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Roots Sustainable Agricultural Technologies Ltd Appendix 4E Preliminary final report 1. Company details Name of entity: ARBN: Reporting period: Previous period: Roots Sustainable Agricultural Technologies Ltd 619 754 540 For the year ended 31 December 2018 For the year ended 31 December 2017 2. Results for announcement to the market Revenues from ordinary activities up 100% 305 - Loss from ordinary activities after tax attributable to the owners of Roots Sustainable Agricultural Technologies Ltd down 41% 2,884 4,883 Loss for the year attributable to the owners of Roots Sustainable Agricultural Technologies Ltd down 41% 2,884 4,883 31-Dec-18 US$’000 31-Dec-17 US$’000 Dividends Not applicable. Franked Amount per security Cents amount per security Cents Additional Appendix 4E disclosure requirements can be found in the notes to the Roots Sustainable Agricultural Technologies Ltd’s financial statements. 3. Net tangible assets Net tangible assets per ordinary security 4. Control gained over entities Not applicable. 5. Loss of control over entities Not applicable. Reporting Previous period period U.S. dollars U.S. dollars 0.0019 0.0492 For personal use only Roots Sustainable Agricultural Technologies Ltd Appendix 4E Preliminary final report 6. Details of associates and joint venture entities Name of associate / joint venture Not applicable. 7. Audit qualification or review Reporting entity's percentage holding Contribution to profit/(loss) Reporting Previous Reporting Previous period % period % period $'000 period $'000 The financial statements have been audited and an unqualified opinion has been issued. The audit report is included in the attached financial statements. 8. Attachments The Annual Report of Roots Sustainable Agricultural Technologies Ltd for the year ended 31 December 2018 is attached. 9. Signed Signed Sharon Devir Director Beit Halevi Date: 28 February 2019 For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Annual Report – 31 December 2018 For personal use only Roots Sustainable Agricultural Technologies Ltd Corporate Directory 31 December 2018 Directors Sharon Devir (Executive Chairman and CEO) Boaz Wachtel (Executive Director) Adam Blumenthal (Non-Executive Director) Graeme Smith (Non-Executive Director) Dafna Shalev-Flamm (Non-Executive Director) Company secretary Sarah Smith Registered office C/- Mirador Corporate Pty Ltd Suite 2, 1 Altona Street West Perth WA 6005 Telephone: +61 8 6559 1792 Principal place of business Hamezach 1 Str. Kefar Vitkin Israel Share registry Auditor Solicitors Bankers Automic Share Registry Level 2, 267 St Georges Terrace Perth WA 6000 Telephone: 1300 288 664 BDO - Tel Aviv Amot Bituach House Bldg. B 48 Derech Menachem Begin Rd Tel Aviv Israel Australian Legal Advisor Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000 Israeli Legal Advisor GKH Law Offices One Azrieli Center Round Building Menachem Begin St. Tel Aviv 6701101 Israel Bank Hapoalim Ltd. Branch 407 Hatidhar St. 16 Raanana IA 43100 Israel Westpac Banking Corporation Level 4, Brookfield Place, Tower Two 123 St Georges Tce Perth WA 6000 ASX Code (Shares) ROO Website www.rootssat.com 1 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Roots Sustainable Agricultural Technologies Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 31 December 2018. Directors The following persons were directors of Roots Sustainable Agricultural Technologies Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Sharon Devir (appointed on 19 April 2009) Boaz Wachtel (appointed on 19 April 2009) Adam Blumenthal (appointed on 9 November 2017) Graeme Smith (appointed on 9 November 2017) Dafna Shalev-Flamm (appointed 29 May 2018) Tal Misch Vered (appointed on 9 November 2017, resigned 29 May 2018) Principal activities The principal activity of the Group during the year was the sale of root zone heating and cooling systems to greenhouse farmers and the development of irrigation systems with combined fertilization and heating/cooling roots zone management. Review of operations Roots Sustainable Agricultural Technologies Ltd is an agricultural technology company focused on developing, producing and commercializing precision agriculture technologies that help: Improve crop yields; • Plants address difficult weather conditions via root zone heating and cooling; • • Energy saving; • • Provide water from humidity, combined with roots cooling, in order to improve crop yield for irrigation purposes, in a Improve fertilization methods by the cooling and heating of roots; and cost effective and environmentally sustainable manner. The highlights for the current financial year include: Technical • Showcasing world-first off-grid, solar and wind-operated Irrigation by Condensation (IBC) installation on beans and alfalfa at key international agriculture conference Agri-Tech Israel 2018; • Successful hydroponic nutrient-temperature controlled greenhouse installation using RZTO, in partnership with Teshuva Agricultural Projects (TAP), where plant roots remained within favourable growing ranges more than 11 degrees lower than the ambient air temperature of nearly 40 degrees; strains of heated medical cannabis; • Excellent RZTO proof of concept results showing a 40 to 272 percent increase in average plant wet weight of eight • • RZTO cooling increasing lettuce growth in greenhouse of more than 130% and nearly halving growing time; • Cooling chives roots using RZTO during Israeli summer to increase yield by more than 250%; • Completing world-first pilot in a commercial operation combining RZTO and Nutrient Film Techniques (NFT); • • Conducting a successful winter pilot on basil increasing yield by 66%; and • Entering the floriculture sector with successful RZTO cooling on Alstroemeria (Peruvian Lily). • Opened new demonstration research and development hub in Hasahron Area, Central Israel to allow faster ; commercialization of agtech solutions and innovation; 2 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 Marketing and Sales • Entry into China with exclusive distribution agreement with Dagan, conditional on $US19 million in ongoing sales over five years; • First China sales with significant US$257,000 contract for RZTO; • First RZTO commercial sale in Israel for medical cannabis; • • First RZTO commercial sale in Israel for basil • Entry and first RZTO sale in South Korea through agreement with Korean agricultural production and distribution Israeli Government approval of up to 30% subsidy for basil growers using RZTO, following successful basil pilot; company. • Signed non-excusive Australian distribution agreement for RZTO and pilot demo program • Signed Letter of Intent with Teshuva Agricultural Projects (TAP) for global collaboration on hydroponic greenhouses using NFT and RZTO systems. IP • Granting of Australian patent for RZTO. • Divisional patent granted in India for irrigation by condensation (IBC) technology • Additional filing of IP in various territories in process Corporate • Formation of Scientific Advisory Board comprising Professor Raoul Bino, Professor Haim Rabinowitch and Professor Uzi Kafkafi, academic leaders in agriculture from Holland and Israel. • Appointed Dave Sharma, former Australia Ambassador to Israel, to assist with the development of international contracts world-wide. Dividends There were no dividends paid or recommended during the financial year ended 31 December 2018 (2017: Nil). Significant changes in the state of affairs There were no other significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year In February 2019, the Company announced its intention to complete a non-renounceable entitlement issue of one (1) Option for every two (2) CDIs held by eligible CDI Holders registered at the Record Date at an issue price of $0.04 per Option. In February 2019, the Company has received a financing commitment by way of execution of a convertible securities agreement with CST Capital (hereafter: the Investor), in which the Company borrowed a total amount of up to AUD 1.62 million ($1,212 thousand) via the issue of convertible notes (hereafter: the Notes). The Notes will be issued in two tranches with a face value of AU$1.00 per Note (Face Value), with 1,650,000 collateral CDIs over fully paid ordinary shares (CDIs) to be issued to the Investor prior to the first purchase of 900,000 Notes. The first tranche is for an amount of AU$0.81 million. A subsequent tranche of up to AU$0.81 million will be issued at a later date subject to mutual consent between Roots and the Investor. The Notes will be interest-free and convertible. The Notes can initially be converted at 130% of the 5-day VWAP prior to issuance of the applicable tranche. From 65 days following the date of issue, the Notes can be converted at the lower of 130% of the 5-day VWAP prior to issuance of the applicable tranche and 90% of the lowest daily VWAP during the 15 trading days preceding the conversion date. Other than with the prior written consent of the Company, in any calendar month, upon issuance of a tranche, the Investor will receive options equal to the face value, multiplied by 0.2, divided by the closing VWAP prior to issuance. The options will be exercisable for 18 months and have an exercise price equal to 160% of the 5-day VWAP prior to issuance of the options. On 19 February 2019, the Company issued 1,935,484 Unlisted Options (exercisable at $0.14 on or before 19 August 2020) being the Options relating to the first tranche of Notes. Likely developments and expected results of operations The company will work to expand its commercial activity internationally. An emphasis will be on the Cannabis sector. 