GAINING
GROUND
C E R E S G LO B A L A G C O R P. | F Y 201 7 A N N U A L R E P O R T
GAINING GROUND
THE YEAR IN REVIEW
We streamlined operations in our agriculture-related
business and idled three inefficient facilities within our
network. This helped drive more volume through each of
our other locations. Along with increasing the number of
bushels handled by 44 percent from the previous year,
gaining new customers and establishing new trade flows,
rationalizing our facilities supported our efforts to reduce
our average handling cost per bushel.
The highlight in our logistics business during the year
was completing construction of our fertilizer facilities at
the Northgate Terminal and launching that business on
time, on budget and with a perfect safety record. Also at
Northgate, we increased natural gas liquids volumes and
began transloading a number of industrial products with
significant growth potential.
Through focused efforts to make the grain supply chain
more efficient, we are gaining ground.
INCREASED REVENUE BY 37% TO
$528.5M
GREW NUMBERS OF BUSHELS HANDLED BY 44%
111.1M
INCREASED COMMODITY PRODUCT LINES FROM
8 TO 13
LOOKING FORWARD: GOALS FOR 2018
2018
2019
Increase core, new and specialty grain volumes, along with oilseed product volumes throughout our networkIncrease origination volumes directly from farmersDevelop other agriculture-related businesses at Northgate, such as specialty product cleaning, handling, and processingStrengthen relationships with key customersAccelerate the development of our logistics business at Northgate ASSETS & CAPABILITIES
ABOUT CERES GLOBAL AG CORP.
Ceres has a network of facilities strategically located
around the Great Lakes, the Midwest and South Central U.S.,
and in close proximity to sources of grain origination.
Headquartered in Minneapolis, Ceres Global Ag Corp. is
focused on two primary businesses: a Grain Storage, Handling
and Merchandising unit; and a Commodity Logistics unit.
NUMBER OF ELEVATORS
6
BUSHEL CAPACITY
34.4M
Ceres’ Grain Storage unit is anchored by its 100% ownership
of Riverland Ag Corp. The grain storage unit is comprised
of a collection of six operating grain storage and handling
assets in Minnesota, Saskatchewan and Ontario, having
aggregate storage capacity of approximately 34.4 million
bushels as at June 30, 2017.
Ceres’ Commodity Logistics unit is focused on the
development of a Commodity Logistics Centre in
Northgate, SK. The Northgate Commodities Logistics
Centre is a state-of-the-art grain, agriculture services and
oilfield supplies transloading site.
Ceres also has a 25% interest in Stewart Southern Railway Inc.,
a short-line railway with a range of 130 kilometres that operates
in southeastern Saskatchewan and a 17% interest in Canterra
Seeds, a Canadian-based seed development company.
STRATEGICALLY CONNECTED FROM ORIGINATION TO DEMAND
Northgate
Duluth Storage
MINNEAPOLIS
Port Colborne
Malt One
Shakopee
Savage
MINNEAPOLIS
Louisville
Origination Expansion
3rd Party Lease
Current
NORTHGATE TERMINAL Ceres’ Northgate Terminal is a multi-commodity logistics center strategically located on the Canada/U.S. border in southeastern Saskatchewan. Northgate serves the industrial and agricultural sectors in both Canada and the U.S. Along with agricultural products, we have leveraged our storage and transloader facilities for both fertilizer and natural gas liquids and grown volumes handled for each. Going forward, we will pursue more logistics and non-agricultural opportunities.The Northgate Terminal sits on 1,300 acres and has 2.7M bushel capacity for agricultural products and 26,000t storage capacity for fertilizer. Facilities are also connected to BNSF’s 32,000 mile rail network. CHAIRMAN’S MESSAGE
Fiscal 2017 was a challenging year for Ceres Global Ag. Corp.
For most of the year, the supply of grain worldwide was
much greater than demand. The effects were felt throughout
the entire supply chain creating volatility in markets, low
margins and aggressive competition.
Despite a difficult external environment, Ceres continued on
the strategic plan that was put in place more than two years
ago. We made significant progress in many areas.
•
Increased the number of bushels handled from the
previous year by 44 percent
• Established new customers and trade flows throughout
the U.S., Mexico, Europe and Asia
• Successfully launched our fertilizer business at Northgate,
completing facility construction on time, under budget
and with an impeccable safety record
•
•
Increased liquid natural gas volumes and began
transloading a number of industrial products with
significant growth potential
Idled or shut down three inefficient facilities which helped
drive more volume through each of our other locations
• Most importantly, added talent to the company across all
major job families
Our strategy focuses on both the turnaround of all assets (that
are not Northgate) and the start-up of Northgate.
Our non-Northgate facilities were significantly underutilized.
For these assets we have increased utilization for Ceres
merchandised grain products, increased utilization for third-party
product, or idled them because they were inefficient. By doing
so, we have significantly lowered our cost per bushel handled
and increased our ability to compete against larger companies.
By contrast, Northgate (which represents more than half the
value of property, plant and equipment on our balance sheet),
is a start-up operation and key to the success of Ceres. While
we are happy with 2017 volumes of grain, oilseeds and liquid
natural gas handled at this facility, margins have been narrow
and we have not met our profit objectives.
In order to generate acceptable returns at Northgate, we must
continue to add more grain and oil seed volume along with
more products to lower fixed cost per unit handled and generate
revenues commensurate with the investment that we made in
the infrastructure. Fertilizer is a great addition and will help us
achieve our financial targets. In the meantime, management and
the Board of Directors are working hard to add more revenue
generating opportunities that will ultimately turn Northgate into
the largest inland export port in Saskatchewan.
Perhaps our greatest challenge in managing a turnaround and a
start-up at the same time has been finding and hiring the talent
needed to operate a business of this complexity. Despite the
difficulties of competing for talent against much larger global
players, we have successfully grown from a small team of
traders and merchandisers to a team of nearly twenty people
including our grain originators. We have challenged all staff to
expand their capabilities as the volume and the complexity of
the business grows. While we have experienced some growing
pains in this area, we believe that we have a strong team in
place to continue to develop and grow the business.
As we look ahead to 2018, we are focused on the following:
•
•
Incrementally increase core grain and oilseed product
volumes (wheat, durum, oats, and canola) and continue to
increase efficiency and margins throughout our network.
As a result, we expect to earn a higher average margin
per bushel
Increase specialty, new grain and oilseed product
volumes. Examples would be pulses, rye, soybeans, and
barley
• Add more farmer origination for grain and other products
• Strengthen relationships with key customers
• Accelerate the development of our logistics business
at Northgate
• Develop other agriculture-related businesses at
Northgate, such as specialty product cleaning, handling,
and processing
As we look ahead we continue to be very optimistic. We
have assembled a strong team, made great progress on our
strategy, and are much better positioned to compete in a low
margin environment.
We would not be where we are without the hard work and
dedication of our employees and I thank each one. I also
thank our Board of Directors for their guidance and wisdom.
Finally I want to thank our shareholders for your patience and
support as we continue to work towards the achievement of
our financial goals.
Douglas E. Speers
Chairman of the Board
TABLE OF CONTENTS
Financial and Operating Results
Quarterly Financial Data
Liquidity & Cash Flow
Capital Resources
Accounting Policies and Critical Accounting Estimates
Outlook
Other
Non-IFRS Financial Measures and Reconciliations
Key Assumptions & Advisories
6
12
13
14
15
16
17
18
19
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
Financial and Operating Summary…………………………………………………………………
Quarterly Financial Data……………………………………………...……………………………
Liquidity & Cash Flow…………………………………………………………...………………...
Capital Resources…………………………………………………………...……………………...
Accounting Policies and Critical Accounting Estimates………………………………...…………
Outlook…………………………………………………………………….....................................
Other…………………………………………………………………….........................................
Non-IFRS Financial Measures and Reconciliations………………………………………………..
MANAGEMENT’S DISCUSSION AND ANALYSIS
Key Assumptions & Advisories……………………………..……………………………………..
2
8
9
10
11
12
13
14
15
This Management’s Discussion and Analysis (“MD&A”) dated September 22, 2017 should be read in
conjunction with the audited Consolidated Financial Statements for the twelve-month period ended June 30,
2017 of Ceres Global Ag Corp. (“Ceres”, the “Corporation”, “we”, “our”, and “us”), and the Corporation’s
audited consolidated financial statements for the fifteen-month period ended June 30, 2016 (the “Annual
Consolidated Financial Statements”). Additional information about Ceres filed with Canadian securities
regulatory authorities, including the quarterly financial statements and MD&A, and annual report and the annual
information form, is available online at www.sedar.com.
Basis of Presentation
Unless otherwise noted, all financial information has been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Unless otherwise
indicated, dollar amounts are expressed in United States dollars (“$” and “USD”) and references to “CAD” are
to Canadian dollars.
Non-IFRS Financial Measures
This MD&A contains references to certain financial measures, including some that do not have any standardized
meaning prescribed by IFRS. These measures include “EBITDA” (Earnings before interest, income tax,
depreciation and amortization) and “Return on shareholders’ equity”, neither of which have a standardized
meaning under IFRS. See “Non-IFRS Financial Measures and Reconciliations.”
Change in Fiscal Year-End and Presentation Currency
On February 10, 2016, the Board of Directors approved a change in the fiscal year end from March 31 to June
30. As a result of the change, the Corporation has a fifteen-month fiscal period that is reported in this Annual
1
FY2017 ANNUAL REPORT
5
Report for the fiscal-period ending June 30, 2016. In conjunction with the change in fiscal year, Ceres changed
its reporting and presentation currency to USD commencing as of July 1, 2016 and for reporting periods,
thereafter. Ceres believes that these changes will give investors a view of the Corporation’s financial
performance that better aligns the fiscal year with that of the agricultural crop year and functional currency.
Risks and Forward Looking Information
The Corporation’s financial and operational performance is potentially affected by a number of factors,
including, but not limited to, the factors described in “Key Assumptions & Advisories”.
This MD&A contains forward-looking information based on the Corporation’s current expectations, estimates,
projections and assumptions. This information is subject to a number of risks and uncertainties, including those
discussed in this MD&A and the Corporation’s other disclosure documents, many of which are beyond the
Corporation’s control. Users of this information are cautioned that actual results may differ materially. See
“Key Assumptions and Advisories” for information on material risk factors and assumptions underlying the
Corporation’s forward-looking information.
1. FINANCIAL AND OPERATING SUMMARY
(in millions except per share)
Revenues
Gross profit (loss)
Income (loss) from operations
Net income (loss)
Weighted average common shares outstanding
Income (loss) per share - Basic
Income (loss) per share - Diluted
As at:
Total assets
Total bank indebtedness, current (1)
Term debt (2)
Shareholders' equity
Return on shareholders' equity (3)
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
$
$
$
$
528.5
7.8
(1.7)
(13.7)
27.5
(0.50)
(0.50)
$
$
$
$
385.8
(0.5)
(10.6)
(12.1)
27.0
(0.45)
(0.45)
$
$
$
$
279.8
20.2
3.8
0.7
18.4
0.04
0.04
$
$
$
$
$
$
$
$
$
$
256.3
56.4
14.5
148.8
-9.2%
$
$
$
$
254.8
55.6
22.9
157.6
-7.7%
$
$
$
$
244.4
14.8
24.0
173.1
0.4%
(1) Includes Bank indebtedness and outstanding cheques in excess of cash on hand
(2) Includes current portion of long-term debt.
(3) Non-IFRS measure. See Non-IFRS Financial Measures and Reconciliations section.
HIGHLIGHTS FOR THE TWELVE MONTHS ENDED JUNE 30, 2017
In an environment of low commodity prices with suppressed margin opportunities, the Corporation
increased gross profit compared to the fifteen-months ended June 30, 2016.
Number of agricultural commodity product lines increased to 13 in 2017 from 8 in the previous year.
Generated cash flow from operations of $14.6 million, an increase of $9.0 million year over year through
efficient management of working capital.
Handled and traded approximately 111.1 million bushels of grain and oilseed during the year, compared to
77.4 bushels for the fifteen-months ended June 30, 2016.
Completed construction of the fertilizer storage warehouse at Northgate, as defined below, and commenced
operations on April 30, 2017 in conjunction with our agreement with Koch Fertilizer Canada, ULC
(“Koch”) to handle and store fertilizer on their behalf.
2
6
CERES GLOBAL AG CORP.
Who We Are
While having one reportable segment, the Corporation operates in two business units: (1) grain storage,
handling and merchandising unit, and; (2) commodity logistics. Ceres’ grain storage, handling, and
merchandising unit is anchored by a collection of six (6) grain storage and handling assets in Minnesota,
Saskatchewan and Ontario having aggregate storage capacity of approximately 34.4 million bushels. The
Corporation’s Commodity Logistics unit is focused on the development of a commodity logistics centre in
Northgate, Saskatchewan. The Northgate Commodities Logistics Centre (“Northgate” or the “NCLC”) is a
state-of-the-art grain, agriculture services, and oilfield supplies transloading site, which is being developed in
conjunction with several potential energy and agricultural input company partners and is connected to
Burlington Northern Santa Fe Railway (the “BNSF”). Ceres also has a 25% interest in Stewart Southern
Railway Inc., a short-line railway with a range of 130 kilometres that operates in Southeastern Saskatchewan,
and a 17% interest in Canterra Seed Holdings Ltd, a Canadian-based seed development company.
Grain Division
The Corporation’s grain division is engaged in grain storage, procurement, and merchandising of specialty
grains and oilseeds such as oats, barley, rye, hard red spring wheat, durum wheat, canola and pulses through
six grain storage and handling facilities in Minnesota, Saskatchewan and Ontario. Two of the grain storage
facilities are located at deep-water ports in the Great Lakes, and one is located on the Minnesota River, which
is tributary to the Mississippi River, allowing access for vessels and barges and enabling the efficient import
and export of grains globally. Approximately 29 million bushels of the Corporation’s facilities are “regular” for
delivery for both spring wheat against the Minneapolis Grain Exchange futures contract and oats against the
Chicago Board of Trade futures contract. In addition, spring wheat and oats sourced by the Corporation out of
Canada are eligible for delivery against the respective futures contract.
The majority of the grain division’s current storage space is utilized to benefit from grain trading, arbitrage and
merchandising opportunities. Management determines which of the Corporation’s facilities is to be employed
for the storage or throughput of a particular grain shipment based on the source of the grain shipment, the
elevator location relative to the end customers, the cost of logistics to transport the grain, and the availability of
space in the intended elevator. In addition, the Corporation stores and handles grain for third-party customers.
Northgate Commodities Logistics Centre
Ceres owns approximately 1,300 acres of land at Northgate, Saskatchewan, where it has constructed a
commodities logistics centre designed to utilize two rail loops, each capable of handling unit trains of up to 120
railcars. The NCLC is an approximately CAD $100 million grain, oil, natural gas liquids and fertilizer terminal
and is connected to the BNSF with plans to further build out infrastructure to support handling of other industrial
products and equipment.
The Corporation commenced its initial grain operations at Northgate in October 2014, operating the facility
with a grain transloader for six months during the year-ended March 31, 2015. Phase one of the elevator was
operational in November 2015 and the elevator was fully operational in May 2016. As part of its grain
operations, the Corporation contracts grain and oilseed purchases from western Canadian producers that are
delivered by truck and unloaded at the NCLC grain terminal. Ceres has the option of storing the grain on-site
or loading it into outbound railcars to customer end-users, or to the Corporation’s other facilities, taking
advantage of the value and strategic location of its current asset base.
Concurrent with its grain operations at NCLC, in April 2015, the Corporation entered into an agreement with
Elbow River Marketing (“ERM”), a wholly owned subsidiary of Parkland Fuel Corporation, to transload
propane at Northgate. This provides a direct link and an added access point for propane to enter the US market.
3
(“Koch”) to handle and store fertilizer on their behalf.
Who We Are
While having one reportable segment, the Corporation operates in two business units: (1) grain storage,
handling and merchandising unit, and; (2) commodity logistics. Ceres’ grain storage, handling, and
merchandising unit is anchored by a collection of six (6) grain storage and handling assets in Minnesota,
Saskatchewan and Ontario having aggregate storage capacity of approximately 34.4 million bushels. The
Corporation’s Commodity Logistics unit is focused on the development of a commodity logistics centre in
Northgate, Saskatchewan. The Northgate Commodities Logistics Centre (“Northgate” or the “NCLC”) is a
state-of-the-art grain, agriculture services, and oilfield supplies transloading site, which is being developed in
conjunction with several potential energy and agricultural input company partners and is connected to
Burlington Northern Santa Fe Railway (the “BNSF”). Ceres also has a 25% interest in Stewart Southern
Railway Inc., a short-line railway with a range of 130 kilometres that operates in Southeastern Saskatchewan,
and a 17% interest in Canterra Seed Holdings Ltd, a Canadian-based seed development company.
Grain Division
The Corporation’s grain division is engaged in grain storage, procurement, and merchandising of specialty
grains and oilseeds such as oats, barley, rye, hard red spring wheat, durum wheat, canola and pulses through
six grain storage and handling facilities in Minnesota, Saskatchewan and Ontario. Two of the grain storage
facilities are located at deep-water ports in the Great Lakes, and one is located on the Minnesota River, which
is tributary to the Mississippi River, allowing access for vessels and barges and enabling the efficient import
and export of grains globally. Approximately 29 million bushels of the Corporation’s facilities are “regular” for
delivery for both spring wheat against the Minneapolis Grain Exchange futures contract and oats against the
Chicago Board of Trade futures contract. In addition, spring wheat and oats sourced by the Corporation out of
Canada are eligible for delivery against the respective futures contract.
The majority of the grain division’s current storage space is utilized to benefit from grain trading, arbitrage and
merchandising opportunities. Management determines which of the Corporation’s facilities is to be employed
for the storage or throughput of a particular grain shipment based on the source of the grain shipment, the
elevator location relative to the end customers, the cost of logistics to transport the grain, and the availability of
space in the intended elevator. In addition, the Corporation stores and handles grain for third-party customers.
Northgate Commodities Logistics Centre
Ceres owns approximately 1,300 acres of land at Northgate, Saskatchewan, where it has constructed a
commodities logistics centre designed to utilize two rail loops, each capable of handling unit trains of up to 120
railcars. The NCLC is an approximately CAD $100 million grain, oil, natural gas liquids and fertilizer terminal
and is connected to the BNSF with plans to further build out infrastructure to support handling of other industrial
products and equipment.
The Corporation commenced its initial grain operations at Northgate in October 2014, operating the facility
with a grain transloader for six months during the year-ended March 31, 2015. Phase one of the elevator was
operational in November 2015 and the elevator was fully operational in May 2016. As part of its grain
operations, the Corporation contracts grain and oilseed purchases from western Canadian producers that are
delivered by truck and unloaded at the NCLC grain terminal. Ceres has the option of storing the grain on-site
or loading it into outbound railcars to customer end-users, or to the Corporation’s other facilities, taking
advantage of the value and strategic location of its current asset base.
Concurrent with its grain operations at NCLC, in April 2015, the Corporation entered into an agreement with
Elbow River Marketing (“ERM”), a wholly owned subsidiary of Parkland Fuel Corporation, to transload
propane at Northgate. This provides a direct link and an added access point for propane to enter the US market.
3
FY2017 ANNUAL REPORT
7
In November 2015, Ceres entered into an agreement with Koch for the storage and handling of dry fertilizer
products which brings phosphate-based fertilizer to Northgate. At Northgate, Ceres unloads and warehouses
fertilizer in a new, state of the art, 26,000-ton fertilizer storage terminal. The fertilizer is loaded out by Ceres
into trucks and distributed to Canadian farmers. The fertilizer operation commenced on April 30, 2017.
Overall Performance
The Corporation’s net loss was $13.7 million for the twelve-month period ended June 30, 2017, compared to a
net loss of $12.1 million in the fifteen-month period ended June 30, 2016. The net loss was in part due to non-
cash items which include a $7.7 million loss on the impairment of the Buffalo and Duluth Lakeport assets and
an increase in depreciation from the full deployment of Northgate assets. Gross profit was $7.8 million for the
twelve-month period ending June 30, 2017 compared to a gross loss of $0.5 million in the fifteen-month period
ended June 30, 2016. Furthermore, loss from operations was $1.7 million for the twelve-month period ended
June 30, 2017 compared to a $10.6 million loss from operations in the fifteen-months ended June 30, 2016.
Revenues and Gross Profit
The Corporation’s revenue is currently generated by its grain and logistics division. The revenues are
predominantly composed of the sale of grain, storage and rental income, and transloading income. Since a
significant portion of revenue is generated through the sale of grain, as a commercial commodities
merchandizing business, revenues can vary from year-to-year due to fluctuations of agricultural commodity
prices. The Corporation has the flexibility to be opportunistic in its decisions to buy, sell or hold inventory
based on market conditions such as grain supply, demand, and grain values.
Total revenue increased by $142.7 million in the twelve-months ended June 30, 2017 compared to the fifteen-
months ended June 30, 2016. The Corporation handled and traded 111.1 million bushels of grain and oilseed
sales in fiscal year 2017 compared to 77.4 million bushels for the fiscal year 2016.
The Corporation’s grain division is principally involved in an agricultural commodity-based business, in which
changes in selling prices generally move in relation to changes in purchase prices. Therefore, increases or
decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact
on sales and cost of sales. Accordingly, management believes it is more important to focus on changes in gross
profit and bushels handled than on changes in revenue dollars.
The table below represents a summary of the components of gross profit for the twelve-months ended June 30,
2017 and the fifteen-months ended June 30, 2016:
(in millions)
Net trading margin
Storage and rental income
Logistics and transloading
Management service revenue
Operating expenses included in Cost of sales
Depreciation expense included in Cost of sales
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
18.4
6.4
1.3
-
(13.8)
(4.5)
$
11.7
5.6
0.8
1.5
(16.3)
(3.8)
Gross profit (loss)
$
7.8
$
(0.5)
4
8
CERES GLOBAL AG CORP.
Gross profit increased by $8.3 million in the twelve-months ended June 30, 2017 compared to the fifteen-
months ended June 30, 2016. The year over year increase in gross profit was driven by an increase in net trading
margins and the exclusion of the prior years’ durum loss of $8.2 million.
Net trading margin
Net trading margin increased by $6.7 million in the twelve-months ended June 30, 2017 compared to the fifteen-
months ended June 30, 2016. The prior year results were impacted by a durum loss of $8.2 million.
Storage and rental income
Storage and rental income increased $0.8 million in the twelve-months ended June 30, 2017 compared to the
fifteen-months ended June 30, 2016. The Corporation’s storage and rental income increase was a result of a
55% increase in third-party bushels handled.
Logistics and transloading
Logistics and transloading revenue increased $0.5 million in the twelve-months ended June 30, 2017 compared
to the fifteen-months ended June 30, 2016. The Corporation earns a service fee for handling liquefied petroleum
gas (“LPG” or “propane”), industrial products and fertilizer, whose shipments began April 30, 2017, at
Northgate.
