WINSTON RESOURCES INC.  
 	Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	 
 	(EXPRESSED IN CANADIAN DOLLARS) 

 	  

 	 

 	 
 	 
 	INDEPENDENT AUDITOR’S REPORT 
 	To the Shareholders of Winston Resources Inc. 
 	We have audited the accompanying financial statements of Winston Resources Inc., which comprise the statement of financial position as at July 31, 2017, and the statements loss and of comprehensive loss, cash flows and changes in shareholders equity (deficiency) for the year then ended, and a summary of significant accounting policies and other explanatory information. 
 	 
 	Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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. 
 	
 	Auditor’s Responsibility 
 	Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 financial statements are free from material misstatement. 
 	An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 
 	The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 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 financial statements. 
 	
 	We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion. 
 	
 	Opinion 
 	In our opinion, the financial statements present fairly, in all material respects, the financial position of Winston Resources Inc. 
 	as at July 31, 2017, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. 
 	 
 	Emphasis of Matter 
 	Without qualifying our opinion, we draw attention to Note 2 in the financial statements which describes certain conditions that indicate the existence of a material uncertainty that cast significant doubt about Winston Resources Inc.’s ability to continue as a going concern. 
 	
 	Other Matter 
 	The financial statements of Winston Resources Inc. for the year ended July 31, 2016 were audited by another auditor who expressed an unmodified opinion on those statements on November 25, 2016. 
 	
 	DALE MATHESON CARR-HILTON LABONTE LLP 
 	CHARTERED PROFESSIONAL ACCOUNTANTS  
 	
 	Vancouver, Canada 
 	November 29, 2017 
 	Winston Resources Inc. 
 	Statements of Financial Position 
 	(Expressed in Canadian Dollars) 

 	

 	As at 
 	As at 
 	July 31, 
 	July 31, 
 	 
 	2017 
 	 
 	2016 

 	

 	ASSETS 

 	
 	
 	Current assets 

 	

 	Cash 
 	$ 
 	1,445,761 
 	$ 
 	84 
 	
 	Prepaid expenses (note 10) 
 	 
 	72,500 
 	
 	- 
 	
 	Loan (note 13) 
 	 
 	371,408 
 	
 	- 
 	
 	GST recoverable 
 	 
 	33,377 
 	
 	5,166 
 	Total current assets 
 	 
 	1,923,046 
 	
 	5,250 

 	 

 	Non-current assets 

 	

 	Exploration and evaluation assets (note 9) 
 	 
 	- 
 	
 	9,000 
 	
 	Investment (note 15) 
 	 
 	125,000 
 	
 	- 
 	Total non-current assets 
 	 
 	125,000 
 	
 	9,000 
 	Total assets 
 	$ 
 	2,048,046 
 	$ 
 	14,250 

 	 

 	LIABILITIES AND SHAREHOLDERS’ EQUITY 

 	
 	
 	Current liabilities 

 	

 	Accounts payable and accrued liabilities (note 11) 
 	$ 
 	84,330 
 	$ 
 	49,291 
 	
 	Due to related parties (note 12) 
 	 
 	- 
 	
 	94,404 
 	Total current liabilities 
 	 
 	84,330 
 	
 	143,695 

 	 

 	Shareholders’ equity 

 	

 	Share capital (note 14) 
 	 
 	11,626,320 
 	
 	10,275,281 
 	
 	Reserves (note 14) 
 	 
 	2,331,049 
 	
 	548,000 
 	
 	Deficit 
 	 
 	(11,993,653) 
 	
 	(10,952,726) 
 	Total shareholders’ equity 
 	 
 	1,963,716 
 	
 	(129,445) 
 	Total liabilities and shareholders’ equity 
 	$ 
 	2,048,046 
 	$ 
 	14,250 

 	

 	Nature of operations (note 1) 

 	
 	
 	Going concern (note 2) 

 	
 	
 	Proposed acquisition (note 15) 

 	
 	
 	Approved on behalf of the Board of Directors: 

 	

 	

 	
 	"Quinn Field-Dyte" (signed) 
 	Quinn Field-Dyte, Director 

 	

 	

 	
 	"Michael Young" (signed) 
 	
 	Michael Young, Director 

 	
 	
 	The notes to the financial statements are an integral part of these statements. 
 	
 	- 1 - 
 	Winston Resources Inc. 
 	Statements of Loss and Comprehensive Loss 
 	(Expressed in Canadian Dollars) 
 	
 	Years ended July 31,  
 	 
 	2017 
 	 
 	2016 
 	 
 	Operating Expenses 

 	

 	Advertising and promotion expenses 
 	$ 
 	383,487 $ 
 	- 
 	
 	Bank service expenses 
 	
 	872 
 	
 	- 
 	
 	Consulting expenses (note 12) 
 	
 	437,670 
 	
 	- 
 	
 	Filing and listing fees 
 	
 	24,434 
 	
 	15,691 
 	
 	Office and rent expenses 
 	
 	59,481 
 	
 	13,461 
 	
 	Management fees (note 12) 
 	
 	4,000 
 	
 	- 
 	
 	Professional fees (note 12) 
 	
 	57,857 
 	
 	11,318 
 	
 	Shareholder information 
 	
 	4,547 
 	
 	3,502 
 	
 	Transfer agent fees (note 12) 
 	
 	46,799 
 	
 	16,824 
 	
 	Travel expenses 
 	
 	34,471 
 	
 	- 

 	(1,053,618) 
 	
 	(60,796) 
 	
 	Other items 

 	
 	
 	Loss on dilution of subsidiary (note 6) 
 	
