More annual reports from Ecofibre Limited:
2023 ReportPeers and competitors of Ecofibre Limited:
Rhythm PharmaceuticalsANNUAL
REPORT
2022
Photo: Pharmacists planting a demonstration crop
at Ecofibre - Georgetown, Kentucky
About Ecofibre
Ecofibre is a diversified industrial hemp company located in the United States and Australia.
We operate three vertically integrated businesses focused on growth in natural health care, plant-based
foods and sustainable product solutions.
Ananda Food owns one of the world’s largest collections of hemp seed genetics and is a leading, low-
cost manufacturer of high quality hemp food products in Australia, including oil, seed and proteins. See
www.anandafood.com.
Ananda Health is a leading US manufacturer of hemp-based nutraceuticals for the professional market.
We produce CBD products for human and pet consumption, as well as topical health and beauty
products. Our focus on high quality, efficacious and safe products is supported by a commitment to
clinical research in Australia and the USA, focused on conditions including sleep, pain, anxiety,
endometriosis and women’s cancers. See www.anandaprofessional.com.
Hemp Black is an industrial business focused on textiles and bioplastics, with specialist capabilities in yarn
extrusion, knitting and polymer compounding. We are using innovative hemp-based composite
technology to help de-carbonise consumer products and the supply chains for a range of industries. See
www.hempblack.com.
CONTENTS
1
4
7
A letter from the CEO
Delivering on our environmental sustainability vision
Social impacts that help our communities
10
Leading meaningful change in the hemp industry
CONTENTS
1
2
3
4
5
6
OVERVIEW
Our purpose
Group structure and priorities
Key metrics
Chairman’s message
Managing Director’s report
Leadership team
OPERATING + FINANCIAL REVIEW
Group overview
Ananda Health
Hemp Black
Ananda Food
Material business risks
DIRECTORS’ REPORT
Board of Directors
Directors’ report
Remuneration report
Auditor’s Independence Declaration
FINANCIAL STATEMENTS
Financial statements
Notes to the financial statements
SIGNED REPORTS
Directors’ declaration
Independent auditor’s report
SHAREHOLDER AND ASX INFORMATION
2
4
5
6
8
11
13
19
25
28
31
34
36
40
49
50
56
96
97
Five-year financial history
Shareholder information
Investor information
Corporate directory
103
104
107
109
ECOFIBRE LIMITED ANNUAL REPORT 2022 1
Ecofibre focused investments in processing infrastructure and IP development on higher value usesfor hemp hurd ('wood' portion)x
Dear Shareholders,
Report.
On behalf of the Board and Ecofibre team, I am pleased to present Ecofibre's Sustainability
Ecofibre places positive impact and environmental sustainability at the core of how we operate
and the markets in which we participate. Over the past several years, Ecofibre has built
commercial business models in three attractive markets that positively impact society and the
environment: natural health care, plant-based foods, and environmentally sustainable industrial
hemp-based products.
This sustainability report describes how Ecofibre is part of the solution and details areas where
the core business lines have a positive impact.
The global commitment toward more measurable, sustainable business models aligns directly
with what Ecofibre produces daily. This international focus creates opportunities for us to
directly support our current and new customers with specific solutions around achieving their
net-zero carbon goals.
Our core values drive us to be accountable for improving our environments
Ecofibre's commitment to improving our environments underpins the company's values
guiding all aspects of our business.
As stated last year, our focus is to provide leadership in developing industrial hemp as “an
industry that is a solution to sustainability as opposed to an industry that requires a solution to
be sustainable.”
S
E
V
L
E
S
R
U
O
A GREAT
COMPANY
HAS
ACCOUNTABLE
INDIVIDUALS.
S
R
E
M
O
T
S
U
C
R
U
O
OUR
CUSTOMERS
ARE OUR
MOST
VALUABLE
RESOURCE.
Y
N
A
P
M
O
C
R
U
O
WE WILL
ALWAYS
BE THE
MOST
RESPECTED
COMPANY.
WHEN YOU
LOVE WHAT
YOU DO,
IT WON’T
FEEL LIKE
YOU ARE
WORKING.
Y
R
T
S
U
D
N
I
R
U
O
Y
T
I
N
U
M
M
O
C
&
Y
L
I
M
A
F
R
U
O
WE ARE A
LEADER
IN OUR
INDUSTRY
WHICH
MEANS
BREAKING
AND
SETTING
THE RULES.
1
0
5
0
4
0
3
0
O U R
E N V I R O N M E N T
2
0
0
0
WE ALWAYS STRIVE TO LEAVE OUR
ENVIRONMENTS BETTER THAN HOW WE
FOUND THEM.
Last year we made it clear that Ecofibre's approach to ESG accountability does not entail purchasing carbon credits,
outsourcing our responsibility via donations, or looking to tick boxes to fit into guidelines of what responsible
companies should be doing.
I am pleased to say that Ecofibre has matured its capabilities and technologies and is on the pathway to becoming a
creator of carbon credits via our hemp-based products and solutions. We are now an outsourced provider for others to
achieve their sustainability goals.
Our Choices in Action
Industrial hemp is widely considered to be the most efficient agricultural or forestry crop, with a CO2-to-biomass
conversion rate of 8-15 tonnes per hectare. Combined with the fact that industrial hemp can be used in more than
25,000 product applications, there is a remarkable opportunity to turn this highly sustainable crop into a solution to the
world's net-zero carbon challenge.
Ecofibre has developed capabilities and intellectual property, from hemp genetics to farming techniques to advanced
material processing, ensuring industrial hemp can be utilised effectively in today's supply chains across various
industry applications. With this foundation, Ecofibre's focus is to be the global leader in sustainable hemp solutions
that address health issues and decarbonize many emission-intensive industries worldwide.
The vision that we work towards is:
Together with our customers, we will deliver sustainable
bio-based materials that revolutionize industrial
production while sequestering one billion kilograms of
carbon by 2028.
Leading industry development to deliver our Vision
To support our bold vision, we continue to actively work with like-minded businesses and the US Government to help
realise hemp's potential to transform the sustainability of industries.
We are developing a multi-year program to set classification standards and establish markets for hemp so it can
become a tradeable, mainstream commodity across multiple industries. Our Australian-based hemp genetics
program, specifically our fibre strain ECO-MS77, has established us as one of the US' leading providers of industrial
hemp genetics.
Ecofibre is very fortunate that the core foundation of our business is the highly carbon-negative industrial hemp crop,
which means that almost everything we do is carbon reducing. To meet the significant challenges our current and
future partners will face in achieving their net-zero carbon commitments, more truly carbon negative solutions, rather
than just reductions and offsets, are needed. I believe there is no company better positioned or better prepared to
partner with brands around the world to create the
"Think Negative "
TM
movement we all need.
Eric Wang
Managing Director
1. OVERVIEW
Our purpose
Seeding the solution
As a global leader in sustainable hemp solutions, Ecofibre, at its core, is an impact company.
Our focus is to be the global leader in sustainable solutions that address health issues and
decarbonise a wide range of emission intensive industries around the world.
2 ECOFIBRE LIMITED ANNUAL REPORT
2022
Principal activities
Ecofibre’s hemp inputs, products and target industries
GROUP RESULT
AUDm
Revenue
Gross Margin
Operating Costs
Profit (Loss) before Tax
Investments:
Research & Development
Capital Expenditure
Net Profit (Loss) after Tax
FLOWER
Fashion
Building &
Construction
Bio-based
composites
Conductive
materials
Ink & coatings
Infrastructure
Healthcare
Bio-based plastics
STALK
Medicine
Supplements
Beauty Care
Products
SEED
We set our bold vision to sequester one billion kilograms of carbon within the next five years to make a meaningful
change in the world's carbon footprint and rapidly establish an at-scale industrial hemp supply chain to continue to do
so into the future.
Food
Flour
Animal Feed
Oils
Protein Powder
Body Care
Products
ECOFIBRE LIMITED ANNUAL REPORT 2022 3
The supply chain required to achieve our Vision
Ecofibre will need to support ~200,000 acres of hemp production over the next five years to achieve our carbon goal.
This will require an effective supply chain that we have been working to establish in the United States since 2019.
The key components that need to be in place include, but are not limited to:
a) High-yielding hemp genetics that can be grown across a wide range of latitudes. Multiple latitudes are required to
support regional supply chains.
b) A strong farming network with the capability to grow effectively.
c) Processing infrastructure and intellectual property to value-add the hemp biomass into manufacturing inputs that
fit into existing supply chains, have equal technical specifications, and be cost competitive to what it is replacing.
d) Demand for hemp by identifying attractive commercial markets and applications where the customer will value
hemp-based inputs in the product.
Seeding the solution - Ecofibre's high-yielding hemp genetics and farming networks have been
established in the US.
Ecofibre has one of the world's largest and most diverse hemp genetic collections, with over 2,100 accessions. Our
R&D program in Australia has allowed us to export this capability into the US. Last year we grew hemp in nine US
States, and this year we have commercial and R&D growing in 19 States supporting local farmers.
SOUTH DAKOTA
KANSAS
WISCONSIN
NEW YORK
PENNSYLVANIA
MONTANA
COLORADO
MISSOURI
CALIFORNIA
TEXAS
MISSISSIPPI
LOUISIANA
ARKANSAS
HAWAII
TEXAS
TEXAS
KENTUCKY
KENTUCKY
N. CAROLINA
N. CAROLINA (2)
TENNESSEE
ALABAMA
FLORIDA
LEGEND
Research
Commercial production
Group structure and priorities
Be the preferred provider to
practitioners and pharmacy
channels
Be the recognized global leader
in sustainable, high-tech hemp
solutions
Be the leading hemp food
supplier in Australia
Be the preferred provider to
practitioners and pharmacy
Be the recognized global leader
Be the leading hemp food
in sustainable, high-tech hemp
supplier in Australia
channels
solutions
Our Brands
Our Brands
In the upcoming 2023 season, we expect to sell our planting seed to support ~24,000 acres of growing. The
geographic spread increasing in the forthcoming season will be able to support regional supply chains. The farming
network to which we will sell our planting seed looks to generate ~120,000 tonnes of biomass (fibre and hurd) to meet
manufacturing demands.
BLISS
GREEN II GOLDTM
BLISS
GREEN II GOLDTM
Our Customers
Our Customers
ECO-MS77 genetics in South Texas, July 2022
4 ECOFIBRE LIMITED ANNUAL REPORT 2022
FY22 Key metrics
Ecofibre focused investments in processing infrastructure and IP development on higher value uses
for hemp hurd ('wood' portion)
Our R&D program with Jefferson University was focused on developing multiple patents on hemp hurd, and a specific
outcome was patented for /eco6, a direct replacement for carbon black. We decided to focus on the hurd portion of
the plant as it comprises ~75% of the stalk and contains ~50% carbon.
The commercial and sustainability opportunity for /eco6 is that nearly every black product used worldwide gets its
colour from carbon black. The defined manufacturing process for traditional carbon black is “the incomplete
combustion of petroleum,” which gives /eco6 a tremendous relative and absolute advantage for its customers from a
sustainability and product health perspective.
Revenue
up from $28.8m to
$30.2m
Gross Margin
down from 61% to
49%
NPAT
down from -$7.0m to
-$14.7m
R&D investment
$6.3m
Net Tangible Assets
per share
13.23 cps
Other Income
down from $5.0m to
$2.1m
Operating Costs
up from $31.4m to
$37.2m
Cash
$7.3m
Capital investment
$3.1m
Earnings
per Share
-4.41 cps
ECOFIBRE LIMITED ANNUAL REPORT 2022 5
Full spectrum hemp extract (Ananda Health) contains cannabidiol (CBD) and other cannabinoids. These cannabinoids
have well-documented potential to assist health and wellbeing.
Research is rapidly advancing, but more is needed, which is why Ecofibre continues to invest in a range of clinical
studies to help our patients better understand the benefit of CBD for opioid dependency, sleep, anxiety and pain.
Ecofibre invested in one of the earliest studies in 2017-18 to address the opioid crisis.
Chairman’s message
Dear Shareholders
As we look back on FY22 and reflect on how many factors came to bear on business in this period, it was indeed an
extraordinary year.
Whilst the COVID pandemic restrictions on our everyday lives are subsiding, business leaders are still confronted with
having to navigate particular challenges to their companies. Of note are: disrupted trading patterns and supply chain
efficiencies; illness-related absenteeism; workplace flexibility and adjusting to new ways of working; resetting of
business relationships including contracting terms; and removal of “covid crisis” government support.
In parallel, world economies are in the middle of multiple transitions, including; (1) macroeconomic reversal including
a re-rating of markets (2) a shift from carbonising to decarbonising the world, (3) the continuing digital and data
revolution, and (4) the changing global geo-political landscape.
Creating impact and shareholder value in this context is greatly aided by; clarity of purpose, maintaining a value
creation focus balancing short and longer-term objectives, and a clear conviction on priority markets and the
company's advantaged capabilities, coupled with retaining a strong reputation with all stakeholders.
Delivering on our purpose
Ecofibre is, at its core, an impact company.
Our Health, Food and Sustainable Industrial businesses are delivering positive impact on the health and wellbeing of
society via our health products and nutritional food products, and in the environment via our decarbonising industrial
hemp solutions. The impact is described in more detail in the Operating Review of this report and in the Sustainability
Report, which I encourage you to read.
Notably this year,
! we have set a bold ambition of sequestering 1 billion kg of carbon within the next five years by disrupting the
$17.5B petroleum-based carbon black market with our patented “/eco6”, a 100% bio-based carbon black.
! Katelyn's Gift, announced at the AGM in November 2021 in recognition of the retirement of Barry Lambert,
continues to provide financial support to children across Australia by providing their families access to life-
changing CBD.
! Ecofibre's ongoing CBD research and product development in women's health has made significant progress in
this important area of need with the potential to impact a very large, under-served segment of the world's
population.
Maintain shareholder value creation focus - balancing short and long term
With an after-tax operating loss of $ 14.7 million, FY22 was a difficult year. This result reflects a wide variety of factors
impacting the three businesses with some real strengths evident and other areas still requiring adjustment.
Each business tightened its market focus over the last year with clear, operational Objectives and Key Results (OKR)
plans. These priorities have been shared in the past two Shareholder Updates. Despite the pressure on margins and
operating costs in the first part of FY22, there is a clear line of sight to profitability in each business.
Importantly, the result also reflects the Company's strong pre-disposition to make the necessary investments in our
high-conviction markets of Food, Health and Sustainable Industrials.
The allocation of investments in each business built on the capability investments of prior years and focused on areas
that have a strong commercial pathway over the next few years.
In Hemp Black (our Sustainable Industrials business), the investments focused on product R&D with near-term
commercialisation leveraging the prior investment in advanced manufacturing capabilities. In Ananda Food the
investments to acquire Soul Seeds and ECS Botanics build on prior investments to establish a scalable platform and
6 ECOFIBRE LIMITED ANNUAL REPORT
2022
Our staff is incredibly proud that we are in a business committed to improving our customers' health and well-being via
natural plant-based inputs. Ecofibre has made the strategic decision to invest in advancing the clinical research for
hemp-based products, to educate professionals and consumers, and in product development to address some of the
most critical unmet healthcare needs today.
Ecofibre is deeply committed to addressing significant unmet needs in women's health.
Today 15-20% of women aged 15 to 50 suffer from chronic pelvic pain, which disrupts physical activity, sexual relations,
sleep, work, and family life. Ecofibre has focused much of its research portfolio on addressing these issues.
This year, we completed the FREE HER (Finding Relief from Endometriosis and Exclusion: Hemp Extract Research)
post-market study. This study was conducted with women suffering from pelvic pain using Ananda Health's Endo
Relief Cream.
differentiated seed genetics. The Ananda Health investments in a CBD beauty line and myEveryday product leverage
prior investment in the professional pharmacy channels and in our Kentucky manufacturing facilities.
Ecofibre aims to build a long-term sustainable business model and the Board and management are working to deliver
tangible social and environmental impact and create attractive shareholder value over time.
differentiated seed genetics. The Ananda Health investments in a CBD beauty line and myEveryday product leverage
prior investment in the professional pharmacy channels and in our Kentucky manufacturing facilities.