Management service revenue
Management service revenue decreased $1.5 million in the twelve-months ended June 30, 2017 compared to
the fifteen-months ended June 30, 2016 as a result of a one-time contingency payment as a part of the sale and
three-year management of a grain elevator and barley seed plant in March 2013.
Operating expenses and depreciation
For the twelve-months ended June 30, 2017, operating and depreciation expense included in cost of sales totaled
$18.3 million compared to $20.1 million for the fifteen-months ended June 30, 2016. On an annualized basis,
the increase was due to a full year’s depreciation of Northgate’s assets compared to the prior year. Also, due to
significant volume increases, the costs at other operating facilities have increased for the twelve-months ended
June 30, 2017 compared to the fifteen-months ended June 30, 2016.
General and Administrative Expenses
General and administrative expense is composed of three components: corporate level administrative expenses,
administrative expenses associated with operating the grain division (exclusive of those expenses incurred at
grain facilities, which are captured in cost of sales and are a reduction to gross profit as described above), and
the revaluation of the provision for future payments to Front Street Capital. In addition, the corporate
administrative expenses are inclusive of non-grain business growth initiatives.
5
FY2017 ANNUAL REPORT
9
The following table sets out the components of the Corporation’s consolidated general and administrative
expenses for the twelve-months ended June 30, 2017 and the fifteen-months ended June 30, 2016:
(in millions)
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
Corporate administration
Non-corporate administration
Revaluation of provision of Front Street Capital
$
3.4
6.3
(0.1)
$
4.5
5.8
(0.2)
Total general and administrative expense
$
9.6
$
10.1
For the twelve-months ended June 30, 2017, general and administrative expenses totaled $9.6 million compared
to $10.1 million in the fifteen-months ended June 30, 2016. The increase in non-corporate administration
expense was primarily due to additional headcount year over year as the Corporation built its grain
merchandising team and related administrative support.
Finance Income (Loss)
For the twelve-month period ended June 30, 2017, finance loss totalled $0.3 million compared to finance
income of $1.2 million during the fifteen-month period end June 30, 2016. Finance income (loss) is composed
of realized and unrealized losses on foreign exchange transactions and currency hedging transactions along with
revaluation gains of portfolio investments.
For the twelve-month period ended June 30, 2017, the decrease compared to the fifteen-month period ended
June 30, 2016 is attributable to the prior year revaluation of the Corporation’s investment in Canterra Seeds
Holdings, Ltd. (“Canterra”). Until September 2015, the Corporation held a 25% equity interest in Canterra that
had a carrying value of $1.8 million. This investment, accounted for using the equity method, was classified on
the Consolidated Balance Sheet as “Investments in associates”. During the quarter ended September 30, 2015,
Canterra issued additional common equity shares, resulting in the dilution of the Corporation’s equity interest
to 17%. As such, the Corporation no longer had significant influence over the financial and operating policies
of Canterra. Therefore, Ceres reclassified its investment to portfolio investments for the period ended September
30, 2015 and recorded it at fair value, recognizing a gain of $1.0 million. The investment in Canterra totals $2.0
million as at June 30, 2017, and is classified on the Consolidated Balance Sheet within “Portfolio investments,
at fair value”.
Revaluation of Derivative Warrant Liability
In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on December 4,
2014, Ceres issued an aggregate of 2.1 million warrants (the “Warrants”) to the stand-by purchasers. The
Warrants issued were conditional upon approval at the Corporation’s annual general meeting (“AGM”), which
was obtained at the AGM on August 7, 2015.
Furthermore, the Warrants were issued at a fixed exercise price of CAD $5.84 and are each exercisable into one
common share of the Corporation (a “Common Share”). The Warrants have an expiry date of December 4,
2016, being 24 months after issuance. In the event that the Warrants are being exercised prior to the completion
of a change of control of the Corporation, but after a transaction that will result in such a change of control has
been publicly announced, in lieu of exercising the Warrants, the holders of Warrants can elect a cashless
exercise to receive Common Shares equal to: the difference between the ten-day Volume-Weighted Average
Price (“VWAP”) of the Corporation’s stock price and CAD $5.84; multiplied by the number of Common Shares
6
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CERES GLOBAL AG CORP.
in respect of which the election is made; divided by the ten-day VWAP of the Corporation’s stock price. If a
Warrant holder exercises this option, there will be variability in the number of shares issued per Warrant.
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity
and must instead be classified as a derivative liability and measured at fair value with changes in the fair value
recognized in the statement of operations and comprehensive loss at each period end.
On November 30, 2016, 1.25 million Warrants were exercised into 1.25 million Common Shares at an exercise
price of CAD $5.84 for total consideration of $5.4 million (CAD $7.3 million). On December 4, 2016, the
remaining 0.8 million Warrants expired and were canceled, resulting in no warrant liability as at June 30, 2017.
As at June 30, 2016, warrant liability was $0.1 million.
Gain (Loss) on Property, Plant and Equipment
As at June 30, 2017, the Corporation had three idle facilities: Duluth Lakeport, Buffalo and Calumet. As the
operations of Duluth Lakeport and Buffalo ceased, the cash flows associated with those specific assets could
no longer support their carrying value. During the twelve-months ended June 30, 2017, Ceres recorded a loss
of $7.7 million on the impairment of Duluth Lakeport and Buffalo compared to a gain of $0.2 million for the
sale of Ceres’ Electric Steel facility during the fifteen-months ended June 30, 2016. Subsequent to June 30,
2017, the Corporation closed the sale of its Buffalo facility on August 15, 2017. The gross proceeds of which
were $0.1 million. On September 19, 2017, the Corporation closed the sale of its Duluth Lakeport facility for a
loss of $0.2 million.
Interest Expense
(in millions)
Interest on revolving credit facility
Interest on repurchase obligations
Long-term debt
Amortization of financing costs paid
Interest income and other interest expense
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
(2.1)
(0.3)
(0.9)
(0.6)
-
$
(1.9)
(0.2)
(1.8)
(0.7)
0.1
Total interest expense
$
(3.9)
$
(4.5)
For the twelve-months ended June 30, 2017, interest expense totaled $3.9 million compared to $4.5 million for
the fifteen-months ended June 30, 2016. The higher interest expense on the revolving credit facility was
primarily driven by maintaining higher average inventory levels and a mid-year revolving credit facility interest
rate increase of 1.0% per annum.
Share of Net Income (Loss) in Investments in Associates
For the twelve-months ended June 30, 2017, the Corporation incurred a loss in its net share in investments in
associates of $0.2 million compared to an income of $0.3 million for the fifteen-months ended June 30, 2016.
7
FY2017 ANNUAL REPORT
11
2. QUARTERLY FINANCIAL DATA
Reporting dates
6/30/2017
3/31/2017
12/31/2016
9/30/2016
6/30/2016
3/31/2016
12/31/2015
9/30/2015
(in millions except per share)
Q4 2017
Q3 2017
Q2 2017
Q1 2017
Q5 2016
Q4 2016
Q3 2016
Q2 2016
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Revenues
Gross profit (loss)
$
112.2
$
128.5
$
131.8
$
155.9
$
115.8
$
87.3
$
61.4
$
73.0
$
0.1
$
3.0
$
2.9
$
1.9
$
1.9
$
2.8
$
(7.8)
$
1.1
Income (loss) from operations
$
(2.5)
$
0.6
$
0.8
$
(0.6)
$
(0.3)
$
0.9
$
(9.8)
$
(0.8)
Net income (loss)
$
(4.0)
$
(8.1)
$
(0.2)
$
(1.4)
$
(1.5)
$
0.8
$
(10.1)
$
0.1
Return on shareholders' equity¹
Weighted-average number of
common shares for the quarter
Basic and fully diluted earnings
(loss) per share
EBITDA¹
EBITDA per share
Shareholders' equity, as at
reporting date
Shareholders' equity per common
-2.7%
-5.4%
-0.1%
-0.9%
-0.9%
0.5%
-6.5%
0.0%
27.9
28.0
27.3
26.9
26.9
27.0
27.1
27.1
$
(0.14)
$
(0.29)
$
(0.01)
$
(0.05)
$
(0.05)
$
0.03
$
(0.37)
$
0.00
$
(1.7)
$
1.6
$
2.0
$
0.7
$
0.5
$
1.9
$
(8.9)
$
0.9
$
(0.06)
$
0.06
$
0.07
$
0.03
$
0.02
$
0.07
$
(0.33)
$
0.03
$
148.8
$
151.0
$
158.4
$
155.1
$
157.6
$
160.1
$
155.1
$
167.4
share, as at reporting date
$
5.33
$
5.40
$
5.64
$
5.77
$
5.86
$
5.92
$
5.73
$
6.19
Volumes
Elevator bushels handled
Direct ship bushels
26.1
3.6
16.1
5.8
20.0
4.6
25.0
9.9
18.7
9.4
9.4
3.2
10.8
4.2
10.1
4.3
¹Non-IFRS measurement. See Note 8 below for further information
Fourth Quarter
Gross profit for the quarter ended June 30, 2017 decreased $1.8 million to $0.1 million compared to the same
period of the previous year. The decline in gross profit was primarily driven by $1.9 million reduction in net
trading margin, due to lower carries quarter over quarter, offset by $0.2 million increase in storage and rental
income due to the increase in stored bushels and storage and handling rates and $0.3 million in logistics and
transloading revenue due to the addition of fertilizer shipments in 2017. Operating and depreciation expense
in cost of sales increased $0.4 million due to addition Northgate assets being placed in service. General and
administrative expenses increased $0.4 for the quarter ended June 30, 2017 compared to the same period in
prior year was due to additional headcount quarter over quarter growth of the grain merchandising and related
support teams. Net loss for the quarter ended June 30, 2017 increased $2.5 million to $4.0 million compared to
the same period of the previous year as a result of the reduction in net trading margin.
8
12
CERES GLOBAL AG CORP.
3. LIQUIDITY & CASH FLOW
(in millions)
Net Cash Provided by (Used in)
Operating activities
Investing activities
Net Cash Provided (Used) Before Financing Activities
Financing Activities
Foreign Exchange Cash Flow Adjustment on Accounts
Denominated in a Foreign Currency
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
14.6
(11.0)
3.6
(3.0)
$
5.6
(30.2)
(24.6)
22.7
-
(2.3)
Increase (Decrease) in Cash and Cash Equivalents
$
0.6
$
(4.2)
Cash and Cash Equivalents (Outstanding cheques)
$
-
$
(0.8)
Operating Activities
Cash provided by operating activities was $14.6 million for the twelve-months ended June 30, 2017. The $9.0
million increase in cash provided by operating activities was primarily a result of the effective management of
working capital.
Investing Activities
During the twelve-months ended June 30, 2017, cash used in investing activities were $11.0 million, which
comprised of additions of property, plant and equipment. The $19.2 million decrease in cash used in investing
activities was primarily due to the completion of asset purchases for the initial buildout of Northgate.
Financing Activities
During the twelve-months ended June 30, 2017, the Corporation had $3.0 million in cash used in financing
activities. The $25.7 million decrease in cash provided by financing activities was primarily due to this year’s
repayment of prior year’s net borrowings to fund the purchase of Northgate assets.
Available Sources of Liquidity
The Corporation’s sources of liquidity as at June 30, 2017 include available funds under its revolving credit
facility (the “Credit Facility”). Management believes that cash flow from operations will be adequate to fund
operating expenditures, maintenance capital, interest, and any income tax obligations. Growth capital
expenditures in the next twelve months are expected to be funded by cash on hand and borrowing against the
Credit Facility. Any additional debt incurred is expected to be serviced by the anticipated increases in cash flow
and will only be borrowed within the Corporation’s debt covenant limits.
In addition, the Corporation’s Credit Facility at June 30, 2017 contains certain covenants, including a covenant
that the Corporation maintain minimum working capital of not less than $30.0 million. As at June 30, 2017 the
Corporation’s working capital – defined as current assets less current liabilities – totaled $39.9 million. In
addition to working capital, the covenants include the maintenance of “consolidated debt” to “consolidated
tangible net worth” (as defined in the agreement) of not more than 4.0 to 1.0 and consolidated tangible net worth
of not less than $120.0 million. As at June 30, 2017 and June 30, 2016, the Corporation was in compliance with
all of the above mentioned financial covenants.
9
FY2017 ANNUAL REPORT
13
Liquidity risk
As at June 30, 2017 and June 30, 2016, the following are the contractual maturities of financial liabilities,
excluding interest payments:
June 30, 2017
Bank indebtedness
Accounts payable and accrued liabilities
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt
June 30, 2016
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
$
56.4
$
56.6
$
56.6
$
-
$
-
$
-
22.5
-
14.1
-
-
14.5
22.5
-
14.1
-
-
15.0
22.5
-
14.1
-
-
3.0
-
-
-
-
-
-
-
-
-
-
5.0
7.0
-
-
-
-
-
-
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
Bank indebtedness
Accounts payable and accrued liabilities
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt
55.6
16.0
-
2.6
0.1
0.1
22.9
55.8
16.0
-
2.6
0.1
0.1
23.6
55.8
16.0
-
2.6
0.1
0.1
1.6
-
-
-
-
-
-
-
-
-
-
-
-
5.0
17.0
-
-
-
-
-
-
-
Future expected operational cash flows and sufficient assets are available to fund the settlement of these
obligations in the normal course of business. In addition, the following factors allow for the substantial
mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management of trade
accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash flow management
activities and the continued likelihood of its operations further minimize liquidity risk.
4. CAPITAL RESOURCES
The Corporation utilizes the Credit Facility to finance its grain trading operations, which primarily consist of
purchases of grain inventories, financing of accounts receivable, and hedging activities, less accounts payable.
Levels of short-term debt fluctuate based on changes in underlying commodity prices and the timing of grain
purchases.
Credit Facility
As disclosed in the Consolidated Financial Statements for the twelve-month period ended June 30, 2017 and
fifteen-month period end June 30, 2016, on December 30, 2016 the Corporation renewed and amended its
uncommitted credit facility to a new maximum revolving facility amount of $67.5 million (previously $120.0
million). The new agreement is set to expire on December 29, 2017. Borrowings bear an interest rate of
overnight LIBOR plus 3.875% per annum, calculated and paid on a monthly basis. The Credit Facility is subject
to borrowing base limitations. Amounts under the Credit Facility that remain undrawn are not subject to a
commitment fee. The Credit Facility has certain covenants pertaining to the accounts of the Corporation, and
as at June 30, 2017, the Corporation was in compliance with all covenants.
14
CERES GLOBAL AG CORP.
10
Term Debt
In addition, as noted in the Annual Consolidated Financial Statements, on June 27, 2014, Ceres entered into a
senior secured term loan facility agreement for $20.0 million with Macquarie Bank to finance further
development and early stage construction of Northgate.
Subsequent to that, and in conjunction with amending and extending the syndicated uncommitted credit
agreement on December 30, 2014, the Corporation entered into a senior secured term loan facility agreement
(the “Loan”) for $25.0 million with Macquarie Bank. The Loan was for a term of 5 years with an interest rate
of one month LIBOR plus 5.25%. This loan was extinguished and replaced the previous loan originated on June
27, 2014, which had an initial term maturing on December 29, 2014.
On November 17, 2015, immediately following the closure of the sale of Electric Steel, the Corporation used
the net sales proceeds to repay a portion of its outstanding term debt in accordance with the terms of the Loan.
The total amount repaid on the term debt was $1.4 million. In accordance with the Loan, the second principal
payment was paid on December 29, 2016 for the amount of $1.6 million. An additional principal payment of
$7.0 million was also made on December 29, 2016 and the term loan payment schedule was amended. The next
principal payment is payable on December 29, 2017 for the amount of $3.0 million, with a principal payment
of $5.0 million due on December 28, 2018 and the final principal payment due on December 27, 2019 in the
amount of $7.0 million. The term loan has an effective interest rate of 6.30% plus one month LIBOR.
Normal Course Issuer Bid
During the twelve-month period ended June 30, 2017, the Corporation purchased Shares under normal course
issuer bids, the purpose of which was to provide Ceres with a mechanism to decrease the potential spread
between the net asset value per Share and the market price of the common shares. On June 9, 2016, Ceres
announced a normal course issuer bid (“the 2016-2017 NCIB”) which commenced on June 12, 2016. Using the
facilities of the Toronto Stock Exchange (“TSX”) and in accordance with its rules and policies, Ceres can
purchase up to a maximum of 1,595,765 of its Common Shares, representing approximately 10% of its
unrestricted public float as of June 2, 2016, subject to a maximum aggregate purchase price of CAD $5.0 million
pursuant to restrictions under the Corporation’s Credit Facility. The 2016-2017 NCIB concluded on June 11,
2017. Ceres may purchase up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except
for purchases made in accordance with the “block purchase” exception under applicable TSX rules and policies.
During the twelve months ended June 30, 2017, the Corporation purchased and canceled a total of 257,582
common shares under the normal course issuer bid for aggregate cash consideration of $1.1 million. The stated
capital value of these repurchased Shares was $1.9 million. The excess of the stated capital value of the
repurchased common shares over the cost thereof, being $0.8 million, was allocated to Retained Earnings in the
twelve-month period ended June 30, 2017.
During the fifteen months ended June 30, 2016, the Corporation purchased and cancelled a total of 168,600
common shares under the normal course issuer bid for aggregate cash consideration of $0.7 million. The stated
capital value of these repurchased Shares was $1.0 million. The excess of the stated capital value of the
repurchased common shares over the cost thereof, being $0.3 million, was allocated to retained earnings in the
fifteen-month period ended June 30, 2016.
5. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
Changes in Accounting Policies and Standards Issued But Not Yet Effective
Refer to Note 3 to the Annual Consolidated Financial Statements for information pertaining to accounting
changes effective for the current fiscal year ending June 30, 2017, and information on standards issued but not
yet effective.
11
FY2017 ANNUAL REPORT
15
Critical Accounting Estimates
The discussion and analysis of Ceres’ financial condition and results of operations are based upon the
Corporation’s Consolidated Financial Statements, which have been prepared in accordance with IFRS. Ceres’
significant accounting policies and accounting estimates are contained in the Annual Consolidated Financial
Statements (see Notes 3 and 4, respectively, for the description of policies or references to notes where such
policies are contained). The critical accounting estimates are valuation of investments; valuation of inventories
and commodity derivatives; because they require Ceres to make assumptions about matters that are potentially
uncertain at the time the accounting estimate is made and due to the likelihood that materially different amounts
could be reported under different conditions or using different assumptions.
6. OUTLOOK
Grain Division
The 2017 cereal grain growing season faced severe droughts in the western half of the U.S. and Southwestern
Canadian growing areas. These droughts created a significant amount of volatility for markets. Initially prices
increased due to supply concerns, then more recently prices set back as yields have been better than expected
due to sufficient soil moisture prior to drought conditions. High prices in the spring and early summer, plus a
relatively strong USD during that time, led to high priced U.S. wheat and durum, and lower than expected
exports and margins out of Duluth/Superior. Meanwhile, high prices led to minimal carries and overall limited
ways to generate revenue until new crop’s arrival.
Early indications of the 2017 crop suggest mixed yields: lower than average where drought conditions were
worst and average or better than average in the east and north where moisture was more abundant. Also, protein
levels appear to be higher for wheat grown in the U.S. than in Canada. Due to the varied protein levels from
this year’s harvest (vs. relatively high uniform protein over the past two years), we expect to see greater
volatility around protein basis levels throughout 2017/18. Meanwhile, the durum crop in the U.S. was more
negatively affected than spring wheat and we expect U.S. imports of Canadian durum to increase in 2017/18
vs. 2016/17.
The fiscal year ending June 30, 2017 marked the first year of operating a fully commissioned grain elevator at
Northgate. While margins were challenging in this environment, and some growing pains were realized, we
achieved our volume objectives and are confident margins and overall performance will improve in 2017/18
vs. 2016/17.
Meanwhile, the Corporation continues to focus on the following:
1. Increasing origination volume direct from farmers in the U.S. and Canada;
2. Maximizing volumes and value through and around its network, capitalizing on its asset utility and
effectively lowering fixed cost per bushel handled;
3. Investing in its infrastructure to broaden its product portfolio and focus more on pulses and specialty crops,
both at Northgate and other locations;
4. Extending its reach to chosen customers both in the U.S. and internationally;
5. Hiring talented people who can execute on all of the above.
Logistics Division
Q4 2017 marked the start-up of a 26,000-ton fertilizer warehouse to provide storage and handling of urea and
phosphate-based fertilizer for Koch Fertilizer Canada. At Northgate, Ceres began unloading by rail,
warehousing and loading trucks for distribution to Canadian farmers. The project officially began operating at
the end of April and finished with no accidents, on time and under budget.
12
16
CERES GLOBAL AG CORP.
While the partnership with Koch provides the international fertilizer producer access to the western Canadian
market, Ceres is working with Koch to provide freight to its fertilizer customers while at the same time provide
the grain suppliers at Northgate the ability to backhaul grain, as local grain suppliers would reload their trucks
with fertilizer after having unloaded grain and return to their origination. This is off to a very good start and
management anticipates that this will greatly improve transportation economics and further highlight Northgate
as an advantageous pricing gateway.
In addition, the Corporation continues to unload LPG from inbound trucks and load into railcars for shipment
into the US market via the BNSF from Northgate, Saskatchewan. The transloading of LPG has increased over
the past quarter as movement into the U.S. via BNSF continues to be competitive vs. other outlets. We expect
volumes will remain consistent throughout the rest of 2017/18. Overall management anticipates that
transloading propane will continue to be a steady business for the Corporation.
The Corporation is also exploring opportunities to build out and further develop the NCLC energy transloading
business with additional tenant customers and the potential to handle other types of energy and industrial
products such as oil field supplies, construction materials, and industrial parts and equipment. Specifically, the
Corporation has conducted several tests and expects to see volumes increase as a result of that effort. Movement
into Canada has been relatively unimpeded, however, issues have surfaced with respect to some products
moving into the U.S. due to infrastructure needed for customs to perform proper inspections. The Corporation
is working with both U.S. customs and BNSF to find a solution.
Lastly, there are several other opportunities the Corporation is looking at to add revenue opportunities and fully
utilize the rail and road infrastructure at Northgate. Management anticipates one or more of these to come to
fruition during the 2017/18 fiscal year.
7. OTHER
CONTROLS ENVIRONMENT
Disclosure Controls and Procedures
Ceres maintains appropriate information systems, procedures, and controls to ensure that new information
disclosed externally is complete, reliable, and timely. National Instrument 52-109 Certification of Disclosure
in Issuers’ Annual and Interim Filings (“NI 52-109”) requires the Chief Executive Officer and the Chief
Financial Officer to certify that they are responsible for establishing and maintaining disclosure controls and
procedures (“DC&P”) and that they have, as at June 30, 2017, designed and evaluated the effectiveness of the
DC&P (or have caused such DC&P to be designed under their supervision) to provide reasonable assurance
that material information relating to Ceres is made known to them by others, particularly during the period in
which Ceres’ annual filings are being prepared, and that information required to be disclosed by Ceres in its
annual filings, interim filings or other reports filed or submitted by Ceres under applicable securities legislation
is recorded, processed, summarized, and reported within the time periods specified in applicable securities
legislation.