 	- 
 	
 	(441,040) 
 	Gain on dilution of ownership in associates (note 5) 
 	
 	- 
 	
 	189,000 
 	Debt forgiveness (notes 6 and 12) 
 	
 	21,691 
 	
 	161,063 
 	Write-off of exploration and evaluation assets (note 9) (9,000) 
 	
 	- 

 	16,183 
 	
 	(90,977) 
 	 
 	Net loss for the year 
 	
 	(1,040,927) 
 	
 	(151,773) 
 	
 	Equity loss on equity accounted investments (note 8) 
 	
 	- 
 	
 	(3,013) 
 	 
 	Net loss and comprehensive loss 
 	$ 
 	(1,040,927) $ 
 	(154,786) 

 	 

 	 

 	
 	
 	Net loss for the year attributed to: 

 	

 	Common shareholders 
 	$ 
 	(1,040,927) $ 
 	(151,662) 
 	
 	Non-controlling interest 
 	 
 	- 
 	
 	(3,124) 
 	 
 	$ 
 	(1,040,927) $ 
 	(154,786) 

 	 

 	Basic and diluted loss per share (note 14) 
 	$ 
 	(0.08) $ 
 	(0.05) 
 	Weighted average number of common shares outstanding – basic and diluted 
 	
 	12,564,526 
 	
 	3,287,445 
 	The notes to the financial statements are an integral part of these statements. 
 	
 	- 2 - 
 	Winston Resources Inc. 
 	Statements of Cash Flows 
 	(Expressed in Canadian Dollars) 

 	

 	 

 	Years ended July 31, 
 	 
 	2017 
 	 
 	2016 

 	

 	Operating activities 

 	
 	
 	Net loss for the year 
 	$ 
 	(1,040,927) 
 	$ 
 	(154,786) 
 	Equity loss in equity accounted investments 
 	 
 	- 
 	
 	3,013 
 	Debt forgiveness 
 	 
 	(21,691) 
 	
 	(161,063) 
 	Gain on dilution of ownership in associates 
 	 
 	- 
 	
 	(189,000) 
 	Gain on dilution of CNRP 
 	 
 	- 
 	
 	441,041 
 	Write-off of exploration and evaluation assets 
 	 
 	9,000 
 	
 	- 

 	(1,053,618) 
 	
 	(60,795) 
 	Net changes in non-cash working capital: 

 	

 	GST recoverable 
 	 
 	(28,211) 
 	
 	(2,783) 
 	
 	Prepaid expenses 
 	 
 	(72,500) 
 	
 	3,236 
 	
 	Accounts payable and accrued liabilities 
 	 
 	56,730 
 	
 	26,962 
 	
 	Due to related parties 
 	 
 	(94,404) 
 	
 	24,557 
 	
 	Due from related companies 
 	 
 	- 
 	
 	5,375 
 	Net cash used in operating activities 
 	 
 	(1,192,003) 
 	
 	(3,448) 

 	 

 	Investing activities 

 	
 	
 	Change in cash from dilution of CNRP 
 	 
 	- 
 	
 	31 
 	Loan receivable 
 	 
 	(371,408) 
 	
 	- 
 	Investment 
 	 
 	(125,000) 
 	
 	- 
 	Net cash provided by (used in) investing activities 
 	 
 	(496,408) 
 	
 	31 

 	 

 	Financing activities 

 	
 	
 	Net proceeds from issuance of shares 
 	 
 	3,126,588 
 	
 	- 
 	Proceeds for warrants exercise 
 	 
 	7,500 
 	
 	- 
 	Net cash provided by financing activities 
 	 
 	3,134,964 
 	
 	- 

 	 

 	Net change in cash 
 	 
 	1,445,677 
 	
 	(3,417) 
 	Cash, beginning of year 
 	 
 	84 
 	
 	3,501 
 	Cash, end of year 
 	$ 
 	1,445,761 
 	$ 
 	84 

 	The notes to the financial statements are an integral part of these statements. 
 	
 	- 3 - 

 	
 	Winston Resources Inc.  
 	Statements of Changes Equity (Deficiency) 
 	(Expressed in Canadian Dollars) 

 	

 	 
 	 
 	Reserves 

 	 
 	Common 
 	Preferred 
 	Non-
 	Share 
 	Share 
 	Subscription 
 	Contributed 
 	Total 
 	controlling 
 	 
 	Capital 
 	Capital 
 	receivable 
 	Options 
 	Warrants 
 	Surplus 
 	Reserves 
 	Deficit 
 	Interest 
 	Total 
 	Balance, July 31, 2015 
 	$ 9,603,437 
 	$ - 
 	$ - 
 	$ 15,831 
 	$ 37,000 
 	$ 1,125,994 
 	$ 1,178,825 
 	$(10,343,561) 
 	$(1,314,277) 
 	$ (875,576) 
 	
 	Dilution of CNRP 
 	- 
 	671,844 
 	- 
 	(4,525) 
 	- 
 	(626,300) 
 	(630,825) 
 	(202,151) 
 	1,317,401 
 	1,156,269 
 	Dividends (notes 5 and 
 	6) 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	(255,352) 
 	- 
 	(255,352) 
 	
 	Net loss for the year 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	(151,662) 
 	(3,124) 
 	(154,786) 
 	Balance, July 31, 2016 
 	 9,603,437 
 	 671,844 
 	 - 
 	11,306 
 	 37,000 
 	 499,694 
 	548,000 
 	(10,952,726) 
 	 - 
 	 (129,445) 
 	Issuance of shares for 
 	cash (note 14) 
 	1,776,433 
 	- 
 	(30,000) 
 	- 
 	1,723,567 
 	- 
 	1,723,567 
 	- 
 	- 
 	3,470,000 
 	
