Holista Colltech
Annual Report 2015

Plain-text annual report

HOLISTA COLLTECH ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2015 For personal use onlyANNUAL REPORT 1 Corporate Information About us Chairman’s Report Business Segment Directors’ Reports Corporate Governance Statement Auditor’s Independence Declaration Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information Page 2 3 4 6 10 23 31 32 33 34 35 36 75 76 78 CONTENT For personal use onlyHOLISTA COLLTECH 2 CORPORATE INFORMATION ABN 24 094 515 992 Directors Dato' Dr Rajen Manicka, Managing Director and Chief Executive Officer Mr Daniel Joseph O’Connor, Non Executive Director Mr Chan Heng Fai, Non Executive Director Mr Kong Hon Khien Company secretary Mr Jay Stephenson Holista CollTech Limited ABN 24 094 515 992 Suite 12, Level 1, 11 Ventnor Avenue, West Perth, WA 6005 Telephone: (+618) 6141 3500 Facsimile: (+618) 6141 3599 Share register Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace, Perth WA 6000 Telephone: (+618) 9323 2000 Facsimile: (+618) 9323 2033 Bankers National Australia Bank 100 St Georges Terrace, Perth WA 6000 Auditors Stantons International Audit and Consulting Pty Ltd Level 2, 1 Walker Avenue West Perth WA 6005 Stock Exchange Australian Securities Exchange (ASX) ASX Code: HCT For personal use onlyANNUAL REPORT 3 ABOUT US “We all strive to be healthy. Yet sometimes things are beyond our control. For the things that are, there’s Holista Colltech. We have devoted all our After all, being healthy is the best gift you can give to your body.” Corporate Profile Holista CollTech Ltd (“Holista”) is a research-driven biotech company and is the result of the merger of Holista Biotech Sdn. Bhd. and CollTech Australia Ltd. Headquartered in Malaysia, in research on herbs and food ingredients from Malaysia’s rainforest – the oldest in the world. Holista researches, develops, manufactures and markets “health-style” products to address the unmet and growing needs of natural medicine. It is the only company to produce sheep (ovine) collagen using patented extraction methods, and is on track in nano-nising and encapsulating liposomes for the ovine collagen. enhanced, engineered and tested natural health supplements and consumer products. For personal use onlyHOLISTA COLLTECH 4 CHAIRMAN’S REPORT Dear Shareholders, 30 June 2015 (“FY2015”). in which our dietary supplements are sold) against the Australian dollar (our reporting currency). There was also some negative foreign exchange impact from the stronger U.S. dollar, the currency in which one of our subsidiaries operates. A major reason for the turnaround was the completion of major research and development (“R&D”) to improve our product line, Fat. These ingredients are a major focus for fast food chains and food manufacturers, which are working to address the global epidemic of obesity, diabetes and cardiovascular disease. Having achieved our R&D goals, our focus going forward is to enhance future growth and shareholder value by expanding our three core business pillars, forging strategic partnerships to widen our distribution channels, and moving up the value chain, including quality assurance. Business Review The turnaround of our bottom-line was achieved on a 9% increase in turnover to A$6.79 million in FY2015 from A$6.23 million in FY2014, mainly from sales of dietary supplements in Malaysia and of cosmetic grade sheep collagen, Ovicoll. Sales of the latter have risen over the last three years, and reached A$187,715 in FY2015. in the United States, a market with vast potential due to its many global fast food and processed food brands. We are actively engaging with these players and promoting our proprietary Low Sodium Salt, Low Calorie Sugar, Low Glycemic Index (“GI”) and Low Fat Chip. Sales of Supplements Malaysian sales of dietary supplements remain our largest revenue contributor. In FY2015, we secured exclusive rights to distribute PRISTIN MOPL®, Norwegian herring caviar oil and the “third generation” extension of PRISTIN, our in-house brand which leadership, and we are working to secure regulatory approval for the product beyond Malaysia. We also secured distribution rights in Asia for EMULIN™, a patented natural plant-based compound to reduce blood sugar directly on the skin to produce a “botox-like” effect, without needle injection. This technology involves tiny water- and fat-soluble liposomes that penetrate the skin. The liposomes transport and reduce the toxicity of anti-ageing active ingredients which, after our proprietary sheep collagen for cosmetic application on the skin, without the need for injections. Food-grade Collagen and Malaysia in FY2015, marking our brand’s entry into the global food grade collagen market. We believe it will be a new and For personal use only CHAIRMAN’S REPORT ANNUAL REPORT 5 Developed from sheep skin – the consumption of which is free of religious or cultural issues associated with pig and cow sources – sourced from Australia (the only nation TM We intend to commence full commercial shipments of food-grade sheep collagen in FY2016, which are expected to record higher revenues compared to cosmetic collagen in the near future. The daily dose of food-grade collagen is 150 grams a month, which is 150 times more than the single gram recommended for cosmetic application. We are targeting direct marketing companies, amongst other sales and distribution channels, to launch our food- grade collagen. Towards this end, the Group intends to commission new equipment at its plant in Collie, Australia, Healthy Food Ingredients Having completed major R&D, our newly incorporated U.S. subsidiary Litefood Inc. (“Litefood”) has commenced active discussions in the country to commercialise our Low Sodium Salt, Low Calorie Sugar, Low Glycemic Index (“GI”) and Low Fat Chip. I am also pleased to report that we have begun selling our Low Sodium Salt and Low Calorie Sugar, albeit at a lower scale, through a Malaysian subsidiary. We will focus on the Business-to-Business (B2B) market to sell the ingredients, as this model seems more appropriate than the Business- to-Consumer (B2C) model, which will require substantial capital. Apart from discussions with fast food companies in the of Sydney for a potential European customer, with results expected in September 2015. Large-scale commercial testing of the Low Fat Chip will begin in Europe in the last quarter of FY2016. Strategic Partnerships During the year under review, we forged a strategic partnership with U.S.