Internal Controls over Financial Reporting
NI 52-109 also requires the Chief Executive Officer and the Chief Financial Officer to certify that they are
responsible for establishing and maintaining internal control over financial reporting (“ICFR”) and that they
have, as at June 30, 2017, designed and evaluated the effectiveness of ICFR to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with International Financial Reporting Standards (IFRS). The control framework used by the
Chief Executive Officer and the Chief Financial Officer to design Ceres’ ICFR is the Risk Management and
Governance: Guidance on Control (COCO Framework) published by CPA Canada. There have been no
13
FY2017 ANNUAL REPORT
17
material changes in the Corporation’s internal control over financial reporting during the twelve-months ended
June 30, 2017 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal
control over financial reporting.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Corporation’s financial instruments and other instruments, including a discussion of risks and relevant risk
sensitivities, can be found in Note 14 of the Annual Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation has not engaged in any off-balance sheet arrangements.
RELATED-PARTY TRANSACTIONS
The remuneration of key management personnel of the Corporation, which includes both members of the Board
of Directors and leadership team including the President and CEO, CFO and vice presidents, is set out below
in aggregate:
(in millions)
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
Employee/director salaries and benefits
Share-based compensation
$
1.1
0.4
$
1.5
0.4
$
1.5
$
1.9
SHARES OUTSTANDING
As at September 22, 2017, the issued and outstanding equity securities of the Corporation consisted of
27,911,014 common shares.
CONTINGENCIES
See Note 21 of the Annual Consolidated Financial Statements for disclosure of the Corporation’s contingencies
as at June 30, 2017.
8. NON-IFRS FINANCIAL MEASURES AND RECONCILIATIONS
Certain financial measures in this MD&A and discussed below are not prescribed by and do not have a
standardized meaning under IFRS. As such, they are unlikely to be comparable to similar measures presented
by other issuers. These non-IFRS financial measures are included because management uses the information to
analyze leverage, liquidity, and operating performance.
18
CERES GLOBAL AG CORP.
14
Earnings Before Interest, Income Taxes, Depreciation and Amortization
The Corporation believes the presentation of EBITDA can provide useful information to investors and
shareholders as it provides increased transparency. EBITDA is one metric that is used by management to
determine the Corporation’s ability to service its debt and finance capital. EBITDA excludes gains and losses
on property, plant and equipment and assets held for sale, as these items are considered to be non-reoccurring
in nature.
The following table is a reconciliation of EBITDA for Ceres on a consolidated basis for the twelve-months
ended June 30, 2017, and the fifteen-months ended June 30, 2016:
(in millions)
Net income (loss) for the period
Add/(Deduct):
Interest Expense
Revaluation of derivative warrant liability
Loss (Gain) on sale or property, plant and equipment
Income taxes (recovered)
Share of net (income) loss in investments in
associates
Depreciation on property, plant and equipment
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
(13.7)
$
(12.1)
3.9
(0.1)
7.7
-
0.2
4.6
4.5
(1.1)
(0.2)
(0.2)
(0.3)
3.9
$
2.6
$
(5.5)
Return on Shareholders’ Equity
Ceres believes that the return on shareholders’ equity can be an effective measure used to evaluate the
performance of the business over time. Management uses this metric to analyze performance and set targets.
Return on shareholders’ equity is the quotient of the net income (loss) for the period and the total shareholders’
equity as at the reporting date.
The following table is a calculation of return on shareholders’ equity for the twelve-months ended June 30,
2017, and the fifteen-months ended June 30, 2016:
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
$
(13.7)
148.8
-9.2%
$
$
(12.1)
157.6
-7.7%
(in millions)
Net income (loss) for the period
Total shareholders' equity as at reporting date
9. KEY ASSUMPTIONS & ADVISORIES
FORWARD LOOKING INFORMATION
This annual MD&A contains information that is “forward-looking information”, “forward-looking statements”
and “future oriented financial information” (collectively herein referred to as “forward-looking statements”)
within the meaning of applicable securities laws. Forward-looking statements in this document may include,
15
FY2017 ANNUAL REPORT
19
among others, statements regarding future operations and results, anticipated business prospects and financial
performance of Ceres and its subsidiaries, expectations or projections about the future, strategies and goals for
growth, the action against Ceres initiated by the Scoular Company, expected and future cash flows, costs,
planned capital expenditures, additional anticipated capital projects, construction and completion dates,
including plans to further develop the NCLC, operating and financial results, critical accounting estimates and
the expected financial and operational consequences of future commitments.
Generally, forward-looking statements can be identified by the use of forward-looking terminology such as
“plans”, “expects” or “does not expect”, “is expected”, “budget”, “outlook”, “likely”, “probably”, “going
forward”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, “believes”,
“may have implications” or similar words and phrases or statements that certain actions, events or results “may”,
“could”, “should”, “would”, “might”, or “will be taken”, “occur”, or “be achieved”. Forward-looking
statements in this document are intended to provide Ceres’ shareholders and potential investors with
information regarding Ceres and its subsidiaries, including Management’s assessment of future financial and
operational plans and outlook for Ceres and its subsidiaries.
Forward-looking statements are based on the opinions and estimates of management at the date the information
is made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other
factors that could cause actual events or results to differ materially from those projected in the forward-looking
statements. Actual results or events may differ from those predicted in these forward-looking statements. All
of the Corporation’s forward-looking statements are qualified by the assumptions that are stated or inherent
therein, including the assumptions listed below. Although Ceres believes these assumptions are reasonable, this
list is not exhaustive of factors that may affect any of the forward-looking statements.
KEY ASSUMPTIONS
Key assumptions have been made in connection with the forward-looking statements in this annual MD&A.
These assumptions include, but are not limited to, the following:
- No material change in the regulatory environment in Canada and the United States;
- Supply and demand factors as well as the pricing environment for grains and other agricultural
commodities;
- Fluctuation of currency and interest rates;
- General financial conditions for Western Canadian and American agricultural producers;
- Market share that will be achieved by the Corporation;
- Adequate and timely service from the railroad companies, and in particular from the Burlington Northern
Santa Fe railroad at the NCLC;
- The ability of Ceres to successfully operate Northgate;
- The Corporation’s ability to successfully defend itself against, or settle, the dispute with The Scoular
Company;
- Realization of economic benefits resulting from the synergies with NCLC; and
- The Corporation’s ability to maintain existing customer contracts and relationships coupled with its ability
to increase its customer portfolio.
The preceding list is not an exhaustive list of all possible factors. All factors should be considered carefully
when making decisions with respect to Ceres. Many such factors and events are not within the control of Ceres.
16
20
CERES GLOBAL AG CORP.
Factors that could cause actual results or events to differ materially from current expectations include, among
others, risks related to weather, politics and governments, changes in environmental and other laws and
regulations, competitive factors in the agricultural, food processing and feed sectors, construction and
completion of capital projects, labour, equipment and material costs, access to capital markets, interest and
currency exchange rates, technological developments, global and local economic conditions, the ability of Ceres
to successfully implement strategic initiatives and whether such strategic initiatives will yield the expected
benefits, the operating performance of the Corporation’s assets, the availability and price of commodities, and
the regulatory environment, processes and decisions. Ceres has attempted to identify important factors that
could cause actual actions, events or results to differ materially from those described in forward-looking
statements. However, there may be other factors that might cause actions, events or results that are not
anticipated, estimated or intended. There can be no assurance that forward-looking information will prove to
be accurate, as actual results and future events could differ materially from those anticipated in such statements
or information.
By its nature, forward-looking information is subject to various risks and uncertainties, including those risks
discussed in other sections of this annual MD&A and in other filings and communications, any of which could
cause Ceres’ actual results and experience to differ materially from the anticipated results or published
expectations. Additional information on these and other factors is available in the reports filed by Ceres with
Canadian securities regulators. Readers are cautioned not to place undue reliance on this forward-looking
information, which is given as of the date of this annual MD&A or otherwise, and not to use future-oriented
information or financial outlooks for anything other than their intended purpose. Ceres undertakes no obligation
to update publicly or revise any forward-looking statements or information, whether as a result of new
information, change in management’s estimates or opinions, future events or otherwise, except as required by
law.
17
FY2017 ANNUAL REPORT
21
Consolidated Financial Statements of
For the twelve-month period ended June 30, 2017 and the fifteen-month period ended June 30, 2016
TABLE OF CONTENTS
Management’s Responsibility for Finanicial Reporting
Indepenent Auditor’s Report
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
Notes to the Consolidated Financial Statements
23
24
25
26
27
28
29
Management’s Responsibility for Financial Reporting
These consolidated financial statements of the Corporation are the responsibility of management. The
consolidated financial statements were prepared by management in accordance with International Financial
Reporting Standards (“IFRS”) using information available to September 22, 2017 and management’s best
estimates and judgments, where appropriate.
Management has established a system of internal accounting and administrative controls to provide reasonable
assurance that assets are safeguarded from loss or unauthorized use, transactions are properly authorized and
recorded, and financial records are properly maintained for the preparation of reliable financial statements.
The Board of Directors discharges its responsibility for the consolidated financial statements primarily through
its Audit Committee, which comprises members of the Board of Directors. The Audit Committee meets with
management and with the external auditors to discuss the results of the audit examination and review the
consolidated financial statements of the Corporation. The Audit Committee also considers, for review by the
Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The financial
statements have been approved by the Board of Directors and have been audited by Wolrige Mahon LLP,
Chartered Professional Accountants, in accordance with Canadian generally accepted auditing standards. Their
Independent Auditor’s Report outlines their responsibilities, the scope of their audit, and their opinion on the
accompanying consolidated financial statements. Wolrige Mahon LLP has full and unrestricted access to the
Audit Committee.
Robert Day
President and CEO
Mark Kucala
Chief Financial Officer
22
CERES GLOBAL AG CORP.
2
Management’s Responsibility for Financial Reporting
These consolidated financial statements of the Corporation are the responsibility of management. The
consolidated financial statements were prepared by management in accordance with International Financial
Reporting Standards (“IFRS”) using information available to September 22, 2017 and management’s best
estimates and judgments, where appropriate.
Management has established a system of internal accounting and administrative controls to provide reasonable
assurance that assets are safeguarded from loss or unauthorized use, transactions are properly authorized and
recorded, and financial records are properly maintained for the preparation of reliable financial statements.
The Board of Directors discharges its responsibility for the consolidated financial statements primarily through
its Audit Committee, which comprises members of the Board of Directors. The Audit Committee meets with
management and with the external auditors to discuss the results of the audit examination and review the
consolidated financial statements of the Corporation. The Audit Committee also considers, for review by the
Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The financial
statements have been approved by the Board of Directors and have been audited by Wolrige Mahon LLP,
Chartered Professional Accountants, in accordance with Canadian generally accepted auditing standards. Their
Independent Auditor’s Report outlines their responsibilities, the scope of their audit, and their opinion on the
accompanying consolidated financial statements. Wolrige Mahon LLP has full and unrestricted access to the
Audit Committee.
Robert Day
President and CEO
Mark Kucala
Chief Financial Officer
2
FY2017 ANNUAL REPORT
23
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Ceres Global AG Corp.
We have audited the accompanying consolidated financial statements of Ceres Global AG Corp. and its subsidiaries, which
comprise the consolidated balance sheet as at June 30, 2017, and the consolidated statement of comprehensive loss, statement
of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies
and other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is necessary to
enable the preparation of consolidated 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 consolidated 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 consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Ceres
Global AG Corp. and its subsidiaries as at June 30, 2017, and their financial performance and cash flows for the year then
ended in accordance with International Financial Reporting Standards.
Other Matter
The consolidated financial statements of Ceres Global AG Corp. and its subsidiaries for the fifteen month period ended June
30, 2016 were audited by another auditor who expressed an unmodified opinion on those statements on September 22, 2016.
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 256,281,768
$ 254,837,124
$ 244,380,839
CHARTERED PROFESSIONAL ACCOUNTANTS
September 22, 2017
Vancouver, B.C.
24
CERES GLOBAL AG CORP.
Property, plant and equipment (net of depreciation)
CERES GLOBAL AG CORP.
Consolidated Balance Sheets
ASSETS
Current
Cash
Due from brokers
Unrealized gains on open cash contracts
Accounts receivable, trade
Inventories, grains
Sales taxes recoverable
Prepaid expenses and sundry assets
Assets held for sale
Portfolio investments
Current assets
Investments in associates
Intangible assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current
Bank indebtedness
Current portion of long-term debt
Accounts payable and accrued liabilities
Repurchase obligations
Unrealized losses on open cash contracts
Current liabilities
Long-term debt
Deferred income taxes
Non-current liabilities
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Common shares
Deferred share units
Contributed surplus
Deficit
Accumulated other comprehensive income
TOTAL SHAREHOLDERS' EQUITY
CONTINGENT LIABILITIES
Note
June 30,
2017
June 30,
2016
April 1,
2015
Restated (see Note 2)
$
585,497
$
723,321
$
4,062,674
1,828,307
10,501,364
22,694,942
95,233,421
41,174
1,923,319
5,458,819
5,106,168
13,457,510
102,616,595
131,015
1,895,386
6,835,418
7,493,264
6,257,573
117,022,684
899,692
1,115,883
-
670,909
3,193,407
3,384,669
136,001,431
132,773,483
144,358,097
2,705,935
300,000
2,946,601
300,000
4,445,034
300,000
117,274,402
118,817,040
95,277,708
120,280,337
122,063,641
100,022,742
$
256,281,768
$
254,837,124
$
244,380,839
$
56,442,820
$
55,584,100
$
14,820,756
3,000,000
22,549,403
1,642,379
16,007,014
14,066,236
2,568,309
10,814
96,069,273
11,453,638
73,325
104,971
75,980,098
21,259,266
11,453,638
21,259,266
-
13,754,313
14,740,904
2,062,395
272,109
1,359,753
47,010,230
24,032,044
234,908
24,266,952
107,522,911
97,239,364
71,277,182
-
-
-
-
-
-
-
15(e)
16
203,263,434
199,605,980
200,640,476
770,876
9,631,605
(21,385,146)
(43,521,912)
616,962
9,431,547
(21,360,954)
(30,695,775)
277,108
9,279,338
(18,105,009)
(18,988,256)
148,758,857
157,597,760
173,103,657
6
5
8
7
8
9
10
13
17
10
18
21
Provision for future payments to Front Street Capital
Derivative warrant liabilty
15(c)
The accompanying notes are an integral part of these financial statements.
ON BEHALF OF THE BOARD
Signed
"Gary Mize"
Director
Signed
"Doug Speers"
Director
5
CERES GLOBAL AG CORP.
Consolidated Balance Sheets
ASSETS
Current
Cash
Due from brokers
Unrealized gains on open cash contracts
Accounts receivable, trade
Inventories, grains
Sales taxes recoverable
Prepaid expenses and sundry assets
Assets held for sale
Portfolio investments
Current assets
Investments in associates
Intangible assets
Property, plant and equipment (net of depreciation)
Non-current assets
TOTAL ASSETS
LIABILITIES
Current
Bank indebtedness
Current portion of long-term debt
Accounts payable and accrued liabilities
Repurchase obligations
Unrealized losses on open cash contracts
Provision for future payments to Front Street Capital
Derivative warrant liabilty
Current liabilities
Long-term debt
Deferred income taxes
Non-current liabilities
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Common shares
Deferred share units
Contributed surplus
Accumulated other comprehensive income
Deficit
TOTAL SHAREHOLDERS' EQUITY
CONTINGENT LIABILITIES
Note
June 30,
2017
June 30,
2016
April 1,
2015
Restated (see Note 2)
$
585,497
1,828,307
10,501,364
22,694,942
95,233,421
41,174
1,923,319
-
3,193,407
$
723,321
5,458,819
5,106,168
13,457,510
102,616,595
131,015
1,895,386
-
3,384,669
$
4,062,674
6,835,418
7,493,264
6,257,573
117,022,684
899,692
1,115,883
-
670,909
136,001,431
132,773,483
144,358,097
2,705,935
300,000
2,946,601
300,000
4,445,034
300,000
117,274,402
118,817,040
95,277,708
120,280,337
122,063,641
100,022,742
$
256,281,768
$
254,837,124
$
244,380,839
$
56,442,820
3,000,000
22,549,403
-
14,066,236
10,814
-
96,069,273
11,453,638
-
11,453,638
$
55,584,100
1,642,379
16,007,014
-
2,568,309
73,325
104,971
75,980,098
21,259,266
-
21,259,266
$
14,820,756
-
13,754,313
14,740,904
2,062,395
272,109
1,359,753
47,010,230
24,032,044
234,908
24,266,952
107,522,911
97,239,364
71,277,182
203,263,434
770,876
9,631,605
(21,385,146)
(43,521,912)
199,605,980
616,962
9,431,547
(21,360,954)
(30,695,775)
200,640,476
277,108
9,279,338
(18,105,009)
(18,988,256)
148,758,857
157,597,760
173,103,657
6
5
8
7
8
9
10
13
17
15(c)
10
18
15(e)
16
21
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 256,281,768
$ 254,837,124
$ 244,380,839
The accompanying notes are an integral part of these financial statements.
ON BEHALF OF THE BOARD
Signed
"Gary Mize"
Director
Signed
"Doug Speers"
Director
5
FY2017 ANNUAL REPORT
25
CERES GLOBAL AG CORP.
Consolidated Statements of Comprehensive Income (Loss)
For the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016
CERES GLOBAL AG CORP.
Consolidated Statements of Cash Flows
For the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016
Note Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
REVENUES
Cost of sales
GROSS PROFIT (LOSS)
General and administrative expenses
LOSS FROM OPERATIONS
Finance income (loss)
Interest expense
Revaluation of derivative warrant liability
Gain (loss) on property, plant and equipment
LOSS BEFORE INCOME TAXES AND UNDERNOTED ITEM
Income taxes (recovered)
LOSS BEFORE UNDERNOTED ITEM
Share of net income (loss) in investments in associates
LOSS FOR THE PERIOD
Other comprehensive income (loss) for the period
Net investment hedge - net income
(Loss) gain on translation of foreign currency accounts of foreign operations
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
1
11
12
15 (c)
8
18
7
14 (b)
$ 528,478,099 $ 385,762,081
(520,636,681) (386,226,972)
7,841,418 (464,891)
(9,558,700) (10,132,889)
(1,717,282) (10,597,780)
(268,460)
1,167,497
(3,879,127) (4,469,194)
1,112,607
104,145
(7,650,521)
204,952
(13,411,245) (12,581,918)
4,282 (233,206)
(13,415,527) (12,348,712)
(237,015) 292,457
(13,652,542) (12,056,255)
-
1,017,384
(24,192) (4,273,329)
(15,312,200)
$
(13,676,734)
$
WEIGHTED-AVERAGE NUMBER OF SHARES FOR THE PERIOD
27,538,615
27,031,968
LOSS PER SHARE
Basic
Diluted
Supplemental disclosure of selected information:
Depreciation included in Cost of sales
Depreciation included in General and administrative expenses
Amortization of financing costs included in Interest expense
Personnel costs included in Cost of sales
Personnel costs included in General and administrative expenses
The accompanying notes are an integral part of these financial statements.
$ (0.50) $ (0.45)
(0.45)
(0.50)
8
8
$ 4,494,849 $ 3,776,829
$ 86,179 $ 83,400
$ 596,254 $ 551,909
$ 1,222,451 $ 1,851,158
$ 814,292 $ 1,018,884
26
CERES GLOBAL AG CORP.
6
7
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period
Adjustments for:
Depreciation of property, plant and equipment
Revaluation of derivative warrant liability
Share incentive compensation
Revaluation of portfolio investments
Loss (Gain) on property, plant and equipment
Interest expense
Income tax expense (recovery)
Deferred share units issued to Directors and fair value adjustment
Director share based compensation
Share of net loss (income) in investments in associates
Revaluation for future payments to Front Street Capital
Deferred income tax
Changes in non-cash working capital accounts
Interest paid
Income taxes recovered (paid)
Cash flow provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposition of assets held for sale
Acquisition of property, plant and equipment
Cash flow used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayment of) bank indebtedness
Net proceeds from (repayment of) term loan
Net proceeds from (repayment of) repurchase obligations
Financing costs paid
Share issuance costs
Warrants exercised
Repurchase of common shares under normal course issuer bid
Cash flow (used in) provided by financing activities
Foreign exchange cash flow adjustment on accounts
denominated in a foreign currency
Change in cash for the period
Cash, beginning of period
Note
8
15(c)
11
12
19
16
7
20
8
11
10
13
15(e)
15(b)
Twelve-month
Fifteen-month
period end
June 30, 2017
period end
June 30, 2016
$
(13,652,542)
$
(12,056,255)
3,860,229
(1,112,607)
152,209
(1,031,658)
(204,952)
4,469,194
(233,206)
373,012
-
(292,457)
(173,747)
(234,908)
16,165,812
(4,074,001)
(3,196)
5,603,469
1,450,000
(31,595,137)
(30,145,137)
40,000,000
(1,357,621)
(14,740,904)
(498,765)
(56,824)
-
(662,094)
22,683,792
(2,315,059)
(4,172,935)
4,062,674
4,581,028
(104,145)
200,058
188,612
7,650,521
3,879,127
4,282
223,799
43,593
237,015
(60,620)
14,753,036
(3,294,758)
(24,640)
14,624,366
(10,946,758)
(10,946,758)
1,595,320
(8,642,379)
(305,000)
5,425,492
(1,055,111)
(2,981,678)
(172)
695,758
(110,261)
-
-
-
-
-
Cash and cash equivalents, end of period
$
585,497
$
(110,261)
Cash
Cheques issued in excess of cash on hand
Cash and cash equivalents, end of period
$
585,497
$
723,321
9
(833,582)
$
585,497
$
(110,261)
The accompanying notes are an integral part of these financial statements
CERES GLOBAL AG CORP.