Ecofibre aims to build a long-term sustainable business model and the Board and management are working to deliver
tangible social and environmental impact and create attractive shareholder value over time.
Strong reputation with stakeholders
Industrial Hemp is still maturing as an industry. Ecofibre is actively involved in influencing the setting of high standards
in the industry; in the USA, via the Managing Director's role in the US Hemp Roundtable, and in Australia, building on
the prior Chairman's drive to enable access to medicinal cannabis, and now working with the TGA to set the standard
for over-the-counter product regulatory approval.
In addition to playing our role as an industry leader, we also put a lot of credence on the way we do business. We
consider our customers, suppliers, communities in which we operate and our team members in all decisions we make
to create shareholder value.
OUR VALUES
S
R
E
M
O
T
S
U
C
R
U
O
OUR
CUSTOMERS
ARE OUR
MOST
VALUABLE
RESOURCE.
Y
N
A
P
M
O
C
R
U
O
WE WILL
ALWAYS
BE THE
MOST
RESPECTED
COMPANY.
S
E
V
L
E
S
R
U
O
A GREAT
COMPANY
HAS
ACCOUNTABLE
INDIVIDUALS.
WHEN YOU
LOVE WHAT
YOU DO,
IT WON’T
FEEL LIKE
YOU ARE
WORKING.
Y
R
T
S
U
D
N
I
R
U
O
Y
T
I
N
U
M
M
O
C
&
Y
L
I
M
A
F
R
U
O
WE ARE A
LEADER
IN OUR
INDUSTRY
WHICH
MEANS
BREAKING
AND
SETTING
THE RULES.
1
0
2
0
3
0
O U R
E N V I R O N M E N T
5
0
4
0
0
0
WE ALWAYS STRIVE TO LEAVE OUR
ENVIRONMENTS BETTER THAN HOW WE
FOUND THEM.
In addition to being an
industry leader, aiming
to influence the
standards and ensure
the supply chain is
established sustainably,
we also put a lot of
credence in the way we
do business.
We consider our
customers, suppliers,
communities in which
we operate and our
team members in all
decisions we make to
create shareholder
value.
The Board has also evolved in line with the business, with an independent Chairman, our first US-based non-executive
director, Michele Anderson joining in March 2022, and Mark Bayliss joining in September 2022. Jon Meadmore has
been Chair of the Audit and Risk Committee for the last 6 years and passed the role to Mark Bayliss on September 1,
2022. We also saw the retirement of Kristi Woolrych in May 2022 and wish her well in her new Executive role.
Thank you
In closing, I pay tribute to our dedicated team led by Eric Wang and thank them for their dedication and contributions
in a year like no other. They responded well to the unique challenges and maintained a focus on building a sustainable
growth business.
To our shareholders, thank you very much for your continuing support through this challenging period. We look
forward to delivering sustainable impact and shareholder value in 2023 and beyond.
Vanessa Wallace
Chairmain
ECOFIBRE LIMITED ANNUAL REPORT 2022 7
DO YOU NEED
RELIEF FROM
PELVIC PAIN?
BLISS
ENDOMETRIOSIS?
MENSTRUAL CRAMPS?
PAIN WITH INTERCOURSE?
JOIN THE
FREE HER STUDY!
Finding Relief from Endometriosis and
Exclusion: Hemp Extract Research
Managing Director’s report
Dear Shareholders,
I want to join Vanessa in thanking you for your continued support of Ecofibre.
We entered FY22 with the challenging operating environment we experienced throughout FY21. Overall, the Group
had revenue growth of 5% but was impacted by reduced operating margins because of supply chain challenges and
business disruption that affected the first nine months of the financial year.
During the final quarter of FY22, we saw improved trading conditions as COVID-related issues ended in the US, and
most major supply chain issues resolved themselves.
While inflationary pressures remain, we enter FY23 in a more favorable operating environment than in FY22.
We have always maintained high conviction in our business portfolio and the three growth markets we participate in:
Natural health care, Plant-based foods, and Sustainability. As communicated last year, the conviction in our chosen
markets meant that despite the disruption, we continued to invest in clinical trials, establish Hemp Black operational
capacity, and innovate and develop new products.
I am pleased to report that during the last quarter of the year, as major disruptors subsided, we started to see the
benefits of our investments across our portfolio, placing us in a good strategic position for FY23.
! Ananda Health revenues were down 9%, but revenue in our core independent pharmacy channel was up 13%.
During the year, we consolidated our Ananda Hemp brand, which focused on health food stores, into our flagship
Ananda Professional business. This consolidation helped to reduce costs and streamline operations to focus on
the professional pharmacy and practitioner channels.
To capture a more significant share of pharmacy shelf space, we launched myEveryday CBD in September this
year. This product range helps our pharmacies serve their value-based consumers and allows us to compete
effectively against other brands in this price segment.
In Australia, our vision has always been to provide an over-the-counter CBD product that is accessible and
affordable to serve those in need. During the year, we made significant progress in this initiative. In September, we
will complete our clinical trial on sleep and then submit our TGA application to register an S3 (over-the-counter)
CBD product before the end of this calendar year. We look to gain a first mover advantage in what we consider to
be a very attractive market.
! Hemp Black revenues increased by 15% in FY22, but profitability was impacted for the first nine months by a
prolonged increase in input costs due to supply chain issues. Input costs have since normalised, and the business
recently brought on a very attractive long-term client in the core turf yarn business.
There was mixed success in FY22 from new clients as trading conditions impacted their growth and, subsequently,
our ability to have them become larger-scale clients. However, the business has a strong pipeline of a small
number of quality clients we can serve with the capabilities we have invested in over the past several years.
! Ananda Food had revenue growth of 36%, with core Australian food sales increasing, new animal products
launched, and our US planting seed business beginning to achieve scale.
During the year, we made two small bolt-on acquisitions to provide Ananda Food with direct access to
Woolworths, Coles, and health food stores with our retail brands. These platforms will allow us to expand product
lines into large consumer channels.
We expect our planting seed business, which we have been developing since FY19, to grow rapidly in FY23 as we
have expanded supply to meet the significant demand for high-yielding planting seeds that work in North
American latitudes. Ecofibre has been investing in its genetic resource for many years, and we are pleased to see
the industrial fibre market grow in the US, which underpins the growth of this business line.
Ecofibre recently announced it had extended its research collaboration with the University of
Newcastle as part of its four patent filings with the United States Patent and Trademark Office.
We continue investing in developing IP to address unmet needs in gynecological cancers,
endometriosis, and other non-malignant gynecological disorders.
The Company has been very encouraged by the data. Hopefully, continued discovery will
provide critical solutions to urgent challenges with gynecological cancers to improve the health
and well-being of women.
Ecofibre is deeply committed to addressing significant unmet needs in women's
Katelyn's Gift – ensuring no Australian children as left behind
Ecofibre is deeply committed to addressing significant unmet needs in women's Today Katelyn's
Gift, Ecofibre's compassionate access program, was founded to support affordable access to
Ananda Hemp's Medicinal Cannabis range for children who could benefit from the product yet
may not be able to afford it.
Ecofibre is proud to support Katelyn's Gift by donating one million dollars of Ananda Hemp
products for the program annually.
This program was inspired by Katelyn Lambert, who was diagnosed with Dravet Syndrome at the
age of two in 2014. This life-changing event for Ecofibre's first Chairman, Barry Lambert, set off a
chain of events that saw him and his family dedicate themselves to the research and education of
Medicinal Cannabis in Australia and Globally. Ultimately, their goal was to ensure all Australians
who needed it could access high-quality, affordable medicinal cannabis.
We have been extremely pleased with the support we have provided to the families of children
who benefit from CBD across Australia.
8 ECOFIBRE LIMITED ANNUAL REPORT 2022
ECOFIBRE LIMITED SUSTAINABILITY REPORT 2022 9
100%
80%
80%
70%
60%
50%
40%
30%
20%
10%
0%
None, it
didn’t seem
to help
Pain
Mood
Sleep
Cramps
Quality
of life
Other
(please
specify)
Environmental sustainability and social impact are core to our business model.
Ecofibre places positive impact and environmental sustainability at the core of how we operate and the markets in
which we participate. Ecofibre has built commercial business models in three attractive markets that positively impact
society and the environment: natural health care, plant-based foods, and environmentally sustainable industrial
hemp-based products.
This year we set our bold vision to sequester one billion kilograms of carbon within the next five years to make a
meaningful change in the world's carbon footprint. To achieve this goal, Ecofibre will need to support ~200,000 acres
of hemp production and concurrently ensure an adequate hemp supply chain that delivers a commercial outcome for
the Group.
This industrial hemp supply chain has been a core initiative in the United States since 2019 and is now in place. Our
business focuses on disrupting the traditional petroleum-based carbon black market with our patented /eco6
technology. By using /eco6 in black plastics, inks, and coatings, we will be able to provide carbon-negative, bio-based
solutions to help our clients achieve their net-zero carbon goals.
We are currently focussed on a high-volume durable bio-plastic item that has global usage, and will continue to
update the market on this initiative.
In the healthcare industry, our staff are incredibly proud to be in a business committed to improving our customers'
health and well-being via natural plant-based inputs. Specifically, we are deeply committed to addressing significant
unmet needs in women's health.
Today 15-20% of women aged 15 to 50 suffer from chronic pelvic pain, which disrupts physical activity, sexual relations,
sleep, work, and family life. Ecofibre has focused much of its research portfolio on addressing these issues. This year,
we completed the FREE HER (Finding Relief from Endometriosis and Exclusion: Hemp Extract Research) post-market
study, which was conducted with women suffering from pelvic pain using Ananda Health's EndoRelief Cream.
In this study, 254 women were asked to identify symptoms that our product improved. Over 90% responded that the
product was helpful, and 60% noted an improvement in pain which was our primary endpoint. We look forward to
publishing the full results of this study in the coming months.
We have also extended our research collaboration with the University of Newcastle following the filing of four
provisional patent applications with the United States Patent and Trademark Office. This investment looks to develop
IP to address gynecological cancers, endometriosis, and other non-malignant gynecological disorders. We have been
very encouraged by the early data. We hope our continued discovery will provide critical solutions to urgent
challenges with gynecological cancers to improve the health and well-being of women.
I would invite you to read our
socially and environmentally.
Sustainability Report
to understand the impacts of your investment in Ecofibre, both
Outlook
We are confident in our strategies and the outlook for the industries and markets in which we participate.
We expect the macro-economic and geo-political environment to remain volatile making results difficult to forecast.
At this time, we expect the Company to incur a smaller loss in FY23, with a clear pathway to profitability and positive
cash flow in FY24.
Hemp Black will experience continued growth with new core clients, and we expect the business to be profitable in
FY23 with the contribution from the execution of our /eco6 strategy.
Ananda Health will continue its recovery in the pharmacy channel, and myEverday CBD will provide solid growth.
However, the business will not return to profitability in FY23. A key to profitability in FY24 will be the Australian over-
the-counter market, where product registration is subject to TGA approval.
ECOFIBRE LIMITED ANNUAL REPORT 2022 9
Ecofibre recently announced it had extended its research collaboration with the University of Newcastle as part of its
four patent filings with the United States Patent and Trademark Office. We continue investing in developing IP to
address unmet needs in gynecological cancers, endometriosis, and other non-malignant gynecological disorders.
The Company has been very encouraged by the data. Hopefully, continued discovery will provide critical solutions to
urgent challenges with gynecological cancers to improve the health and well-being of women.
Ecofibre is deeply committed to addressing significant unmet needs in women's Katelyn's Gift –
ensuring no Australian children as left behind
Ecofibre is deeply committed to addressing significant unmet needs in women's Today Katelyn's Gift, Ecofibre's
compassionate access program, was founded to support affordable access to Ananda Hemp's Medicinal Cannabis
range for children who could benefit from the product yet may not be able to afford it.
Ecofibre is proud to support Katelyn's Gift by donating one million dollars of Ananda Hemp products for the program
annually.
This program was inspired by Katelyn Lambert, who was diagnosed with Dravet Syndrome at the age of two in 2014.
This life-changing event for Ecofibre's first Chairman, Barry Lambert, set off a chain of events that saw him and his
family dedicate themselves to the research and education of Medicinal Cannabis in Australia and Globally. Ultimately,
their goal was to ensure all Australians who needed it could access high-quality, affordable medicinal cannabis.
We have been extremely pleased with the support we have provided to the families of children who benefit from CBD
across Australia.
Ananda Food will continue to experience solid growth. Launching new animal-based products and expanding our
fibre planting seed business will make this business profitable in FY23.
Thank you
I sincerely thank 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 the contribution that everyone has
made in a year of constant disruption.
I want to thank my fellow directors for their expertise and support during a very challenging year and welcome new
directors to the Board. Following Barry's retirement at last year's AGM, Vanessa assumed the role of our Chairman and
has provided me with great support and guidance. Jon and Bruce have provided advice and continuity for the
company, and I am delighted to welcome Michele and Mark to the Board.
CLOTHING/
TEXTILES
INSULATION
PAPER
ROPE
MEDICINE
COMPOST
FOOD
PLASTICS
OILS
SUPPLEMENTS
BODY CARE
PRODUCTS
FUEL
PAINT
ANIMAL FEED
FLOUR
PROTEIN POWDER
Eric Wang
Managing Director
GREEN II GOLD
10 ECOFIBRE LIMITED ANNUAL REPORT
2022
3. LEADING MEANINGFUL
CHANGE IN THE
HEMP INDUSTRY
Leading the development of a meaningful industrial hemp industry to deliver health, well-being, and
sustainability benefits at a significant scale
Since its founding, Ecofibre has taken a leadership role in legislation, IP development, clinical research, education, and
advocacy. While the US hemp industry has progressed since its start as part of the 2014 US Farm Bill, much work is still
needed.
In July, the US Congress held its first-ever hearing on industrial hemp. This hearing was held by the House sub-
committee on Agriculture ahead of the 2023 US Farm Bill.
Leadership team
Eric Wang
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.
Jonathan Brown
Chief Financial Offer and
Joint Company Secretary
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 Sheldon
General Counsel and Joint
Company Secretary
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.
Dr Alex Capano
Chief Science Officer
Dr. Capano earned her DNP at
Thomas Jefferson University in
Philadelphia, Pennsylvania, where
she graduated Summa Cum Laude
and was awarded the Sandra Festa
Ryan award for Outstanding
Creativity and Innovation. She was
the first doctoral candidate of any
discipline who focused on
cannabinoid science under the
guidance of the Lambert Center for
the Study of Medicinal Cannabis
and Hemp. Dr. Capano also holds
a BSN and an MSN from the
University of Pennsylvania, and a
BS in neuroscience from the
University of Miami.
ECOFIBRE LIMITED ANNUAL REPORT 2022 11
Jeff Bruner
President, Hemp Black
Kieren Brown
Managing Director,
Ananda Food
Alex Nance
President, Ananda Health
Jeff founded The Quantum Group,
Inc. in 1985 later transitioned into
Quantum Materials, LLC in 2017
and then founded TexInnovate, Inc.
in 2017 which was later sold to
Ecofibre. At Quantum Materials
Jeff was responsible for the
development and innovation of a
wide range of high-performance
textile applications across a range
of industries to include office
furniture, automotive seating, truck
tires, road construction fabrics,
filtration, composite yarns &
fabrics, medical implants, outdoor
furniture and many other highly
engineered yarns and fabrics. Jeff
is a leading textile engineer and
inventor of solutions to meet
industry needs for high
specification applications.
Kieren became the MD of Ananda
Food in March 2018 with a remit to
grow the newly established
Australian food business. Kieren is
an experienced executive with over
23 years' experience within the UK,
Spanish and Australian food
industries, specialising in the
operational and technical
disciplines in short shelf-life fresh
produce. Kieren's last role was with
Australia's largest supplier of pre-
packaged salads. As the GM of
National Operations, he oversaw
several hundred staff across four
sites in four states, with turnover of
over $230 million per annum. Prior
to that, Kieren worked overseas for
Heinz and has deep experience
with some of the largest retailers –
including Woolworths, Coles and
Marks and Spencer.Kieren holds a
BSC (Hons) in Microbiology from
University of Wales Aberystwyth.
