CANN GROUP LIMITED
and its controlled entities
ABN 25 603 949 739
ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2016
CANN GROUP LIMITED
ABN 25 603 949 739
Corporate Information
These are the first full financial statements of Cann Group Ltd (the company) and its 100% owned subsidiaries,
including Cannproducts Pty Ltd (incorporated and domiciled in Victoria, Australia), Cannoperations Pty Ltd
(incorporated and domiciled in Victoria, Australia), Anslinger Holdings Pty Ltd (incorporated and domiciled in
Victoria, Australia), Cann Investments Pty Ltd (incorporated and domiciled in Victoria, Australia), Cannproducts NZ
Limited (domiciled in New Zealand) and Cann Global Inc (incorporated and domiciled in Nevada, USA) (together,
the Group). These financial statements are for the year ended 30 June 2016. Unless otherwise stated, all amounts
are presented in $AUD.
A description of the group’s operations and of its principal activities is included in the review of operations and
activities in the attaching directors’ report.
Directors
Mr Allan McCallum (Chairman)
Mr Philip Jacobsen (Deputy Chairman)
Mr Douglas Rathbone
Mr Alberto Mariani (resigned 11 April 2016)
Mr Michael Murchison (appointed 3 December 2015)
Mr Geoffrey Pearce (appointed 11 April 2016)
Registered and Principal Office
52 Duerdin Street
Clayton VIC 3168
Contents
Directors’ report
Auditor’s Independence Declaration
Annual financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent Auditor’s report
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6
7
8
9
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11
28
29
CANN GROUP LIMITED
ABN 25 603 949 739
DIRECTORS’ REPORT
Your directors present their report on the group for the year ended 30 June 2016.
INFORMATION ON DIRECTORS
The names and details of the directors in office during the period and until the date of this report are as
follows. Directors have been in office for this entire period unless otherwise stated.
The names of the directors in office at any time during or since the end of the year and their qualifications
are as follows:
Allan McCallum, Dip. Ag Science, FAICD (Executive Chairman)
An experienced public company director who has strong ethics, proven leadership capabilities and extensive
experience in strategy development and implementation and mergers and acquisitions. Allan is a former Director
of Incitec Pivot Ltd (ASX IPL), the current Chair of Tassal Group Ltd (ASX TGR) Australia’s largest producer of Atlantic
salmon and a Director of Medical Developments International Ltd (ASX MVP), a pharmaceutical and device
manufacturer, marketing nationally and internationally.
Special Responsibilities - Member – Audit and Risk Committee
Interest in Shares and Performance Rights
3,840,000 Ordinary Shares
640,000 Options
2,000,000 Performance Rights Class A
1,000,000 Performance Rights Class B
Philip Robert Nicholas Jacobsen, CPA (Deputy Chairman)
An experienced public company director, he co-founded Premier Artists in 1975 and The Frontier Touring Company
in 1979. He serves as a director of Liberation Music, Premier Artists, The Harbour Agency and Jacobsen Bloodstock.
Former Chair of MCM Entertainment Group, Philip brings to the Board a 45 plus year history of applying solid fiscal
accounting perspectives to an emerging business model in a constantly changing, high demand market place.
Special Responsibilities - Chairman – Audit and Risk Committee
Interest in Shares and Performance Rights
2,300,000 Ordinary Shares
800,000 Options
1,000,000 Performance Rights Class A
500,000 Performance Rights Class B
Douglas John Rathbone, AM, FATSE, FI ChemE, ARMIT B Comm, TTC
An experienced public company director, he is the former Managing Director and CEO of Nufarm Limited – an ASX
200 listed company and is a former Board member of the FERNZ Corporation and the CSIRO. He is a member of
the RABO Bank Advisory Board, an Honorary Life Governor of the Royal Children’s Hospital and a former Director
of the Burnett Centre for Medical Research. Doug brings to the Board experienced management and corporate
governance skills together with a passion to grow the business having successfully transformed Nufarm to become
one of the world’s leading crop protection and seed companies with an extensive global footprint.
Special Responsibilities - Member – Audit and Risk Committee
Interest in Shares and Performance Rights
1,120,000 Ordinary Shares
320,000 Options
80,000 Performance Rights Class A
80,000 Performance Rights Class B
1
CANN GROUP LIMITED
ABN 25 603 949 739
Michael Kenneth Murchison, MAICD (appointed 3 December 2015)
Michael is an experienced project manager, with direct experience and business interests in the US regulated
cannabis industry. He holds certifications under Californian medicinal cannabis laws and is a long term advocate
for the development of a regulated medicinal cannabis industry in Australia. Michael founded the first Cann Group
company in early 2014 after a successful career in the music and entertainment promotions industry. Apart from
his extensive knowledge of the international medicinal cannabis industry, Michael brings experience in logistics,
international business and technology licensing.
Special Responsibilities - Member – Audit and Risk Committee
Interest in Shares and Performance Rights
13,600,000 Ordinary Shares
6,480,000 Performance Rights Class A
4,260,000 Performance Rights Class B
Geoffrey Ronald Pearce (appointed 11 April 2016)
Geoff is a successful entrepreneur and businessman with more than 40 years’ experience in the personal care
industry. He established and owned Scental Pacific Pty Ltd and grew the business to become Victoria’s largest
manufacturer of personal care products before selling it to the Smorgon Family. He later built a contract
manufacturing business, Beautiworx Australia Pty Ltd, which was also sold. Geoff currently owns The Continental
Group, which supplies pharmaceutical packaging and raw materials and has developed alliances with some of the
world’s leading herbal extract manufacturers. He has extensive experience in areas including manufacturing,
procurement, distribution and regulatory affairs.
Special Responsibilities - Member – Audit and Risk Committee
Interest in Shares and Performance Rights
520,000 Ordinary Shares
320,000 Options
Directors have been in office since the start of the period to the date of this report unless otherwise stated.
CHIEF EXECUTIVE OFFICER
Peter Crock – CEO, B.Ag.Sci (Hon); MBA (appointed 23 May 2016)
Peter is an experienced public company senior manager with strong skills in marketing and technology
development. In a 28-year career at Nufarm Limited, Peter held senior management roles in marketing,
business development, and information technology, most recently heading up the group’s new technologies
division which involved the licensing and commercial development of several new agribusiness technologies.
He has project managed the successful integration of newly acquired businesses and has extensive experience
working with regulators in Australia and overseas.