Consolidated Statements of Cash Flows
For the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period
Adjustments for:
Depreciation of property, plant and equipment
Revaluation of derivative warrant liability
Share incentive compensation
Revaluation of portfolio investments
Loss (Gain) on property, plant and equipment
Interest expense
Income tax expense (recovery)
Deferred share units issued to Directors and fair value adjustment
Director share based compensation
Share of net loss (income) in investments in associates
Revaluation for future payments to Front Street Capital
Deferred income tax
Changes in non-cash working capital accounts
Interest paid
Income taxes recovered (paid)
Cash flow provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposition of assets held for sale
Acquisition of property, plant and equipment
Cash flow used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayment of) bank indebtedness
Net proceeds from (repayment of) term loan
Net proceeds from (repayment of) repurchase obligations
Financing costs paid
Share issuance costs
Warrants exercised
Repurchase of common shares under normal course issuer bid
Cash flow (used in) provided by financing activities
Foreign exchange cash flow adjustment on accounts
denominated in a foreign currency
Change in cash for the period
Cash, beginning of period
Note
8
15(c)
11
12
19
16
7
20
8
11
10
13
15(e)
15(b)
Twelve-month
period end
June 30, 2017
Fifteen-month
period end
June 30, 2016
$
(13,652,542)
$
(12,056,255)
4,581,028
(104,145)
200,058
188,612
7,650,521
3,879,127
4,282
223,799
43,593
237,015
(60,620)
-
14,753,036
(3,294,758)
(24,640)
14,624,366
-
(10,946,758)
(10,946,758)
1,595,320
(8,642,379)
-
(305,000)
-
5,425,492
(1,055,111)
(2,981,678)
(172)
695,758
(110,261)
3,860,229
(1,112,607)
152,209
(1,031,658)
(204,952)
4,469,194
(233,206)
373,012
-
(292,457)
(173,747)
(234,908)
16,165,812
(4,074,001)
(3,196)
5,603,469
1,450,000
(31,595,137)
(30,145,137)
40,000,000
(1,357,621)
(14,740,904)
(498,765)
(56,824)
-
(662,094)
22,683,792
(2,315,059)
(4,172,935)
4,062,674
Cash and cash equivalents, end of period
$
585,497
$
(110,261)
Cash
Cheques issued in excess of cash on hand
Cash and cash equivalents, end of period
$
585,497
$
723,321
9
-
(833,582)
$
585,497
$
(110,261)
The accompanying notes are an integral part of these financial statements
7
FY2017 ANNUAL REPORT
27
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8
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
1. CORPORATE STATUS, REPORTING ENTITY AND NATURE OF OPERATIONS
Ceres Global Ag Corp. (hereinafter referred to as “Ceres” or the “Corporation”) was incorporated on
November 1, 2007, as amended on December 6, 2007, under the provisions of the Business Corporations
Act (Ontario). On April 1, 2013, Ceres Global Ag Corp. amalgamated with Corus Land Holding Corp. In
addition, on April 1, 2014, Ceres Global Ag Corp. amalgamated with Riverland Agriculture Ltd. and
Ceres Canada Holding Corp. Thereafter, the amalgamated corporations continued operating as Ceres
Global Ag Corp. Ceres is a corporation domiciled in Canada, with its head office located at 1660 South
Highway 100, Suite 350, St. Louis Park, Minnesota, United States, 55416.
These consolidated financial statements of Ceres as at June 30, 2017, June 30, 2016 and April 1, 2015 and
for the twelve-month and fifteen-month periods ended June 30, 2017 and June 30, 2016, respectively,
include the accounts of Ceres and its wholly owned subsidiaries Ceres U.S. Holding Corp. and Riverland
Ag Corp. (“Riverland Ag”). All intercompany transactions and balances have been eliminated. In
combination with Riverland Ag, the Corporation is an agricultural cereal grain storage, customer-specific
procurement and supply ingredient company that owns nine grain storage, handling and merchandising
facilities in the states of Minnesota and New York, and the provinces of Ontario and Saskatchewan, with
a combined licensed capacity of 43 million bushels.
The Corporation has one reportable segment while having two operating segments: (1) grain trading,
handling and storage, and; (2) logistics, which includes transloading non-grain commodities on behalf of
third-party customers. With the exception of $1,405,049 of revenue recognized for the twelve-month
period ended June 30, 2017 (fifteen-month period ended June 30, 2016: $1,188,714), all of the
Corporation’s revenues are comprised of grain trading, handling and storage.
2.
BASIS OF PREPARATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS). The accounting, estimation and valuation policies, as described below, have
been consistently applied to all periods presented herein.
These consolidated financial statements were authorized for issue by the Audit Committee of the Board
of Directors on September 22, 2017.
Functional and presentation currency
These consolidated financial statements are presented in United States Dollars (“USD”), which is different
from the Corporation’s functional currency of Canadian Dollars (“CAD”). This represents a change in
accounting policy and is the first year the Corporation has used USD as a presentation currency.
Effective July 1, 2016 the Corporation changed its presentation currency from the CAD to the USD. The
change in presentation currency is to better reflect the Corporation’s business activities. There has been
no change to Ceres’ functional currency (CAD) or its subsidiaries’ functional currencies (USD). In
making this change to the USD presentation currency, the Corporation followed the guidance in IAS 21
The Effects of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively
as if the new presentation currency had always been the Corporation’s presentation currency. In
9
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28
CERES GLOBAL AG CORP.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
1. CORPORATE STATUS, REPORTING ENTITY AND NATURE OF OPERATIONS
Ceres Global Ag Corp. (hereinafter referred to as “Ceres” or the “Corporation”) was incorporated on
November 1, 2007, as amended on December 6, 2007, under the provisions of the Business Corporations
Act (Ontario). On April 1, 2013, Ceres Global Ag Corp. amalgamated with Corus Land Holding Corp. In
addition, on April 1, 2014, Ceres Global Ag Corp. amalgamated with Riverland Agriculture Ltd. and
Ceres Canada Holding Corp. Thereafter, the amalgamated corporations continued operating as Ceres
Global Ag Corp. Ceres is a corporation domiciled in Canada, with its head office located at 1660 South
Highway 100, Suite 350, St. Louis Park, Minnesota, United States, 55416.
These consolidated financial statements of Ceres as at June 30, 2017, June 30, 2016 and April 1, 2015 and
for the twelve-month and fifteen-month periods ended June 30, 2017 and June 30, 2016, respectively,
include the accounts of Ceres and its wholly owned subsidiaries Ceres U.S. Holding Corp. and Riverland
Ag Corp. (“Riverland Ag”). All intercompany transactions and balances have been eliminated. In
combination with Riverland Ag, the Corporation is an agricultural cereal grain storage, customer-specific
procurement and supply ingredient company that owns nine grain storage, handling and merchandising
facilities in the states of Minnesota and New York, and the provinces of Ontario and Saskatchewan, with
a combined licensed capacity of 43 million bushels.
The Corporation has one reportable segment while having two operating segments: (1) grain trading,
handling and storage, and; (2) logistics, which includes transloading non-grain commodities on behalf of
third-party customers. With the exception of $1,405,049 of revenue recognized for the twelve-month
period ended June 30, 2017 (fifteen-month period ended June 30, 2016: $1,188,714), all of the
Corporation’s revenues are comprised of grain trading, handling and storage.
2.
BASIS OF PREPARATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS). The accounting, estimation and valuation policies, as described below, have
been consistently applied to all periods presented herein.
These consolidated financial statements were authorized for issue by the Audit Committee of the Board
of Directors on September 22, 2017.
Functional and presentation currency
These consolidated financial statements are presented in United States Dollars (“USD”), which is different
from the Corporation’s functional currency of Canadian Dollars (“CAD”). This represents a change in
accounting policy and is the first year the Corporation has used USD as a presentation currency.
Effective July 1, 2016 the Corporation changed its presentation currency from the CAD to the USD. The
change in presentation currency is to better reflect the Corporation’s business activities. There has been
no change to Ceres’ functional currency (CAD) or its subsidiaries’ functional currencies (USD). In
making this change to the USD presentation currency, the Corporation followed the guidance in IAS 21
The Effects of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively
as if the new presentation currency had always been the Corporation’s presentation currency. In
9
FY2017 ANNUAL REPORT
29
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
accordance with IAS 21, the financial statements for all years and periods presented have been translated
to the new USD presentation currency as follows:
the difference between the fair value and the cost of portfolio investments is recognized as a revaluation
of portfolio investments in Finance income (loss) on the Statement of Comprehensive Income (Loss).
All assets and liabilities have been translated from their functional currency into the new USD
presentation currency using the closing current exchange rate at the date of each balance sheet;
Investments in associates
Income and expenses for each statement of profit or loss presented have been retranslated at
average exchange rates prevailing during each reporting period;
Equity balances have been retrospectively translated at historical rates prevailing during the
period incurred; and
All resulting exchange differences have been recognized in other comprehensive income and
accumulated as a separate component of equity (cumulative translation adjustment listed as
Accumulated Other Comprehensive Income on the Balance Sheet).
In addition to the comparative financial statements, the Corporation has presented a third statement of
financial position as at April 1, 2015 as required by IFRS upon application of a voluntary change in
accounting policy.
Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis, except for the
following material items in the Balance Sheet:
Derivative financial instruments are measured at fair value;
Assets held for sale are measured at fair value less costs to sell;
Financial instruments at fair value through profit or loss are measured at fair value; and
Inventories of agricultural commodities are measured at fair value less costs to sell.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transaction costs
The accounting policies described below have been applied consistently to all periods presented in these
consolidated financial statements.
Revenue recognition, net sales and cost of sales
The Corporation follows a policy of recognizing sales revenue at the time of delivery of the product and
when all of the following have occurred: a sales agreement is in place, title and risk of loss have passed,
pricing is fixed or determinable, and collection is reasonably assured. Grain storage, rental and other
operating income are recorded as earned on an accrual basis. Freight costs and handling charges related
to sales are presented gross in Revenues and Cost of sales.
Other direct and indirect costs associated with inventory and storage, including payroll and benefits of
elevator employees, depreciation of buildings, silos and elevators, utilities and other similar costs are
classified within Cost of sales. Income and expenses are recorded on an accrual basis. Investment
transactions are recognized on the trade date. Dividend revenues are recognized on the ex-dividend date.
Interest is recognized as earned using the effective interest method. Realized gains and losses from the
sale of investments are calculated using the average cost method. The change over a reporting period of
Associates are entities in which Ceres has significant influence, but has no control, over the financial and
operating policies. Significant influence is presumed to exist when the Corporation holds between 20%
and 50% of the voting power of another entity.
Investments in associates are accounted for using the equity method and are recognized initially at cost.
The Corporation’s investment includes goodwill identified on acquisition, net of any accumulated
impairment losses. The consolidated financial statements include the Corporation’s share of the after-tax
net income (or net loss) and of the changes in equity during a reporting period, after adjustments (if any)
to align the associate’s accounting policies with those of the Corporation, from the date that significant
influence commences until the date that significant influence ceases. If the Corporation’s accumulated
share of net losses in an associate were to exceed the carrying amount of its interest in that associate, the
carrying amount of that interest, would be reduced to nil and the recognition of further losses would be
discontinued except to the extent the Corporation were to have an obligation or were to have made
payments on behalf of the associate.
The Corporation reviews its investments in associates for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the investments may not be recoverable.
Evidence of impairment in value might include the absence of an ability to recover the carrying amount
of the investments, the inability of the associates to sustain earnings capacity that would justify the
carrying amount of the investments or, where applicable, estimated sales proceeds that are insufficient to
recover the carrying amount of the investments. If the recoverable amount of the investments is
determined to be less than the carrying amount, an impairment write-down is recorded based on the excess
of the carrying amount over management’s estimate of the recoverable amount.
Portfolio transaction costs include brokerage commissions incurred in the purchase and sale of portfolio
securities in which Ceres invests. Corporate transaction costs include costs directly attributable to the
acquisition of subsidiaries and the investments in associates. All such costs are expensed in the period
incurred and classified as General and administrative expenses in the Statement of Comprehensive Income
(Loss).
Transaction costs related to the issuance of equity instruments of the Corporation or its subsidiaries are
accounted for as a reduction of the stated capital of the equity securities issued. Transaction costs related
to the issuance of debt instruments of the Corporation or its subsidiaries are considered in the
determination of amortized cost. Transaction costs related to bank indebtedness are amortized using the
straight-line method over the term of the financing arrangement, while transaction costs for long-term
debt are amortized using the effective interest method.
30
CERES GLOBAL AG CORP.
10
11
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
the difference between the fair value and the cost of portfolio investments is recognized as a revaluation
of portfolio investments in Finance income (loss) on the Statement of Comprehensive Income (Loss).
Investments in associates
Associates are entities in which Ceres has significant influence, but has no control, over the financial and
operating policies. Significant influence is presumed to exist when the Corporation holds between 20%
and 50% of the voting power of another entity.
Investments in associates are accounted for using the equity method and are recognized initially at cost.
The Corporation’s investment includes goodwill identified on acquisition, net of any accumulated
impairment losses. The consolidated financial statements include the Corporation’s share of the after-tax
net income (or net loss) and of the changes in equity during a reporting period, after adjustments (if any)
to align the associate’s accounting policies with those of the Corporation, from the date that significant
influence commences until the date that significant influence ceases. If the Corporation’s accumulated
share of net losses in an associate were to exceed the carrying amount of its interest in that associate, the
carrying amount of that interest, would be reduced to nil and the recognition of further losses would be
discontinued except to the extent the Corporation were to have an obligation or were to have made
payments on behalf of the associate.
The Corporation reviews its investments in associates for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the investments may not be recoverable.
Evidence of impairment in value might include the absence of an ability to recover the carrying amount
of the investments, the inability of the associates to sustain earnings capacity that would justify the
carrying amount of the investments or, where applicable, estimated sales proceeds that are insufficient to
recover the carrying amount of the investments. If the recoverable amount of the investments is
determined to be less than the carrying amount, an impairment write-down is recorded based on the excess
of the carrying amount over management’s estimate of the recoverable amount.
Transaction costs
Portfolio transaction costs include brokerage commissions incurred in the purchase and sale of portfolio
securities in which Ceres invests. Corporate transaction costs include costs directly attributable to the
acquisition of subsidiaries and the investments in associates. All such costs are expensed in the period
incurred and classified as General and administrative expenses in the Statement of Comprehensive Income
(Loss).
Transaction costs related to the issuance of equity instruments of the Corporation or its subsidiaries are
accounted for as a reduction of the stated capital of the equity securities issued. Transaction costs related
to the issuance of debt instruments of the Corporation or its subsidiaries are considered in the
determination of amortized cost. Transaction costs related to bank indebtedness are amortized using the
straight-line method over the term of the financing arrangement, while transaction costs for long-term
debt are amortized using the effective interest method.
11
FY2017 ANNUAL REPORT
31
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Classification of financial instruments
Valuation of investments
Financial assets
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is
designated as such upon initial recognition. Financial assets are designated at fair value through profit or
loss if the Corporation manages such investments and makes purchase and sale decisions in accordance
with the Corporation’s documented risk management and investment strategies. Financial assets at fair
value through profit or loss are measured at fair value, and changes therein are recognized in net income
or loss. Portfolio investments represent non-derivative financial assets classified as held for trading. The
Corporation’s unrealized gains on open cash contracts are derivative financial assets classified as held for
trading.
Financial assets having fixed or determinable payments, and which are not quoted in an active market are
defined as loans and receivables. Such assets are initially recognized at fair value plus directly attributable
transaction costs, if any. Thereafter, loans and receivables are measured at amortized cost using the
effective interest method less impairment losses, if any. Loans and receivables include cash, due from
Brokers, and accounts receivable, trade.
Financial liabilities
Unrealized losses on open cash contracts are classified as held for trading and valued at fair value through
profit or loss. The provision for future payment to Front Street Capital is also valued at fair value through
profit and loss. Non-derivative financial liabilities of the Corporation include bank indebtedness, accounts
payable and accrued liabilities, repurchase obligations and long term debt. These financial liabilities are
initially recognized at fair value plus any directly attributable transaction costs. Thereafter, these financial
liabilities are measured at amortized cost using the effective interest method.
Equity
Common shares and unconditional warrants
Common shares and certain warrants are classified as equity. Incremental costs directly attributable to the
issue of common shares and warrants are recognized as a deduction from equity, net of the effects of
income taxes, if any.
Contributed surplus
The value of warrants issued that have expired is recognized as contributed surplus, net of the effects of
income taxes, if any.
Repurchase of common shares
When common shares recognized as equity are repurchased, the amount of the consideration paid (which
may include directly attributable transaction costs) is recognized as a deduction from equity, net of the
effects of income taxes, if any. The portion of the consideration paid that represents the value of the stated
capital of the shares repurchased is deducted from the carrying amount of common shares. Any difference
between the total consideration paid and the stated capital amount of the shares repurchased is added to
(or deducted from) retained earnings (deficit), as applicable.
Portfolio investments are held for trading, and are measured and reported at fair value. Securities and
ownership interests over which the Corporation exercises significant influence or control are accounted
for using the equity-accounting model or through consolidation, as appropriate.
As at a reporting date, the fair value of financial instruments traded in active markets (primarily equity
securities of public companies and related derivative instruments, if any) is based on the bid price for
investments held by the Corporation, and on the asking price for investments sold short, if any. The fair
value of financial instruments not traded in an active market (including but not limited to: securities in
private companies, warrants and restricted securities) is determined using valuation techniques.
Depending on various circumstances, the Corporation may use several methods and makes assumptions
based on market conditions existing at each reporting date. Valuation techniques may include, without
limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by market participants.
Recognition of investments
Purchases and sales of investments are recognized on the trade date, being the date on which the
Corporation commits to purchase or sell an investment. Investments cease to be recognized when the
rights to receive cash flows from the investments have expired or the Corporation has transferred
substantially all risks and rewards of ownership.
Derivative contracts
Ceres may purchase forward foreign exchange contracts to act as an economic hedge against assets and
liabilities denominated in foreign currencies. As at a reporting date, forward foreign exchange contracts
are valued based on the difference between the forward contract rate and the forward bid rate (for currency
held). Unrealized gains and losses, if any, on these forward contracts used to hedge foreign currency assets
and liabilities are presented separately on the Balance Sheet and included in Derivative assets or
Derivative liabilities, as applicable, and are recognized in the Statement of Comprehensive Income (Loss)
as a component of Finance income (loss) and included with the revaluation of portfolio investments. Upon
the closing out of these contracts, any gains or losses on foreign exchange are reported in Finance income
(loss) in the Statement of Comprehensive Income (Loss) as realized gain (loss) on currency hedging
transactions.
To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using
exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural
commodity inventories and forward cash purchase and sales contracts. The Corporation will also use
exchange-traded futures and options contracts as components of merchandising strategies designed to
enhance margins. The results of these strategies may be significantly influenced by factors such as the
volatility of the relationship between the value of exchange-traded commodities futures contracts and the
cash prices of the underlying commodities, and volatility of freight markets. Derivative contracts have not
been designated, and are not accounted for, as fair value hedges. Management determines fair value based
on exchange-quoted prices, and in the case of its forward purchase and sale contracts, estimated fair value
is adjusted for differences in local markets. Realized and unrealized gains and losses in the value of
inventories of merchandisable agricultural commodities, forward cash purchase and sales contracts, and
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12
13
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Valuation of investments
Portfolio investments are held for trading, and are measured and reported at fair value. Securities and
ownership interests over which the Corporation exercises significant influence or control are accounted
for using the equity-accounting model or through consolidation, as appropriate.
As at a reporting date, the fair value of financial instruments traded in active markets (primarily equity
securities of public companies and related derivative instruments, if any) is based on the bid price for
investments held by the Corporation, and on the asking price for investments sold short, if any. The fair
value of financial instruments not traded in an active market (including but not limited to: securities in
private companies, warrants and restricted securities) is determined using valuation techniques.
Depending on various circumstances, the Corporation may use several methods and makes assumptions
based on market conditions existing at each reporting date. Valuation techniques may include, without
limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by market participants.
Recognition of investments
Purchases and sales of investments are recognized on the trade date, being the date on which the
Corporation commits to purchase or sell an investment. Investments cease to be recognized when the
rights to receive cash flows from the investments have expired or the Corporation has transferred
substantially all risks and rewards of ownership.
Derivative contracts
Ceres may purchase forward foreign exchange contracts to act as an economic hedge against assets and
liabilities denominated in foreign currencies. As at a reporting date, forward foreign exchange contracts
are valued based on the difference between the forward contract rate and the forward bid rate (for currency
held). Unrealized gains and losses, if any, on these forward contracts used to hedge foreign currency assets
and liabilities are presented separately on the Balance Sheet and included in Derivative assets or
Derivative liabilities, as applicable, and are recognized in the Statement of Comprehensive Income (Loss)
as a component of Finance income (loss) and included with the revaluation of portfolio investments. Upon
the closing out of these contracts, any gains or losses on foreign exchange are reported in Finance income
(loss) in the Statement of Comprehensive Income (Loss) as realized gain (loss) on currency hedging
transactions.
To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using
exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural
commodity inventories and forward cash purchase and sales contracts. The Corporation will also use
exchange-traded futures and options contracts as components of merchandising strategies designed to
enhance margins. The results of these strategies may be significantly influenced by factors such as the
volatility of the relationship between the value of exchange-traded commodities futures contracts and the
cash prices of the underlying commodities, and volatility of freight markets. Derivative contracts have not
been designated, and are not accounted for, as fair value hedges. Management determines fair value based
on exchange-quoted prices, and in the case of its forward purchase and sale contracts, estimated fair value
is adjusted for differences in local markets. Realized and unrealized gains and losses in the value of
inventories of merchandisable agricultural commodities, forward cash purchase and sales contracts, and
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FY2017 ANNUAL REPORT
33
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
exchange-traded futures contracts are recognized in profit or loss as a component of Cost of sales.
Unrealized gains and losses on these derivative contracts are recognized in earnings and classified on the
Balance Sheet as Due from Broker, Derivative assets or Derivative liabilities, as applicable.
Fair value measurements
The Corporation uses a valuation hierarchy as a framework for disclosing fair values, based on the inputs
to measure the fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities including
exchange-traded derivative contracts that can be assessed at measurement date;
Level 2 – inputs are quoted prices for similar assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs are unobservable inputs based on the Corporation’s own assumptions used to measure
assets and liabilities at fair value.
Foreign currency translation, transactions of Canadian dollar functional currency entities
Foreign currency transactions are translated into CAD using the exchange rates prevailing at the dates of
the transactions. As at a reporting date, assets and liabilities denominated in a foreign currency are
translated into CAD, as follows:
Foreign currency monetary items are translated using the spot exchange rate in effect at the
reporting date, and;
Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rate(s) in effect as at the date(s) on which fair value was determined.
Foreign exchange gains or losses resulting from the settlement of such transactions and from the
translation as at a reporting date of assets and liabilities denominated in foreign currencies are reflected in
the Statement of Comprehensive Income (Loss). Translation gains or losses on securities included in the
investment portfolio of the Corporation are recognized as Finance income (loss) in the Statement of
Comprehensive Income (Loss) and classified with the revaluation of portfolio investments.
Foreign currency translation, non-USD functional currency entities
For the preparation of these consolidated financial statements, all assets and liabilities are translated into
the presentation currency of U.S. dollars (“USD”) using the foreign exchange rate in effect as at the
reporting date with income statement accounts translated using the average exchange rate for the reporting
or applicable period. Translation adjustments arising from changes in exchange rates are reported as a
component of other comprehensive income and form part of the cumulative translation account in
shareholders’ equity. When a foreign operation is disposed of such that control, significant influence or
joint control is lost, the cumulative amount in the translation account related to that foreign operation is
reclassified to profit or loss as part of the profit or loss on disposal.