Alex joined Ananda Health in
September of 2017 and is
responsible for the overall
management and delivery of the
Ananda product range. He helped
to develop the current facility and
is also responsible for all aspects of
quality control and planning. Alex's
background is in toxicology and
chemical production. Prior to
joining Ananda he worked at Ethos
Laboratories as Laboratory
Production Manager and Dubois
Chemicals as a chemist. Alex holds
a Bachelor of Science in
Pharmaceutical Sciences from The
Ohio State University.
12 ECOFIBRE LIMITED ANNUAL REPORT 2022
2.
OPERATING +
FINANCIAL REVIEW
Group overview
GROUP RESULT
AUDm
Revenue
Gross Margin
Operating Costs
Profit (Loss) before Tax
Profit (Loss) after Tax
Investments:
Research & Development
Capital Expenditure
FY22
FY22
30.2
49%
(37.2)
(21.7)
(14.7)
6.3
3.1
FY21
FY21
28.8
61%
(31.4)
(10.0)
(7.0)
4.4
28.8
%
%
+5%
-12%
-18%
-116%
-110%
+41%
-90%
ECOFIBRE LIMITED ANNUAL REPORT 2022 13
$4m net cost saving in FY2021
6.4
1.5
27.5
31.4
-4
FY20
Depreciation
FY21
Acquisition
Savings
The group continued its focus on strong cost controls and
efficiency in FY21.
Overall Summary
Ecofibre had a loss after tax for FY22 of $14.7m (FY21 loss: $7.0m). The Group increased revenues by 5% from FY21
despite challenging trading conditions in the US CBD market. Our Hemp Black (+15%) and Ananda Food (+36%)
businesses delivered ongoing revenue growth, partially offset by lower Ananda Health revenue (-9%).
In FY22 gross margins reduced by 12% resulting from some temporary and permanent changes during the year which
included major supply chain disruption leading to polymer cost increases which have now subsided, inventory
provisions for goods manufactured at pre-pandemic sales forecasts, and the full-year effects of our strategic price
review in the Ananda Health business.
Operating costs increased by 18% as we continue to focus on investing across our businesses. 45% of this increase
relates to investment in R&D and marketing, including clinical trials and new product development, as well as higher
marketing costs. 33% related to increases related to prior period investments, including depreciation, property taxes,
and the full-year impact of the TexInnovate acquisition.
The following table shows the key changes in the loss after tax compared with the prior year. Each of these items is
discussed further below.
FY21
NPAT
Revenue
Direct
Costs
Other
Income
Operating
Costs
Tax
FY22
NPAT
1.4
-7.0
-4.3
-2.9
4.0
-14.7
-5.8
Revenue and Margin
Group revenue increased 5%, from $28.8m to $30.2m (+$1.4m):
! Hemp Black (FY22: $13.7m; FY21: $11.9m)
Hemp Black grew revenue by 15% in FY22. This growth includes higher production and prices for core turf and
biomedical yarn extrusion lines, as well as higher multi-filament, knitting, polymer and equipment sales.
14 ECOFIBRE LIMITED ANNUAL REPORT 2022
The increase in revenue included the first full period of the TexInnovate acquisition in FY22 (+$1.7m benefit), offset
by a reduction in facemask revenues from their peak in FY21 (-$1.9m lower revenues in FY22).
! Ananda Health (FY22: $12.9m; FY21: $14.3m)
Ananda Health's revenue reduced by 9% in FY22, with improved sales in the professional channel (+13%) more
than offset by lower sales in other channels (-40%). The business' distribution strategy continues to focus on the
professional segment. US independent pharmacy and medical professional sales represented 72% of total
segment revenue and were $1.0m (+13%) higher than FY21, mainly due to sales from the new Ananda
professional.com pharmacy portal.
This increase was offset by lower non-professional sales to the health food sector, mass e-commerce channels, and
CVS (-$2.4m, -40%). Sales to CVS were down $0.5m compared with FY21, which had included the initial stocking
of Ananda Health's BalansLabs brand across its pharmacy network. CVS continues to limit its CBD range to topical
products as it awaits regulatory clarity from the FDA on CBD as a dietary supplement. During the year, CVS
reduced their CBD supplier brands from 8 to 5, and BalansLabs has been retained.
! Ananda Food (FY22: $3.6m; FY21: $2.6m)
Ananda Food increased revenue by 36% in FY22, with growth from various sources, including the sale of a record
amount of planting seed ($0.5m), primarily to US farmers for fibre crops. Food sales increased steadily, mainly due
to existing food products sold to new customers and new products such as Ananda Equine.
Gross margin for the overall Group fell from 61% to 49%. Excluding the impact of inventory impairments during the
period, the gross margin would have been 55%. The reduction in margin also reflected a change in business mix, as
the revenue contribution of Ananda Heath (Ecofibre's highest margin business) declined and Hemp Black and Ananda
Food grew.
Within each business segment:
! Hemp Black margin was lower (FY22: 44%; FY21: 57%), reflecting higher polymer input costs due to temporary
supply chain disruptions for the turf yarn business and a $0.7m provision for yarns used in the manufacture of
facemasks that were not able to be re-purposed for other products.
! Ananda Health margin was lower (FY22: 61%; FY21: 74%) for two reasons.
- The business implemented a strategic pricing review in November 2020, and prices for selected Ananda
Professional product lines were reduced by c20%. FY22 results reflect the full-year impact of these lower prices.
- Inventory provisions and write-offs totaled $0.8m in FY22, mainly for finished goods inventory that has a two-
year shelf life and which were manufactured during pre-pandemic sales periods. The value of finished goods
has reduced over the last 12 months, and ongoing production is aligned with current demand.
! Ananda Food's average margins improved (FY22: 20%; FY21: 11%) due to increased high-margin planting seed
sales, continued increases in processing volumes and manufacturing economies of scale, and lower average seed
costs due to improved yields from proprietary genetics. Inventory provisions and write-offs in the year totaled
$0.3m.
Other Income
Other Income reduced by 57%, from $5.0m to $2.1m (-$2.9m):
! COVID-related government grants and tax incentives reduced from $5.3m in FY21 to $1.4m in FY22. FY22
COVID benefits are mainly related to US federal government relief programs, including the final US Government
Employee Retention Credit ($1.4m) (ERC) derived in 1Q22. The US Federal Government ceased the ERC
program effective 1 October 2021.
ECOFIBRE LIMITED ANNUAL REPORT 2022 15
Other Income
Other Income reduced by 57%, from $5.0m to $2.1m (-$2.9m):
! COVID-related government grants and tax incentives reduced from $5.3m in FY21 to $1.4m in FY22. FY22
COVID benefits are mainly related to US federal government relief programs, including the final US Government
Employee Retention Credit ($1.4m) (ERC) derived in 1Q22. The US Federal Government ceased the ERC program
effective 1 October 2021.
! Higher sales & marketing and travel as COVID-related restrictions abated, and the business was able to increase
engagement with pharmacies at conferences and seminars (+$0.7m)
! Higher depreciation from capital investment in prior periods (+$0.8m).
The cost of share-based payments was flat year on year, noting that FY21 included a high level of one-off credits for
lapsed or renegotiated share incentives ($1.0m comparative cost improvement in underlying costs in FY22 relative to
By business segment, higher operating costs were concentrated in Ananda Health (+$2.9m) and Hemp Black
(+$2.4m), with smaller increases in Ananda Food ($0.2m) and Corporate (+$0.2m).
Across all cost categories, the total annualised impact of the TexInnovate acquisition was +$0.9m, mainly related to
employee and contractor costs as described above, but also for depreciation, leases, maintenance, property taxes,
FY21).
and other costs.
Income Tax
Ecofibre recognised an income tax benefit of $7.1m during the period (FY21: $3.1), which was in line with the increase
! $3.1m investing cash outflows, including $2.8m for plant and equipment and $0.3m for business acquisitions. By
business segment:
- Hemp Black ($2.2m) - work to progress the single, bi, and tri-component yarn extrusion lines. Part of the cost of
the equipment and materials for the yarn extrusion lines was adjusted as part of the TexInnovate purchase price
settlement (USD0.8m), and ongoing expenditure relates to final commissioning costs.
- Ananda Health, Ananda Food and Corporate ($0.9m) - includes minor capital upgrades for operational
efficiency initiatives and the acquisition of Soul Seed by Ananda Food.
! $12.5 financing cash inflows, including $8.7m loan funds received and $4.3m received following the exercise of a
call option by Thomas Jefferson University, less $0.5m for repayment of lease liabilities.
! A gain from the revaluation of financial assets held in currencies other than Australian dollars (up from a $0.5m loss
in FY21 to a $0.5m gain).
Operating Expenses
Operating expenses increased by 18%, from $31.4m to
$37.2m (+$5.8m), which was higher than the increase in
revenue. The increase in operating expenses included
higher investment in R&D and marketing and the
embedded cost of prior period investments, including
depreciation, property taxes, and the annualised impact
of the TexInnovate acquisition that was completed in
late August 2020.
By cost type, the change in operating costs included:
! Operating cost investment in R&D (+$1.8m, +32%)
Change in
Operating
Expenses
Increased
investment,
45% of
increase
Embedded
cost increases,
33% of
increase
Other, 22%
of increase
- Ananda Health R&D operating costs increased $1.8m to $3.5m, which mainly related to the increased cost of
clinical studies (+$1.5m, mainly for the Southern Cross University (SCU) sleep study and the University of
Newcastle cancer study). Other R&D costs include staff for clinical studies, product development, and
operational trials and testing.
- Hemp Black R&D operating costs increased from $2.0m to $2.5m. FY22 R&D costs mainly related to staff costs
($2.0m) and operational trials and testing ($0.5m)
in the company's loss before income tax.
Cashflows and Balance Sheet
FY22 cash movements comprised
- Ananda Food R&D operating costs decreased from $0.5m to $0.1m for operational trials and testing.
! $10.6m operating cash outflows, including $4.6m cash expenditure on R&D.
- Other R&D decreased from $0.3m to $0.2m, including genetics and plant science.
! Employee and Contractor costs (+$1.4m, +11%) included the full period impact of the TexInnovate acquisition in
October 2022 (+$0.5m) and the impact of staffing mix and wage inflation, particularly in the Hemp Black business
in North Carolina.
! Higher sales & marketing and travel as COVID-related restrictions abated, and the business was able to increase
engagement with pharmacies at conferences and seminars (+$0.7m)
! Higher depreciation from capital investment in prior periods (+$0.8m).
The cost of share-based payments was flat year on year, noting that FY21 included a high level of one-off credits for
lapsed or renegotiated share incentives ($1.0m comparative cost improvement in underlying costs in FY22 relative to
FY21).
By business segment, higher operating costs were concentrated in Ananda Health (+$2.9m) and Hemp Black
(+$2.4m), with smaller increases in Ananda Food ($0.2m) and Corporate (+$0.2m).
Across all cost categories, the total annualised impact of the TexInnovate acquisition was +$0.9m, mainly related to
employee and contractor costs as described above, but also for depreciation, leases, maintenance, property taxes,
and other costs.
16 ECOFIBRE LIMITED ANNUAL REPORT
2022
Income Tax
Ecofibre recognised an income tax benefit of $7.1m during the period (FY21: $3.1), which was in line with the increase
in the company's loss before income tax.
Cashflows and Balance Sheet
FY22 cash movements comprised
! $10.6m operating cash outflows, including $4.6m cash expenditure on R&D.
! $3.1m investing cash outflows, including $2.8m for plant and equipment and $0.3m for business acquisitions. By
business segment:
- Hemp Black ($2.2m) - work to progress the single, bi, and tri-component yarn extrusion lines. Part of the cost of
the equipment and materials for the yarn extrusion lines was adjusted as part of the TexInnovate purchase price
settlement (USD0.8m), and ongoing expenditure relates to final commissioning costs.
- Ananda Health, Ananda Food and Corporate ($0.9m) - includes minor capital upgrades for operational
efficiency initiatives and the acquisition of Soul Seed by Ananda Food.
! $12.5 financing cash inflows, including $8.7m loan funds received and $4.3m received following the exercise of a
call option by Thomas Jefferson University, less $0.5m for repayment of lease liabilities.
At year-end, the Group had $23.7m available to fund its operations and ongoing investments, including:
! Cash on hand, $7.3m
! One-off receivables from the US Federal Government, $7.1m
This relates to the outstanding balance of ERC receivable for both FY21 and FY22 ($3.1m) and a US federal tax
refund due to a one-off measure to carry back current period losses into prior years ($4.0m).
The Group received $0.9m ERC payments during FY22, and a further $0.8m was received in July 2022. The US's
Internal Revenue Service continued economy-wide, processing delays mean the timing of the remaining ERC
payments and the tax refund payment remains unknown.
! Undrawn loan receivable, $9.3m
As at 30 June 2022, the Group agreed to a USD10.0m secured loan facility with NuBridge Commercial Lending LLC
(NuBridge). USD3.6m was received prior to year-end, and the balance, USD 6.4m, was received in July 2022.
The Group is focused on rapidly improving underlying operating cashflows whilst balancing the need to invest in
revenue growth and client development.
In the near term, the Group is using existing inventory balances and reducing non-cash working capital, to generate
higher operating cash margins.
Dried flower purchases for Ananda Health CBD have stopped, and smaller food seed crops were planted for Ananda
Food as those businesses can draw down on existing crop inventories.
ECOFIBRE LIMITED ANNUAL REPORT 2022 17
These measures helped reduce the carrying value of Inventories and Biological Assets during the year from $17.8m to
$16.3m. These balances also included a $1.1m foreign currency uplift and a $1.8m inventory write-down.
Trade Receivables reduced by $0.4m during the year.
Non-current assets increased from $102.5m to $112.9m, including the impact of 8% appreciation of the US dollar
(USD) versus the Australian dollar (AUD), and the consequent impact on the AUD value of USD denominated assets.
Property, Plant and Equipment was steady over the period ($47.0m), as depreciation charges were offset by foreign
exchange impacts.
Intangible Assets include Goodwill recognized on the acquisition of the business and assets of TexInnovate in August
2020 ($51.1m) and the acquisition of Soul Seed and New Composite Partners in FY22 ($0.5m).
The Group also has a corresponding $14.0m liability from the TexInnovate acquisition for Contingent Consideration
payable in cash, and a $14.3m Share Capital Reserve for contingent equity consideration applicable to the transaction.
These amounts become payable if the acquired business delivers Earnings before Interest and Tax of US6.0m in two
consecutive annual periods within five years from the date of the acquisition (21 August 2020).
Current liabilities total $8.1m, including $2.0m payable to the James & Cordelia Thiele Trust Fund (J&CTTF) in July
2022 which reduced the total balance of that loan from $10.0m to $8.0m.
Non-current liabilities total $31.5m, including the non-current portion of the J&CTTF term loan ($8.0m), Lambert
Super Fund loan ($3.5m), the drawn portion of the NuBridge loan ($5.2m), and TexInnovate Contingent Consideration
($14.0m).
Overall, the Group's net assets reduced from $111.8m at 30 June 2021 to $109.9m during the period, and the number
of shares on issue increased from 326.7m to 335.5m, including 8.0m shares issued to Thomas Jefferson University
following the exercise of an option, and 0.8m shares issued by the Employee Share Trust. At the end of the period the
Net Tangible Assets per share was 13.23 cps (FY21: 17.64 cps).
The value of net assets, and the Consolidated Statement of Other Comprehensive Income, included a benefit of
$6.9m in FY22 because of the strengthened USD and the consequent revaluation of the net assets of the group's US
entities.
18 ECOFIBRE LIMITED ANNUAL REPORT 2022
AUDm
Revenue
Gross Margin
Operating Costs
Profit (Loss) before Tax
Investments:
Research & Development
Capital Expenditure
FY22
FY22
12.9
61%
(16.8)
(8.3)
3.5
0.3
FY21
FY21
14.3
74%
(13.9)
0.3
%
%
-9%
-13%
-21%
1.7
0.6
+102%
-39%
Ananda Health aims to be the preferred provider of the highest quality CBD to US practitioner and pharmacy channels,
and the Australian over the counter market. To achieve this outcome, the businesses key priorities are to:
! Be the #1 CBD brand for US pharmacies & healthcare professionals
! Ensure our CBD customers stay with us for life
! Be the #1 CBD brand in Australia
! Advance gynecological cancer research portfolio towards commercial opportunities
Performance Review
Ananda Health's loss before tax for FY22 was $8.3m (FY21: $0.3m profit).
