effects of Changes in Foreign Exchange
Rates, which involve the receipt or payment of an advance consideration in a foreign currency. The interpretation
applies for annual reporting periods beginning on or after January 1, 2018.
IFRIC 23 Uncertainty over income tax treatments issued by the IASB in June 2017, provides guidance as to when it
is appropriate to recognize a current tax asset when the taxation authority requires an entity to make an immediate
payment related to an amount in dispute. This interpretation applies for annual reporting periods beginning on or after
January 1, 2019.
3. Summary of significant accounting polices
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial
statements.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
16
3.1. Basis of consolidation
The consolidated financial statements include the accounts of the Company and entities controlled by the Company
and its subsidiaries.
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investees;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Subsidiaries of the parent Company, Namaste Technologies Inc., are as follows:
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statements of income and other comprehensive income from the date
the Company gains control until the date when the Company ceases to control the subsidiary
All intercompany transactions, balances, revenue and expenses are eliminated in full on consolidation.
3.2. Property and equipment
Property and equipment are stated at cost, less accumulated depreciation and any accumulated impairment losses.
The gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of
income (loss). Expenditure to replace a component of an item of property, plant or equipment that is accounted for
separately is capitalized and the existing carrying amount of the component written off. Other subsequent expenditure
is capitalized if future economic benefits will arise from the expenditure. All other expenditures, including repair and
maintenance, are recognized in the statement of income (loss) as incurred.
Depreciation is charged to the income statement based on the cost, less estimated residual value, of the asset on a
straight-line basis over the estimated useful life. Depreciation commences when the assets are available for use. The
estimated useful lives are as follows:
Equity interests
August 31, 2017 August 31, 2016
Namaste Technologies Holdings Inc. 100% 100%
Dollinger Enterprises US Ltd. 100% 100%
Namaste Bahamas Inc. 100% 100%
Australian Vaporizers Pty Ltd. 100% -
CannMart Inc. 100% -
Next Gen USA Inc. 100% 100%
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
17
• Production equipment 5 years;
• Furniture and fixtures 3 - 5 years;
• Computer equipment 2 years;
• Leasehold improvements 5 years.
Assets held for sale. Assets for which a management decision has been made to advertise for sale on the open market and are expected to be sold in a twelve months period are adjusted to fair value less costs to sell and reclassified to current assets.
3.3. Business combinations
Acquisitions of business are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value. This is calculated as the sum of the acquisition date fair values of the assets
transferred by the Company and liabilities incurred by the Company to the former owners of the acquiree in exchange
for control of the acquiree. Acquisition related costs are recognized in profit and loss as incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over
the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in
profit or loss as a bargain purchase gain.
When the consideration transferred by the Company in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair
value and included as part of the consideration transferred in a business combination. Changes in the fair value of the
contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is
accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at
subsequent reporting dates in accordance with IAS 39 Financial Instruments: recognition and measurement, or IAS
37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being
recognized in profit or loss.
When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is
re-measured to fair value at the acquisition date (i.e. the date when the Company obtains control) and the resulting
gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such
treatment would be appropriate if that interest were disposed of.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
18
3.4. Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Where goodwill forms part of a cash-generating unit and part of the operation within the unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative
values of the operation and the portion of the cash-generating unit retained.
3.5. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances and short-term deposits with original maturities of
three months or less. As at August 31, 2017 and as at August 31, 2016, there were no cash equivalents.
3.6. Inventory
Inventory is valued at the lower of cost and net realizable value. Cost comprises all costs of purchases and other costs
incurred in brining inventories to their present location and condition. The Company uses the weighted average
method to track and cost inventory items. The inventory consists of vaporizers, vaporizer accessories, and therapeutic
herbs. The inventory consists solely of goods currently available for sale and does not include any unfinished goods
or work-in-progress.
Inventory is written down to net realizable value by item when a decline in the price of items indicates that the cost is
higher than the net realizable value. When events having caused a decline in the valuation of inventories no longer
exist, the amount of the write-down is reversed so that the new carrying amount is the lower of the cost and the revised
net realizable value.
3.7. Accounts payable and accrued liabilities
Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the
supplier or not. Provisions are recognized when the Company has an obligation (legal or constructive) arising from a
past event, and the Company has a present obligation, and the costs to settle this obligation are both probable and
able to be reliably measured.
3.8. Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating policy decisions. Parties are also
considered to be related if they are subject to common control or common significant influence. Related parties may
be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a
transfer of resources or obligations between related parties.
3.9. Revenue recognition
The Company derives its revenues from the online sales of vaporizers and accessories through e-commerce platforms.
Revenue is recognized when goods are dispatched, the amount of revenue can be measured reliably, the receipt of
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
19
economic benefits are probable and costs incurred can be measured reliably.
3.10. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases. As at August 31, 2017 and August 31,
2016, the Company did not have any finance leases.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.
3.11. Share-based payments
Share-based payments to employees are measured at the fair value of the instruments issued and recognized over
the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services
received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services
cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding
amount is recorded to the stock options reserve. The fair value of options is determined using the Black-Scholes
Option Pricing Model which incorporates all market vesting conditions. The number of shares and options expected
to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services
received as consideration for the equity instruments granted shall be based on the number of equity instruments that
will eventually vest.
3.12. Income taxes
Tax expense is recognized in the statement of profit and loss, except to the extent it relates to items directly in equity,
in which case the related tax is recognized in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted by the date of the statement of financial position.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the end of the reporting period, adjusted for amendments to tax payable with regards to
previous years.
Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or
substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive
enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against
which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset
will be recovered, the deferred tax asset is reduced.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
20
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
3.13. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity
instrument of another party.
Financial assets of the Company are comprised of cash, receivables and due from related party. The financial liabilities
of the Company are comprised of accounts payable and accrued liabilities, due to related party, earn-out payable and
long-term debt.
Financial assets and financial liabilities are recognized in the statement of financial position initially at fair value when
the Company becomes a party to the contractual provisions of the financial instrument.
3.14. Financial assets
Financial assets are classified, at initial recognition, into one of the following categories:
• fair value through profit or loss;
• held-to-maturity investments;
• loans and receivables;
• available-for-sale financial assets; or
• derivatives designated as hedging instruments in an effective hedge.
Financial assets at fair value through profit or loss (“FVTPL”) include financial assets held for trading, and are classified
as such if they are acquired for the purpose of selling or repurchasing in the near term, and those that are designated
as such upon initial recognition when doing so results in more relevant information being presented. This category
also includes derivative financial instruments entered into by the Company that are not designated as hedging
instruments in an effective hedging relationship. Cash is classified into this category.
Financial assets are initially and subsequently measured at fair value with the exception of loans and receivables and
investments that are held-to-maturity, which are subsequently measured at amortized cost using the effective interest
rate method, less impairment. Receivables and due from related party are currently classified in loans and receivables.
Subsequent recognition of changes in fair value of financial assets re-measured at each reporting date at fair value
depend on their initial classification. Financial assets at fair value through profit or loss are measured at fair value with
all gains and losses included in net income in the period in which they arise. Available-for-sale financial assets are
measured at fair value with gains and losses included in other comprehensive income until the asset is removed from
the consolidated statement of financial position or until impaired. No assets are currently classified as available-for-
sale financial assets.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
21
3.15. Intangibles
Purchased intangible assets are recognized as assets in accordance with IAS 38, Intangible Assets, where it is
probable that the use of the asset will generate future economic benefits and where the cost of the asset can be
determined reliably. Intangible assets acquired are initially recognized at cost of purchase and are subsequently
carried at cost less accumulated amortization, if applicable, and accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets are carried at cost
less any accumulated amortisation and any accumulated impairment losses. Customer lists have a useful life not
exceeding 5 years. Licenses, domains and trade names have an indefinite useful life, and are tested for impairment
annually.