3 For personal use only Pinnacle Listed Practical Limited Directors' report 31 December 2018 Information on Directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Nil Special responsibilities: Interests in shares: Interests in options: Contractual rights to shares: Name: Title: Qualifications: Experience and expertise: Mr Sharon Devir Executive Director/CEO BSc, MSc, PHD Dr Devir is a Co-Founder and Chief Executive Officer of Roots. He previously cofounded Salicrop, an abiotic stress seed treatment technology as well as Rimonim, an Agri-Tech fund. Dr Devir was the former Chief Executive Officer of NGT, a technology incubator which sold a company Flourinex to Colgate for US$100 million. He was also the Former Chief Scientific Officer of AFIMILK dairy management systems and he has lectured at The Hebrew University, Israel on behalf of the Agriculture Faculty. Dr Devir’s achievements led to being awarded the “Man of the Year” award by Israeli TV Channel 2 and the Daily “Yediot Acharonot” newspaper for his Unique Social Contribution. – Salicrop, SkyX, Rimonim Agro Management Chairman, CEO 2,931,564 CDI’s (subject to escrow until 6 December 2019) 28,000 CDI’s 430,490 Options 2,000,000 Performance Rights Mr Boaz Wachtel Co-Founder, R&D and Business Development, Executive Director Masters in Management and Marketing Mr. Wachtel is the Co-Founder and Executive Director of Roots. Mr. Wachtel is the inventor of irrigation by condensation (NASA Tech Brief magazine- Technologies of the Month) and root zone heating and cooling - ROOTS's core technologies. He has published 25 publications focussing on water and he is a frequent lecturer on agricultural technology, Middle East water issues and sustainability. He is a former assistant army attaché to the Israeli Embassy in Washington DC and has lectured at the UN conflict resolution conference. Mr Wachtel holds a Masters in Management and Marketing from the University of Maryland. Creso Pharma Limited Other current directorships: Former directorships (last 3 years): MMJ Phytotech (resigned August 2015) Special responsibilities: Interests in shares: Business Development 5,298,777 CDI’s (subject to escrow until 6 December 2019) 78,000 CDI’s 850,510 Options 1,000,000 Performance Rights (subject to escrow until 6 December 2019) Interests in options: Contractual rights to shares: 4 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 Name: Title: Qualifications: Experience and expertise: Other current directorships: Mr Adam Blumenthal Non-Executive Director Bachelor of Commerce, a Masters of International Relations and a Masters of Business Administration Mr Blumenthal has 10 years' experience in investment banking and corporate finance. He has deep exposure to Australian and international markets, having provided capital raising and financing solutions to an extensive number of unlisted and listed companies. Mr Blumenthal has played a lead role in advising and supporting multiple organisations across a broad spectrum of industries. Using his experience and extensive network of international contacts to provide corporate advisory and capital markets input, he has successfully brought to market several companies and is actively involved in mining, cyber security, agricultural technology, medicinal cannabis, pharmaceutical and information technology sectors. Mr Blumenthal is a shareholder of EverBlu, the Lead Manager to the Offer and, on 23 August 2017, was appointed as the Chairman on EverBlu. Creso Pharma Limited Burrabulla Corporation Limited Former directorships (last 3 years): MOV Corporation Limited (resigned December 2014) Interests in shares: 966,667 CDI’s (subject to escrow until 6 December 2019) 354,632 CDI’s Nil 1,783,333 Performance Rights (subject to escrow until 6 December 2019) Interests in options: Contractual rights to shares: Name: Title: Qualifications: Experience and expertise: Mr Graeme Smith Independent Director and Non-Executive Director Certified Practicing Agriculturist (CPAG) Mr Smith is a Melbourne-based, world agriculture and horticulture expert, consultant and lecturer. Mr Smith is a Certified Practicing Agriculturist (CPAG), from the Australian Institute Agricultural Science and Technology. Graeme Smith Consulting has (beginning with Hydroponic Designs Pty Ltd), delivered over 40 protected cropping projects around Australia since 1995. These projects have largely delivered modern greenhouse food production systems ranging from 400m2 to 160,000m2 in poly tunnels through to modern glasshouses. Most of Mr Smith's food production projects involved full return on, system design, costings, project management, as well as commissioning and ongoing crop advisory services. Other current directorships: Nil Former directorships (last 3 years): Nil Nil Interests in shares: Nil Interests in options: Nil Contractual rights to shares: 5 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 Name: Title: Qualifications: Experience and expertise: Other current directorships: Ms Dafna Shalev-Flamm (appointed 29 May 2018) Independent Director and Non-Executive Director Certified Public Accountant, MBA Ms Shalev-Flamm was an experienced Chief Financial Officer and Director with extensive experience in operational management, accounting and finance, capital management and corporate governance. Plasson Industries Ltd MTI Computers Software Services Ltd Former directorships (last 3 years): Poliram Ltd Special responsibilities: Interests in shares: Interests in options: Contractual rights to shares: Chair of the Audit and remuneration committees Nil Nil Nil Name: Title: Qualifications: Experience and expertise: Other current directorships: Ms Tal Misch Vered (resigned 29 May 2018) Independent Director and Non-Executive Director Certified Public Accountant, BA, MSc. Ms Misch Vered is a Certified Public Accountant since 1994. She is currently a board member of four Israeli public companies and an institutional investor as follows: Telsys Ltd. (Chairperson of the financial statements and the compensation committee), Medipower (Overseas) Public (Chairperson of the financial statements committee and the compensation committee), Opal Balance Investments, Ltd. the compensation (Chairperson of committee), and Mordechai Aviv, Keren Hishtalmut le Ovdei Medina (Chairperson of the audit committee). Telsys Ltd, Medipower (Overseas) Public, Opal Balance Investments, Ltd. Mordechai Aviv, Keren Hishtalmut le Ovdei Medina financial statements committee and the Former directorships (last 3 years): Nil Special responsibilities: Interests in shares: Interests in options: Contractual rights to shares: Chair of the Audit and remuneration committees (resigned 29 May 2018) Nil Nil Nil Company secretary Ms Sarah Smith Ms Smith specialises in corporate advisory, company secretarial and financial management services. Ms Smith’s experience includes company secretarial and financial management services for ASX listed companies, capital raisings and IPOs, due diligence reviews and ASX and ASIC compliance. Ms Smith is a Chartered Accountant and has acted as the Company Secretary for a number of ASX listed companies. 6 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 Meetings of directors The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the year ended 31 December 2018, and the number of meetings attended by each director were: Directors’ Meetings Held Attended Audit Committee Meetings Attended Held Remuneration Committee Meetings Held Attended Sharon Devir Boaz Wachtel Adam Blumenthal Graeme Smith Dafna Shalev-Flamm (i) Tal Misch Vered (ii) 6 5 6 6 2 4 6 6 6 6 2 4 - - 1 2 1 1 - - 2 2 1 1 1 1 1 1 - 1 1 1 1 1 - 1 (i) (ii) Dafna Shalev-Flamm was appointed as a Non-Executive Director on 29 May 2018. Tal Misch Vered resigned as a Director on 29 May 2018. Shares under option At the date of this report, the unissued ordinary shares under option are as follows: Grant date Expiry date Exercise price Number under option 29 November 2017 19 February 2019 30 November 2022 19 August 2020 AUD $0.01 AUD $0.14 1,655,000 1,935,484 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the company or of any other body corporate. At the date of this report, the number of performance rights on issue was as follows: Grant date 29 November 2017 29 November 2017 19 June 2018 Class Class A Class C Class D Class Class A Performance Rights Class C Performance Rights Class D Performance Rights Expiry date 29 November 2020 29 November 2020 19 June 2023 Number of rights issued 2,966,666 2,966,667 200,000 6,133,332 Milestone The 12-month anniversary of the Company having been admitted to the Official List of ASX. The Company total sales, calculated from the date that the Company is admitted to the Official List, exceeding AU$500,000. 66,666 Performance Rights will vest upon completion of 12 months of continuous service to the Company; 66,667 Performance Rights will vest upon the Consultant introducing a new opportunity, investor or client for the benefit of the Company as determined by the CEO; and 66,667 Performance Rights will vest upon completion of 24 months continuous service to the Company. The performance rights will vest and become capable of exercise into ordinary shares in the Company upon the satisfaction of vesting conditions as disclosed above. Shares issued on the exercise of options At the date of this report, no shares were issued on the exercise of options. 