Hemp oil, Hand holding bottle of Cannabis oil against Marijuana plant, CBD oil pipette.   alternative remedy or medication,medicine concept
Hemp oil, Hand holding bottle of Cannabis oil against Marijuana plant, CBD oil pipette. alternative remedy or medication,medicine concept

Cannabis company’s share price up in smoke

SHARES in cannabis oil producer THC Global - which has its main facility in Southport - plunged 16 per cent today after a grilling from the ASX on the accuracy of its financial statements.

The stock price fell 4.6c, or 16.3 per cent, in intraday trading to 23c - wiping $11.21 million off its market capitalisation.

It followed the company releasing a response to questions from the market operator on its recently released accounts for the second half of FY20.

Those accounts, for the six months to June 30, show a net loss of $5.578 million despite revenue increasing 60 per cent on the prior corresponding period to $3.483 million.

The THC Global facility in Southport
The THC Global facility in Southport

The independent auditor of the accounts, Sydney-based K.S. Black & Co., issued a qualified opinion stating it disagreed with management over the application of Australian accounting standards.

The firm said it had not been possible to obtain enough evidence to verify the sales forecast assumptions in the company's financial model.

"This model contained assumptions with respect to the financially feasible sale of medical cannabis oils both domestically and internationally on a prospective basis," it said.

The forecasts provided its cash generating unit - including assets/plant and equipment and delivery of cannabis - with a carrying value of $22.9 million.

K.S. Black & Co. said this was in part because of the early stages of commercial arrangements that the projections are drawn from.

THC Global Ltd grows its cannabis in Bundaberg and processes it in Southport.
THC Global Ltd grows its cannabis in Bundaberg and processes it in Southport.

This morning a letter was released with THC's response to questions from the ASX.

The market operator asked how the directors of THC "satisfied themselves that the carrying values are appropriate and adheres to the current Australian Accounting Standards".

"The Company refutes the ASX's suggestion that the qualified opinion relates to the independent auditor's "inability to obtain sufficient information to verify the carrying values (emphasis added) of the plant & equipment," THC responded.

"The independent auditor's report in fact discloses the basis of the qualification as "not being able to verify and obtain sufficient and appropriate audit evidence to verify those sales forecast assumptions in the financial model" (emphasis added)."

The response goes on to say that THC has provided the auditor with "a significant amount of information".

THC said that an independent valuation of its Southport facility provided it with the majority of the carrying value of its property, plant and equipment for the half year.

Originally published as Cannabis company's share price up in smoke


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