APPENDIX 4E
ANNUAL
REPORT
2021
CONTENTS
1
2
6
Financial
Overview
Chairman’s
Letter
Managing
Director’s
Letter
10
Operating +
Financial
Review
26
Financial
Report 2021
89
94
97
Independent
Auditor’s
Report
Shareholders’
Information
Corporate
Directory
About Ecofibre
Ecofibre is the leading diversified hemp company globally.
In the United States, Ananda Hemp is the leading pharmacy brand for hemp-
derived CBD products. The Company produces nutraceutical products for
human and pet consumption, as well as topical creams and salves. See
www.anandaprofessional.com and www.anandahemp.com. The Company
also supplies its leading Ananda Hemp CBD products to Australians via
the SAS B program. See www.anandahemp.com.au.
Hemp Black manufactures and sells sustainable, high-performance textile
products in the United States. See www.hempblack.com.
In Australia, Ananda Food is the leading grower and producer of a range of
hemp food products including protein powders, de-hulled hemp seed and
hemp oil. See www.anandafood.com. The Company is also a leading
provider of quality industrial hemp genetics in the United States.
The Company owns or controls key parts of the value chain in each business,
from breeding, growing and production to sales and marketing. Our value
proposition to customers is built on strong brands and quality products.
FINANCIAL OVERVIEW
Revenue
down 43%
from $50.7m to
$28.8m
TexInnovate
Acquisition
on track
NPAT
down 153%
from $13.2m to
-$7.0m
Further
growth
investment
$4.7m
Hemp Black
production capacity
$75m
Cash ($8.6m)
& grants / options
$18.6m
Net Tangible Assets
per share
17.64 cps
Earnings
per Share
-2.16 cps
ECOFIBRE LIMITED ANNUAL REPORT 2021 1
CHAIRMAN’S LETTER
1.
Dear Shareholders
As your outgoing Chairman, I wanted to take
the opportunity to thank you for being an
Ecofibre (EOF) shareholder.
EOF was established with the
firm intention of creating
products to assist people with
their health and wellbeing. We
are at the cusp of realising the
full potential EOF can provide to
human health and lifestyle
wellbeing. It has been a positive
and productive experience for
me as your Chairman and I
would like to take this
opportunity to wish you good
health and your Company a
growing and prosperous future.
Unfortunately, during FY21 your
Company was negatively impacted by
both COVID and the civil unrest on our
USA Health business. The resulting
disrupted consumer access and
experience meant that we were unable
to fully realise our targets in terms of
product sales.
Fortunately, as reported elsewhere in
this Annual Report, your Company is
on a path to recovery and we are
implementing a series of new,
technology-based strategies to address
any potential future disruption and
maximise our distribution capabilities.
2
ECOFIBRE LIMITED ANNUAL REPORT
2021
Director Appointments
I would like to extend my sincere thanks to the recently appointed Directors for contributing their expertise and
leadership experience to assist EOF to prosper and I would encourage you to vote for their formal election at the
AGM.
Vanessa Wallace’s strong track record of experience as an ASX Company Director and business consultant is highly
valued by EOF. Vanessa is currently a director of two large and successful ASX listed companies as well as a
director of two smaller listed and unlisted medical companies.
Professor Bruce Robinson AC is a distinguished Medical Doctor and Researcher who has received Australia’s
highest public recognition for his contribution to Australia in medical research and administration. Bruce will Chair
our newly formed Health & Government Relations Board Committee in FY22. Our Ananda Health subsidiary is a
very important component of EOF and Professor Robinson’s expert knowledge and experience will be invaluable
in overseeing our investment into cannabinoid science and research as well as government relations engagement.
At our last AGM we also welcomed Kristi Woolrych as a Director of EOF. Kristi is a senior marketing executive with
an International Food group. Kristi will Chair a working group focused on amplifying and positioning EOF’s
capabilities and products to target customers throughout Australia and the US, where her marketing and brand
management experience will be highly valuable at this stage of our development.
Following my retirement at this year’s AGM, this will leave EOF with five Directors, including our Managing
Director. It is likely that the new Chairman may wish to appoint another suitably qualified director to the Board and
an update on this will provided to shareholders in due course.
Business Update
We are all disappointed that EOF is yet to reach its potential and that you have not been rewarded as
shareholders.
However, I remain confident that management, assisted by the appointment of the new directors, will soon deliver
profits across all three of our businesses - Hemp Black (USA), Ananda Health (USA) and Ananda Foods (Australia).
Our CEO Eric Wang provides more detail in his report on each business and their prospects, but for our newer
shareholders let me summarise my views on these three businesses.
Hemp Black
Most people recognise hemp as a very hardy, rapid growing plant used for clothing fabric or for industrial use such
as, for example, in rope, animal bedding and garden mulch.
We hold a strong belief that the application of hemp in industrial products can be much broader and higher value
add in terms of its sustainability, anti-microbial properties, resilience, and strength.
As a result, EOF chose to work with Thomas Jefferson University (TJU) to develop and patent specific high value
processes and uses, including the ability to incorporate CBD oils and hemp biochar into polymer-based fabrics.
The potential uses are significant and diverse and while some present immediate opportunities for the Company,
others will require development, education, and investment to bring the benefits into industrial production.
ECOFIBRE LIMITED ANNUAL REPORT 2021 3
To maximise this part of the business, we acquired an advanced manufacturing business specialising in polymers,
yarns and knitted fabrics. Based in North Carolina, TexInnovate became part of Ecofibre in August 2020 and is
expected to begin making a meaningful contribution in FY22. Further details are set out in the Hemp Black
section of this annual report.
Ananda Health
Given the laws around growing, processing and selling hemp-derived CBD extract over the counter (OTC) are
more advanced in USA than in Australia, the Ananda Health business is USA-centric at this time.
We are currently undertaking two major FDA approved, randomised, placebo controlled, double blind trials in the
USA with the Lankenau Institute for Medical Research and Eastern Virginia Medical School. The focus of these
trials is on pain, sleep and anxiety in different patient groups. Unfortunately, there were initial delays due to
mandated COVID lockdowns during the period, but the studies are now progressing as expected.
Australia’s Therapeutic Goods Association (TGA) has announced they will consider legalising 98% CBD (THC Free)
OTC product in Australia. In late FY21 we commenced a sleep study with Southern Cross University in Australia to
help meet TGA's product requirements. Subject to TGA approval, we expect the company will have its leading
US Pharmacy products available over-the-counter in Australian pharmacies from late 2022.
Ananda Professional THC Free (S4) and Full Spectrum (S8) products are already available in Australia via a medical
practitioner prescription.
Ananda Food
Ananda Food is our Australian based business. To date our hemp-based food products have mostly been grown in
Tasmania and processed in our NSW facility in Newcastle. As the business grows, we are diversifying our growing
regions across multiple states to disperse harvesting costs and harvest dates and minimise any adverse seasonal
impacts in any single region. Whilst Tasmania has proven to be a very reliable farming area, diversification of our
geographic growing areas to address production and inventory risk is an important protection measure for our
customers and for EOF.
Barry Lambert & Jon Meadmore, Ecofibre seed crop, South East Queensland, June 2021
4
ECOFIBRE LIMITED ANNUAL REPORT
2021
Hemp Food is often referred to as a ‘super food’ because it is gluten free with a high protein content and
optimum mix of Omega oils. The Hemp plant is also environmentally friendly and performs a bioremediatory
function by adding carbon to the soil when left as mulch. The notable global trend toward substitution of meat
production with plant based protein signals the growth outlook is positive for Ananda Food.
As one of Australia’s largest growers of hemp seed, EOF also supplies third party food producers and distributors.
Products are currently available to consumers in leading Supermarkets under the following brands: Macro
Wholefoods in Woolworths; Soul Seed Hemp and ECS Botanics (from 2Q22) in Coles; and Ananda Food in
selected IGA stores.
It is our expectation that Ananda Food will become profitable during FY22 and this sustainable ‘super food’
should continue to grow strongly and profitably in the years to follow.
Ecofibre Team
I would like to acknowledge that it has been a very difficult year for our entire team across the globe. On behalf of
the Board, I would like to extend our sincere thanks to each of our employees for their considerable and
dedicated efforts in this very difficult year which has been challenging both personally and professionally. It has
not been easy given the sheer number of our team who have endured protracted “lock-downs” in the US and in
Australia and for those in our Australian team who have been unable to visit our USA operations to do their work.
Hopefully that will soon end.
On behalf of the Board, I would also like to acknowledge and give special thanks to our CEO Eric Wang and his
family who made the decision last year to relocate to the USA in order to best support the EOF business given the
difficulty travelling in and out of Australia during the pandemic. Please accept our thanks and recognition for your
significant contribution as our CEO and as a family.
Thank you for being an Ecofibre shareholder.
Barry Lambert
Chairman
Barry Lambert
Chairman
ECOFIBRE LIMITED ANNUAL REPORT 2021 5
MANAGING DIRECTOR’S LETTER
2.
Dear Fellow Shareholders,
I would like to join Barry in thanking you for your
continued support of Ecofibre.
FY21 was a disrupted, but highly
transformational, year for our business. Whilst
the pandemic and US social unrest disrupted our
Ananda Health sales, we maintained our long-
term focus to deliver on our strategy to build a
sustainable and diversified growth company.
In FY21 we established a portfolio of
businesses that are well-positioned in three
growth markets in which we have high
conviction: Natural health care, Plant-based
foods and Sustainability. The conviction in
our chosen markets meant that despite the
disruption during FY21, we continued to
invest in clinical trials, acquired core assets to
establish Hemp Black and build operational
capacity, and continued to innovate and
develop new products.
Our businesses are well established with very
strong operating models and manufacturing
capabilities, but the operational focus is still
to regain momentum in our core
independent pharmacy channel. The
pandemic made a highly competitive US
CBD market more difficult to navigate,
particularly given our focus on 'bricks and
mortar' independent pharmacies. Our shift to
a distributor-based model just before the
pandemic gave it no opportunity to succeed,
and travel restrictions meant we couldn't
engage with pharmacies at tradeshows,
education events and in-person which was a
core part of our growth.
6
ECOFIBRE LIMITED ANNUAL REPORT
2021
As the impacts of COVID look to be abating, we are starting to see our pharmacies re-engaging in their
businesses and trying to find a more normal operating rhythm. In 4Q21 we invested into our online channels to
include a new marketing and e-commerce capability built specifically for pharmacies.
Hemp Black was fully formed with the acquisition of TexInnovate in August 2020, and the early completion of our
research relationship with Thomas Jefferson University in April 2021. We now have the operational know-how,
production capacity and customer relationships to leverage our patents and to target attractive new markets.
Ananda Food continues to grow steadily. Our operational capabilities set us apart from competitors, and the
opportunities in rapidly emerging markets in the USA for planting seed align with our key strengths in this
business.
Whilst we carefully managed expenses during this disrupted period, we continued to invest for the long-term.
This meant that we did not close businesses or furlough employees based on our strong conviction in our chosen
markets, and our ability to serve those markets well. We enter FY22 well positioned to grow our revenues across
each business.
Strong conviction in our core markets
Each of our businesses make products that improve the lives and well-being of people and the sustainability of our
planet. As a management team and Board, our strong conviction in the market opportunity and our views on the
attractiveness of our core markets have not changed.
Hemp-derived full spectrum extract helps people live a better life and will play an
important role in
natural health care
.
Environmental sustainability is non-negotiable – manufacturers must deliver
sustainability with higher performance and safety as consumers will not settle
for less.
Plant-based diets will continue growing in prominence. Hemp seed is one of the
highest quality, sustainable sources of plant-based protein.
Despite challenges and disappointing revenue results for Ananda Health in FY21, our business today is more
diversified, has more growth opportunities, and stronger capabilities than it did 12 months ago.
The group completed most of its fixed infrastructure investment in FY20. In FY21, we acquired TexInnovate and
undertook further investment to increase the productive capacity of the Hemp Black business, as well as Research
and Development initiatives across all our three businesses which centered on clinical trials and new product
development.
Our growth investment in FY21 totaled $4.7m (excluding the TexInnovate acquisition, marketing, and
infrastructure investments).
ECOFIBRE LIMITED ANNUAL REPORT 2021 7
Acquisition of TexInnovate completes the formation of Hemp Black
During the year we welcomed the TexInnovate team to the Ecofibre family. TexInnovate added significant
technical depth and capacity to our Hemp Black supply chain and gave us a tremendous platform to leverage our
Hemp Black technologies.
As president of Hemp Black, Jeff Bruner and his team have built a world-class high performance textiles capability
in North Carolina, and together with our Chief Innovation & Sustainability Officer Mark Sunderland, have strongly
positioned the business for future growth.
When we acquired the business, TexInnovate had two large, long-term clients for medical and artificial turf yarns.
There was also tremendous opportunity to add new production capacity at a relatively low cost, and to engage
new and existing customers with specialist product solutions.
Our progress during the year has been very encouraging:
!
!
A new, commercial scale polymer compounding line was added in 4Q21, together with a new single-
component yarn extrusion line and eleven 3D circular knitting machines for the next range of Hemp Black
activewear and other items.
Three additional high-performance yarn extrusion lines will be completed in FY22 which provide even
greater technical capacity.
Together these investments raise the annual revenue potential of the business to $75m, and product development
R&D and trials are well underway with customers across a range of industries and specialist applications.
A Sustainable Company and Industry
This year I am pleased to present Ecofibre's Sustainability Report. Whilst this is our first formal report,
sustainability has been at the core of Ecofibre's DNA since the Company was founded.
Ecofibre’s objective is to provide the best returns for our shareholders. To achieve this objective, we have worked
to build sustainable, commercial business models that not only serve our customers well, but also positively
contribute to all environments that we operate within. We strongly believe that this combination leads to long-
term returns for our shareholders.
In the United States, we are pursuing a bold strategy in conjunction with the US Hemp Roundtable and likeminded
businesses to help realise hemp's potential to transform the sustainability of entire industries. This is an incredibly
important undertaking and will underpin the acceleration of the development and application of industrial hemp
more broadly.
Outlook
While we see encouraging signs in the US CBD market, our business will remain subject to the impacts of
decisions made by governments on the handling of COVID and its variant strains. We are well positioned as
markets begin to normalise, and expect that Ananda Health revenues, profitability and cashflows will increase in
FY22.
Hemp Black will add long term clients in FY22 and continue to invest in growth and innovation to capture strategic
opportunities.
Ananda Food's growth will continue in Australia and access to the attractive US hemp food and seed market will
drive operational scale.
8
ECOFIBRE LIMITED ANNUAL REPORT
2021
ECOFIBRE LIMITED
ANNUAL REPORT 2020 7
Thank you
My sincere thanks to all our customers, business partners and shareholders for your continued support of Ecofibre.
We have a strong and committed team across the business and I want to acknowledge again the contribution that
everyone has made in a year of constant disruption.
I would like to thank my fellow directors for their expertise and support during a very challenging year. Barry and
Jon have provided guidance and continuity for the company for many years, and with the recent addition of
Vanessa, Bruce and Kristi to the Board, the company is in good hands.
As you know, Barry will be retiring as Chairman at the 2021 AGM. This is a sad moment for myself personally as I
have had the pleasure of knowing Barry and his family for over 15 years.
Many of us know Barry and the Lambert family for their business successes and philanthropic contributions.
However, there is much beyond the successes and contributions that is read about in newspapers. I am sure Barry
would not want me to share these things, but as this is the MD letter, I have editorial control.
Barry’s interest and involvement in the hemp and cannabis sector was not borne from a seeing a commercial
opportunity, rather, it was a personal family tragedy involving his granddaughter Katelyn who suffered from severe
epileptic seizures. After seeing a hemp derived extract literally save Katelyn’s life, the Lamberts took it upon
themselves to ensure the world understood the potential of hemp and made the single largest donation ever to
research this incredible plant.
Several months after the Lambert Initiative was established,
Barry approached me to help him investigate a company he
had been introduced to called Ecofibre. His rationale was to
solve a future problem of affordability and accessibility of
hemp products to Australian patients in need. In the nearly
six years since our initial trip to the US in October of 2015, it
has been my honor to work with Barry in taking a founder’s
vision for hemp and turning it into a commercial reality that
has had significant positive impact on the wellbeing of
people suffering from a range of conditions. Today Ecofibre
is one the leading global industrial hemp companies.
Whilst the mission for Ecofibre is to improve the lives of our
customers, once we began to take investment beyond our
own, Barry has been steadfast in his guidance to me – that
shareholder’s best interests over the short, medium and long
term must always come first. Over my years of experience in
public companies, the words shareholders best interests have
often been used, but under Barry’s leadership these are more
than words.
Finally, I cannot thank Christy and my children Alex, Caroline
and Max enough for all of their support and understanding
over the many years that I have been away and for their
continued support for the life changing work of Ecofibre.