7 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 Indemnifying Officers The Company indemnifies each of its Directors and Officers. The Company indemnifies each Director or Officer to the maximum extent permitted by the Israeli Companies Law, 5759-1999 from liability to third parties, except where the liability arises out of conduct involving lack of good faith, and in defending legal and administrative proceedings and applications for such proceedings. The Company must use its best endeavours to insure a Director or Officer against any liability, which does not arise out of conduct constituting a willful breach of duty or a contravention of the Israeli Companies Law, 5759-1999. The Company must also use its best endeavours to insure a Director or Officer against liability for costs and expenses incurred in defending proceedings whether civil or criminal. Insurance Premiums During the year, the Company paid insurance premiums to insure Directors and Officers against certain liabilities arising out of their conduct while acting as an officer of the Group. Under the terms and conditions of the insurance contract, the nature of the liabilities insured against and the premium paid cannot be disclosed. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Proceedings on behalf of the company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. Non-audit services During the year, BDO Israel, the Company’s auditor, did not provide any services other than their statutory audits. In the event that non-audit services are provided by BDO Israel, the Board has established certain procedures to ensure that the provision of non-audit services are compatible with, and not compromise the auditor independence. These procedures include: ● ● all non-audit services will be subject to the corporate governance procedures adopted by the Company and will be reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor; and ensuring non-audit services do not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Corporations Act 2001 As a foreign company registered in Australia, the Company will not be subject to Chapters 6A, 6B and 6C of the Corporations Act dealing with the acquisition of shares (e.g. substantial holders and takeovers). Under the Israeli Companies Law there are restrictions on acquisition of shares, requiring a tender offer for acquisition of public Company shares resulting in a holding of 25% or more voting rights of the Company. In addition, under the Companies Law, a person may not purchase shares of a public company if, following the purchase of shares, the purchaser would hold more than 90% of the company’s shares, unless the purchaser makes a tender offer to purchase all of the target company’s shares. Otherwise, the acquisition of the company’s securities generally not restricted by the company’s articles of association or the laws of Israel, except that Israeli law prohibits the ownership of securities by nationals of certain countries that are, or have been, in a state of war with Israel. Environmental Regulations In the normal course of business, there are no environmental regulations or requirements that the Company is subject to. 8 For personal use only Roots Sustainable Agricultural Technologies Ltd Directors' Report 31 December 2018 This report is made in accordance with a resolution of directors. On behalf of the directors Sharon Devir Director 28 February 2019 Beit-Halevi 9 For personal use only For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Financial Report – December 31, 2018 For personal use only Roots Sustainable Agricultural Technologies Ltd December 31, 2018 TABLE OF CONTENTS Independent Auditors’ Report Statements of Financial Position Statements of Comprehensive Loss Statements of Changes in Equity Statements of Cash flows Notes to the Financial Statements Page 1-4 5-6 7 8-9 10 11-33 All amounts are stated in U.S. dollars ($) For personal use only For personal use only For personal use only For personal use only For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Statements of Financial Position ASSETS Current Assets Cash and cash equivalents Restricted cash Trade receivables Other accounts receivables Total Current Assets Non-Current Assets Property and equipment Total Non-Current Assets As at December 31, 2017 2018 $’000 $’000 Note 7.B 4 593 35 115 154 897 78 78 3,544 23 - 39 3,606 45 45 TOTAL ASSETS 975 3,651 The accompanying notes are an integral part of the financial statements. - 5 - For personal use only For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Statements of Comprehensive loss Revenues Cost of revenues Gross profit Share based compensation Listing fee expenses Research and development expenses, net Marketing, distribution and business development expenses General and administrative expenses Loss from operations Finance expense Finance income Loss before income tax Income tax Net loss Other comprehensive loss Items that will not be reclassified to profit or loss: Translation adjustment to the presentation currency Total comprehensive loss Note 11 9 12 13 14 15 15 16 For the year ended December 31, 2018 $’000 2017 $’000 305 268 37 110 31 849 967 819 2,737 147 - 2,884 - 2,884 - - - 2,548 641 222 - 156 3,567 1,412 96 4,883 - 4,883 108 2,992 17 4,900 Loss per share Basic and diluted loss per share ($) 8,10 (0.046) (0.253) The accompanying notes are an integral part of the financial statements. - 7 - For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Statements of Changes in Equity For the year ended December 31, 2018: Foreign Currency Translation Reserve $’000 Share Capital $’000 Accumulated Deficit $’000 Total Equity $’000 Balance at January 1, 2018 9,457 (35) (6,420) 3,002 Changes during the period: Comprehensive loss: Loss for the period Other comprehensive loss: Translation differences Total comprehensive loss for the period Stock based compensation Balance as of December 31, 2018 - - - 110 9,567 - (2,884) (2,884) (108) (108) - (143) - (2,884) - (9,304) (108) (2,992) 110 120 The accompanying notes are an integral part of the financial statements. -8- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Statements of Changes in Equity For the year ended December 31, 2017: Foreign Currency Translation Reserve $’000 Share Capital $’000 Accumulated Deficit $’000 Total Equity $’000 Balance at January 1, 2017 1,078 (18) (1,537) (477) Changes during the period: Comprehensive loss: Loss for the period Other comprehensive loss: Translation differences Total comprehensive loss for the period Issuance of shares upon IPO, net Issuance of benefit shares Stock based compensation Conversion of convertible loan to shares Balance as of December 31, 2017 - - - 3,292 - 2,810 2,277 9,457 - (4,883) (4,883) (17) (17) - (4,883) - - - - - - - - (35) (6,420) (17) (4,900) 3,292 - 2,810 2,277 3,002 The accompanying notes are an integral part of the financial statements. -9- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Statements of Cash Flows CASH FLOWS FROM OPERATING ACTIVITIES: Net loss for the year Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation Share-based compensation expenses Share-based compensation included in listing fee expenses Loss from changes in fair value of embedded derivative Change in liability for grants received from the IIA Interest on liability for grants received from the IIA Increase in trade receivable Increase in other accounts receivable Increase (decrease) in trade payable Increase in other accounts payable Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment Change in restricted cash Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of liabilities on grants received from IIA Receipt of grants from the IIA Receipt of convertible loan Net Proceeds from issuance of shares upon IPO Net cash provided by financing activities Translation differences on cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year For the year ended December 31, 2018 $’000 2017 $’000 (2,884) (4,883) 10 110 - - - 105 (117) (126) (63) 215 (2,750) (48) (14) (62) (6) - - - (6) (133) (2,818) 3,544 593 3 2,548 262 1,362 (287) - - (27) 87 123 (812) (45) (11) (56) - 62 900 3,292 4,254 56 3,386 102 3,544 The accompanying notes are an integral part of the financial statements. -10- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 1 - GENERAL: A. Roots Sustainable Agricultural Technologies Ltd (the "Company") was incorporated in Israel on 20 April 2009 but commenced its operations in November 2012. The Company is listed, and its shares are publicly traded on the Australian Securities Exchange (“ASX”). Roots is an agriculture technology company focused on developing, producing and commercializing precision agriculture technologies that address difficult weather conditions, improve crop yields and provide water for irrigation in a cost effective and environmentally sustainable manner. The formal address of the Company is Hamezach 1 Str. Kefar Vitkin, Israel. B. The company is in its commercialization stage and does not generate significant revenue in this stage and financed its operation up to date mainly by issuance of shares. As of December 31, 2018 the Company has incurred negative cash from operation and net losses of USD 2,884 thousand for the current year. As a result of these matters, there is a material uncertainty that may cast significant doubt on the entity's ability to continue as a going concern. The financial report does not include adjustments relating to the recoverability or classification of the recorded assets nor to the amounts or classification of liabilities that might be necessary should the company not be able to continue as a going concern. The directors believe that the company will be able to pay its debts when they fall due, and to fund near term anticipated activities based on receipt from a convertible note agreement (see Note 20B) in addition to revenues backlog. The Directors are satisfied that it is appropriate to prepare the financial statements on a going concern basis on the basis that the above can be reasonably expected to be accomplished. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: The following accounting policies have been applied consistently in the financial statements for all periods presented, unless otherwise stated. A. Basis of preparation: The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, except for the embedded derivative that is measured at fair value through profit or loss. B. Estimates and assumptions: The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenue and expenses. These estimates and underlying assumptions are reviewed regularly. Changes in accounting estimates are reported in the period of the change in estimate. The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates used by the Company that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed in Note 3. -11- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): C. Functional and reporting currency: The majority of the Company's costs are incurred in New Israeli Shekel (hereafter "NIS"). Thus, the functional currency of the Company is NIS. The financial statements are presented in United States Dollars, which provides relevant information for the majority of investors and users of the financial statements. All values are rounded to the nearest dollar unless otherwise stated. Assets and liabilities are translated at the closing rate at each reporting date. Profit or loss items are translated at average exchange rates for all periods presented. The resulting translation differences are recognized in other comprehensive loss. D. Foreign currency transactions: Transactions denominated in foreign currency (other than the functional currency) are recognized on initial recognition at the exchange rate as of the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate as of that date. Exchange differences are recognized in profit or loss. Non-monetary assets and liabilities measured at cost are translated at the exchange rate as of the date of the transaction. E. Governmental liabilities on grants received: Grants received from the IIA for Israel Innovation Authority (henceforth "IIA") as support for a research and development projects include an obligation to pay back royalties conditional on future sales arising from the project. Grants received from the IIA are accounted for as forgivable loans, accordingly, when the liability for the loan is first recognized, it is measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grants received and the fair value of the liability is accounted for upon recognition of the liability as a grant and recognized in profit or loss as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Changes in the projected cash flows are discounted using the original effective interest and recognized in profit or loss. At the end of each reporting period, the company evaluates, based on its best estimate of future sales, whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid. If there is such reasonable assurance, the appropriate amount of the liability is derecognized and recognized in profit or loss as an adjustment of research and development expenses. If the estimate of future sales indicates that there is no such reasonable assurance, the appropriate amount of the liability that reflects expected future royalty payments is recognized with a corresponding adjustment to research and development expenses. -12- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): F. Cash equivalents: Cash equivalents are considered by the Company to be highly-liquid investments, including, inter alia, short-term deposits with banks and the maturity of which do not exceed three months at the time of deposit and which are not restricted. G. Restricted cash: Restricted cash is considered by the Company to be deposits with banks which are used mainly as a security for guarantees provided against payable payments in advance. H. Deferred taxation: Deferred tax asset or liability is recognized where the carrying amount of an asset or liability in the statement of financial position differs from its tax base. Recognition of deferred tax asset is restricted to those instances where it is probable that such difference can be utilized. As of December 31, 2018 and 2017, there is deferred tax assets since it is not probable that taxable profit will be available in the foreseen future therefore no deferred tax assets recognized. I. Impairment of non-financial assets: Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of the non-financial asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to dispose), the asset is written down and impairment charge is recognized accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit (i.e. the smallest Company of assets to which the asset belongs that generates cash inflow that are largely independent of cash inflows from other assets). During the years 2018 and 2017 no impairment charges of non-financial assets were recognized. J. Fair value measurement: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: 1. In the principal market for the asset or liability, or 2. In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. -13- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Classification of fair value hierarchy The financial instruments presented in the statement of financial position at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of input used in measuring fair value: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Level 3 - - Inputs other than quoted prices included within Level 1 that are observable either directly or indirectly. Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data). K. Financial instruments: The accounting policy applied until December 31, 2017 in regards of financial instruments is as follows: 1. Financial assets: The Company classifies its financial assets depending on the purpose for which the asset was acquired. The Company's accounting policy for each category is as follows: Loans and receivables: Loans and receivables are investments with fixed or determinable payments that are not quoted in an active market and they are initially recognized at fair value plus directly attributable transaction costs. After initial recognition, loans are measured based on their terms at amortized cost plus directly attributable transaction costs using the effective interest method and less any impairment losses. 2. Impairment of financial assets: The Company assesses at the end of each reporting period whether there is any objective evidence of impairment of a financial asset as follows. Financial assets carried at amortized cost: There is objective evidence of impairment of loans and receivables if one or more events have occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments. The amount of the loss recognized in profit or loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate (the effective interest rate at initial recognition). If the financial asset has a variable interest rate, the discount rate is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. -14- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): In a subsequent period, the amount of the impairment loss is reversed if the recovery of the asset can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal recognized in profit or loss. 3. Financial Liabilities: The Company financial liabilities are mainly governmental liabilities, convertible loans, trade payables and other accounts payable, the governmental grants measured at amortized cost using the effective interest rate method. In 2017 the convertible loans are designated upon initial recognition as at fair value through profit or loss, during 2017 the loan converted to shares. The accounting policy applied as from January 01, 2018 in regards of financial instruments is as follows: 1. Financial assets: The Company classifies its financial assets into one of two categories, depending on the purpose for which the asset was acquired. Amortized cost These assets arise principally from the provision of goods and services to customers (eg trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment. 2. Financial Liabilities: The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. Amortized cost These liabilities include Governmental liabilities on grants received, initially recognized at fair value plus transaction costs that are directly attributable to the issue of the instrument, and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment. 3. Derecognition: Financial assets The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows. Financial Liabilities The Company derecognizes a financial liability when its contractual obligations are discharged or Cancelled, or expire. -15- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): L. Revenue from contracts with customers Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services Revenues from Construction Contracts The Company recognizes income from construction contracts over time, since the Company's performance creates an asset that the customer controls as the asset is created. Revenues are recognize by the input methods. Input