-based multi-level marketing company iGalen Pte Ltd (iGalen), which sells products that naturally including Emulin and Ovinex, to a wide-ranging network that includes the ASEAN countries and Australia. Holista has been building international partnerships in order to market key products and access biopharmaceutical product patents and intellectual properties worldwide. We expect sales to grow as we widen our distribution network and increase our suite of products. Quality Assurance As part of our efforts to constantly move up the value chain, Holista has spearheaded the launch of an anti-counterfeiting security authentication pioneered by Sekuworks LLC (“Sekuworks”). Sekuworks is an established security printer and technology integrator that provides brand protection and other anti-counterfeiting solutions, including currency- printing technology. Our premium PRISTIN MOPL® is now tagged with to prevent Sekuworks’ QR track-and-trace system secured at the highest level. Outlook Holista completed the bulk of our R&D during the year under review, at a time when we also expanded our distribution network and moved up the value chain. We expect to drive future growth by introducing more new products – especially cosmetic and food-grade sheep collagen, as well as healthy food ingredients – to bigger markets. FY2015, as well as our R&D efforts, have laid a strong foundation that positions us as a world-class manufacturer of proprietary food ingredients. Appreciation On behalf of the Board, I would like to personally thank our period. I would also like to express my appreciation for our R&D collaborators, retailers, suppliers and customers. Most of all, I would like to convey my gratitude to my fellow directors – past and present – for guiding the company and charting our course, as well as my colleagues for their continuous support and dedication. In closing, allow me to reiterate Holista’s commitment to adding value for our shareholders. I look forward to another exciting year ahead with all of you. - Dato’ Dr. Rajen Manicka Chairman For personal use only HOLISTA COLLTECH BUSINESS SEGMENT COSMETIC GRADE COLLAGEN 6 Holista CollTech is proud to be the world’s only ovine (sheep) collagen provider. Sheep collagen is the future of collagen-based products. Our mammalian-sourced, sheepskin-based collagen uses sheep from Australia, the only nation in the world to have disease-free sheep. It can be consumed without cultural, religious or health concerns, toxic heavy metal poisoning. Comparison of Collagen Sources Human Body Temperature (37 C) l d e d o o B m r a W Mammal - Warm Blooded • Genetically closest • Better fit with human make-up • Traceable • No odour • High thermal stability • Larger yield • Most researched • Less lost in process l d e d o o B d o C l Fish (Marine)-Cold Blooded • Contaminated with ocean toxins • Low thermal stability • Fish is becoming scarce • Seldom traceable • Emits odour Closest to human In April 2015, Holista CollTech secured exclusive distribution rights for Geltox Skin Science, a skin formulation that can be applied directly to the skin to produce a “botox-like” effect. This technology involves tiny water- and fat-soluble liposomes that penetrate the skin. The liposomes transport and reduce the toxicity of anti-ageing active ingredients which, after penetration, technology to develop our proprietary sheep collagen for cosmetic application on the skin, without the need for injections. For personal use only ANNUAL REPORT BUSINESS SEGMENT (continued) FOOD GRADE COLLAGEN 7 plant in Collie. OVINEX™ is the result of three years of research and development in Australia, the U.S. and Malaysia, and marks As the solution to bone density problems, stiff joints, and skin woes, OVINEX™ can be consumed and included in drinks, confectionery products, energy bars, yogurts and juices. For personal use onlyHOLISTA COLLTECH BUSINESS SEGMENT (continued) 8 FUNCTIONAL FOOD INGREDIENTS The basic building blocks of all food products, dubbed the 4-S Tsunami, are Salt, Sugar, Starch and Saturated Fat. These ingredients are a major focus for fast food chains and food manufacturers, which are working to address the global epidemic of obesity, diabetes and cardiovascular disease. Our U.S.-incorporated subsidiary, LiteFoods,Inc., a specialty food ingredient company with research and development facilities in Australia and Malaysia, concentrates on taking the guilt out of ‘guilty pleasures’ like fries, bread, sugar and salt. LiteFoods’ proprietary Low Sodium Salt, Low Calorie Sugar, Low Glycemic Index (“GI”) and Low Fat Chip aim to create a healthier eating experience. Low Sodium Salt (LITESALTTM) LITESALT reduces sodium levels in salt by 25% to 40%, significantly lowering the risk of blood pressure and heart disease. Our reduced sodium salt product replaces sodium with a proprietary potassium blend without an unpleasant metallic taste, and works equally well in water- and oil-based foods. Low Fat Chip (NeusoliteTM) NeusoliteTM combines FDA-compliant natural ingredients in our patent-pending two-stage wash system, which dramatically reduc- es the amount of oil and saturated fat in deep-fried products such as chips. The final product reduces calories by up to 40%, creating crispier and healthier fried food. Low GI Bread (Gi LITETM) Gi LITETM is a proprietary blend of ingredients based on two common Asian foods, okra (ladies finger) and the Indian mung beans, used in very low concentration. They are added to the manufacturing process to create wholesome breads, buns and pizzas without compromising taste. It reduces the glycemic index in bread by up to 40%, effectively delivering a low Gi ‘wholemeal bread’ with the look, taste and texture of white bread. Low Calorie Sugar (ZEROVIATM, 80LESSTM) ZEROVIATM is a zero-calorie sugar substitute that can be used for virtually any application (except as a bulking agent) with no aftertaste. It can be used in cooking: a single teaspoon of ZEROVIATM is the equivalent of two teaspoons of sugar, with none of the calories. 