Replies to post #19737 on Lifeist Wellness Inc (NXTTF)

[r clarke]

Future has dimmed with increased competition and Sean's missteps:



More importantly, the future for both CannMart and NamasteMD is dim. NamasteMD was launched in February 2018 and it has accumulated 14,000 users and will charge 15-20% of the revenue by referring patients to licensed producers (10 partners now). However, during the quarter Namaste has only managed to generate $61k of revenue which is basically non-existent. It is clear that NamasteMD is failing to monetize the users and most people just downloaded the app without making any purchase on it.

As for CannMart, despite receiving the sales-only license on September 24, Namaste has yet to prove that its platform could compete with other LPs and the government channels. The fundamental question is why would someone buy from CannMart rather than the provincial stores? Namaste needs to either cut prices or carry superior products that are exclusive to them. However, most producers that go to CannMart will likely be those ones that failed to secure supply agreements with the provinces. As legalization sales started in October, Namaste will be tested on its ability to generate sales while competing with the government-run online stores powered by Shopify (SHOP). In the medical market, it has to compete with other LPs including the largest incumbents such as CannTrust (OTC:CNTTF), Canopy (CGC), Aurora (ACB) and Aphria (APHA). We worry that CannMart has missed the optimal launch time and will have a difficult time catching up and acquiring customers.






"The last quarter was great! How do you come up with this garbage? Lol. The growth stage will show in coming quarters. You will learn...

[r clarke]

Questionable Management


The biggest risk for Namaste, in our view, is its highly promotional and inappropriate management team. The key milestones highlighted below best illustrated the disastrous path Namaste has chosen to walk down over the past few months. First of all, the share buyback was a total disaster as discussed. The infamous pledge party made headlines nationally, in a bad way. The Nasdaq listing is nothing but a dream now given the questionable track record of the company and a plunging share price.

Namaste's promotional corporate culture was best illustrated when it had to make a press release announcing that its NamasteMD Android app was approved for publishing. To borrow a quote below:

"I'm disgusted sometimes when I read some of these press releases" - Vic Neufeld, CEO of Aphria (APHA)

Besides a highly promotional management, Namaste also appears to have unrealistic goals and misleading guidance. For example, the company announced in a press release that it aims to have a 50% gross margin for its CannMart sales. However, without in-house production, Namaste has to acquire its products from its partners who are licensed producers. We struggle to see a scenario where Namaste will be able to obtain a 50% gross margin assuming they have to pay $5.0-$6.0 in the wholesale market and retail price $8.0-$9.0 inclusive of the $1.0 exercise. Again, management has provided unsupported guidance that is overstating its future profitability while its existing vaporizer business continues to struggle.

With Namaste's medical cannabis "sales-only" license imminent, the Company anticipates a sharp increased revenue and margin with Cannmart booking full revenue amounts from patient ordering and the Company will aim to maintain a minimum of a 50% gross margin on cannabis products sold directly on its website.

Conclusion
We think Namaste has a very simple story here and investors should not be confused by the promotional materials disseminated by the company. The vaporizer business stalled this quarter which means limited value for this segment. NamasteMD had negligible sales almost 6 months into launch which is worrisome. CannMart finally received its licenses but we struggle to see how it could compete with the provinces in online sales due to inferior product assortment and an unclear value proposition. Namaste has some interesting technology and unique propositions, however, the management has lost all of our respect after the shareholder pledge and more recently share buybacks. Investors need to focus on investing alongside quality and credible management teams which is crucial for the cannabis industry.


Cornerstone Investments

[r clarke]

Last quarter was great? Really?

Namaste announced fiscal 2018 Q4 results for the 3 months ended on August 31, 2018. Net revenue came in at $3.9 million, which represents no growth from 2017 Q4. Namaste has relied on acquisitions in the past to show inorganic revenue growth but this quarter proved that its vaporizer online business has no organic growth and has hit a wall at only $3.9 million in quarterly sales. The CannMart segment generated revenue of $32k during the quarter which is basically negligible.

NamasteMD generated sales of $61k which are also immaterial. More importantly, COGS came in at $3 million which implies a gross margin of only 24%! Gross margin was negative in 2017 but 2018 numbers still showed a picture where the business model simply does not work financially. With only $930k in gross profit, the company lost $8.7 million last quarter after paying for its operating expenses including $2.5 million of selling and distribution and $6.9 million of G&A expenses.




"The last quarter was great! How do you come up with this garbage? Lol. The growth stage will show in coming quarters. You will learn..."