COMPANY SECRETARY
Richard Baker, M.Commrcl Law, B.Ec., CPA
A senior experienced Financial Controller and Company Secretary, with extensive ASX experience, in terms of
governance, capital raisings and reporting including implementing internal controls, accounting and ERP systems
in established and start-up enterprises. He has had public practice experience in business services, taxation and
audit to a diverse range of clients involved in FMCG, manufacturing, professional services and transport and
gained a variety of experience as Financial Controller with previous employers including mineral exploration,
import and distribution, FMCG and professional consulting.
DIVIDENDS
No dividends have been paid or have been recommended during the period.
PRINCIPAL ACTIVITIES
The principal activities of the group during the year consisted of developing a manufacturing and a technology
structure to conduct scientific research with a view to commercialise the outputs of that research for medicinal
uses.
No significant change in the nature of these activities occurred during the period.
2
CANN GROUP LIMITED
ABN 25 603 949 739
OPERATING RESULTS FOR THE PERIOD
The group made an operating loss of $1,462,011 for the period ended 30 June 2016.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Capital raising
During the period the Company issued an Information Memorandum for a private capital raising (“the Offer”) up
to $648,000 at an offer price of $0.60 per new share together with a 1:1 option (for no additional consideration
and exercisable at $0.60, or $0.15 post the share-split of 30 June 2016) for each new share, with capacity to accept
oversubscriptions of $648,000, from sophisticated and professional investors under section 708 of the
Corporations Act. The Offer closed on 12 May 2016 and raised $1,927,000 (before costs).
Deregistration of Cannlabs Australia Pty Ltd
On 11 May 2016 the Directors of Cannlabs Australia Pty Ltd (ACN 603 792 794) (“Cannlabs”) applied for voluntary
deregistration of the Company. Cannlabs is a wholly-owned subsidiary of Cann Group Limited. The Australian
Securities and Investments Commission is processing the application as at the date of this report. It was
determined by the Board of Cann Group Limited that Cannlabs was superfluous to the Group structure going
forward and cost savings could be made by deregistering the Company.
There were no other significant changes in the state of affairs of the group during the year.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Other than matters referred to elsewhere in this report and above, further information as to likely developments
in the operations of the entity and the expected results of operations have not been included in this report because
the directors believe it would be likely to result in unreasonable prejudice to the entity.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The group’s operations are not subject to any particular environmental regulations.
DIRECTORS’ MEETINGS
The number of meetings of the Company’s Board of Directors and Audit and Risk Committee members held during
the year ended 30 June 2016 and the number of meetings attended by each Director / member were:
Board Meetings
Audit and Risk Committee Meetings
Number eligible
to attend
9
9
9
8
5
1
Name
Allan McCallum
Philip Jacobsen
Douglas Rathbone
Alberto Mariani
(resigned 11 April 2016)
Michael Murchison
(appointed 3 December
2015)
Geoff Pearce (appointed
11 April 2016)
OPTIONS
Number attended
9
9
9
8
5
1
Number eligible
to attend
2
2
2
2
1
-
Number attended
2
2
2
2
1
-
The group has on issue 12,846,667 options to purchase ordinary fully paid shares. The options were issued
pursuant to the Information Memorandum dated 11 April 2016 entitling each subscriber to one option at no
additional cost for each new share subscribed for under that Information Memorandum.
3
CANN GROUP LIMITED
ABN 25 603 949 739
The options are exercisable at $0.60 pre share-split and $0.15 post share-split (which occurred on 30 June 2016)
at any time during the period commencing from the date of its issue and expiring on the earlier of 4:00pm
(Melbourne, Victoria time) on 31 March 2017 or the date of allotment of new shares under a prospectus issued by
the Company in relation to its admission to the Official List of the ASX.
PERFORMANCE RIGHTS
The Company has issued 18,000,000 Performance Rights at $0.0001 per Right comprising 11,000,000 Class A
Performance Rights and 7,000,000 Class B Performance Rights of which:
•
•
9,560,000 Class A Performance Rights and 5,840,000 Class B Performance Rights (post share-split) have
been issued to Directors and Key Management Personnel of the Company; and
1,440,000 Class A Performance Rights and 1,160,000 Class B Performance Rights (post share-split) have
been issued to a former Director and non-related party consultants and advisors in consideration for
various advisory services.
The Performance Rights have the following milestones attached to them:
(i) Class A Performance Rights: if the Company issues further Shares in addition to the New Shares at
$1.50 per Share ($0.375 post share-split) or higher (subject to any adjustments as set out below in
(iii)); and
(ii) Class B Performance Rights: if the Company applies to be admitted to the Official List of the ASX or a
trade sale of the underlying business of the Company or the Company occurs.
(iii) If, at any time, the issued capital of the Company is reorganised (including consolidation, subdivision,
reduction or return), all rights of a holder of a Performance Right (including the Vesting Conditions)
are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the
time of the reorganisation.
The Performance Rights were issued for $0.0001 each and no consideration will be payable upon the vesting of
the Performance Rights.
Upon satisfaction of the relevant Performance Rights vesting, each Performance Right will, at the election of the
holder, vest and convert as follows:
(i) each Class A Performance Right converts into one Share; and
(ii) each Class B Performance Right converts into one Share.
If the Milestone attaching to a Performance Right has not been satisfied in the time periods set out below, it will
automatically lapse:
(i) Class A Performance Rights: 3 years from 22 May 2015;
(ii) Class B Performance Rights: 4 years from 22 May 2015;
otherwise, any Performance Right that has not been converted into a Share on or before the date of admission of
the Company to the Official List of the ASX will automatically lapse.
INDEMNIFYING OFFICERS OR AUDITOR
No indemnities have been given or insurance premiums paid, during or since the end of the period, for any
person who is or has been an officer or auditor of the group.
PROCEEDINGS ON BEHALF OF THE GROUP
No person has applied for leave of court to bring proceedings on behalf of the group or intervene in any
proceedings to which the group is a party for the purpose of taking responsibility on behalf of the group for all or
any part of those proceedings.
There were no proceedings during the period.