3.16. Impairment of financial assets
At each reporting date, the Company assesses whether its financial assets are impaired. Impairment losses are
recognized in the consolidated income statement when there is objective evidence that the financial assets are
impaired. Financial assets are deemed to be impaired if there is objective evidence of impairment as a result of one
or more events that have occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event
has an impact on the estimated future cash flows of the financial asset(s) that can be reliably estimated.
3.17. De-recognition of financial assets
Financial assets are derecognized when the Company’s contractual rights to the cash flows from the respective assets
have expired or have been transferred and the Company has neither exposure to the risks inherent in those assets
nor entitlement to rewards from them.
3.18. Financial liabilities and equity instruments
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Financial liabilities are classified, at initial recognition, into one of the following categories:
• fair value through profit or loss;
• other financial liabilities measured at amortized cost; or
• derivatives designated as hedging instruments in an effective hedge.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition at fair value through profit or loss. Financial liabilities are classified as held for
trading if they are acquired for the purpose of selling in the near term, and those that are designated as such upon
initial recognition when doing so results in more relevant information being provided. This category includes derivative
financial instruments entered into by the Company that are not designated as hedging instruments in an effective
hedging relationship. Otherwise, they are considered as another financial liability. No financial liabilities are currently
classified as at fair value through profit or loss. Accounts payable and accrued liabilities, due to related party, earn-
out payable and long-term debt are currently classified as other liabilities.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
22
Financial liabilities at fair value through profit or loss are measured at fair value with all gains and losses included in
net income in the period in which they arise. Other financial liabilities are initially measured at fair value and
subsequently measured at amortized cost using the effective interest rate method.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue
costs and applicable income taxes.
3.19. Foreign currency transactions
Foreign currency transactions are translated into the respective companies’ functional currency using the exchange
rates prevailing at the dates of the transaction or valuation where items are re-measured. Foreign denominated
monetary assets and liabilities are translated to their respective companies’ functional currency equivalents using
foreign exchange rates prevailing at the financial position reporting date.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or
loss. All conversions from the respective companies’ functional currencies, to Canadian dollars, the Company’s
reporting currency, have been calculated utilizing the exchange rate as at August 31, 2017 or the average exchange
rate for the period, as applicable.
3.20. Prior year restatement and re-classifications
Restatement
During the year management identified transactions that were recognized in the current fiscal year that should have
been recorded in the prior year. As a result, the consolidated statement of financial loss and the consolidated statement
of financial position for the year ended August 31, 2016 were restated to reflect these transactions. The nature of the
transactions and their impact of their correction are described further as follows:
(i) During the fourth quarter of fiscal 2016, the Company incurred legal fees that had not been accrued
during the year ended August 31, 2016. These amounts were recognized when they were paid which
was during the three-month period ended November 30, 2016. This resulted in $77,667 being
recognized as a reduction of net income for the year ended August 31, 2016 with a corresponding
reduction in opening retained earnings on September 1, 2016.
(ii) Management recognized an amount of $146,868 owing to a shareholder through income, when it
should have been recognized as an increase in the amount owing to that shareholder in the prior
year. The impact of this adjustment resulted in increasing the amounts owing to related parties by
$146,868 as at August 31, 2016 with a corresponding reduction in opening retained earnings on
September 1, 2016.
A summary of the combined impact on the consolidated statement of loss and the consolidated statement of cashflows
for the period ending August 31, 2016, as well as on the consolidated statement of financial position as at August 31,
2016, arising from the above restatements are below. A third column was not added to the consolidated statement of
financial position as at August 31, 2017 because there was no impact on opening retained earnings to the prior period
balance.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
23
Consolidated statement of loss
For the twelve months ending August 31, 2016
As Reported Restated
Gross profit 1,120,474 - 1,120,474
Operating expenses 3,286,666 77,667 3,364,333
Loss before other income (2,166,192) (77,667) (2,243,859)
Other income 238,416 (146,868) 91,548
Net loss (1,927,776) (224,535) (2,152,311)
Net loss per share, basic and diluted: $(0.04) $(0.00) $(0.04)
Weighted average number of outstanding common
shares, basic and diluted: 53,458,671 53,458,671 53,458,671
Consolidated statement cash flows
For the twelve months ending August 31, 2016
As Reported Restated
Cash flows used in operating activities: (1,692,335) 146,868 (1,545,467)
Cash flows used in financing activities: 2,293,509 (146,868) 2,146,641
Cash flows used in investing activities: (656,200) - (656,200)
Decrease in cash resources (55,026) - (55,026)
Cash resources, beginning of the year 168,691 - 168,691
Cash resources (deficiency), end of the year 113,665 - 113,665
Restatement of prior
year errors
Restatement of prior
year errors
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
24
Consolidated statement of financial position
As at August 31, 2016
As Reported Restated
Assets
Current
Cash 113,665 - 113,665
Prepaids and deposits 91,946 - 91,946
Inventory 943,306 - 943,306
Receivables 40,694 - 40,694
Tax receivable 31,881 - 31,881
Due from related party 6,531 - 6,531
Total current assets 1,228,023 - 1,228,023
Long-term
Intangibles 892,342 - 892,342
Goodwill 1,990,716 - 1,990,716
Total long-term assets 2,883,058 - 2,883,058
Total assets 4,111,081 - 4,111,081
Liabilities
Current
Accounts payable and accrued liabilities 489,482 77,667 567,149
Earn-out payable 398,092 - 398,092
Due to related party 79,449 146,868 226,317
Total current liabilities 967,023 224,535 1,191,558
Long-term
Earn-out payable 1,232,935 - 1,232,935
Total long-term liabilities 1,232,935 1,232,935
Shareholders' equity
Share capital 1,929,133 - 1,929,133
Deferred share issuance 595,831 - 595,831
Warrant and option reserve 872,317 - 872,317
Contributed surplus 250,061 - 250,061
Accumulated other comprehensive income (163,672) - (163,672)
Retained earnings (deficit) (1,572,547) (224,535) (1,797,082)
Net assets 1,911,123 (224,535) 1,686,588
Total shareholders' equity & liabilities 4,111,081 - 4,111,081
Restatement of prior
year errors
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
25
Re-classification
The company has reclassified certain expenses to their appropriate function. The impact of the re-classifications is nil. The
increase in operating expenses is due to the restatement of legal fees, which were discussed.
For the twelve months ending August 31, 2016
As Reported Restated
Operating expenses
Selling expenses
Advertising and promotion 203,423 33,465 236,888
Consulting fees 511,403 - 511,403
Total selling expenses 714,826 33,465 748,291
Administration expenses
Share-based compensation 277,826 - 277,826
Salaries 375,674 (33,465) 342,209
Bank and credit card fees 176,151 - 176,151
Professional fees 308,195 64,207 372,402
General and administration 370,150 (20,512) 349,638
Investor relations 277,360 - 277,360
Listing expenses 570,350 24,124 594,474
Total administration expenses 2,355,706 34,354 2,390,060
Other expenses
Depreciation and amortization - 7,222 7,222
Amortization of intangibles - - -
Foreign exchange loss 216,134 2,626 218,760
Total other expenses 216,134 9,848 225,982
Impairment of goodwill and intangibles
Impairment of goodwill - - -
Impairment of intangibles - - -
Total impairment of goodwill and intangibles - - -
Total operating expenses 3,286,666 77,667 3,364,333
Re-calssification and
restatement
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
26
4. Business acquisitions
4.1. VaporSeller acquisition
On July 18, 2016, the Company reported it closed its purchase of certain assets of Haze Industries, Inc. (“Haze”)
representing its VaporSeller business. The Company acquired assets constituting an identifiable business thereby
acquiring control of the business. The purchase price was determined as one-times the trailing revenue of the business.
VaporSeller is an e-commerce platform for the retail distribution of vaporizers with a presence in the United States.
VaporSeller is a recognized name within the industry with a reputation for providing quality products and service for
competitive prices.