Eric Wang
Managing Director
Barry Lambert & Eric Wang
- First visit to Kentucky, October 2015
ECOFIBRE LIMITED ANNUAL REPORT 2021 9
Dear Fellow Shareholders,
I would like to join Barry in thanking you for your continued support and it is my pleasure to
report on Ecofibre's operations and financial performance in our first full year as a publicly
listed company.
To draw an analogy closer to home, the leadership mindset that we have taken reminds me of the song “Four
Seasons in One Day” by Crowded House. Like the weather, economic conditions are always changing, and this
ultimately impacts customer mindsets and behaviours. And like people adjust to the weather on a regular
basis, companies must regularly adjust to economic changes to grow and be relevant.
In the last several months Ecofibre has certainly experienced several abrupt changes in economic conditions that
have affected our customer’s mindset and behaviour. In my view, going forward it is prudent to expect abrupt
changes to our economy to become the norm as opposed to the exception.
Our Victorian shareholders will tell us they pretty much leave the house every morning prepared for Four
Seasons in One Day. Likewise, our management team is prepared to keep growing Ecofibre profitably in an
environment where ‘economic seasons’ can change in one day.
With this backdrop, there are two points I will highlight as I review FY20 and more importantly set the scene for
Fy21:
! Our strategy and vision remain constant
! All three of our businesses are now in commercial phase as we grow our diversified portfolio
Our strategy and vision remain constant
In last year's annual report, I shared the four principles we use to deploy capital in support of our portfolio
strategy. I wanted to remind shareholders of these principles as they anchor our strategy, and ensure measured
decision making. They help keep us focused on building a growing, sustainable, resilient business that actively
manages economic change.
! Strong purpose: we only enter markets where we believe our products can improve the lives and well-being
of people and the sustainability of our planet
! Clear focus: we target customers and segments that our capabilities and values are aligned to
! Quality, safety and transparency
! Education
! Sustainability
PROFIT
BEFORE TAX
276%
Sale growth, scale benefits,
cost management
17.3
4.6
-8.2
2018
2019
2020
OPERATING FINANCIAL REVIEW
3.
Financial Results
Ecofibre recorded a loss after tax of $7.0m in FY21, down
from $13.2m profit after tax in FY20.
The result was primarily driven by lower revenue in our
Ananda Health business (FY21: $14.3m; FY20: $46.8m).
Overall group revenue reduced from $50.7m to $28.8m,
with the decline in revenue for Ananda Health partially
offset by increased revenue for Hemp Black (FY21:
$11.9m; FY20 $2.4m).
Ananda Food revenue increased from $1.5m to $2.6m.
The overall gross margin for the group reduced from 76%
to 61%, which reflected the change in the business mix of
the portfolio. Ananda Health margins remained strong
year on year (FY21: 74%; FY20: 80%).
In recognition of the impact of the COVID-19 pandemic
on our businesses, the group derived significant benefits
under US federal government relief programs, including a
second US Government Payroll Protection Program
forgivable loan ($2.4m), a US Government Employee
Retention Credit ($2.4m) (ERC), as well as benefits
available under Australian federal and state government
programs.
$4m net cost saving in FY2021
6.4
1.5
27.5
-4
31.4
27.5
6.4
1.5
-4
FY20
their lifecycle.
FY21
FY20
Depreciation
FY21
Acquisition
Savings
The group continued its focus on strong cost controls and
efficiency in FY21.
10
ECOFIBRE LIMITED ANNUAL REPORT
2021
Our strategy and vision remain constant
In last year's annual report, I shared the four principles we use to deploy
capital in support of our portfolio strategy. I wanted to remind
shareholders of these principles as they anchor our strategy, and ensure
measured decision making. They help keep us focused on building a
growing, sustainable, resilient business that actively manages economic
change.
! Strong purpose: we only enter markets where we believe our
products can improve the lives and well-being of people and the
sustainability of our planet
! Clear focus: we target customers and segments that our capabilities
and values are aligned to
! Quality, safety and transparency
! Education
! Sustainability
! Design to last: our business models must be profitable, sustainable
and provide flexibility as we operate in a highly fluid industry
! Execute with conviction: patience to properly invest in infrastructure
and brand, and conviction that our products improve the lives of
people and our planet, means we take a long-term view on these
businesses
Across our three businesses we have deep conviction that our value
propositions resonate with customers, the segments we target are
attractive from a growth and financial perspective and that we can be
31.4
the clear leader in our specific market segments.
All three of our businesses are now in commercial phase as we
grow our diversified portfolio
Our stated strategy is to establish a portfolio of businesses that create
hemp-based products that add value and improve people’s lives. I am
very pleased to report that we have progressed this strategy to a point
where all three of our businesses are now in the full commercial stage of
Last year our portfolio had an ‘established’ US based CBD business
Ananda Health, a ‘recently established’ Australian based hemp food
business Ananda Food, and a Hemp Black ‘R&D program’ with plans to
begin early commercial activity by the end of FY20.
Total operating expenses increased from $27.5m to $31.4m year on year, however after adjusting for new
expenses from the TexInnovate acquisition, and additional depreciation from prior year investments in the
Georgetown facility and other assets, the group achieved savings equal to 15% of its prior year cost base (net
saving: $4.0m).
FY21 cashflows included operating cash outflows totalling $8.4m, and investing cash outflows ($28.7m) and
financing cash inflows ($28.6m) which were matched during the period.
The group has substantial cash and other resources available to fund its operations, including $10.0m one-off
receivables and other funds from the ERC ($2.4m), a US federal tax refund due to a one-off off measure to carry
back current period losses into prior years ($3.3m) and $4.3m potentially receivable from Thomas Jefferson
University in relation to options to purchase shares in the company which are exercisable by October 2021.
The group's net assets increased from $63.0m to $111.8m during the period, largely due to the acquisition of
TexInnovate, which contributed $65.3m in net tangible and intangible assets.
Portfolio Overview
Ecofibre's operations are diversified by business line, geography and value chain.
!
!
!
Ananda Health aims to be the preferred provider in the USA practitioner and pharmacy channels by
providing federally legal, safe, high quality products.
Ananda Food is focussed on the production and sale of hemp foods in Australia and the USA. The business
aims to be the leading hemp food supplier in Australia and the USA by helping to supply the future demand
for quality, safe plant-based foods.
Hemp Black supplies sustainable and functional hemp materials, based on superior technical performance at
a better price point delivered more sustainably. Our aim is to be the recognised leader in sustainable high-
tech hemp applications.
Each business also has strong capabilities and depth through its value chain:
!
!
!
Ananda Health's vertically integrated supply chain, respected brand and reputation for safety and quality is
a point of difference in the retail pharmacy market;
Ananda Food's gene bank, agronomic experience, vertically integrated business, specialist facility and fully
traceable food supply chain experience is difficult for competitors to replicate; and
Hemp Black's intellectual property and manufacturing know-how combine to produce unique products with
attributes our customers value.
ANNUAL REPORT 2021 11
Ananda Health
FY21 RESULT
Revenue: $46.8m
Profit before Tax: $20.8m
Revenue: $14.3m
Profit before Tax: $0.3m
Ananda Health's profit before tax decreased during
the year from $20.8m in FY20 to $0.3m in FY21.
Our key brands - Ananda Professional and Ananda Hemp
- target the health and wellbeing segment, including
customers seeking help with sleep, anxiety or pain. We focus
on well-regulated and reputable distribution channels and
invest in high quality research, training and advice.
Other key brands include Bliss and Ananda Pets, and the BalansLabs
brand developed for CVS.
The vast majority of revenue originates from the US, which continues to
be the world's largest market for hemp-derived CBD.
1
We are also increasing our focus on the Australian market, with three new
products launched and new distribution relationships beginning in early FY22.
US industry overview
Hemp-derived CBD products remain broardly available in the US, even though the
product is not yet widely adopted within the US healthcare system.
The market remains oversupplied and competitive, with farmers growing a surplus after
hemp production was federally legalised in December 2018, and product re-sellers and
marketing companies have subsequently been competing on price rather than quality.
Many suppliers have exited the industry, but not in sufficient numbers to re-balance immediate
supply with demand.
1
Grandview Research, Cannabidiol Market Size, Share & Trends Analysis Report, February 2021
12 ECOFIBRE LIMITED ANNUAL REPORT
2021
Publicly available benchmark data showed a continued, significant decrease in hemp crop licensing and acreage
for the northern 2021 summer growing season:
!
Licences:
ultimately documented for 2020); and
8,298 licences issued (down 8% from 9,066 counted in June 2020; down 58% from 19,799
! Acres:
107,702 acres registered for outdoor production (down 55% compared to 236,732 acres documented
in June 2020; down 75% from 429,300 ultimately documented for 2020).
‘Due to a variety of factors – including low prices, a continuing glut of biomass and extracted CBD, extreme
weather conditions, regulatory uncertainties, and the lure of better money to be made by farming mainstream
crops – the amount of hemp being grown and processed this year is expected to be significantly lower than in
2020; and likely at its lowest level since the national legalization of hemp in 2018.'
2
Notwithstanding growing market conditions, product sales in the US CBD market are forecast to continue growing
according to a number of published industry reports.
Regulatory Environment
In the United States, hemp remains a federally legal agricultural commodity since enactment of the 2018 Farm Bill,
and hemp and hemp products are no longer a controlled substance . Hemp is regulated as an agricultural
commodity by the US Department of Agriculture (Food & Drug Administration, FDA) rather than the US Justice
Department (Drug Enforcement Agency, DEA).
3
The US Food and Drug Administration (FDA) has still only approved one cannabis-derived prescription medicine
in the US for limited indications, namely seizures associated with two rare and severe forms of epilepsy, Lennox-
Gastaut syndrome and Dravet syndrome.
For Ananda Health, the safety and compliance of our products remains a key priority. This is particularly important
in the highly regulated pharmacy segment, which is regulated by state-based pharmacy boards, the FDA and also
the DEA.
There are currently two items of proposed legislation that would make major changes to how hemp-derived CBD
is regulated in the United States:
!
H.R. 841:
Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2021
4
! S.R. 1698:
5
Hemp Access and Consumer Safety Act
H.R. 841 would allow CBD to be marketed as a dietary supplement, something that the U.S. Food and Drug
Administration currently prohibits.
H.R. 841 is scheduled to have a hearing in the House Energy and Commerce committee in September, which is
6
when a mark-up of the bill would occur and amendments could be introduced.
S.R. 1698 would also permit CBD to be marketed as a dietary supplement, but goes further than the House
measure in allowing CBD to also be added to food and beverages.
2
3
4
5
6
https://www.hempbenchmarks.com/hemp-market-insider/2021-us-hemp-production-update/
US Controlled Substances Act
https://www.congress.gov/bill/117th-congress/housebill/841?q=%7B%22search%22%3A%5B%22841%22%5D%7D&r=3&s=2
https://www.congress.gov/bill/117th-congress/senate-bill/1698?r=7&s=1
https://www.hempbenchmarks.com/hemp-market-insider/hemp-cbd-legislation-status-in-congress/
ECOFIBRE LIMITED ANNUAL REPORT 2021 13
In addition, on 14 July 2021, three senators published a “discussion draft” for a Cannabis Administration and
Opportunity Act (CAOA). This measure is meant to decriminalize and de-schedule cannabis (including
marijuana), while expunging certain cannabis-related offences and providing for “reinvestment in certain persons
adversely impacted by the War on Drugs.” Additionally, one part of the draft legislation, Section 505, would
establish a legal pathway for the marketing of hemp-derived CBD as a dietary supplement.
7
Ananda Health continues to focus on things the business can control - quality, costs, pricing - and investing in long
term relationships with customers, distributors and scientific researchers.
Focus on direct relationships with independent pharmacies
In FY21 Ananda Health reported a significant decline in independent pharmacy sales, which was driven by three
factors:
!
- CBD sales were negatively impacted due to store closures and social distancing
Business disruption
mandates during the COVID-19 pandemic. CBD sales in the professional healthcare market still require
advice, and the increased use of home delivery, drive through and curbside pickup limited the opportunity
for interaction between pharmacists and their customers.
As small businesses, many independent pharmacists were not enabled with on-line and e-commerce
capabilities.
As a result, Ananda Health implemented programs to help pharmacists re-engage their customers, including
development of an on-line sales portal for pharmacies.
! Significant price / product competition
- a large number of CBD brands are sold in the United States.
Ananda is a premium priced product based on our product quality and research, however pharmacies
added cheaper brands to their ranges and introduced product formats not sold by Ananda.
Ananda Health repriced a number of its products in November 2020, with average prices reduced by 15% -
25%. New product formats were also introduced to meet pharmacy and customer demand.
! Distrbutor model underperformed
- Ecofibre had previously announced Ananda Health's shift to the
traditional 'distributor-led' model used by independent pharmacies to stock a wide range of products. This
strategy was launched in 3Q20.
Our subsequent experience was that distributors did not prioritise education and sales support on CBD for
independent pharmacies, and in many cases their sales teams were unable to make face-to-face visits with
pharmacies.
As a consequence of the underperformance of the new strategy, it was progressively reversed in FY21 so
that Ananda Health is again directly supporting its independent pharmacy customers.
CVS Pharmacy
CVS Pharmacy is the largest retail pharmacy in the US, with over 9,900 retail locations in 49 states.
Ananda Professional manufactures a range of 14 'BalansLabs' hemp-derived products for CVS for health, beauty
and sleep. During the year Ecofibre also sold c120,000 face masks to CVS.
Health and beauty products are currently ranged in c3,000 stores, and 500 new stores for the sleep range are
expected to be introduced in 1Q22.
CVS Pharmacy has also approved BalansLabs products for launch in 6 new US states, which is expected to
increase the overall store count by c30% from 3Q22.
7
https://www.democrats.senate.gov/imo/media/doc/Cannabis%20Administration%20and%20Opportunity%20Act.pdf
14 ECOFIBRE LIMITED ANNUAL REPORT
2021
NPAT
119%
Strong contribution by
Ananda Health
DILUTED
EPS
1
100%
Prioritising
shareholder outcomes
13.2
6.0
4.34
2.17
-8.6
-3.71
2018
2019
2020
2018
2019
2020
NET
ASSETS
49%
Balance sheet
strength
63.0
42.3
UNDERLYING
EBITDA MARGIN
Improved net
margins
8%
19%
27%
1.6
-128%
2018
2019
2020
2018
2019
2020
1
Diluted EPS for 2018 adjusted for 3:1 share split implemented on 6 February 2019
Other New Products
Multiple new products were launched to independent pharmacies, and in some cases on-line, in 3Q21 and 4Q21.
These products were focused on new patient segments and formats, and in 4Q21 accounted for c20% of
pharmacy sales.
The new product lines included:
!
Women’s health
– two products focused on pelvic pain and vaginal health launched February 2021
! Diabetes
– sock & foot care cream launched February 2021
! New formats
- chewables range launched to independent pharmacies April 2021
Research Studies
Ecofibre and Ananda Health are continuing to focus on clinical research on CBD hemp-extracts to support our
long term focus on the professional healthcare market.
ECOFIBRE LIMITED ANNUAL REPORT 2021 15
Study
focus
Research
Institution
Patient
Population
Location
Status
Opioid
Reduction
Pain
(neuropathic)
Sleep and
anxiety
Sleep
Murphy Clinic
Chronic Opiod
Louisville, KY
Lankenau
Institute for
Medical Research
Breast, colon
and ovarian
cancer
Philadelphia,
PA
Prospective
cohort
study
Phase 2
Complete - published 2019
in Journal Postgraduate
Medicine
Enrollment underway
(FDA authorised - IND)
Eastern Virginia
Medical School
Dementia
Norfolk, VA
Phase 2
Enrollment underway
(FDA authorised - IND)
Southern Cross
University
Healthy
population
Australia
(4 sites)
Phase 2b
Enrollment underway
Pain
(endometriosis)
University of
Newcastle
Endometriosis
Newcastle,
Australia
Avatar
Study
Scheduled completion:
3Q22
Addiction
8
Cognitive
9
decline
University of
Colorado
University of
Colorado
Alcohol use
disorder
Adults, no
dementia
Boulder, CO
Phase 2
Boulder, CO
Phase 2
Enrollment underway
(FDA authorised - IND)
Pending FDA authorisation
- IND (expected 1Q22)
The Sleep study with Southern Cross University will be used to support an application for Schedule 3 product
registration by the Australian TGA.
8
9
Not funded by Ecofibre, but Ecofibre product used for study and input to study design
Not funded by Ecofibre, but Ecofibre product used for study and input to study design
16 ECOFIBRE LIMITED ANNUAL REPORT
2021
Australia
Type / Phase
Australia is a small but rapidly growing CBD market
currently supplied by doctor prescription rather than
over-the-counter sales.