4
CANN GROUP LIMITED
ABN 25 603 949 739
EVENTS AFTER THE END OF THE REPORTING PERIOD
On 3 August 2016 the Directors wrote to the Company advising of their notice of intention to provide financial
support to Cann Group Limited by not calling upon Director Fees owing or accrued by that Director, so that the
Company has sufficient working capital in order to pay its debts as and when they fall due and payable, for a period
of at least 13 months from the date of signing of the letter, or to such a point in time that the Company is able to
satisfy its commitments and obligations to its suppliers and employees without such help and without jeopardising
its available working capital position. In their letters the Directors also noted that they have the option, but not
the obligation, to provide additional working capital to the Company by the exercise their option-holdings in a
seed capital raising prior to the expiry date of those options, being 31 March 2017. Details of their interests in
share options, exercisable at a strike price of 15 cents are disclosed in Note 5.
There were no other matters or circumstances have arisen since the end of the year which significantly affected
or may significantly affect the operation of the group, the results of those operations, or the state of affairs of the
group in future financial years.
Signed in accordance with a resolution of the Board of Directors:
____________________
Allan McCallum
CHAIRMAN
Date: 3 August 2016
5
CANN GROUP LIMITED
ABN 25 603 949 739
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CANN GROUP LIMITED AND CONTROLLED
ENTITIES (CONT)
Auditor’s Opinion
In our opinion:
c)
the accompanying financial report of Cann Group Limited is in accordance with the Corporations Act 2001,
including:
iii. giving a true and fair view of the Company and consolidated entity’s financial position as at 30 June 2016 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
iv.
Corporations Regulations 2001; and
the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.
d)
William Buck Audit (VIC) Pty Ltd
ABN: 59 116 151 136
N. S. Benbow
Director
Dated this 3rd day of August, 2016
6
CANN GROUP LIMITED
ABN 25 603 949 739
Consolidated Statement of Profit or Loss
and other Comprehensive Income
FOR THE PERIOD ENDED 30 JUNE 2016
For the period
30 January
2015 to 30
June 2015
$
Note
2016
$
Revenue
3
6,662
5,726
Administration and corporate costs
Depreciation
Employee remuneration
Finance costs
Occupancy expenses
Operational preparation costs
Professional fees
Performance rights expense
Share based payments
Research and development
Travel expenses
Other expenses
(589,200)
(28,917)
(216,778)
(15,533)
(79,754)
(178,140)
(95,682)
(83,904)
-
(64,404)
(93,287)
(23,074)
(380,958)
-
-
(5,231)
(15,303)
(45,693)
(13,025)
(381,163)
(519,634)
(182,247)
(173,299)
(29,359)
Loss before income tax
Income tax expense
Loss attributable to members of the company
Other comprehensive income
Total comprehensive loss attributable to
members of the company
4
(1,462,011)
-
(1,462,011)
-
(1,740,186)
-
(1,740,186)
-
(1,462,011)
(1,740,186)
The accompanying notes form part of these statements.
7
CANN GROUP LIMITED
ABN 25 603 949 739
Consolidated Statement of Financial Position
AS AT 30 JUNE 2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade receivables and other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Rental bond
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Unsecured trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Ordinary share capital
Performance rights reserve
Accumulated losses
TOTAL EQUITY
The accompanying notes form part of these statements
Note
2016
$
2015
$
7
8
9
11
13
1,344,055
5,519
1,349,574
450,824
103,961
554,785
486,758
35,000
521,758
1,871,332
171,369
-
171,369
726,154
181,849
181,849
181,849
77,829
77,829
77,829
1,689,483
648,325
4,376,271
1,957,006
515,409
431,505
(3,202,197)
(1,740,186)
1,689,483
648,325
8
CANN GROUP LIMITED
ABN 25 603 949 739
Consolidated Statement of Changes in Equity
FOR THE PERIOD ENDED 30 JUNE 2016
Ordinary
shares
$
1,957,006
2,527,000
(107,735)
-
-
Performance
Rights
reserve
Accumulated
losses
Total
equity
$
431,505
$
(1,740,186)
-
-
83,904
-
-
-
$
648,325
2,527,000
(107,735)
83,904
-
(1,462,011)
(1,462,011)
Balance at 1 July 2015
Issue of shares
Costs of issuing shares
Vesting of Class B performance
rights
Comprehensive loss for the
period ended 30 June 2016
Balance at 30 June 2016
4,376,271
515,409
(3,202,197)
1,689,483
Ordinary
shares
$
-
1,992,006
(35,000)
-
-
Performance
Rights
reserve
Accumulated
losses
$
$
-
-
431,505
Total
equity
$
-
1,992,006
(35,000)
431,505
-
-
-
-
(1,740,186)
(1,740,186)
Balance at 30 January 2015
Issue of shares
Costs of issuing shares
Issue or performance rights (net
of costs)
Comprehensive loss for the
period ended 30 June 2015
Balance at 30 June 2015
1,957,006
431,505
(1,740,186)
648,325
The accompanying notes form part of these statements
9
CANN GROUP LIMITED
ABN 25 603 949 739
Consolidated Statement of Cash Flows
FOR THE PERIOD ENDED 30 JUNE 2016
Note
2016
$
2015
$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest receipted
Net cash flows provided used in operating activities
17
420
(1,253,428)
6,280
(1,246,728)
3,357
(272,231)
1,067
(267,807)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Acquisition of other assets
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of shares
Costs of issuing shares
Net cash flows provided by financing activities
Net increase/ (decrease) in cash held
Cash and cash equivalents at the beginning of the period
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD
The accompanying notes form part of these statements
(344,305)
(35,000)
(379,305)
(171,369)
(171,369)
2,627,000
(107,736)
2,519,264
925,000
(35,000)
890,000
893,231
450,824
450,824
-
1,344,055
450,824
10
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
1.
CORPORATE INFORMATION
These are the first full financial statements of Cann Group Limited (the company) and its 100% owned subsidiaries,
including Cannproducts Pty Ltd (incorporated and domiciled in Victoria, Australia), Cannoperations Pty Ltd
(incorporated and domiciled in Victoria, Australia), Anslinger Holdings Pty Ltd (incorporated and domiciled in
Victoria, Australia), Cann Investments Pty Ltd (incorporated and domiciled in Victoria, Australia), Cannproducts NZ
Limited (domiciled in New Zealand) and Cann Global Inc (incorporated and domiciled in Nevada, USA) (together,
the Group). Cann Group Limited is an unlisted public company incorporated and domiciled in Victoria, Australia.