80LessTM – 80LESS is five times sweeter than sugar with 80% fewer calories. It is specifically designed and processed for use with liquid and dry mix applications. For personal use onlyANNUAL REPORT BUSINESS SEGMENT (continued) 9 DIETARY SUPPLEMENTS The Supplements business segment of Holista CollTech forms our largest revenue stream, with a strong distribution network throughout Malaysia. We market and sell 23 different proprietary supplements through our two wholly owned subsidiaries, with new products in the pipeline. These products include PRISTIN, our in-house brand which has dominated Malaysia’s Omega 3 supplements market for six consecutive years; LACTO-5, probiotics to aid digestion; and MOO, a calcium and mineral extract from milk. PRISTIN MOPL During the year, we secured exclusive ASEAN distribution rights for PRISTIN MOPL®, an extension of our PRISTIN brand. This “third-generation” Omega 3 supplement is sourced from premium Norwegian herring caviar, and is clinically proven to have a While Omega 3 improves cognitive performance and prevents heart disease, it is not naturally produced by the human body and must be absorbed from one’s diet. The body can only absorb about 15% of the Omega 3 contained in traditional (second- PRISTIN MOPL® incorporates phospholipids that surround the human cell. Aside from human breast milk, Omega 3 phospholipids stable, preventing rancidity and gastric discomfort. Aside from boosting cognitive performance and preventing the risk of heart .niks dna sgnul ,syendik ,revil ,traeh eht fo ytilanoitcnuf llarevo eht evorpmi nac sdipilohpsohp fo seititnauq hgih gnitsegni ,esaesid Our premium PRISTIN MOPL is also tagged with Sekuworks LLC’s ( “Sekuworks”) QR track-and-trace system to prevent ® and technology integrator that provides higher security brand protection and other anti-counterfeiting solutions, including currency-printing technology. For personal use onlyHOLISTA COLLTECH 10 DIRECTORS’ REPORT Dietary Supplements This remains as the Group’s main income contributor during the year. Its revenue continues to grow despite challenging market condition faced by its subsidiaries in Malaysia. Market conditions in Malaysia have changed during the past 12 months mainly recently, the introduction of Goods and Service Tax (GST) by the Government of Malaysia. However, customers remain loyal to the Company’s dietary supplements despite a growing number of competitors in not only the intense pharmacy business but also with the Multi Level Marketing. (5) new products in Malaysia to cater to market demand and to increase its market presence in the dietary supplement market. Furthermore, the company has also generated new source of revenue by supplying raw materials to Multi-Level Marketing companies. The Group will continue to source new potential products for the coming year. Prudent cost management in this dietary supplement business in Malaysia has resulted in cost reduction from $3,587,119 to $3,403,458 (5.1%) in the same time frame. Sheep Collagen (Ovine) as compared to 2,095kg in the previous reporting period. For personal use only ANNUAL REPORT DIRECTORS’ REPORT (continued) 11 and development of its food grade collagen formulation focusing on yield and quality. The Company has managed to produce of this new range of product to support its existing cosmetic grade collagen. The potential of the food grade collagen is huge as it is the only mammalian collagen in the market which is neutral to all religious groups and cultures. This is also an appeal of being “Australian sourced” and “disease free”. The company is also working with a European research & development partner to develop variants of highly absorbed collagen for food and cosmetic applications. Healthy Food Ingredients The Group’s key focuses are:- • Low Sodium Salt • Low Fat Chip • Low Glycemic Index (“GI”) • Low Calorie Sugar During the year, Litefood Inc. (“Litefood”) which was incorporated in the United States of America (“USA”) continues to focus on the commercialisation of this new market segment. The USA are well known to be the home of large fast food chains and by being close to the market will present opportunities for the Group to generate income from this area in the near future. (www. litefoodsinc.com). The Group has begun to sell its Low Sodium Salt and Low Calorie Sugar albeit in lower scale through one of its subsidiaries in Malaysia. The demand has been quite encouraging but has been quite limited as it is a Business to Consumer (B2C) market which requires huge capital to promote. The Group believes that Business to Business (B2B) will be the most appropriate method to the University of Sydney. In the USA, it is working with several fast food companies. Operating results for the year The Group has recorded a 9% increase in revenue from $6,227,814 to $6,788,953 mainly from the Dietary Supplements and Sheep Dollar against the Australian Dollar and Malaysia Ringgit. The Group’s investment in LiteFood to commercialise its Healthy Food Ingredient business has also prevented the Group from recording better results. For the past three (3) years, revenue generated from our cosmetic grade sheep collagen has been growing consistently with sales despite the declining trend of animal based cosmetic products around the world. Operating results for the year The Group has recorded a 9% increase in revenue from $6,227,814 to $6,788,953 mainly from the Dietary Supplements and of the US Dollar against the Australian Dollar and Malaysia Ringgit. The Group’s investment in LiteFood to commercialise its Healthy Food Ingredient business has also prevented the Group from recording better results. For the past three (3) years, revenue generated from our cosmetic grade sheep collagen has been growing consistently with sales For personal use only HOLISTA COLLTECH DIRECTORS’ REPORT (continued) 12 The Group believes that it’s yet to be launched food grade collagen is expected to contribute better revenue compared to its become obvious: Free of cultural and religious issues (compared to pig and cow sources) free - - - Based on the above, the Group is