Revenue declined 9% during the year, however the pharmacy segment grew by 13%, offset by lower revenue in non-
professional channels:
Apr 21 - launched CBD chews range, women’s health products
May 21 - e-comm channel for pharmacy customers launched
4Q20 - full impact of
COVID begins in
United States
Nov 20 - first price reduction
in three years implemented
across selected products,
commenced initial stocking
of CVS Pharmacy
1Q22 - Delta,
Omicron variants
predominant in the
United States
2H22 - COVID related
challenges ending for US
pharmacies in 3Q22
AUDm
1H20 2H20
1H21 2H21
1H22 2H22
US Independent Pharmacies
Ananda Hemp / Health Food Stores
CVS
Australia
Other (bulk, whitelabel)
Total
21.8
3.2
-
-
3.3
28.3
15.3
1.5
-
0.0
1.9
18.7
4.2
2.2
0.6
0.1
0.4
7.5
4.0
1.9
0.3
0.0
0.5
6.7
4.3
1.3
0.2
0.2
0.5
6.6
4.9
0.3
0.2
0.5
0.4
6.3
independent pharmacy and
related online channels held
steady
closing Ananda Hemp as the
non-professional channels
continue to struggle as a
oversupplied segment
national chain channel
limited movement without
regulatory clarity
ECOFIBRE LIMITED ANNUAL REPORT 2022 19
Gross margin was 61%, and as described above included the impact of $0.8m inventory provisions and the annual
impact of prior period price reductions.
Higher operating costs included increased investment in clinical R&D (+$1.5m) and marketing / travel ($0.4m), and
higher legal costs to successfully defend a 3rd party claim (+$0.8m).
Be the #1 brand for US pharmacies & healthcare professionals
In FY22 we supported over 2,000 pharmacies in the United States with access to high quality, safe and federally legal
hemp-derived CBD products in a wide variety of formats. We have an ongoing opportunity to expand the breadth of
our offer to these pharmacies and to increase re-order rates by helping them better serve their customers.
The US continues to be the world's largest market for hemp-derived CBD , and accounts for most of Ananda Health's
revenue ($12.2m, 95% of total segment sales).
1
Over the past two years the US CBD market has been challenging, but COVID related challenges for US independent
pharmacies began abating in 3Q22, and industry supply also continues to consolidate and reduce. 2022 crop
estimates showed a continued, significant decrease in hemp crop licensing and acreage for the northern summer
growing season.
2019-2022 US Hemp Acreage
511,442
336,655
201,126
As of June 2022, there were
51,016 acres licensed for
outdoor hemp production in
2022, down 53% from 107,702
in 2021
-53%
-53%
107,702
17,724
13,475
70,530
54,152
51,016
8,298
5,381
2019
2020
2021
2022
Licenses Issued
Acres Licensed
Acres Planted
Source: https://newfrontierdata.com/cannabis-insights/midterm-review-a-2022-u-s-hemp-production-outlook/
Despite hemp-derived CBD being federally legal since December 2018, the FDA has not yet established these
products as a dietary supplement or food. Because of this lack of clarity, products containing hemp-derived CBD have
limited access to mainstream retail distribution channels.
Until regulations are clarified, large national clients, such as CVS Pharmacy, will continue to limit their CBD range to
topical cosmetic products and not carry ingestible CBD products classified as dietary supplements.
1 Grandview Research, Cannabidiol Market Size, Share & Trends Analysis Report, 2022
20 ECOFIBRE LIMITED ANNUAL REPORT
2022
Ecofibre sits on the Executive Committee of the most significant lobbying organization for hemp in the US. The US
Hemp Roundtable represents the industry in lobbying efforts across two federal bills that look to legislate CBD as a
dietary supplement as soon as possible. Both bills have bi-partisan support, however, due to the challenging agenda
of the current administration, we are waiting for these bills to be placed on the agenda.
The business has received third party certification for both dietary supplements and ISO22716 in preparation for any
future regulatory changes.
As trading conditions improve Ananda Health has focussed on a number of key initiatives:
! CBD value range: to help pharmacies address the impact of inflation on their customers, and to capture
additional shelf space in Ananda Health's pharmacy network, a second range of CBD products will be launched
for price-sensitive consumers.
The myEveryday CBD range launched in August 2022, and features a smaller and more affordable product range
that leverages existing production capacity.
! Extend range of outcome-based products: the business has focused on product differentiation to address a
hyper-competitive market and sustain margins.
In addition to the Women's Health range launched in 2021, in 3Q22 Ananda Health launched a range of new
products including an Ananda PM sleep product which incorporates the cannabinoid 'CBN', and products that
capture the acid form of the CBD cannabinoid 'CBDa', which require specific genetics and processing methods to
manufacture.
In 4Q22, Ananda Health leveraged its experience in topical CBD products to develop and launch the 'Green to
Gold" range of beauty products that can be sold through independent pharmacies and also professional beauty
salons and spas.
! Renew focus on industry conferences: as COVID related travel restrictions reduced, the business has renewed its
pre-pandemic focus on educational and speaking opportunities at independent pharmacy conferences.
! Continued investment in the professional market digital channel: the Ananda Professional direct-to-consumer
offering was launched in late FY21 to help pharmacists re-engage their customers through COVID-19, and the
business has continued to enhance the offering and opened the channel to physicians at the end of 1H22. This
new channel has shown steady uptake by Pharmacists and customer sales results are positive.
! Extend BalansLabs distribution: CVS sales were disappointing during the year, especially given BalansLabs
positioning as the home brand for CVS. In August 2022 CVS advised that it would be extending BalansLabs
products into a further 5 US states.
Be the #1 CBD brand in Australia
Ananda Health generated $0.6m revenue in Australia from the existing Schedule 4 and 8 (S4 & S8) prescription market
(5% of total revenue for Ananda Health in FY22, and up from $0.1m in FY21).
72% of this revenue was generated in 2H22 as the business added new distribution relationships and increased
promotional activity in the market. Ananda Health imports CBD dominant (< 0.3% THC) products to Australia from its
production facility in the US and does not participate in the high-THC or dried flower market segments.
Ecofibre is undertaking Phase 3 clinical research to support its commercial objective of being the first and leading
provider of high-quality CBD for the over-the-counter market.
The Sleep Study (Phase III Double-Blind, Randomised Placebo-Controlled Clinical Trial) is being conducted to support
our TGA S3 over the counter product registration. It is one of the largest CBD sleep studies ever conducted and
following study completion a TGA application is expected to be submitted in 2Q22.
ECOFIBRE LIMITED ANNUAL REPORT 2022 21
September completion of the
largest ever CBD sleep trial to
support a Schedule 3 (over-
the-counter) registration
• AUD1.4m investment with
Southern Cross University
• c.350 patients
• enrolment complete, final
patients complete ten-week
treatment period in
September
S3 Registration on track for
submission in 2Q23
• TGA review process up to
one year
• Beginning to establish
pharmacy distribution
partnerships
Product development
completed using US
manufactured product
Ethics approval
for SCU
sleep study
Patient enrolment
completed
July 2022
September
study completion
2Q23
submit TGA
application
Australia TGA
US site visitcompleted
The business will leverage its deep experience and leading position with US pharmacies, and its US manufacturing
capacity, to work with pharmacy in the highly attractive Australian S3 market once TGA approval is received.
Ecofibre launched the Katelyn's Gift Compassionate Access Program in November 2021 to support affordable access
to Ananda Hemp's Medicinal Cannabis range for children who could benefit from the product via doctor's prescription
but may not be able to afford it.
Advance gynecological cancer research portfolio towards commercial opportunities
The commercial objective of the research partnership with The University of Newcastle is to establish a portfolio of
intellectual property on a range of gynecological cancers that can be commercialized with a group of future partners.
This research studies the effects of Ananda full spectrum extract on gynecological diseases. A clinical set-up study was
concluded in 1H22 and based on the outcomes of the study, Ecofibre filed four patent applications with the US Patent
and Trademark Office (USPTO) on 28 October 2021.
Ecofibre subsequently accelerated this program to develop clinical trials and to support and expand on its existing IP
portfolio. The business is very encouraged by the ongoing progress of the study, which is a compelling opportunity to
improve the lives of women globally.
22 ECOFIBRE LIMITED ANNUAL REPORT
2022
Ananda Health is committed to developing CBD-
based solutions to address a gap in the
treatment of gynecological diseases and overall
women's health.
Clinical set-up study undertaken by University of
Newcastle in 2H21:
• Ananda proprietary formulation
• positive outcomes observed in a range of
gynecological diseases
• Ecofibre filed four provisional patent
applications with the USPTO in October 2021
Final patent submissions on track for October
2022 deadline
• research program expanded to support IP
protection and commercialization pathway
• completing in vitro data collection
• support phase II studies
• staged investment based on research
milestones - $1.1m invested to date
Overall portfolio of research studies to support efficacy data for professional health care
channels
Ecofibre and Ananda Health continue to focus on clinical research for hemp-derived CBD to differentiate our brands
and support our long-term focus on the professional healthcare market. In addition to the two Australian studies
described above, Ecofibre also conducts clinical research in the United States to support this overall goal.
The slow adoption by the US FDA and the traditional US healthcare system is largely due to the lack of clinical data
supporting the efficacy of CBD across a range of conditions.
Ananda Health was the first business to obtain an IND on full spectrum hemp extracts in the United States. As a result
of this investment, institutions such as the University of Colorado are undertaking research using Ananda Professional
products at no cost to Ananda Health.
Enrolment in a number of US studies remains ongoing due to COVID related delays. Successful completion of the
clinical studies on the Ananda products, we will provide medical professionals with the only over-the-counter full and
broad-spectrum CBD products with proven efficacy.
ECOFIBRE LIMITED ANNUAL REPORT 2022 23
An overall summary of current studies is set out below:
Study
focus
Research
Institution
Patient
Population
Location
Type/Phase
Status
US Research Program
Opioid
Reduction
Free Her
study
Murphy Clinic
Chronic Opiod
Louisville, KY
Ecofibre
Pelvic pain
Various
Pain
(neuropathic)
a
Lankenau
Institute for
Medical Research
Breast, colon
and ovarian
cancer
Philadelphia,
PA
Prospective
cohort
study
Complete - published 2019
in Journal Postgraduate
Medicine
Post
market
Complete
Phase 2
Enrollment underway
Sleep and
anxiety
a
Eastern Virginia
Medical School
Addiction
a,c
Cognitive
a,c
decline
University of
Colorado
University of
Colorado
Dementia
Norfolk, VA
Phase 2
Enrollment underway
Alcohol use
disorder
Adults, no
dementia
Boulder, CO
Phase 2
Enrollment underway
Boulder, CO
Phase 2
Enrollment underway
AUSTRALIAN Research Program
b
Sleep
Southern Cross
University
Healthy
population
Australia
(4 sites)
Phase 3
Discussed above
Gynaecological
cancers and
endometriosis
University of
Newcastle
Endometriosis
Newcastle,
Australia
Avatar
study
Discussed above
a FDA (USA) authorised IND
b TGA (Australia) authorised
c not funded by Ecofibre, but Ecofibre product used for study and input to study design
Outlook
Ananda Health expects to see continued recovery in the pharmacy channel and myEveryday CBD will provide solid
growth. However, the business will not return to profitability in FY23. A key to profitability in FY24 will be the Australian
over-the-counter market, where product registration is subject to TGA approval.
24 ECOFIBRE LIMITED ANNUAL REPORT
2022
AUDm
Revenue
Gross Margin
Operating Costs
Profit (Loss) before Tax
Investments:
Research & Development
Capital Expenditure
FY22
FY22
13.7
44%
(11.5)
(4.5)
2.5
2.2
FY21
FY21
11.9
57%
(9.0)
(1.0)
2.0
1.7
%
%
+15%
-13%
-27%
-266%
+27%
+29%
Hemp Black aims to be the recognized global leader in environmentally sustainable, high-tech hemp solutions to
target markets. The business' priorities are to:
! Fill manufacturing capacity with existing and new clients
! Establish new use cases for /eco6TM as a 100% bio-based carbon black
Performance Review
In FY22 Hemp Black incurred a loss before tax of $4.5m (FY21: $1.0m). As described above, FY22 revenue growth
(+$1.8m, +15%) was concentrated in Hemp Black's core biomedical and turf yarn lines. All other parts of the business
(excluding masks) also delivered solid revenue growth.
Gross margin was 44% and included the impact of $0.7m inventory provisions and higher polymer costs. Higher
operating costs included the annualised impact of the TexInnovate acquisition (+$0.9m), and higher R&D and staff
costs.
Fill manufacturing capacity with new and existing clients
Hemp Black businesses include polymer compounding, yarn extrusion and 2D and 3D knitting. These processes
leverage advanced yarn manufacturing technology and are able to utilise Hemp Black inputs to create value-added
properties such as anti-odor, anti-static, and conductivity.
The acquisition of TexInnovate, and ongoing investments in manufacturing capability and R&D for high-performance
customer applications, provides a pathway to translate those investments into profitable growth drivers by matching
production capability and capacity to Hemp Black's new client pipeline:
! Turf yarn - Hemp Black's turf yarn business increased production during the year and has been operating at near
full capacity. A significant new turf yarn client was on-boarded in July 2022, and changes to optimise the existing
production line and products are expected to deliver a c30% capacity increase from 1Q23.
The R&D investment in this business has resulted in new yarns being developed for the market-leading provider
of turf products in the United States, including different polymer types, colours and physical properties. Demand
for turf yarn has been expanding in the US, and increased ongoing demand is evident beyond current purchase
orders.
ECOFIBRE LIMITED ANNUAL REPORT 2022 25
! Client pipeline - 'at scale' commercialization of other capabilities is taking longer than expected, with an ongoing
focus on natural anti-odor yarn.
- premium US department store - Hemp Black's knitting business made substantial progress on product
development for a range of 'own label' activewear for a large, premiere US department store. Initial products
are expected to ship in 2Q23.
- global shoe manufacturer – the knitting business also made progress on a new seamless shoe design for a
leading outdoor footwear manufacturer
- Zoox – designs and product trials have been progressed for a range of interior fabrics for Zoox driverless
electric vehicles, with at-scale production dependent on future vehicle roll-out
- global furniture brand - final design phase of expanded product line
The Biomedical business operates a dedicated, ISO9001 production facility supplying yarn for vascular grafts to
Intervascular SAS, part of the Getinge AB group. The business has the capacity to meet steady ongoing increases in
orders from this customer.
Hemp Black has slowed the commissioning of new mono, bi and tri component yarn extrusion lines, which will be
activated and tailored as needed to meet specific customer demand.
TM
Establish new use cases for /eco6 as a 100% bio-based carbon black
Together with our customers, we will deliver
sustainable bio-based materials
that revolutionize industrial production
while sequestering one billion kilograms of carbon by 2028
To achieve this vision, we will support ~200,000 acres of hemp production over the next 5 years underpinned by our
/eco6 supply chain.
TM
/eco6TM is a direct replacement for petroleum-based carbon black and is certified by the United States Department of
Agriculture's (USDA's) BioPreferred® program as a 100% biobased product:
!
total market opportunity as a carbon black replacement is over $1B for our target segment of plastics and inks
! potential is significantly higher as a bio-based plastic
! carbon black usage as black pigment (c2%) vs /eco6TM usage as a bio-based input – c25%
!
initial focus on shipping pallets, particularly for use in the food and pharmaceutical industries
In FY22 the business further established the required supply chain to be able to service the bio-based plastics market
at scale.
With the expansion of our hemp fibre planting seed program and partnerships with farming groups across the US and
polymer compounding capability, the business can begin to target the existing injection moulding supply chain in a
seamless manner.