These financial statements are for the year ended 30 June 2016. Unless otherwise stated, all amounts are
presented in $AUD, which is the functional and presentation currency of all entities in the Group. The financial
statements were authorised for issue by the Directors on the date of signing the attached Directors’ Declaration.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of accounting
The financial statements are general purpose financial statements that have been prepared in accordance with
Interpretations, other authoritative
including Australian Accounting
Australian Accounting Standards,
announcements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001 as
appropriate for for-profit oriented entities.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial
statements containing relevant and reliable information about transactions, events and conditions. Compliance
with Australian Accounting Standards ensures that the financial statements and notes also comply with
International Financial Reporting Standards. Material accounting policies adopted in the preparation of these
financial statements are presented below. They have been consistently applied unless otherwise stated.
The financial statements have been prepared on an accruals basis and are based on historical costs modified,
where applicable, by the measurement of fair value of selected non-current assets, financial assets and financial
liabilities.
The amounts presented in the financial statements have been rounded to the nearest dollar.
Accounting Standards and Interpretations
(i) Changes in accounting policy and disclosures
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting
period.
(ii) Accounting standards and interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended but are
not yet effective and have not been adopted by the Group for the annual reporting period ending 30 June
2016 are outlined in the table below.
Standard
Mandatory date for annual
reporting periods beginning
on or after)
Reporting period standard
adopted by the company
AASB 9 Financial Instruments and related standards
AASB 2014-4 Clarification of Acceptable Methods of
Depreciation and Amortisation
AASB 15 Revenue from Contracts with Customers and AASB
2014-5 Amendments to Australian Accounting Standards from
AASB 15
AASB 2014-9 Equity method in separate financial statements
AASB 2015-1 Annual improvements 2012-2014 cycle
AASB 2015-2 Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 101
AASB 2015-9 Amendments to Australian Accounting Standards
AASB 16 Leases
1 January 2018
1 January 2016
1 January 2018
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2019
1 July 2018
1 July 2016
1 July 2018
1 July 2016
1 July 2016
1 July 2016
1 July 2016
1 July 2018
11
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basis of accounting (continued)
Management have assessed that these new standards will not materially impact these financial statements.
(b)
Principles of Consolidation
These consolidated financial statements comprise the financial statements of the company and its controlled
entities throughout reporting period. Controlled entities refers to entities over which the group has the power to
govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the
voting rights. The existence and effect of the potential voting rights that are currently exercisable or convertible
are considered when assessing whether the group controls another entity.
The financial statements of the controlled entities used in the preparation of the consolidated financial statements
are prepared for the same reporting date as the company. Consistent accounting policies are applied to like
transactions and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group
transactions and dividends are eliminated in full.
Income Tax
(c)
The income tax expense (income) for the period comprises current income tax expense (income) and deferred tax
expense (income).
Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities
(assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation
authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during
the year as well as unused tax losses.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled and their measurement also reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be
utilised.
(d)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable after taking into account any
trade discounts and volume rebates allowed and is stated net of goods and services tax or value-added tax charges.
Revenue from credits received from the ATO for research and development activities is recognised when it can be
reliably measured and the probability of meeting the criteria for receipt of these credits is probable.
Revenue from the rendering of services is recognised at the point of delivery of those services as they are earned
under contractual agreement.
12
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e)
Cash and cash equivalents
Cash in the Statement of Financial Position comprise cash at bank and in hand.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
(f)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in
receipts from customers or payments to suppliers.
(g)
Trade and other payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services
provided to the group prior to the end of the financial year that are unpaid and arise when the group becomes
obliged to make future payments in respect of the purchase of these goods and services.
(h)
Trade and other receivables
Trade and other receivables include amounts due from customers for goods sold and services performed in the
ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting
period are classified as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any provision for impairment.
(i)
Financial Instruments
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual
provisions of the instrument. For financial assets, this is equivalent to the date that the group commits itself to
either purchase or sell the asset (i.e. trade date accounting is adopted).
Classification and subsequent measurement
Financial instruments are subsequently measured at amortised cost using the effective interest method, or cost.
Impairment
At each reporting date, the group’s directors assess whether there is objective evidence that the financial
instrument has been impaired. Impairment losses are recognised in the profit or loss.
13
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
2.
(j)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Plant and Equipment
Each class of plant and equipment is carried at cost less any accumulated depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash
flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows
have been discounted to their present values in determining recoverable amounts.
The cost of plant and equipment constructed within the Group includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads.
Depreciation
The depreciable amount of all plant and equipment is depreciated on a diminishing value basis over the asset’s
useful life to the group commencing from the time the asset is held ready for use.
As at 30 June 2016, the Group’s asset classes had effective useful lives as follows:
Asset Class
Grow Room facilities and infrastructure
Computer, network and security equipment
Tools and workshop equipment
Leasehold improvements
Office furniture and equipment
Useful Life
(years)
7
1 to 3
1 to 2
2
1 to 3
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and
losses are included in the statement of comprehensive income.
(k)
Impairment of Assets
At each reporting date, the group’s directors review the carrying values of the group’s tangible and intangible
assets to determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the asset’s fair value less cost to sell and value in
use, is compared to the assets carrying value. Any excess of the assets carrying value over its recoverable
amount is expensed to the income statement.
14
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(l)
Share Based Payments
The Company reflects in its comprehensive income (or loss) and its financial position the effects of share-based
payment transactions, including expenses associated with transactions in which shares are granted to related
parties, key management personnel and employees.
For share-based payments received by employees and key management personnel of the group, fair value is
measured by reference to the fair value of the equity instruments granted at their grant date, being the date that
both the recipient and the Company have a shared understanding of the terms and conditions connected to the
share-based payment. Any market-based vesting conditions are incorporated into the valuation of the share-based
payment arrangement as at the grant date of the share-based payment. Share-based payments with non-market
based performance conditions vest according to the pro-rata achievement of those conditions. Share-based
payments with market-based performance conditions are valued using a binomial model which incorporates from
both the performance rights arrangement and market data that existed at grant date.
(m)
Research and Development Tax Incentive
The Group does not recognise benefits from the research and development tax incentive as an asset as receipt of
incentive payments is not regarded as probable. The Directors believe the probable is when the tax incentive is
receipted in cash and also that it is reflected as income in the Consolidated Statement of Profit and Loss and Other
Comprehensive Income.
(n)
Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial statements based on historical
knowledge and best available current information. Estimates assume reasonable expectation of future events and
are based on current trends and economic data, obtained both externally and within the entity.
