Namaste Technologies Inc., a platform for cannabis products, accessories, and education, is pleased to announce it has entered into a share purchase agreement (the “Share Purchase Agreement”) to acquire the remaining 49% interest in CannMart Labs Inc., an applicant for a processing licence under the Cannabis Act (Canada) for cannabis extraction activities.
Transaction Highlights:
- Namaste to acquire remaining 49% of CannMart Labs to 100% ownership
- CannMart Labs facility in Ontario is completed for BHO extraction using leading extraction technology, making it one of only a few facilities in Canada with such capabilities
- Application in final phase for a processing licence from Health Canada
- Set to produce in-house branded Cannabis 2.0 products for medical channel customers at CannMart.com and recreational customers across Canada through sister company CannMart Inc.’s network of provincial sales partners
- Cannabis 2.0 products initially planned include shatter and live resin with capabilities to expand future distillate product offerings to vape cartridges, gel capsules, tinctures and edibles
In May 2018, Namaste acquired a 51% interest in CannMart Labs and agreed to finance the construction of its facility in Etobicoke, Ontario, a purpose-built oil extraction facility which incorporates a leading extraction technology facility designed to meet EU Good Manufacturing Practice (EU-GMP) certification requirements.
“Acquiring the remaining interest in CannMart Labs is another important milestone achieved in establishing Namaste as a leading company within the Canadian cannabis sector,” said Meni Morim, Chief Executive Officer of Namaste. “CannMart Labs is in the final stage of its application for an important processing licence from Health Canada. It has installed state-of-the-art extraction technology in its facility, which when granted a licence, will be able to produce an array of cannabis products including shatter and live resin, as well as future distillate products such as vape cartridges, gel capsules, tinctures and edibles.”
Mr Morim added, “This transaction is advantageous to Namaste shareholders as the Vendors will continue to provide management services and will receive earn-out payments in the form of Namaste common shares or cash only upon the successful achievement of certain revenue and gross profit targets and if the targets are met, the cash payment option allows Namaste to minimize dilution associated with the acquisition. We are working hard towards receiving our processing licence from Health Canada and look forward to producing in house branded Cannabis 2.0 products, for our medical channel customers at CannMart.com and recreational consumers across Canada through our network of provincial sales partners.”
Under the terms of the proposed transaction, Namaste will acquire the remaining 49% interest of CannMart Labs from MKD Holdings Inc. and JLLS Holdings Inc. (together, the “Vendors”) in exchange for a purchase price of $4,034,000 (the “Purchase Price”). A first tranche of the Purchase Price of $1,608,500 will be paid to the Vendors in common shares of Namaste issued at a deemed price equal to the seven day volume weighted average price of Namaste’s common shares on the TSX Venture Exchange (VWAP) on the closing date of the Proposed Transaction. The remaining Purchase Price of $2,425,500 is payable to the Vendors in equal tranches over the next nine fiscal quarters beginning on the fiscal quarter ending February 28, 2021, at the VWAP on the date of issuance required within 5 days of the end of the applicable fiscal quarter.
The Vendors are also entitled to earn-out payments in the form of Namaste common shares, on a sliding scale, upon the achievement of pre-determined revenue targets (the “Earn-Out Payments”) which are also payable over the next nine fiscal quarters beginning on the fiscal quarter ended February 28, 2021. The maximum amount of each Earn-Out Payment payable to the Vendors in aggregate is capped at approximately $1.94M of Namaste common shares at the VWAP on the date of issuance required 15 days from publication of Namaste’s applicable quarterly financial statements. There is no minimum quarterly Earn-Out Payment.
Namaste has the option of paying any of the Purchase Price and any Earn-Out Payment (if any), in cash, subject to a five percent discount. Under the terms of the Share Purchase Agreement, the maximum number of common shares which may be issued to the Vendors is 64,466,942 (the “Maximum Share Number”) being 19.9% of Namaste’s currently outstanding common shares. In the event Namaste wishes to issue common shares in excess of the Maximum Share Number in satisfaction of the Purchase Price or the Earn-Out Payments, Namaste would be required to seek further approvals from the TSX Venture Exchange.
MKD Holdings Inc., one of the Vendors, is controlled by a director and officer of CannMart Labs and the CannMart Labs’ shares held by this entity are beneficially owned by his wife. Accordingly, the Proposed Transaction is considered to be a Non-Arm’s Length Transaction under the policies of the TSX Venture Exchange.
Closing of the Proposed Transaction is subject to customary closing conditions, including final approval of the TSX Venture Exchange.
Headquartered in Toronto, Canada, Namaste Technologies is a leading online platform for cannabis products, accessories, and responsible education.