Finance income (loss)
Corporation, and includes:
Finance income (loss) pertains to revenues, gains and losses related to the investing activities of the
Dividend revenues, if any, from portfolio investments;
Realized gains (losses) on portfolio investments;
Realized gains (losses) on currency-hedging transactions;
Realized and unrealized gains (losses) on foreign exchange; and
Unrealized increase (decrease) in fair value of investments.
Depending on the movements of equity and other markets, finance income and losses will vary for each
Finance expenses represent the aggregate of interest expense on borrowings and the amortization of
reporting period.
Interest expenses
financing transaction costs.
Inventories
Inventories represent agricultural grain and oilseed commodities and are stated at fair value less costs to
sell. Fair value is primarily determined from market prices quoted on public commodity exchanges,
adjusted for expected freight costs to normal delivery points and a price premium or discount to cover
local supply and demand factors as estimated by management. Changes in the fair value less costs to sell
of inventories of agricultural grain commodities are recognized in profit or loss as and when they occur,
and such changes are included as a component of cost of sales.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditures
that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s
carrying amount or recognized as a separate asset, as appropriate. Costs are capitalized only when it is
probable that future economic benefits associated with the item will flow to the Corporation and the cost
can be measured reliably. When parts of an item of property and equipment have different useful lives,
they are accounted for as separate components of property and equipment and depreciated accordingly.
The carrying amount of a replaced component is derecognized.
Repairs and maintenance costs are expensed as incurred.
Property, plant and equipment are reviewed for impairment at the end of each reporting period to assess
whether there is any indication of impairment. If any indication of impairment exists, an estimate of the
asset’s recoverable amount is calculated as the higher of fair value less costs of disposal and value in use.
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15
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Finance income (loss)
Finance income (loss) pertains to revenues, gains and losses related to the investing activities of the
Corporation, and includes:
Dividend revenues, if any, from portfolio investments;
Realized gains (losses) on portfolio investments;
Realized gains (losses) on currency-hedging transactions;
Realized and unrealized gains (losses) on foreign exchange; and
Unrealized increase (decrease) in fair value of investments.
Depending on the movements of equity and other markets, finance income and losses will vary for each
reporting period.
Interest expenses
Finance expenses represent the aggregate of interest expense on borrowings and the amortization of
financing transaction costs.
Inventories
Inventories represent agricultural grain and oilseed commodities and are stated at fair value less costs to
sell. Fair value is primarily determined from market prices quoted on public commodity exchanges,
adjusted for expected freight costs to normal delivery points and a price premium or discount to cover
local supply and demand factors as estimated by management. Changes in the fair value less costs to sell
of inventories of agricultural grain commodities are recognized in profit or loss as and when they occur,
and such changes are included as a component of cost of sales.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditures
that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s
carrying amount or recognized as a separate asset, as appropriate. Costs are capitalized only when it is
probable that future economic benefits associated with the item will flow to the Corporation and the cost
can be measured reliably. When parts of an item of property and equipment have different useful lives,
they are accounted for as separate components of property and equipment and depreciated accordingly.
The carrying amount of a replaced component is derecognized.
Repairs and maintenance costs are expensed as incurred.
Property, plant and equipment are reviewed for impairment at the end of each reporting period to assess
whether there is any indication of impairment. If any indication of impairment exists, an estimate of the
asset’s recoverable amount is calculated as the higher of fair value less costs of disposal and value in use.
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FY2017 ANNUAL REPORT
35
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Land is not depreciated. Depreciation on the other assets is provided for on a straight-line basis over the
estimated useful lives of assets as follows:
Earnings (loss) per Share
Buildings, silos/elevators, and improvements
Machinery and equipment
Furniture, fixtures, office equipment, and computers
15 – 31 years
7 – 15 years
3 – 7 years
For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there
are separately identifiable cash flows.
Gains and losses on disposals of property, plant and equipment are determined by comparing the disposal
proceeds with the carrying amount of the asset and are included in profit or loss as gain (loss) on property,
plant and equipment.
Repurchase obligations
The Corporation periodically enters into sale/repurchase agreements whereby the Corporation receives
cash in exchange for selling inventory to a commodity trading financial institution and the Corporation
agrees to repurchase the inventory from the financial institution at a fixed rate on a future date. The
Corporation accounts for these as product financing arrangements and, accordingly, these transactions are
treated as borrowings and commodity inventory in the Corporation’s consolidated financial statements and
no sales and purchases are reported in the consolidated financial statements.
Income taxes
Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in
profit or loss, except to the extent that they relate to a business combination, or to items recognized directly
in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, measured using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences: the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither accounting nor taxable profit or loss,
and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for
taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at
the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted as at the reporting date. Deferred tax assets and liabilities
are offset to the extent that they relate to income taxes levied on the same taxable entity by the same
taxation authority.
A deferred tax asset is recognized for unused tax losses and tax credits and deductible temporary
differences, to the extent that it is probable that future taxable income will be available against which they
can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the
probability of future taxable profits improves.
Earnings (loss) per Share (“EPS”) is reported for basic and diluted net income (loss). Basic EPS is
calculated by dividing net income (loss) for the reporting period by the weighted-average number of
common shares outstanding during the reporting period. Diluted EPS is calculated by adjusting net income
(loss) and the weighted-average number of common shares outstanding for the effects, if any, of all
potentially dilutive common shares, resulting from the exercise of options or Warrants or the redemption
of Deferred Share Units outstanding as at the end of a reporting period. The effect of the potential issuance
of common shares related to the redemption of Deferred Share Units or exercise of options on diluted EPS
has not been presented, as it is anti-dilutive in a period of loss.
Share-based payments
Deferred Share Unit
The Corporation has established a Directors’ Deferred Share Unit Plan (the “DSU Plan”), which became
effective on March 10, 2014 and is an equity-settled share-based payment plan. Under the DSU Plan, a
director who is not an employee of the Corporation or any affiliate (including any non-executive Chair of
the Board) is an Eligible Director. Any Eligible Director may elect to receive some or all of the Annual
Cash Remuneration amount (as defined in the DSU Plan) for that Director in the form of Deferred Share
Units (“DSUs”). DSUs are settled by the issuance of common shares on the Entitlement Date (as defined
under the DSU Plan), which is a date after the end of a director’s term of service with the Board.
As at the dates on which DSUs are issued under the Plan, the Corporation recognizes as an expense the
portion of the Directors’ fees issued in the form of DSUs issued to the Director, which are issued at fair
value, and the Corporation increases shareholders’ equity by an equal amount. The Corporation revalues
DSUs as at each reporting period-end, based on the volume-weighted average trading price per common
share of the Corporation on the Toronto Stock Exchange during the immediately preceding five (5) trading
days. Revaluation adjustments are recognized as an increase or decrease in the expense for Directors’ fees
during the reporting period, with a corresponding increase or decrease in shareholders’ equity.
Stock Options
Stock options are equity-settled share-based payment transactions. The Corporation follows the fair value
method to measure stock option awards it grants to certain officers, key employees and consultants of the
Corporation and its subsidiaries. The fair value of stock options on the date the options are granted is
determined by the Black Scholes option pricing model with assumptions for risk-free interest rate, dividend
yield, volatility of the expected market price of the Corporation’s common shares and an expected life of
the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based
on historical experience and future expectations, as applicable. Expected annual volatility is estimated
using historical volatility. Compensation is amortized to earnings over the vesting period of the related
option. The Corporation uses graded or accelerated amortization, which specifies that each vesting tranche
must be accounted for as a separate arrangement with a unique fair value measurement. Each vesting
tranche is subsequently amortized separately and in parallel from the grant date.
Stock Appreciation Rights
Stock Appreciation Rights (“SARs”) may be granted to officers, certain employees and consultants of the
Corporation on such terms and conditions determined by the Board of Directors (the “Board”). Stand
Alone SARs are cash-settled share-based payment transactions and are measured at the fair value of the
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16
17
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Earnings (loss) per Share
Earnings (loss) per Share (“EPS”) is reported for basic and diluted net income (loss). Basic EPS is
calculated by dividing net income (loss) for the reporting period by the weighted-average number of
common shares outstanding during the reporting period. Diluted EPS is calculated by adjusting net income
(loss) and the weighted-average number of common shares outstanding for the effects, if any, of all
potentially dilutive common shares, resulting from the exercise of options or Warrants or the redemption
of Deferred Share Units outstanding as at the end of a reporting period. The effect of the potential issuance
of common shares related to the redemption of Deferred Share Units or exercise of options on diluted EPS
has not been presented, as it is anti-dilutive in a period of loss.
Share-based payments
Deferred Share Unit
The Corporation has established a Directors’ Deferred Share Unit Plan (the “DSU Plan”), which became
effective on March 10, 2014 and is an equity-settled share-based payment plan. Under the DSU Plan, a
director who is not an employee of the Corporation or any affiliate (including any non-executive Chair of
the Board) is an Eligible Director. Any Eligible Director may elect to receive some or all of the Annual
Cash Remuneration amount (as defined in the DSU Plan) for that Director in the form of Deferred Share
Units (“DSUs”). DSUs are settled by the issuance of common shares on the Entitlement Date (as defined
under the DSU Plan), which is a date after the end of a director’s term of service with the Board.
As at the dates on which DSUs are issued under the Plan, the Corporation recognizes as an expense the
portion of the Directors’ fees issued in the form of DSUs issued to the Director, which are issued at fair
value, and the Corporation increases shareholders’ equity by an equal amount. The Corporation revalues
DSUs as at each reporting period-end, based on the volume-weighted average trading price per common
share of the Corporation on the Toronto Stock Exchange during the immediately preceding five (5) trading
days. Revaluation adjustments are recognized as an increase or decrease in the expense for Directors’ fees
during the reporting period, with a corresponding increase or decrease in shareholders’ equity.
Stock Options
Stock options are equity-settled share-based payment transactions. The Corporation follows the fair value
method to measure stock option awards it grants to certain officers, key employees and consultants of the
Corporation and its subsidiaries. The fair value of stock options on the date the options are granted is
determined by the Black Scholes option pricing model with assumptions for risk-free interest rate, dividend
yield, volatility of the expected market price of the Corporation’s common shares and an expected life of
the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based
on historical experience and future expectations, as applicable. Expected annual volatility is estimated
using historical volatility. Compensation is amortized to earnings over the vesting period of the related
option. The Corporation uses graded or accelerated amortization, which specifies that each vesting tranche
must be accounted for as a separate arrangement with a unique fair value measurement. Each vesting
tranche is subsequently amortized separately and in parallel from the grant date.
Stock Appreciation Rights
Stock Appreciation Rights (“SARs”) may be granted to officers, certain employees and consultants of the
Corporation on such terms and conditions determined by the Board of Directors (the “Board”). Stand
Alone SARs are cash-settled share-based payment transactions and are measured at the fair value of the
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FY2017 ANNUAL REPORT
37
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
liability as at the date the Stand-Alone SARs are granted. At the end of each reporting period, the
Corporation re-measures the fair value of the liability for such Stand-Alone SARs, and any changes in fair
value of that liability is recognized in profit or loss for the period. Tandem SARs are granted with stock
options. Tandem SARs may settled by the payment or the delivery of cash or common shares, as may be
determined by the Board. Any portion of Tandem SARs to be settled for cash is measured using the
measurement standards described for Stand-Alone SARs. The portion, if any, of the Tandem SARs to be
settled by the issuance of common shares is measured using the measurement standards that apply to stock
options awards, as described in the preceding paragraph.
Option-pricing models require the use of highly subjective estimates and assumptions; including the
expected share price volatility. Changes in the underlying assumptions can materially affect fair value
estimates. Therefore, existing models do not necessarily provide reliable measurement of the fair value of
the Corporation’s share-based payments.
Future changes in accounting standards
The standards and interpretations that are issued but not yet effective up to the date of issuance of the
Corporation’s consolidated financial statements are listed below. This listing of standards and
interpretations issued includes those that the Corporation reasonably expects to have an impact on
disclosures, financial position or performance when applied at a future date.
IFRS 9 – Financial Instruments
On July 24, 2014, the IASB issued the final version of IFRS 9, which replaces IAS 39 – Financial
Instruments: Recognition and Measurement and all previous versions of IFRS 9. The new standard
introduces requirements for the classification and measurement of financial assets and financial liabilities,
impairment, hedge accounting and the fair value of an entity’s own debt. IFRS 9 will be effective for
annual periods beginning on or after January 1, 2018, with earlier adoption permitted. Ceres has not yet
determined the impact of this standard on the Corporation’s consolidated financial statements.
IFRS 15 – Revenue from Contracts with Customers
On May 28, 2014, the IASB issued IFRS 15, which provides a single, principles-based five-step model to
be applied to all contracts with customers. IFRS 15 specifies how and when to recognize revenue as well
as requiring entities to provide users of financial statements with more relevant disclosures. IFRS 15
supersedes IAS 18 – Revenue, IAS 11 – Construction Contracts and a number of revenue-related
interpretations and applies to annual reporting periods beginning on or after January 1, 2018, although
early adoption is permitted. Ceres has not yet determined the impact of this standard on the Corporation’s
consolidated financial statements.
IFRS 16 – Leases
On January 13, 2016, the IASB issued IFRS 16 Leases. This standard introduces a single lessee accounting
model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12
months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make
lease payments. The new standard is effective for annual periods beginning on or after January 1, 2019.
Ceres has not yet determined the impact of this standard on the Corporation’s consolidated financial
statements.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND
ASSUMPTIONS
The timely preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the
disclosure of contingent assets and liabilities. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized
prospectively. The following summarizes the accounting judgments, estimates and assumptions
management considers significant:
Inventories and Commodity Derivatives
To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using
exchange traded futures and options contracts to minimize its net position of merchandisable agricultural
commodity inventories and forward cash purchase and sales contracts. The Corporation will also use
exchange traded futures and options contracts as components of merchandising strategies designed to
enhance margins. The results of these strategies can be significantly impacted by factors such as the
volatility of the relationship between the value of exchange traded commodities futures contracts and the
cash prices of the underlying commodities, and volatility of freight markets.
Derivative instruments, including futures contracts, forward commitments, options and other similar types
of contracts and commitments based on commodity derivatives, are carried at their fair value. The
estimated fair value of the commodity derivative contracts that require the receipt or posting of cash
collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin
deposits) within commodity derivative assets or liabilities. Management determines fair value based on
exchange quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is
adjusted for differences in local markets. While the Corporation considers its commodity contracts to be
effective economic hedges, the Corporation does not designate or account for its commodity contracts as
hedges. Realized and unrealized gains and losses in the value of commodity contracts and grain
inventories are recognized in earnings immediately in cost of sales in consolidated profit or loss.
Unrealized gains and losses on these derivative contracts are included in due from broker, and derivative
assets and liabilities on the consolidated Balance Sheet.
Estimates and assumptions are required in determination of fair values of commodity inventories,
particularly for those commodities where exchange-traded prices are not available. For these inventories,
management assesses the available quoted market prices and applies judgment in determining the effect
local market conditions.
Valuation of investments
Portfolio investments are held for trading, are measured and reported at fair value, and may include
securities not traded in an active market. The fair value of such securities is determined using valuation
techniques. Depending on various circumstances, the Corporation may use several methods and makes
assumptions based on market conditions existing at each reporting date. Valuation techniques may
include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow
analysis, option-pricing models and other valuation techniques commonly used by market participants.
38
CERES GLOBAL AG CORP.
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19
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
4.
SUMMARY OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND
ASSUMPTIONS
The timely preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the
disclosure of contingent assets and liabilities. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized
prospectively. The following summarizes the accounting judgments, estimates and assumptions
management considers significant:
Inventories and Commodity Derivatives
To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using
exchange traded futures and options contracts to minimize its net position of merchandisable agricultural
commodity inventories and forward cash purchase and sales contracts. The Corporation will also use
exchange traded futures and options contracts as components of merchandising strategies designed to
enhance margins. The results of these strategies can be significantly impacted by factors such as the
volatility of the relationship between the value of exchange traded commodities futures contracts and the
cash prices of the underlying commodities, and volatility of freight markets.
Derivative instruments, including futures contracts, forward commitments, options and other similar types
of contracts and commitments based on commodity derivatives, are carried at their fair value. The
estimated fair value of the commodity derivative contracts that require the receipt or posting of cash
collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin
deposits) within commodity derivative assets or liabilities. Management determines fair value based on
exchange quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is
adjusted for differences in local markets. While the Corporation considers its commodity contracts to be
effective economic hedges, the Corporation does not designate or account for its commodity contracts as
hedges. Realized and unrealized gains and losses in the value of commodity contracts and grain
inventories are recognized in earnings immediately in cost of sales in consolidated profit or loss.
Unrealized gains and losses on these derivative contracts are included in due from broker, and derivative
assets and liabilities on the consolidated Balance Sheet.
Estimates and assumptions are required in determination of fair values of commodity inventories,
particularly for those commodities where exchange-traded prices are not available. For these inventories,
management assesses the available quoted market prices and applies judgment in determining the effect
local market conditions.
Valuation of investments
Portfolio investments are held for trading, are measured and reported at fair value, and may include
securities not traded in an active market. The fair value of such securities is determined using valuation
techniques. Depending on various circumstances, the Corporation may use several methods and makes
assumptions based on market conditions existing at each reporting date. Valuation techniques may
include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow
analysis, option-pricing models and other valuation techniques commonly used by market participants.
19
FY2017 ANNUAL REPORT
39
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
5.
INVENTORIES
As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation held $95,233,421, $102,616,595
and $117,022,684 of inventories at fair value less costs to sell, respectively. For the twelve-month period
ended June 30, 2017, inventories recognized as an expense through cost of sales totaled $445,474,086.
For the fifteen-month period ended June 30, 2016, inventories recognized as an expense through cost of
sales totaled $294,599,905. Furthermore, as at April 1, 2015, the carrying amount of inventories pledged
as security against the Corporation’s repurchase obligations totaled $14,786,250.
6.
DUE FROM (TO) BROKERS
Due from Brokers is composed of commodity futures and options contracts and margin deposits in the
form of cash and open trade equity maintained by a broker in connection with such contracts. Amounts
due from Brokers are offset by amounts due to the same Brokers, under the terms and conditions of
enforceable master netting arrangements in effect with all brokers through which the Corporation executes
its transactions and for which it intends either to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
As at June 30, 2017, June 30, 2016 and April 1, 2015, the amounts due from Brokers represent the
following:
Due from Brokers
Margin deposits
Unrealized gains on future contracts and options,
at fair value
Due to Brokers
Unrealized losses on future contracts and options,
at fair value
7.
INVESTMENT IN ASSOCIATES
June 30, 2017 June 30, 2016 April 1, 2015
$
2,815,351
$
5,453,861
$
5,161,958
33,215
2,848,566
128,518
5,582,379
2,114,710
7,276,668
(1,020,259)
1,828,307
$
(123,560)
5,458,819
$
(441,250)
6,835,418
$
June 30, 2017
June 30, 2016
April 1, 2015
Canterra Seeds Holdings, Ltd., common shares
Stewart Southern Railway Inc., common shares
$
-
$
-
2,705,935
2,946,601
$
1,466,704
2,978,330
$
2,705,935
$
2,946,601
$
4,445,034
(a)
Investment in Canterra Seeds Holdings, Ltd. (“Canterra”)
As at April 1, 2015, Ceres held a 25% equity interest in Canterra, a Canadian company. Canterra
purchases, produces, and distributes seed varieties and related technologies to its customers throughout
Western Canada and the Great Northern Plains and Pacific North West of the United States. Major
operating decisions of Canterra are made by its Board of Directors and Ceres, as at April 1, 2015, had a
25% voting right on Canterra’s Board of Directors. Due to these factors, Ceres did not control Canterra,
20
40
CERES GLOBAL AG CORP.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
and accounted for its investment in Canterra, which had a carrying value of $1,466,704 and was classified
on the Consolidated Balance Sheet as “Investments in associates” using the equity method. During the
quarter ended June 30, 2015, the Corporation recorded its portion of Canterra’s net income of $254,731.
During the fifteen-month period ended June 30, 2016, Canterra issued additional common equity shares,
resulting in the dilution of the Corporation’s equity interest to 17%. As a result, the Corporation no longer
has a significant influence over the financial and operating policies of Canterra. Therefore, Ceres
reclassified its investment to portfolio investments and recorded it at fair value, recognizing a gain of
$1,031,658 as “Finance income” within profit or loss.
(b) Investment in Stewart Southern Railway Inc. (“SSR”)
Ceres holds a 25% equity interest in SSR, a Canadian private company. Ceres also holds rights to a 25%
voting position on SSR’s Board of Directors. SSR operates a 132-kilometre (82-mile) short-line railway
in southeastern Saskatchewan. Major operating decisions of SSR are made by its Board of Directors and
Ceres does not have a majority of the board seats. Due to these factors, Ceres does not control SSR, and
accounts for its investment in SSR using the equity method.
Revenues
Income from continuing operations
Net and comprehensive income (loss)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
1,245,414
$
3,856,482
(1,137,305)
(948,060)
271,924
150,904
$
2,217,210
$
3,201,700
8,382,043
144,652
88,074
8,396,737
207,917
60,536
For the period ended June 30, 2017, the Corporation’s consolidated profit or loss included the
Corporation’s share in the net loss of SSR’s equity of $237,015 (2016: net income of $37,726). During
the period ended June 30, 2017, the Corporation did not receive a dividend from SSR (2016: nil).
Included below is a reconciliation of the Corporation’s 25% portion in SSR’s equity to the carrying value
reported on the Consolidated Balance Sheets as at June 30, 2017, June 30, 2016 and April 1, 2015:
June 30, 2017
June 30, 2016
April 1, 2015
Investee's equity as at reporting date
$
10,366,990
$
11,329,984
$
11,445,564
Corporation's 25% portion of SSR equity
Goodwill
Carrying value
2,591,747
114,188
2,832,495
114,106
2,861,390
116,940
$
2,705,935
$
2,946,601
$
2,978,330
21
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
and accounted for its investment in Canterra, which had a carrying value of $1,466,704 and was classified
on the Consolidated Balance Sheet as “Investments in associates” using the equity method. During the
quarter ended June 30, 2015, the Corporation recorded its portion of Canterra’s net income of $254,731.
During the fifteen-month period ended June 30, 2016, Canterra issued additional common equity shares,
resulting in the dilution of the Corporation’s equity interest to 17%. As a result, the Corporation no longer
has a significant influence over the financial and operating policies of Canterra. Therefore, Ceres
reclassified its investment to portfolio investments and recorded it at fair value, recognizing a gain of
$1,031,658 as “Finance income” within profit or loss.