Key Judgement – determination of probability of achieving milestones for vesting of Performance Rights
In determining the probability of the Group achieving each of the respective milestones for the Class B
Performance Rights, which would permit vesting of the Performance Rights, the Directors took into account all
developments of the Group since the granting of the Performance Rights including operational, business and legal
progress to 30 June 2016 and progress towards an Initial Public Offering scheduled for the first half of the 2017
Financial Year. It was determined as at 30 June 2016 that the Group had a seventy-five percent (75%) likelihood
of achieving the milestone that would result in the vesting of the Class B Performance Rights.
This percentage was applied to the fair value of each class of the Class B Performance Rights at grant date thereby
resulting in the valuation of each class of Performance Rights as at 30 June 2016. The milestones for vesting of the
Performance Rights are contained in Note 13 – Performance Rights.
15
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Critical Accounting Estimates and Judgments (continued)
Key Judgement – non-recognition of carry-forward tax losses
The balance of future income tax benefit arising from current year tax losses and timing differences has not been
recognised as an asset because recovery is not regarded as probable. The future income tax benefit, which has
not been recognised as an asset, will only be obtained if:
(i)
the Company derives future assessable income of a nature and an amount sufficient to enable the benefit
to be realised;
(ii) the Company continues to comply with the conditions for deductibility imposed by law; and
(iii) no changes in tax legislation adversely affecting the Company realising the benefit.
Refer Note 4: Income Tax Expense.
Key Judgement – non-recognition of research and development tax incentive benefits
The balance of research and development tax incentive arising from operations of the Company has not been
recognised as an asset because receipt as at this stage as it cannot be reliably calculated. The research and
development tax incentive, which has not been recognised as an asset, will only be obtained if:
(i)
the Company’s activities fulfil the eligibility criteria of the research and development tax initiative and it
is successful in registering for the research and development tax initiative;
(ii) the Company continues to comply with the conditions for registration of the research and development
tax initiative imposed by law; and
(iii) no changes in tax legislation adversely affecting the Company realising the tax incentive from research
and development.
Refer Note 2: Summary of Significant Accounting Policies.
16
Notes to the financial statements
3.
REVENUE
Licencing fees
Other income
Interest received
Other income
4.
INCOME TAX EXPENSE
CANN GROUP LIMITED
ABN 25 603 949 739
For the period 30
January 2015 to 30
June 2015
$
2016
$
-
4,659
6,280
382
6,662
1,067
-
5,726
The prima-facie tax on profit from ordinary activities before income
tax is reconciled to income tax as follows:
Profit / (loss) before income tax
Prima-facie tax payable on profit / (loss) from ordinary activities
before income tax at 30%
Add:
Tax effect of:
-
Non-deductible expenses
The Directors estimate that the potential deferred income tax assets
not brought to account is
Tax benefits not recognised during the period
Income Tax Expense for the period
(1,462,011)
(1,740,186)
(438,603)
(522,056)
272
438,331
155,890
(366,166)
(804,497)
804,497
-
(366,166)
366,166
-
At the end of the reporting period, the group has tax losses of $804,497 that are available for offset against future
taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised due to
uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and
compliance with certain provision of the tax legislation of respective countries in which the companies operate.
5.
KEY MANAGEMENT PERSONNEL
(a) Names and positions held of key management personnel in office at any time during the year are:
Key Management Person
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Alberto Mariani (resigned 11 April 2016)
Mr Geoff Pearce (appointed 11 April 2016)
Mr Michael Murchison
Mr Peter Crock (appointed 23 May 2016)
Position
Chairman
Deputy Chairman
Director
Director
Director
Director
Chief Executive Officer
17
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
5. KEY MANAGEMENT PERSONNEL (continued)
(b) Number of Shares held by Key Management Personnel
Name
Balance 1
July 2015
Issued on
exercise of
Performance
Rights
Net Change
Other*
Net Change
Share Split**
Balance 30
June 2016
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Geoff Pearce
Mr Michael Murchison
Total
800,000
375,000
50,000
50,000
3,400,000
4,675,000
-
-
-
-
-
-
160,000
200,000
230,000
80,000
-
670,000
2,880,000
1,725,000
890,000
390,000
10,200,000
16,085,000
3,840,000
2,300,000
1,120,000
520,000
13,600,000
21,380,000
Name
Balance 30
January
2015
Received as
equity-
settled share
based
payment
Issued on
exercise of
Performance
Rights
Net Change
Other*
Balance 30
June 2015
750,000
Mr Allan McCallum
375,000
Mr Philip Jacobsen
-
Mr Douglas Rathbone
-
Mr Alberto Mariani
3,875,000
Mr Michael Murchison
Total
5,000,000
* Net Change Other refers to shares purchased or sold or otherwise transferred during the period.
** Net Change Share-split refers to the share-split on the basis that every share be divided into four fully
paid ordinary shares with effect from 5:00pm (Melbourne time) on 30 June 2016 approved at the Annual
General Meeting held that day.
800,000
375,000
50,000
250,000
3,400,000
4,875,000
50,000
-
50,000
250,000
(475,000)
(125,000)
-
-
-
-
-
-
-
-
-
-
-
-
(c) Number of Options held by Key Management Personnel
Name
Balance 1
July 2015
Net Change
Other*
Balance 30
June 2016
Net Change
Share Split**
480,000
600,000
240,000
240,000
1,560,000
-
-
-
-
-
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Geoff Pearce
Total
* Net Change Other refers to Options purchased or sold or otherwise transferred during the period.
** Net Change Share-split refers to the share-split on the basis that every share be divided into four fully
paid ordinary shares with effect from 5:00pm (Melbourne time) on 30 June 2016 approved at the Annual
General Meeting held that day, applied in the same basis to all securities on issue including options and
performance rights.
640,000
800,000
320,000
320,000
2,080,000
160,000
200,000
80,000
80,000
520,000
18
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
5. KEY MANAGEMENT PERSONNEL (continued)
(d) Number of Performance Rights Class A held by Key Management Personnel
Name
Balance 1
July 2015
Net Change
Other*
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Michael Murchison
Total
500,000
250,000
20,000
1,487,000
2,257,000
-
-
-
133,000
133,000
Net Change
Share Split**
1,500,000
750,000
60,000
4,860,000
7,170,000
Balance 30
June 2016
2,000,000
1,000,000
80,000
6,480,000
9,560,000
Name
Balance 30
June 2015
Net Change
Other*
Balance 30
January 2015
-
-
-
-
-
-
Received as
compensation
500,000
Mr Allan McCallum
250,000
Mr Philip Jacobsen
20,000
Mr Douglas Rathbone
160,000
Mr Alberto Mariani
1,487,500
Mr Michael Murchison
Total
2,417,500
* Net Change Other refers to Performance Rights Class A purchased or sold or otherwise transferred
during the period.