 	Share issuance cost 
 	
 	(note 14) 
 	(402,894) 
 	- 
 	- 
 	- 
 	59,482 
 	- 
 	59,482 
 	- 
 	- 
 	(343,412) 
 	
 	Exercise of warrants 
 	
 	(note 14) 
 	7,500 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	7,500 
 	
 	Cancelation of options 
 	
 	(note 14) 
 	- 
 	- 
 	- 
 	(11,306) 
 	- 
 	11,306 
 	- 
 	- 
 	- 
 	- 
 	
 	Net loss for the year 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	- 
 	(1,040,927) 
 	- 
 	(1,040,927) 
 	Balance, July 31, 2017 
 	$ 10,984,476 
 	$ 671,844 
 	$ (30,000) 
 	$ - $ 1,820,049 
 	$ 511,000 
 	$ 2,331,049 
 	$(11,993,653) 
 	$ - 
 	$ 1,963,716 

 	 

 	

 	

 	

 	

 	

 	The notes to the financial statements are an integral part of these statements. 
 	- 4 - 

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	1. 
 	Nature of Operations 
 	 
 	Winston Resources Inc. (“Winston” or the “Company”) is incorporated under the laws of the province of British Columbia. Winston was an exploration stage company engaged in the acquisition and exploration of mineral resource properties in Canada. Prior to January 29, 2016, the Company also invested in four other companies operating in the Canadian resource sector as well as a United States based company providing management services to Canadian based mineral exploration companies. On January 29, 2016, the Company distributed to its shareholders all its interest in CNRP Mining Inc. (“CNRP”), Zara Resources Inc. (“Zara”), Leo Resources Inc. (“Leo”) and Hadley Mining Inc. (“Hadley”) and no longer has any interest in these companies. As of July 31, 2017 the Company is changing its business from natural resources to the cannabis sector. 
 	
 	Effective May 31, 2017 the Company entered into a definitive agreement (the “Share Exchange Agreement”) with GT 
 	Therapeutics Corporation (“GTT”), pursuant to which the Company will complete a reverse takeover and acquire from the shareholders of GTT, all of the issued and outstanding shares of GTT, causing GTT to become a wholly owned subsidiary of Winston. On completion of the transaction, the business of GTT will become the business of Winston (note 15). 
 	
 	Winston is a reporting issuer in the jurisdictions of British Columbia, Alberta and Ontario whose common shares are listed for trading on the Canadian Securities Exchange (“CSE”) under the symbol “WRW”. The head office of the Company is located at 800 – 1199 West Hastings St., Vancouver, BC, V6E 3T5, Canada. 
 	
 	2. 
 	Going Concern Assumption 
 	 
 	These financial statements have been prepared on the basis of accounting principles applicable to a going concern under International Financial Reporting Standards (“IFRS”). The use of these principles under IFRS assumes that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge its liabilities in the normal course of operations. The Company continues to incur operating losses, which casts significant doubt about the Company’s ability to continue as a going concern. 
 	
 	Management’s current strategy is to focus on the completion of the GTT acquisition and, at the same time, to exercise careful cost control to sustain operations in the short term. Management recognizes the Company’s need to expand its cash reserves in the coming year if it intends to adhere to its sales and marketing plans and has evaluated its potential sources of funds. Although Management intends to assess and act on these options throughout the course of the year, there can be no assurance that the steps Management take will be successful. 
 	
 	In the event that cash flow from operations, together with the proceeds from any future financings are insufficient to cover planned expenditures, Management will allocate available resources in such manner as deemed to be in the Company’s best interest. This may result in a significant reduction in the scope of existing and planned operations. 
 	
 	As at July 31, 2017, the Company had yet to generate revenues from operations and had a deficit of $11,993,653 (2016 
 	- $10,952,726). The Company is actively seeking additional sources of financing. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern that these uncertainties are material and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. Accordingly, these financial statements do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore to realize its assets and discharge its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying financial statements. These adjustments could be material. 

 	

 	

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	3. 
 	Statement of Compliance and Basis of Presentation 
 	 
 	(a) 
 	 Statement of compliance 
 	 
 	These financial statements are prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) as of November 29, 2017, the date the Company's Board of Directors approved these financial statements. 
 	
 	(b) Basis of presentation 
 	 
 	These financial statements have been prepared on a going concern basis, under the historical cost convention, except for certain financial instruments which may be carried at fair value in subsequent periods, and have been prepared using the accrual basis of accounting, except for cash flow information. 
 	 
 	4. 
 	Significant Accounting Policies 
 	 
 	These financial statements have been prepared by management in accordance with IFRS and IFRIC. Outlined below are those policies considered particularly significant: 
 	
 	Basis of consolidation 
 	
 	These financial statements include the accounts of the Company and its former subsidiaries; 100% owned CNRP Dallas Inc. ("CNRP Dallas"), a Dallas, Texas based management services Company, and 84.9% owned CNRP, until the Company lost control of CNRP after it distributed all of its investment interest in CNRP to the Company's shareholders on January 29, 2016 (note 6). Control is achieved when the Company has the power over the investees; exposure to variable returns from an investee; and the ability to use power to affect the reporting entity’s returns. 
 	
 	On consolidation, all intercompany transactions, balances, income and expenses are eliminated in full. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company losses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed during the year are included in the statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. 
 	