(b) Investment in Stewart Southern Railway Inc. (“SSR”)
Ceres holds a 25% equity interest in SSR, a Canadian private company. Ceres also holds rights to a 25%
voting position on SSR’s Board of Directors. SSR operates a 132-kilometre (82-mile) short-line railway
in southeastern Saskatchewan. Major operating decisions of SSR are made by its Board of Directors and
Ceres does not have a majority of the board seats. Due to these factors, Ceres does not control SSR, and
accounts for its investment in SSR using the equity method.
Revenues
Income from continuing operations
Net and comprehensive income (loss)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
1,245,414
(1,137,305)
(948,060)
$
3,856,482
271,924
150,904
$
2,217,210
8,382,043
144,652
88,074
$
3,201,700
8,396,737
207,917
60,536
For the period ended June 30, 2017, the Corporation’s consolidated profit or loss included the
Corporation’s share in the net loss of SSR’s equity of $237,015 (2016: net income of $37,726). During
the period ended June 30, 2017, the Corporation did not receive a dividend from SSR (2016: nil).
Included below is a reconciliation of the Corporation’s 25% portion in SSR’s equity to the carrying value
reported on the Consolidated Balance Sheets as at June 30, 2017, June 30, 2016 and April 1, 2015:
June 30, 2017
June 30, 2016
April 1, 2015
Investee's equity as at reporting date
$
10,366,990
$
11,329,984
$
11,445,564
Corporation's 25% portion of SSR equity
Goodwill
Carrying value
2,591,747
114,188
2,705,935
$
2,832,495
114,106
2,946,601
$
2,861,390
116,940
2,978,330
$
21
FY2017 ANNUAL REPORT
41
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
8.
PROPERTY, PLANT AND EQUIPMENT
June 30, 2017
Cost
Balances, June 30, 2016
Asset additions
Assets placed in service
Reclassification of assets held for sale
Foreign currency translation adjustments
Balances, June 30, 2017
Accumulated depreciation
Balances, June 30, 2016
Depreciation charged to operations
Reclassification of assets held for sale
Foreign currency translation adjustments
Balances, June 30, 2017
Land
Buildings and
silos/elevators
Machinery &
equipment
Office
equipment &
other assets
Construction in
Progress
Totals
22,708,494
-
4,225
(789,787)
13,035
21,935,967
79,579,445
-
10,937,080
(8,412,466)
202,729
82,306,788
-
-
-
-
-
(10,601,220)
(2,790,854)
2,405,948
(23,296)
(11,009,422)
23,449,513
-
2,245,606
(1,322,323)
50,897
24,423,693
(1,647,996)
(1,645,936)
596,242
(30,915)
(2,728,605)
3,479,467
-
74,900
(50,761)
1,500
3,505,106
(1,417,036)
(144,238)
48,689
(4,621)
(1,517,206)
3,266,374
10,477,697
(13,261,811)
(126,063)
1,884
358,081
132,483,293
10,477,697
-
(10,701,400)
270,045
132,529,635
-
-
-
-
-
(13,666,252)
(4,581,028)
3,050,879
(58,832)
(15,255,233)
Carrying amount, June 30, 2017
$
21,935,967
$
71,297,366
$
21,695,088
$
1,987,900
$
358,081
$
117,274,402
June 30, 2016
Cost
Balances, April 1, 2015
Asset additions
Assets placed in service
Disposals
Foreign currency translation adjustments
Balances, June 30, 2016
Accumulated depreciation
Balances, April 1, 2015
Depreciation charged to operations
Disposals
Foreign currency translation adjustments
Balances, June 30, 2016
23,311,179
-
177,903
(349,043)
(431,545)
22,708,494
56,290,655
-
24,340,035
(892,512)
(158,733)
79,579,445
-
-
-
-
-
(7,981,567)
(2,690,102)
109,817
(39,369)
(10,601,221)
5,110,713
-
18,630,570
(190,634)
(101,136)
23,449,513
(952,276)
(740,258)
49,641
(5,103)
(1,647,996)
1,489,313
-
2,004,738
-
(14,584)
3,479,467
(984,955)
(429,869)
-
(2,212)
(1,417,036)
18,994,646
29,426,425
(45,153,246)
-
(1,451)
3,266,374
105,196,506
29,426,425
-
(1,432,189)
(707,449)
132,483,293
-
-
-
-
-
(9,918,798)
(3,860,229)
159,458
(46,684)
(13,666,253)
Carrying amount, June 30, 2016
$
22,708,494
$
68,978,224
$
21,801,517
$
2,062,431
$
3,266,374
$
118,817,040
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
During the twelve-month period ended June 30, 2017, Ceres continued with its plan to idle three grain
storage elevators located in Buffalo, New York (Buffalo); Minneapolis, Minnesota (Calumet); and Duluth,
Minnesota (Duluth Lakeport). As the operations at Duluth Lakeport and Buffalo have ceased, the cash
flows associated with these specific assets could no longer support their carrying values. During the
twelve-month period ended June 30, 2017, Ceres recorded a loss of $7,650,521 on the impairment of
Duluth Lakeport and Buffalo, which is classified within profit or loss as “(Loss) gain on property, plant
and equipment”. Additionally, Ceres committed to, and activated a plan for the sale of Buffalo and Duluth
Lakeport. As noted in footnote twenty-two, subsequent to the reporting date of June 30, 2017 but prior to
the date of issuance of these financial statements, Ceres closed on the sale of the Buffalo and Duluth
Lakeport storage facilities. As at June 30, 2017, Buffalo and Duluth Lakeport are assets held for sale with
a net book value of zero. As at June 30, 2016 and April 1, 2015, Ceres did not have any assets held for
sale.
Asset additions during the twelve months ended June 30, 2017 accrued and not yet paid for as at the
reporting date totaled $3,904,304 (2016: $4,373,365).
9. BANK INDEBTEDNESS
On December 30, 2016, the Corporation amended its uncommitted credit facility (the “Credit Facility”),
which now expires on December 29, 2017. The maximum borrowings under the revolving facility are
$67,500,000. Borrowings bear an interest rate of overnight LIBOR plus 3.875% per annum, and interest
is calculated and paid on a monthly basis. The Credit Facility is subject to borrowing base limitations.
Amounts under the Credit Facility that remain undrawn are not subject to a commitment fee. The Credit
Facility has certain covenants pertaining to the accounts of the Corporation and as at June 30, 2017, the
Corporation was in compliance with all covenants.
On December 18, 2015, the Corporation amended its uncommitted $120,000,000 Credit Facility.
Borrowings bore an interest rate dependent on the facility utilization level: at any time the utilization level
was less than 50%, overnight LIBOR plus 2.875% per annum, and at any time that the utilization level
was greater than or equal to 50%, overnight LIBOR plus 2.750% per annum.
Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest
of overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly.
As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation had $10,705,000, $37,493,000 and
$83,154,000 in availability, respectively, on its revolving line of credit.
As at June 30, 2017, June 30, 2016 and April 1, 2015, the carrying amount of bank indebtedness is
summarized as follows:
June 30, 2017
June 30, 2016
April 1, 2015
Revolving line of credit
Unamortized financing costs
Cheques issued in excess of cash on hand
$
56,595,320
$
55,000,000
$
15,000,000
(152,500)
-
(249,383)
833,483
(179,244)
-
$
56,442,820
$
55,584,100
$
14,820,756
42
CERES GLOBAL AG CORP.
22
23
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
During the twelve-month period ended June 30, 2017, Ceres continued with its plan to idle three grain
storage elevators located in Buffalo, New York (Buffalo); Minneapolis, Minnesota (Calumet); and Duluth,
Minnesota (Duluth Lakeport). As the operations at Duluth Lakeport and Buffalo have ceased, the cash
flows associated with these specific assets could no longer support their carrying values. During the
twelve-month period ended June 30, 2017, Ceres recorded a loss of $7,650,521 on the impairment of
Duluth Lakeport and Buffalo, which is classified within profit or loss as “(Loss) gain on property, plant
and equipment”. Additionally, Ceres committed to, and activated a plan for the sale of Buffalo and Duluth
Lakeport. As noted in footnote twenty-two, subsequent to the reporting date of June 30, 2017 but prior to
the date of issuance of these financial statements, Ceres closed on the sale of the Buffalo and Duluth
Lakeport storage facilities. As at June 30, 2017, Buffalo and Duluth Lakeport are assets held for sale with
a net book value of zero. As at June 30, 2016 and April 1, 2015, Ceres did not have any assets held for
sale.
Asset additions during the twelve months ended June 30, 2017 accrued and not yet paid for as at the
reporting date totaled $3,904,304 (2016: $4,373,365).
9. BANK INDEBTEDNESS
On December 30, 2016, the Corporation amended its uncommitted credit facility (the “Credit Facility”),
which now expires on December 29, 2017. The maximum borrowings under the revolving facility are
$67,500,000. Borrowings bear an interest rate of overnight LIBOR plus 3.875% per annum, and interest
is calculated and paid on a monthly basis. The Credit Facility is subject to borrowing base limitations.
Amounts under the Credit Facility that remain undrawn are not subject to a commitment fee. The Credit
Facility has certain covenants pertaining to the accounts of the Corporation and as at June 30, 2017, the
Corporation was in compliance with all covenants.
On December 18, 2015, the Corporation amended its uncommitted $120,000,000 Credit Facility.
Borrowings bore an interest rate dependent on the facility utilization level: at any time the utilization level
was less than 50%, overnight LIBOR plus 2.875% per annum, and at any time that the utilization level
was greater than or equal to 50%, overnight LIBOR plus 2.750% per annum.
Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest
of overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly.
As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation had $10,705,000, $37,493,000 and
$83,154,000 in availability, respectively, on its revolving line of credit.
As at June 30, 2017, June 30, 2016 and April 1, 2015, the carrying amount of bank indebtedness is
summarized as follows:
June 30, 2017
June 30, 2016
April 1, 2015
Revolving line of credit
Unamortized financing costs
Cheques issued in excess of cash on hand
$
56,595,320
(152,500)
-
$
56,442,820
$
$
55,000,000
(249,383)
833,483
55,584,100
$
15,000,000
(179,244)
-
$
14,820,756
23
FY2017 ANNUAL REPORT
43
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
The revolving Credit Facility, is secured by the following: (i) a security interest in substantially all of the
personal property of Ceres; (ii) a charge and mortgage over substantially all of the real property and
elevator assets held by Riverland Ag,; and (iii) a pledge of substantially all of the equity interests and
investment property held by the Corporation.
11. FINANCE INCOME (LOSS)
10. TERM LOAN
On December 29, 2016, the Corporation paid down the principal on its term loan facility agreement by
the amount of $1,642,379 in accordance with the principal payment schedule included in the agreement.
Additionally, the Corporation made an additional principal payment of $7,000,000, reducing the principal
to $15,000,000 and amended the existing term loan facility agreement. The agreement was revised to
reflect a term of 3 years. The interest rate of one month LIBOR plus 5.25% is consistent with the previous
term loan agreement. In accordance with the amended agreement, the next principal payment on the term
loan is payable on December 29, 2017 in the amount of $3,000,000 with a principal payment of
$5,000,000 payable on December 28, 2018 and $7,000,000 payable on December 27, 2019. The loan has
an effective interest rate of 6.30% plus one month LIBOR.
On December 30, 2014, the Corporation entered into a senior secured term loan facility agreement for
$25,000,000. This term loan was for a term of 5 years with an interest rate of one month LIBOR plus
5.25%. The first principal payment was payable on December 29, 2016 in the amount of $1,642,379. On
November 17, 2015, immediately following the closure of the sale of the Electric Steel facility, the
Corporation used the net sales proceeds to repay a portion of its outstanding term debt. The total amount
repaid on the term debt was $1,357,621. The loan had an effective interest rate of 6.21% plus one month
LIBOR.
In connection with the origination of the term loan, the Corporation paid transaction costs relating to the
loan closure in the amount of $1,011,629, which included legal fees and other related borrowing costs.
Transaction costs directly attributable to the issuance of the term loan are recognized as a reduction in the
balance of the loan, and are amortized over the term of the loan using the effective interest rate method.
June 30, 2017
June 30, 2016
April 1, 2015
Total term debt
Less current portion of long-term debt
Unamortized financing costs
$
15,000,000
(3,000,000)
12,000,000
(546,362)
$
23,642,379
(1,642,379)
22,000,000
(740,734)
$
25,000,000
-
$
25,000,000
(967,956)
Total long-term debt
$
11,453,638
$
21,259,266
$
24,032,044
The term loan, is secured by the following: (i) a security interest in substantially all of the personal
property of Ceres; (ii) a charge and mortgage over substantially all of the real property and elevator assets
held by Riverland Ag; and (iii) a pledge of substantially all of the equity interests and investment property
held by the Corporation.
The following table presents realized and unrealized gains (losses) on foreign exchange, currency-hedging
transactions and the revaluation of portfolio investments for the twelve-month period ended June 30, 2017
and fifteen-month period ended June 30, 2016:
Realized and unrealized losses on foreign exchange
$
(73,051)
$
(42,925)
Realized and unrealized gains (losses) on
currency-hedging transactions
Revaluation of portfolio investments
Twelve-month
Fifteen-month
period ended
June 30, 2017
period ended
June 30, 2016
(6,797)
(188,612)
178,764
1,031,658
$
(268,460)
$
1,167,497
As at April 1, 2015, the Corporation held a 25% equity interest in Canterra Seeds Holdings, Ltd.
(“Canterra”) that had a carrying value of $1,466,704. This investment, accounted for using the equity
method, was classified on the Consolidated Balance Sheet as “Investments in associates”. During the
quarter ended September 30, 2015, Canterra issued additional common equity shares, resulting in the
dilution of the Corporation’s equity interest to 17%, and it no longer having a significant influence over
the financial and operating policies of Canterra. Therefore, during the fifteen-month period ended June
30, 2016, Ceres reclassified this investment to portfolio investments and recorded it at fair value,
recognizing a gain of $1,031,658 classified within profit or loss as “Finance income”. The investment in
Canterra totals $2,110,189 as at June 30, 2017, and is classified on the Consolidated Balance Sheet within
“Portfolio investments, at fair value”.
12. INTEREST EXPENSE
The following table presents interest income (expense) for the twelve-month period June 30, 2017 and
fifteen-month period ended June 30, 2016:
Interest on revolving line of credit
Interest on repurchase obligation
Interest on long-term debt
Amortization of financing costs paid
Interest income and other interest expense
Twelve-month
Fifteen-month
period ended
June 30, 2017
period ended
June 30, 2016
$
(1,822,299)
$
(1,877,446)
(297,260)
(1,163,314)
(596,254)
-
(172,010)
(1,851,791)
(655,867)
87,920
$
(3,879,127)
$
(4,469,194)
44
CERES GLOBAL AG CORP.
24
25
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
11. FINANCE INCOME (LOSS)
The following table presents realized and unrealized gains (losses) on foreign exchange, currency-hedging
transactions and the revaluation of portfolio investments for the twelve-month period ended June 30, 2017
and fifteen-month period ended June 30, 2016:
Realized and unrealized losses on foreign exchange
Realized and unrealized gains (losses) on
currency-hedging transactions
Revaluation of portfolio investments
Twelve-month
period ended
June 30, 2017
$
(73,051)
Fifteen-month
period ended
June 30, 2016
$
(42,925)
(6,797)
(188,612)
(268,460)
$
178,764
1,031,658
1,167,497
$
As at April 1, 2015, the Corporation held a 25% equity interest in Canterra Seeds Holdings, Ltd.
(“Canterra”) that had a carrying value of $1,466,704. This investment, accounted for using the equity
method, was classified on the Consolidated Balance Sheet as “Investments in associates”. During the
quarter ended September 30, 2015, Canterra issued additional common equity shares, resulting in the
dilution of the Corporation’s equity interest to 17%, and it no longer having a significant influence over
the financial and operating policies of Canterra. Therefore, during the fifteen-month period ended June
30, 2016, Ceres reclassified this investment to portfolio investments and recorded it at fair value,
recognizing a gain of $1,031,658 classified within profit or loss as “Finance income”. The investment in
Canterra totals $2,110,189 as at June 30, 2017, and is classified on the Consolidated Balance Sheet within
“Portfolio investments, at fair value”.
12. INTEREST EXPENSE
The following table presents interest income (expense) for the twelve-month period June 30, 2017 and
fifteen-month period ended June 30, 2016:
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
Interest on revolving line of credit
Interest on repurchase obligation
Interest on long-term debt
Amortization of financing costs paid
Interest income and other interest expense
$
$
(1,822,299)
(297,260)
(1,163,314)
(596,254)
-
(3,879,127)
(1,877,446)
(172,010)
(1,851,791)
(655,867)
87,920
(4,469,194)
$
$
25
FY2017 ANNUAL REPORT
45
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
13. REPURCHASE OBLIGATIONS
As at April 1, 2015, the Corporation had two open repurchase commitments under its product financing
arrangement to repurchase 2,500,000 bushels of certain grains. Under the product financing arrangement,
the Corporation sold grain under contract and simultaneously entered into contracts to repurchase the grain
during the first quarter of the fifteen-month period ending June 30, 2016. Since the Corporation was
obligated to repurchase these commodities, it did not recognize these transactions as sales. As at April 1,
2015, the Corporation recognized the inventory owned by the Corporation in this regard on its
consolidated balance sheet and recorded a liability of $14,740,904 plus accrued interest payable. As at
April 1, 2015, the fixed interest rate on the open repurchase commitment was 3.06%.
14. FINANCIAL INSTRUMENTS
(a)
Fair value of financial instruments
The Corporation’s financial assets and liabilities that are measured at fair value in the consolidated balance
sheets are categorized by level according to the significance of the inputs used in making the
measurements. The Corporation recognizes transfers between fair value measurements hierarchy levels as
of the date of the event or change in circumstances that caused the transfer.
The following table presents information about the financial assets and liabilities measured at fair value
on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine
such fair values.
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (derivatives)
Due to broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (derivatives)
Provision for future payments
to Front Street Capital
June 30, 2017
Le ve l 1
$
-
Le ve l 2
$
-
Le ve l 3
Total
$
3,193,407
$
3,193,407
33,215
-
-
10,501,364
(1,020,259)
-
-
(14,066,236)
-
(987,044)
$
(10,814)
(3,575,686)
$
-
-
-
-
-
$
3,193,407
33,215
10,501,364
(1,020,259)
(14,066,236)
(10,814)
(1,369,323)
$
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Portfolio investments
$
-
$
2,729,868
$
654,801
$
3,384,669
Le ve l 1
Le ve l 2
Le ve l 3
Total
June 30, 2016
$
4,958
$
5,089,431
$
654,801
$
5,749,190
Portfolio investments
$
-
$
-
$
670,909
$
670,909
Le ve l 1
Le ve l 2
Le ve l 3
Total
April 1, 2015
128,518
(123,560)
2,114,710
(441,251)
-
-
-
-
-
-
-
-
-
-
-
-
5,106,168
(2,568,309)
(104,971)
(73,325)
7,493,264
(2,062,395)
(1,359,753)
(272,109)
-
-
-
-
-
-
-
-
-
-
-
-
128,518
5,106,168
(123,560)
(2,568,309)
(104,971)
(73,325)
2,114,710
7,493,264
(441,251)
(2,062,395)
(1,359,753)
(272,109)
$
1,673,459
$
3,799,007
$
670,909
$
6,143,375
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
Reconciliation of Level 3 fair values
Balance at April 1, 2015
Currency translation differences
Balance at June 30, 2016
Recategorizations
Revaluation of portfolio investments
Currency translation differences
Balance at June 30, 2017
Level 3
$
670,909
(16,108)
654,801
2,731,990
(188,612)
(4,772)
$
3,193,407
46
CERES GLOBAL AG CORP.
26
27
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
Reconciliation of Level 3 fair values
Balance at April 1, 2015
Currency translation differences
Balance at June 30, 2016
Recategorizations
Revaluation of portfolio investments
Currency translation differences
Balance at June 30, 2017
Le ve l 1
$
-
Le ve l 2
Le ve l 3
Total
$
2,729,868
$
654,801
$
3,384,669
June 30, 2016
128,518
-
-
5,106,168
(123,560)
-
-
-
(2,568,309)
(104,971)
-
-
-
-
-
128,518
5,106,168
(123,560)
(2,568,309)
(104,971)
-
4,958
$
(73,325)
5,089,431
$
-
654,801
$
(73,325)
5,749,190
$
Le ve l 1
$
-
Le ve l 2
$
-
Le ve l 3
Total
$
670,909
$
670,909
April 1, 2015
2,114,710
-
-
7,493,264
(441,251)
-
(2,062,395)
(1,359,753)
-
-
-
$
1,673,459
-
-
-
-
-
2,114,710
7,493,264
(441,251)
(2,062,395)
(1,359,753)
(272,109)
3,799,007
$
-
670,909
$
(272,109)
6,143,375
$
Level 3
$
670,909
(16,108)
654,801
2,731,990
(188,612)
(4,772)
3,193,407
$
27
FY2017 ANNUAL REPORT
47
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
For the fiscal year ended June 30, 2017, the Corporation was not able to obtain observable inputs to fair
value its portfolio investments that were classified as a Level 2 investment as at June 30, 2016.
Accordingly, the $2,731,990 of portfolio investments transferred out of Level 2 and into Level 3.
Commodity risk
(b) Management of financial instruments risks
In the normal course of business, the Corporation is exposed to various financial instruments risks,
including market risk (consisting of price risk, commodity risk, interest rate risk and currency risk), credit
risk, custodian and prime brokerage risks, and liquidity risk. The Corporation’s overall risk management
program seeks to minimize potentially adverse effects of those risks on the Corporation’s financial
performance. The Corporation may use derivative financial instruments to mitigate certain risk exposures.
The Corporation may invest in non-public and public issuers and assets.
Price risk
As at June 30, 2017, the Corporation’s market risk pertaining to portfolio investments was potentially
affected by changes in actual market prices. As at June 30, 2017, the Corporation’s portfolio investments
are solely in private companies. Therefore, market factors affecting the value of the portfolio investments
are primarily changes in fair value of the investments and the Corporation’s ability to liquidate the
investments.
The following is a summary of the effect on the results of operations of the Corporation for the twelve-
month period ended June 30, 2017, if the fair value of each of the portfolio investments as at June 30,
2017 had increased or decreased by 10% with all other variables remaining constant:
Change in fair value of investments
June 30, 2017
Increase
(decrease) in
net income
Increase
(decrease)
in earnings
per share
10% increase in fair value
10% decrease in fair value
$
$
319,341
(319,341)
$
$
0.01
(0.01)
The following is a summary of the effect on the results of operations of the Corporation for the twelve-
month period ended June 30, 2017, if the fair value of each of the open cash contracts as at June 30, 2017
had increased or decreased by 5%, with all other variables remaining constant:
June 30, 2017
Increase
Increase
(decrease)
(decrease) in
in earnings
net income
per share
Change in bid/ask prices of commodities
5% increase in bid-ask prices
5% decrease in bid-ask prices
$
(848,050)
$
(0.03)
$
848,050
$
0.03
During the fifteen-month period ended June 30, 2016, the Corporation hedged a portion of its investment
in a US subsidiary through US dollars futures contracts, which mitigated the foreign currency risk arising
from the subsidiary’s net assets. During the quarter ended December 31, 2015, the Corporation settled the
US dollar futures hedge and realized a gain of $1,017,384, which has been recognized in other
comprehensive income.
