Namaste Technologies Inc. Consolidated Financial … Technologies Inc. Consolidated Financial...

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


(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


(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


(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



(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.



(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



(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



(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.



(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%



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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.



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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



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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.



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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.



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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.



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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.



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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



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


year errors



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24

Consolidated statement of financial position

As at August 31, 2016


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


year errors



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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.



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



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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



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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




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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.


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


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)




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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:


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


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




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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


Purchase price allocation CannMart

August 31, 2017

License 3,516,310

Net Asset acquired 33,690




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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


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:


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:


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



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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%.



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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


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



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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



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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



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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)



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Compensation key executives


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



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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$



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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.



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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



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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$



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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



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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


2016 - Restated

Long-term loans 284,943 -

Current portion of long-term loans 94,981 -

Carrying value August 31,2017 379,924 -



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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



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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.



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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)



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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



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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) -



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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



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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



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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



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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)



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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)



(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)



(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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