 	Use of estimates and judgments 
 	
 	The preparation of financial statements in accordance with IFRS requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised. 
 	
 	Estimates and assumptions where there is significant risk of material adjustments to assets and liabilities in future accounting periods include the fair value measurements for financial instruments, the recoverability and measurement of deferred tax assets, and contingent liabilities. 
 	
 	The preparation of financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty, and the classification of financial instruments. 

 	 

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	 
 	4. 
 	 Significant Accounting Policies (continued) 
 	 
 	Foreign currency translation 
 	 
 	The functional currency of an entity is measured using the currency of the primary economic environment in which that entity operates. The financial statements are presented in Canadian dollars which is the Company’s functional and presentation currency. 
 	
 	Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. 
 	
 	Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the statement of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge. 
 	
 	Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the statement of comprehensive loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss. 
 	
 	Share-based payments 
 	 
 	Share-based payments to employees are measured at the fair value of the instruments issued and amortized 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 share-based payment reserves. The fair value of options is determined using the Black–Scholes Option Pricing Model. 
 	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 eventually vest. 
 	
 	Warrants 
 	
 	When the Company issues units that are comprised of a combination of shares and warrants, the value is assigned to shares and warrants based on their relative fair values. The fair value of the shares is determined by the closing price on the date of the transaction and the fair value of the warrants is determined based on a Black-Scholes Option Pricing Model. 
 	
 	Income (loss) per share 
 	
 	Basic income (loss) per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, basic income (loss) per share equals the dilutive income (loss) per share. Diluted income (loss) per share is calculated by using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted income (loss) per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period. 
 	 
 	Financial instruments 
 	
 	The Company classifies its financial instruments in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale and financial liabilities. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition. 

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	4. 
 	 Significant Accounting Policies (continued) 
 	
 	Financial instruments (continued) 
 	
 	Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. 
 	Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. 
 	
 	Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. 
 	
 	Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. 
 	 
 	Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments and are subsequently measured at fair value. Unrealized gains and losses are recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary financial assets. 
 	
 	Non-derivative financial liabilities (excluding financial guarantees) are initially measured at fair value and subsequently measured at amortized cost. 
 	
 	On the Company’s statement of financial position, cash, loan receivable, and investments are classified as loans and receivables; and accounts payable and due to related parties are classified as non-derivative financial liabilities. 
 	
 	Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Company commits to purchase the asset. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. 
 	
 	At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. The Company does not have any derivative financial assets and liabilities. 
 	
 	Impairment of assets 
 	
 	The carrying amounts of the Company’s assets (which include equipment and exploration and evaluation assets) are reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. 
 	Impairment losses are recognized in the statement of comprehensive loss. 
 	
 	The recoverable amount of an asset is the greater of its fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash- 

 	
 	 
 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	4. 
 	 Significant Accounting Policies (continued) 
 	 
 	Impairment of assets (continued) 
 	 
 	generating unit to which the asset belongs. 
 	
 	An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous periods. 
 	
 	Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. 
 	 
 	Income taxes 
 	Current income tax: 
 	Current income tax assets and liabilities for the current period 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, at the reporting date, in the countries where the Company operates and generates taxable income. 
 	
 	Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. 
 	
 	Deferred income tax: 
 	Deferred income tax is provided using the asset and liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 
 	
 	The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. 
 	 
 	Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. 
 	
 	Deferred income tax assets and deferred income tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. 
 	 
 	Restoration and environmental obligations 
 	The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to exploration and evaluation assets along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset will be depreciated on the same basis as other mining assets. 
 	
 	The Company’s estimates of restoration costs could change as a result of changes in regulatory requirements. These changes are recorded directly to mining assets with a corresponding entry to the restoration provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. 

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	4. 
 	 Significant Accounting Policies (continued) 
 	
 	Restoration and environmental obligations (continued) Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period. The net present value of restoration costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred. 
 	
 	The costs of restoration projects that were included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for resource property interest. 
 	
 	The Company has no restoration, rehabilitation and environmental obligations. 
 	 
 	Future accounting policies 
 	 
 	At the date of authorization of these financial statements, the IASB has issued the following new and revised Standards and Interpretations which are not yet effective for the relevant reporting period. 
 	
 	Financial Instruments 
 	
 	In November 2013, the IASB issued IFRS 9, Financial Instruments, (Hedge Accounting and amendments to IFRS 9, IFRS 
 	7 and IAS 39). IFRS 9 (2009) establishes the measurement and classification of financial assets. Financial assets are measured either at fair value through earnings or at amortized cost if certain conditions are met. IFRS 9 (2010) includes guidance on the classification and measurement of financial liabilities. 

 	The most recent amendment, IFRS 9 (2013) includes a new general hedge accounting model, which will align hedge accounting more closely with risk management. Additionally, the new standard removes the January 1, 2015 effective date. The new mandatory effective date of this standard is January 1, 2018. The Company is currently evaluating the impact of IFRS 9 on its financial statements and expects to apply the standard in accordance with its future mandatory effective date. 
 	
 	Revenue from Contracts with Customers 
 	
 	On May 28, 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. The new standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. 
 	The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard is effective for fiscal years beginning on or after January 1, 2018 and is available for early adoption. The Company is currently evaluating the impact of IFRS 15 on its financial statements and expects to apply the standard in accordance with its future mandatory effective date. 
 	
 	Other recent accounting pronouncements that have no material impact to the Company are not included above. 