Interest rate risk
securities.
As at June 30, 2017, Ceres had no long or short portfolio positions in any interest-bearing investment
As at June 30, 2017, except for cash on deposit, the amounts of which vary from time-to-time and on
which the Corporation earns interest at nominal variable interest rates, the Corporation had no other
variable rate interest-bearing financial assets. As at those dates, a notional increase or decrease in interest
rates applicable to cash on deposit would not have materially affected interest revenue and the results of
operations. Therefore, as at June 30, 2017, the Corporation’s assets are not directly exposed to any
significant degree to cash flow interest rate risk due to changes in prevailing market interest rates.
As disclosed in Note 9 (Bank Indebtedness), as at June 30, 2017, the Corporation’s Credit Facility (as
defined herein) bears interest at an annual rate of 3.875% plus overnight LIBOR. As at June 30, 2017,
management has determined the effect on the future results of operations of the Corporation, if the variable
interest rate component applicable on that date was to increase by 25 basis points (“25 bps”), using the
balance of the revolving credit facility payable as at that date, and the number of shares then issued and
outstanding, and with all other variables remaining constant.
Furthermore, as at June 30, 2017, the Corporation’s term loan (Note 10) bears interest at an annual rate of
5.25% plus one month LIBOR. As at June 30, 2017, management has determined the effect on the future
results of operations of the Corporation, if the variable interest rate component applicable on that date on
the term loan was to increase by 25 bps, using the balance of the term loan payable as at that date, and the
number of shares then issued and outstanding, and with all other variables remaining constant.
48
CERES GLOBAL AG CORP.
28
29
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Commodity risk
The following is a summary of the effect on the results of operations of the Corporation for the twelve-
month period ended June 30, 2017, if the fair value of each of the open cash contracts as at June 30, 2017
had increased or decreased by 5%, with all other variables remaining constant:
Change in bid/ask prices of commodities
June 30, 2017
Increase
(decrease) in
net income
Increase
(decrease)
in earnings
per share
5% increase in bid-ask prices
5% decrease in bid-ask prices
$
$
(848,050)
848,050
$
$
(0.03)
0.03
During the fifteen-month period ended June 30, 2016, the Corporation hedged a portion of its investment
in a US subsidiary through US dollars futures contracts, which mitigated the foreign currency risk arising
from the subsidiary’s net assets. During the quarter ended December 31, 2015, the Corporation settled the
US dollar futures hedge and realized a gain of $1,017,384, which has been recognized in other
comprehensive income.
Interest rate risk
As at June 30, 2017, Ceres had no long or short portfolio positions in any interest-bearing investment
securities.
As at June 30, 2017, except for cash on deposit, the amounts of which vary from time-to-time and on
which the Corporation earns interest at nominal variable interest rates, the Corporation had no other
variable rate interest-bearing financial assets. As at those dates, a notional increase or decrease in interest
rates applicable to cash on deposit would not have materially affected interest revenue and the results of
operations. Therefore, as at June 30, 2017, the Corporation’s assets are not directly exposed to any
significant degree to cash flow interest rate risk due to changes in prevailing market interest rates.
As disclosed in Note 9 (Bank Indebtedness), as at June 30, 2017, the Corporation’s Credit Facility (as
defined herein) bears interest at an annual rate of 3.875% plus overnight LIBOR. As at June 30, 2017,
management has determined the effect on the future results of operations of the Corporation, if the variable
interest rate component applicable on that date was to increase by 25 basis points (“25 bps”), using the
balance of the revolving credit facility payable as at that date, and the number of shares then issued and
outstanding, and with all other variables remaining constant.
Furthermore, as at June 30, 2017, the Corporation’s term loan (Note 10) bears interest at an annual rate of
5.25% plus one month LIBOR. As at June 30, 2017, management has determined the effect on the future
results of operations of the Corporation, if the variable interest rate component applicable on that date on
the term loan was to increase by 25 bps, using the balance of the term loan payable as at that date, and the
number of shares then issued and outstanding, and with all other variables remaining constant.
29
FY2017 ANNUAL REPORT
49
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
On that basis, the potential effects on the result of operations for the twelve-month period ending June 30,
2017 would be as follows:
Liquidity risk
Change in interest rate on revolving facility
June 30, 2017
Increase in
net loss
Increase
in loss per
share
25 bps increase in annual interest rate
$
(143,060)
$
(0.01)
Change in interest rate on term loan
25 bps increase in annual interest rate
$
(37,917)
$
(0.00)
Credit risk
Credit risk is the risk a counterparty would be unable to pay for amounts due to the Corporation in
accordance with the terms and conditions of the debt instruments. As at June 30, 2017, the Corporation is
subject to credit risk concerning cash, amounts due from brokers, trade accounts receivable, and to the
extent, open cash contracts for grain commodities have given rise to unrealized gains. The maximum
exposure to credit risk on those assets is limited to the carrying value of those assets. The Corporation
uses various grain contracts as part of its overall grain merchandising strategies. Performance on these
contracts is dependent on delivery of the grain or a customer buy-out. There is counter-party risk
associated with non-performance, which may have the potential of creating losses. Management has
assessed the counter-party risk and believes that insignificant losses, if any, would result from non-
performance.
The Corporation regularly evaluates its credit risk concerning its trade accounts receivable to the extent
that such receivables may be concentrated in certain industries or with significant customers. The
Corporation minimizes this risk by having a diverse customer base and established credit policies. The
aging of the Corporation’s trade accounts receivable is substantially current. Based on its review and
assessment of its trade accounts receivable, management has determined that as at June 30, 2017, no
allowance for doubtful accounts is warranted.
The Corporation had two customers that each individually represented more than 10% of total revenue for
the twelve-month period ended June 30, 2017, comprising 12% and 11% of total revenue. For the fifteen-
month period ended June 30, 2016, the Corporation had one customer that individually represented more
than 10% of total revenue, comprising 16% of total revenue.
Custody and prime brokerage risk
There are risks involved with dealing with a custodian or broker who settle trades. In certain
circumstances, the securities or other assets deposited with the custodian or broker may be exposed to
credit risk with respect to those parties. In addition, there may be practical or timing problems associated
with enforcing the Corporation’s rights to its assets in the case of the insolvency of any such party.
Notwithstanding the foregoing, management has evaluated the risk of loss related to the custodian or
brokers and has determined this risk to be insignificant.
As at June 30, 2017 and June 30, 2016, the following are the contractual maturities of financial liabilities,
excluding interest payments:
June 30, 2017
Bank indebtedness
Accounts payable and accrued liabilities
Derivatives
Provision for future payments to Front Street Capital
Long-term debt (Note 10)
14,453,638
15,000,000
5,000,000
7,000,000
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
$
56,442,820
$
56,595,320
$
56,595,320
$
-
$
-
$
-
22,549,403
14,066,235
10,814
22,549,403
14,066,235
10,814
22,549,403
14,066,235
10,814
3,000,000
Carrying
amount
Contractual
cash flows
1 year
2 years
5 years
5 years
3 to
More than
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bank indebtedness
$
55,584,100
$
55,833,483
$
55,833,483
$
-
$
-
$
-
Accounts payable and accrued liabilities
16,007,014
16,007,014
16,007,014
Provision for future payments to Front Street Capital
2,568,309
2,568,309
2,568,309
73,325
104,971
73,325
104,971
73,325
104,971
22,901,645
23,642,379
1,642,379
5,000,000
17,000,000
Future expected operational cash flows and sufficient assets are available to fund the settlement of these
obligations in the normal course of business. In addition, the following factors allow for the substantial
mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management
of trade accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash
flow management activities and the continued likelihood of its operations further minimize liquidity risk.
June 30, 2016
Derivatives
Warrants
Long-term debt
Currency risk
In the normal course of business, Ceres may hold assets or have liabilities denominated in currencies other
than USD. Therefore, Ceres is exposed to currency risk, as the value of any assets or liabilities
denominated in currencies other than USD will vary due to changes in foreign exchange rates.
50
CERES GLOBAL AG CORP.
30
31
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
Liquidity risk
As at June 30, 2017 and June 30, 2016, the following are the contractual maturities of financial liabilities,
excluding interest payments:
June 30, 2017
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
Bank indebtedness
Accounts payable and accrued liabilities
Derivatives
Provision for future payments to Front Street Capital
Long-term debt (Note 10)
$
56,442,820
$
56,595,320
$
56,595,320
$
-
$
-
$
-
22,549,403
14,066,235
10,814
22,549,403
14,066,235
10,814
14,453,638
15,000,000
22,549,403
14,066,235
10,814
3,000,000
-
-
-
-
-
-
5,000,000
7,000,000
-
-
-
-
June 30, 2016
Carrying
amount
Contractual
cash flows
1 year
2 years
5 years
5 years
3 to
More than
Bank indebtedness
$
55,584,100
$
55,833,483
$
55,833,483
$
-
$
-
$
-
Accounts payable and accrued liabilities
16,007,014
16,007,014
16,007,014
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt
2,568,309
2,568,309
2,568,309
73,325
104,971
73,325
104,971
73,325
104,971
-
-
-
-
-
-
-
-
-
-
-
-
-
22,901,645
23,642,379
1,642,379
5,000,000
17,000,000
Future expected operational cash flows and sufficient assets are available to fund the settlement of these
obligations in the normal course of business. In addition, the following factors allow for the substantial
mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management
of trade accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash
flow management activities and the continued likelihood of its operations further minimize liquidity risk.
Currency risk
In the normal course of business, Ceres may hold assets or have liabilities denominated in currencies other
than USD. Therefore, Ceres is exposed to currency risk, as the value of any assets or liabilities
denominated in currencies other than USD will vary due to changes in foreign exchange rates.
31
FY2017 ANNUAL REPORT
51
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
As at June 30, 2017, the following is a summary, at fair value, of Ceres’ exposure to currency risks:
Currency
Canadian dollars
June 30, 2017
Net asset
(liability)
exposure
$
607,095
As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation had no commitment to any futures
foreign exchange contracts.
The following is a summary of the effect on Ceres’ profit or loss for the twelve-month period ended June
30, 2017 if the USD had become 5% stronger or weaker against the CAD as at June 30, 2017, with all
other variables remaining constant, related to monetary assets and liabilities denominated in foreign
currencies:
Change in foreign exchange rate
C$ 5% stronger
C$ 5% weaker
June 30, 2017
Increase
(decrease) in
net income
Increase
(decrease)
in earnings
per share
$
$
(24,680)
22,330
$
$
(0.00)
0.00
Currency risk for Ceres relates to grain transactions denominated in a currency other than USD and the
translation of its accounts from the functional currency CAD to the presentation currency USD for the
purposes of the consolidated financial reporting of Ceres. Adjustments related to the translation of accounts
from the functional currency to the presentation currency are included as other comprehensive income
(loss) and have no effect on the determination of net income for the reporting period.
Other financial instruments
The carrying values of cash and cash equivalents, due from (to) brokers, accounts receivable, bank
indebtedness, and account payable and accrued liabilities approximate their fair values as at June 30, 2017
due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair
value as at June 30, 2017.
15. SHARE CAPITAL AND WARRANTS
(a) Authorized
Unlimited number of voting, participating Common shares, without par value.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
(b) Normal Course Issuer Bids
During the twelve-month period ended June 30, 2017 and the fifteen-month period ended June 30, 2016,
the Corporation purchased Shares under normal course issuer bids, the purpose of which was to provide
Ceres with a mechanism to decrease the potential spread between the net asset value per Share and the
market price of the common shares. On June 10, 2015, Ceres announced a normal course issuer bid (“the
2015-2016 NCIB”) which commenced on June 12, 2015 and concluded on June 11, 2016. The
Corporation renewed the normal course issuer bid (“the 2016-2017 NCIB”) commencing on June 12,
2016. Using the facilities of the Toronto Stock Exchange (“TSX”) and in accordance with its rules and
policies, Ceres intended to purchase up to a maximum of 1,595,765 of its Common Shares, representing
approximately 10% of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate
purchase price of CAD $5,000,000 pursuant to restrictions under the Corporation’s Credit Facility. Ceres
purchased up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except for
purchases made in accordance with the “block purchase” exception under applicable TSX rules and
policies. The 2016-2017 NCIB concluded on June 11, 2017.
During the twelve months ended June 30, 2017, the Corporation purchased a total of 257,582 common
shares under the normal course issuer bid for aggregate cash consideration of $1,055,111. The stated
capital value of these repurchased Shares was $1,881,516. The excess of the stated capital value of the
repurchased common shares over the cost thereof, being $826,405, was allocated to Deficit in the twelve-
month period ended June 30, 2017.
During the fifteen months ended June 30, 2016, the Corporation purchased a total of 168,600 common
shares under the normal course issuer bid for aggregate cash consideration of $662,094. The stated capital
value of these repurchased Shares was $1,010,830. The excess of the stated capital value of the
repurchased common shares over the cost thereof, being $348,736, was allocated to Deficit in the fifteen-
month period ended June 30, 2016.
(c) Common Share Purchase Warrants
In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on
December 4, 2014, Ceres issued an aggregate of 2,083,334 warrants (the “Warrants”) to the stand-by
purchasers. The Warrants issued were conditional upon approval at the Corporation’s annual general
meeting (“AGM”), which was obtained at the AGM on August 7, 2015.
Furthermore, the Warrants were issued at a fixed exercise price of CAD $5.84 and were each exercisable
into one common share of the Corporation (a “Common Share”). The Warrants had an expiry date of
December 4, 2016, being 24 months after issuance. In the event that the Warrants were exercised prior to
the completion of a change of control of the Corporation, but after a transaction that will result in such a
change of control has been publicly announced, in lieu of exercising the Warrants, the holders of Warrants
could elect a cashless exercise to receive Common Shares equal to: the difference between the ten-day
Volume-Weighted Average Price (“VWAP”) of the Corporation’s stock price and CAD $5.84; multiplied
by the number of Common Shares in respect of which the election was made; divided by the ten-day
VWAP of the Corporation’s stock price. If a Warrant holder exercised this option, there would be
variability in the number of shares issued per Warrant.
52
CERES GLOBAL AG CORP.
32
33
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
(b) Normal Course Issuer Bids
During the twelve-month period ended June 30, 2017 and the fifteen-month period ended June 30, 2016,
the Corporation purchased Shares under normal course issuer bids, the purpose of which was to provide
Ceres with a mechanism to decrease the potential spread between the net asset value per Share and the
market price of the common shares. On June 10, 2015, Ceres announced a normal course issuer bid (“the
2015-2016 NCIB”) which commenced on June 12, 2015 and concluded on June 11, 2016. The
Corporation renewed the normal course issuer bid (“the 2016-2017 NCIB”) commencing on June 12,
2016. Using the facilities of the Toronto Stock Exchange (“TSX”) and in accordance with its rules and
policies, Ceres intended to purchase up to a maximum of 1,595,765 of its Common Shares, representing
approximately 10% of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate
purchase price of CAD $5,000,000 pursuant to restrictions under the Corporation’s Credit Facility. Ceres
purchased up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except for
purchases made in accordance with the “block purchase” exception under applicable TSX rules and
policies. The 2016-2017 NCIB concluded on June 11, 2017.
During the twelve months ended June 30, 2017, the Corporation purchased a total of 257,582 common
shares under the normal course issuer bid for aggregate cash consideration of $1,055,111. The stated
capital value of these repurchased Shares was $1,881,516. The excess of the stated capital value of the
repurchased common shares over the cost thereof, being $826,405, was allocated to Deficit in the twelve-
month period ended June 30, 2017.
During the fifteen months ended June 30, 2016, the Corporation purchased a total of 168,600 common
shares under the normal course issuer bid for aggregate cash consideration of $662,094. The stated capital
value of these repurchased Shares was $1,010,830. The excess of the stated capital value of the
repurchased common shares over the cost thereof, being $348,736, was allocated to Deficit in the fifteen-
month period ended June 30, 2016.
(c) Common Share Purchase Warrants
In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on
December 4, 2014, Ceres issued an aggregate of 2,083,334 warrants (the “Warrants”) to the stand-by
purchasers. The Warrants issued were conditional upon approval at the Corporation’s annual general
meeting (“AGM”), which was obtained at the AGM on August 7, 2015.
Furthermore, the Warrants were issued at a fixed exercise price of CAD $5.84 and were each exercisable
into one common share of the Corporation (a “Common Share”). The Warrants had an expiry date of
December 4, 2016, being 24 months after issuance. In the event that the Warrants were exercised prior to
the completion of a change of control of the Corporation, but after a transaction that will result in such a
change of control has been publicly announced, in lieu of exercising the Warrants, the holders of Warrants
could elect a cashless exercise to receive Common Shares equal to: the difference between the ten-day
Volume-Weighted Average Price (“VWAP”) of the Corporation’s stock price and CAD $5.84; multiplied
by the number of Common Shares in respect of which the election was made; divided by the ten-day
VWAP of the Corporation’s stock price. If a Warrant holder exercised this option, there would be
variability in the number of shares issued per Warrant.
33
FY2017 ANNUAL REPORT
53
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of
equity and must instead be classified as a derivative liability and measured at fair value with changes in
the fair value recognized in the statement of operations and comprehensive loss at each period end.
On November 30, 2016, 1,250,000 Warrants were exercised into 1,250,000 Common Shares at an exercise
price of CAD $5.84 for total consideration of $5,425,492 (CAD $7,300,000). On December 4, 2016, the
remaining 833,334 Warrants expired, resulting in no warrant liability as at June 30, 2017. As at June 30,
2016 and April 1, 2015, the warrant liability was $104,971 and $1,359,753 respectively.
(d) Stock Option and Appreciation Rights
On March 10, 2014, the Board approved the Ceres Global Ag Corp. Stock Option Plan (the “Options
Plan”). The Options Plan is available to certain officers, key employees and consultants of the
Corporation and its subsidiaries. The purpose of the Options Plan is to attract, retain and motivate these
parties by providing them with the opportunity, through options, to acquire a proprietary interest in the
Corporation and to benefit from its growth.
The Options Plan is administered by the Board, which determines (among other things) those officers,
key employees and consultants who may be granted awards as Participants and the terms and conditions
of any award to any such Participant. The Exercise Price of the options is fixed by the Board and maybe
no less than 100% of the Market Price on the effective date of the award of the options, which may be
granted for a term not exceeding ten (10) years. The maximum number of common shares reserved for
issuance upon the exercise of options cannot exceed 10% of the total number of common shares issued
and outstanding less the number of common shares reserved for issuance under the Corporation’s
Directors Deferred Share Unit Plan (Note 16). Restrictions exist as to the number of options that may be
granted to Insiders within any one-year period, and as to the number of, and the aggregate fair market
value of, the common shares underlying the options that may be granted to any one Participant.
The Options Plan also provides for the Board to grant Stock Appreciation Rights (“SARs”) to certain
officers, key employees and consultants of the Corporation. Stand-Alone SARs granted under the Plan
become vested at such times, in such installments and subject to the terms and conditions of the Options
Plan (including satisfaction of Performance Criteria and/or continued employment) as may be determined
by the Board. The Base Price for each common share subject to a Stand-Alone SAR may not be less than
100% of the Market Price of a common share on the Effective Date of the award of such Stand-Alone
SAR. Tandem SARs may be granted at or after the Effective Date of the related award of options, and
each Tandem SAR is subject to the same terms and conditions and denominated in the same currency as
the option to which it relates and the additional terms and conditions under the Options Plan. Tandem
SARs may be exercised only if and to the extent the options related thereto are then vested and exercisable.
On exercise of a Tandem SAR, the related option will be cancelled and the Participant will be entitled to
an amount in settlement of such Tandem SAR calculated and in such form as provided by the Options
Plan.
As at June 30, 2017, June 30, 2016 and April 1, 2015, no SARs had been awarded.
During the twelve months ended June 30, 2017, Ceres granted stock options (“Options”) under the
Corporation’s Option Plan to certain officers and employees of the Corporation. The exercise price was
fixed by the Board of Directors at the time of grant.
As at June 30, 2017, the outstanding Options are as follows:
Outstanding as at April 1, 2015
$
-
Granted
Exercised
Expired/forfeited
Granted
Exercised
Expired/forfeited
Outstanding as at June 30, 2016
$
6.71
Outstanding as at June 30, 2017
1,091,879
$
6.00
Exercisable as at June 30, 2017
354,123
$
6.13
Weighted-
average
Weighted-
average
Remaining
Number
of Options
exercise price
Contractual
(CAD)
Term (Years)
-
-
-
322,500
(44,169)
278,331
892,826
(79,278)
6.72
6.75
5.84
-
-
6.75
-
5.00
4.53
4.11
3.91
3.39
At the grant date, the fair value of the Options was estimated using the Black-Scholes pricing model with
the following weighted-average assumptions: an average risk free interest rate of 0.75%; expected
volatility of 24.6%; dividend yield of nil; an average expected option life of 4.6 years; and average exercise
price of CAD $5.84. The weighted average grant date fair value of the Options granted during the twelve-
month period ended June 30, 2017, is CAD $0.72 (fifteen-month ended June 30, 2016: CAD $1.45 and
twelve-month ended March 31, 2015: nil). As at June 30, 2017 and June 30, 2016, outstanding Options
had exercise prices ranging from CAD $5.84 to CAD $6.75.
The total Option compensation cost included in general and administrative expenses for the twelve months
ended June 30, 2017, amounted to $200,058 (fifteen months ended June 30, 2016: $152,209) with the
non-cash expense being accrued and classified within contributed surplus in the Consolidated Balance
Sheet.
54
CERES GLOBAL AG CORP.
34
35
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
As at June 30, 2017, the outstanding Options are as follows:
Outstanding as at April 1, 2015
Granted
Exercised
Expired/forfeited
Outstanding as at June 30, 2016
Granted
Exercised
Expired/forfeited
Outstanding as at June 30, 2017
Number
of Options
-
322,500
-
(44,169)
278,331
892,826
-
(79,278)
1,091,879
Weighted-
average
exercise price
(CAD)
Weighted-
average
Remaining
Contractual
Term (Years)
$
-
6.72
-
6.75
6.71
5.84
-
6.75
6.00
$
$
-
5.00
4.53
4.11
3.91
3.39
Exercisable as at June 30, 2017
354,123
$
6.13
At the grant date, the fair value of the Options was estimated using the Black-Scholes pricing model with
the following weighted-average assumptions: an average risk free interest rate of 0.75%; expected
volatility of 24.6%; dividend yield of nil; an average expected option life of 4.6 years; and average exercise
price of CAD $5.84. The weighted average grant date fair value of the Options granted during the twelve-
month period ended June 30, 2017, is CAD $0.72 (fifteen-month ended June 30, 2016: CAD $1.45 and
twelve-month ended March 31, 2015: nil). As at June 30, 2017 and June 30, 2016, outstanding Options
had exercise prices ranging from CAD $5.84 to CAD $6.75.