optimistic that its new Food Grade Collagen will be ready for commercialisation in the near the recommended minimum dosage for food grade collagen is 5gm a day (equivalent to 150gm a month). Comparing this against 1gm of cosmetic collagen per bottle, Food Grade Collagen is expected to provide the Group with a much higher return in the future. launch of more exciting new supplements in the market. The positive development in both the Healthy Food Ingredients in Financial Position The Group’s net assets increased during the year by $761,812 to $2,291,204 with revenue being the principal contributor to the funding of the Company’s operations for the year. than disclosed elsewhere in this Annual Report. Dividends Likely developments and expected results expected results of those operations is likely to result in unreasonable prejudice to the Group. Therefore, this information has not been presented in this report. Environmental legislation Holista CollTech Limited has operated under environmental licence 7998/1 issued by the Western Australian Department of Environment as prescribed under the Environmental Protection Act 1986. The licence relates to collagen extraction and Risk Management The Group takes risk management seriously and has put in place the following procedures: Oversight: An Audit Committee has been established to direct, review and initiates corrective action in matters of internal control and minimise risk exposures compatible with a group company of this size and nature. been categorised according to which part or parts of the business would be effected, what controls might be put in place and whether the resulting levels of exposure are acceptable. For personal use onlyANNUAL REPORT DIRECTORS’ REPORT (continued) 13 Risk Management: The Group has taken decisions as to how it should manage the various categories of risk exposure and they include the imposition of Standard Operating Procedures (SOP’s) for routine business transactions; mitigation policies to lessen or obviate risks such as Insurance Policies and formal long term Agreements with critical suppliers; and hedging arrangements if applicable. Compliance and Control: Standard Operating Procedures have been drawn up, circulated and regularly monitored to ensure adherence to company policy. They include the various cash, purchasing, sales, and payment cycles, and payroll. Levels of Authority have been set, divisions of duty are made and multiple signature approvals imposed. Regular checks are made by management to ensure that these controls are indeed in place and complied with. and in conjunction with the Audit Committee and External Auditors, instructs improvements to be put in place. Information on Directors Dato’ Dr Rajen Manicka - Managing Director Dato’ Dr Rajen, B Ph.(Hons) began his career as an intern pharmacist at the Kuala Lumpur General Hospital from 1986 - 1987. In 1987 he joined Lee Pharmacy as a community Pharmacist. Over a period of 9 years, Dr Rajen worked for several reputable pharmaceutical companies including Roche and CIBA Pharmaceuticals in various capacities including medical representative, product manager and marketing manager. In 1995, he incorporated Total Health Concept, which was restructured into Holista Biotech Sdn Bhd in January 2004 and has been Managing Director and major shareholder from inception of this group until Dato’ Dr Rajen has been a guest lecturer in alternative medicine at the University of Malaysia, the National University of Malaysia and the International Medical University in Malaysia. He was also a health columnist for the Sunday Times- Malaysia’s second largest Sunday newspaper and writes a monthly column on biotech and business for The Edge, Malaysia’s largest business weekly. Dato’ Dr Rajen is a member of the Malaysian Ministry of Health Standing Committee for Traditional Medicine and until March 2009 was on the board of Malaysian Herbal Corporation Sdn Bhd, a wholly owned subsidiary of the Malaysian Industry - Government Group for High Technology. Dato Dr Rajen holds no other current directorships in listed companies and has no former directorships in listed companies in the last three years. Mr Daniel Joseph O’Connor – Non Executive Director Mr O’Connor has over 20 years in professional practice with a specialisation in Intellectual Property Commercialisation. He is the Consultant Principal and major shareholder of Xenex Consulting and the Keys2Growth program, and has helped numerous companies expand their international trading boundaries through planning, funding, and strategy. Mr O’Connor holds a Bachelor of Business in marketing and a Master of Business Administration specialising in International Business. He has commenced a doctoral degree in International Business, focused on the commercialisation of intellectual is a member of the United Nations Subcomittee on Innovation and Mr O’Connor holds no other current directorships in listed companies and has had no former directorships in listed companies in the last three years. For personal use onlyHOLISTA COLLTECH DIRECTORS’ REPORT (continued) 14 Mr Chan Heng Fai – Non Executive Director Mr Chan Heng Fai has restructured over 35 companies in different industries and countries in the past 40 years. high asset quality bank, with zero loan losses for over 5 consecutive years before it was ultimately bought and merged into the Seattle Times “Annual Northwest’s Top 100 Public Companies” for the year 2003, and ranked #6 in the Oregon state [for the year 2003], which ranked ahead of names such as Nike, Microsoft, Costco, AT&T Wireless and Amazon.com. In 1997, Mr Chan Heng Fai acquired and ran a regional investment banking and securities broking-dealing business Mr Kong Hon Khien Kong Hon Khien is a Member of the Malaysia Institute of Accountants (MIA) and an Associate Member of the Chartered Institute of Management Accountants (CIMA). He has more than 20 years of working experience from various industries ranging from 2 public companies listed on the Main Board of Bursa Malaysia prior to joining Holista CollTech Ltd. Company Secretary Mr Jay Stephenson Chartered Institute of Secretaries. Mr Stephenson has over 21 years of business development including approximately 