Ecofibre has the necessary Schedule 4 and 8
licenses to import and supply a range of five
prescription products. Three of these products
were introduced to Australia in 4Q21, including the
new and unique Endo relief cream.
Ananda Health is an education partner to two of
Australia's largest pharmacy brands, TerryWhite
Chemmart and Priceline Pharmacy.
The business launched a new digital portal in 4Q21
to support sales growth, including a practitioner
login and ordering platform, and an education hub
using material already developed for our US
business.
Our focus in Australia is to build sales and brand
ahead of the opportunity to supply S3 over-the-
counter product.
ECOFIBRE LIMITED ANNUAL REPORT 2021 17
Hemp Black
FY21 RESULT
Revenue: $11.9m
Loss before Tax: $1.0m
Hemp Black's loss before tax was $1.0m for the
year, compared with a breakeven result in FY20.
Hemp Black began commercial operations in the fourth
quarter of FY20 when the business launched anti-microbial
face masks in response to the COVID-19 pandemic.
Since mid-2017, Ecofibre worked with TJU to develop a
platform of intellectual property to sustainably deliver products
for a variety of industries. The TJU research contract was completed
early in April 2021, and to date the business has been granted 9
patents and 23 pending. Several patents are under an exclusive
commercial license to Ecofibre from Thomas Jefferson University.
10
Our focus has now shifted to building brand, developing use cases for
Hemp Black's technology, building production capacity and leveraging
existing and new customer relationships.
TexInnovate
The acquisition of TexInnovate in August 2020 delivered deep technical and
manufacturing capability to the Hemp Back business.
At the date of acquisition, TexInnovate had two key customers:
!
Getinge
, a global leader in healthcare and life sciences, for the supply of ISO 9001
medical implant yarn; and
! Controlled Products
, a supplier of premium artificial turf
10
Patents are filed and owned by Thomas Jefferson University, and Ecofibre has exclusive,
global rights to commercialise these technologies
18 ECOFIBRE LIMITED ANNUAL REPORT
2021
Polymer Compounding, Yarn and Knitting
Hemp Black has a differentiated capability to compound complex, sustainable inputs for yarns and fabrics, which
is based on customised equipment, deep technical know-how and sustainable inputs.
Inputs include but are not limited to eco , reclaimed ocean plastics, hemp extract, and essential oils.
6
Recycled
polymers
Traditional
polymers
Hemp Black performs
complex compounding
with non-traditional inputs
to deliver new physical
properties tailored to
customer requirements
Hemp Additives
(extract, carbon)
Anti-microbial
Odour-neutralising
Conductive
Sustainable
Cooling
Magnetic
Fluorescence
Other
Additives
The polymer compound can be sold externally, or used internally to manufacture high performance yarns with
customised properties. IP protection for these processes include highly customised equipment built in-house,
deep technical know-how and process patents.
Yarns extruded from 'masterbatch' polymer compounds can be used for specialist applications such as the existing
medical implants and outdoor turf, and also other applications including anti-microbial, conductive, fluorescent,
cooling, IR reflective and others.
Fabrics and final products manufactured by Hemp Black using its own yarns or purchased yarns have the
advantage of a highly sustainable US based supply chain and sustainable manufacturing processes. These
processes are also based on deep technical know-how, and industrial applications include medical, automotive,
office, safety, interiors, fashion, accessories and others.
ECOFIBRE LIMITED ANNUAL REPORT 2021 19
Completion of the current program of investment is expected by 3Q22, delivering a combined total revenue
capacity for the business of up to $75m at full production:
! commercial scale polymer compounding line (4Q21)
! single component yarn line #1 (4Q21)
! single component yarn line #2 (2Q22)
! bi and tri component yarn (3Q22)
! 3D circular knitting (11 machines) (4Q21)
Case Study: Hemp Black activewear
R&D, Innovation and Production Capacity
Hemp Black launched it's first line of activewear in November 2020, incorporating proprietary Hemp Black yarns
which provide anti-microbial benefits in pockets, jacket sleeves and other parts of the clothing.
Since the acquisition of TexInnovate, Hemp Black has continued to invest in the business to add production
capacity and develop specialist product solutions for US manufacturers.
The clothing line was developed to help establish and promote the Hemp Black brand and showcase its
technologies, and was launched for sale online (hempblack.com).
In 1Q22, Hemp Black launched its second range of activewear using seamless tubular knitting technology.
The new Ecofierce range features:
!
sustainable inputs
! sustainable processes
- hemp for anti-odour without the requirement for metal additives
!
yarns are solution dyed rather than using traditional piece dyed fabric techniques, which means no waste
water and colours that do not bleed
!
3D knitting technology which has minimal industrial waste compared with traditional 'cut-and-sew' textile
industries
! US supply chains
!
!
!
product travels <1,000 miles -v- ~30,000 miles for most garments
rapid replenishment and small batch orders – lower inventory
no dependence on China and overseas supply – less risk
20 ECOFIBRE LIMITED ANNUAL REPORT
2021
R&D, Innovation and Production Capacity
Since the acquisition of TexInnovate, Hemp Black has continued to invest in the business to add production
capacity and develop specialist product solutions for US manufacturers and other cusomers.
The current program of investment is expected to be completed by 3Q22, delivering a combined total revenue
capacity for the business of up to $75m at full production:
!
!
!
!
!
commercial scale polymer compounding line (4Q21)
single component yarn line #1 (4Q21)
single component yarn line #2 (2Q22)
bi and tri component yarn (3Q22)
3D circular knitting (11 machines) (4Q21)
3
4
5
Details of the study are available at https://www.tandfonline.com/doi/full/10.1080/00325481.2019.1685298
Details of the study are available at https://clinicaltrials.gov/ct2/show/NCT04398446
Details of the study are available at https://clinicaltrials.gov/ct2/show/NCT04436081
ECOFIBRE LIMITED ANNUAL REPORT 2021 21
Ananda Food
FY21 RESULT
Revenue: $2.6m
Loss before Tax: $1.5m
Revenue: $46.8m
Profit before Tax: $20.8m
Growing
business.
Ananda Food is well established as a leading hemp seed grower in Australia.
Underpinned by Ecofibre's unique and globally significant genetic resource, the group's investment in genetics,
agronomy and grower relationships delivers higher yields and profitability for growers and for Ananda Food's
The group continued development of its genetic resource during the year at its pollen-secure indoor breeding
facility, and at 9 outdoor R&D sites across Australia.
In FY21 the business used its unique hemp varieties to expand commercial cropping from Tasmania into south-
east and northern Queensland. This will enable multiple growing seasons each year, and results in smoother
cashflow, reduced growing risk and better management of seed inventory.
The business has a quality customer base, including:
! Woolworths Macro brand - Ananda Food has
supplied de-hulled hemp seeds and protein
powder since August 2019, and began to supply
hemp seed oil in 1Q21; and
! Coles - in 2Q21 Ananda Food began to supply
hemp seed oil, protein powder and de-hulled
seed to 'Soul Seeds', a supplier to Coles
Supermarkets. The business will begin to supply
hemp seed oil to ECS Botanics, a second Coles
supplier, in 2Q22.
As a producer of ingestible products we remain
focussed on product quality and safety, and also on
delivering scale benefits from efficient utilisation of our
productive capacity.
Ananda Food incurred a loss before tax of $1.5m in FY21
Processing & Sales
(FY20: $2.2m loss before tax).
Revenue growth has been steady over the last three years,
driven by range expansion in Woolworths and Coles and
increasing awareness of the health benefits of plant-based diets
and hemp foods.
Ananda Food supplies 100% Australian hemp seed products that are rich in digestible protein, fibre, omega 3 and
omega 6 oils. The company's products are mainly sold to wholesalers and distributors, including bulk, white-label
and branded products.
Production is certified under the British Retail Consortium Global Standard (BRCGS) for food, which builds on the
Hazard Analysis and Critical Control Points (HACCP) certification.
Ananda Food Revenue - $m
2.6
1.4
1.5
2019
2020
2021
-4
22 ECOFIBRE LIMITED ANNUAL REPORT
2021
Growing
Ananda Food is well established as a leading hemp seed grower in Australia.
Ananda Food is well established as a leading hemp seed grower in Australia.
Hemp Black
Ecofibre's operations are di a key asset for the entire group, and diversification - and integration - of our
business portfolio has emerged as a key strength.
Underpinned by Ecofibre's unique and globally significant genetic resource, the Group's investment in genetics,
agronomy and grower relationships delivers higher yields and profitability for growers and for Ananda Food's
business.
The Group continued development of its genetic resource during the year at its pollen-secure indoor breeding
facility and at 9 outdoor R&D sites across Australia.
In FY21 the business used its unique hemp varieties to expand commercial cropping from Tasmania into south-
east and northern Queensland. This will enable multiple growing seasons each year, and result in smoother
cashflow, reduced growing risk and better management of seed inventory.
Processing & Sales
Ananda Food supplies 100% Australian hemp seed products that are rich in digestible protein, fibre, iron, and a
balance of omega 3 and omega 6 oils. The company's products are mainly sold to wholesalers and distributors,
including bulk, white-label and branded products.
Production is certified under the British Retail Consortium Global Standard (BRCGS), which builds on Ananda
Food’s Hazard Analysis and Critical Control Points (HACCP) certification.
The business has a quality customer base, including:
!
Woolworths Macro brand
supplied de-hulled hemp seeds and protein
powder since August 2019, and began to supply
hemp seed oil in 1Q21; and
- Ananda Food has
! Coles
- in 2Q21 Ananda Food began to supply
hemp seed oil, protein powder and de-hulled
seed to 'Soul Seeds', a supplier to Coles
Supermarkets. The business will begin to supply
hemp seed oil to ECS Botanics, a second Coles
supplier, in 2Q22.
As a producer of ingestible products we remain
focussed on product quality and safety, and delivering
scale benefits from efficient utilisation of our productive
capacity.
ECOFIBRE LIMITED ANNUAL REPORT 2021 23
Growing
business.
Underpinned by Ecofibre's unique and globally significant genetic resource, the group's investment in genetics,
agronomy and grower relationships delivers higher yields and profitability for growers and for Ananda Food's
The group continued development of its genetic resource during the year at its pollen-secure indoor breeding
facility, and at 9 outdoor R&D sites across Australia.
In FY21 the business used its unique hemp varieties to expand commercial cropping from Tasmania into south-
east and northern Queensland. This will enable multiple growing seasons each year, and results in smoother
cashflow, reduced growing risk and better management of seed inventory.
Processing & Sales
and branded products.
Ananda Food supplies 100% Australian hemp seed products that are rich in digestible protein, fibre, omega 3 and
omega 6 oils. The company's products are mainly sold to wholesalers and distributors, including bulk, white-label
Production is certified under the British Retail Consortium Global Standard (BRCGS) for food, which builds on the
Hazard Analysis and Critical Control Points (HACCP) certification.
The business has a quality customer base, including:
! Woolworths Macro brand - Ananda Food has supplied de-hulled hemp seeds and protein powder since
August 2019, and began to supply hemp seed oil in 1Q21; and
! Coles - in 2Q21 Ananda Food began to supply hemp seed oil, protein powder and de-hulled seed to 'Soul
Seeds', a supplier to Coles Supermarkets. The business will begin to supply hemp seed oil to ECS Botanics,
a second Coles supplier, in 2Q22.
As a producer of ingestible products we remain focussed on product quality and safety, and also on delivering
scale benefits from efficient utilisation of our productive capacity.
24 ECOFIBRE LIMITED ANNUAL REPORT
2021
USA
In FY21 the group sold 18t of planting seed in the United States, enabling 650 acres of hemp fibre production
across 9 states.
In addition, seed was supplied to 11 universities in the US to assess regional suitability, production timing,
planting density, nutrient requirements and other factors.
MONTANA
MICHIGAN
ILLINOIS
NEW YORK
OHIO
COLORADO
NEW MEXICO
KENTUCKY (2)
VIRGINIA
VIRGINIA
N. CAROLINA (2)
N. CAROLINA
S. CAROLINA (2)
S. CAROLINA
TEXAS
TEXAS
MISSISSIPPI
LEGEND
Seed supplied to universities
Planting seed to enable hemp fibre production
ECOFIBRE LIMITED ANNUAL REPORT 2021 25
FINANCIAL REPORT 2021
26 ECOFIBRE LIMITED ANNUAL REPORT
2021
28
Directors’
Report
44
Directors’
Declaration
34
Remuneration
Report
43
Auditor’s
Independence
Declaration
45
46
47
48
49
Consolidated
Statement of
Profit or Loss
Consolidated
Statement of Other
Comprehensive Income
Consolidated
Statement of
Financial Position
Consolidated
Statement of
Changes in Equity
Consolidated
Statement of
Cash Flows
50
Notes to the
Financial Statements
ECOFIBRE LIMITED ANNUAL REPORT 2021 27
Directors’ Report
The directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as the ‘Group’) consisting of Ecofibre Limited (referred to hereafter as the 'Company' or 'Parent Entity') and
the entities it controlled at the end of, or during, the year ended 30 June 2021.
Directors
The following persons were directors of Ecofibre Limited during the whole of the financial year and up to the date of
this report:
Barry Lambert
Jon Meadmore
Eric Wang
Kristi Woolrych (appointed on 20 October 2020)
Bruce Robinson (appointed on 4 March 2021)
Vanessa Wallace (appointed on 1 July 2021)
Principal activities
The principal continuing activities of the Group during the year were breeding, growing, manufacturing, marketing
and selling hemp products.
Significant changes in the state of affairs
On 21 August 2020, the Group completed its acquisition of the business and assets of TexInnovate, a portfolio of
five businesses with deep technical expertise and capability across a broad range of high-performance textile
disciplines. Total consideration for the acquisition was USD48.7m.
Total potential consideration for the businesses and operating assets is USD42.0m:
• at completion Ecofibre settled 50% of the business acquisition (USD21.0m), comprising USD10.5m cash and the
issue of 5,924,926 shares at a value of USD10.5m; and
• contingent consideration with a value up to USD21.0m is also payable subject to the acquired businesses
delivering USD6.0m earnings before interest and tax (EBIT) for two consecutive annual periods within five years
of completion. The earliest that any such consideration may become due is in 3 equal tranches of USD7.0m on
the 3rd, 4th and 5th anniversaries after completion, payable in equal proportions of cash and shares.
Consideration for real estate assets used by the businesses totalled USD6.7m, as determined by independent market
appraisal. Acquisition of the real estate assets was settled in cash at the completion date.
To fund the upfront cash component of the acquisition, Ecofibre conducted a placement under its Listing Rule 7.1
capacity to existing institutional shareholders to raise $29.5m. The placement was completed and 11,800,000 new
shares issued on 4 August 2020.
28
ECOFIBRE LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
Significant changes in the state of affairs (continued)
During the year, the Group also issued 1,646,116 new shares to Thomas Jefferson University (TJU) in settlement of
the final costs of research services rendered pursuant to a Research and Share Subscription Agreement which
concluded in April 2021. Additionally, as per the agreement, TJU have a six-month option to subscribe for an
additional 7,964,581 shares in Ecofibre Limited at an exercise price of $0.537 per share which expires on 28 October
2021.
1,706,248 shares also vested during the year from the Employee Share Trust pursuant to the Group’s Employee Share
Scheme.
On 29 March 2021, a mandatory escrow restriction on 191,907,744 shares that had been required by the ASX for a
period of 24 months following the initial public offering was released.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Review of operations and results
The loss from ordinary activities for the Group after providing for income tax amounted to $7.0m (30 June 2020:
profit of $13.2m).
The net assets of the Group are $111.8m as at 30 June 2021 (2020: $63.0m).
Ecofibre's annual result was significantly impacted by the ongoing disruption and uncertainty caused by COVID-19,
particularly in US markets.
Ananda Health
The Ananda Health business was most impacted by COVID-19 as the key independent pharmacy channel
experienced temporary and permanent store closures, a shift in service models to include a higher proportion of
home deliveries and drive through business, and a focus on vaccine rollouts.
At the beginning of the pandemic, Ananda Health had been in the process of changing its distribution model from
direct-to-pharmacy to an intermediated wholesale model, which is the traditional procurement model used by
independent pharmacies to source most of their products. The timing of this transition was difficult as sales
representatives for wholesale distributors were unable to travel for much of the time, and ultimately their focus was
spread across a large range of products.
Following a review in 2H21 it was decided to revert to the direct-to-pharmacy distribution model, which improved
cashflow and re-established closer links between Ananda Health and its primary customers.
Ananda Health's sales to independent pharmacies began showing signs of recovery in the 4th quarter of the year.