The total Option compensation cost included in general and administrative expenses for the twelve months
ended June 30, 2017, amounted to $200,058 (fifteen months ended June 30, 2016: $152,209) with the
non-cash expense being accrued and classified within contributed surplus in the Consolidated Balance
Sheet.
35
FY2017 ANNUAL REPORT
55
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
(e)
Issued and outstanding as at June 30, 2017, June 30, 2016 and April 1, 2015
The following is a summary of the changes in the Common shares for the twelve-month period ended
June 30, 2017 and fifteen-month period ended June 30, 2016:
Common shares
Shares
Amount
The Corporation intends to settle all DSUs with shares through the issuance of treasury shares.
Compensation expense is included as part of Directors’ fees classified with general and administrative
expenses, and is recognized in the accounts as and when services are rendered to the Corporation. DSUs
outstanding as at a reporting period-end are revalued at the fair market value as at that period and changes
in the fair market value are recognized to Directors’ fees in the period in which the changes occur.
The following is a summary of the changes in the number of DSUs issued and outstanding for the twelve-
month period ended June 30, 2017 and fifteen-month period ended June 30, 2016:
$
$
$
200,640,476
33,158
(56,824)
(1,010,830)
199,605,980
69,885
(1,881,516)
5,425,492
43,593
203,263,434
Balances, March 31, 2015
Redemption of deferred share units
Share issuance costs
Repurchase under normal course issuer bid
Balances, June 30, 2016
Redemption of deferred share units
Repurchase under normal course issuer bid
Exercise of warrants
Directors' remuneration
Balances, June 30, 2017
27,050,673
6,982
-
(168,600)
26,889,055
17,333
(257,582)
1,250,000
10,790
27,909,596
DSUs, beginning of period
Units issued
Units redeemed
Balance, end of period
17. MANAGEMENT FEES
12-month
period ended
June 30, 2017
15-month
period ended
June 30, 2016
142,717
58,201
(17,333)
183,585
52,813
96,887
(6,983)
142,717
On August 23, 2013, Ceres announced it had entered into a Management Transition Agreement (the
“Transition Agreement”) with Front Street Capital 2004 (“Front Street Capital”), which provided, among
other things, for the early termination of the Management Agreement. The Transition Agreement was
approved by the shareholders at the annual and special meeting held on September 27, 2013. The
Transition Agreement provided for the following:
The Management Agreement was terminated effective November 30, 2013;
Monthly management fee payments to the Front Street Capital ended December 31, 2013;
On October 1, 2013, Ceres paid Front Street Capital CAD $5,000,000 plus HST of CAD
$650,000;
Front Street Capital will be paid an additional CAD $1,000,000 if the five-day volume-
weighted average price of Ceres’ common shares (the “5-day VWAP”) reaches CAD $10
within the five-year period ending August 23, 2018, and a further CAD $1,000,000 if the
5-day VWAP reaches CAD $11 at any time during that 5-year period; and
The additional payments will become payable immediately if, prior to the fifth anniversary
of the date of the Transition Agreement, there occurs either a change in control or a going
private transaction for a price in excess of CAD $7.85 per share;
Ceres must deposit into an escrow fund 5% of any gross sale proceeds in excess of net book value and
direct transaction costs from the sale of any of Ceres’ assets, to a maximum amount of CAD $1,000,000,
and such escrow fund amount shall be paid to the Manager if the 5-day VWAP does not reach CAD $10
within five years.
As at June 30, 2017, management has determined the fair value of the potential additional payments
provided for under the Transition Agreement is $10,814 (June 30, 2016: $73,321 and April 1, 2015:
$272,109). As at June 30, 2017, the fair value of each additional payment was determined using the
binomial options pricing model, with a remaining term to August 23, 2018, using volatility of 25% and a
risk-free interest rate of 1.1% (fifteen-month period ended June 30, 2016: remaining term to August 23,
As at June 30, 2017, June 30, 2016 and April 1, 2015, directors and officers of the Corporation, through a
controlled entity, beneficially own, directly or indirectly, or exercise control or direction over 43.6%,
40.7% and 40.3%, respectively, of the outstanding Common shares of the Corporation.
16. DEFERRED SHARE UNIT PLAN
Effective September 29, 2016, the Board amended the Directors’ Deferred Share Unit Plan to (i) authorize
the Board, in its sole discretion, to issue Common Shares to directors in lieu of all or a portion of the annual
cash remuneration payable to eligible directors in respect of services provided by such eligible directors
to the Corporation, (ii) increase the aggregate number of Common Shares issuable under the plan from
450,000 to 600,000 Common Shares and (iii) rename the plan the Directors’ Share and Deferred Share
Unit Plan.
Effective March 10, 2014, Ceres has a Directors’ Deferred Share Unit Plan, whereby deferred share units
(“DSU”) are issued to Eligible Directors, in lieu of cash, for a portion of Directors’ fees otherwise payable
to Directors. The Fair Market Value of the DSUs on the date such units are calculated and issued represents
the volume-weighted average trading price of Ceres’ common shares for the five trading days immediately
preceding the date of issuance of the DSUs. Each DSU entitles the director to receive payment after the
end of the director’s term in the form of common shares of the Corporation. Under the plan, the aggregate
number of common shares issuable by Ceres under this Plan was limited to 450,000 and subsequently
amended to 600,000 common shares. Certain insider restrictions and annual dollar limits per Eligible
Director exist. Dividends, if any, otherwise payable on the common shares represented by the DSUs are
converted into additional DSUs based on the Fair Market Value as of the date on which any such dividends
would be paid. The Plan also provides for the Board to award additional DSUs (referred to in the Plan
agreement as “Matching DSUs”) to an Eligible Director who has elected to receive DSUs pertaining to
his/her Annual Cash Remuneration amount (as defined by the Plan).
56
CERES GLOBAL AG CORP.
36
37
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
The Corporation intends to settle all DSUs with shares through the issuance of treasury shares.
Compensation expense is included as part of Directors’ fees classified with general and administrative
expenses, and is recognized in the accounts as and when services are rendered to the Corporation. DSUs
outstanding as at a reporting period-end are revalued at the fair market value as at that period and changes
in the fair market value are recognized to Directors’ fees in the period in which the changes occur.
The following is a summary of the changes in the number of DSUs issued and outstanding for the twelve-
month period ended June 30, 2017 and fifteen-month period ended June 30, 2016:
DSUs, beginning of period
Units issued
Units redeemed
Balance, end of period
17. MANAGEMENT FEES
12-month
period ended
June 30, 2017
15-month
period ended
June 30, 2016
142,717
58,201
(17,333)
183,585
52,813
96,887
(6,983)
142,717
On August 23, 2013, Ceres announced it had entered into a Management Transition Agreement (the
“Transition Agreement”) with Front Street Capital 2004 (“Front Street Capital”), which provided, among
other things, for the early termination of the Management Agreement. The Transition Agreement was
approved by the shareholders at the annual and special meeting held on September 27, 2013. The
Transition Agreement provided for the following:
The Management Agreement was terminated effective November 30, 2013;
Monthly management fee payments to the Front Street Capital ended December 31, 2013;
On October 1, 2013, Ceres paid Front Street Capital CAD $5,000,000 plus HST of CAD
$650,000;
Front Street Capital will be paid an additional CAD $1,000,000 if the five-day volume-
weighted average price of Ceres’ common shares (the “5-day VWAP”) reaches CAD $10
within the five-year period ending August 23, 2018, and a further CAD $1,000,000 if the
5-day VWAP reaches CAD $11 at any time during that 5-year period; and
The additional payments will become payable immediately if, prior to the fifth anniversary
of the date of the Transition Agreement, there occurs either a change in control or a going
private transaction for a price in excess of CAD $7.85 per share;
Ceres must deposit into an escrow fund 5% of any gross sale proceeds in excess of net book value and
direct transaction costs from the sale of any of Ceres’ assets, to a maximum amount of CAD $1,000,000,
and such escrow fund amount shall be paid to the Manager if the 5-day VWAP does not reach CAD $10
within five years.
As at June 30, 2017, management has determined the fair value of the potential additional payments
provided for under the Transition Agreement is $10,814 (June 30, 2016: $73,321 and April 1, 2015:
$272,109). As at June 30, 2017, the fair value of each additional payment was determined using the
binomial options pricing model, with a remaining term to August 23, 2018, using volatility of 25% and a
risk-free interest rate of 1.1% (fifteen-month period ended June 30, 2016: remaining term to August 23,
37
FY2017 ANNUAL REPORT
57
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
2018, volatility of 25% and risk-free interest rate of 0.52% and twelve-month period ended March 31,
2015: remaining term to August 23, 2018, volatility of 25% and risk-free interest rate of 0.62%).
Management recalculates the fair value of such potential additional payments as at each quarter-end and
adjusts the provision recognized in the accounts. For the twelve-month period ended June 30, 2017, the
Corporation recognized a gain of $60,620 related to the revaluation of the provision for future payments
to Front Street Capital (fifteen-month period ended June 30, 2016: revaluation gain of $173,747).
18.
INCOME TAXES
(a) Reconciliation of statutory tax provision to the effective tax provision
As the Corporation operates in several tax jurisdictions, its income is subject to taxation at various
rates.
The provision for income taxes differs from the amount that would have resulted from applying
the Canadian statutory income tax rates to income before income taxes for the following reasons:
2017
2016
Income tax expense (recovered)
$
4,282
$
(217,809)
Income (loss) before income taxes and share of net income in
investments in associates:
Canada
United States of America
Combined statutory Canadian federal and Ontario corporate
income tax rate
Provision for income taxes recoverable using statutory rate
Adjusted for the income tax effect of:
Difference in tax rates applicable to subsidiaries
U.S. state taxes, net of U.S. federal benefit
Non-deductible portion of unrealized losses on investments
Changes in unrecognized temporary difference on deferred
income tax assets, net of deferred tax liabilities
Non-deductible changes in the revaluation of the derivative
warrant liability
Foreign exchange and other differences
$
$
$
(5,342,140)
(8,069,105)
$
6,981,987
(19,038,242)
(13,411,245)
$
(12,056,255)
26.5%
26.5%
(3,553,980)
$
(3,194,908)
(964,335)
4,282
144,766
(2,143,443)
29,959
79,643
6,126,269
5,783,919
-
(1,752,720)
3,558,262
(370,595)
(417,781)
2,961,702
Income tax expense (recovered)
$
4,282
$
(233,206)
The components of the provision for income taxes are as follows:
Canada
2017
2016
$
-
$
-
Current
Deferred
Current
Deferred
Current
Deferred
United States of America - Federal
United States of America - State
(b) Deferred income tax liability
tax liability are as follows:
Deferred tax assets:
-
-
-
-
-
4,282
-
4,282
(226,695)
(226,695)
(4,054)
(15,324)
(19,378)
29,959
(1,695)
28,264
2017
2016
974,007
678,988
205,079
783,908
645,675
166,408
42,983,338
38,016,076
(14,339,757)
(15,541,595)
(423,748)
(450,581)
(386,982)
(317,318)
(15,150,487)
(16,309,494)
(27,832,851)
(21,706,582)
$
-
$
-
The tax effects of temporary differences that give rise to significant elements of the net deferred income
Non-capital and net operating losses carried-forward
$
41,125,264
$
36,420,085
Allowable capital losses carried forward
Deductible portion of unrealized depreciation of investments
Share issuance costs
Deferred tax liabilities:
Property, plant and equipment
Taxable portion of unrealized depreciation of investment in
associates
Other temporary taxable differences, net of temporary
deductible differences
Unrecognized deferred tax assets
Non-current deferred tax liabilities, net
58
CERES GLOBAL AG CORP.
38
39
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
The components of the provision for income taxes are as follows:
Canada
Current
Deferred
United States of America - Federal
Current
Deferred
United States of America - State
Current
Deferred
2017
$
-
-
-
2016
$
-
(226,695)
(226,695)
-
-
-
4,282
-
4,282
(4,054)
(15,324)
(19,378)
29,959
(1,695)
28,264
Income tax expense (recovered)
$
4,282
$
(217,809)
(b) Deferred income tax liability
The tax effects of temporary differences that give rise to significant elements of the net deferred income
tax liability are as follows:
2017
2016
Deferred tax assets:
Non-capital and net operating losses carried-forward
Allowable capital losses carried forward
Deductible portion of unrealized depreciation of investments
Share issuance costs
$
41,125,264
974,007
678,988
205,079
$
36,420,085
783,908
645,675
166,408
Deferred tax liabilities:
Property, plant and equipment
Taxable portion of unrealized depreciation of investment in
associates
Other temporary taxable differences, net of temporary
deductible differences
Unrecognized deferred tax assets
Non-current deferred tax liabilities, net
42,983,338
38,016,076
(14,339,757)
(15,541,595)
(423,748)
(450,581)
(386,982)
(317,318)
(15,150,487)
(16,309,494)
(27,832,851)
(21,706,582)
$
-
$
-
39
FY2017 ANNUAL REPORT
59
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
(c) Tax losses carried forward
(i) Operations in Canada
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
19. RELATED PARTY TRANSACTIONS
Key management personnel
As at June 30, 2017, the Corporation has accumulated non-capital losses in the amount of CAD
$57,042,744 relating to its operations in Canada. The non-capital losses are being carried forward and,
unless utilized, will expire in the following taxation years:
The Corporation has defined key management personnel as senior executive officers, as well as the
members of the Board of Directors, as they collectively have the authority and responsibility for planning,
directing and controlling the activities of the Corporation and its subsidiaries. The following table
summarizes total compensation expense for key management personnel for the twelve-month period
ended June 30, 2017 and fifteen-month period ended June 30, 2016:
Year of expiry
Amount in CAD
2031
2032
2033
2034
2035
2036
2037
$
$
400,608
7,335,493
6,548,720
13,586,280
8,197,795
10,776,858
10,196,990
57,042,744
As at June 30, 2017, Ceres has accumulated capital losses totaling CAD $9,517,086, which are available
indefinitely to be applied against capital gains in future taxation years. The potential income tax benefit
of the non-capital and capital losses has not been recognized in the consolidated financial statements.
(ii) Operations in the United States of America
As at June 30, 2017, the Corporation has accumulated net operating losses in the amounts noted below in
USD, for federal and state income tax purposes. These net operating losses are being carried forward and,
unless utilized, will expire in the following taxation years:
Year of expiry
Federal
Minnesota
New York
North Dakota
Wisconsin
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
-
$
-
-
-
-
9,596,976
3,686,320
8,570,443
12,772,909
-
26,591,099
5,309,455
3,359,802
$
5,248,595
1,724,905
6,334,919
9,210,006
-
9,847,204
2,187,786
1,281,966
-
-
-
-
-
-
$
-
-
-
-
5,704,206
3,169,350
9,875,230
13,816,532
-
617,130
5,457
3,531
$
470,876
200,556
-
-
-
-
-
-
-
124,459
67,731
121,103
58,746
-
$
-
1,278,355
1,764,043
-
-
-
-
-
-
311,229
111,069
-
$
69,887,004
$
35,835,381
$
33,191,436
$
1,043,471
$
3,464,696
Salaries and short-term employee/director benefits
Share-based compensation
20. CHANGES IN NON-CASH WORKING CAPITAL ACCOUNTS
Decrease in due from Broker
Decrease in net open cash contracts
Increase (Decrease) in accounts receivable
Decrease in inventories
Decrease in Sales taxes recoverable
(Increase) in prepaid expenses and sundry assets
Increase in accounts payable and accrued liabilities
21. CONTINGENT LIABILITIES
Twelve-month
Fifteen-month
period ended
June 30, 2017
period ended
June 30, 2016
$
1,091,071
$
1,485,918
416,962
409,214
$
1,508,033
$
1,895,132
Twelve-month
Fifteen-month
period ended
period ended June
June 30, 2017
30, 2016
$
3,630,512
$
1,376,599
6,102,263
2,893,010
(9,241,399)
(7,170,810)
7,383,174
14,406,089
89,783
772,274
(27,107)
(777,517)
6,815,810
4,666,167
$ 14,753,036
$ 16,165,812
The Corporation is involved in various legal claims and legal notices arising in the ordinary course of
business. The Corporation believes it has adequately assessed each claim, and the necessity of a provision
for such claims. As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation has no provision
for any contingent liabilities.
During the year ended March 31, 2014, Ceres terminated its arrangements and ongoing discussions with
The Scoular Company (“Scoular”) as a potential development partner with respect to the development
and construction of a grain facility at Northgate Commodities Logistics Centre (NCLC). The termination
of discussions with Scoular may have implications for any amounts to be collected from the potential
partner and amounts previously paid to Ceres by Scoular in respect to a certain portion of NCLC site
preparation costs under a cost-sharing agreement. The recovery and/or reimbursement of such amounts,
if any, will be subject to resolution of the claim described below.
60
CERES GLOBAL AG CORP.
40
41
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
19. RELATED PARTY TRANSACTIONS
Key management personnel
The Corporation has defined key management personnel as senior executive officers, as well as the
members of the Board of Directors, as they collectively have the authority and responsibility for planning,
directing and controlling the activities of the Corporation and its subsidiaries. The following table
summarizes total compensation expense for key management personnel for the twelve-month period
ended June 30, 2017 and fifteen-month period ended June 30, 2016:
Salaries and short-term employee/director benefits
Share-based compensation
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended
June 30, 2016
$
1,091,071
416,962
$
1,485,918
409,214
$
1,508,033
$
1,895,132
20. CHANGES IN NON-CASH WORKING CAPITAL ACCOUNTS
Decrease in due from Broker
Decrease in net open cash contracts
Increase (Decrease) in accounts receivable
Decrease in inventories
Decrease in Sales taxes recoverable
(Increase) in prepaid expenses and sundry assets
Increase in accounts payable and accrued liabilities
21. CONTINGENT LIABILITIES
Twelve-month
period ended
June 30, 2017
Fifteen-month
period ended June
30, 2016
$
3,630,512
6,102,263
(9,241,399)
7,383,174
89,783
(27,107)
6,815,810
$ 14,753,036
$
1,376,599
2,893,010
(7,170,810)
14,406,089
772,274
(777,517)
4,666,167
$ 16,165,812
The Corporation is involved in various legal claims and legal notices arising in the ordinary course of
business. The Corporation believes it has adequately assessed each claim, and the necessity of a provision
for such claims. As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation has no provision
for any contingent liabilities.
During the year ended March 31, 2014, Ceres terminated its arrangements and ongoing discussions with
The Scoular Company (“Scoular”) as a potential development partner with respect to the development
and construction of a grain facility at Northgate Commodities Logistics Centre (NCLC). The termination
of discussions with Scoular may have implications for any amounts to be collected from the potential
partner and amounts previously paid to Ceres by Scoular in respect to a certain portion of NCLC site
preparation costs under a cost-sharing agreement. The recovery and/or reimbursement of such amounts,
if any, will be subject to resolution of the claim described below.
41
FY2017 ANNUAL REPORT
61
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2017 and June 30, 2016
During the year ended March 31, 2015, Scoular initiated an action against the Corporation for injunctive
relief and unspecified damages relating to the development and construction of a grain facility at NCLC.
As of the date hereof, the Corporation, based on the advice of its litigation counsel, does not believe that
the claims alleged by Scoular have any legal merit, and therefore, the Corporation intends to vigorously
defend the lawsuit. Prior to the termination of its relationship with Scoular, the counterparty paid CAD
$3,899,146 in costs related to the project. The Corporation does not believe that the counterparty is entitled
to recovery of any of these costs based on the legal relationship that existed at the time and based on the
claims alleged in the counterparty’s complaint. On January 20, 2017, the court heard oral argument on
the Corporation’s motion for summary judgment, which seeks dismissal of all claims asserted by Scoular.
On August 16, 2017, the court denied the Corporation’s motion and scheduled a trial by jury expected to
start in Q2 fiscal year 2018.
The outcome of this complaint is difficult to assess or quantify. The plaintiff may seek recovery of large
or indeterminate amounts, and the magnitude of the potential loss may remain unknown for substantial
periods of time. The cost to defend this complaint may be significant. In addition, this complaint, if
decided adversely to the Corporation or settled by the Corporation, may result in liability material to the
Corporation’s financial statements as a whole or may materially and adversely affect the Corporation’s
business, financial position, cash flow and/or results of operations.
22. SUBSEQUENT EVENTS
On August 16, 2017, the Corporation closed the sale of its Buffalo grain storage facility. The gross
proceeds from the sale were $120,000. During the quarter ended March 31, 2017, the Buffalo facility
was idled and its carrying value of $2,610,306 was impaired in full.
On September 19, 2017, the Corporation closed the sale of its Duluth Lakeport grain storage facility and
realized a loss on the sale of $150,000. During the quarter ended March 31, 2017, the Corporation
recognized a loss on the impairment of Duluth Lakeport of $5,040,215.
62
CERES GLOBAL AG CORP.
42
SENIOR MANAGEMENT
Robert Day
President and
Chief Executive Officer
Kyle Egbert
Vice President and
Chief Financial Officer
John Carroll
Vice President Trading
and Risk Management
DIRECTORS
Douglas Speers
Independent Director,
Chairman, and Member of the
Human Resources, Safety and
Environmental Committee
Robert Day
Director and Officer,
Member of Nominating,
Government, Risk and
Ethics Committee
Harvey Joel
Independent Director,
Chair of the Human Resources
Safety and Environmental Committee,
Member of the Audit and
Finance Committee
Gary Mize
Independent Director,
Chair of Audit and Finance
Committee, Chair of the Nominating,
Governance, Risk and Ethics Committee
James Vanasek
Member of Audit and
Finance Committee
CORPORATE OFFICE
1660 S. Highway 100
Suite 350
St. Louis Park MN
55416 USA
REGISTERED OFFICE
155 Wellington West, 40th floor
Toronto ON M5V 3J7
TRANSFER AGENT
AST Trust Company (Canada)
AUDITORS
Wolrige Mahon LLP
400 Burrard Street, Ninth Floor
Vancouver BC V6C 3B7
INVESTOR CONTACT
Heidi Christensen Brown
NATIONAL Equicom
T: 416 848 1389
E: hchristensenbrown@national.ca
AGM
Ceres Global Ag Corp.
Annual General Meeting
November 15 at 11:00 am EST
Blake, Cassels & Graydon LLP
199 Bay Street, Suite 4000
Commerce Court West
Toronto, ON M5L 1A9
ceresglobalagcorp.com
CORPORATE INFORMATION
ceresglobalagcorp.com