20 years as Director, Chief Financial CollTech Limited, Doray Minerals Limited, Drake Resources Limited, Strategic Minerals Corporation NL, Nickelore Limited and Yonder and Beyond Group Limited as well as acts as Company Secretary for a number of ASX Listed resource and industrial companies. Directors’ Meetings The number of meetings of directors (including meetings of committees of directors) held during the year and the numbers of meetings attended by each director were as follows: No of Directors’ Meeting held No. Of Directors’ Meeting Attended Dato’ Dr Rajen Manicka Mr Daniel Joseph O’Connor Mr Chan Heng Fai 4 4 4 4 4 4 Interests in the shares and options of the company and related bodies corporate The following relevant interests in shares and options of the company or a related body corporate were held by the directors as at the date of this report. For personal use only ANNUAL REPORT DIRECTORS’ REPORT (continued) Directors Dato’ Dr Rajen Manicka Mr Chan Heng Fai 15 Number of options over ordinary shares Number of fully paid ordinary shares - 23,333,333 73,914,400 20,898,268 Mr Chan Heng Fai is the director of Hengfai Business Development Pte Ltd which in addition to the above also currently holds $500,000 convertible notes in Holista Colltech Ltd. Options of an option. At the date of this report there are 25,333,333 unissued ordinary shares of the Company under option. Holista CollTech Limited has agreed to indemnify all the directors of the Company for any liabilities to another person (other than the Company or related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. permitted by the Corporations Act 2001. (2014: $17,156) Auditor Independence and Non-Audit Services Section 307C of the Corporations Act 2001 requires our auditors, Stantons International Audit and Consulting Pty Ltd, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 31 and forms part of this Directors’ Report for the year ended 30 June 2015. Non-Audit Services Remuneration report (Audited) This report outlines the remuneration arrangements in place for the key management personnel of Holista CollTech Limited audited as required by Section 308(3C) of the Corporations Act 2001. persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Parent Company, and includes the executives in the Parent and the Group. Key Management Personnel (i) Directors Dato’ Dr Rajen Manicka Mr Daniel Joseph O’ Connor Mr Chan Heng Fai (ii) Executives Mr Jay Stephenson (Company Secretary) - Managing Director and - Non-Executive Director - Non-Executive Director For personal use onlyHOLISTA COLLTECH DIRECTORS’ REPORT (continued) this report. 16 Remuneration philosophy The performance of the Company depends upon the quality of the directors and executives. The philosophy of the Company in determining remuneration levels is to: • set competitive remuneration packages to attract and retain high calibre employees; • link executive rewards to shareholder value creation; and • establish appropriate, demanding performance hurdles for variable executive remuneration. Remuneration committee The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors, the CEO and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of directors and executives on a periodic basis by reference to relevant employment market conditions with an overall objective of ensuring Currently the responsibilities of the Remuneration Committee are undertaken by the full Board. Remuneration structure In accordance with best practice Corporate Governance, the structure of non-executive director and executive remuneration is separate and distinct. Non-executive director remuneration The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held on 1 December 2003 when shareholders approved an aggregate remuneration of $ 200,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external shareholders as well as the fees paid to non- executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the Company. An additional fee is also paid for each Board committee on which a director sits. The payment of additional fees for serving on a committee recognises the additional time commitment required by directors who serve on one or more sub committees. The remuneration of non-executive directors for the year ended 30 June 2015 is detailed in Table 1 of this report. Senior manager and executive director remuneration schemes). Fixed Remuneration Fixed remuneration is reviewed annually by the Remuneration Committee. The process consists of a review of relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. The Committee has access to external, independent advice where necessary. be optimal for the recipient without creating undue cost for the Group. For personal use onlyANNUAL REPORT DIRECTORS’ REPORT (continued) 17 Variable Remuneration The aggregate of annual payments available for executives across the Group is subject to the approval of the Remuneration Committee During the year, the Board of Directors approved $28,225 bonus payment to its Malaysia subsidiaries as per their employment contract. (2014: $11,197) Employment Contracts and Managing Director. On the 28 August 2015, the Board of Directors reviewed and renewed the Employment Agreement of Dato’ Dr Rajen as the Chief Executive Director and Managing Director of the Group. Saved for the changes below, all other terms and conditions of the original Agreement dated 7 September 2010 remains the same. A summary of the terms of his employment are as follows: a) b) c) d) e) Commencement date Termination date of contract Period of notice for resignation/termination Remuneration Termination - with cause f) Termination - without cause Dato’ Dr. Rajen Manicka 10 July 2015 Initial 3 year period 3 months RM692,160 (AUD229,054) The Company may terminate at any time without notice if serious misconduct has occurred. Where termination with cause occurs employees are only entitled to entitlements up to the date of ter- mination and any unvested options will immediately be forfeited. The Agreement provides for the termination of the Agreement by paying a severance payment of up to three months in addition to notice period. For personal use only 18 9 1 . s l i a t e d r e h t r u f r o f l