26 ECOFIBRE LIMITED ANNUAL REPORT
2022
/eco6 supply chain established
a) Established high-yielding hemp genetics - ECO-MS77 will yield
AUD$4-5M in sales for Ananda Food in FY23.
b) Built a strong farming network - in 2023, ECO_MS77 genetics will
grow ~23,000 acres of hemp.
c) Established processing infrastructure and /eco6 patents ro value-
add hemp into manufacturing inputs that fit existing supply chains
d) Identifying and developing attractive commercial markets and
applications for /eco6.
sustainable growth cycle
Outlook
Hemp Black will experience continued growth with new core clients. We expect Hemp Black to be profitable in FY23
with the contribution from the execution of our /eco6 strategy.
ECOFIBRE LIMITED ANNUAL REPORT 2022 27
ECOFIBRE LIMITED ANNUAL REPORT 2022 27
AUDm
FY22
FY22
FY21
FY21
Revenue
Gross Margin
Operating Costs
Profit (Loss) before Tax
Investments:
Research & Development
Capital Expenditure
3.6
20%
(2.2)
(1.6)
0.1
0.2
2.6
11%
(2.0)
(1.6)
0.5
0.1
%
%
+36%
+9%
-11%
-3%
-78%
+112%
Ananda Food aims to be the leading hemp food supplier in Australia, and is focused on three priorities
! Be the lowest cost producer
! Grow the category via product innovation and brand
! Be the leading provider of hemp fibre seeds in the US and Australia
Performance Review
In FY22 the combined business incurred a loss before tax of $1.6m (FY21: $1.6m). Revenue growth continued in FY22,
up $0.9m (+36%) from FY21, including:
! $0.3m increase in seasonal, high margin seed sales (FY22: $0.5m; FY21: $0.2m); and
! ongoing steady growth in food product sales reflected increased supply to multiple white label and bulk
customers in the hemp-food industry and increasing awareness of the benefits of plant-based diets and hemp
foods.
Overall gross margins improved from 11% to 20%, and operating costs were in-line with FY21.
Gross margin was 44% and included the impact of $0.7m inventory provisions and higher polymer costs. Higher
operating costs included the annualised impact of the TexInnovate acquisition (+$0.9m), and higher R&D and staff
Overview
costs.
Ananda Food operates two business in Australia and the United States. Each business is based on unique, registered
varieties of hemp genetics:
! Hemp foods - Ananda Food supplies 100% Australian hemp seed products that are rich in digestible protein,
fibre, omega 3 and omega 6 fatty acids, iron and other essential vitamins and minerals.
Ecofibre's hemp varieties enable high yields and progressive grain harvests in growing regions from Tasmania to
North Queensland.
Hemp Black aims to be the recognized global leader in environmentally sustainable, high-tech hemp solutions to
target markets. The business' priorities are to:
! Fill manufacturing capacity with existing and new clients
! Establish new use cases for /eco6TM as a 100% bio-based carbon black
Performance Review
In FY22 Hemp Black incurred a loss before tax of $4.5m (FY21: $1.0m). As described above, FY22 revenue growth
(+$1.8m, +15%) was concentrated in Hemp Black's core biomedical and turf yarn lines. All other parts of the business
(excluding masks) also delivered solid revenue growth.
Fill manufacturing capacity with new and existing clients
Hemp Black businesses include polymer compounding, yarn extrusion and 2D and 3D knitting. These processes
leverage advanced yarn manufacturing technology and are able to utilise Hemp Black inputs to create value-added
properties such as anti-odor, anti-static, and conductivity.
The acquisition of TexInnovate, and ongoing investments in manufacturing capability and R&D for high-performance
customer applications, provides a pathway to translate those investments into profitable growth drivers by matching
production capability and capacity to Hemp Black's new client pipeline:
! Turf yarn - Hemp Black's turf yarn business increased production during the year and has been operating at near
full capacity. A significant new turf yarn client was on-boarded in July 2022, and changes to optimise the existing
production line and products are expected to deliver a c30% capacity increase from 1Q23.
The R&D investment in this business has resulted in new yarns being developed for the market-leading provider
of turf products in the United States, including different polymer types, colours and physical properties. Demand
for turf yarn has been expanding in the US, and increased ongoing demand is evident beyond current purchase
orders.
The business operates a highly efficient BRCGS and HACCP rated food processing facility in Beresfield,
Australia. This facility has the only processing capability in Australia that can produce all three major categories of
hemp food: de-hulled seed, oil and protein / fibre.
Varieties such as ECO-Excalibur produce reliable, high-yielding grain crops and are bred for optimal performance
in specific growing latitudes.
28 ECOFIBRE LIMITED ANNUAL REPORT
2022
3
2
! Fibre planting seed: Ananda Food propagates and sells planting seed to hemp fibre growers in the United States
and Australia.
Varieties such as ECO-MS77 produce high biomass in a short growing season, and are adaptable to a wide range
of growing conditions.
Hemp foods
The food business continues to focus on being the lowest cost producer through building scale as the white label and
wholesale partner-of-choice, continuous improvement in crop yields, and best in class production facilities.
In FY22 the business continued to invest in automation and processing efficiency to strengthen its cost position.
The business also undertakes ongoing product innovation to expand market demand and share, including new hemp
formats to improve usability and use of by-products in animal feed markets
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 hemp food industry in Australia is changing rapidly, and Ananda Food has invested to build scale, strengthen its
direct relationship with key supermarket customers, establish a retail customer brand and broaden its product
portfolio.
New product development has focused on new hemp formats to improve use of by-products, including the launch of
Ananda Equine horse feed in 2H22. A number of other wholesale and retail products are also under development,
including textured vegetable protein formats for use by food manufacturers.
During the year Ecofibre also had an opportunity to leverage and strengthen Ananda Food's vertically integrated
capability by acquiring two complementary businesses.
In April 2022, Ecofibre purchased the 'Soul Seed' hemp food business for $0.24m, effectively bringing this white
labelled manufacturing relationship inhouse. The acquisition of Soul Seed has removed costs from the supply chain,
improved product margins and has enabled Ananda Food to enter the retail market with a modern brand. The
business will leverage the brand and expand its use with additional Australian retailers and eventually to export 100%
Australian grown retail product overseas.
In July 2022, Ananda Food agreed to purchase the hemp food and wellness business of ECS Botanics for $0.25m plus
a small amount of stock at valuation. Contract completion subsequently occurred on 19 August 2022. Ananda Food
had also been a white label supplier to ECS for some time. The acquisition extends the benefits of the Soul Seed
transaction, including further strengthening Ananda Food's supply relationship with Coles and Woolworths. It also
delivers new customer relationships, including health food distribution opportunities, and an expanded product
range, including hemp terpene wellness products.
ECOFIBRE LIMITED ANNUAL REPORT 2022 29
ECOFIBRE
PLACES POSITIVE
IMPACT AND
ENVIRONMENTAL
SUSTAINABILITY
AT THE CORE OF
HOW WE
OPERATE AND
WHAT MARKETS
WE PARTICIPATE
IN
Fibre Planting Seed
The US market for hemp fibre seed has been growing strongly as new industrial applications are developed for hemp
stalk (inner 'hurd' and exterior 'fibre') materials.
Ananda Food is becoming the leading provider of hemp fibre planting seed in the US and Australia
! ECO-MS77 widely considered the best fibre genetic in the US based on yield and ability to grow in all US latitudes
! demand currently exceeds supply
! strong margins
Since 2016, Ecofibre has conducted growing trials across 18 States and 15 Universities to validate and market our
genetics.
SOUTH DAKOTA
KANSAS
WISCONSIN
NEW YORK
PENNSYLVANIA
MONTANA
COLORADO
MISSOURI
CALIFORNIA
TEXAS
MISSISSIPPI
LOUISIANA
ARKANSAS
HAWAII
TEXAS
TEXAS
KENTUCKY
KENTUCKY
N. CAROLINA
N. CAROLINA (2)
TENNESSEE
ALABAMA
FLORIDA
LEGEND
Research
Commercial production
Ananda Food has also expanded capability in seed propagation, extending growing areas to include North
Queensland and beginning to propagate seed in the US to reduce transport costs and supply chain risks
Following strong sales growth in FY22, seed sales are forecast to increase to $4-5m in FY23 subject to yields.
! In FY22 Ananda Food exported 46t of seed to the United States for hemp fibre production in the 2022 summer
growing season. This was a significant increase on FY21, when the group sold 18t of planting seed in the United
States to enable 650 acres of hemp fibre production across 9 states.
The business uses a portion of available seed to propagate for next season to ensure it can support the growing
demand of fibre planting seed both in the US and Australia.
30 ECOFIBRE LIMITED ANNUAL REPORT
2022
Fibre Planting Seed
The US market for hemp fibre seed has been growing strongly as new industrial applications are developed for hemp
stalk (inner 'hurd' and exterior 'fibre') materials.
Ananda Food is becoming the leading provider of hemp fibre planting seed in the US and Australia
! ECO-MS77 widely considered the best fibre genetic in the US based on yield and ability to grow in all US latitudes
! demand currently exceeds supply
! strong margins
Since 2016, Ecofibre has conducted growing trials across 18 States and 15 Universities to validate and market our
genetics.
! In FY22, the business planted 575 acres of fibre seed crops in Queensland and is planning to plant up 1,000 acres
in Texas in October / November 2022. Depending on final yield and customer sales, this crop has the potential to
deliver over $5.0m revenue in FY23.
This business supports Hemp Black's /eco6 strategy to ensure supply of hemp feedstock through relationships with
fibre growers.
Outlook
Ananda Food will continue to experience solid growth. The launch of new animal-based products and the expansion
of the fibre planting seed business will make this business profitable in FY23.
Material Business Risks
Ecofibre's growth strategy across its business portfolio exposes the Group to various risks, which are fully or partially
mitigated in accordance with the Group's risk appetite and risk management framework. Risks and mitigating
strategies set out in this report include:
! Managing working capital, including timing of receipt of ERC and income tax refunds in the United States,
inventory management initiatives, and improving operating profits and cashflows across each of the Group's
businesses
! Improving profitability and managing working capital to re-pay Group loans on agreed timeframes
! Implementing strategy to restore Ananda Health revenue growth, including the focus on professional healthcare
and independent pharmacies and responding to ongoing oversupply and heightened competition in the US CBD
market
! US FDA position on CBD as a dietary supplement, and managing ongoing regulatory change
! Hemp Black ongoing growth strategy and implementation, including commissioning and filling new production
capacity in new market and product segments, and growing the /eco6 business
TM
! Ananda Food ongoing growth strategy and implementation, including significant expansion of the fibre seed
business (including associated agricultural and yield risk), and balancing the production and sale of different
outputs from seed processing
! Delivering a commercial return on the Group's investment in research and development, including Ananda
Health's clinical research program
! Managing the impact of inflation on Group margins and operating costs
! Key person risk and retention of critical staff
! Global instability, including impacts on major customer strategies, supply chains and foreign exchange rates
Other portfolio risks include systems complexity and cyber risk. The Group's businesses are dependent on
sophisticated business processes and systems to operate effectively. If these systems do not operate as intended,
through cyber-attack or otherwise, the group's ability to operate its businesses would be significantly impacted.
ECOFIBRE LIMITED ANNUAL REPORT 2022 31
3. DIRECTORS’ REPORT
32 ECOFIBRE LIMITED ANNUAL REPORT
2022
ECOFIBRE LIMITED ANNUAL REPORT 2022 33
Board of Directors
Your Board of Directors, as at the date of this report, is profiled below.
Vanessa Wallace
Independent Chairman
Eric Wang
Managing Director & CEO
Jon Meadmore
Independent
Non-Executive Director
Experience and expertise:
Experience and expertise:
Experience and expertise:
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.
Board Committee Memberships
Chairman of the Audit, Risk and
Compliance Committee
Qualifications
LLB (QUT)
BBus (Acc) (QUT)
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
Global Holdings Inc. 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.
Board Committee Memberships
Chairman of the Board
Chair of the People and
Nomination Committee
Member of the Audit, Risk and
Compliance Committee
Member of the Health and
Government Relations Committee
Qualifications
BCom (UNSW), MBA (IMD,
Switzerland)
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.
Board Committee Memberships
Member of the Health and
Government Relations Committee
Qualifications
BS Engineering (WestPoint)
MBA (Dartmouth)
34 ECOFIBRE LIMITED ANNUAL REPORT
2022
Professor Bruce Robinson
Independent
Non-Executive Director
Michele Anderson
Independent
Non-Executive Director
Mark Bayliss
Independent
Non-Executive Director
Experience and expertise:
Experience and expertise:
Experience and expertise:
Mark is a director and senior
executive with extensive
experience in a variety of roles
across listed and private
companies, management buyouts,
private equity and turnarounds in
Australia, NZ, UK and US.
He has been the CEO of three
listed companies and one private
company and the Chairman of 3
companies and 2 not-for-profits.
His industry experience is broad
including eCommerce, Technology,
Credit Finance, Retail, FMCG,
Media & Publishing, Advertising &
Marketing Services and
Manufacturing.
Board Committee Memberships
Member of the Audit, Risk and
Compliance Committee
(from 1 September 2022)
Qualifications
BSc Economics (LSE), ACA, MAICD
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.
Board Committee Memberships
Chairman of Health and
Government Relations Committee
Member of the Audit, Risk and
Compliance Committee
(from 1 July 2022)
Member of the People and
Nominations Committee
Qualifications
Michele's executive career spans
30 years as an operating business
executive, independent director
and founder working across the
technology, wine and professional
services sectors. Her leadership
contributions and passion lie in
developing and implementing
growth strategy, scaling brands and
businesses, driving digital growth
and transformation, and supporting
positive environmental impact and
de-carbonisation. She began her
career in Australia as a
management consultant with Booz
Allen and Hamilton and then spent
most of her career to date working
in the US, including running
Shutterfly's US$1B revenue
consumer ecommerce business in
Silicon Valley and Staples' Print and
Marketing Services business across
1,200 US stores. Michele holds
bachelor's degrees in Commerce
and Law from UNSW, an MBA from
Wharton, and a Master of Wine.
Board Committee Memberships
Member of the Audit, Risk and
Compliance Committee
(from 1 July 2022)
Member of the People and
Nominations Committee
MD (USyd), MSc (USyd), FRACP,
FAAHMS, FAIRCD
Qualifications
BCom (UNSW), LLB (UNSW), MBA
(Wharton, University of
Pennsylvania, USA)
ECOFIBRE LIMITED ANNUAL REPORT 2022 35
DIRECTORS’ REPORT
Directors’ report
Your directors present their report, together with the financial statements, on the consolidated entity consisting of
Ecofibre Limited (referred to hereafter as the 'Company') and the entities it controlled at the end of, or during, the year
ended 30 June 2022.
Board of Directors
The following persons were directors of Ecofibre Limited during the whole of the financial year and up to the date of
this report, unless otherwise indicated:
Barry Lambert, outgoing Chairman (retired on 19 November 2021)
Vanessa Wallace, incoming Chairman (appointed to the Board on 1 July 2021, Chairman since 19 November 2021)
Eric Wang, Managing Director
Jon Meadmore
Kristi Woolrych (retired on 31 May 2022)
Prof. Bruce Robinson
Michele Anderson (appointed to the Board on 14 March 2022)
Mark Bayliss (appointed to the Board on 1 September 2022)
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.
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 in FY22
On 1 July 2021, Vanessa Wallace was appointed as Deputy Chairman of the Board.
On 28 October 2021, Ecofibre filed four patent applications with the US Patent and Trademark Office (USPTO)
following the results of a clinical set-up study being conducted with the University of Newcastle. The study used
organoids derived from 31 patients, and diseased cells of varying gynaecological diseases were eradicated upon
treatment with Ananda's proprietary CBD formulation. This unexpectedly positive, but early finding will support
continued investment into this clinical research, which by its very nature is uncertain in its outcome.
On 28 October 2021, Thomas Jefferson University (TJU) has exercised an option over 7,964,581 shares at $0.537
per share pursuant to a Research and Share Subscription Agreement.
On 19 November 2021, Barry Lambert retired as Ecofibre’s Chairman of the Board at the AGM. Vanessa Wallace
became Chairman at the end of the AGM on 19 November 2021.