The Company acquired the VaporSeller assets from Haze in exchange for cash, shares and an earn-out. Financial
terms of the transaction are as follows:
• US$500,000 in cash upon closing of the transaction;
• 5,000,000 common shares of the Company issued to Haze in three installments and not subject to any lockup
period at an assumed value of US$0.10 per share. 1,700,000 common shares will be issued January 1, 2017,
1,700,000 common shares will be issued on July 1, 2017 and 1,600,000 common shares will be on January 1,
2018; and
• US$1,527,052 in earn-out cash payments over a maximum of 4 years, subject to certain performance criteria
including operational controls on revenue and margins.
In addition to the purchase price, Haze also consigned the Company an initial inventory amount of $153,901 at an
agreed value for each product. The agreed value of each product was reimbursed to Haze as the product was sold.
The Company did not recognize this inventory in its statement of financial position and recorded the value of the product
at the time it was sold as cost of goods.
On January 16, 2017 Namaste Technologies Inc. announced that it entered into a binding amending agreement with
Haze for the purchase of the remaining earn-out obligation as set forth in the definitive asset purchase agreement
announced on June 7, 2016. The initial undiscounted value of the earn-out was approximately US$1.5 million.
Namaste settled the remaining earn-out obligation by making an initial payment of US$285,000 and monthly payments
of US$8,000 for 12-months commencing February 2017. The purchase price allocation is adjusted for this as the
decision to terminate the earn-out arose as a result of information acquired after the acquisition that clarified conditions
existing at the acquisition date. Management decided to integrate the sales platform used by Vaporseller into their
own platforms to enhance sales opportunities that were not being optimized by the previous management of
Vaporseller. This integration resulted in reducing sales refunds that had historically been recognized by Vaporseller
thereby increasing net revenue earned by Vaporseller sales in the future.
Consideration paid for VaporSeller
August 31, 2017
Cash 656,200
Common shares 595,831
Earn-out 513,867
Net purchase price 1,765,898
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
27
The purchase price allocation attributed to the identifiable net assets acquired is as follows:
Goodwill reflects how the acquisition will impact the Company’s ability to generate future profits in excess of existing
profits due to the reputation of VaporSeller and credibility it has established in the US market for selling quality products.
The consideration paid mostly related mostly to combined synergies, related mainly to revenue growth. These benefits
are not recognized separately from goodwill as they do not meet the recognition criteria for identifiable intangible
assets.
The useful life of the domain is indefinite. The useful life of the customer list did not exceed three years.
Total acquisition costs related to the business combination amounted to $81,808. These expenses related mainly to
legal costs incurred which are included in the consolidated statement of loss.
4.2. URT1 acquisition
On October 18, 2016, (the “acquisition date”), the Company reported it closed its purchase of certain assets of URT1
Limited (”URT1) representing its Everyonedoesit business. The Company acquired assets constituting an identifiable
business thereby acquiring control of the business. The purchase price was determined as one-times the trailing
revenue of the business. URT1 is one of the top five domains in the world for the sale of vaporizers, pipes and
accessories. The company operates two websites, www.everyonedoesit.com and www.everyonedoesit.co.uk, and
retails through select third-party marketplaces. It is anticipated the acquisition of the URT1 assets will generate
synergies for the Company in the form of reduced operating costs associated with employees and consultants,
software and information technology, and rent.
Pursuant to the terms of the Definitive Asset Purchase Agreement announced on September 15, 2016, Namaste
acquired all the website domains, the customer list of over 40,000 individuals, the EDIT Collection of smoking
accessories, direct relationships with over 190 vendors, intellectual property and related technologies. The purchase
price was calculated as one-times the 12-month trailing gross revenue of URT1, subject to adjustments for inventory,
wind down costs, and assumed liabilities. The assumed liabilities include a secured note of $515,499 for 4 years at
an interest rate of 4% payable in equal annual installments. Upon closing of the transaction, the Company has provided
an initial 80% of the purchase price to URT1 of the estimated cash wind down costs and 13,771,933 common shares.
The Company made an adjustment to the purchase price, subject to the actual wind down costs realized by URT1.
The additional consideration to URT1 was provided in common shares of the Company at a 25% discount to the 10-
day volume weighted average trading price of the common shares of the Company on the Canadian Securities
Exchange.
Purchase price allocation VaporSeller
August 31, 2017
Customer list 557,456
Domain 314,886
Goodwill 893,556
Net purchase price 1,765,898
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
28
The preliminary purchase price allocation attributed to the identifiable net assets acquired is as follows:
Included in the share consideration is an amount of $1,239,474 for deferred shares that were subsequently
measured at $543,462 upon issuance of the shares. The difference of $696,012 was included in other income.
Goodwill reflects how the acquisition will impact the Company’s ability to generate future profits in excess of existing
profits due to the reputation of URT1 and credibility it has established in the US market for selling quality products.
The consideration paid mostly relates to combined synergies, related mainly to revenue growth. These benefits are
not recognized separately from goodwill as they do not meet the recognition criteria for identifiable intangible assets.
The useful life of the brand name is indefinite. The useful life of the customer list does not exceed three years.
Total acquisition costs related to the business combination amounted to $138,223. These expenses related mainly to
legal costs incurred which are included in the consolidated statement of loss.
4.3. Australian Vaporizers Pty Ltd. acquisition
On March 16, 2017 (the acquisition date was March 15, 2017), the Company announced that it completed its
acquisition of Australian Vaporizers PTY Ltd. (“Australian Vaporizers”) Post consolidation, Namaste controlled
approximately 90% of the vaporizer online retail market in Australia. During its the last fiscal year ended June 30,
2016, Australian Vaporizers reported to have operated with a 45% gross margin and an EBITDA margin of 24%.
Pursuant to the terms of the definitive agreement announced on February 24, 2017, Namaste acquired all of the issued
and outstanding shares of Australian Vaporizers. The purchase price was calculated as 1.0x 12-month trailing sales
of AUD$4.9 million, plus the value of inventory acquired within six (6) months preceding the closing, and 50% of the
value of the inventory acquired prior to six (6) months preceding the closing, less all liabilities and plus trade debt and
Consideration paid for URT1
August 31, 2017
Cash 895,207
Common shares 6,197,370
Net purchase price 7,092,576
Purchase price allocation URT1
August 31, 2017
Customer list 1,854,607
Brand name 194,763
Goodwill 5,372,160
Net assets acquired 188,272
Pension loan liability (517,225)
Net purchase price 7,092,576
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
29
cash, and adjusted for any related deferred tax effects
Upon closing of the transaction, the Company provided an initial 75% of the purchase price in cash, being
AUD$4,256,197 and 10% of the purchase price was satisfied with 1,988,182 common shares in the capital of the
Company, at an agreed price based on the 20-day volume weighted average trading price upon signing of the definitive
agreement.
The purchase price allocation attributed to the identifiable net assets acquired is as follows:
Goodwill reflects how the acquisition will impact the Company’s ability to generate future profits in excess of existing
profits due to the reputation of Australian Vaporizers and credibility it has established in the Australian market for
selling quality products. The consideration paid mostly relates to combined synergies, related mainly to revenue
growth. These benefits are not recognized separately from goodwill as they do not meet the recognition criteria for
identifiable intangible assets.
The useful life of the brand name is indefinite. The useful life of the customer list does not exceed three years.
The remaining 15% of the consideration will be satisfied through an earn-out based on sales and integration
milestones. Since the closing of the acquisition the milestone has been paid and the first two of four earn-out payments
have been made.
Acquisition costs related to the business combination amounted to $78,817. These expenses related mainly to legal
costs incurred which are included in the consolidated statement of loss.
4.4. CannMart Inc. acquisition
Consideration paid for Australian Vaporizers
August 31, 2017
Cash net of assumed liabilities 4,347,861
Common shares 576,573
Milestone 283,746
Earn-out 564,613
Net purchase price 5,772,793
Purchase price allocation Australian Vaporizers
August 31, 2017
Customer list 2,814,733
Brand Name 331,313
Net assets acquired 743,327
Deferred tax liability (944,000)
Goodwill 2,827,420
Net purchase price 5,772,793
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
30
On April 28, 2017, (“the acquisition date”) the Company completed its acquisition of all of the issued and outstanding
shares in the capital of Cannmart Inc. (“CannMart”), a late stage applicant under the Access to Cannabis for Medical
Purposes Regulations. The acquisition of CannMart represents a strategic decision for Namaste to leverage its
strength in ecommerce and logistics in becoming a leader in retail distribution of medical cannabis in Canada. The
rationale for the acquisition includes but is not limited to:
• Expansion of Namaste's product offerings, with the ability to sell both vaporizers and consumables from one
location. Namaste aims to be a one-stop-shop for medical cannabis consumers in Canada.