Overall, the US CBD market remained highly competitive during the year, with rationalisation of suppliers continuing
but at a slower pace than expected. Online distribution of CBD products re-emerged as an important growth
channel for the industry, and Ananda Health also increased its investment in this area.
CVS Pharmacy and other large wholesale customers continue to be important for Ananda Health, and ongoing
product development across all channels delivered a range of unique new products across all channels.
ECOFIBRE LIMITED ANNUAL REPORT 2021
29
DIRECTORS’ REPORT
Review of operations and results (continued)
Hemp Black
FY21 was a transformational year for the Hemp Black business.
The acquisition of TexInnovate, Hemp Black's manufacturing partner, delivered operational expertise in advanced
textiles, masterbatch formulation, machinery customisation and other capabilities. The two businesses were fully
integrated in 1H21.
The research program with TJU was completed in April 2021, over 12 months early, and the focus has been on the
ongoing development of innovative products and utilisation of existing production capacity.
Ananda Food
Ananda Food continued to grow its revenues, principally supplying whitelabel wholesale food markets in Australia.
Key customers included suppliers to the two largest supermarket chains in Australia, Woolworths and Coles.
Revenue included the sale of planting seed for fibre crops in the US, and additional seed crops were planted to
supply this market in FY22.
No dividend was paid during the year (2020: Nil).
Matters subsequent to the end of the financial year
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly
affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs
in future financial years.
Likely developments and expected results of operations
Ananda Health will focus on continuing to build its support of US independent pharmacies, accelerating S4 and S8
CBD sales in Australia ahead of any future S3 product approval, progressing its program of clinical trials in the US
and Australia, and ongoing product development across all channels.
Hemp Black will seek foundation customers for new and existing capacity, including 3D knitting production lines
and completion of new bi and tri component yarn production lines.
Ananda Food will focus on making hemp food ingredients available to food manufacturers, and seek to expand its
food business into the United States including the expansion of its fibre seed business.
Environmental regulation
The Group is subject to and compliant with all aspects of environmental regulations for its business activities. The
directors are not aware of any environmental law that is not being complied with.
30
ECOFIBRE LIMITED
ANNUAL REPORT
2021
Directors
Name:
Title:
Experience and expertise:
DIRECTORS’ REPORT
Barry Lambert
Non-Executive Chairman
Barry founded ASX listed company, Count Limited, a financial services business, in
1980. Count was one of the largest independent advice providers in Australia and
was acquired by Commonwealth Bank in 2011. Barry was also asked to serve as
Chairman of Class Limited and subsequently took Class through to listing on the ASX.
Barry also served as Chairman of ASX listed Count Plus. In 2017, Barry resigned as
Chairman of Class Limited and Count Plus to focus on his role as Chairman of
Ecofibre. In 2016 and 2017, Barry and Joy Lambert made significant donations to
establish the Lambert Initiative at Sydney University and Lambert Center at Thomas
Jefferson University, respectively. Both of these entities are focused on the research
and education of medicinal cannabis and hemp.
Special responsibilities:
Chairman of the Remuneration and Nomination Committee effective 1 July 2021
Member of the Audit, Risk and Compliance Committee
Name:
Title:
Experience and expertise:
Eric Wang
Chief Executive Officer and Managing Director
Eric joined Ecofibre as CFO and Director in December 2015. He was appointed CEO
and Managing Director in December 2017. Eric has over 25 years of leadership and
executive management experience, both as an officer in the United States Army and
as a financial services executive in Australia. Prior to joining Ecofibre, Eric served as
Captain and Apache pilot in the US Army for eight years in a range of roles, including
Troop Commander, Operations Officer, Executive Officer and Personnel Officer in
the United States and Europe. After leaving the military, Eric moved to Australia to
work for the global management consulting firm, Bain & Company, where he
specialized in the financial services industry in Australia and Asia. He then served as
the Chief Operating Officer of Perpetual Limited and Director of the APO for AMP
Limited.
Special responsibilities:
Member of the Health and Government Relations Committee effective 1 July 2021
Name:
Title:
Experience and expertise:
Jon Meadmore
Non-Executive Director
Jon is a Brisbane-based partner of law firm, Colin Biggers & Paisley, where he is the
joint leader of the corporate group. Jon has practiced law for over 25 years and holds
a Bachelor of Business (Accounting) in addition to his law degree.
Special responsibilities:
Chairman of Audit, Risk and Compliance Committee
Name:
Title:
Experience and expertise:
Kristi Woolrych
Non-Executive Director
Kristi has over 20 years’ experience in brand strategy, customer acquisition and
retention, customer experience, eCommerce and retail marketing. She is currently the
Chief Marketing Officer for KFC in Australia and New Zealand with accountability for
sales growth, eCommerce and overall brand performance. Kristi holds a Bachelor of
Business degree from the Queensland University of Technology, and has completed a
range of postgraduate programs including the Harvard Business School Digital
Masterclass, INSEAD CMO Academy and Australian Marketing Institute Advanced
Strategic Planning.
Special responsibilities:
None
ECOFIBRE LIMITED ANNUAL REPORT 2021
31
DIRECTORS’ REPORT
Bruce Robinson
Non-Executive Director
Prof. Robinson has over 25 years leadership experience as a board director, academic
physician and scientist across research, healthcare and medicine, and tertiary
education. He has extensive experience covering academia, government, public and
private health providers, research institutes and philanthropic organisations. He is
currently a director of Cochlear, an ASX listed global hearing implants business;
MaynePharma, an ASX listed pharmaceutical manufacturer; and QBiotics, a drug
development company. Since 2015 Prof. Robinson has also chaired the Australian
Government's National Health and Medical Research Council, and the Medical
Benefits Schedule Review Task Force.
Chairman of Health and Government Relations Committee effective 1 July 2021
Member of the Remuneration and Nomination Committee effective 1 July 2021
Vanessa Wallace
Non-Executive Deputy Chairman
Vanessa has a long track record as a director of listed and non-listed companies
including Wesfarmers Ltd, SEEK Ltd, Doctor Care Anywhere PLC and Palladium
Holdings Pty Ltd. Her executive career includes almost 30 years as a strategy
management consultant, where she focused on financial services, health and consumer
product industries, including co-leading the Booz & Company business in Japan for 4
years. Earlier in her career she was a Portfolio Manager with Investment Bank
Schroders. Vanessa is an early-stage investor in the health sector and the founding
Chairman of Australian digital health & biotechnology business, Drop Bio Pty Ltd.
Member of the Remuneration and Nomination Committee effective 1 July 2021
Member of the Audit, Risk and Compliance Committee effective 1 July 2021
Member of the Health and Government Relations Committee effective 1 July 2021
Directors (continued)
Name:
Title:
Experience and expertise:
Special responsibilities:
Name:
Title:
Experience and expertise:
Special responsibilities:
Company Secretaries
Jonathan Brown and Robin Sheldon are the joint company secretaries of the Company. Robin was appointed by the
board as a General Counsel and Joint Company Secretary of the Company with effect from 22 January 2021 to act
jointly with Jonathan who is the Company’s Chief Financial Officer and has been the Company Secretary of the
Company since 18 June 2019.
Jonathan is a Chartered Accountant with over 25 years commercial experience. Jonathan has a Bachelor of Business
(Accounting), a Graduate Diploma in Advanced Accounting, and a Graduate Diploma in Finance and Investment.
Prior to joining Ecofibre in 2016, Jonathan worked for AMP, the London Stock Exchange and Ferrier Hodgson in a
variety of roles including corporate strategy, M&A, senior finance roles and insolvency & reconstruction.
Robin has over 25 years experience in corporate law. Prior to joining Ecofibre, Robin was employed by Thomas
Jefferson University as Sr, VP of Jefferson Strategic Ventures, VP of its Innovation Pillar and Associate Counsel. Prior
to Jefferson, Robin was a partner at Fox Rothschild, LP, where she specialized in mergers & acquisitions, private equity
and intellectual property issues, especially in the biotech area. She was the General Counsel of Half.com, Inc.
(acquired by eBay, Inc.), Associate Counsel for Sanchez Computers, and Counsel for SEI Investments. Robin has been
an adjunct professor at Temple University's Beasley School of Law, and frequent lecturer on the ethics of Intellectual
Property. She has served on the board of directors, and has been secretary of Global Links - a non-profit dedicated
to putting US medical surplus to productive use around the world - for over 25 years.
32
ECOFIBRE LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
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 30 June 2021, and the number of meetings attended by each director, were:
Director
Attended
Held
Attended
Held
Board
Audit, Risk and Compliance
Committee
Barry Lambert
Eric Wang
Jon Meadmore
Kristi Woolrych
Bruce Robinson
10
10
10
5
3
10
10
10
5
3
8*
8*
8*
-*
-*
8*
8*
8*
-*
-*
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
* Attendance by invitation.
ECOFIBRE LIMITED ANNUAL REPORT 2021
33
DIRECTORS’ REPORT
Remuneration report (audited)
The remuneration report details the key management personnel (KMP) remuneration arrangements for the
consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. It also
details the Company’s Employee Share Scheme (ESS) available to all employees in the Group.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of
the entity, directly or indirectly, including all directors. Throughout this Remuneration report, the members of the
executive KMP are collectively referred to as “executives”.
Principles used to determine the nature and amount of remuneration
Details of remuneration
The remuneration report is set out under the following main headings:
●
●
●
●
●
Service agreements
Additional disclosures relating to key management personnel
Employee share scheme
Principles used to determine the nature and amount of remuneration
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives.
The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration
philosophy is to attract, motivate and retain high performance and high quality personnel.
The Board has structured an executive remuneration framework that is market competitive and complementary to
the reward strategy of the consolidated entity.
The reward framework is designed to align executive reward to shareholders' interests by:
●
●
●
having total shareholder return as a core component of plan design;
focusing on sustained growth in shareholder wealth, particularly growth in share price; and
attracting and retaining high calibre executives.
Remuneration for executive and non-executive directors is structured separately.
34
ECOFIBRE LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
Remuneration report (continued)
Principles used to determine the nature and amount of remuneration (continued)
Non-executive director remuneration
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by the
Company’s members in general meeting. The most recent determination was at the Annual General Meeting held
on 8 December 2017, where the shareholders approved a maximum annual aggregate remuneration of $500,000.
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Board. The chairman's fees are determined
independently to the fees of other non-executive directors based on comparative roles in the external market. Non-
executive directors do not currently receive share options or other incentives.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework covers base pay, share-based payments, and other benefits such
as superannuation and health care which may be country and person specific. The combination of these comprises
the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed periodically
by the Board based on individual and business performance, the overall performance of the consolidated entity and
comparable market remuneration.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor
vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional
value to the executives.
Long-term incentives (LTI) include share-based payments and any long service leave. Shares are awarded to
executives from shares already held by the ESS in an Employee Share Trust (EST) once the executives meet time
and performance based vesting hurdles.
Details of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the tables below.
The key management personnel of the consolidated entity consisted of the directors and CFO of Ecofibre Limited:
●
●
●
●
●
●
Barry Lambert – Non-Executive Chairman
Eric Wang – Managing Director and CEO
Jon Meadmore – Non-Executive Director
Kristi Woolrych – Non-Executive Director
Bruce Robinson – Non-Executive Director
Jonathan Brown – CFO and Joint Company Secretary
ECOFIBRE LIMITED ANNUAL REPORT 2021
35
Remuneration report (continued)
Details of remuneration (continued)
2021
Non-Executive Directors:
Barry Lambert (Chairman)
Jon Meadmore
Kristi Woolrych
Bruce Robinson
Executive Director:
Eric Wang
Other Key Management Personnel:
Jonathan Brown
2020
Non-Executive Directors:
Barry Lambert (Chairman)
Jon Meadmore
Executive Director:
Eric Wang
Other Key Management Personnel:
Jonathan Brown
DIRECTORS’ REPORT
Short-term
benefits
Post-employment
benefits
Share-based
payments
Cash salary
and fees
$
Super-
annuation
$
Equity-settled
shares
$
91,324
90,000
51,986
24,247
8,676
-
-
-
-
-
-
-
Total
$
100,000
90,000
51,986
24,247
284,012
7,327
792,768
1,084,107
200,000
741,569
20,000
36,003
179,244
972,012
399,244
1,749,584
91,324
90,000
8,676
-
-
-
100,000
90,000
280,000
25,000
792,768
1,097,768
200,000
661,324
20,000
53,676
391,764
1,184,532
611,764
1,899,532
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Barry Lambert (Chairman)
Jon Meadmore
Kristi Woolrych
Bruce Robinson
Executive Directors:
Eric Wang
Fixed remuneration
At risk - LTI
2021
2020
2021
2020
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
27%
28%
73%
72%
Other Key Management Personnel:
Jonathan Brown
55%
36%
45%
64%
36 ECOFIBRE LIMITED ANNUAL REPORT 2021
Remuneration report (continued)
Service agreements
Remuneration and other terms of employment for executives are formalised in service agreements. Details of these
agreements are as follows:
DIRECTORS’ REPORT
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Eric Wang
Managing Director and Chief Executive Officer
8 December 2017
No fixed term
Base salary of US$220,000 per annum, to be reviewed every 12 months from the date of
commencement. Either party may terminate the employment upon 6 months’ written
notice. No notice is required by the Company upon limited events akin to misconduct
or incapacity. Eric is subject to a restraint of trade restricting competition with the
company for up to 24 months from termination of his employment.
7,200,000 shares are held by the ESS Trustee as potential LTI under the ESS and will vest
in tranches upon satisfaction of the following share price hurdles and earliest vesting
dates for each tranche:
LTI:
Share
tranches
2,400,000
2,400,000
2,400,000
Share Price Hurdle
Share price on ASX of at least $1.50 based on
a rolling 30 day volume weighted average
price (VWAP) during the period between 1
January 2022 and 31 December 2024
Share price on ASX of at least $1.83 based on
a rolling 30 day VWAP during the period
between 1 January 2023 and 31 December
2024
Share price on ASX of at least $2.17 based on
a rolling 30 day VWAP during the period
between 1 January 2024 and 31 December
2024
Earliest Vesting
Date
30 June 2022
30 June 2023
30 June 2024
ECOFIBRE LIMITED ANNUAL REPORT 2021
37
Remuneration report (continued)
Service agreements (continued)
DIRECTORS’ REPORT
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Jonathan Brown
CFO and Joint Company Secretary
8 December 2017
LTI:
No fixed term
Base salary of $200,000 per annum plus superannuation, to be reviewed every 12 months
from the date of commencement. Either party may terminate the employment upon 3
months’ written notice. No notice is required by the Company upon limited events akin
to misconduct or incapacity. Jonathan is subject to a restraint of trade restricting
competition with the company for up to 24 months from termination of his employment.
799,998 shares were issued on 31 July 2020 upon satisfaction of a share price vesting
hurdle. A further 1,600,002 shares are held by the ESS Trustee as potential LTI under the
ESS and will vest in tranches upon satisfaction of the following share price hurdles and
earliest vesting dates for each tranche
Share Price Hurdle
Share
tranches
800,001
Earliest Vesting
Date
31 July 2022
Share price on ASX of at least $1.83 based
on a rolling 30 day VWAP during the period
between 1 January 2022 and 31 December
2024
800,001
Share price on ASX of at least $2.17 based
on a rolling 30 day VWAP during the period
between 1 January 2024 and 31 December
2024
31 July 2024
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Details of shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2021 are set out below:
Name
Date
No. of shares
Issue price
$
Jonathan Brown
31 July 2020
799,998
$0.537
429,332
38
ECOFIBRE LIMITED ANNUAL REPORT 2021
I
A
DIRECTORS’ REPORT
Remuneration report (continued)
Additional information
The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below:
Sales revenue
EBITDA
EBIT
(Loss) / Profit after income tax
2021
$’000
28,793
(4,580)
(8,870)
(6,986)
2020
$’000
50,717
19,187
17,138
13,156
2019
$’000
35,605
5,766
4,808
6,000
2018
$’000
5,749
(7,338)
(7,682)
(8,627)
2017
$’000
575
(7,692)
(8,067)
(8,649)
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
0.68
-
(2.16)
2.22
-
4.43
2.10
-
2.28
n/a*
-
(3.17)
n/a*
-
(4.01)
2021
2020
2019
2018
2017
* Ecofibre was listed on ASX in March 2019.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at the start of
the year
Additions
Disposals
Balance at the end of
the year
Ordinary shares
Barry Lambert
Jon Meadmore
Kristi Woolrych
Bruce Robinson
Eric Wang
Jonathan Brown
76,005,959
538,000
-
-
13,301,253
2,297,246
92,142,458
-
-
-
-
350,000
799,998
1,149,998
(51,204)
-
-
-
-
(580,000)
(631,204)
75,954,755
538,000
-
-
13,651,253
2,517,244
92,661,252
ECOFIBRE LIMITED ANNUAL REPORT 2021
39
DIRECTORS’ REPORT
Remuneration report (continued)
Employee share scheme
The Board believes that employees should be given the opportunity to become shareholders in our business, and
that the share scheme helps engage, retain and motivate employees over the long term, and to encourage
alignment with the performance of the Group.