** Net Change Share-split refers to the share-split on the basis that every share be divided into four fully
paid ordinary shares with effect from 5:00pm (Melbourne time) on 30 June 2016 approved at the Annual
General Meeting held that day, applied in the same basis to all securities on issue including options and
performance rights.
500,000
250,000
20,000
160,000
1,487,500
2,417,500
-
-
-
-
-
-
(e) Number of Performance Rights Class B held by Key Management Personnel
Name
Balance 1
July 2015
Net Change
Other*
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Michael Murchison
Total
250,000
125,000
20,000
932,500
1,327,500
-
-
-
132,500
132,500
Net Change
Share Split**
750,000
375,000
60,000
3,195,000
4,380,000
Balance 30
June 2016
1,000,000
500,000
80,000
4,260,000
5,840,000
Name
Balance 30
June 2015
Net Change
Other*
Balance 30
January 2015
-
-
-
-
-
-
Received as
compensation
250,000
Mr Allan McCallum
125,000
Mr Philip Jacobsen
20,000
Mr Douglas Rathbone
90,000
Mr Alberto Mariani
932,500
Mr Michael Murchison
Total
1,417,500
* Net Change Other refers to Performance Rights Class B purchased or sold or otherwise transferred
during the period.
** Net Change Share-split refers to the share-split on the basis that every share be divided into four fully
paid ordinary shares with effect from 5:00pm (Melbourne time) on 30 June 2016 approved at the Annual
General Meeting held that day, applied in the same basis to all securities on issue including options and
performance rights.
250,000
125,000
20,000
90,000
932,500
1,417,500
-
-
-
-
-
-
19
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
5. KEY MANAGEMENT PERSONNEL (continued)
(f) Remuneration paid to Key Management Personnel
Directors Fees
Salary and wages
Superannuation
Allowances
Share based payments
Consulting fees
Vesting charge for Performance Rights
For the period
30 January
2015 to 30
June 2015
$
-
-
-
-
519,634
140,000
393,149
1,052,783
2016
$
35,000
17,876
27,825
34,124
-
39,069
69,976
223,870
2016
Name
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Alberto Mariani (resigned
11 April 2016)
Mr Michael Murchison
Mr Geoff Pearce (appointed
11 April 2016)
Mr Peter Crock
Total
Directors
Fees
Superan-
uation
8,000
8,000
8,000
8,000
3,000
-
-
35,000
760
760
760
760
24,785
-
-
27,825
Salary and
Allowances
-
-
-
-
52,000
-
-
52,000
Vesting charge
for
Performance
Rights
Consulting
Fees
-
-
-
-
-
-
39,069
39,069
11,982
5,991
959
-
51,044
-
-
69,976
2015
Name
Mr Allan McCallum
Mr Philip Jacobsen
Mr Douglas Rathbone
Mr Alberto Mariani
Mr Michael Murchison
Total
Directors
Fees
Superan-
uation
Share-based
Payments
Consulting
Fees
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
519,634
519,634
-
-
-
-
140,000
140,000
Vesting charge
for
Performance
Rights
71,917
35,959
3,836
23,972
257,465
393,149
Total
20,742
14,751
9,719
8,760
130,829
-
39,069
223,870
Total
71,917
35,959
3,836
23,972
917,099
1,052,783
6.
AUDITOR’S REMUNERATION
Remuneration of the auditors of the group for:
Auditing the financial statements – William Buck
2016
$
11,000
11,000
2015
$
10,000
10,000
20
Notes to the financial statements
7.
TRADE RECEIVABLES AND OTHER ASSETS
Current
Trade receivables
Share Subscription receivables
Reimbursements due from related parties
Prepaid expenses due from related parties
8.
PLANT AND EQUIPMENT
CANN GROUP LIMITED
ABN 25 603 949 739
2016
$
2015
$
-
-
-
5,519
5,519
1,300
100,000
101,300
2,661
-
103,961
Opening Balance
Additions
Depreciation
Closing Balance
Growth
Facilities
$
171,369
298,120
(17,117)
452,372
2016
Other
Assets
-
46,186
(11,800)
34,386
2015
Total
$
171,369
344,306
(28,917)
486,758
Growth
Facilities
$
-
171,369
-
171,369
Total
$
-
171,369
-
171,369
During the year the Modular Plant Growth Research Facility was completed to operational levels and was available
for use as at 1 April 2016. Growing operations commenced at that time and depreciation commenced from 1 April
2016. In addition to this a used Laboratory Facility was purchased and depreciation commenced from the date of
being available for use. The remaining four Modular Plant Growth Facilities were in various stages of construction
as at 30 June 2016. As at 30 June 2016 the Directors reviewed the overall progress of the Modular Plant Growth
Facilities and the Directors conducted an impairment test which was applied as at 30 June 2016 whereby the
Directors compared the carrying values of the four Modular Plant Growth Facilities to the selling values of
comparable assets and concluded that no impairment existed relating to these assets.
9.
UNSECURED TRADE AND OTHER PAYABLES
Current
Unsecured trade and other payables
Unsecured payables - related parties
2016
$
2015
$
181,849
-
181,849
26,729
51,100
77,829
21
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
10.
CONTROLLED ENTITIES
Cann Group Limited has six wholly-owned subsidiaries as at 30 June 2016 as follows:
Subsidiary Name
Cannproducts Pty Ltd (ACN 600 887 189)
Date Acquired
27 February 2015
Number of
Shares held
100
Percentage
Shareholding
100%
Cannoperations Pty Ltd (ACN 603 323 226)
27 February 2015
Anslinger Holdings Pty Ltd (ACN 169 764 407)
27 February 2015
Cann Investments Pty Ltd (ACN 604 834 488)
18 March 2015
Cann Global Inc
Cannproducts NZ Limited
20 August 2014
8 April 2016
100
100
100
100
100
100%
100%
100%
100%
100%
11.
ORDINARY SHARES
The group has on issue 39,346,668 ordinary fully paid shares.
Ordinary shares participate in dividends and the proceeds on winding up of the company in proportion to the
number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called,
otherwise each shareholder has one vote on a show of hands.