• Namaste's ability to market and brand medical cannabis products to its 50,000+ dataset of Canadian consumers.
• Namaste launching a Canadian warehouse in the CannMart facility in order to process both vaporizer and medical
cannabis shipments, medical cannabis packaging, filling for pod-based vaporizers, and distribution for other
brands of medical cannabis products.
• Namaste’s ability to provide same day delivery within the Greater Toronto Area and next day delivery within
Canada.
In consideration for its acquisition of CannMart, Namaste made a one-time payment of $50,000 and issued 8,668,515
common shares of the Company to the vendors. An additional 3,467,406 common shares will be issued to the vendors
upon satisfaction of certain milestones outlined in the definitive agreement.
This acquisition was determined not to meet the definition of a business under the principles of IFRS 3 Business
Combinations as CannMart was not an operational business, it’s only material asset consisted of its application to
distribute medical and recreational marijuana. Therefore, this acquisition was not accounted for as a business
combination but rather as an acquisition of an intangible asset.
The preliminary purchase price allocation attributed to the identifiable net assets acquired is as follows:
The consideration paid mostly relates to the expected revenues that will be generated with CannMart's sales license
and combined synergies, related mainly to traffic generated on the Canadian website.
Consideration paid for CannMart
August 31, 2017
Cash net of assumed liabilities 50,000
Common shares 2,500,000
Earn-out 1,000,000
Net purchase price 3,550,000
Purchase price allocation CannMart
August 31, 2017
License 3,516,310
Net Asset acquired 33,690
Net purchase price 3,550,000
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
31
The useful life of the license is indefinite.
5. Intangible assets and goodwill
On July 15, 2016, the Company acquired certain assets of Haze representing its VaporSeller business (Note 4). On October
18, 2016, the Company acquired certain assets of URT1 Limited ("URT1") (Note 4) representing its Everyonedesoit (“EDIT”)
business. On March 16, 2017, the Company acquired the shares in Australian Vaporizers (Note 4). On May 3, 2017 the
Company acquired the shares of CannMart (Note 4). Pursuant to the transactions, the Company acquired intangible assets
with estimated values set forth as follows:
Intangibles
License Customer list Domains Brand names Total
Cost:
Balance as at August 31, 2015 -
as reported - - - - -
Additions from business
acquisitions - 577,456 314,886 - 892,342
Balance as at August 31, 2016 -
restated - 577,456 314,886 - 892,342
Accumulated amortization:
Balance as at August 31, 2015 - - - - -
Amortization - - - - -
Balance August 31, 2016 -
restated - - - - -
Net book value August 31, 2016 -
restated - 577,456 314,886 - 892,342
Cost:
Balance as at August 31, 2016 -
restated - 577,456 314,886 - 892,342
Additions from business
acquisitions 3,516,310 4,669,340 - 526,076 8,711,726
Impairment (2,406,191) (300,864) (194,763) (2,901,818)
Translation adjustment - (30,488) (14,022) - (44,510)
Balance as at August 31, 2017 3,516,310 2,810,117 - 331,313 6,657,740
Accumulated amortization:
Balance as at August 31, 2016 -
restated - - - - -
Amortization - (430,029) - - (430,029)
Balance August 31, 2017 - (430,029) - - (430,029)
Net book value August 31, 2017 3,516,310 2,380,088 - 331,313 6,227,711
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
32
The carrying amount of the customer list, domains and brand names that were acquired as part of the acquisitions of
VaporSeller and URT1 have been reduced to it’s recoverable amount of nil through the recognition of an impairment loss.
The impairment loss was calculated as part of the Company’s annual goodwill impairment test. This loss is included in the
consolidated statement of loss. The customer list related to URT1 acquisition was subsequently integrated as part of the
larger business operations and therefore can no longer be specifically identified. As such, management felt it was prudent
to impair this asset and assess the contribution from these customers as part of a larger CGU at the goodwill level.
With respect to the intangible assets that arose in the prior year, Management has since integrated the customers from the
Vaporseller sites into its greater operations not only to increase traffic though its overall web-based platform but also to
reduce the amount of refunds that had been historically recognized by the management of Vaporseller which had not been
anticipated, an impairment was recognized related to these assets as well as to the goodwill, discussed further below.
These impairment losses were included in the consolidated statement of loss.
Goodwill allocation
Goodwill acquired in a business combination is allocated to the cash-generating units (CGU), which are expected to benefit
from that business combination. The Company’s goodwill was generated through the acquisition of VaporSeller, URT1
(which is also referred to as EDIT) and Australian Vaporizers. The Company operates the acquisition of VaporSeller and
EDIT with it’s normal operations and these are considered to be a single CGU, known as Namaste-other. The Company
monitors its acquisition of Australian Vaporizers and CannMart as separate CGU from the aforementioned businesses.
Goodwill impairment testing
The Company tests indefinite-lived assets, including goodwill, for impairment on an annual basis or more frequently if there
are indicators that any of these assets may be impaired. The annual impairment test is performed as at August 31, 2017,
after taking into consideration certain material events that occurred after the period, which would have an impact on future
cashflow. The group’s impairment test compares the carrying value of the CGU with it’s recoverable amount. Under IAS 36
Impairment of Assets, an impairment is deemed to have occurred where the recoverable amount of a CGU is less than its
carrying value. The recoverable amount of a CGU is generally determined by its value in use, which is derived from
discounted cash flow calculations. They key inputs to the calculations are described below.
Forecast cash flows
Cash inflows from the company’s e-commerce websites are based on estimates of future website traffic, rate of converting
website traffic into paying customers, and average revenue per order.
Key assumptions
Traffic and growth rates
The growth of website traffic is based on historical growth rates. Growth rates for Namaste Vapes and EDIT are expected
to be 9% and for Australian Vaporizers 2% and CannMart 3%.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
33
Conversion rates
The conversion rates of website traffic to customer orders is based on the Company’s historical results and management’s
internal projections of growth rates over the next 5 years. For Namaste – other Namaste Vapes’s projected conversion rate
is 3.5% while EDIT’s is 2.62%, for Australian Vaporizers it is 4.33% and for CannMart it is 5%.
Discount rates
The discount rate used in the impairment analysis of for all CGU’s except CannMart was approximately 13%, which is the
Company’s weighted average cost of capital. The discount rate used for CannMart was 25% which management felt
represented an accurate weighted average cost of capital for this CGU given the risk associated with this CGU.
Basket price
The average basket price is management’s expectation of average revenue per customer based on historical results when
applicable. For Namaste-other the average basket price for Namaste Vapes is $174 whereas for EDIT it is $58, for
Australian Vaporizers the average basket price is $147 and CannMart it is $161.
Assessment
Goodwill acquired from business combinations as well as it’s subsequent impairment are as follows:
On January 6, 2017, Namaste purchased the remaining Haze earn-out obligation as discussed above. The earn-out
obligation was a part of the consideration used in the acquisition of Haze. Goodwill arose because the consideration paid
was greater than the value of the assets received. Since a portion of the earn-out obligation was no longer required, an
equivalent amount of goodwill was also reduced.
Impairment
The recoverable amount for the Namaste-other CGU is less than the carrying value, which has resulted in an impairment
of $6,285,610, and this is recognized in other expenses in the consolidated statement of loss. The goodwill impaired relates
to the acquisitions of VaporSeller and EDIT.