36 ECOFIBRE LIMITED ANNUAL REPORT 2022
Significant changes in the state of affairs in FY22 (continued)
DIRECTORS’ REPORT
On 31 December 2021, Ecofibre renegotiated a $10m term loan which was due to be repaid on 15 July 2022 as
follows:
•
$2.0m due to be repaid on 15 July 2022, and the remaining balance of $8.0m is repayable on 15 July 2023;
and
at the Company's option, the amount repayable on 15 July 2023 can also be reduced to $2.0m, and the
remaining balance of $6.0m will then become repayable on 15 July 2024.
•
On 14 March 2022, Director Michele Anderson, based in the USA, was appointed to the Board.
On 25 March 2022, Ecofibre received a $3.5m loan from the Lambert Superannuation Fund. The interest rate on
the loan is 10% p.a, and the loan is repayable on 15 July 2023.
On 31 May 2022, Director Kristi Woolrych retired.
On 30 June 2022, the Group obtained a USD10m loan from Nubridge Commercial Lending LLC in the United
States for a period of 2 years. The interest rate on the loan is 8.49% p.a, and the origination fee was USD0.2m.
The Group's interests in the following properties were pledged as security for the loan: Corporate Boulevard,
Georgetown, Kentucky; Cessna Drive, Greensboro, North Carolina; West Market Street, Greensboro, North
Carolina. USD3.6m loan funds were received on 30 June, and the balance of the loan funds were received in July
2022.
During the year 849,500 shares vested from the Employee Share Trust pursuant to the Group’s Employee Share
Scheme.
During the year two small acquisitions were undertaken, and a third acquisition completed subsequent to the end of
the financial year. Ananda Food acquired Soul Seed (April 2022) and ECS Botanics’s Food and Wellness business
(August 2022), and Hemp Black acquired New Composite Partners (April 2022).
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
In July 2022, the Group received USD6.4m from NuBridge Commercial Lending LLC, being the balance of funds
due on the USD10m loan. The Group also repaid $2.0m due to the James & Cordelia Thiele Trust Fund (J&CTTF)
in July 2022.
On 1 September 2022, Director Mark Bayliss joined the Board of the Company as an independent, non-executive
director. Mr Bayliss will transition into the role of Chair of the Audit, Risk & Compliance Committee after a brief
handover period with Director Jon Meadmore.
On 19 August 2022 the Group completed the acquisition of ECS Botanics’ Food and Wellness business for a total
purchase consideration of $250,000.
No other matter or circumstance has arisen since 30 June 2022 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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 37
DIRECTORS’ REPORT
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.
Ecofibre takes its ESG responsibilities seriously. At its core the business aims to have a positive impact on society
and on the environment, including via Ecofibre’s /eco6TM industrial hemp based decarbonising solutions.
Any current risk from climate change is not considered material, however 'random' high impact weather events such
as tornados or floods in the United States could cause significant damage in a short period. The Group's agricultural
risk is considered low, as it has a highly diversified growing strategy and maintains sufficient inventory to protect
against shortages of hemp inputs in each business.
Ecofibre published its most recent Governance Report on the same date as this annual report and a separate
Sustainability Report published on 19 September 2022.
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 2022, and the number of meetings attended by each director, were:
Director
Board
ARCC
HGRC
PNC (RNC)
Barry Lambert
(until 19 Nov 2021)
Vanessa Wallace
Eric Wang
Jon Meadmore
Kristi Woolrych
(until 31 May 2022)
Bruce Robinson
Michele Anderson
(since 14 Mar 2022)
Attended
3
Held
3
Attended
4
Held
4
Attended
-
Held
-
Attended
-
Held
-
8
8
8
7
8
4
8
8
8
7
8
4
8
-
8
-
-
-
8
-
8
-
-
-
2
2
-
-
2
-
2
2
-
-
2
-
3
-
-
-
3
-
3
-
-
-
3
-
ARCC – Audit, Risk and Compliance Committee
HGRC – Health & Government Relations Committee
PNC – People and Nominations Committee (formerly known as Remuneration & Nomination Committee (RNC))
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
Shares issued on the exercise of options
The following ordinary shares of the Company were issued during the year ended 30 June 2022 and up to the date
of this report on the exercise of options granted:
Date options granted
Exercise price
Number of shares
issued
1 July 2017
$0.537
7,964,581
38 ECOFIBRE LIMITED ANNUAL REPORT 2022
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.
DIRECTORS’ REPORT
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.
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 22 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 22 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.
Dividend
No dividend was declared or paid during the year (FY21: Nil).
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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 39
REMUNERATION 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 Remunerati on report, the members of the
executive KMP are collectively referred to as “executives”.
The key management personnel of the consolidated entity in the period consisted of the directors, including the
managing Director, and the CFO of Ecofibre Limited:
Barry Lambert – former Chairman
Vanessa Wallace – Non Executive Director & incoming Chairman
Eric Wang – Managing Director and CEO
Jon Meadmore – Non-Executive Director
Kristi Woolrych – former Non-Executive Director
Prof. Bruce Robinson – Non-Executive Director
•
•
•
•
•
•
• Michele Anderson – Non-Executive Director
•
Jonathan Brown – CFO and Joint Company Secretary
The remuneration report is set out under the following main headings:
●
Principles used to determine the nature and amount of remuneration
●
●
●
●
Details of remuneration
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.
40 ECOFIBRE LIMITED ANNUAL REPORT 2022
REMUNERATION REPORT
Principles used to determine the nature and amount of remuneration (continued)
Use of remuneration consultants
During the financial period ended 30 June 2022, the Company consulted Godfrey Remuneration Group Pty Limited
to provide high level advice on the grant of options to Non-Executive Directors. Fees paid for this review totalled
$3,000.
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. 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. Any
changes to directors fees in FY22 are noted in the Details of Remuneration table on page 43.
Shareholders approved a maximum annual aggregate fee pool of $500,000 at the AGM in December 2017. No
increase in this pool has been sought since then.
Shareholders approved the issue of 3 years options over shares for directors at the AGM in November 2021
pursuant to Listing Rule 10.14. The value of options over ordinary shares granted, exercised and lapsed for
directors as part of compensation during the year ended 30 June 2022 are set out below:
Option holder
Value of options granted
during the year
Value of options exercised
during the year
Value of options lapsed
during the year
Vanessa Wallace
Jon Meadmore
Bruce Robinson
Kristi Woolrych
$
109,586
49,313
41,095
41,095
$
-
-
-
-
$
-
-
-
41,095
Post Ms Woolrych’s retirement on 31 May 2022, her 144,750 options lapsed. At the 2022 Annual General Meeting
the Company will seek shareholder approval to grant options to all directors who have joined the Board since the
last AGM.
The terms and conditions of each grant of options over ordinary shares to directors in this financial year of future
reporting years are as follows:
Option holder
Number
of options
granted
Grant date
Vesting date and
exercisable date
Vanessa Wallace
Jon Meadmore
Bruce Robinson
Kristi Woolrych
386,001
173,700
144,750
144,750
1 Dec 2021
1 Dec 2021
1 Dec 2021
1 Dec 2021
1 Oct 2024
1 Oct 2024
1 Oct 2024
1 Oct 2024
Exercise
price
Fair value per
option at
grant date
$0.83
$0.83
$0.83
$0.83
$0.2839
$0.2839
$0.2839
$0.2839
Expiry date
7 Oct 2024
7 Oct 2024
7 Oct 2024
7 Oct 2024
All options were granted over unissued fully paid ordinary shares in the company. Options granted carry no
dividend or voting rights. Options vest based on the provision of service over the vesting period whereby the
executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder as
from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant
date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than
on their potential exercise
ECOFIBRE LIMITED ANNUAL REPORT 2022 41
REMUNERATION REPORT
Executive remuneration
The company 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, is 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.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Managing Director & CEO:
Eric Wang
CFO:
Jonathan Brown
Fixed remuneration
2021
2022
At risk - LTI
2022
2021
28%
27%
72%
73%
55%
55%
45%
45%
42 ECOFIBRE LIMITED ANNUAL REPORT 2022
Details of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the tables below.
REMUNERATION REPORT
Short-term
benefits
Post-employment
benefits
Share-based payments
Cash salary
and fees
$
Super-
annuation
$
Long
service
leave
Equity-
settled
shares
$
Equity-
settled
options
$
Total
$
2022
Non-Executive Directors:
Chairman:
Barry Lambert (retired 19 Nov
21)
Vanessa Wallace (Deputy Chair
1 Jul 21, Chair as of 19 Nov 21)
Directors:
Jon Meadmore
Kristi Woolrych (retired 31 May
22)
Bruce Robinson
Michele Anderson (as of March
22)
35,101
3,510
131,944
76,875
59,375
63,438
-
-
-
-
24,512
2,451
Managing Director & CEO:
Eric Wang
305,071
-
-
-
-
-
-
-
-
-
-
-
-
-
-
792,768
-
38,611
22,410
154,354
10,084
86,959
-
8,404
-
-
59,375
71,842
26,963
1,097,839
CFO:
Jonathan Brown
2021
Non-Executive Directors:
Barry Lambert (Chairman)
Jon Meadmore
Kristi Woolrych
Bruce Robinson
Managing Director & CEO:
Eric Wang
CFO:
Jonathan Brown
200,000
896,316
20,000
25,961
15,324
15,324
179,244
972,012
-
40,898
414,568
1,950,511
91,324
90,000
51,986
24,247
8,676
-
-
-
284,012
7,327
200,000
741,569
20,000
36,003
-
-
-
-
-
-
-
-
-
-
-
792,768
179,244
972,012
-
-
-
-
-
-
-
100,000
90,000
51,986
24,247
1,084,107
399,244
1,749,584
ECOFIBRE LIMITED ANNUAL REPORT 2022 43
REMUNERATION REPORT
Service agreements
Remuneration and other terms of employment for executives are formalised in service agreements. Details of these
agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
LTI:
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:
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
44 ECOFIBRE LIMITED ANNUAL REPORT 2022
REMUNERATION REPORT
Service agreements (continued)
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
LTI:
Jonathan Brown
CFO and Joint Company Secretary
8 December 2017
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.
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
tranches
800,001
800,001
Share Price Hurdle
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
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
31 July 2022
31 July 2024
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Additional disclosures relating to key management personnel
The Board believes that all Directors and KMP should think and act as owners of the business. As such we promote
the long-term ownership and accumulation of shares.
Directors’ interests in shares and options
As at 30 June 2022, the directors and other KMP held the following interests in shares and options:
ECOFIBRE LIMITED ANNUAL REPORT 2022 45
Additional disclosures relating to key management personnel (continued)
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:
REMUNERATION REPORT
Ordinary shares
Barry Lambert*
Jon Meadmore
Bruce Robinson
Eric Wang
Vanessa Wallace
Jonathan Brown
Balance at the start
of the year
Additions
Disposals/ other
Balance at the end
of the year^
75,954,755
538,000
-
13,651,253
250,000
2,517,244
92,911,252
-
-
30,000
1,012,000
250,000
-
1,292,000
-
-
-
-
-
-
-
75,954,755
538,000
30,000
14,663,253
500,000
2,517,244
94,203,252
^ Where a director ceased to be a director throughout the year, “Balance at the end of the year” reflects the
balance of shares as at the date they ceased to be a director.
* Barry Lambert retired from the Board and ceased to be a member of the KMP, effective 19 November 2021.
No shares were received as remuneration by the directors.
Option holding
The number of options over ordinary 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
financial year
Options over ordinary shares
Vanessa Wallace
Jon Meadmore
Kristi Woolrych
Bruce Robinson
Michele Anderson *
-
-
-
-
-
-
Granted Expired/forfeited
Balance at the end
of the financial year
386,001
173,700
144,750
144,750
-
849,201
-
-
(144,750)
-
-
(144,750)
386,001
173,700
-
144,750
-
704,451
* Approval will be sought from shareholders at the 2022 annual general meeting for options to be granted to
directors who joined the Board after the 2021 annual general meeting.
Details of these options are as follows:
Grant date
1 Dec 2021
Expiry date
7 Oct 2024
Exercise price
$0.83
Balance at the end of the year
704,451
There were no other options over unissued ordinary shares apart from the 704,451 held by directors. 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.
46 ECOFIBRE LIMITED ANNUAL REPORT 2022
REMUNERATION REPORT
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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 47
DIRECTORS’ REPORT
The auditor’s independence declaration has been received and can be found on page 49 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
_________________________________________
Vanessa Wallace
Director
_________________________________________
Eric Wang
Director
27 September 2022
Sydney
27 September 2022
Lexington
48 ECOFIBRE LIMITED ANNUAL REPORT 2022
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF ECOFIBRE LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30
June 2022 there have been:
— no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to
the audit.
William Buck (Qld)
ABN 21 559 713 106
M J Monaghan
Director
Brisbane: 27 September 2022
ECOFIBRE LIMITED ANNUAL REPORT 2022 49
4. FINANCIAL STATEMENTS
50 ECOFIBRE LIMITED ANNUAL REPORT 2022
Consolidated Statement of Profit or Loss
For the year ended 30 June 2022
Revenue
Direct costs
Gross profit
Other income
Other operating expenses
Interest expense
Profit (Loss) before income tax
Note
4(a)
5(a)
4(b)
5(b)
2022
$’000
2021
$’000
30,220
28,793
(15,526)
(11,169)
14,694
17,624
2,144
4,951
(37,206)
(31,417)
(1,380)
(1,201)
(21,748)
(10,043)
Income tax benefit
6
7,078
3,057
Profit (Loss) after income tax attributable to the members of the
company
Earnings (Loss) per share:
Basic earnings (loss) per share - cents
Diluted earnings (loss) per share - cents
(14,670)
(6,986)
(4.41)
(4.41)
(2.16)
(2.16)
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes
ECOFIBRE LIMITED ANNUAL REPORT 2022 51
Consolidated Statement of Other Comprehensive Income
For the year ended 30 June 2022
Profit (loss) after income tax attributable to the members of the
company
Other comprehensive profit (loss) for the year:
2022
$’000
2021
$’000
(14,670)
(6,986)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign controlled entities
35
6,907
(4,922)
Total comprehensive profit (loss) for the year attributable to the
members of the company
(7,763)
(11,908)
The above consolidated statement of other comprehensive income should be read in conjunction with the
accompanying notes
52 ECOFIBRE LIMITED ANNUAL REPORT 2022
Consolidated Statement of Financial Position
As at 30 June 2022
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
Borrowing
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
18
13
17
33
19
18
21
35
30
2022
$’000
7,251
4,126
15,702
579
5,086
3,943
36,687
55,368
838
46,991
9,670
112,867
149,554
5,560
467
31
2,012
8,070
463
-
13,996
318
16,765
31,542
39,612
109,942
115,347
1,810
(26,004)
14,300
4,489
109,942
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
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
ECOFIBRE LIMITED ANNUAL REPORT 2022 53
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Note
Issued
capital
$'000
Share-
based
payment
reserve
$'000
Share
capital
reserve
$’000
Foreign
currency
translation
reserve
$'000
Accumulated
gains (losses)
$'000
Total
$'000
Consolidated
Balance 30 June 2020
62,376
5,148
Total comprehensive income for
the year
-
Shares issued
21
44,975
-
-
Share-based payments
21
1,125
648
-
-
-
-
Contingent consideration to
TexInnovate
21
-
Share issue cost
(344)
-
-
14,300
-
(175)
(4,348)
63,001
(4,922)
(6,986)
(11,908)
-
-
-
-
-
-
-
-
44,975
1,773
14,300
(344)
Balance 30 June 2021
108,132
5,796
14,300
(5,097)
(11,334) 111,797
Total comprehensive income for
the year
-
-
Share Options exercised
21
6,344
(2,067)
Share-based payments
Share issue cost
21
21
911
(40)
760
-
-
-
-
-
6,907
(14,670)
(7,763)
-
-
-
-
-
-
4,277
1,671
(40)
Balance 30 June 2022
115,347
4,489
14,300
1,810
(26,004) 109,942
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
54 ECOFIBRE LIMITED ANNUAL REPORT 2022
Consolidated Statement of Cash Flows
For the year ended 30 June 2022
Note
2022
$’000
2021
$’000
Cash flows from operating activities
Receipts from customers
Government grants
Payments to suppliers and employees
Interest received
Interest paid
Income tax paid
Net cash flows used in from operating activities
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
25
34
18
21
31,386
919
(41,957)
4
(966)
19
32,866
3,126
(42,161)
24
(874)
(1,339)
(10,595)
(8,358)
(2,792)
(314)
-
119
(9)
(5,780)
(22,729)
(325)
33
63
(2,996)
(28,738)
8,725
(546)
4,277
-
-
(534)
29,500
(392)
12,456
28,574
(1,135)
(8,522)
Cash and cash equivalents at the beginning of the financial year
8,620
18,252
Effect of movement in exchange rates on cash held
(234)
(1,110)
Cash and cash equivalents at the end of the financial year
7
7,251
8,620
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
ECOFIBRE LIMITED ANNUAL REPORT 2022 55
Notes to the 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 29.