Ordinary Shares
Issue Date
Balance 1 July 2015
13 August 2015 - placement
30 October 2015 - placement
12 May 2016 – issued pursuant to
Information Memorandum
30 June 2016*
30 June 2016** Costs of issuing shares
Balance 30 June 2016
Issue Price
$
Number of Shares
1.00
1.00
0.60
-
-
6,025,000
150,000
450,000
3,211,667
29,510,001
-
39,346,668
Issue Date
30 January 2015
31 January 2015
22 May 2015 (net of costs)
Balance 30 June 2015
Issue Price
$
-
0.192
1.00
Number of Shares
10,030
4,989,970
1,025,000
6,025,000
2016
$
1,957,006
150,000
450,000
1,927,000
-
(107,735)
4,376,271
2015
$
-
967,006
990,000
1,957,006
22
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
11.
ORDINARY SHARES (continued)
*On 30 June 2016, at the Annual General Meeting held on that day, shareholders passed the resolution that in
accordance with section 254H of the Corporations Act 2001 (Cth), the fully paid ordinary shares in the issued capital
of the Company be split on the basis that every share be divided into four fully paid ordinary shares with effect
from 5.00pm (Melbourne time) on 30 June 2016. Options and performance rights on issue at the effective date of
the share split were also adjusted which involved an increase in the number of these securities in the same ratio
as the share split, and a decrease in the exercise price in the inverse ratio.
**During the year the Company incurred costs of $46,467 from issuing shares on 12 May 2016 and on 30 June
2016 the Company recognised costs of $61,268 incurred pursuant to the proposed Initial Public Offering.
12.
OPTIONS
The group has on issue 12,846,667 options to purchase ordinary fully paid shares. The Options were issued
pursuant to the Information Memorandum dated 12 April 2016 which issued one Option at no additional cost for
each new share subscribed for under that Information Memorandum.
The options are exercisable at $0.60 ($0.15 post share-split on 30 June 2016) at any time during the period
commencing on the date of its issue and expiring on the earlier of 4:00pm (Melbourne, Victoria time) on 31 March
2017 and 4:00pm (Melbourne, Victoria time) on the date of allotment of the new shares under a prospectus issued
by the Company in relation to its admission to the Official List of the ASX.
Issue Date
Balance 1 July 2015
12 May 2016*
30 June 2016**
Balance 30 June 2016
Issue Price
$
-
-
Number of Options
-
3,211,667
9,635,001
12,846,668
2016
$
-
-
-
-
*On 12 May 2016 the Company issued 3,211,667 Ordinary Shares at one dollar ($1.00) per Share pursuant to the
Information Memorandum dated 11 April 2016 and issued one attaching Option at no additional cost for each new
share subscribed for under that Information Memorandum.
**On 30 June 2016, at the Annual General Meeting held on that day, shareholders passed the resolution that in
accordance with section 254H of the Corporations Act 2001 (Cth), the fully paid ordinary shares in the issued capital
of the Company be split on the basis that every share be divided into four fully paid ordinary shares with effect
from 5.00pm (Melbourne time) on 30 June 2016. Options and performance rights on issue at the effective date of
the share split were also adjusted which involved an increase in the number of these securities in the same ratio
as the share split, and a decrease in the exercise price in the inverse ratio.
23
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
13.
PERFORMANCE RIGHTS
The Company has issued 18,000,000 Performance Rights at $0.0001 per Right comprising 11,000,000 Class A
Performance Rights and 7,000,000 Class B Performance Rights of which:
•
•
9,560,000 Class A Performance Rights and 5,840,000 Class B Performance Rights have been issued to
Directors and Key Management Personnel of the Company; and
1,440,000 Class A Performance Rights and 1,160,000 Class B Performance Rights have been issued to a
former Director and non-related party consultants and advisors in consideration for various advisory
services.
The Performance Rights have the following milestones attached to them, which are their vesting conditions:
(i) Class A Performance Rights: if the Company issues further Shares in addition to the New Shares at $0.375 per
Share or higher subject to, if, at any time, the issued capital of the Company is reorganised (including consolidation,
subdivision, reduction or return), all rights of a holder of a Performance Right (including the Vesting Conditions)
are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the
reorganisation; and
(ii) Class B Performance Rights: if the Company applies to be admitted to the Official List of the ASX or a trade
sale of the underlying business of the Company or the Company occurs.
The Performance Rights were issued for $0.0001 each and no consideration will be payable upon the vesting of
the Performance Rights.
Upon satisfaction of the relevant Performance Rights vesting, each Performance Right will, at the election of the
holder, vest and convert as follows:
(i) each Class A Performance Right converts into one Share; and
(ii) each Class B Performance Right converts into one Share.
Based on the above, the performance rights reserve has been calculated as at 30 June 2016 as follows:
Class Number of rights
(post share-split)
Grant Date
A
B
11,000,000
7,000,000
18,000,000
31 January 2015
31 January 2015
Fair value
(post share-split)
(cents)
Vested
2.40
4.80
100%
75%
Total in
reserve
$
263,698
251,711
515,409
If the Milestone attaching to a Performance Right has not been satisfied in the time periods set out below, it will
automatically lapse:
(i) Class A Performance Rights: 3 years from 22 May 2015;
(ii) Class B Performance Rights: 4 years from 22 May 2015;
otherwise, any Performance Right that has not been converted into a Share on or before the date of admission of
the Company to the Official List of the ASX will automatically lapse
24
Notes to the financial statements
14.
RELATED PARTY INFORMATION
CANN GROUP LIMITED
ABN 25 603 949 739
For the
period 30
January
2015 to 30
June 2015
$
2016
$
Transactions between the Consolidated Group and related parties are on
normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated. Related party transactions
not otherwise disclosed in these financial statements include the following:
Fees for United States representative services were paid to BPI Inc., a
company of which Mr Michael Murchison is a Director and shareholder.
41,100
-
Fees for hire of office equipment and furniture were paid to Odd Couple
Productions Pty Ltd, a company of which Mr Michael Murchison is a Director
and shareholder.
Purchase of office equipment and furniture from Odd Couple Productions Pty
Ltd, a company of which Mr Michael Murchison is a Director and shareholder.
Prepayment of funds to enable purchase of materials provided to Mr Michael
Murchison not used nor repaid as at balance date.
35,500
15,000
24,495
5,519
-
-
106,614
15,000
15.