s e r u s o c s i D y t r a P d e t a e R l : 0 2 e t o N d n a s t n e m y a P d e s a B e r a h S : 6 2 e t o N o t r e f e r e s a e P l l . e v o b a e b a t n o i t a r e n u m e r e h t n i d e d u c n l i HOLISTA COLLTECH e c n a m r o f r e P % d e t l a e R - - - - - - - - - - l a t o T $ 0 0 0 , 6 3 0 0 0 , 9 3 0 0 0 , 6 3 0 0 0 , 6 3 - 0 0 0 , 6 9 8 2 , 2 0 3 7 1 9 , 9 5 2 9 8 2 , 4 7 3 7 1 9 , 0 4 3 , r o t c e r i D , i a F g n e H n a h C r M o t ) s t 1 e l b a T n o i t a r e n u m e R ’ s r o t c e r i D y t i u q E e r a h S s n o i t p O $ - - - - - - - - - - l t n e m y o p m e - t s o P t i f e n e b r e h O t $ - - - - - - - - - - - r e p u S n o i t a u n n a $ - - - - - - 5 6 2 , 8 4 2 0 5 , 1 4 5 6 2 , 8 4 2 0 5 , 1 4 y r a t e n o M - n o N l s t i f e n e b e e y o p m E m r e t - t r o h S s t i f e n e B s e s u n o B s e e F & y r a a S l $ - - - - - - - - - - $ - - - - - - 2 6 8 , 9 1 2 9 4 , 8 2 6 8 , 9 1 2 9 4 , 8 $ 0 0 0 , 6 3 0 0 0 , 9 3 0 0 0 , 6 3 0 0 0 , 6 3 - 0 0 0 , 6 2 6 1 , 4 3 2 3 2 9 , 9 0 2 2 6 1 , 6 0 3 3 2 9 , 0 9 2 5 1 0 2 4 1 0 2 5 1 0 2 4 1 0 2 5 1 0 2 4 1 0 2 5 1 0 2 4 1 0 2 5 1 0 2 4 1 0 2 ’ r o n n o C O h p e s o J l i e n a D r M s n i l l o C r e t e P k r a M r M ) 3 1 0 2 / 7 / 1 3 d e n g s e R i ( i a F g n e H n a h C r M i a k c n a M n e a R j r D ' o t a D l a t o T . d t L y t P ) A W ( k c u B m a i l l i W o t s e e f f o y a w y b i d a p s a w n o i t a r e n u m e r s n i l l o C r e t e P k r a M r M . g n i t l u s n o C x e n e X o t s e e f f o y a w y b i d a p s a w n o i t a r e n u m e r r o n n o C O ’ l i e n a D r M l , n a r r a w ( d s e n t n o a i t r p g o y 3 n a 3 p 3 m 3 o 3 C 3 , e 3 h 2 t d , 3 e 1 t n 0 2 a r r g e b y m n a e p v o m N o C 7 2 e e h h t t , 3 n o 1 0 d 2 e r h e g b n m i t e e v e o M N a 7 r 2 e n e e h G t n a o u n d n e A h e g h n t i n t e e s r M e d a o r h e e n r e a h G s l e a h u t n y n b A d e e h v o t r n p p s a r e s A d o h e r a h ) i s ( l l i l l i l l e h t y b d e v o r p p a s A ) i ( : 6 2 e t o N o t r e f e r e s a e P l . e v o b a l e b a t l i i l . i t n s o n o a i t r p e o n u e m h t e f o r e e h u t a n v r d i a e f d e u h t c f n o n t o o n i t r e o r p a a s 4 t n 1 u 0 o 2 m e a n u e J s 0 e 3 h T t A . d d e o s h n t e e m p x n e o g i t n a u e a b v e s c e n o a h a c b S k e c h a t B h t e i w h t s g t s n i o s c u g 2 7 n 7 s , 3 a 6 r 1 y , 2 t i $ u q f o e e s u a a d v e r i a a f e a r t t i i i l l l l l e h t f o e u a v l r i a f e h t f o n o i t r o p a 4 1 0 2 e e v n a u h J s n 0 o 3 i t p A o . d e o h T h t t i l i l l l i . e t n m e m n o e i c t a a u p a e v h t s n e o n h o c i t S a p k c c i t a r a B p e s i h h t o g t n t n s a u u 2 s r 7 u 7 p , 3 , r 6 o t 1 c , e 2 r $ i D f o , i a e F u g a n v e H r i a n f a a h C e v r a M h o s t n ) o s t i n t p a o r r a e w h T s n . t o n i e t p m o e 3 c 3 a 3 p 3 3 e 3 h t 3 n 2 , , ( l l i n o i t i a p c i t r a p i s h o t t n a u s r u p n e e b s a h ) 0 0 0 0 7 $ ( s n o i t p o t o n e r a s t n u o m a e s e h T . i d e s n e p x e g n e b e c n a a b e h t h t i l l w . s s t l s i a o t c e d g n r e i s h i t a r u r f y r t o i u f q s e e r u s a s o d c e s t i a D e y r t t r n a e P e d b e t s a a e h R 0 0 0 2 0 e 0 7 o $ N ( d n a ) : t l s t n e m y a P d e s a B e r a h S For personal use only ANNUAL REPORT d e t i i m L h c e T l l o C a t s i l o H 19 e c n a m r o f r e P % d e t l a e R - - - - - - l a t o T $ 4 5 8 , 1 1 1 5 7 7 , 8 7 0 0 0 , 8 4 0 0 0 , 0 6 4 5 8 , 9 5 1 5 7 7 , 8 3 1 y t i u q E e r a h S s n o i t p o $ - - - - - - l t n e m y o p m e - t s o P t i f e n e b l s t i f e n e b e e y o p m E m r e t - t r o h S - r e p u S y r a t e n o M - n o N r e h O t n o i t a u n n a s t i f e n e B s e s u n o B s e e F & y r a a S l $ - - - - - - $ 2 6 8 , 9 1 1 0 2 , 9 - - 2 6 8 , 9 1 1 0 2 , 9 $ - - - - - - $ 3 6 3 , 8 5 0 7 , 2 - - 3 6 3 , 8 5 0 7 , 2 $ 9 2 6 , 3 8 9 6 8 , 6 6 0 0 0 , 8 4 0 0 0 , 0 6 9 2 6 , 1 3 1 9 6 8 , 6 2 1 5 1 0 2 4 1 0 2 5 1 0 2 4 1 0 2 5 1 0 2 4 1 0 2 i n e h K n o H g n o K . r M n o s n e h p e S y a J t . r M l a t o T 2 e l b a T n o i t a r e n u m e R s e v i t u c e x E ) d e u n i t n o c ( T R O P E R ' S R O T C E R D I For personal use only HOLISTA COLLTECH DIRECTORS’ REPORT (continued) DIRECTORS' REPORT (continued) Holista CollTech Limited 20 Details of employee share option plans Details of employee share option plans The Group believes that encouraging its directors and executives to become shareholders is the best way of aligning The Group believes that encouraging its directors and executives to become shareholders is the best way of aligning their their interests with those of its shareholders. interests with those of its shareholders. At present the Group does not have an employee share option plan. At present the Group does not have an employee share option plan. Bonuses Bonuses No bonus was granted to the Directors except for Dr M. Rajendran, $19,862 for his contribution in the Malaysia No bonus was granted to the Directors except for Dr M. Rajen Manicka, $19,862 for his contribution in the Malaysia operation. operation. (2014 : $8,492). (2014 : $8,492). Share-based payments Share-based payments No shares or options were issued as share based compensation during the year. No shares or options were issued as share based compensation during the year. 23,333,333 options (warrants) were issued to Mr Chan Heng Fai pursuant to his participation in the placement completed on 23,333,333 options (warrants) were issued to Mr Chan Heng Fai pursuant to his participation in the placement completed on 27 27 November 2013. November 2013. Options awarded and vested in Holista CollTech Limited (number) during the year ended 30 June 2014. Options awarded and vested in Holista CollTech Limited (number) during the year ended 30 June 2014. 