Goodwill
Balance as at August 31, 2015 -
Addition 1,990,716
Balance as at August 31, 2016 1,990,716
Addition 8,199,580
Haze earn-out adjustment (987,988)
Impairment (6,285,610)
Translation adjustment (89,278)
Balance as at August 31, 2017 2,827,420
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
34
The remaining goodwill balance of $2,827,420, is allocated to Australian Vaporizers. The recoverable amount of the
Australian Vaporizers CGU exceeded it’s carrying value.
The goodwill recognized on the acquisition of URT1 was impaired as management felt the amount measured in accordance
with IFRS 3 requirements for the consideration paid was overstated and could not be supported as the Company’s share
price on the date of issuance of the shares was three times higher than the price agreed to by the parties. Furthermore, the
business strategy of the Company is changing to focus more on markets outside the US.
As explained above, Management has integrated the customers from the Vaporseller sites into its greater operations not
only to increase traffic though its overall web-based platform but also to reduce the amount of refunds that had been
historically recognized by the management of Vaporseller which had not been anticipated. This has resulted in recognizing
the goodwill that had been recorded on the acquisition of Vaporseller as impaired through income this year.
6. Receivables
The Company’s products are sold on-line whereby payment is received before goods are shipped. Receivables are amounts
held on rolling reserve in merchant accounts and market places Amazon and eBay. At the year ending August 31, 2017
receivables in merchant accounts were $157,243 (2016 - $40,694). Amounts to be received from Amazon and eBay were
$112,360 at August 31, 2017.
7. Prepaids, deposits and other
Prepaids primarily relate to consulting fees paid and licensing fees for systems. Deposits are for inventory with suppliers
that do not offer credit terms. Other receivables are from revenue earned through online sales, but have not yet been
received.
Accounts receivable
August 31, 2017 August 31,
2016 - Restated
1 - 30 days 174,072 40,694
30 - 60 days 71,693 -
60 - 90 days 2,965 -
> 90 days 54,500 -
303,230 40,694
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
35
8. Inventory
All inventory consists of finished goods. The cost of inventory including duties and shipping to and between warehouses
recognized as an expense and included in cost of goods sold for the twelve months ending August 31, 2017 is $9,603,286
(August 31, 2016 - $2,368,428).
9. Accounts payable and accrued liabilities
Prepaids, deposits and other
August 31,
2017
August 31,
2016 - Restated
Pre-paid 240,952 47,178
Deposits 362,897 27,297
Other 64,063 17,471
Total 667,912 91,946
Inventory by location
Region August 31, 2017 August 31,
2016 - Restated
United States 1,109,945 493,287
UK 1,033,543 324,926
Brazil 170,078 69,961
Australia 690,000 55,132
Mexico 33,610 -
China 59,719 -
Israel 2,891 -
Inventory write-down (601,902) -
Total 2,497,884 943,306
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
36
10. Related parties
Amounts due to and due from related parties are non-interest bearing, unsecured, and payable within the upcoming fiscal
year. Related parties include Sean Dollinger, Dollinger Enterprises Holding which is controlled by Sean Dollinger and
Wireless Coverage Solutions which is controlled by Sean Dollinger. Kory Zelickson, a founding shareholder, is paid a salary
by the Company. The Company uses the credit card and bank accounts of Jason Zylbering in the Brazilian operations of
the Company. Due to related parties includes Dollinger Enterprises Ltd which is controlled by Sean Dollinger. During the
year, the Company hired Northcote Advisors to perform corporate advisory and investor relations services. Cliff Starke, who
is a Director of the Company, is also the President and CEO of Northcote Advisors. As at August 31, 2017, there was an
amount of $190,800, in prepaid and deposits.
Key management includes the Company’s directors, senior officers and any employees with authority and responsibility for
planning, directing and controlling the activities of an entity, directly or indirectly.
Accounts payable & accrued liabilities
August 31, 2017August 31,
2016 - Restated
Trade payables 650,559 457,241
Payroll accrual 33,738 49,791
Credit card payable 78,597 56,206
Other accounts payable & accruals 14,508 3,910
Total 777,402 567,148
Related party transactions
August 31, 2017August 31, 2016 -
Restated
Due from shareholders 64,730 -
Due from other related parties 16,882 6,531
Total due from related parties 81,612 6,531
Due to shareholders - 186,945
Due to other related parties 552 39,372
Total due to related parties 552 226,317
Total due from (to) related parties 81,060 (219,786)
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
37
Compensation key executives
August 31, 2017 August 31,
2016 - Restated
Salaries, commissions, bonuses, consulting fees 397,351 21,721
Share-based compensation 1,028,821 25,650
Total 1,426,172 47,371
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
38
11. Share capital
11.1. Authorized share capital
The Company has authorized for issuance an unlimited number of common shares. At August 31, 2017, the Company
had 184,759,916 common shares issued and outstanding.
11.2. Issuance of shares
During the second quarter ending February 29, 2016, the Company secured $1,213,975 of equity capital (before
deduction for transaction financing expenses) pursuant to the completion of its three-cornered amalgamation with
Next Gen Metals Inc. (“Next Gen”)
Pursuant to the terms of the Transaction between the Company and Next Gen, Next Gen issued 3.6 million
subscription receipts at a price of $0.10 per subscription receipt for a total of gross proceeds of $360,000. Each
subscription receipt automatically converted, for no additional consideration, into 3.6 million units of the Company
upon the closing of the transaction with Next Gen, which occurred on February 26, 2016. Each unit consisted of one
common share of the Company and one-half of one common share purchase warrant. Each full warrant entitles the
holder to purchase one common share at a price of $0.15 per common share for a period of two years from closing of
the private placements. The weighted average fair value of each full warrant is estimated at $0.02 using the Black
Scholes Option Pricing Model as disclosed further in 11.3.
In addition to the unit offering, Next Gen also completed a concurrent private-placement offering by issuing 11,386,330
subscription receipts at a price of $0.075 cents per subscription receipt for a total of $853,975. Each of these
subscription receipts automatically converted, for no additional consideration, into 11,386,330 common shares of the
Company, upon the closing of the Transaction with Next Gen, which occurred on February 26, 2016.
In the fourth quarter ending August 31, 2016, the Company closed a non-brokered private placement by issuing
8,087,454 units of the Company for gross proceeds of $970,496. Each Unit consists of one common share of the
Company and one common share purchase warrant at an exercise price of $0.18 for a period of 2-years. In addition
to the initial closing, the Company issued an additional 250,000 units for gross proceeds of $30,000 on August 5, 2016.
The weighted average fair value of each full warrant is estimated at $0.03 using the Black Scholes Model as described
in 11.3.
Capitalization
Number of shares Gross proceeds C$
Balance August 31, 2015 - -$
Issued during year ending August 31, 2016 67,852,297 2,199,402$
Balance year end August 31, 2016 67,852,297 2,199,402$
Issued during year ending August 31, 2017 117,863,619 16,555,638$
Balance year end August 31, 2017 185,715,916 18,755,040$
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
39
In September 2016, the Company issued an unsecured note to an arm's length lender for an aggregate principal
amount of $400,000 convertible at the option of the holder into common shares of the Company at a conversion price
of $0.15 per common share. The term of the note was for an initial 90 days with an option to extend for up to 2 years.
The Company issued the lender an initial 100,000 common shares of the Company. On October 14, 2016, the full
note was converted. 2,666,667 shares were issued, in addition to the initial 100,000. The Company also issued 37,777
common shares as interest payment. In total 2,804,443 shares were issued to the bridge loan lender.
On September 12, 2016, the Company closed a non-brokered private placement by issuing 825,000 units at a price
of $0.12 per unit for total gross proceeds of $99,000. Each Unit consists of one common share of the Company and
one common share purchase warrant at an exercise price of $0.18 for a period of 24 months. The weighted average
fair value of each full warrant is estimated at $0.06 using the Black Scholes Option Pricing Model as disclosed further
in 11.3.