56 ECOFIBRE LIMITED ANNUAL REPORT 2022
1.
Summary of significant accounting policies (continued)
b) Principles of consolidation
NOTES TO THE 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 2022 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 2022 57
NOTES TO THE 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.
58 ECOFIBRE LIMITED ANNUAL REPORT 2022
1.
Summary of significant accounting policies (continued)
e)
Income Tax
NOTES TO THE 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 2022 59
1.
Summary of significant accounting policies (continued)
f) Business combination (continued)
NOTES TO THE 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.
60 ECOFIBRE LIMITED ANNUAL REPORT 2022
g)
Summary of significant accounting policies (continued)
h) Trade and other receivables
NOTES TO THE 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 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 2022 61
1.
Summary of significant accounting policies (continued)
l) Property, plant and equipment
NOTES TO THE 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.
m) 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 applica ble, 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.
n) 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.
o) Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
62 ECOFIBRE LIMITED ANNUAL REPORT 2022
1.
Summary of significant accounting policies (continued)
p) Trade and other creditors
NOTES TO THE FINANCIAL STATEMENTS
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.
q) 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.
r) Employee entitlements
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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 63
1.
Summary of significant accounting policies (continued)
r) Employee entitlements (continued)
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
64 ECOFIBRE LIMITED ANNUAL REPORT 2022
1. Summary of significant accounting policies (continued)
s) Cash and cash equivalents
NOTES TO THE FINANCIAL STATEMENTS
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.
t) 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.
u) 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.
v) Earnings per share
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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 65
NOTES TO THE FINANCIAL STATEMENTS
1.
Summary of significant accounting policies (continued)
w) 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 2022. 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.
2. Critical accounting estimates and judgements
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 or 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.
Deferred tax assets are recognised for deductible temporary differences and carried forward tax losses where
the consolidated entity considers it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
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.
66 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
2. Critical accounting estimates and judgements (continued)
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.
3. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into three operating segments based on differences in products and
services provided: nutraceuticals (Ananda Health), food (Ananda Food) and fibre (Hemp Black).
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 corporate headquarter functions and some of the research and development
activities of the Group.
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 in the United States and
Australia
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 the United
States
Ecofibre Corporate
Group corporate functions and some of the research and development activities of
the Group
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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 67
3. Operating segments (continued)
Operating segment information
a) Segment performance
Consolidated - 2022
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
Profit (Loss) before income tax
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
Profit (Loss) before income tax
NOTES TO THE FINANCIAL STATEMENTS
Ananda
Health
$’000
12,922
-
12,922
498
(16)
-
73
13,477
(21,778)
-
Hemp
Black
$’000
13,744
-
13,744
867
(7)
-
29
14,633
(19,170)
-
Ananda
Food
$’000
Ecofibre
Corporate
$’000
3,554
78
3,632
10
(6)
-
6
3,642
(5,115)
(49)
-
-
-
-
568
1
121
690
(8,049)
-
(8,301)
(4,537)
(1,522)
(7,359)
14,276
-
14,276
3,688
22
1
(18)
17,969
(17,680)
-
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)
Total
$’000
30,220
78
30,298
1,375
539
1
229
32,442
(54,112)
(49)
(21,719)
(29)
(21,748)
28,793
177
28,970
5,260
(478)
28
141
33,921
(43,787)
(80)
(9,946)
(97)
(10,043)
68 ECOFIBRE LIMITED ANNUAL REPORT 2022
3. Operating segments (continued)
b) Segment assets and liabilities
Consolidated - 2022
Assets
Segment assets
Unallocated assets:
Cash and cash equivalents
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Borrowings
Total 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
4. Revenue and other income
a)
Revenue
Sales
b) Other income
Government grant and tax incentives ^
Foreign exchange gain (loss) *
Interest
Other income
NOTES TO THE FINANCIAL STATEMENTS
Ananda
Health
$’000
Hemp
Black
$’000
Ananda
Food
$’000
Ecofibre
Corporate
$’000
Total
$’000
16,824
82,296
5,374
37,809
142,303
7,251
149,554
1,509
15,560
1,331
2,487
20,887
18,725
39,612
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
2022
$'000
2021
$'000
30,220
28,793
1,375
539
1
229
2,144
5,260
(478)
28
141
4,951
^ Current year income predominantly relates to accrued US Employment Retention Credit (2022: $1.4m, 2021:
$2.4m). The ERC was made available under the US federal government relief programs in recognition of the
impact of the COVID-19 pandemic.
In 2021 the Group also derived significant benefits from the US Government Payroll Protection Program
forgivable loan of $2.4m.
* Gain (loss) from revaluation of financial assets held in currencies other than Australian dollars.
ECOFIBRE LIMITED ANNUAL REPORT 2022 69
5. Expenses
a) Direct costs
Costs of goods sold
Write down of inventory
b) Other operating expenses
Employees and contractors *
Share based payments (note 30)
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 development *
Bad and doubtful debts
Other
NOTES TO THE FINANCIAL STATEMENTS
2022
$'000
13,688
1,838
15,526
14,095
1,671
2,260
742
982
235
1,790
437
5,073
6,285
67
3,569
37,206
2021
$'000
10,844
325
11,169
12,651
1,773
1,896
360
890
217
1,437
394
4,290
4,442
27
3,040
31,417
* In 2022, employee and contractor expenses related to research and development work are classified as
research and development, and 2021 costs have been restated accordingly.
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% (2021: 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
(21,748)
(10,043)
(6,524)
510
16
537
(24)
(345)
34
98
(174)
-
(759)
-
(454)
7
(7,078)
(3,013)
(58)
256
120
(755)
(328)
370
85
85
275
(314)
(10)
(118)
348
(3,057)
70 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
6.
Income tax (continued)
b)
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Under/(over) provision from previous years
- Current tax
- Deferred tax
Aggregate income tax expense
2022
$'000
(80)
(6,544)
(463)
9
(7,078)
2021
$'000
(2,888)
(51)
(33)
(85)
(3,057)
c) Franking credits
c)
Franking credits available for the subsequent financial year amount to $nil (2021 - $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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 71
7. Cash and cash equivalents
Cash at bank
Term deposits and other cash equivalents
8. Trade and other receivables
Trade debtors
Allowance for expected credit losses
GST receivable
NOTES TO THE FINANCIAL STATEMENTS
2022
$'000
7,046
205
7,251
4,111
(119)
134
4,126
2021
$'000
4,339
4,281
8,620
4,509
(148)
119
4,480
Allowance for expected credit losses
The consolidated entity has recognised a loss of $64,000 (2021: gain of $23,000) 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
Provision for impairment
2022
$'000
148
115
(93)
(51)
119
2,048
9,050
5,219
(615)
15,702
2021
$'000
355
267
(184)
(290)
148
2,397
9,246
4,770
-
16,413
Provision for impairment was recognised to reduce some inventories to their net realisable value.
10. Biological assets
Crops planted
579
1,350
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
Balance at 30 June
72 ECOFIBRE LIMITED ANNUAL REPORT 2022
2022
$'000
1,350
(1,350)
579
579
2021
$'000
2,321
(2,321)
1,350
1,350
NOTES TO THE FINANCIAL STATEMENTS
11. Other current assets
Prepayments
Other ^
2022
$'000
1,451
3,635
5,086
^ Includes accrued Employee Retention Credit grant of $3.1m at 30 June 2022 (30 June 2021: $2.4m).
12.
Intangible assets
Goodwill at 1 July / acquisition date
Foreign currency impact
Balance at 30 June 2022
Patents, customer list 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
2021
$'000
48,814
(2,048)
46,766
3,253
(6)
3,247
282
(148)
134
557
(92)
465
30
2022
$'000
46,766
4,327
51,093
3,789
(146)
3,643
320
(238)
82
905
(355)
550
-
56,107
(739)
55,368
50,888
(246)
50,642
ECOFIBRE LIMITED ANNUAL REPORT 2022 73
NOTES TO THE FINANCIAL STATEMENTS
12.
Intangible assets (continued)
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,
customer list
and trademarks Software
$’000
$’000
Website
development
$’000
8
(8)
30
-
-
-
30
(30)
-
-
-
-
-
-
48,814
-
-
(2,048)
46,766
-
-
-
4,327
51,093
499
-
2,794
(4)
(42)
-
3,247
-
536*
(139)
(1)
3,643
152
8
65
(91)
-
-
134
30
8
(90)
-
82
-
-
557
(92)
-
-
465
-
348
(243)
(20)
550
Balance at 1 July 2020
Transfer
Additions
Amortisation
Write off
Exchange difference
Balance at 1 July 2021
Transfer
Additions
Amortisation
Exchange difference
Balance at 30 June 2022
* See Note 34
Goodwill impairment testing
Total
$’000
659
-
52,260
(187)
(42)
(2,048)
50,642
-
892
(472)
4,306
55,368
Goodwill acquired through business combinations have been allocated to the following cash-generating units:
Hemp Black (acquired business)
2022
$'000
2021
$'000
51,093
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.
74 ECOFIBRE LIMITED ANNUAL REPORT 2022
12.
Intangible assets (continued)
Goodwill impairment testing (continued)
NOTES TO THE FINANCIAL STATEMENTS
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:
●
• 9.8% post tax discount rate (FY21: 10.9%)
• 2.5% growth rate beyond the five year forecast period
• 40% - 100% per annum projected revenue growth rate over the projected cash flow period to fill $75m annual
production capacity by the FY26 financial year
• mono, bi and tri component yarn extrusion capacity activated as required to match customer demand
• Hemp Black is progressing a number of opportunities to fill its production capacity and grow revenue,
including working with a strong pipeline of existing and new clients, including a global leader in outdoor turf
yarn, a premium US department store, a global shoe manufacturer and electric vehicle manufacturers. Hemp
Black can offer customised, high performance solutions to these clients because of its vertically integrated
capabilities in polymer masterbatch and compounding, yarn extrusion and knitting.
The post-tax discount rate of 9.8% 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 increased operating costs is based on estimated cost inflation 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 more than double 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 2022 75
13. Leases
NOTES TO THE FINANCIAL STATEMENTS
The Group leases warehouse, factory and administrative facilities. The leases typically run for a period of 2 to 3
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
10% (2021: 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:
2022
Balance at 1 July 2021
Additions to right-of-use assets
Depreciation charge for the year
Exchange difference
Balance at 30 June 2022
2021
Balance at 1 July 2020
Additions to right-of-use assets
Depreciation charge for the year
Exchange difference
Balance at 30 June 2021
Farming and
processing
equipment
Buildings
$’000
900
505
(576)
6
835
1,028
449
(544)
(33)
900
$’000
11
-
(8)
-
3
19
-
(8)
-
11
Total
$’000
911
505
(584)
6
838
1,047
449
(552)
(33)
911
76 ECOFIBRE LIMITED ANNUAL REPORT 2022
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
NOTES TO THE FINANCIAL STATEMENTS
2022
$’000
965
505
(621)
65
16
930
467
463
930
65
584
546
65
2021
$’000
1,084
449
(609)
74
(33)
965
491
474
965
75
552
534
75
Some property leases contain extension options exercisable by the Group up to 2 to 3 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 2022 77
14. Property, plant, and equipment
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
NOTES TO THE FINANCIAL STATEMENTS
2022
$'000
2021
$'000
6,294
4,904
2,900
2,680
31,856
(1,603)
30,253
522
(199)
323
1,555
(1,089)
466
13,719
(6,964)
6,755
56,846
(9,855)
46,991
31,226
(814)
30,412
498
(133)
365
1,369
(649)
720
12,500
(4,501)
7,999
53,177
(6,097)
47,080
2022 Movement Schedule
Carrying value 1 July 2021
Additions
Transfer
Disposals
Depreciation
Exchange difference
Carrying value 30 June 2022
2021 Movement Schedule
Carrying value 1 July 2020
Additions
Transfer
Disposals
Depreciation
Exchange difference
Carrying value 30 June 2021
Capital
WIP
$’000
Land Building
$’000
$’000
Motor
vehicles
$’000
Office
equipment
$’000
Plant and
machinery
$’000
Total
$’000
4,904
1,439
(497)
-
-
448
6,294
2,680
-
-
-
-
220
2,900
3,729
2,549
(1,138)
-
-
(236)
4,904
297
2,383
-
-
-
-
2,680
30,412
52
-
-
(789)
578
30,253
24,267
6,907
-
-
(763)
1
30,412
365
-
-
-
(66)
24
323
427
59
-
(21)
(65)
(35)
365
720
137
-
-
(440)
49
466
1,076
171
-
-
(432)
(95)
720
570
497
(116)
(2,722)
527
7,999 47,080
2,198
-
(116)
(4,017)
1,846
6,755 46,991
4,838 34,634
4,618 16,687
-
1,138
(57)
(36)
(3,551)
(2,291)
(268)
(633)
7,999 47,080
78 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE 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
2022
$'000
2021
$'000
(2,307)
-
512
32
53
1,360
(117)
1,702
8,449
(103)
9,581
(255)
-
181
4
187
887
(4)
779
2,066
12
3,857
89
49
9,670
3,906
3,906
5,724
40
9,670
2,154
614
2,792
5,560
2,492
1,365
49
3,906
2,074
699
2,389
5,162
ECOFIBRE LIMITED ANNUAL REPORT 2022 79
NOTES TO THE FINANCIAL STATEMENTS
17. Related party loans
Related party loans
Non-current term loan
As at 30 June 2022, this loan is classified under Borrowings – see Note 18
18. Borrowings
Current
Unsecured term loan
Chattel mortgage
Non-current
Unsecured term loans
Secured term loan
Chattel mortgage
2022
$'000
2021
$'000
-
10,000
2022
$'000
2,000
12
2,012
11,500
5,225
40
16,765
2021
$'000
-
-
-
-
64
64
Unsecured term loans
In June 2020, the Company obtained a $10m loan from James & Cordelia Thiele Trust Fund. The interest rate
on the loan was 8% p.a. In December 2021 the term of the loan was extended, and the repayment dates are
now as follows: $2m repayable on 15 July 2022, and $8m repayable on 15 July 2023. Ecofibre also has an
option to reduce the amount repayable on 15 July 2023 to $2m, and to repay the remaining balance of $6m
on 15 July 2024.
In March 2022, Ecofibre received a $3.5m loan from the Lambert Superannuation Fund. The interest rate on
the loan was 10% p.a, and the loan is repayable on 15 July 2023.
Secured term loan
In June 2022, the Group obtained a USD10m loan from Nubridge Commercial Lending LLC in the United
States for a period of 2 years. The interest rate on the loan was 8.49% p.a, and the origination fee was
USD0.2m. The Group's interests in the following properties were pledged as security for the loan: Corporate
Boulevard, Georgetown, Kentucky; Cessna Drive, Greensboro, North Carolina; West Market Street,
Greensboro, North Carolina. USD3.6m loan funds were received on 30 June 2022, and the balance of the
loan funds were received in July 2022.
Reconciliation of proceeds from borrowings in 2022 as follows:
Unsecured term loan from Lambert Superannuation Fund
Secured term loan from Nubridge Commercial Lending LLC
Total proceeds from borrowings during the financial year
$'000
3,500
5,225
8,725
80 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
19. 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
20. Employee share trust
2022
$'000
2021
$'000
2,007
4,173
-
-
-
-
(1,689)
-
318
1,278
(960)
318
(349)
(192)
94
(159)
(2,403)
114
1,278
-
1,278
1,278
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:
Balance at 1 July
Shares issued by the EST to employees as part of the ESS
Balance as at 30 June 2022
2022
Number of
shares
14,319,286
(849,500)
13,469,786
2021
Number of
shares
16,025,534
(1,706,248)
14,319,286
ECOFIBRE LIMITED ANNUAL REPORT 2022 81
NOTES TO THE FINANCIAL STATEMENTS
2022
$'000
2021
$'000
2022
Quantity
2021
Quantity
21.