0 2 30 June 2014 Directors Mr Chan Heng Fai Dato’ Dr Rajen Manicka Mr Daniel O’Connor Executives Mr Kong Hon Khien Mr Jay Stephenson Awarded Number Award date Fair value per option at award date $ Exercise price $ Expiry date Number vested or lapsed during year 23,333,333 27/11/ 2013 0.09 0.06 17/12/2018 23,333,333 - - - - 23,333,333 - - - - - - - - - - - - - - - - - - - - - - - - 23,333,333 Relationship between the remuneration policy and company performance Relationship between the remuneration policy and company performance The Company has been in an ongoing restructure of its operation since the reverse takeover in Year 2009. The The Company has been in an ongoing restructure of its operation since the reverse takeover in Year 2009. The Company Company is also in the midst of commercialising some of its patented technologies, namely its Healthy Food is also in the midst of commercialising some of its patented technologies, namely its Healthy Food Ingredients and Sheep Ingredients and Sheep Collagen. Accordingly, the Company’s remuneration policy during the current and the previous four (4) financial years is not related to the Company’s performance. related to the Company’s performance. 21 For personal use only ANNUAL REPORT DIRECTORS’ REPORT (continued) 21 Ordinary shares held in Holista CollTech Limited (number) 30 June 2015 Directors Balance at beginning of year Granted as remuneration On Exercise of Option Net Change Other Balance at end of year Mr Chan Heng Fai 11,666,667 Dato’ Dr Rajen Manicka 73,914,400 Mr Daniel O’Connor Executives Mr Kong Hon Khien Mr Jay Stephenson - - - 85,581,067 - - - - - - - - - - - - 9,231,601 20,898,268 - - - - 73,914,400 - - - 9,231,601 94,812,668 12,731,601 shares issued to Mr Chan Heng Fai upon conversion of $1,000,000 convertible notes on 24 September 2014. 30 June 2014 Directors Balance at beginning of year Granted as remuneration On Exercise of Option Net Change Other Balance at end of year Mr Chan Heng Fai - Dato’ Dr Rajen Manicka 77,039,400 Mr Daniel O’Connor Executives Mr Kong Hon Khien Mr Jay Stephenson - - - - - - - - - - - - - 11,666,667 11,666,667 (3,125,000) 73,914,400 - - - - - - 77,039,400 8,541,667 85,581,067 For personal use only HOLISTA COLLTECH DIRECTORS’ REPORT (continued) Options held in Holista CollTech Limited (number) 22 30 June 2015 Directors Balance at beginning of year Granted Vested Lapsed Balance at end of year Mr Chan Heng Fai 23,333,333 Dato’ Dr Rajen Manicka Mr Daniel O’Connor Executives Mr Kong Hon Khien Mr Jay Stephenson 30 June 2014 Directors Mr Chan Heng Fai Dato’ Dr Rajen Manicka Mr Daniel O’Connor Executives Mr Kong Hon Khien Mr Jay Stephenson - - - - - - - - - - - - - - - - - - - - 23,333,333 Balance at beginning of year detnarG Vested Lapsed - - - - - - 23,333,333 - - - - 23,333,333 - - - - - - - - - - - - 23,333,333 - - - - 23,333,333 Balance at end of year 23,333,333 - - - - 23,333,333 Value of options held by directors, exercised and lapsed during the year. No options were exercised, forfeited or lapsed during the year. For details on the valuation of the options, including models and assumptions used, please refer to note 26. END OF REMUNERATION REPORT The Director’ Report incorporating the Remuneration Report is signed in accordance with a resolution of the Directors. Dato’ Dr. Rajen Manicka Director Selangor, Malaysia 28 September 2015 For personal use only ANNUAL REPORT CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT Holista CollTech Limited 23 This Corporate Governance summary discloses the extent to which the Company will follow the recommendations set by the ASX Corporate Governance Council in its publication ‘Corporate Governance Principles and Recommendations This Corporate Governance summary discloses the extent to which the Company will follow the recommendations set by the (3rd Edition)’ (Recommendations. The Recommendations are not mandatory, however, the Recommendations that ASX Corporate Governance Council in its publication ‘Corporate Governance Principles and Recommendations (3rd Edition)’ will not be followed have been identified and reasons have been provided for not following them. (Recommendations. The Recommendations are not mandatory, however, the Recommendations that will not be followed The Company’s Corporate Governance Plan has been posted on the Company’s website at www.holistaco.com. The Company’s Corporate Governance Plan has been posted on the Company’s website at www.holistaco.com. PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO) EXPLANATION Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 The Company has adopted a Board Charter. A listed entity should have and disclose a charter which: YES (a) (b) the respective roles and sets out responsibilities of the board, the chair and management; and includes a description of those matters expressly reserved to the board and those delegated to management. Recommendation 1.2 A listed entity should: YES (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) provide security holders with all material information relevant to a decision on whether or not to elect or re-elect a director. Recommendation 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. YES Recommendation 1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. Recommendation 1.5 A listed entity should: (a) have a diversity policy which includes requirements for the board: YES YES the composition, The Board Charter sets out the specific responsibilities of the Board, requirements as to roles and the Boards responsibilities of the Chairman and Company Secretary, the establishment, operation and management of Board Committees, Directors access to company records and information, relationship with details of management, details of the Board’s performance review and details of the Board’s disclosure policy. the Board’s A copy of the Company’s Board Charter is stated in Schedule 1 of the Corporate Governance Plan which is available on the Company’s website. (a) The Company has detailed guidelines for the appointment and selection of the Board. The Company’s Corporate Governance Plan requires the Board to undertake appropriate checks before appointing a person, or putting to security holders a candidate for election, as a director. forward (b) Material information relevant to any decision on whether or not to elect or re-elect a Director will be provided to security holders in the the notice of meeting holding resolution to elect or re-elect the Director. The Company’s Corporate