On October 17, 2016, the Company closed a non-brokered private placement by issuing approximately 25,000,000
units at a price of $0.12 per unit for total gross proceeds of $3,000,000. Each unit was comprised of one common
share of the Company and one-half of one common share purchase warrant, with each full warrant being exercisable
for one common share at an exercise price of $0.20 for a period of 24 months. The weighted average fair value of
each full warrant is estimated at $0.19 using the Black Scholes Option Pricing Model as disclosed further in 11.3. In
conjunction with the private placement, the Company issued to the underwriter 1,318,062 broker warrants with an
exercise price of $0.12 for a period of 24 months. Each broker warrant consists of one share and one half of one
common share purchase warrant with an exercise price of $0.20. The value of share issuance costs in relation to the
issue of the broker warrants is $405,807.
On March 9, 2017, the Company completed a private placement by issuing 45,352,000 units at a price of $0.25 per
unit for total gross proceeds of $11,338,000. Each Unit consisted of one common share of the Company and one-half
of one common share purchase warrant, with each full warrant being exercisable for one common share at an exercise
price of $0.35 for a period of 24 months. If the closing price of the Company’s shares on the Canadian Securities
Exchange is greater than $0.70 per Share for a period of 10 consecutive trading days at any time after the closing of
the Offering, the Company may accelerate the expiry date of the Warrants by giving notice to the holders thereof and
in such case the Warrants will expire on the 30th day after the date on which such notice is given by the Company.
The weighted average fair value of each full warrant is estimated at $0.19 using the Black Scholes Option Pricing
Model as disclosed further in 11.3. In conjunction with the private placement the Company issued 3,174,640
compensation options to the placement brokers. Each compensation option has an exercise price of $0.25 for a period
of 24 months. Each compensation option consists of one share and one-half of a common share purchase warrant
with an exercise price of $0.35. The value of share issuance costs in relation to the issue of the compensation options
is $652,359. The Company also issued 600,000 units to one of its advisers comprised of one share and one half of
one purchase warrant with an exercise price of $0.35 in exchange for his services. The value of share issuance costs
in relation to the issuance of these units was $150,000.
During the year, the Company issued 10,181,362 common shares on exercise of various warrants and options.
11.3. Share purchase warrants
37,998,921 warrants were granted during the period under review. The average exercise price is $0.29. 7,681,363
warrants were exercised with an average exercise price of $0.18. The weighted average fair value of each warrant
granted is $0.24 and the fair value of each warrant exercised is $0.18 using the Black-Scholes Option Pricing Model.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
40
The following is a summary of the changes in the Company’s share purchase warrants for the twelve months ending
August 31, 2017.
The assumptions used for the calculation of the fair value of the warrants are as follows:
Volatility is calculated by using the historical volatility of other companies that the Company considers comparable that
have trading and volatility history prior to the Company becoming public. The expected life in years represents the
time that the options granted are expected to be outstanding. The risk-free rate is based on zero coupon Canada
government bonds with a remaining term equal to the expected life of the options.
11.4. Stock options
The Company has established a stock option plan for directors, employees, and consultants. Under the Company's
stock option plan, the exercise price of each option is determined by the Board, subject to the Discounted Market Price
policies of the CSE. The aggregate number of common shares issuable pursuant to options granted under the plan is
18,571,592 common shares, being 10% of the Company's issued common shares under the plan. The board of
directors has the exclusive power over the granting of options and their vesting and cancellation provisions.
The following is a summary of the changes in the Company’s stock option plan for the twelve months ending August
31, 2017:
Share purchase warrants
Number of
warrants
Weighted
average
exercise price
Number of
warrants
Weighted
average
exercise price
Outstanding beginning of period 11,315,069 0.17$ - -$
Granted 37,957,254 0.29$ 11,315,069 0.17$
Exercised (7,681,363) 0.18$ - -$
Forfeited (96,666) 0.54$ - -$
Outstanding end of period 41,494,294 0.28$ 11,315,069 0.17$
August 31, 2016 - RestatedAugust 31, 2017
Black-Scholes assumptions for warrants
August 31, 2017
August 31, 2016
- Restated
Risk free rate 0.55% - 0.82% 0.50% - 1.10%
Expected life 2 years 2 years
Expected volatility 125% 125%
Expected dividend per share Nil Nil
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
41
13,279,640 options with an average exercise price of $0.29 were granted to employees and consultants during the
year ending August 31, 2017 and the weighted average fair value of options granted is $0.24 using the Black-Scholes
Option Pricing Model. The Company recognized share-based compensation expense of $1,548, during the period for
the value of stock options earned. The weighted average fair value of each option that vested during the period under
review is $0.24. The Company also recognized a non-cash salary expense of $599,188 during the period for the value
of shares earned.
The following table summarizes information regarding stock options outstanding by exercise price as at August 31,
2017:
Options outstanding
Number of
options
Weighted
average
exercise price
Number of
options
Weighted average
exercise price
Outstanding, beginning of period 5,300,000 0.16$ 5,300,000 0.16$
Granted 13,279,640 0.29$ - -$
Exercised (2,500,000) 0.16$ - -$
Forfeited - -
Outstanding, end of period 16,079,640 0.27$ 5,300,000 0.16$
August 31, 2016 - RestatedAugust 31, 2017
Options outstanding by exercise price
Number of
options
outstanding
Weighted-
average
remaining
contractual life
(years)
Weighted
average
exercise price
$0.01 - $0.19 2,500,000 3.53 0.15$
$0.20 - $0.39 13,579,640 3.10 0.31$
Total options outstanding 16,079,640 3.17 0.29$
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
42
The following table summarizes information regarding stock options outstanding and exercisable as at August 31,
2017:
The assumptions used for the calculation of the fair value of the options are as follows:
Volatility is calculated by using the historical volatility of other companies that the Company considers comparable that
have trading and volatility history prior to the Company becoming public. The expected life in years represents the
time that the options granted are expected to be outstanding. The risk-free rate is based on zero coupon Canada
government bonds with a remaining term equal to the expected life of the options.
12. Capital management
Options exercisable
Number of
options
outstanding
Weighted-
average
remaining
contractual
life (years)
Weighted
average
exercise price
$0.01 - $0.19 2,500,000 3.53 0.15$
$0.20 - $0.39 5,904,640 2.75 0.28$
Total options exercisable 8,404,640 2.98 0.24$
Black-Scholes assumptions for options
August 31, 2017
August 31,
2016 -
Restated
Risk free rate 0.72% - 1.13% 0.66% - 0.77%
Expected life 5 years 5 years
Expected volatility 125% 125%
Expected dividend per share Nil Nil
Capital structure
August 31, 2017August 31,
2016 - Restated
Shareholders' equity 11,527,394 1,929,133
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
43
The Company’s objective for managing capital are: (i) to maintain a flexible capital structure which optimizes the cost/risk
equation; and (ii) to manage capital in a manner which maximizes the interests of shareholders. The Company considers
capital as the total equity disclosed on the statement of financial position.
Management does not establish quantitative return on capital criteria, however management reviews its capital
management approach on an on-going basis and believes that this approach, given the relative size of the Company, is
appropriate. As at August 31, 2017, the Company is not subject to any externally imposed capital requirements.
13. Loans
The loan from NNKS Pension Trust to URT1 acquired by the Company is repaid in five installments. The first installment of
US$90,919.92 was paid in October 2016. Four equal installments of US$75,766.60 are payable on each of the first, second,
third and fourth anniversaries of the date of the agreement. The next installment is due on October 31, 2017. The loan is
securitized and carries an annual interest rate of 4%. Security is a floating charge over the inventory held by the borrower
in the United Kingdom.
14. Financial instruments
14.1. Fair value of financial instruments
Financial instruments that are measured at fair value use inputs which are classified within a hierarchy that prioritizes
their significance. The three levels of the fair value hierarchy are:
• Level One includes quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level Two includes inputs that are observable other than quoted prices included in Level One; and
• Level Three includes inputs that are not based on observable market data.
The Company has designated its cash as FVTPL. Its accounts receivable is classified as loans and receivables. Its
accounts payable and accrued liabilities, due to related party, earn-out and loans payable have been designated as
other financial liabilities. The fair value of all financial instruments is determined using level three of the hierarchy.