The employee share scheme is an LTI designed to help the Group attract and retain the best staff as we deliver our
long-term strategy. These shares will be issued to employees from shares already held by the (EST) if employees
meet time-based, performance based or time and performance based, vesting hurdles. The time-based hurdles are
1, 2, 3 or 4 years, typically depending on the seniority of the employee.
Key terms of the ESS are:
How is it paid?
Employees are eligible to receive shares if they meet certain time-based, performance-
based or time and performance-based vesting hurdles.
How can employees
earn and how is
performance
measured?
Different vesting conditions are offered to various employees. The conditions include:
a. Share price hurdles – earned when share price exceeds a certain level on a 30 days
volume weighted average price (VWAP) basis within a certain period.
b. Profit-based hurdles – earned when Group or business unit profitability achieve
target levels.
c. Sales target hurdle– earned when achieving certain sales, gross margin or volume
targets.
d. Time-based hurdles – earned when employee remains with the Group within 1 to 4
years.
When is performance
measured?
The performance measures are tested at the date specific in each offer document.
What happens if an
employee leaves?
If an employee resigns or is terminated for cause, any unvested LTI under the ESS are
typically forfeited, unless otherwise determined by the Board.
If an employee ceases employment during the performance period by reason of
redundancy, ill health, death, or other circumstances approved by the Board, the
employee may receive a pro-rata number of unvested shares based on achievement of
the vesting conditions over the performance period up to the date of ceasing
employment (subject to Board discretion).
This concludes the remuneration report, which has been audited.
40
ECOFIBRE LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
Shares under option
Unissued ordinary shares of Ecofibre Limited under option at the date of this report are as follows:
Option holder
Grant date
Expiry date
Exercise price
Number under option
Thomas Jefferson University
1 July 2017
28 October 2021
$0.537
7,964,581
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.
Due to early completion of the TJU research agreement, all options granted are exercisable as at 30 June 2021. No
options have been exercised during the 2021 financial year and up to the date of this report.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives
of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the full details of the cover and the amount of the premium.
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.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings
on behalf of the company, or to 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 part of those proceedings.
The company was not party to any such proceedings during the year.
ECOFIBRE LIMITED ANNUAL REPORT 2021
41
DIRECTORS’ REPORT
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the
auditor are outlined in note 21 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
●
The directors are of the opinion that the services as disclosed in note 21 to the financial statements do not compromise
the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting
Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a
management or decision-making capacity for the company, acting as advocate for the company or jointly sharing
economic risks and rewards.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financials/ Directors’ Report) Instrument 2016/191, the amounts
in this report are rounded off to the nearest thousand dollars unless otherwise indicated.
Auditor's independence declaration
The auditor’s independence declaration has been received and can be found on page 43 of the annual report.
Auditor
William Buck (Qld) continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Barry Lambert
Director
19 August 2021
Sydney
___________________________
Eric Wang
Director
19 August 2021
Lexington
42
ECOFIBRE LIMITED ANNUAL REPORT 2021
Directors’ Declaration
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards,
the Corporations Regulations 2001 and other mandatory professional reporting requirements
the attached financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30
June 2021 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable; and
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Barry Lambert
Director
19 August 2021
Sydney
44
ECOFIBRE LIMITED ANNUAL REPORT 2021
Consolidated Statement of Profit or Loss
For the year ended 30 June 2021
Revenue
Direct costs
Gross profit
Other income
Other operating expenses
Interest expense
(Loss) / profit before income tax
Note
4(a)
5(a)
4(b)
5(b)
2021
$’000
2020
$’000
28,793
50,717
(11,169)
(12,255)
17,624
38,462
4,951
6,482
(31,417)
(27,549)
(1,201)
(144)
(10,043)
17,251
Income tax benefit / (expense)
6
3,057
(4,095)
(Loss) / profit after income tax attributable to the members of the
company
Earnings per share:
Basic (loss) / earnings per share - cents
Diluted (loss) / earnings per share - cents
(6,986)
13,156
(2.16)
(2.16)
4.43
4.34
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes
ECOFIBRE LIMITED ANNUAL REPORT 2021
45
Consolidated Statement of Other Comprehensive Income
For the year ended 30 June 2021
(Loss) / profit after income tax attributable to the members of the
company
Other comprehensive loss for the year:
2021
$’000
2020
$’000
(6,986)
13,156
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign controlled entities
33
(4,922)
(425)
Total comprehensive (loss) / income for the year attributable to the
members of the company
(11,908)
12,731
The above consolidated statement of other comprehensive income should be read in conjunction with the
accompanying notes
46
ECOFIBRE LIMITED ANNUAL REPORT 2021
Consolidated Statement of Financial Position
As at 30 June 2021
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Biological assets
Other current assets
Tax recoverable
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Intangible assets
Right-of-use assets
Property, plant and equipment
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Tax payable
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities
Related party loans
Contingent consideration
Deferred tax liabilities
Borrowing
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Foreign currency translation reserve
Accumulated losses
Share capital reserve
Share-based payment reserve
TOTAL EQUITY
Note
7
8
9
10
11
12
13
14
15
16
13
13
17
32
18
20
33
32
29
2021
$’000
8,620
4,480
16,413
1,350
4,986
3,357
39,206
50,642
911
47,080
3,906
102,539
141,745
5,162
491
65
5,718
474
10,000
12,414
1,278
64
24,230
29,948
111,797
108,132
(5,097)
(11,334)
14,300
5,796
111,797
2020
$’000
18,252
9,442
10,014
2,321
5,434
-
45,463
659
1,047
34,634
2,492
38,832
84,295
9,381
491
829
10,701
593
10,000
-
-
-
10,593
21,294
63,001
62,376
(175)
(4,348)
-
5,148
63,001
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
ECOFIBRE LIMITED ANNUAL REPORT 2021
47
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
Note
Issued
capital
$'000
Share-
based
payment
reserve
$'000
Convertible
loan reserve
$'000
Share
capital
reserve
$’000
Foreign
currency
translation
reserve
$'000
Accumulated
losses
$'000
Total
$'000
Consolidated
Balance 30 June 2019
56,189
3,229
139
Total comprehensive
income for the year
-
Shares issued
20
3,836
-
-
Share-based payments 20
918
1,919
-
-
-
Convertible loan
conversion to shares
20
1,433
-
(139)
Balance 30 June 2020
62,376
5,148
Total comprehensive
income for the year
-
Shares issued
20
44,975
-
-
Share-based payments 20
1,125
648
Contingent
consideration to
TexInnovate
Share issue cost
32
20
-
(344)
-
-
Balance 30 June 2021
108,132
5,796
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,300
-
250
(17,504) 42,303
(425)
13,156 12,731
-
-
-
-
-
-
3,836
2,837
1,294
(175)
(4,348)
63,001
(4,922)
(6,986)
(11,908)
-
-
-
-
-
-
-
-
44,975
1,773
14,300
(344)
14,300
(5,097)
(11,334) 111,797
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
48
ECOFIBRE LIMITED ANNUAL REPORT 2021
Consolidated Statement of Cash Flows
For the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers
Government grants
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
Note
2021
$’000
2020
$’000
32,866
3,126
(42,161)
24
(874)
(1,339)
42,954
1,691
(34,917)
274
(189)
(4,004)
Net cash flows (used in) / generated from operating activities
24
(8,358)
5,809
Cash flows from investing activities
Payments for property, plant and equipment
Payments for business acquisition
Payments for other intangible assets
Receipt from sale of property, plant and equipment
Other
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of lease liabilities
Proceeds from issue of shares
Transaction costs related to issues of shares
Net cash flows generated from financing activities
Net decrease in cash and cash equivalents held
32
20
(5,780)
(22,729)
(325)
33
63
(22,605)
-
-
203
(126)
(28,738)
(22,528)
-
(534)
29,500
(392)
10,000
(598)
-
-
28,574
9,402
(8,522)
(7,317)
Cash and cash equivalents at the beginning of the financial year
18,252
25,740
Effect of movement in exchange rates on cash held
(1,110)
(171)
Cash and cash equivalents at the end of the financial year
7
8,620
18,252
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
ECOFIBRE LIMITED ANNUAL REPORT 2021
49
Notes to the Consolidated Financial Statements
1. Summary of significant accounting policies
Ecofibre Limited ('the Company' or ‘Ecofibre’) is a for profit company limited by shares incorporated in Australia.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Basis of preparation
The financial statements are general purpose financial statements which have been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in
financial statements containing relevant and reliable information about transactions, events and conditions.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply
with International Financial Reporting Standards. The following is a summary of the material accounting policies
adopted by the Group in the preparation of the financial statements. The accounting policies have been
consistently applied, unless otherwise stated.
The financial statements have been prepared on an accruals basis and are based on historical costs modified by
the revaluation of selected non-current assets, financial assets, financial liabilities and biological assets for which
fair value basis of accounting has been applied.
The financial statements are presented in Australian dollars and all values are rounded to the nearest thousand
dollars in accordance with ASIC Corporation Instrument 2016/191 unless otherwise stated.
a) Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated
entity only. Supplementary information about the parent entity is disclosed in note 28.
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ECOFIBRE LIMITED ANNUAL REPORT 2021
1. Summary of significant accounting policies (continued)
b) Principles of consolidation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements incorporate the results and assets and liabilities of all entities controlled
by Ecofibre Limited ("parent entity") as at 30 June 2021 and results of all controlled entities for the year then
ended. The parent entity and its controlled entities together are referred to in the financial statements as "the
consolidated entity" or "the Group". Subsidiaries are all those entities over which the parent entity has control.
The parent entity controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through the power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the parent entity.
Where controlled entities have entered the group during the year, the financial performance of those entities is
included only for the period of the year that they were controlled.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated
entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the consolidated entity.
c) Foreign currency translation
The financial statements are presented in Australian dollars, which is Ecofibre's functional and presentation
currency.
Foreign currency transactions and balances
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in profit or loss.
Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items
measured at fair value are reported at the exchange rate at the date when fair value was determined.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the
extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in
the statement of profit or loss or statement of other comprehensive income.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at
the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using
the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All
resulting foreign exchange differences are recognised in other comprehensive income through the foreign
currency reserve in equity.
The foreign currency reserve is recognised in profit or loss if the foreign operation or net investment is disposed.
ECOFIBRE LIMITED ANNUAL REPORT 2021
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (continued)
d) Revenue recognition
The consolidated entity recognised revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected
to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer,
the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the
contract; determines the transaction price which takes into account estimates of variable consideration and the
time value of money; allocates the transaction price to the separate performance obligations on the basis of the
relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when
or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods
or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle
are recognised as a refund liability.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the
goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts
disclosed as revenue are net of sales rebates, returns and trade discounts.
Bill-and-hold arrangements
Bill-and-hold arrangements occur when there is a sale to a customer and the customer requests the consolidated
entity to warehouse its products for a period of time until it can accept delivery or arrange transfer of the products
to third parties. Revenue from bill-and-hold arrangements is recognised when the customer obtains title and
acknowledges control of a product.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Government grants
Government grants relating to costs are recognised in profit or loss over the period necessary to match them
with the costs that they are intended to compensate.
52 ECOFIBRE LIMITED ANNUAL REPORT 2021
1. Summary of significant accounting policies (continued)
e)
Income Tax
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on
the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
A charge for current income tax expense is recognised based on the profit for the year adjusted for any non-
assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively
enacted throughout the reporting period.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax
will be recognised from the initial recognition of an asset or liability, excluding a business combination, where
there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or
liability is settled. Deferred tax is credited in the statement of profit or loss and other comprehensive income
except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted
directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be
available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income taxation legislation and the anticipation that the company and
consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply
with the conditions of deductibility imposed by the law.
f) Business combination
The acquisition method of accounting is used to account for business combinations regardless of whether
equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of
any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets.
All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms, economic
conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in
existence at the acquisition-date.
ECOFIBRE LIMITED ANNUAL REPORT 2021 53
1. Summary of significant accounting policies (continued)
f) Business combination (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held
equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and
the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent
settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-
existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to
the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held
equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises additional assets or liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition-
date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii)
when the acquirer receives all the information possible to determine fair value.
g) Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in
the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to
be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other
assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal
operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the
reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months
after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
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ECOFIBRE LIMITED ANNUAL REPORT 2021
g) Summary of significant accounting policies (continued)
h) Trade and other receivables
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for
settlement within 60 days.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a
lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped
based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
i)
Inventories
Inventories and agricultural produce are valued at the lower of cost and net realisable value on a standard cost
basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes. Costs
of purchased inventory are determined after deducting rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
j) Biological assets
Biological assets are measured on initial recognition and at the end of each reporting period at their fair value
less costs to sell.
k) Impairment of assets
At the end of each reporting period, the company and consolidated entity review the carrying values of their
tangible and intangible assets to determine whether there is any indication that those assets have been impaired.
If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less
costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value
over its recoverable amount is expensed to the statement of profit or loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
l)
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-
use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate
specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent
cash flows are grouped together to form a cash-generating unit.
ECOFIBRE LIMITED ANNUAL REPORT 2021
55
1. Summary of significant accounting policies (continued)
m) Property, plant and equipment
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Plant and equipment
Plant and equipment is measured on the cost basis less accumulated depreciation and impairment losses.
The carrying value of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net
cash flows that will be received from the assets' employment and subsequent disposal. The expected net cash
flows have been discounted to their net present values in determining recoverable amounts.
Depreciation
Depreciation is calculated on the basis of writing off the net cost of each item of property, plant and equipment
over its expected useful life to the entity. Estimates of remaining useful lives are made on a regular basis for all
assets, with annual reassessments for major items. The expected useful lives vary from 3 to 40 years.
n) Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at
cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs incurred,
and, except where included in the cost of inventories, an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain
ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life.
Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for
short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets
are expensed to profit or loss as incurred.
o)
Intangible assets
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss
and are not subsequently reversed.
p) Financial instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the
related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured
as set out below:
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ECOFIBRE LIMITED ANNUAL REPORT 2021
1. Summary of significant accounting policies (continued)
p) Financial instruments (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are stated at amortised cost using the effective interest rate method.
Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt, less principal
repayments and amortisation.
Impairment
At the end of each reporting period, the consolidated entity recognises a loss allowance for expected credit
losses on financial assets measured at amortised cost. The measurement of the loss allowance depends upon
the consolidated entity’s assessment at the end of each reporting period as to whether the financial instruments’
credit risk has increased significantly since initial recognition, based on reasonable and supportable information
that is available, without undue cost or effort to obtain. Impairment losses are recognised in the statement of
profit or loss.
.
q) Trade and other creditors
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end
of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition.
r) Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease
liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written down.
ECOFIBRE LIMITED ANNUAL REPORT 2021
57
1. Summary of significant accounting policies (continued)
s) Employee entitlements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave, expected
to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees’
services up to the reporting date and are measured on the basis of when the benefit is expected to be settled.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services,
where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option,
together with non-vesting conditions that do not determine whether the consolidated entity receives the services
that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the
vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at
each reporting date less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying
either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on
which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated
as follows:
• during the vesting period, the liability at each reporting date is the fair value of the award at that date
•
multiplied by the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability
at the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the
cash paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided
all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been
made. An additional expense is recognised, over the remaining vesting period, for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
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ECOFIBRE LIMITED ANNUAL REPORT 2021
1. Summary of significant accounting policies (continued)
s) Employee entitlements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or
employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over
the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award,
the cancelled and new award is treated as if they were a modification.
t) Cash and cash equivalents
For purposes of the statement of cash flows, cash includes deposits at call with financial institutions and other
highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are
subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.
u) Goods and services tax, sales and use tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) and sales and
use tax (SUT) except where the amount of GST or SUT incurred is not recoverable. In these circumstances the
GST or SUT is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables are stated with the amount of GST or SUT included. The net amount of GST or SUT
recoverable or payable is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST or SUT components of cash
flows arising from investing and financing activities which are recoverable or payable are classified as operating
cash flows.
v) Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on 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 and assumes that the transaction
will take place either in the principal market or in the absence of a principal market, in the most advantageous
market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement
is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for
which sufficient data is available to measure fair value, are used, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
ECOFIBRE LIMITED ANNUAL REPORT 2021
59
1. Summary of significant accounting policies (continued)
w) Earnings per share
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Ecofibre Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation
to dilutive potential ordinary shares.
x) New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30
June 2021. The consolidated entity has assessed the impact of any new or amended Accounting Standards and
Interpretations, and concluded that they would not have any material impact.