methods recognize revenue on the basis of an entity’s efforts or inputs towards satisfying a performance obligation (including resources consumed, labor hours expended, costs incurred, time elapsed) relative to the total expected inputs to satisfy the performance obligation. When a loss from a contract is anticipated, a provision is made in the period in which it first becomes evident, for the entire loss anticipated, as assessed by the company's management. The payment terms in the projects are based on milestones set at the date of signing the contract and are based mainly on the rate of progress. For this reason, the Company is not expected to recognize assets in respect of contracts and liabilities in respect of contracts in significant amounts in relation to these contracts. Financing components The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money. M. Assets and liabilities arising from contracts with customers Contract assets A contract asset is the Company's right to consideration in exchange for goods or services the entity has transferred to a customer that is conditional on something other than the passage of time Trade receivables A receivable represents the Company's right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). -16- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): N. Property, plant and equipment: Property and equipment are stated at cost, net of accumulated depreciation and net of impairment. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets at the following rates: Computer equipment Machinery and equipment Vehicles O. Employee benefits: % 33 7-20 15 1. Short-term employee benefits: Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid sick leave, recreation, and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Company has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made. 2. Post-employment benefits: The plans are normally financed by contributions to insurance companies and classified as defined contribution plans. The Company has defined contribution plans pursuant to Section 14 to the Severance Pay Law under which the Company pays fixed contributions to a specific fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense simultaneously with receiving the employee's services and no additional provision is required in the financial statements except for the unpaid contribution. P. Operating Segment The company currently conduct its operation through one operating segment. Q. Share-based payments: Where equity settled share options are awarded to employees, the fair value of the options calculated at the grant date based on the share fair price is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized Over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, -17- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense charged is not adjusted for failure to achieve a market vesting condition. R. Research and Development: Costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate: · The technical feasibility of completing the intangible asset so that the asset will be available for use or sale · Its intention to complete and its ability and intention to use or sell the asset. · How the asset will generate future economic benefits. · The availability of resources to complete the asset. · The ability to measure reliably the expenditure during development. During the years 2018 and 2017 the company didn’t stand in the following criteria therefore all research and development recognized as expenses. S. Issuance costs: The company allocated the incremental costs that were directly attributable to issuing new shares to equity (net of any income tax benefit) and the costs that were related to the stock market listing, or are otherwise not incremental and directly attributable to issuing new shares, were recognized as an expense in the statement of comprehensive income. Costs that were related to both share issuance and listing were allocated between those functions based on the number of shares. T. Earnings (loss) per share: Earnings per share are calculated by dividing the net income (loss) attributable to equity holders of the Company by the weighted number of Ordinary shares outstanding during the period. Potential Ordinary shares are included in the computation of diluted earnings per share when their conversion decreases earnings per share from continuing operations. Potential Ordinary shares that are converted during the period are included in diluted earnings per share only until the conversion date and from that date in basic earnings per share. U. New IFRSs adopted in the period: 1. IFRS 9 Financial Instruments IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. The Company has implemented the requirements of IFRS 9 retrospectively on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective -18- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.): application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018. The adoption of IFRS 9 did not have an impact on the financial statements. 2. IFRS 15 Revenue from Contracts with Customers IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The Company elected to apply IFRS 15 retrospectively for the first time by recognizing the cumulative effect of the retroactive application as an adjustment to the opening balance of retained earnings as at January 1, 2018. The adoption of IFRS 15 did not have an impact on the financial statements. NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS: The areas requiring the use of estimates and critical judgments that may potentially have a significant impact on the Company's earnings and financial position is Governmental liabilities on grants received. Governmental liabilities on grants received The Company measured governmental liabilities on grants received, each period, based on discounted cash flows derived from Company's future anticipated revenues. The discount rate reflect the market rate. NOTE 4 - OTHER ACCOUNTS RECEIVABLES: Government institutions Prepaid expenses Other receivables NOTE 5 - OTHER ACCOUNTS PAYABLES: Employees and related institutions Accrued expenses Governmental liabilities on grants received (Note 7.C) Liabilities to related parties Other payables -19- As at December 31, 2018 $’000 2017 $’000 63 46 45 154 33 - 6 39 As at December 31, 2018 $’000 2017 $’000 121 99 39 90 49 398 72 48 10 3 34 167 For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 6 - CONVERTIBLE LOAN: On April 2017, the Company signed a convertible loan agreement (the "Agreement") with an investor (hereafter: the Lender), in which the Company borrowed a total amount of AUD 1.2 million ($900 thousand). The loan bears an annual interest of 3% starting October 2017. According to the Agreement the loan will be mandatory converted to the Company’s ordinary shares In case of an initial public offering ("IPO") at an exercise price of $0.06 (AUD 0.08). The Company designated upon initial recognition that the convertible loan will be measured at fair value through profit or loss. Upon the IPO that took place in December, 2017 the loan fair value amounted to $ 2,277 thousand was converted into 15,000,000 shares. NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES: A. The Company leases premises for its offices and R&D center in Bet Halevi. The initial contract period ended September 30, 2015. According to the lease agreement, the Company has an option to renew the lease period for tree additional years at its discretion. The company chose to utilize this option. Total rent expenses for the years ended December 31, 2018 and 2017 were 20 and 3 thousand U.S. dollars respectively. B. As of December 31, 2018 and 2017, the Company has a lien in first degree to the bank in amount of approximately 35 and 23 thousands U.S. dollars, respectively on a bank deposit account and all cash and securities deposited in them. C. The Company participates in programs sponsored by the Israel Innovation Authority ("IIA"), for the support of several research and development projects programs which subjected to royalties, while others are not (the company is committed to pay royalties for the R&D programs, while the research programs does not required repayment). In exchange for the IIA's participation in the programs, the Company is required to pay royalties to the IIA at a rate of 3% of sales of developed products linked to U.S dollars, until repayment of 100% of the amount of grants received, plus annual interest at the LIBOR rate. The company is required to pay royalties, to the IIA, of sales to end customers of products developed with funds provided by the IIA, if and when such sales are recognized. As of December 31, 2018 and 2017 the Company has received grants amounted to 0 and 62 thousands U.S. dollars respectively, the aggregate governmental liabilities was 433 and 362 thousands U.S. dollars, respectively. The exceptions of the Company to pay the grants are based on its estimation at the end of the each year. As of December 31, 2018 the company paid royalty to the IIA amounted to 6 thousands U.S. dollars. -20- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.): Changes in liabilities arising from financing activities Reconciliation of the changes in liabilities for which cash flows have been, or will be classified as financing activities in the statement of cash flows: At 1 January Changes from financing cash flows grants received from IIA Repayment of liabilities on grants received from IIA Total changes from financing cash flows changes in fair value Interest on