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	5. 
 	 Distribution of Share Dividends 
 	 
 	On January 29, 2016 the Company declared share dividends to distribute all of the Company's share interest in Zara, Leo, Hadley, and CNRP. Other than CNRP (note 6), all three investees were associates in which the investments were accounted for using the equity method of accounting. Subsequent to the distribution of share dividends, the Company holds no further interest in these companies. 

 	 Zara 
 	Leo 
 	Hadley 
 	Share interest held (%) 
 	17.94% 
 	16.76% 
 	40.68% 
 	Number of shares 
 	895,902 
 	879,402 
 	10,169,022 
 	Initial investment 
 	$ 143,400 
 	$ 115,541 
 	$ 176,800 
 	Cumulative equity loss on investments 
 	$(651,500) 
 	$(108,864) 
 	$(368,686) 
 	Carrying value of investment in associates 
 	$ - 
 	$ 6,677 
 	$ - 
 	Share price on dividend date 
 	$ 0.10 
 	$ 0.005 
 	$ 0.01 
 	Dividend distribution value 
 	$ 89,590 
 	$ 4,397 
 	$ 101,690 
 	Gain (loss) on dilution of ownership in associates 
 	$ 89,590 
 	$ (2,280) 
 	$ 101,690 
 	
 	6. 
 	Dilution of CNRP 
 	 
 	On January 29, 2016, the Company declared share dividend to distribute all of its share interest in CNRP to the Company's shareholders. After the distribution, the Company holds no further interest in CNRP. As a result of the distribution, all assets and liabilities of CNRP were de-consolidated and the net liabilities was reallocated to the statement of loss. The fair value of the dividend distribution of $59,675 for 3,978,339 shares of CNRP held by the Company is based on the market price of CNRP's shares at the date the dividend was declared. 
 	
 	The following summarizes the impact to the profit and loss for the year ended July 31, 2016 of the Company as a result of the transaction. 

 	Amount 
 	Loss on dilution of CNRP 
 	 
 	Dividend - CNRP shares 
 	$ 59,675 
 	Non-controlling interest in CNRP 
 	
 	(1,317,401) 
 	Net liabilities of CNRP 
 	816,686 
 	Loss on dilution of CNRP 
 	$ 
 	(441,040) 
 	
 	The amount of $161,063 due from Winston to CNRP which was previously eliminated upon consolidation has been forgiven on de-consolidation. 
 	
 	A total of 671,844 preferred shares with a value of $671,844 issued to CNRP which was previously eliminated upon consolidation is now included in the share capital of Winston on de-consolidation. 

 	

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	7. 
 	 Financial Risk Management and Capital Management 
 	 
 	 Financial risk management objectives and policies 
 	  
 	The Company is exposed to various financial risks resulting from both its operations and its investments activities. The Company's management, with the Board of Directors oversight, manages financial risks. Where material, these risks will be reviewed and monitored by the Board of Directors. The Company does not enter into financial instrument agreements including derivative financial instruments for speculative purposes. 
 	
 	 Financial risks 
 	
 	The Company's main financial risk exposure and its financial risk management policies are as follows: 
 	
 	 Credit risk 
 	Credit risk is the risk of loss associated with a counter-party’s inability to fulfill its payment obligations. The credit risk is limited to the carrying value amount carried on the statement of financial position. The Company’s assets most susceptible to credit risk is its cash, which is held at a Canadian chartered bank in a non-interest bearing account and government GST recoverable, which is due from the Canadian government. As such, the risk of loss on these assets is minimal. 
 	
 	 Market risk 
 	Market risk is the risk of uncertainty arising primarily from possible commodity market price movements and their impact on the future economic viability of the Company’s projects and ability of the Company to raise capital. These market risks are evaluated by monitoring changes in key economic indicators and market information on an ongoing basis and adjusting operating and exploration budgets accordingly. 
 	
 	 Fair value risk 
 	Fair value risk is the potential for fair value fluctuations in the value of a financial instrument. The level of market risk to which the Company is exposed varies depending on market conditions, and expectations of future price and yield movements. The Company believes the carrying amounts of its financial assets and financial liabilities are a reasonable approximation of fair value. 
 	
 	 Interest rate risk 
 	Interest rate risk is the potential for fair value changes of a financial instrument resulting from changes in interest rates. 
 	The Company is not exposed to interest rate risk. 
 	
 	 Liquidity risk 
 	Liquidity risk is the risk the Company will not be able to meet its financial obligations as they fall due. The Company manages its liquidity needs by carefully monitoring cash outflows due in day-to-day business. As at July 31, 2017 the Company had, at its disposal, $1,445,761 in cash. The Company will require additional working capital to fund its operations. There is no guarantee that market conditions will be conducive to raising such additional equity capital. 
 	
 	 Foreign currency risk 
 	The Company is exposed to currency risks on its United States dollar denominated working capital balances due to changes in the US dollar/Canadian dollar exchange rate. As of July 31, 2017, the Company does not use derivative instruments to reduce its exposure to currency risk. 

 	

 	

 	 
 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	7. 
 	Financial Risk Management and Capital Management (continued) 
 	
 	 Financial risks (continued) 
 	
 	The carrying values of the Company’s financial instruments carried at amortized cost approximate fair values due to their short duration. 
 	
 	The Company has designated its cash as fair value through profit or loss. The GST recoverable is categorized as loans and receivables whereby they are initially recognized at fair value and then subsequently carried at amortized cost. 
 	Accounts payables and accrued liabilities and due to related parties are classified as other financial liabilities whereby they are initially recognized at fair value and then measured at amortized cost. 
 	