Issued Capital
Ordinary shares
115,347
108,152
335,510,772
326,696,691
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
Share options exercised^
Shares issued by the EST
Share issue cost
108,132
-
-
-
6,344
911
(40)
62,376
883
29,500
14,592
-
1,125
(344)
326,696,691
-
-
-
7,964,581
849,500
-
305,619,401
1,646,116
11,800,000
5,924,926
-
1,706,248
-
Closing balance 30 June
115,347
108,132
335,510,772
326,696,691
348,980,558 total shares are on issue by the parent entity, which includes 335,510,772 consolidated shares on
issue plus shares held by the EST (13,469,786) which have been issued by the parent entity and are eliminated
on consolidation.
^ On 28 October 2021, Thomas Jefferson University (TJU) has exercised an option over 7,964,581 shares at
$0.537 per share pursuant to the Research and Share Subscription Agreement. Breakdown of increase in
amount of share capital from options exercised is as follows:
Cash proceeds from issue of shares @ $0.537 per share
Share option fair value at grant date expensed over the term of the option
Increase in value of share capital
Reconciliation to the Consolidated Statement of Changes in Equity:
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
Shares options exercised
Share based payment: shares issued as part of the ESS
Share issue cost
Balance at 30 June 2022
$’000
4,277
2,067
6,344
$’000
62,376
44,975
1,125
(344)
108,132
6,344
911
(40)
115,347
82 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
22. 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
2022
$
2021
$
166,501
26,686
193,187
18,425
32,275
50,700
134,952
32,566
167,518
45,745
18,500
64,245
Amount received or due and receivable by other William Buck offices:
- Tax advisory
24,350
14,800
23. 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
2022
$’000
142
-
142
2021
$’000
113
4
117
138
-
ECOFIBRE LIMITED ANNUAL REPORT 2022 83
24.
Interests in subsidiaries
NOTES TO THE 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 USA RE LLC (EUSARE)
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
United States of America
Uruguay
Ownership Interests
2022
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2021
%
100%
100%
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.
EAP’s 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.
HBP’s principal activity is to provide performance masterbatch and custom compounding to the plastics
industry for technical textiles.
EOFD is a special purpose sales and marketing entity for the Ananda Health business in the United States.
EUSARE is a special purpose entity for the securitisation of loans.
EU is a dormant entity.
84 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
25. Reconciliation of profit after income tax to net cash flows from
operating activities
Net profit (loss) after income tax
Depreciation and amortisation
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 gain (loss)
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
2022
$'000
(14,670)
5,073
-
64
2021
$'000
(6,986)
4,290
26
(23)
1,671
1,773
-
-
1,675
(76)
383
749
711
771
(5,764)
(659)
80
403
39
(85)
(960)
318
-
(4,922)
57
5,169
371
(6,399)
971
(1,414)
(3,357)
1,045
(3)
(764)
212
1,278
Net cash flows from operating activities
(10,595)
(8,358)
26. Financial risk management objectives and policies
The Group’s principal financial instruments comprise receivables, payables 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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 85
NOTES TO THE FINANCIAL STATEMENTS
26. 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
2022
$'000
2021
$'000
7,251
8,620
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 2022, 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)
2022
$'000
73
(36)
2021
$'000
86
(43)
Equity higher/ (lower)
2022
2021
$'000
$'000
73
(36)
86
(43)
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.
86 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
26. Financial risk management objectives and policies (continued)
Liquidity risk
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
2022
$’000
8,070
31,542
-
39,612
2021
$’000
5,718
24,230
-
29,948
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
2022
$'000
2021
$'000
Liabilities
2022
$'000
2021
$'000
1,537
1,397
-
-
The consolidated entity had net assets denominated in foreign currencies of US$1,537,000 (assets of
US$1,537,000 less liabilities of nil) as at 30 June 2022 (2021: US$1,397,000). Based on this exposure, had the
Australian dollar weakened by 5%/strengthened by 5% (2021: 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 $112,000 higher/$112,000 lower (2021: $93,000 higher/$93,000 lower). The percentage
change is the expected overall volatility of the significant currencies, which is based on man agement’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 gain for the year ended 30
June 2022 was $539,000 (2021: loss of $478,000).
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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 87
NOTES TO THE FINANCIAL STATEMENTS
27. 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 28 for other related party transactions
28. Related party transactions
Transactions with related parties
The following transactions occurred with related parties:
Interest expense for term loan (see note 17)
2022
$
896,316
1,012,910
41,285
1,950,511
2021
$
741,569
972,012
36,003
1,749,584
2022
$
-
-
2021
$
800,000
800,000
In FY21, interest expense from related party relates to loan from James & Cordelia Thiele Trust Fund, a trust
related to the Company’s former non-executive Chairman, Mr Barry Lambert. The interest rate on the loan is
8% p.a. As at 30 June 2022, this loan is classified under Borrowings – see Note 18, and the interest is no longer
a related party transaction.
Receivable and payable to related parties
The receivables from and payables to related parties are disclosed in note 17.
88 ECOFIBRE LIMITED ANNUAL REPORT 2022
29. Parent entity information
Set out below is the supplementary information about the parent entity.
NOTES TO THE 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
30. Share-based payments
2022
$’000
(12,083)
2021
$’000
1,982
(12,083)
1,982
163
4,343
120,029
125,130
1,173
169
11,486
10,412
115,347
4,489
14,300
(25,593)
108,132
5,796
14,300
(13,510)
108,543
114,718
TJU share options
In accordance with the Research and Share Subscription Agreement signed between TJU and Ecofibre and upon
completion of the research program, TJU has exercised an option over 7,964,581 shares. 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
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
Transfer from share option reserve to share capital
2022
$’000
-
2,067
2021
$’000
827
-
ECOFIBRE LIMITED ANNUAL REPORT 2022 89
30. Share-based payments (continued)
NOTES TO THE FINANCIAL STATEMENTS
Non-Executive Director (NED) share options
A share option plan has been established by the consolidated entity and approved by shareholders at a general
meeting, whereby the consolidated entity may grant options over ordinary shares in the company to the Non-
Executive Directors of the consolidated entity. The options are issued for nil consideration and are granted in
accordance with the Company’s Share and Option Plan, the terms of which were summarized in the Company’s
2019 IPO Prospectus.
Set out below are summaries of options granted under the plan:
Grant date
Expiry date Exercise
price
1 Dec 2021
7 Oct 2024 $0.83
Balance at
the start of
the year
-
Granted
849,201
Exercised Expired/
forfeited/
other
(144,750)
-
Balance at
the end of
the year
704,451
Weighted average exercise price
$0.83
$0.00
$0.00
$0.00
$0.83
None of the options granted are exercisable at 30 June 2022.
The weighted average share price during the financial year was $0.57 (2021: $1.35)
The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.3
years.
For the options granted during the current financial year, the valuation model input used to determine the fair
value at the grant date, are as follows:
Grant date
Expiry date
1 Dec 2021 7 Oct 2024
Share price
at grant date
$0.68
Exercise
price
$0.83
Expected
volatility
74%
Dividend
yield
-
Risk-free
interest rate
17.5%
Fair value at
grant date
$0.2839
Expenses recognized during the year for NED share options
2022
$’000
41
2021
$’000
-
90 ECOFIBRE LIMITED ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
30. Share-based payments (continued)
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
Share-based payment reserve
TJU options
NED options
Employee shares
Total share-based payment reserve
2022
$’000
1,630
2021
$’000
946
2022
$’000
-
41
4,448
4,489
2021
$’000
2,067
-
3,729
5,796
The share-based payment reserve is used to record the cost of equity-settled transactions over the vesting
period.
Share-based payment expense
TJU options
NED options
Employee shares
Total share-based payment expense
31. Earnings per share (EPS)
Loss used in the calculation of basic and diluted EPS
Weighted average number of shares* outstanding during the period used in
the calculation of basic and diluted EPS:
Basic
Diluted**
2022
$’000
-
41
1,630
1,671
2021
$’000
827
-
946
1,773
2022
$’000
(14,670)
2021
$’000
(6,986)
332,533,170
332,533,170
322,746,559
322,746,559
* Weighted average number of shares exclude Treasury shares held in the EST.
** Options granted are not included in the diluted weighted average number of shares because they are
antidilutive. Adding these options would result in a lower loss per share.
ECOFIBRE LIMITED ANNUAL REPORT 2022 91
NOTES TO THE FINANCIAL STATEMENTS
32. Fair value measurement
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 - 2022
Assets
Biological assets
Liabilities
Contingent consideration
Consolidated - 2021
Assets
Biological assets
Liabilities
Contingent consideration
Level 1
$'000
Level 2
$'000
Level 3
$'000
-
-
-
-
579
13,996
1,350
12,414
-
-
-
-
Total
$'000
579
13,996
1,350
12,414
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.
92 ECOFIBRE LIMITED ANNUAL REPORT 2022
33. Contingent consideration
NOTES TO THE 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 USD42.0, including 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.
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 2022:
Balance at 1 July 2021/ fair value^ at acquisition date
Fair value movement on contingent consideration during the period
Foreign currency impact
Balance at 30 June 2022
$'000
12,414
414
1,168
13,996
$'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).
34. Business acquisitions
On April 2022, the Group completed the acquisition of Soul Seed (Ananda Food) and New Composite Partners
(Hemp Black).
Total consideration for the businesses:
• AU$245,000 for Soul Seed, fully settled in cash
• US$200,000 for New Composite Partners, consideration to be paid in equal 4 instalments. As at 30 June 2022,
US$50,000 had been settled in cash
Details of the acquisition are as follows:
Soul Seed
New Composite Partners
Acquisition-date fair value of the total consideration
Cash used to acquire business:
Acquisition-date fair value of the total consideration transferred
$'000
245
291
536
314
ECOFIBRE LIMITED ANNUAL REPORT 2022 93
35. Foreign currency translation reserve
NOTES TO THE FINANCIAL STATEMENTS
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 majority of the Company’s business is conducted in Australian and United States dollars. The closing
exchange rate for this currency pair changed by 8% during the year as the USD appreciated against the AUD
(2022: AUD1 for USD0.6875, 2021: AUD1 for USD0.7511).
The foreign currency translation reserve as at 30 June 2022 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 2021
Exchange differences on translation of foreign controlled entities
Balance at 30 June 2022
36. Events after the reporting period
$'000
2,929
(1,119)
1,810
$'000
(5,097)
6,907
1,810
In July 2022, the Group received USD6.4m from NuBridge Commercial Lending LLC, being the balance of funds
due on the USD10m loan. The Group also repaid $2.0m due to the James & Cordelia Thiele Trust Fund (J&CTTF)
in July 2022.
On 19 August 2022 the Group completed the acquisition of ECS Botanics’s Food and Wellness business for a
total purchase consideration of $250,000.
On 1 September 2022, Director Mark Bayliss joined the Board of the Company as an independent, non-
executive director. Mr Bayliss will transition into the role of Chair of the Audit, Risk & Compliance Committee
after a brief handover period with Director Jon Meadmore.
The impact of the Coronavirus (COVID-19) pandemic is ongoing. It is not practicable to estimate the potential
impact after the reporting date, but overall the impact of the pandemic on the Group's businesses has
moderated toward the latter part of FY22.
No other matter or circumstance has arisen since 30 June 2022 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.
94 ECOFIBRE LIMITED ANNUAL REPORT 2022
5.
SIGNED REPORTS
ECOFIBRE LIMITED ANNUAL REPORT 2022 95
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 2022 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 from the CEO and CFO, 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
________________________________________
Vanessa Wallace
Director
27 September 2022
Sydney
96 ECOFIBRE LIMITED ANNUAL REPORT 2022
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
2022, 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 2022 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.
ECOFIBRE LIMITED ANNUAL REPORT 2022 97
Key Audit Matters (continued)
Share-based Payments
Refer also to Remuneration Report, note 1(r) and
30
The Group issued share options to non-executive
Directors.
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.
98 ECOFIBRE LIMITED ANNUAL REPORT 2022
Key Audit Matters (continued)
Valuation of Inventories and Biological Assets
Refer also to note 1(i), 1(j), 9 and 10
The Group held biological assets of $579,000 at 30
June 2022. 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.
How our audit addressed it
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.
Impairment Assessment of Intangible Assets Including Goodwill
Refer also to note 1(n) and note 12
Included in the statement of financial position is an
intangible asset balance of $55.4 million as at 30
June 2022, which includes goodwill of $51.1 million.
In accordance with AASB 136 – Impairment of
assets the Group 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
Group 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 Group’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
Group’s disclosures in the notes to the
financial report.
ECOFIBRE LIMITED ANNUAL REPORT 2022 99
Key Audit Matters (continued)
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 2022, 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.
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/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our independent auditor’s report.
100 ECOFIBRE LIMITED ANNUAL REPORT 2022
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 2022.
In our opinion, the Remuneration Report of Ecofibre Limited, for the year ended 30 June 2022,
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
M J Monaghan
Director
Brisbane: 27 September 2022
ECOFIBRE LIMITED ANNUAL REPORT 2022 101
6. SHAREHOLDER AND
ASX INFORMATION
102 ECOFIBRE LIMITED ANNUAL REPORT 2022
Five-year financial history
Summarised income statement
Sales Revenue
Other income
Total revenue and other income
Operating profit (loss) before
depreciation and amortisation,
finance costs and income tax
Depreciation and amortisation
EBIT
Net finance costs
Income tax expense (credit)
Profit (Loss) after income tax
attributable to members of Ecofibre
Limited
Factors affecting total shareholders
return
Share price at financial year end ($)
Total dividends declared (cents per
share)
Basic earnings per share (cents per
share)
Financial position as at 30 June
Total assets
Total liabilities
Net assets
Net tangible asset per ordinary
share ($)
Net debt to equity (%)
Total liabilities / total assets (%)
2022
$’000
30,220
2,144
32,364
2021
$’000
28,793
4,951
33,744
2020
$’000
50,717
6,482
57,199
2019
$’000
35,605
1,864
37,469
2018
$’000
5,749
3,557
9,306
(15,296)
(4,580)
19,187
5,766
(7,338)
(5,073)
(20,369)
(1,379)
7,078
(4,290)
(8,870)
(1,173)
3,057
(2,049)
17,138
113
(4,095)
(958)
4,808
(223)
1,415
(344)
(7,682)
(532)
(413)
(14,670)
(6,986)
13,156
6,000
(8,627)
0.20
-
0.68
-
(4.41)
(2.16)
149,554
39,612
109,942
13.23
17%
26%
141,745
29,948
111,797
17.64
9%
21%
2.22
-
4.43
84,295
21,294
63,001
19.60
16%
25%
2.10
-
2.28
47,775
5,472
42,303
13.81
3%
11%
n/a*
-
(3.17)
11,268
9,708
1,560
0.51
389%
86%
* Ecofibre was listed on ASX in March 2019.
ECOFIBRE LIMITED ANNUAL REPORT 2022 103
Shareholder information
The shareholder information set out below was applicable as at 13 September 2022.
Number of securityholders
There are 5,215 holders of ordinary shares, 3 holder of options (unquoted) over ordinary shares, 18 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
2,057
1,662
517
820
159
5,215
2,679
1,030,594
4,183,593
4,064,302
24,669,520
315,032,549
348,980,558
1,916,951
% of shares on
issue
0.30%
1.20%
1.16%
7.07%
90.27%
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
National Nominees Limited
Kylie Warner Pty Ltd
Citicorp Nominees Pty Limited
Thomas Jefferson University
Eric Wang
Pacific Custodians Pty Limited (Employee Securities TST Unallocated A/C)
Texsymmetry Inc
Pacific Custodians Pty Limited (Employee Securities TST A/C)
Warner Research Institute Limited
Jeffrey Bruner
Freshwater Superannuation Fund Pty Limited
Yarrawonga Holdings Pty Limited
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