liability The effect of changes in foreign exchange rates At 31 December NOTE 8 - SHAREHOLDERS EQUITY: Governmental liabilities on grants received 2018 $’000 362 - (6) (6) - 105 (28) 433 2017 $’000 539 62 - 62 ( )287 - 48 362 Ordinary shares of NIS 0.01 par value Number of shares December 31, 2018 December 31, 2017 Authorized 100,000,000 Issued and outstanding 63,966,667 Authorized 100,000,000 Issued and outstanding 61,000,000 A. The Ordinary Shares confer upon the holders thereof all rights accruing to a shareholder of the Company, including, the right to receive notices of and to attend meetings of shareholders; for each share held, the right to one vote at all meetings of shareholders; and to share equally, on a per share basis, in such dividend and other distributions to shareholders of the Company as may be declared by the Board of Directors and upon liquidation or dissolution of the Company, in the distribution of assets of the Company legally available for distribution to shareholders in accordance with the terms of applicable law. All Ordinary Shares rank pari-passu in all respects with each other. B. In January 1, 2016 the share capital consists of 217,682 ordinary shares of NIS 0.01 and during 2016, the company has issued share capital as following: · The company issued 10,464 ordinary shares of NIS 0.01 par value for four lenders and 4,532 ordinary shares of NIS 0.01 par value for an employee. See also note 6. · Two employees exercised 9,256 options into 9,256 ordinary shares of NIS 0.01 par value at a price of NIS 0.01 per share. See also note 9. · The company issued 14,335 ordinary shares of NIS 0.01 par value, for a total amount of 244 thousand U.S. dollars. -21- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 8 – SHAREHOLDERS EQUITY (CONT.): C. On April 3, 2017, the company reconstruct the share capital of the Company by issuance of 14,743,731 Ordinary Shares as bonus shares to be pro-rata allocated to the holders of the Ordinary Shares of the Company so that the holding ratio remain the same as previous to the reconstruction. D. In December 2017, the Company's IPO took place, in which 25,000,000 shares issued at a price per share of $0.15 (AUD 0.2). In addition, the Company issued as following: · · · Prior to admission 1,500,000 Bonus shares issued to all pre-offer shareholders on a pro-rata basis. Prior to admission 15,000,000 shares issued according to its convertible loan agreement (See Note 6). 4,500,000 shares issued to seed capitalists at par value. The value of the transaction measured according to the value of the shares granted duo to the lack of the ability to reliably measure the fair value of the services rendered. E. On May 17, 2018 the company converted 2,966,667 Performance Rights into Ordinary Shares. The Performance Rights converted on the satisfaction of the following Milestone as per the IPO Prospectus lodged with ASX on 6 December 2017: "Roots Share Price trading at not less than $0.40 for 5 consecutive trading days” NOTE 9 - SHARE BASED PAYMENT: A. Options and shares granted to employees and service providers: i. Prior to admission, some of the Director issued with a total of 1,281,000 options (‘Director Options’), which are fully vested and have an exercise price of $0.01 exercisable to ordinary shares on 1:1 basis. The Director Options were valued using the Black Scholes option valuation methodology. The company recognized an expense at the amount of $ 326 thousand. An additional 700,000 options will be granted to employees, executives and consultants 326,000 of these options are not yet allocated and will be retained to be granted at a future date, with vesting conditions to be determined. The remaining 374,000 options exercisable to ordinary shares on 1:1 basis were granted subject to a range of vesting periods. · 80,000 options vest upon completion of a technical milestones as follows: (i) 40,000 Options upon completion of the system head and monitor system on or before May 1, 2018; (ii) 20,000 Options upon completion of a commercial ground source heat exchanger and a set of agricultural smart pipes field tests on or before November 1, 2018; and (iii) 20,000 Options upon completion of the manufacturing of a smart pipe series, on or before 1 June 2019; · 120,000 Options vest upon the following sales milestones: (i) 10,000, 20,000 and 10,000 Options when the Company's Sales (including backlog) directly through JV exceed AUD 100,000, 250,000 and 500,000 Respectively, on or before March 31, 2019; and (ii) 80,000 Options when the Company's Sales (including backlog) exceed AUD 2,000,000 (in the aggregate) on or before June 1, 2019. -22- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 9 - SHARE BASED PAYMENT (CONT.): · 174,000 Options shall vest on a time basis: (i) 32,000 Option following two years from the date of the Company's admission to the ASX; (ii) 62,000 Options follow three years from the date of the Company's admission to the ASX; and (iii) 80,000 Options following four years from the date of the Company's admission to the ASX. The options valued using the Black Scholes option valuation methodology based on the following data and assumptions: Share price - AUD 0.335 (representing approximately $0.26), Exercise price - AUD 0.01 (representing approximately $0.078), Expected volatility - 70% ,Risk-free interest rate – 2.161% , and expected average life of options 0.5 year The total value of the options are $ 95 thousand and as of December 31, 2018 the company recognized an expense at the amount of $ 56 thousand. ii. Further to the above On July 01, 2018 the company granted 160,000 options from the unallocated options to employees, executives and consultants in same conditions except the following: Share price - AUD 0.285 (representing approximately $0.21), Exercise price - AUD 0.01 (representing approximately $0.073), Risk-free interest rate – 2.01%, and expected average life of options 2 years. The total value of the options are $ 34 thousand and as of December 31, 2018 the company recognized an expense at the amount of $ 13 thousand. Data related to the share option plan as of December 31, 2018 and changes during the two years ended on that date are as follows: Options outstanding as beginning of year Changes during the year: Granted Forfeited Exercised Options outstanding at end of year (*) Options exercisable at year-end 2018 2017 Number of Options Weighted Average Exercise Price NIS Number of Options Weighted Average Exercise Price NIS 1,655,000 0.04 - - 160,000 (36,000) - 1,779,000 1,415,667 0.04 1,655,000 0.04 - - - - 0.04 1,655,000 0.04 1,281,000 - - 0.04 0.04 Weighted-average fair value of options Granted during the year $ 34,164 $ 421,000 * The options outstanding at 31 December 2018 had a weighted-average contractual life of 3.04 year. -23- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 9 - SHARE BASED PAYMENT (CONT.): B. Performance rights: i. Upon IPO, three classes of Performance Rights ("Rights") were approved by The Board and shareholders at an Extraordinary General Meeting. The Rights are fully vested and convert to ordinary shares on 1:1 basis, when the attaching milestone is met: 2,966,667 Class A - upon the 12-month anniversary of the Company having been admitted to the official list of ASX; (Milestone A). These performance rights have been valued at $754 thousand (AUD 994 thousand) based on the Company’s forecasts for milestone fulfilment, as the condition is not vesting condition. 2,966,667 Class B - upon the Company’s share price being traded at not less than $0.40 for 5 consecutive trading days; (Milestone B). These performance rights have been valued at $707 thousand (AUD 931 thousand) using the Monte Carlo simulation model. 2,966,666 Class C - the Company’s total sales, starting as of its first day of listing on the ASX, exceeds 500,000 Australian Dollars; (Milestone C). These performance rights have been valued at $754 thousand (AUD 994 thousand) based on the Company’s forecasts for milestone fulfilment, as the condition is not vesting condition. The Class A and Class C Rights valued using the Black Scholes option valuation methodology, Class B valued using the Monte Carlo simulation model based on the following data and assumptions: Share price - AUD 0.335 (representing approximately $0.26), Expected volatility - 70%, Risk-free interest rate – 1.9%, and expected average life of options 2 years. The total fair value of performance shares at the amount of $ 2,215 thousand was expensed through profit and loss. ii. On February 27, 2018 the company Issue of Performance Rights to unrelated Consultant. The Performance Rights will convert into Ordinary Shares in three equal tranches on a 1:1 basis upon the satisfaction of Performance Milestones as follows: (cid:127) 66,667 Performance Rights will vest upon the completion of 12 months of continuous service to the Company. (cid:127) 66,667 Performance Rights will vest upon the Consultant introducing a new opportunity, investor or client for the benefit of the Company as determined by the CEO and vest upon the completion of 24 months continuous service to the Company. (cid:127) 66,667 Performance Rights will vest upon the completion of 24 months continuous service to the Company. The Performance Rights valued using the Black Scholes option valuation methodology based on the following data and assumptions: Share price - AUD 0.48 (representing approximately $0.36), Expected volatility - 70%, Risk-free interest rate – 1.9% and expected average life of options 1.67 