 	The carrying values, which approximate fair values of the Company’s financial instruments are as follows: 

 	 
 	As at July 31, 2017 
 	 As at July 31, 2016 
 	Financial Assets 

 	

 	 Loans and receivables 

 	

 	GST recoverable 
 	$ 
 	33,377 
 	$ 
 	5,166 
 	
 	Loan receivable 
 	$ 
 	371,408 
 	$ 
 	- 
 	
 	Investment 
 	$ 
 	125,000 
 	$ 
 	- 
 	
 	Cash 
 	$ 
 	1,445,761 
 	$ 
 	84 

 	 

 	Financial Liabilities 

 	

 	 Other financial liabilities 

 	

 	Accounts payable 
 	$ 
 	40,623 
 	$ 
 	40,298 
 	
 	Due to related parties 
 	$ 
 	- 
 	$ 
 	94,404 
 	 
 	Capital Management 
 	 
 	The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition of new business interests to ensure it continues as a going concern. 
 	The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. 
 	
 	The Company defines its capital as its shareholders' equity. As at July 31, 2017, the Company's capital resources amounted to $1,963,716 (2016 - deficiency of $129,445). 
 	
 	As of July 31, 2017 the Company is changing its business from natural resources to the cannabis sector (note 15). 
 	
 	The Company’s capital management objectives, policies and processes have remained unchanged during the year ended July 31, 2017. The Company is not subject to any capital requirements imposed by a lending institution. 

 	
 	 
 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	8. 
 	Investments in Associates 
 	 
 	During the year ended July 31, 2016, investments in Zara, Leo and Hadley were accounted for using the equity method of accounting. On January 29, 2016, the Company distributed to its shareholders all its interest in Zara, Leo and Hadley and no longer has any interest in these companies (note 5). 

 	During the year ended July 31, 2016, the Company recognized $3,013 in losses from the above companies. 
 	
 	9. 
 	 Exploration and Evaluation Assets 
 	
 	Pigeon River 
 	(Ontario property) 

 	(25% interest) 
 	Balance, July 31, 2015 
 	$ 
 	- 
 	Acquisition 
 	 
 	9,000 
 	Balance, July 31, 2016 
 	 
 	9,000 
 	Write-off 
 	
 	(9,000) 
 	Balance, July 31, 2017 
 	$ 
 	- 
 	 
 	Pigeon River 
 	 
 	On January 19, 2016, the Company purchased a 25% interest in the Pigeon River mining claim from Zara for the sum of $9,000. The Pigeon River mining claim is located in the Pigeon River area of Northwest Ontario. During the year ended July 31, 2017, the Company wrote off Pigeon River Property. 
 	
 	10. 
 	Prepaid Expenses 
 	
 	As at July 31, 2017, the Company has prepaid expenses of $72,500 (2016 - $nil) consisting of prepaid rent. 
 	
 	11. 
 	 Accounts Payable and Accrued Liabilities 

 	As at 
 	As at 
 	 
 	July 31, 2017 
 	 
 	July 31, 2016 
 	Accounts payable (note 12) 
 	$ 
 	40,623 $ 
 	40,298 
 	Accrued liabilities 
 	 
 	43,707 
 	 
 	8,993 
 	
 	$ 
 	84,330 $ 
 	49,291 
 	
 	The accounts payable and accrued liabilities which arise from the Company’s day to day operations have standard vendor terms and are normally settled between one and two months. 

 	
 	 
 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	12. 
 	 Related Party Transactions and Disclosures 
 	 
 	The amount due to related parties and companies amounts to $nil (2016 - $94,404), the business purpose of which were made to provide working capital to the Company, and is comprised of amounts due to Daniel Wettreich, a former officer and director of the Company, of $nil (2016 - $50,399), a payable to GreenBank Capital Inc. of $nil (2016 - $578), a payable to Sammiri Capital Inc. ("Sammiri"), a private company owned by Daniel Wettreich of $nil (2016 - $43,427). The amounts are interest free, payable on demand and have no set repayment terms. During the year ended July 31, 2017 
 	an amount of $1,000 due to Daniel Wettreich was forgiven. 
 	
 	During the year ended July 31, 2017, the Company incurred transfer agent fees of $29,824 (2016 - $16,823) to Reliable Stock Transfer Inc., ("Reliable") a company owned by Daniel Wettreich for the provision of share transfer services. 
 	
 	As at July 31, 2017, the amount owed to Reliable is $nil (2016 - $19,585) and has been included in the accounts payable (note 11). During the year ended July 31, 2017 an amount of $21,691 was forgiven. 
 	
 	The following transaction occurred between related parties during the years ended July 31, 2017 and 2016: 

 	 
 	July 31, 2017 
 	 
 	July 31, 2016 
 	Management fees paid to the current CEO and director 
 	$ 
 	4,000 $ 
 	- 
 	Consulting expenses paid to former directors 
 	 
 	72,000 
 	 
 	50,399 
 	Share issuance costs paid to a company controlled by a former director 
 	 
 	100,000 
 	 
 	- 
 	Professional fees paid to a company controlled by a former director 
 	 
 	18,742 
 	 
 	44,005 
 	
 	$ 
 	194,742 $ 
 	94,404 
 	
 	13. 
 	 Loan Receivable 
 	
 	As at July 31, 2017, the Company has a loan receivable of $371,408 due from GTT. The loan has no set terms of repayment, is interest free, and is due on demand (notes 1 and 15). 
 	
 	14. 
 	 Share Capital and Reserves 
 	 
 	Share capital 
 	
 	The Company’s authorized share capital consists of: 
 	
 	• 
 	an unlimited number of common shares without par value; and 
 	• 
 	an unlimited number of preferred shares without special rights or restrictions attached. A total of 671,844 
 	preferred shares with a value of $671,844 are issued and outstanding as of July 31, 2016 and 2017. 
 	