As at August 31, 2017, both the carrying and fair value amounts of all the Company's financial instruments are
approximately equivalent due to their short-term nature. The carrying and fair value amounts of the Company’s loans
payable are equivalent due to the nature of the loans.
Loans
August 31, 2017 August 31,
2016 - Restated
Long-term loans 284,943 -
Current portion of long-term loans 94,981 -
Carrying value August 31,2017 379,924 -
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
44
14.2. A summary of the Company’s risk exposures as it relates to financial instruments are reflected below:
Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's
credit risk is primarily attributable to cash and accounts receivable. The Company has no significant concentration of
credit risk arising from operations. Cash consists of cash on hand deposited with reputable financial institutions which
is closely monitored by management. Management believes credit risk with respect to financial instruments included
in cash and due from related parties is minimal. The Company’s maximum exposure to credit risk as at August 31,
2017 is the carrying value of cash held in merchant accounts and accounts receivable.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying its financial obligations. The Company
manages its liquidity risk by forecasting it operations and anticipating its operating and investing activities. All amounts
in current liabilities are due within one year.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in
market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk.
Interest rate risk
Interest rate risk consists of a) the extent that payments made or received on the Company’s monetary assets and
liabilities are affected by changes in the prevailing market interest rates, and b) to the extent that changes in prevailing
market rates differ from the interest rate in the Company’s monetary assets and liabilities. The Company is not exposed
to interest rate price risk.
Financial liabilities - August 31, 2017
Carrying value 1 - 30 days 30 - 60 days 60 - 90 days > 90 days
Accounts payable and accrued liabilities 777,402 530,047 205,432 38,745 3,178
Long-term loans 379,924 - 94,981 - 284,943
Earn-out 489,230 - - - 489,230
1,646,556 530,047 300,413 38,745 777,351
Financial liabilities - August 31, 2016 - Restated
Carrying value 1 - 30 days 30 - 60 days 60 - 90 days > 90 days
Accounts payable and accrued liabilities 567,148 231,343 243,121 20,266 72,418
Earn-out 1,631,027 - - - 1,631,027
2,198,175 231,343 243,121 20,266 1,703,445
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
45
Foreign currency risk
The Company buys inventory and sells products in several countries. The Company is exposed to foreign currency
risk from fluctuations in foreign exchange rates and the degree of volatility in these rates due to the timing of their
accounts payable balances. This risk is mitigated by timely payment of creditors and monitoring of foreign exchange
fluctuations by management. The Company does not use derivative instruments to reduce its exposure to foreign
currency risk.
Transactions in foreign currencies are translated to the respective functional currencies at the spot rate on the dates
of the transactions. At each statement of financial position date, monetary assets and liabilities are translated using
the period end foreign exchange rate. Non-monetary assets and liabilities are translated using the historical rate on
the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated using the
historical rate on the date that the fair value was determined. All gains and losses on translation of these foreign
currency transactions are included in income.
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
46
Below is a list of all financial instruments in their base currency:
A +/- 10 change in basis points in the US exchange rate would impact net income by approximately $59,000 (2016 -
$201,000). The same change in the BRL exchange rate would impact net income by approximately $47,000 (2016 –
$13,000). A change in all other currencies exchange rate would not be significant.
August 31, 2017August 31, 2016 -
Restated
Cash - USD 200,742 45,710
Cash - GBP 37,169 2,444
Cash - EUR 12,107 5,321
Cash - BRL 231,725 65,148
Cash - MXN 7,541 -
Cash - SEK - 4,179
Cash - NZD - 660
Cash - AUD 194,460 764
Receivables - USD 120,854 39,793
Receivables - EUR 50,782 -
Receivables - GBP 42,587 -
Payables - USD 155,793 157,470
Payables - GBP 66,297 10,607
Payables - AUD 183,458 -
Payables - EUR 24,450 -
Payables - BRL 12,234 -
Loan payable - USD 303,066 -
Credit Card Payable - USD 62,697 42,827
Earn Out Payable - USD 40,000 1,242,783
Due from Related Parties - USD 230,914 246,725
Due to Related Parties - BRL (983,634) (275,174)
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
47
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is not
exposed to significant other price risk.
15. Expenses by Nature
August 31, 2017August 31, 2016 -
Restated
Cost of sales
Opening inventory 943,306 375,903
Purchases 9,455,581 2,260,244
Delivery costs 1,702,283 675,587
Ending inventory (2,497,884) (943,306)
Total cost of sales 9,603,286 2,368,428
Operating Expenses
Selling expenses
Advertising and promotion 966,172 236,888
Consulting fees 2,153,113 511,403
Total selling expenses 3,119,285 748,291
Administration expenses
Share-based compensation 2,147,691 277,826
Salaries 1,059,128 342,209
Bank and credit card fees 714,821 176,151
Professional fees 1,360,836 372,402
General and administration 1,317,491 356,860
Investor relations 75,902 277,360
Listing expenses 24,399 594,474
Total administration expenses 6,687,474 2,390,060
Other expenses
Amortization of intangibles 430,029 -
Foreign exchange loss 70,517 218,760
Total other expenses 513,340 225,982
Impairment of goodwill and intangibles
Impairment of goodwill 6,285,610 -
Impairment of intangibles 2,901,818 -
Total impairment of goodwill and intangibles 9,187,428 -
Total operating expenses 19,507,527 3,364,333
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
48
16. Income taxes
The relationship between the expected tax recovery based on the statutory tax rate and the reported tax recovery in the
statements of comprehensive loss can be reconciled as follows:
The statutory tax rate used in the 2016 effective tax rate reconciliation was the US statutory rate because the Company’s
business operations were substantially carried on in the United States at the time. With the acquisitions completed during
the current year, the Company now carries on business in several countries and accordingly, the statutory tax rate used in
the 2017 effective tax rate reconciliation is that of the Canadian parent entity which reflects the Canadian federal tax rate
of 15% plus the provincial tax rate of 11%.
Tax (recovery)
August 31, 2017August 31, 2016 -
Restated
Accounting loss before income tax (17,357,600) (2,152,311)
Expected income tax recovery at the statutory
rate of 26% (2016 – 37.63%) (4,512,976) (809,915)
Adjustments for the following items:
Share-based compensation 558,400 104,546
Tax impact of temporary differences for which no
deferred tax asset was recorded
4,808,403 652,310
Effect of tax rates of foreign jurisdictions (782,327) 67,854
Permanent differences and other (71,835) (14,795)
Tax (recovery) (336) -
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
49
Significant components of the deferred income tax assets and (liabilities) of the Corporation are as follows:
Deferred income tax continued - year ending August 31, 2017
Opening
balance
Recognized in net
income
Recognized in
goodwill Closing balance
Deferred income tax assets (liabilities):
Intangible assets (3,872) 129,022 (944,793) (819,643)
Property & equipment (3,945) - - (3,945)
Accounting provisions & accruals - 35,157 30,746 65,903
Total deferred income tax asset (liabilities (7,817) 164,179 (914,047) (757,685)
Losses carried forward 7,817 - - 7,817
Deferred tax assets (liabilities) - 164,179 (914,047) (749,868)
Deferred income tax continued - August 31, 2016 - restated
Opening
balance
Recognized in net
income
Recognized in
goodwill Closing balance
Deferred income tax assets (liabilities):
Intangible assets - - (3,872) (3,872)
Property & equipment - - (3,945) (3,945)
Total deferred income tax asset (liabilities) - - (7,817) (7,817)
Losses carried forward - - 7,817 7,817
Deferred tax assets (liabilities) - - - -
Temporary differences for which no deferred tax assets were recorded - August 31, 2017
United States Canada
Property & equipment - 105,955
Intangible property 1,556,376 7,678,309
Share issuance costs - 2,120,697
Resource-related deductions 497,999 1,632,160
Non-capital losses 4,414,732 6,758,535
6,469,107 18,295,656
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
50
As at August 31, 2017 the Company has the following non-capital losses for which no deferred tax asset was recorded.