years. -24- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 9 - SHARE BASED PAYMENT (CONT.): The total fair value of performance rights is 71 thousand (AUD 96 thousand), $41 thousand was expensed through profit and loss during the period. Data related to the Performance rights as of December 31, 2018 and changes during the two years ended on that date are as follows: Performance rights outstanding as beginning of year Changes during the year: Granted Forfeited Exercised Performance rights outstanding at end of year (*) Performance rights exercisable at year-end Weighted-average fair value of Performance rights Granted during the year 2018 2017 Weighted Average Exercise Price NIS - - - - - - Weighted Average Exercise Price NIS - - - - - - Number of rights - 8,900,000 - - 8,900,000 - Number of rights 8,900,000 200,000 - (2,966,667) 6,133,333 2,966,667 $ 71,000 $ 2,215,000 * The Performance rights outstanding at December 31, 2018 had a weighted-average contractual life of 0.07 year. NOTE 10 - LOSS PER SHARE: Net loss per share attributable to equity owners: Net loss used in basic and diluted EPS For the year ended December 31, 2018 $’000 2017 $’000 2, ( 884 ) (4,883) Weighted average number of shares used in basic and diluted EPS 62,853,151 19,311,813 Basic and diluted net EPS (dollars) (0.046) (0.253) At 31 December 2018, 6,133,333 Performance Rights and 1,779,000 options (2017: 8,900,000 Performance Rights and 1,655,000 options) were excluded from the diluted weighted-average number of ordinary shares calculation because their effect would have been anti-dilutive. -25- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 11 - REVENUE: Primary Geographic Markets China Israel Total NOTE 12 - RESEARCH AND DEVELOPMENT EXPENSES, NET: Salaries and benefits Subcontractors Materials Legal fees Participation in expense Other Governmental Grants received and changes in liability, net Total For the year ended December 31, 2018 $’000 2017 $’000 258 47 305 - - - For the year ended December 31, 2018 $’000 2017 $’000 163 453 160 45 - 28 849 - 849 339 123 47 - (5) 5 509 (287) 222 NOTE 13 - MARKETING, DISTRIBUTION AND BUSINESS DEVELOPMENT EXPENSES: Public Relations Marketing Salaries and benefits Business development Other Total For the year ended December 31, 2018 $’000 2017 $’000 319 259 189 141 59 967 - - - - - - -26- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 14 - GENERAL AND ADMINISTRATIVE EXPENSES: Salaries and benefits Consulting Professional fees Insurance Rental and office expenses Refreshments Exhibitions Other Total NOTE 15 - FINANCE EXPENSE AND INCOME: Finance expense: Change in convertible loan Interest on governmental liabilities on grants received Interest and bank charges Net foreign exchange loss Total finance expense Finance income: Net foreign exchange gain Total finance income -27- For the year ended December 31, 2018 $’000 2017 $’000 271 247 128 58 57 16 7 35 819 - - 94 4 5 8 41 4 156 For the year ended December 31, 2018 $’000 - 77 3 67 147 2017 $’000 1,367 45 - - 1,412 For the year ended December 31, 2018 $’000 - - 2017 $’000 96 96 For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 16 - TAXATION: A. Israeli tax rates: Israeli corporate tax rates are 24% in 2017 and 23% in 2018. The Law for the Amendment to the Income Tax Ordinance, New Version, 1961(hereafter – "the Ordinance") (Amendment 216 to the Ordinance) (hereafter – "the amendment") was published in the official gazette in January 2016; the said law stipulated the reduction of the rate of corporate tax from 26.5% to 25% commencing January 1, 2016. On December 2016, the Israeli government published the Economic Efficiency Law (2016) (legislative amendments to accomplish budget goals for the years 2017 and 2018) According to which, in 2017 the tax rate will decrease by 1% and starting 2018 by 2%; so that the tax rate will be 24% in 2017 and 23% in 2018 and onwards. Since the Company has carry forward losses and there is no deferred tax assets or liability there is no impact of the tax rate change. B. Net operating losses carry forward: As of December 31, 2018, the Company has estimated carry forward tax losses of approximately 5,562 thousands U.S. dollars, which may be carried forward and offset against taxable income for an indefinite period in the future. Deferred tax asset on the company's losses was not recognized since it is not probable that taxable profit will be available in the foreseen future. C. Reconciliation of effective tax rate: The adjustments for the difference between the actual tax charge for the year and the standard rate of corporation tax in Israel applied to profits for the year are as follows: Loss before income tax Tax computed at the corporate rate in Israel losses for which no deferred tax asset is recognized Total income tax expense For the year ended December 31, 2018 $'000 (2,884) (663) 663 - 2017 $'000 (4,883) (1,172) 1,172 - -28- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 17 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT: The Company is expose to variety of financial risks, which results from its financing, operating and investing activities. The objective of financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the Company's financial performance and position. The Company's financial instruments are its cash, trade and other receivables, trade payables and other liabilities. The main purpose of these financial instruments is to raise finance for the Company's operation. The Company actively measures, monitors and manages its financial risk exposures by various functions pursuant to the segregation of duties and principals. The risks arising from the Company's financial instruments are mainly credit risk, currency risk and liquidity risk. The Company has no interest rate risk as the balances exposure to interest is minimal. The risk management policies employed by the Company to manage these risks discussed below. A. Credit risk: Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Trade receivables and contract assets The Company believes that there is no material credit risk in light of Company's policy to assess the credit risk instruments of customers before entering contracts. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Cash and cash equivalents and deposits with banks The Company holds cash and cash equivalents and deposit accounts in big banking institutions in Israel and in the Australia, thereby substantially reducing the risk to suffer credit loss B. Foreign currency risk: Foreign exchange risk arises when the company enter into transactions denominated in a currency other than its functional currency. The company is exposed to currency risk to the extent that there is a mismatch between the currency in which it denominated and the respective functional currency of the company. The currencies in which some transactions are primarily denominated are US dollars and Australian dollars. -29- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 17 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT.): The company's policy is not to enter into any currency hedging transactions. The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: Assets Cash And cash equivalents Trade receivables Other accounts receivables Liabilities Trade and other payables Governmental liabilities on grants received Assets Cash And cash equivalents Liabilities Trade and other payables Governmental liabilities on grants received Analysis: As at December 31, 2018 US dollar AUD NIS Total 132 85 26 243 147 433 580 455 - - 455 78 - 78 6 30 2 38 76 - 76 593 115 28 736 301 433 734 As at December 31, 2017 US dollar AUD NIS Total 83 83 41 362 403 3,446 3,446 101 - 101 15 15 71 - 71 3,544 3,544 213 362 575 A 5% strengthening of the NIS against the following currencies would have increased (decreased) equity and the income statement by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 5% weakening of the NIS against the relevant currency, there would be an equal and opposite impact on the profit and other equity. 2018 2017 Linked to US dollar Linked to AUD C. Liquidity risks: )337( 5% )17( 377 5% 19 )320( 5% )16( 3,345 5% 167 Liquidity risk is the risk that arises when the maturity of assets and the maturity of liabilities do not match. An unmatched position potentially enhances profitability but can also increase the risk of loss. The Company has procedures with the object of minimizing such loss by maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. The Company has no material obligation beyond one year (the liabilities for governmental institutes depends on achieving future revenues) and has a positive working capital and cash in bank to finance its working capital in the near future. -30- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 17 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT.): The following tables detail the Company's remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the repayment forecast of the management of the company. December 31, 2018: Book value Less than one year 1 to 2 years Amortized cost 2 to 3 years 3 to 4 years U.S. dollars in thousands > 5 years Total Trade and other accounts payables Governmental liabilities on grants received Total December 31, 2017: (301) (433) (734) (301) (44) (345) - (89) (89) - - - (301) (178) (178) (266) (266) (230) (230) (807) (1,108) Book value Less than one year 1 to 2 years Amortized cost 2 to 3 years 3 to 4 years U.S. dollars in thousands > 5 years Total Trade and other accounts payables Governmental liabilities on grants received Total (213) (362) (575) (213) (11) (224) - (44) (44) - (89) (89) - - (177) (177) (518) (518) (213) (839) (1,052) D. Fair value of financial assets and liabilities: The fair value of the Company's current financial assets and liabilities approximates their carrying amounts as their maturity date is less than 1 year and they do not bear a fixed interest rate. The fair value of governmental liabilities on grants received measured (for disclosure purposes only) according to level 3. Item Governmental liabilities on grants received Fair value $’000 433 Valuation technique Fair value hierarchy level Significant unobservable inputs fair value using a discount rate that reflects a market rate of interest level 3 WACC -31- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 17 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT.): Reconciliation of fair value measurements that are categorized within Level 3 of the fair value hierarchy: Balance as of January 1 Convertible loan Conversion of convertible loan to shares (transferred out to Level 1) * Loss recognized in Profit or loss: Balance as of December 31 2018 $’000 - - - - - 2017 $’000 - 900 ( 2,277 ) 1,377 - * At the time of conversion, the shares had quoted fair value, therefore measured at Level 1 E. The Group's objectives when maintaining capital are: The Company seeks to maintain a capital structure which enables it to continue as a going concern and which supports its business strategy. The Company's capital is provided by equity rising. The Company manages its capital structure through raising funds from shareholders. The Company has net cash and cash equivalents at the balance sheet date of 593 (2017 – 3,132) thousands U.S. dollars, and a positive working capital. Accordingly, the directors believe that the company will be able to pay its debts when they fall due, and to fund near term anticipated activities based on receipt from a convertible note agreement (see Note 20B) in addition to revenues backlog. NOTE 18 - RELATED PARTY AND SHAERHOLDRS: Related party transactions: Compensation of key management personnel of the Company: Short-term employee benefits *) Share base payment Other related party transactions: Material costs For the year ended December 31, 2018 $’000 168 - 435 2017 $’000 105 1,856 - *) Including Management fees for the CEO, Directors Executive Management and other related parties. Balances with related parties: Trade payables As at December 31, 2017 2018 $’000 $’000 90 2 -32- For personal use only Roots Sustainable Agricultural Technologies Ltd ARBN 619 754 540 Notes to the Financial Statements NOTE 19 - EMPLOYEE BENEFITS: The Company has defined contribution plans pursuant to Section 14 to the Severance Pay Law under which the Company pays fixed contributions to a specific fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Expenses in respect of defined contribution plans Year ended December 31, 2018 $’000 2017 $’000 33 18 NOTE 20 - EVENTS AFTER THE REPORTING PERIOD: A. In February 2019, the Company announced its intention to complete a non-renounceable entitlement issue of one (1) Option for every two (2) CDIs held by eligible CDI Holders registered at the Record Date at an issue price of $0.04 per Option. B. On February 2019, the Company has received a financing commitment by way of execution of a convertible securities agreement with CST Capital (hereafter: the Investor), in which the Company borrowed a total amount of up to AUD 1.62 million ($1,212 thousand) via the issue of convertible notes (hereafter: the Notes). The Notes will be issued in two tranches with a face value of AU$1.00 per Note (Face Value), with 1,650,000 collateral CDIs over fully paid ordinary shares (CDIs) to be issued to the Investor prior to the first purchase of 900,000 Notes. The first tranche is for an amount of AU$0.81 million. A subsequent tranche of up to AU$0.81 million will be issued at a later date subject to mutual consent between Roots and the Investor. The Notes will be interest-free and convertible. The Notes can initially be converted at 130% of the 5-day VWAP prior to issuance of the applicable tranche. From 65 days following the date of issue, the Notes can be converted at the lower of 130% of the 5-day VWAP prior to issuance of the applicable tranche and 90% of the lowest daily VWAP during the 15 trading days preceding the conversion date. Other than with the prior written consent of the Company, in any calendar month, upon issuance of a tranche, the Investor will receive options equal to the face value, multiplied by 0.2, divided by the closing VWAP prior to issuance. The options will be exercisable for 18 months and have an exercise price equal to 160% of the 5-day VWAP prior to issuance of the options. On 19 February 2019, the Company issued 1,935,484 Unlisted Options (exercisable at $0.14 on or before 19 August 2020) being the Options relating to the first tranche of Notes. -33- For personal use only Roots Sustainable Agricultural Technologies Ltd Corporate Governance Statement 31 December 2018 CORPORATE GOVERNANCE STATEMENT The Company and the Board of Directors are committed to achieving the highest standards of corporate governance. The Board continues to review the framework and practices to ensure they meet the interests of shareholders. A description of the Group’s main corporate governance practices is set out on the Company’s website at http://rootssat.com/profile/corporate-governance/. 10 For personal use only Roots Sustainable Agricultural Technologies Ltd ASX Additional Information 31 December 2018 ASX ADDITIONAL INFORMATION 1. SHAREHOLDINGS The Company has ordinary shares on issue. The Company’s ordinary shares traded on the ASX are traded as Chess Depository Interests (‘CDI’s’) under the code ROO. Each CDI has a beneficial interest in a share. The issued capital of the Company as at 27 February 2019 is 65,616,667. All issued ordinary fully paid shares carry one vote per share. The Company as at 27 February 2019 has on issue the following unlisted securities: • • 3,590,484 unlisted options; and 6,133,333 performance rights. Unquoted Options  1,281,000 unquoted options with an exercise price of $0.01 and an expiry date of 30 November 2022.  20,000 unquoted options with an exercise price of $0.01 and an expiry date of 30 November 2022.  354,000 unquoted options with an exercise price of $0.01 and an expiry date of 30 November 2022.  1,935,484 unquoted options with an exercise price of $0.14 and an expiry date of 19 August 2020.  2,966,666 Class A performance rights escrowed for 24 months.  2,966,667 Class C performance rights escrowed for 24 months.  200,000 Class D performance rights expiring 5 years from issue. 2. DISTRIBUTION OF EQUITY SECURITIES (SHAREHOLDERS AND CDI HOLDERS) Range Total holders 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 9,999,999,999 Total 45 759 312 455 80 1,651 Units % of Issued Capital 0.04% 3.21% 3.83% 21.33% 71.59% 100.00% 24,171 2,104,910 2,515,891 13,998,886 46,972,809 65,616,667 The number of investors holding a less than marketable parcel of 5,800 ROO shares (based on a share price of A$0.086 was 844. 3. TOP TWENTY LARGEST SHAREHOLDERS AS AT 27 FEBRUARY 2019 Holder Name 1 2 3 4 5 6 7 8 9 10 11 12 13 BOAZ WACHTEL SUBURBAN HOLDINGS PTY LIMITED YOUDIM PHARMACEUTICA LS LTD J P MORGAN NOMINEES AUSTRALIA SHARON DEVIR ERAN FRIEDMAN CST CAPITAL PTY LTD ALEX MEITLIS JACOB WEISMANN YOEL FRIEDMAN TOMER WEISMANN HORATIO STREET PTY LTD SHARON DEVIR Number Held 5,298,777 2,907,981 2,682,750 2,571,844 1,931,564 1,741,545 1,650,000 1,524,777 1,241,545 1,241,545 1,241,545 1,102,500 1,000,000 Percentage 8.08% 4.43% 4.09% 3.92% 2.94% 2.65% 2.51% 2.32% 1.89% 1.89% 1.89% 1.68% 1.52% 11 For personal use only Roots Sustainable Agricultural Technologies Ltd ASX Additional Information 31 December 2018 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 14 15 MFCM NOMINEE SERVICES PTY LTD 16 17 18 19 ADAM BLUMENTHAL JANSTEG PTY LTD STOCK ASSIST GROUP PTY LTD FRANKLIN INTERNATIONAL HOLDINGS PTY LTD TAC PROFESSIONAL SERVICES PTY LTD 20 Total: Top 20 holders 962,482 956,250 916,667 800,000 780,605 740,625 1.47% 1.46% 1.40% 1.22% 1.19% 1.13% 645,500 31,938,502 0.98% 48.66% VOTING RIGHTS 4. Ordinary shareholders have the right to one vote at a meeting of Shareholders of the Company or a Resolutions of Shareholders. CDI Holders do not hold the right to vote at meetings of the Company and if they wish to take a vote, they must direct the CHESS Depositary Nominees (CDN) on how to vote in advance of the applicable meeting, provided that both Shareholders and CDI Holders are able to attend meetings. 5. SUBSTANTIAL SHAREHOLDERS AS AT 27 FEBRUARY 2019 BOAZ WACHTEL Holding Balance % of Issued Capital 5,298,777 8.08% 6. RESTRICTED SECURITIES SUBJECT TO ESCROW The following securities are subject to escrow: Name 1 2 3 4 5 CDI escrowed 24 months CDI escrowed 24 months Unlisted Options $0.01 escrowed 24 months Performance Rights Class A escrowed 24 months Performance Rights Class C escrowed 24 months Number of Securities 15,791,987 2,966,666 1,281,000 2,966,666 2,966,667 Escrow Period 30/11/2019 30/11/2019 30/11/2022 30/11/2019 30/11/2019 7. There is current no on-market buyback program for any Roots listed securities. ON-MARKET BUY BACK GROUP CASH AND ASSETS 8. In accordance with Listing Rule 4.10.19, the Company confirms that it has been using the cash and assets for the year ended 31 December 2018 in a way that is consistent with its business objectives and strategy. 12 For personal use only

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