 	On January 31, 2017, the Company consolidated its issued and outstanding share capital on the basis of one post-consolidation share for each three pre-consolidation common shares. The shares began trading on a consolidated basis on February 1, 2017. All references to share capital have been retroactively restated to reflect the share consolidation. 
 	
 	On February 2, 2017, the Company closed a private placement of 10,000,000 units at a price of $0.06 per unit. A total of $600,000 was raised. Each unit consists of one common share and one share purchase warrant. Each warrant has an exercise price of $0.06 per share, and is exercisable within two years after issuance. The fair value of warrants issued in connection with the private placement was estimated to be $296,103. 
 	
 	On March 22, 2017, the Company closed a private placement of 11,600,000 units at a price of $0.25 per unit for total proceeds of $2,900,000. Each unit consists of one common share and one share purchase warrant, exercisable within two years after issuance at an exercise price of $0.50. In connection with the private placement, the Company incurred 

 	 
 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	 
 	14. 
 	 Share Capital and Reserves (continued) 
 	
 	Share capital (continued) 
 	
 	share issuance costs of $402,894 including 245,440 finders’ warrants valued at $59,482. The finder’s warrants have the same exercise price and terms as the warrants forming part of the units. The fair value of warrants issued in connection with the private placement was estimated to be $1,427,464. 
 	
 	During the year ended July 31, 2017, the Company issued 50,000 common shares from exercise of warrants at $0.15 
 	per share for a gross proceeds of $7,500. 
 	
 	Preferred 
 	Number of 
 	Common 
 	Share 
 	
 	Shares 
 	Share Capital 
 	Capital 
 	Reserves 
 	Total 
 	Balance July 31, 2016 and 
 	2015 
 	3,483,840 
 	$ 9,603,437 $ 671,844 $ 548,000 
 	$ 9,640,437 
 	Private placement – February 
 	2, 2017 
 	10,000,000 
 	303,897 
 	- 
 	296,103 
 	600,000 
 	Private placement – March 22, 
 	2017 
 	11,600,000 
 	1,472,536 
 	- 
 	1,427,464 
 	2,900,000 
 	Subscription receivable 
 	- 
 	(30,000) 
 	- 
 	- 
 	(30,000) 
 	Exercise of warrants 
 	50,000 
 	7,500 
 	- 
 	- 
 	7,500 
 	Share issuance cost 
 	- 
 	(402,894) 
 	- 
 	59,482 
 	(343,412) 
 	Balance July 31, 2017 
 	25,133,840 
 	$ 10,954,476 $ 671,844 $ 2,331,049 
 	$ 12,774,525 
 	 
 	Basic and diluted loss per share 
 	 
 	The calculation of basic and diluted loss per share for the year ended July 31, 2017 was based on the loss attributable to common shareholders of $1,040,927 (2016 - $151,662) and the weighted average number of common shares outstanding of 12,564,526 (2016 - 3,287,445). Diluted loss per share did not include the effect of nil options (2016 - 210,000 options) and 22,954,887 warrants (2016 - 1,159,447) as they are anti-dilutive. 
 	
 	Warrants 
 	
 	The issued and outstanding warrants balance at July 31, 2017 is comprised as follows: 

 	Number of 
 	warrants 
 	Balance, July 31, 2016 and 2015 
 	1,159,447 
 	Warrants issued on February 2, 2017 
 	10,000,000 
 	Warrants issued on March 22, 2017 
 	11,845,440 
 	Warrants exercised on April 25, 2017 
 	(50,000) 
 	Balance, July 31, 2017 
 	22,954,887 
 	Number of 
 	Issue date 
 	
 	Expiry date 
 	Exercise price 
 	warrants 
 	October 9, 2014 
 	
 	October 9, 2017 
 	$0.15 
 	1,109,447 
 	February 2, 2017 
 	
 	February 2, 2019 
 	$0.06 
 	10,000,000 
 	March 22, 2017 
 	
 	March 22, 2019 
 	$0.50 
 	11,845,440 

 	

 	

 	

 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	14. 
 	 Share Capital and Reserves (continued) 
 	
 	During the year ended July 31, 2017, the fair value of the warrants issued has been estimated using the Black- Scholes Option Pricing Model assuming a risk free rate of 0.74% to 0.77%, an expected life of 2 years, an expected volatility of 315.19% to 323.91%, and no expected dividends. 
 	 
 	Stock options 
 	
 	The Company has a stock option plan in place under which the Board of Directors may grant options to acquire common shares of the Company to qualified directors, officers, employees and other service providers. The stock options vest according to the provisions of the individual option agreements approved by the directors’ resolutions and have a maximum life of ten years. The plan allows for the issuance of up to 10% of the number of issued and outstanding common shares of the Company at any time on a non-diluted basis. 
 	
 	The following table summarizes the activity in stock options over the year. 

 	Number of stock 
 	Weighted average 
 	Fair value ($) 
 	options 
 	exercise price ($) 
 	Balance, July 31, 2015 
 	15,831 
 	676,667 
 	0.15 
 	Dilution of CNRP 
 	(4,525) 
 	(466,667) 
 	0.15 
 	Balance, July 31, 2016 
 	11,306 
 	210,000 
 	0.15 
 	Expired/forfeited 
 	(11,306) 
 	(210,000) 
 	0.15 
 	Balance, July 31, 2017 
 	- 
 	-  
 	-  
 	
 	There were no stock options outstanding as at July 31, 2017. 
 	 