CONTINGENT LIABILITIES AND COMMITMENTS
The Company has a bank guarantee of $35,000 for the operating premises lease of the company's premises. With
the exception of this bank guarantee, the Company currently has no contingent liabilities or commitments at the
date of signing this report.
16.
EVENTS AFTER THE END OF THE REPORTING PERIOD
On 3 August 2016 the Directors wrote to the Company advising of their notice of intention to provide financial
support to Cann Group Limited by not calling upon Director Fees owing or accrued by that Director, so that the
Company has sufficient working capital in order to pay its debts as and when they fall due and payable, for a period
of at least 13 months from the date of signing of the letter, or to such a point in time that the Company is able to
satisfy its commitments and obligations to its suppliers and employees without such help and without jeopardising
its available working capital position. In their letters the Directors also noted that they have the option, but not
the obligation, to provide additional working capital to the Company by the exercise their option-holdings in a
seed capital raising prior to the expiry date of those options, being 31 March 2017. Details of their interests in
share options, exercisable at a strike price of 15 cents are disclosed in Note 5.
There were no other matters or circumstances have arisen since the end of the year which significantly affected
or may significantly affect the operation of the group, the results of those operations, or the state of affairs of the
group in future financial years.
25
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
17.
CASH FLOW INFORMATION
Reconciliation of net loss after tax to net cash flows from
operations-
Profit/(loss) for the period
Non-cash flows in profit
Issue of shares to founders
Vesting of performance rights
Depreciation
For the
period 30
January 2015
to 30 June
2015
$
(1,740,186)
2016
$
(1,462,011)
-
83,904
28,917
967,006
431,505
-
Movements in working capital
(Increase)/decrease in trade receivables and other assets
(Decrease)/increase in trade and other payables
(1,558)
104,021
(3,961)
77,829
Net cash outflows from operating activities
(1,246,728)
(267,807)
18.
LEASE
On 4 September 2015 the Group entered into a lease for premises at 52 Duerdin Street, Clayton, Victoria, 3168.
The term of the lease is three years and six months. The Lease allows for two further terms of three years each.
Lease commitments are:
Period
Less than 12 months
From one to five years
$
110,000
183,333
293,333
19.
FINANCIAL RISK MANAGEMENT
The consolidated group’s financial instruments consist of deposits with banks and its accounts payable and
receivable. The Board is responsible for managing the Group’s only significant financial risk, which is its liquidity
risk, which it does through regularly reviewing rolling cash flow forecasts and examining its levels of available
working capital against such forecasts. For further details concerning this, refer to Note 2(a).
Liquidity risk arises from the possibility that the Group may encounter difficulty in meeting its obligations for its
financial liabilities, which at 30 June 2016 were accounts payable with due terms from 0 – 45 days. For details of
these refer to Note 9.
The Directors have assessed that the fair values of the Group’s financial assets and liabilities reasonably
approximate their carrying values, as represented in these financial statements.
26
Notes to the financial statements
CANN GROUP LIMITED
ABN 25 603 949 739
20.
CAPITAL MANAGEMENT
The Board of Directors are charged with determining the optimal mix of debt and equity which is suitable for the
needs of the Group. For the year ended 30 June 2016 the Group held no material commercial borrowings or
facilities for credit as the board considered that, at this point of time, that funds sourced through equity would be
most appropriate. The Company does have a corporate credit card facility however any accumulated debt is fully
repaid on a monthly basis. The Group’s treasury function reports to the board periodically with forecast cash flow
information that enables the Board to conduct its capital raising activities in an orderly fashion at a dilutive cost to
existing shareholders that is appropriate and reasonable.
21.
PARENT ENTITY DISCLOSURES
Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial Performance
Loss for the year / period
Other comprehensive income
Total comprehensive loss
2016
$
2015
$
1,378,747
131,508
1,693,207
1,231,270
3,071,954
1,362,778
157,662
21,181
-
-
157,662
21,181
4,376,270
1,957,006
515,409
431,505
(1,977,417)
(1,046,914
2,914,262
1,341,5987
For the
period 30
January
2015 to 30
June 2015
$
2016
$
(930,503)
(1,046,914)
-
-
(930,503)
(1,046,914)
The subsidiary companies have expenditure commitments under the premises lease. The parent entity has
committed to providing funds to ensure the subsidiary companies can fulfil these commitments as well as any
other operating commitments.
27
CANN GROUP LIMITED
ABN 25 603 949 739
Directors’ Declaration
1.
a.
b.
c.
2.
a.
b.
c.
3.
The Directors declare that the financial statements and notes set out on pages 7 to 27 are in accordance
with the Corporations Act 2001 and:
comply with International Financial Reporting Standards, as stated in Note 2 to the financial statements;
comply with Accounting Standards, the Corporations Regulations 2001; and
give a true and fair view of the financial position as at 30 June 2016 and of the performance for the period
ended 30 June 2016 of the Company and the consolidated group.
The Chief Executive Officer and Company Secretary have each declared that:
the financial records of the Company for the period ended 30 June 2016 have been properly maintained in
accordance with section 286 of the Corporations Act 2001;
the financial statements and notes for the period comply with the Accounting Standards; and
the financial statements and notes for the period give a true and fair view.
In the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Directors.
Allan McCallum
Chairman
Date: 3 August 2016
28
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CANN GROUP LIMITED AND
CONTROLLED ENTITIES
Report on the Financial Report
We have audited the accompanying financial report of Cann Group Limited (the Company), which
comprises the consolidated statement of financial position as at 30 June 2016, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cash flows for the year then ended, notes comprising a
summary of significant accounting policies and other explanatory information, and the directors’
declaration of the company and the consolidated entity comprising the company and the entities it
controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation of the financial report that gives a true and fair view 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 the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
CANN GROUP LIMITED
ABN 25 603 949 739
29
CANN GROUP LIMITED
ABN 25 603 949 739
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CANN GROUP LIMITED AND CONTROLLED
ENTITIES (CONT)
Auditor’s Opinion
In our opinion:
a)
the accompanying financial report of Cann Group Limited is in accordance with the Corporations Act 2001,
including:
i.
giving a true and fair view of the Company and consolidated entity’s financial position as at 30 June 2016 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
ii.
Corporations Regulations 2001; and
the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.
b)
William Buck Audit (VIC) Pty Ltd
ABN: 59 116 151 136
N. S. Benbow
Director
Dated this 3rd day of August, 2016
30