These carry forward balances expire as follows:
The temporary differences relating to the share issuance costs which the Company has not recognized will be deductible
until the year 2021.
The temporary differences relating to the resource-related deductions which the Company has not recognized have no
expiry date.
As at August 31, 2017, the Company has investment tax credits in the amount of $70,193 (2016 - $70,193) which were not
recorded. These credits can be used against Canadian federal income taxes payable and expire in the years 2032 and
2033.
17. Commitments and contingencies
The Company has commitments under operating leases for office space and a commitment to the repayment of a loan in
relation to the acquisition of URT1. The estimated amounts are as follows:
Non-capital losses for which no deferred tax asset was recorded
United States Canada
2037 3,851,254 2,752,418
2036 563,478 709,976
2035 308,921
2034 595,862
2033 415,559
2032 689,782
2031 448,340
2030 174,093
2029 70,240
2028 165,424
2027 243,922
2026 183,998
4,414,732 6,758,535
Commitments
Year ending August 31 Amount due
2018 351,493
2019 199,870
2020 196,459
2021 199,504
2022 107,659
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
51
18. Operating Segments
18.1. Segmented information
The operating segments of the Company are known as Namaste-other, Australia Vaporizers and CannMart. In
determining the operating segments, management considered the product mix as well as the geographical segments
that the business units sell under. The Australian Vaporizers segment is a self-sustaining entity that handles its own
fulfillment and sale of products in Australia. CannMart is the Company’s entrance into the medicinal and recreational
cannabis market in Canada. As such, the business operating metrics and customer base is different from the rest of
the Company. Namaste-other is the Company’s global e-commerce business that sells similar products in various
geographic areas. Namaste-other operates from a central capacity in order to fulfill orders, sell their products and
make decisions. The chief operating decision maker monitors these three segments separately throughout the year.
Revenue by segment
August 31, 2017August 31, 2016 -
Restated
Namaste-other
Gross segment revenue 8,933,097 3,488,902
Intersegement revenue (86,915) -
External revenue 8,846,182 -
Australian Vaporizers -
Gross segment revenue 2,208,752 -
Intersegement revenue (73,520) -
External revenue 2,135,232 -
CannMart - -
Total revenue by segment 10,981,414 3,488,902
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
52
Non-current assets by segment
August 31, 2017August 31, 2016 -
Restated
Namaste-other - 2,883,058
Australian Vaporizers 5,538,821 -
CannMart 3,516,310 -
Total non-current assets by segment 9,055,131 2,883,058
Net income (loss) by segment
August 31, 2017August 31, 2016 -
Restated
Namaste-other (17,537,043) (2,152,311)
Australian Vaporizers 209,763 -
CannMart (29,984) -
Total net income (loss) by segment (17,357,264) (2,152,311)
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
53
18.2. Geographical information
The company markets its products globally. Sales are attributed to countries based on the location of customers.
Current assets other than financial instruments and deferred taxes are attributed to countries where assets are based
18.3. Customer information
The company does not have any major customers representing more than 10% of total sales for the reporting segment.
19. Additional disclosure for statement of cash-flow
Revenues by country
Country August 31, 2017
August 31, 2016
- Restatd
Great Britain 3,332,578 1,534,271
Australia 2,578,325 176,488
United States of America 2,308,530 391,887
Brazil 521,126 279,379
Canada 467,122 52,296
New Zealand 397,556 270,353
Germany 246,541 133,391
Ireland 216,608 42,486
Israel 193,381 63,820
Other 615,272 544,531
Total 10,981,414 3,488,902
Changes in non-cash working capital
August 31, 2017August 31, 2016 -
Restated
Receivables (249,523) 39,331
Inventory (570,303) (449,971)
Prepaids and deposits (531,231) (85,732)
Tax receivable (199,612) -
Corporate taxes receivable (1,165) (24,847)
Accounts payable and accrued liabilities (25,269) 384,811
Changes in non-cash working capital (1,577,103) (136,408)
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
54
The following represents non-cash transactions resulting in business acquisitions in the year:
20. Subsequent events
On October 31, 2017 Namaste completed its non-brokered private placement, whereby a total of 14,409,000 Units of the
Company have been issued and sold, at a price per Unit of $0.25, for total gross proceeds of $3,602,250. Each Unit consists
of one common share of the Company (a “Share”) and one common share purchase warrant (a “Warrant”). Each Warrant
entitles the holder thereof to acquire one Share at a price of $0.35 for a period of 24 months following the closing date. In
the event that the closing price of the Company's Shares on the Canadian Securities Exchange is greater than $0.70 per
Share for a period of 10 consecutive trading days at any time after the closing of the Offering, the Company may accelerate
the expiry date of the Warrants by giving notice to the holders thereof and in such case the Warrants will expire on the 30th
day after the date on which such notice is given by the Company. The securities issued pursuant to the Offering are subject
to a four months plus one day hold period in Canada expiring on March 1, 2018. Namaste intends to use the net proceeds
from the Offering to finance construction at the Company’s wholly owned subsidiary, CannMart Inc., to purchase medical
cannabis inventory once CannMart receives its distribution license from Health Canada and for strategic corporate purposes.
On November 28, 2017 the Company announced that it signed a stock purchase agreement with ESC Hughes Holdings
Limited (“ECS”) to sell the Company’s wholly owned US subsidiary, Dollinger Enterprises US Inc. (“Dollinger US”). The
Agreement includes the sale of the domain names Everyonedoesit.com and NamasteVapes.com which combined represent
less than 7% of Namaste’s current gross revenue, both of which are currently operating at a net loss. Under the terms of
the Agreement, Namaste will, through its wholly owned subsidiary, Namaste Technologies Holdings Inc., in consideration
of a cash purchase price of US $400,000 convey to ESC all authorized and issued shares of Dollinger US,
NamasteVapes.com and Everyonedoesit.com domains, all banking, merchant, and services accounts, five employees of
August 31, 2017August 31, 2016 -
Restated
Receivables 13,013 -
Inventory 984,275 -
Prepaids and deposits 57,529 -
Tax receivable (28,790) -
Intangibles 8,711,727 892,342
Goodwill 8,199,580 1,990,716
Accounts payable and accrued liabilities (235,523) -
Corporate taxes payable (18,037) -
Loan payable (517,225) -
Earn-outs payable (576,886) (1,631,027)
Deferred tax liability (922,780) -
Share capital (9,273,942) -
Deferred share issuance (1,000,000) (595,831)
Namaste Technologies Inc. Notes to the Consolidated Financial Statements
For the twelve months ending August 31, 2017 and August 31, 2016 (Expressed in Canadian dollars)
(Audited)
55
Dollinger US and one real estate lease held under Dollinger US.
On December 22, 2017 the Company announced that its wholly owned subsidiary CannMart Inc. has signed a Fulfilment
Services Agreement with Greenlane Canada whereby Greenlane will provide exclusive order fulfilment and warranty
services for Namaste’s Canadian websites. Under the terms of the Agreement, Greenlane will fulfill orders for all products
set forth in Greenlane’s product offering as well as products which are marketed and sold under brands controlled by
Namaste and other third-party products as specified by Namaste. The Agreement represents a strategic decision to further
align the Company with the industry’s leading business-to-business distributor, while Namaste will benefit through a
significant reduction of inventory and operational expenses, bringing the company closer to profitability. In addition, it is
believed this Agreement will set the framework for Namaste to collaborate with Greenlane on future opportunities in areas
related to the distribution of cannabis packaging products and pre-filled cartridges for medical cannabis, to be sold in
Canada through Namaste’s wholly owned subsidiary CannMart.
On October 22, 2017, the Company granted 1.3 million options at $0.24, which expire on October 2, 2022, vesting in equal
tranches over 2 years. On October 16, 2017, the Company granted 60,000 options at $0.22, which expire on June 30, 2022,
vesting in equal tranches over 1 year. On November 21, 2017, the Company granted 500,000 options at $0.22, which expire
on June 30, 2022, vesting in equal tranches over 1 year.
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