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ECOFIBRE LIMITED ANNUAL REPORT 2021
2. Critical accounting estimates and judgements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates its
judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the circumstances.
The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined by using the
Binomial and Black-Scholes model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would
have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may
impact profit or loss and equity.
Provision for impairment of inventories
The provision for impairment of inventories requires a degree of estimation and judgement. The level of the
provision is assessed by taking into account recent and expected future sales experience, production
requirements, the age of inventories and other factors that affect inventory obsolescence.
Taxation
There are many transactions and calculations undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. The consolidated entity recognises liabilities or receivables for
anticipated tax issues based on estimates of whether additional taxes will be due or refundable. Where the final
tax outcome of these matters is different from the amounts that were actually recorded, such differences will
impact the current and deferred tax positions in the period in which such determination is made.
Biological assets
Biological assets, in the form of planted hemp crops, are accounted for under AASB 141 Agriculture, which
requires that the assets be measured at fair value less costs to sell. Fair value is determined using a range of
judgemental assumptions including cost per area (acre or hectare), total area planted and percentage of maturity
of the crops based on estimated harvest dates.
Goodwill
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate whether
goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable
amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of assumptions, including estimated discount rates based on the current cost of capital and
growth rates of the estimated future cash flows.
ECOFIBRE LIMITED ANNUAL REPORT 2021
61
3. Operating segments
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Identification of reportable operating segments
The consolidated entity is organised into three operating segments based on differences in products and
services provided: nutraceuticals, food and fibre.
These operating segments are based on the internal reports that are reviewed and used by the Board of
Directors (BOD) in assessing performance and in determining the allocation of resources.
Other segments represent the research and development and corporate headquarter activities of the
consolidated entity.
The BOD reviews the profit or loss before income tax for each segment. The accounting policies adopted
for internal reporting to the BOD are consistent with those adopted in the financial statements.
Types of products and services
The principal products and services of each of the operating segments are as follows:
Ananda Health
Production and sale of hemp related nutraceutical products focused on the
United States
Ananda Food
Production and sale of hemp related food products primarily in Australia
Hemp Black
Production and sale of innovative textile and hemp products primarily in
United States
Ecofibre Corporate
Research and development and group corporate functions
Intersegment transactions
Intersegment transactions are made at arms-length market rates and are eliminated on consolidation.
Intersegment receivables and payables
Intersegment transactions are initially recognised at the consideration received. Intersegment receivables and
payables that earn or incur non-market interest are not adjusted to fair value based on market interest rates.
Intersegment receivables and payables are eliminated on consolidation.
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ECOFIBRE LIMITED ANNUAL REPORT 2021
3. Operating segments (continued)
Operating segment information
a) Segment performance
Consolidated - 2021
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Government grant
Foreign exchange gain / (loss)
Interest income
Other income
Total revenue and other income
Total expenses
Intersegment purchases
Segment profit/ (loss) before income
tax
Intersegment eliminations
Loss before income tax
Consolidated - 2020
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Interest income
Other income
Total revenue and other income
Total expenses
Intersegment purchases
Segment profit/ (loss) before
income tax
Intersegment eliminations
Profit before income tax
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Ananda
Health
$’000
14,276
-
14,276
3,688
22
1
(18)
17,969
(17,680)
-
Hemp
Black
$’000
Ananda
Food
$’000
Ecofibre
Corporate
$’000
11,900
-
11,900
1,116
(4)
-
94
13,106
(14,116)
-
2,617
177
2,794
133
(3)
-
15
2,939
(4,355)
(80)
-
-
-
323
(493)
27
50
(93)
(7,636)
-
289
(1,010)
(1,496)
(7,729)
46,819
213
47,032
22
1,824
48,878
(27,950)
(100)
2,429
-
2,429
-
-
2,429
(2,420)
-
1,469
327
1,796
-
371
2,167
(4,225)
(141)
-
-
-
235
4,030
4,265
(5,353)
-
20,828
9
(2,199)
(1,088)
Total
$’000
28,793
177
28,970
5,260
(478)
28
141
33,921
(43,787)
(80)
(9,946)
(97)
(10,043)
50,717
540
51,257
257
6,225
57,739
(39,948)
(241)
17,550
(299)
17,251
ECOFIBRE LIMITED ANNUAL REPORT 2021
63
3. Operating segments (continued)
b) Segment assets and liabilities
Consolidated - 2021
Assets
Segment assets
Unallocated assets:
Cash and cash equivalents
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Related party loans and borrowings
Total liabilities
Consolidated - 2020
Assets
Segment assets
Unallocated assets:
Cash and cash equivalents
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Related party loans and borrowings
Total liabilities
4. Revenue and other income
a)
Revenue
Sales
b) Other income
Government grant and tax incentives ^
Foreign exchange (loss) / gain *
Interest
Other income
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Ananda
Health
$’000
Hemp
Black
$’000
Ananda
Food
$’000
Ecofibre
Corporate
$’000
Total
$’000
20,411
70,319
6,583
35,812
133,125
8,620
141,745
3,019
13,695
1,833
1,401
19,948
10,000
29,948
25,205
6,229
7,767
26,842
66,043
18,252
84,295
6,949
311
2,600
1,434
11,294
10,000
21,294
2021
$'000
2020
$'000
28,793
50,717
5,260
(478)
28
141
4,951
1,876
3,925
257
424
6,482
^ Current year income includes receipt of a US Paycheck Protection Program (PPP) forgivable loan of $2.4m
(2020: $1.6m), accrued Employment Retention Credit $2.4m (2020: nil) and other government grants due to
COVID-19.
* (Loss) / gain from revaluation of financial assets held in currencies other than Australian dollars.
64 ECOFIBRE LIMITED ANNUAL REPORT 2021
5. Expenses
a) Direct costs
Costs of goods sold
Write down of inventory
Reversal of inventory provision
b) Other operating expenses
Employees and contractors
Share based payments (note 29)
Sales and marketing
Travel and accommodation
Equipment modification and maintenance
Short-term and low value lease payments
Legal fees and compliance
Accounting and audit
Depreciation and amortisation
Research and trials
Bad and doubtful debts
Other
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2021
$'000
10,844
325
-
11,169
14,445
1,773
1,896
360
890
217
1,437
394
4,290
2,648
27
3,040
31,417
2020
$'000
12,009
368
(122)
12,255
12,008
2,705
2,874
676
360
266
959
391
2,049
2,296
1,049
1,916
27,549
6.
Income tax
a) The aggregated amount of income tax attributable to the financial year differs from the prima facie amount
calculated on the operating profit. The difference is reconciled as follows:
Profit/ (loss) before income tax
Prima facie tax (benefit) / tax on (loss) / profit from ordinary activities
before income tax at 30% (2020: 30%)
Adjustment for foreign tax rates
Tax effect of permanent differences:
- Share based payments
- Research and development expenses
- COVID-19 government assistance
- Know-how amortisation
- Foreign witholding taxes
- Contingent consideration
- Other
Change in opening deferred taxes resulting from change in tax rate
R & D tax rebate received
Currency conversion differences upon consolidation
Tax over provided in prior period
Current year losses for which no DTA is recognised
Income tax (benefit)/ expense
(10,043)
17,251
(3,013)
(58)
256
120
(755)
(328)
370
85
85
275
(314)
(10)
(118)
348
(3,057)
5,175
(546)
(1)
159
(15)
-
28
-
76
(230)
(205)
(98)
(248)
-
4,095
ECOFIBRE LIMITED ANNUAL REPORT 2021
65
6.
Income tax (continued)
b)
Income tax expense
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Current tax
Deferred tax - origination and reversal of temporary differences
Under/(over) provision from previous years
- Current tax
- Deferred tax
Aggregate income tax expense
c) Tax losses
Tax losses available in Australia – AU$
Tax losses available in USA – US$
d) Franking credits
2021
$'000
(2,888)
(51)
(33)
(85)
(3,057)
6,888
7,837
2020
$'000
4,562
(219)
383
(631)
(4,095)
-
-
d)
e)
Franking credits available for the subsequent financial year amount to $nil (2020 - $nil). This represents the
balance of the franking account as at the end of the financial year adjusted for franking credits that will
arise from the payment of any income tax payable as at the end of the year.
66
ECOFIBRE LIMITED ANNUAL REPORT 2021
7. Cash and cash equivalents
Cash at bank
Call deposits
Term deposits and other cash equivalents
8. Trade and other receivables
Trade debtors
Allowance for expected credit losses
GST receivable
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2021
$'000
4,339
-
4,281
8,620
4,509
(148)
119
4,480
2020
$'000
4,117
2,912
11,223
18,252
9,610
(355)
187
9,442
Allowance for expected credit losses
The consolidated entity has recognised a gain of $23,000 (2020: loss of $1,049,000) in the profit or loss in
respect of the expected credit losses for the year.
The consolidated entity has continued to monitor debt recovery for any increased probability of customers
delaying payment or being unable to pay, due to the Coronavirus (COVID-19) pandemic.
Movement in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
9.
Inventories
Finished goods
Work in progress
Raw materials
10. Biological assets
Crops planted
2021
$'000
355
267
(184)
(290)
148
2,397
9,246
4,770
16,413
2020
$'000
152
1,049
(846)
-
355
1,278
5,788
2,948
10,014
1,350
2,321
The risk of crop failure due to weather conditions is managed through planting at different locations and times.
Reconciliation of biological assets:
Crops planted at 1 July
Harvested and transferred to raw material inventory
Crops planted
Harvested and transferred to raw material inventory
Balance at 30 June
$'000
2,321
(2,321)
1,350
-
1,350
$'000
2,405
(2,405)
2,825
(504)
2,321
ECOFIBRE LIMITED ANNUAL REPORT 2021 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Other current assets
Prepayments
Other ^
^ Includes accrued Employee Retention Credit grant of $2.4m at 30 June 2021.
12. Intangible assets
Goodwill – at cost (Note 32)
Patents and trademarks – at cost
Less: Accumulated amortisation
Software – at cost
Less: Accumulated amortisation
Website development – at cost
Less: Accumulated amortisation
Work in progress – at cost
Total intangible assets
Less: accumulated amortisation
2021
$'000
2,200
2,786
4,986
2020
$'000
4,845
589
5,434
46,766
3,253
(6)
3,247
282
(148)
134
557
(92)
465
30
50,888
(246)
50,642
-
501
(2)
499
209
(57)
152
-
-
-
8
718
(59)
659
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Work in
progress Goodwill
$’000
$’000
Patents and
trademarks Software
$’000
$’000
Website
development
$’000
Balance at 1 July 2019
Additions
Amortisation
Balance at 1 July 2020
Transfer
Additions
Amortisation
Write off
Exchange difference
Balance at 30 June 2021
-
8
-
8
(8)
30
-
-
-
30
-
-
-
-
-
48,814
-
-
(2,048)
46,766
340
161
(2)
499
-
2,794
(4)
(42)
-
3,247
-
209
(57)
152
8
65
(91)
-
-
134
-
-
-
-
-
557
(92)
-
-
465
Total
$’000
340
378
(59)
659
-
52,260
(187)
(42)
(2,048)
50,642
68
ECOFIBRE LIMITED ANNUAL REPORT 2021
Goodwill impairment testing
Goodwill acquired through business combinations have been allocated to the following cash-generating units:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Hemp Black (acquired business)
2021
$'000
2020
$'000
46,766
-
The recoverable amount of the consolidated entity's goodwill has been determined by a value-in-use calculation
using a discounted cash flow model based on a 5 year projection period and a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model:
●
●
10.9% as the discount rate; and
30% - 60% per annum projected revenue growth rate over the projected cash flow periods.
The discount rate of 10.9% has been set using the estimated weighted average cost of capital to equate the present
value of future cashflows against the current carrying value of fixed and intangible assets.
Management believes the projected revenue growth rate is prudent and justified.
Management’s estimation of increase in operating costs is based on estimated inflation rate and also an effort by
the consolidated entity to contain costs.
There were no other key assumptions.
Based on the above, the recoverable amount of Hemp Black (acquired business) exceeded the carrying amount.
Sensitivity
As disclosed in note 2, the directors have made judgements and estimates in respect of impairment testing of
goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease.
The sensitivities are as follows:
●
Revenue would need to decrease by more than 50% before goodwill would need to be impaired, with all other
assumptions remaining constant.
The discount rate would be required to increase by 350% before goodwill would need to be impaired, with all other
assumptions remaining constant.
●
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of
goodwill is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount.
ECOFIBRE LIMITED ANNUAL REPORT 2021 69
13. Leases
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group leases warehouse, factory and administrative facilities. The leases typically run for a period of 3 to 4
years with some leases having the option to renew the lease after that date. Lease terms are renegotiated upon
expiry of each lease to reflect market rentals. Some leases provide for additional rent payments that are based
on changes in local price indices.
The Group leases office equipment with contract terms of 5 years. These leases are for low-value items, and the
Group has elected not to recognise right-of-use assets and lease liabilities for these leases.
The weighted average incremental borrowing rate applied to lease liabilities at the date of initial application was
7.5%.
Information about leases for which the Group is a lessee is presented below.
i. Right-of-use assets
Right-of-use assets relate to leased properties that do not meet the definition of investment property and are
presented as below:
2021
Balance at 1 July 2020
Additions to right-of-use assets
Depreciation charge for the year
Exchange difference
Balance at 30 June 2021
2020
Balance at 1 July 2019
Additions to right-of-use assets
Depreciation charge for the year
Exchange difference
Balance at 30 June 2020
Farming and
processing
equipment
Buildings
$’000
1,028
449
(544)
(33)
900
1,440
194
(635)
29
1,028
$’000
19
-
(8)
-
11
-
24
(5)
-
19
Total
$’000
1,047
449
(552)
(33)
911
1,440
218
(640)
29
1,047
70
ECOFIBRE LIMITED ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Leases (continued)
ii) Lease liabilities
The lease liabilities are presented as below:
Balance at 1 July
New leases during the period
Payments
Interest charges during the period
Exchange difference
Balance at 30 June
Lease liability recognised as at 30 June of which are:
Current lease liabilities
Non-current lease liabilities
iii) Amounts recognised in profit or loss
Interest on lease liabilities
Depreciation charge
iv) Amounts recognised in statement of cash flows
Cash outflow for leases:
Financing cash outflow
Operating cash outflow
v) Extension options
2021
$’000
1,084
449
(609)
74
(33)
965
491
474
965
75
552
534
75
2020
$’000
1,440
218
(689)
91
24
1,084
491
593
1,084
91
640
598
91
Some property leases contain extension options exercisable by the Group up to 2 years before the end of the
non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases
to provide operational flexibility. The extension options held are exercisable only by the Group and not by the
lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the
extension options. The Group reassesses where it is reasonably certain to exercise the options if there is a
significant event or significant changes in circumstances within its control.