 	Contributed surplus 
 	
 	Contributed surplus includes the accumulated fair value of share-based compensation and warrants transferred from share-based payment reserve and warrant reserve upon cancellation or expiry of the stock options and warrants. A summary of the changes in the Company’s contributed surplus is set out below: Contributed 
 	 
 	Option Reserve 
 	Warrant Reserve 
 	Surplus 
 	Balance, July 31, 2015 
 	$ 15,831 
 	$ 37,000 
 	$ 1,125,994 
 	Dilution of CNRP 
 	(4,525) 
 	- 
 	(626,300) 
 	Balance, July 31, 2016 
 	11,306 
 	37,000 
 	499,694 
 	Expired/forfeited 
 	(11,306) 
 	
 	11,306 
 	Warrants granted 
 	- 
 	1,783,049 
 	- 
 	Balance, July 31, 2017 
 	$ - 
 	$ 1,820,049 
 	$ 511,000 

 	
 	 
 	Winston Resources Inc.  
 	Notes to Financial Statements 
 	Years Ended July 31, 2017 and 2016 
 	(Expressed in Canadian Dollars) 
 	(Audited) 
 	
 	15. 
 	 Definitive Agreement with GTT 
 	
 	On May 31, 2017, the Company entered into a definitive agreement to acquire GTT through a reverse take-over. After the completion of this transaction, GTT will become the business of Winston. As at July 31, 2017 and the date of these financial statements, this transaction is not yet completed. Pursuant to the agreement, the Company will issue an aggregate of 5,500,000 common shares to the existing shareholders of GTT, on a pro rata basis, at a price of $0.45 per share for total consideration of $2,475,000 plus $125,000 in cash (paid). The Company was required to complete a concurrent private placement. In connection with the same, on March 22, 2017, the Company closed a non-brokered private placement of 11,600,000 units (Note 14). Completion of the transaction is subject to a number of conditions, including but not limited to satisfactory due diligence and acceptance of the Canadian Securities Exchange. The transaction cannot close until the required approvals are obtained and the other conditions to the transaction are satisfied. 
 	
 	16. 
 	Deferred Income Taxes 
 	
 	The Company’s income tax provision differs from the amount resulting from the application of the Canadian statutory income tax rate. A reconciliation of the combined Canadian federal and provincial income tax rates, as well as the United States federal and state income tax rates, with the Company’s effective tax rate is as follows: 2017 
 	2016 
 	Loss before income taxes 
 	$ (1,040,927) 
 	$ (151,773) 
 	Combined statutory rate 
 	26% 
 	26.5% 
 	
 	(270,641) 
 	(40,000) 
 	Loss on dilution of CNRP 
 	- 
 	117,000 
 	Gain on dilution of ownership interest in associates 
 	- 
 	(50,000) 
 	Financing costs amortization 
 	- 
 	(2,000) 
 	Share issuance costs 
 	(53,261) 
 	- 
 	Other 
 	678 
 	(43,000) 
 	Benefit of tax losses not recognized 
 	323,224 
 	18,000 
 	
 	$ - 
 	$ - 
 	
 	As at July 31, 2017, the Company has Canadian non-capital losses of approximately $2,335,000 (2016 - $911,000) available for deduction against future Canadian taxable income, the balances of which will expire as follows: 2032 
 	$ 
 	26,000 
 	2033 
 	593,000 
 	2034 
 	198,000 
 	2035 
 	377,000 
 	2036 
 	70,000 
 	2037 
 	1,071,000 
 	
 	$ 2,335,000 
 	 
 	The tax effects of temporary differences that give rise to significant portions of future tax assets are as follows: 2017 
 	2016 
 	Benefit of non-capital losses 
 	$ 607,000 
 	$ 
 	329,000 
 	Mineral property exploration 
 	259,000 
 	257,000 
 	Share issue costs 
 	43,000 
 	- 
 	Less: Valuation allowance (100% impairment deferred tax asset) (909,000) 
 	(586,000) 
 	
 	$ - 
 	$ - 
 	
 	Deferred income tax assets have been impaired in respect of these items because it is not probable that future profit will be available against which the Company can utilize the benefits therefrom. 
 	
 	Document Outline

 DALE MATHESON CARR-HILTON LABONTE LLP Winston Resources Inc. Statements of Changes Equity (Deficiency) (Expressed in Canadian Dollars) 1. Nature of Operations 2. Going Concern Assumption 3. Statement of Compliance and Basis of Presentation (b) Basis of presentation 4. Significant Accounting Policies 4. Significant Accounting Policies (continued) 4. Significant Accounting Policies (continued) 4. Significant Accounting Policies (continued) Income taxes 4. Significant Accounting Policies (continued) 5. Distribution of Share Dividends 7. Financial Risk Management and Capital Management Financial risk management objectives and policies Financial risks Credit risk Market risk Fair value risk Interest rate risk Liquidity risk Foreign currency risk 7. Financial Risk Management and Capital Management (continued) Financial risks (continued) 8. Investments in Associates 9. Exploration and Evaluation Assets 10. Prepaid Expenses 11. Accounts Payable and Accrued Liabilities 12. Related Party Transactions and Disclosures 13. Loan Receivable 14. Share Capital and Reserves Share capital 14. Share Capital and Reserves (continued) Share capital (continued) Basic and diluted loss per share Warrants 14. Share Capital and Reserves (continued) Stock options Contributed surplus 15. Definitive Agreement with GTT 16. Deferred Income Taxes