ECOFIBRE LIMITED ANNUAL REPORT 2021 71
14. Property, plant and equipment
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Capital work in progress
Land
Building
Less: accumulated depreciation
Motor vehicles
Less: accumulated depreciation
Office equipment
Less: accumulated depreciation
Plant and machinery
Less: accumulated depreciation
Total property, plant and equipment
Less: accumulated depreciation
2021
$'000
2020
$'000
4,904
3,729
2,680
297
31,226
(814)
30,412
498
(133)
365
1,369
(649)
720
12,500
(4,501)
7,999
53,177
(6,097)
47,080
24,318
(51)
24,267
514
(87)
427
1,293
(217)
1,076
7,141
(2,303)
4,838
37,292
(2,658)
34,634
2021 Movement Schedule
Carrying value 1 July 2020
Additions
Transfer
Disposals
Depreciation
Exchange difference
Carrying value 30 June 2021
2020 Movement Schedule
Carrying value 1 July 2019
Additions
Transfer
Disposals
Depreciation
Exchange difference
Carrying value 30 June 2020
Capital
WIP
$’000
Land Building
$’000
$’000
Motor
vehicles
$’000
Office
equipment
$’000
Plant and
machinery
$’000
Total
$’000
3,729
297
2,549 2,383
(1,138)
-
-
-
-
-
-
(236)
4,904 2,680
2,795
1,844
(903)
(7)
3,729
-
297
-
-
-
-
297
24,267
6,907
-
-
(763)
1
30,412
-
23,715
603
-
(51)
-
24,267
427
59
-
(21)
(65)
(35)
365
80
370
31
(19)
(39)
4
427
1,076
171
-
-
(432)
(95)
720
20
1,172
-
-
(113)
(3)
1,076
4,838 34,634
4,618 16,687
-
1,138
(57)
(36)
(2,291)
(3,551)
(633)
(268)
7,999 47,080
3,760
6,655
1,996 29,394
-
(116)
(1,350)
51
4,838 34,634
269
(97)
(1,147)
57
72
ECOFIBRE LIMITED ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. Deferred tax assets
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Property, plant and equipment
Inventory
Accrued expenses
Allowance for expected credit losses
Blackhole expenditure
Employee share transactions
Prepayments
R&D non-refundable offsets
Carried forward losses
Other
Amounts recognised in equity:
Transaction costs on share issue
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss
Credited to equity
Closing balance
16. Trade and other payables
Trade creditors
Employee entitlements
Other creditors and accruals
17. Related party loans
Non-current
Term loan ^
2021
$'000
2020
$'000
(255)
-
181
4
187
887
(4)
779
2,066
12
3,857
(1,058)
(28)
2,340
49
211
1,134
(90)
-
-
(66)
2,492
49
-
3,906
2,492
2,492
1,365
49
3,906
2,074
699
2,389
5,162
2,034
458
-
2,492
1,029
487
7,865
9,381
10,000,000
10,000,000
^ The term loan has been provided by a trust related to the Company’s non-executive Chairman, Mr Barry
Lambert. Mr Lambert is the appointor of the trust, but neither he nor his descendents are beneficiaries. Mr
Lambert is not a director or shareholder of the trustee company. The terms of the term loan are as follows:
Agreement date
Principal balance
Interest rate
Repayment date
: 23 June 2020
: $10,000,000
: 8.0% per annum
: 15 July 2022
ECOFIBRE LIMITED ANNUAL REPORT 2021
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Deferred tax liabilities
Deferred tax liability comprises temporary difference attributable to:
Amounts recognized in profit or loss:
Property, plant and equipment
Accrued expenses
Employee share transactions
Prepayments
R&D non-refundable offsets
Carried forward losses
Others
Deferred tax liabilities
Movements:
Opening balance
(Credited) / debited to profit or loss
Closing balance
19. Employee share trust
2021
$'000
2020
$'000
4,173
(349)
(192)
94
(159)
(2,403)
114
1,278
-
1,278
1,278
-
-
-
-
-
-
-
-
392
(392)
-
On 29 June 2018, the Company entered into an Employee Securities Trust Deed with Pacific Custodians Pty
Limited (PCPL) to set up an employee share trust (EST). PCPL is the trustee for the EST.
In August 2018 and September 2018, Ecofibre Limited issued a total of 7,355,659 shares into the EST as part of
Ecofibre's employee share scheme (ESS).
The movement of Ecofibre's shares held in the EST are as follows:
Opening balance as at 30 June 2018
Shares issued by the Company to the EST
Shares issued by the EST to employees as part of the ESS – pre split
Balance pre share split
Share split – 3:1
Shares issued by the EST to employees as part of the ESS – post split
Balance as at 30 June 2019
Shares issued by the EST to employees as part of the ESS
Balance as at 30 June 2020
Shares issued by the EST to employees as part of the ESS
Balance as at 30 June 2021
Number of shares
-
7,355,659
(1,356,449)
5,999,210
11,998,420
(599,957)
17,397,673
(1,372,139)
16,025,534
(1,706,248)
14,319,286
74
ECOFIBRE LIMITED ANNUAL REPORT 2021
20. Issued Capital
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2021
$'000
2020
$'000
2021
Quantity
2020
Quantity
Ordinary shares
108,152
62,376
326,696,691
305,619,401
Movement in ordinary shares
Opening balance 1 July
Shares issued at $0.537 per share
Shares issued at $2.50 per share
TexInnovate acquisition shares (note 32)
Conversion of convertible loan
Shares issued by the EST
Share issue cost
62,376
883
29,500
14,592
-
1,125
(344)
56,189
3,836
-
-
1,433
918
-
305,619,401
1,646,116
11,800,000
5,924,926
-
1,706,248
-
291,951,478
7,147,561
-
-
5,148,223
1,372,139
-
Closing balance 30 June
108,132
62,376
326,696,691
305,619,401
341,015,977 total shares are on issue by the parent entity, which includes 326,696,691 consolidated shares on
issue plus shares held by the EST (14,319,286) which have been issued by the parent entity and are eliminated
on consolidation.
Reconciliation to the Consolidated Statement of Changes in Equity:
Balance at 30 June 2019
Shares issued
Share based payment: shares issued as part of the ESS
Convertible loan conversion to shares
Balance at 30 June 2020
Shares issued
Share based payment: shares issued as part of the ESS
Share issue cost
Balance at 30 June 2021
$’000
56,189
3,836
918
1,433
62,376
44,975
1,125
(344)
108,132
ECOFIBRE LIMITED ANNUAL REPORT 2021
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. Remuneration of auditors
Amount received or due and receivable by the auditors of the
company in respect of services to the group:
- Annual audit
- Half year review
Audit and review of financial statements
- Tax advisory
- Accounting assistance
Other services
2021
$
2020
$
134,952
110,000
32,566
25,000
167,518
135,000
45,745
18,500
64,245
52,270
13,843
66,113
Amount received or due and receivable by other William Buck offices:
- Tax advisory
14,800
-
22. Contingent liabilities and commitments
i) Contingent liability
The Group has sought declaratory judgments regarding a previous agreement in the United States. As part of
the litigation, defendants have asserted various counter claims against the Group. As the matter is still before
the courts, no further information has been disclosed as this may prejudice the position of the Group.
ii) Commitment for non-cancellable leases are as follows:
Less than one year
Between one and five years
Capital expenditure commitments not provided for in the financial
statements
2021
$’000
113
4
117
-
2020
$’000
34
9
43
69
76
ECOFIBRE LIMITED ANNUAL REPORT 2021
23. Interests in subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The financial statements of the subsidiaries have been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board. These financial statements
also comply with Australian Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’).
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-
owned subsidiaries:
Name
Principal place of business /
Country of Incorporation
Ecofibre Services Pty Ltd (ES)
Ananda Food Pty Ltd (AF)
Ecofibre Asia Pacific Pty Ltd (EAP) (formerly
Ecofibre Holdings Pty Ltd)
Ecofibre USA Inc. (EUSA)
Ananda Hemp Inc. (AH)
Ecofibre Kentucky LLC (EK)
Hemp Black Inc. (HB)
Hemp Black Biomedical, LLC (HBB)
Hemp Black Polymer, LLC (HBP)
EOF Distribution Inc. (EOFD)
Ecofibre Uruguay SA (EU)
Australia
Australia
Australia
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
Uruguay
Ownership Interests
2021
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2020
%
100%
100%
100%
100%
100%
100%
100%
-
-
100%
100%
ES’s principal activity is the provision of group corporate functions and research and development services.
AF’s principal activity is the growing, processing and distribution of hemp food products.
EAPs principal activity is sales and distribution of hemp products.
EUSA’s principal activity is an investment holding company.
AH's principal activity is the marketing and distribution of hemp nutraceutical products.
EK's principal activity is to support the manufacture of hemp nutraceutical products.
HB's principal activity is to develop and commercialise hemp fibre products.
HBB’s principal activity is manufacturing and sale of customised polymer-based yarns used for internal medical
implants and applications. HBB was formed on 31 July 2020.
HBP’s principal activity is to provide performance masterbatch and custom compounding to the plastics
industry for technical textiles. HBP was formed on 31 July 2020.
EOFD is a special purpose sales and marketing entity for the Ananda Health business in the United States.
EU is a dormant entity.
ECOFIBRE LIMITED ANNUAL REPORT 2021
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Reconciliation of profit after income tax to net cash flows from
operating activities
Net profit/ (loss) after income tax
Depreciation and amortisation
(Gain)/ Loss from disposal of fixed assets
Provision for expected credit losses
Share-based payments
Transaction costs from business acquisition
Fair value adjustments for convertible loan
Movement in foreign exchange
Unrealised foreign exchange loss / (gain)
Change in operating assets and liabilities
Decrease (increase) in assets
Trade and other debtors
Prepayments
Inventories
Biological assets
Deferred tax assets
Tax recoverable
Increase (decrease) in liabilities
Trade creditors
Other creditors and accruals
Tax payable
Employee entitlements
Deferred tax liabilities
2021
$'000
(6,986)
4,290
26
(23)
1,773
318
-
(4,922)
57
5,169
371
(6,399)
971
(1,414)
(3,357)
1,045
(3)
(764)
212
1,278
2020
$'000
13,156
2,049
(85)
203
2,705
-
(45)
(425)
(152)
(6,837)
(4,341)
(3,441)
84
(458)
251
373
2,250
829
85
(392)
Net cash flows from operating activities
(8,358)
5,809
25. Financial risk management objectives and policies
The Group’s principal financial instruments comprise receivables, payables, convertible loans and cash and cash
equivalents.
The main risks arising from the Group’s financial instruments are credit risk, interest rate risk, foreign exchange
risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to
which it is exposed. These include monitoring the levels of exposure to foreign exchange and interest rates and
assessments of market forecasts for foreign exchange and interest rates.
78
ECOFIBRE LIMITED ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Financial risk management objectives and policies (continued)
Risk exposures and responses
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade
and other receivables. The Group’s maximum exposures to credit risk at the end of the reporting period in
relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the
Statement of Financial Position. The Group minimises concentrations of credit risk in relation to trade
receivables by having payment terms of 60 days and receivable balances are monitored on an ongoing basis.
Interest rate risk
The Group’s exposure to market interest rates relates primarily to the Group’s funds held on term deposits. All
interest-bearing liabilities are at fixed interest rates. At the end of the reporting period the Group had the
following financial assets exposed to interest rate risk.
Financial Assets
Cash and cash equivalents
2021
$'000
2020
$'000
8,620
18,252
The Group’s policy is to place funds in interest-bearing accounts and term deposit where the funds are surplus
to immediate requirements. The Group’s interest rate exposure is reviewed near the maturity date of term
deposits, to assess whether more attractive rates are available without increasing risk.
The following sensitivity analysis is based on the interest rate exposures in existence at the end of the reporting
period. At 30 June 2021, if interest rates had moved, as illustrated in the table below, with all other variables
held constant, profit after tax and equity would have been affected as follows:
Consolidated
+ 1% (100 basis points)
- 0.5 % (50 points)
Profit after tax higher/ (lower)
2021
$'000
86
(43)
2020
$'000
183
(91)
Equity higher/ (lower)
2021
2020
$'000
$'000
86
(43)
183
(91)
The movements in profits is due to higher/ (lower) interest income from cash balances. There is no impact on
equity other than impact on accumulated losses.
ECOFIBRE LIMITED ANNUAL REPORT 2021 79
25. Financial risk management objectives and policies (continued)
Liquidity risk
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group’s objective is to maintain sufficient funds to finance its current operations and additional funds to
ensure its long-term survival. The Group will rely on increasing sales and operating cashflows to finance
ongoing operations, together with government incentives. Liquidity risk is monitored through rolling cash flow
forecasts that are tabled and reviewed by the Board. Total liabilities are payable as follows:
Less than one year
Between one and five years
Later than five years
2021
$’000
5,718
24,230
-
29,948
2020
$’000
10,701
10,593
-
21,294
Foreign currency risk
The Group is exposed to fluctuations in foreign currencies on product sales and purchases of goods and
services in currencies other than the Group’s functional currency. The group manages this risk by monitoring
the level of exposure to foreign currency transactions and forecasting currency requirements through rolling
cash flow forecasts.
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial
liabilities at the reporting date were as follows:
Consolidated
US dollars
Assets
2021
$'000
2020
$'000
Liabilities
2021
$'000
2020
$'000
1,397
17,114
-
21
The consolidated entity had net assets denominated in foreign currencies of US$1,397,000 (assets of
US$1,397,000 less liabilities of nil) as at 30 June 2021 (2020: US$17,093,000). Based on this exposure, had the
Australian dollar weakened by 5%/strengthened by 5% (2020: weakened by 5%/strengthened by 5%) against
these foreign currencies with all other variables held constant, the consolidated entity's profit before tax for the
year would have been $93,000 higher/$93,000 lower (2020: $1,246,000 higher/$1,246,000 lower). The
percentage change is the expected overall volatility of the significant currencies, which is based on
management’s assessment of reasonable possible fluctuations taking into consideration movements over the
last 6 months each year and the spot rate at each reporting date. The actual foreign exchange loss for the year
ended 30 June 2021 was $478,000 (2020: gain of $3.9m).
Fair value
The carrying amount of all other recognised financial assets and financial liabilities are considered a reasonable
approximation of their fair value due to their short-term nature.
80
ECOFIBRE LIMITED ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Key management personnel disclosures
Compensation
The aggregated compensation made to the key management personnel of the parent entity is set out below:
Short-term employee benefits and directors fees
Share based payments
Post-employment benefits
See also Note 27 for other related party transactions
27. Related party transactions
Transactions with related parties
The following transactions occurred with related parties:
Interest expense for convertible loan with Lambert Superannuation Fund
Interest expense for term loan (see note 17)
Receivable and payable to related parties
The receivables from and payables to related parties are disclosed in note 17.
2021
$
741,569
972,012
36,003
1,749,584
2020
$
661,324
1,184,532
53,676
1,899,532
2021
$
-
800,000
800,000
2020
$
35,237
17,534
52,771
ECOFIBRE LIMITED ANNUAL REPORT 2021
81
28. Parent entity information
Set out below is the supplementary information about the parent entity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Profit/ (Loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share based payment reserve
Share capital reserve
Accumulated losses
Total equity
29. Share-based payments
2021
$’000
1,982
2020 restated
$’000
8,890
1,982
8,890
4,343
13,570
125,130
62,718
169
686
10,412
10,686
108,132
5,796
14,300
(13,510)
62,376
5,148
-
(15,492)
114,718
52,032
Shares issued in-lieu of research services
Ecofibre has entered into an agreement with Thomas Jefferson University (TJU) to provide research services to
Ecofibre over 5 years, commencing 1 July 2017. Due to early research success and opportunities for
commercialisation, the research program was accelerated and has now been completed in April 2021, 15 months
ahead of schedule. In accordance with the Research and Share Subscription Agreement signed between both
parties, 1,646,116 new shares were issued to TJU in settlement of the final costs of the research in the current
year for $883,000 worth of research services. Of the total research services, $754,000 was recognised as part of
the research expenses in the current year as disclosed in note 5(b)).
82
ECOFIBRE LIMITED ANNUAL REPORT 2021
29. Share-based payments (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Share options
Ecofibre has granted TJU an option to subscribe for fully paid ordinary shares within 6 months of the end of the
research.
Set out below are summaries of options granted under the plan:
Grant date Expiry date
1 Jul 2017 28 Oct 2021
Exercise
price
$0.537
Balance at the start
of the year
7,964,581
No of options
granted
-
Exercised Balance at the
end of the year
7,964,581
-
Due to early completion of the research agreement, all options granted are exercisable as at 30 June 2021.
For the options granted, the valuation model inputs used to determine the fair value at the grant date are as
follows:
Grant date
Expiry date
Share price
at grant date
1 Jul 2017
31 Dec 2022 $0.537
Exercise
price
$0.537
Expected
volatility
54%
Dividend
yield
-
Risk-free
interest rate
2.21%
Fair value at
grant date
$0.26
Expenses recognised during the year for share options granted in prior years
2021
$’000
827
2020
$’000
(24)
Employee shares
Employment agreements were signed with key employees who have an impact on the Group's performance.
The agreements include clauses which entitled the employees to payment in shares of the Company if certain
performance conditions are met.
The expenses recognised for employee services received during the year as part of the employee share scheme
are as follows:
Expenses from equity-settled share-based payment transactions
2021
$’000
946
2020
$’000
2,729
ECOFIBRE LIMITED ANNUAL REPORT 2021
83
29. Share-based payments (continued)
Share-based payment reserve
Share options
Employee shares
Total share-based payment reserve
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2021
$’000
2,067
3,729
5,796
2020
$’000
1,240
3,908
5,148
The share-based payment reserve is used to record the cost of equity-settled transactions over the vesting
period.
Share-based payment expense
Share options
Employee shares
Total share-based payment expense
30. Earnings per share (EPS)
(Loss) / earnings used in the calculation of basic and diluted EPS ($'000)
Weighted average number of shares* outstanding during the period used in
the calculation of basic and diluted EPS:
2021
$’000
827
946
1,773
2020
$’000
(24)
2,729
2,705
2021
$’000
(6,986)
2020
$’000
13,156
Basic
Diluted**
322,746,559
322,746,559
296,929,432
303,165,688
* Weighted average number of shares exclude Treasury shares held in the EST.
** 7,964,581 options granted to TJU has not been included in the 2021 diluted weighted average number of
shares because they are antidilutive.
84
ECOFIBRE LIMITED ANNUAL REPORT 2021
31. Fair value measurement
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair value hierarchy
The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value,
using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value
measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2021
Assets
Biological assets
Liabilities
Contingent consideration
Consolidated - 2020
Assets
Biological assets
Liabilities
Contingent consideration
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
1,350
-
1,350
12,414
-
12,414
2,321
-
-
-
2,321
-
There were no transfers between levels during the financial year.
The fair value of biological assets is estimated based on the maturity of the plant, the potential output and the
estimated grower payments when the crops are harvested.
The fair value of contingent consideration is estimated based on the discounting of potential future cash outflow
to present value.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate
their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current
market interest rate that is available for similar financial liabilities.
ECOFIBRE LIMITED ANNUAL REPORT 2021
85
32. Business combinations
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
technical expertise and capabilities across a broad
On 21 August 2020, the Group completed the acquisition of TexInnovate, a portfolio of five businesses with
deep
textile
disciplines. TexInnovate was acquired to complete a key part of its supply chain for Hemp Black, accelerate
commercialisation of the business and underpin the future growth and success of Hemp Black.
range of high-performance
•
Total potential consideration for the businesses and operating assets is USD42.0m:
•
at completion Ecofibre settled 50% of the business acquisition (USD21.0m), comprising USD10.5m cash and
the issue of 5,924,926 shares at a value of USD10.5m; and
contingent consideration with a value up to USD21.0m is also payable subject to the acquired businesses
delivering USD6.0m earnings before interest and tax (EBIT) for two consecutive annual periods within five
years of completion. The earliest that any such consideration may become due is in 3 equal tranches of
USD7.0m on the 3rd, 4th and 5th anniversaries after completion, payable in equal proportions of cash and
shares. 5,924,925 shares will be issued if the performance targets are met.
Consideration for real estate assets used by the businesses totalled USD6.7m, as determined by independent
market appraisal. Acquisition of the real estate assets was settled in cash at the completion date.
The value of goodwill recognised on acquisition (AUD $48.8m) represents the proprietary capability, know-how
and highly skilled workforce and expected growth synergies from combining this business with Hemp Black. The
acquired business contributed revenues of $9.7m and profit before tax of $387,000 to the consolidated entity
for the period from 21 August 2020 to 30 June 2021. The values identified in relation to the acquisition of
TexInnovate are final as at 30 June 2021 other than impacts of foreign currency translation. It is impracticable to
disclose the revenue and profit or loss of the combined entity for the current reporting period as though the
acquisition date for the business combination that occurred during the year had been as of the beginning of the
annual reporting period as this is an assets and business acquisition and not an acquisition of a subsidiary.
Details of the acquisition are as follows:
Inventory
Plant and equipment
Land and buildings
Net assets acquired
Goodwill *
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable
Shares issued to TexInnovate
Contingent consideration payable in cash subject to the acquired business achieving
EBIT target ^
Contingent consideration payable in shares subject to the acquired business achieving
EBIT target
Acquisition costs expensed to profit or loss
Cash used to acquire business:
Acquisition-date fair value of the total consideration transferred
Net cash used
86
ECOFIBRE LIMITED ANNUAL REPORT 2021
$'000
1,080
6,201
9,249
16,530
48,814
65,344
23,841
14,592
12,611
14,300
65,344
354
22,729
22,729
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. Business combinations (continued)
* Reconciliation of goodwill at acquisition date to the balance at 30 June 2021:
Goodwill at acquisition date
Foreign currency impact
Balance at 30 June 2021
$'000
48,814
(2,048)
46,766
^ Reconciliation of acquisition date contingent consideration payable in cash, which is subject to the acquired
business achieving the EBIT target, to the balance at 30 June 2021:
Acquisition-date fair value of the contingent consideration payable in cash ^^
Fair value movement on contingent consideration during the period
Foreign currency impact
Balance at 30 June 2021
$'000
12,611
325
(522)
12,414
^^ The fair value of the contingent consideration is determined based on the probability weighted cash flow
projections discounted at the incremental borrowing rate. The inputs used in the valuation falls under level 2
of the fair value hierarchy (inputs other than quoted prices that are observable for the asset of liability, either
directly or indirectly).
33. Foreign currency translation reserve
Foreign currency translation reserve consists of exchange differences arising from translation of foreign
subsidiary’s financial statements, where the subsidiaries reporting currency differs from that of the consolidated
entity’s currency. The balance sheet is translated either at historical spot rates or the closing rate at the end of
the period. Profit and loss is translated at average rates.
The foreign currency translation reserve as at 30 June 2021 consists of the following exchange differences:
Balance sheet component
Rate used for translation
Rate
Investment in subsidiaries
Retained earnings
Total
Historical spot rate
Average rate
Movement in the foreign currency translation reserve:
Balance at 30 June 2020
Exchange differences on translation of foreign controlled entities
Balance at 30 June 2021
$'000
(3,522)
(1,575)
(5,097)
$'000
(175)
(4,922)
(5,097)
ECOFIBRE LIMITED ANNUAL REPORT 2021
87
34. Events after the reporting period
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may
significantly affect the consolidated entity's operations, the results of those operations, or the consolidated
entity's state of affairs in future financial years.
88
ECOFIBRE LIMITED ANNUAL REPORT 2021
Ecofibre Limited
Independent auditor’s report to the members
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Ecofibre Limited (the Company and its
subsidiaries (the Group)), which comprises the consolidated statement of financial
position as at 30 June 2021, the consolidated statement of profit or loss, the
consolidated statement of other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the
year then ended, and notes to the financial statements, including a summary of
significant accounting policies and other explanatory information, and the directors’
declaration.
In our opinion, the accompanying financial report of the Group, is in accordance
with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June
2021 and of its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that
are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of
most significance in our audit of the financial report of the current period. These
matters were addressed in the context of our audit of the financial report as a
whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key Audit Matters (continued)
Share-based Payments
Refer also to Remuneration Report, note 1(s)
and 29
The Group issued share options to a major supplier
who provides research services to the Group.
The Group also signed employment agreements with
key employees which entitled them to shares in the
Company if certain performance or service
conditions are met.
The valuation of share-based payment arrangements
required significant judgement and estimation by
management, including the following:
- The evaluation of the grant date of the
arrangements, and the evaluation of the fair
value of the share-based payment
arrangement as at the grant dates;
- The evaluation of the share-based payment
expenses taken to the profit or loss in
respect of the accrual of service and
performance conditions attached to the
share-based payments; and
- The evaluation of key inputs into the
valuation model.
How our audit addressed it
Our audit procedures included:
— In determining the grant date, we
evaluated what was the most appropriate
date based on the terms and conditions of
the share-based payment arrangements;
— Evaluating the fair value of the share-
based payment arrangement by agreeing
assumptions to third party evidence;
— In evaluating the progress of the vesting of
share-based payments with performance
milestones, we evaluated the directors’
assessment of the likely success or failure
of achieving those milestones;
— In assessing the vesting of service
conditions, we considered the expensing
of each share-based payment tranche
granted to the arrangement’s beneficiary;
— For specific application of the Black-
Scholes Model in the valuation of share
options, we retested some of the
assumptions used in the model and
recalculated those fair values using the
skill and know-how of our in-house
specialists. We considered that the
forecast volatility applied in the model to
be appropriately reasonable and within
industry norms; and
— We also reconciled the vesting of share-
based payment arrangement to
disclosures made in the Remuneration
Report and financial statements.
— Assessing the adequacy of disclosures in
the notes to the financial statements.
90
ECOFIBRE LIMITED ANNUAL REPORT 2021
Key Audit Matters (continued)
Valuation of Inventories and Biological Assets
Refer also to note 1(i), 1(j), 9 and 10
How our audit addressed it
The Group held biological assets of $1.4 million at 30
June 2021. The Group’s biological assets consist of
planted hemp crop. The biological assets are
measured at fair value less costs to sell or, in the
absence of a fair value, at cost less impairment. The
valuation uses a range of judgemental assumptions.
Key assumptions include:
- Total number of acres or hectares planted;
- Percentage of maturity of the plant based on
estimated harvest date; and
- Costs per acre, hectare or yield paid or
payable to the farmers.
Upon harvest, the value of biological assets are
transferred to inventory. Its fair value forms part of
the standard cost for inventory valuation.
The group’s inventory of $16 million is significant to
the financial statements and has increased by $6
million from prior year.
Business Acquisition
Refer also to note 32
The Group acquired Texinnovate on 21 August 2020
for a total consideration of USD$42 million, inclusive
of USD$21 million of contingent consideration.
Accounting for this transaction is complex and
required significant judgements and estimates by
management on the initial entries recorded,
specifically:
-
-
to determine the fair value of assets and
liabilities acquired in the context of Australian
Accounting Standards; and
to determine the fair value of the contingent
consideration.
As such this matter has been determined as a key
area of focus for our audit.
Our audit procedures included:
— Attending stock counts at multiple
locations;
— Considering the valuation methodology
against the relevant Australian Accounting
Standard;
— Testing the mathematical accuracy of the
calculation;
— Testing the assumptions used based on
farming contracts;
— Assessing management’s standard costing
model and inputs;
— Evaluating management’s judgement and
assumptions used in determining the
inventory provision; and
— Assessing the adequacy of disclosures in
the notes to the financial statements.
How our audit addressed it
Our audit procedures included:
— Assessing that the acquisition target meets
the definition of a business under AASB 3
– Business Combinations;
— Reviewing the sale and purchase
agreement to understand the key terms
and conditions of the acquisition, including
the date that control passed to Ecofibre;
— Assessing the Group’s determination of
fair values of assets acquired; and
— Testing the appropriateness of the
contingent consideration that was recorded
on acquisition date and at 30 June 2021.
We assessed the adequacy of the Group’s
disclosures in respect of the acquisition in the
financial report.
ECOFIBRE LIMITED ANNUAL REPORT 2021 91
Key Audit Matters (continued)
Impairment Assessment of Intangible Assets Including Goodwill
Refer also to note 1(o), note 12 and note 32
Included in the statement of financial position is an
intangible asset balance of $50.6 million as at 30
June 2021, which includes goodwill of $46.8 million.
In accordance with AASB 136 – Impairment of
assets the consolidated entity is required to, at least
annually, perform an impairment assessment of
goodwill and intangible assets that have an indefinite
useful life. For intangible assets with useful lives, the
consolidated entity is required to review these for
impairment whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable, and at least annually,
review whether there is any change in their expected
useful lives.
All intangible assets including goodwill have been
allocated to cash generating units (“CGUs”). The
recoverable amount of the underlying CGUs are
supported by value-in-use calculations which are
based on future discounted cash flows.
How our audit addressed it
Our audit procedures included:
— a detailed evaluation of the consolidated
entity’s budgeting procedures upon which
the forecast is based and testing the
principles and integrity of the discounted
future cash flow models;
— testing the accuracy of the calculation
derived from the forecast model and
assessing key inputs to the calculations
such as revenue growth, discount rates
and working capital assumptions; and
— reviewing the sensitivity analysis of the
calculations.
We also considered the adequacy of the
consolidated entity’s disclosures in the notes to
the financial report.
Other Information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2021, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
92
ECOFIBRE LIMITED ANNUAL REPORT 2021
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our independent auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30
June 2021.
In our opinion, the Remuneration Report of Ecofibre Limited, for the year ended 30 June 2021,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
William Buck (Qld)
ABN 21 559 713 106
Junaide Latif
Director
Brisbane: 19 August 2021
ECOFIBRE LIMITED ANNUAL REPORT 2021 93
Shareholder Information
The shareholder information set out below was applicable as at 5 August 2021.
Number of securityholders
There are 5,524 holders of ordinary shares, 1 holder of options (unquoted) over ordinary shares, 27 holders of
employee share rights (unquoted) and 1 holder of performance rights (unquoted). There were no other classes of
equity securities on issue.
Fully paid ordinary shares
Distribution of ordinary shares
Size of shareholding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Holding less than a marketable parcel
Number of shareholders Number of shares
2,336
1,760
561
744
123
5,524
1,691
1,172,078
4,496,577
4,385,300
21,645,352
309,316,670
341,015,977
594,170
% of shares on
issue
0.34%
1.32%
1.29%
6.35%
90.70%
100.00%
Twenty largest holders of quoted ordinary shares
The names of the twenty largest holders of quoted ordinary shares are listed below:
Name
Barjoy Pty Ltd
Barry Martin Lambert & Joy Wilma Lillian Lambert
Phil Warner Pty Ltd
HSBC Custody Nominees (Australia) Limited
Freshwater Superannuation Fund Pty Limited
Kylie Warner Pty Ltd
Thomas Jefferson University
Eric Wang
Citicorp Nominees Pty Limited
Pacific Custodians Pty Limited (Employee Securities TST Unallocated A/C)
Pacific Custodians Pty Limited (Employee Securities TST A/C)
Wow Corporate Pty Ltd
Texsymmetry Inc
Jeffrey Bruner
John Ryan
Manderrah Pty Limited
Walling Pty Limited
National Nominees Limited
Yarrawonga Holdings Pty Limited
Troncell Pty Ltd
Total
Number
37,688,454
34,497,242
32,481,381
25,820,376
20,089,149
16,340,072
12,178,259
8,644,158
7,664,587
7,200,000
6,909,286
6,648,700
6,595,959
5,400,148
5,311,786
5,243,369
4,850,181
3,163,706
3,048,553
2,922,078
252,697,444
% of quoted
ordinary shares
11.05%
10.12%
9.52%
7.57%
5.89%
4.79%
3.57%
2.53%
2.25%
2.11%
2.03%
1.95%
1.93%
1.58%
1.56%
1.54%
1.42%
0.93%
0.89%
0.86%
74.09%
94
ECOFIBRE LIMITED ANNUAL REPORT 2021
Substantial holders
Substantial holders in the Company as disclosed in substantial holding notices given to the Company were as
follows:
SHAREHOLDER INFORMATION
Name of substantial holder
Barry Martin Lambert
Philip Warner
James William Vicars
Unquoted Options
Number of shares over
which interest is held
74,236,900
53,109,243
30,841,174
% of issued capital
23.57%
17.17%
9.97%
There were 7,964,581 unquoted options over ordinary shares as follows:
Unquoted options – description
Thomas Jefferson University options expiring 28 October
2021 exercisable @ AU$0.537 per share
Total
Number of options
Number of holders
7,964,581
7,964,581
1
1
Unquoted Employee Share Rights
Distribution of Employee Share Rights
There are 11,499,302 unquoted performance rights on issue held by 27 holders as follows:
Size of holding
1-1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
Number of holders
1
6
3
9
8
27
Unquoted Performance Rights
There are 5,924,925 unquoted performance rights on issue as follows:
Number of Rights % of Rights on issue
0.0026%
0.1087%
0.2087%
3.6741%
96.0058%
300
12,500
24,000
422,500
11,040,002
11,499,302
100.0000%
Unquoted performance rights – description
TexInnovate performance rights – contingent
consideration expiring 21 August 2025
Total
Number of rights
Number of holders
5,924,925
5,924,925
1
1
ECOFIBRE LIMITED ANNUAL REPORT 2021
95
SHAREHOLDER INFORMATION
Voting Rights
Ordinary shares carry voting rights on a one for one basis. Unquoted options, employee share rights and
performance rights do not carry voting rights.
Other ASX required information
During the period between admission to the Official List of ASX and the end of the reporting period, the Company
used the cash, and assets in a form readily convertible to cash, that it had at the time of admission to the ASX, in a
way consistent with its business objectives. This statement is made pursuant to ASX Listing Rule 4.10.19.
96
ECOFIBRE LIMITED ANNUAL REPORT 2021
CORPORATE DIRECTORY
Directors
Barry Lambert
Jon Meadmore
Bruce Robinson
Kristi Woolrych
Vanessa Wallace
Eric Wang
Company secretary
Jonathan Brown
Registered Office
Level 12, 680 George Street
Sydney NSW 2000
Principal place of business
Level 12, 680 George Street
Sydney NSW 2000
Share Registry
Link Market Services
Level 21
10 Eagle Street
Brisbane QLD 4000
Auditor
William Buck (Qld)
Level 21, 307 Queen Street,
Brisbane QLD 4000
Solicitor
Colin Biggers & Paisley Lawyers
Level 35, 1 Eagle Street
Brisbane QLD 4000
www.cbp.com.au
Banker
Commonwealth Bank of Australia
240 Queen Street
Brisbane QLD 4000
Stock exchange listing
Ecofibre Limited shares are listed on the
Australian Securities Exchange (ASX code:
EOF
)
Corporate Governance Statement
ecofibre.com/investors/corporate/
www.ecofibre.com
ECOFIBRE LIMITED ANNUAL REPORT 2021 97
ANNUAL
REPORT
2021