Governance Plan requires the Board to ensure that each Director and senior executive is a party to a written agreement with the Company which sets out the terms of that Director’s or senior executive’s appointment. the outlines The Board Charter roles, responsibility and accountability of the Company Secretary. is accountable directly to the Board, through the chair, on all matters to do with the proper functioning of the Board. The Company Secretary (a) The Company has adopted a Diversity Policy. (i) The Diversity Policy provides a framework for the Company to achieve a list of 6 measurable objectives that For personal use only HOLISTA COLLTECH (i) (ii) to set measurable objectives achieving gender diversity; and to the both annually objectives and the entity’s progress in achieving them; assess for (b) disclose that policy or a summary or it; and (c) disclose as at the end of each reporting period: (i) the measurable objectives for achieving gender diversity set by the board in accordance with the entity’s diversity policy and its progress towards achieving them; and (ii) either: (A) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or the entity’s “Gender Equality Indicators”, as defined in the Workplace Gender Equality Act 2012. (B) Holista CollTech Limited 24 encompass gender equality. (ii) The Diversity Policy provides for the monitoring and evaluation of the scope and currency of the Diversity Policy. The company for implementing, monitoring and reporting on the measurable objectives. (b) The Diversity Policy is stated in Schedule 9 of the Corporate Governance Plan which is available on the company website. responsible is (c) (i) The measurable objectives set by the Board will be included in the annual key performance indicators for the CEO, MD and senior executives. In addition the Board will review progress against the objectives in its annual performance assessment. (ii) The Board will include in the annual the measurable report each year, the objectives, objectives, and the proportion of male and female employees in the whole organisation, at senior management level and at Board Level. progress against Recommendation 1.6 A listed entity should: YES (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. (a) The Board is responsible for evaluating the performance of the Board and individual directors on an annual basis. It may do so with the aid of an independent advisor. The process for this can be found in Schedule 6 of the Company’s Corporate Governance Plan. . (b) The Company’s Corporate Governance Plan requires the Board to disclosure whether or not performance evaluations were conducted during the relevant reporting period. Details of the performance evaluations conducted will be provided in the Company’s Annual Reports. Recommendation 1.7 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. YES (a) The Board is responsible for evaluating the performance of senior executives. The Board to arrange an annual performance is evaluation of the senior executives. 6 the Board (b) The Company’s Corporate Governance Plan requires to conduct annual performance of the senior executives. ‘Performance Evaluation’ Schedule requires the Board to disclose whether or not performance evaluations were conducted during the relevant reporting period. Details of the performance evaluations conducted will be provided in the Company’s Annual Report. Principle 2: Structure the board to add value Recommendation 2.1 The board of a listed entity should: YES (a) have a nomination committee which: (i) (ii) least three members, a has at majority of whom are independent directors; and is chaired by an director, independent (a) Due to the size and nature of the existing Board and the magnitude of the Company’s operations the Company currently has no Nomination Committee. Pursuant to clause 4(h) of the Company’s Board Charter, the full Board carries out the duties that would ordinarily be assigned to the Nomination terms of Committee under the written 2 For personal use only ANNUAL REPORT Holista CollTech Limited 25 and disclose: (iii) (iv) (v) the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the the committee met individual period attendances of the members at those meetings; or throughout the and (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, experience, independence and knowledge of the entity to enable it to discharge its duties and responsibilities effectively. Recommendation 2.2 A listed entity should have and disclose a board skill matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. reference for that committee. The duties of the Nomination Committee are outlined in Schedule 5 of the Company’s Corporate Governance Plan available online on the Company’s website. time Board devotes The at [each/quarterly/annual board meeting(s)] to discuss board succession issues. All members of the Board are involved in the the to Company’s nomination process, maximum extent permitted under the Corporations Act and ASX Listing Rules. The Board regularly updates the Company’s board skills matrix (in accordance with the 2.2) recommendation appropriate balance of skills, experience, independence and knowledge of the entity. to assess YES Board Skills Matrix Number of Directors that Meet the Skill Executive & Non- Executive experience Industry experience & knowledge Leadership Corporate governance & risk management Strategic thinking Desired behavioural competencies Geographic experience Capital Markets experience Subject matter expertise: - accounting - capital management - corporate financing - industry taxation 1 - risk management - legal - IT expertise 2 3 1 3 3 3 3 3 3 3 3 3 0 3 3 0 (1) Skill gap noticed however an external to maintain is emplo4yed taxation firm taxation requirements. (2) Skill gap noticed however an external IT firm is employed on an adhoc basis to maintain IT requirements. Recommendation 2.3 A listed entity should disclose: (a) the names of the directors considered by YES 3 (a) The Board Charter provides the disclosure of the names of Directors considered by the Board to be independent. These details are provided in the Annual Reports and Company website. for For personal use only HOLISTA COLLTECH Holista CollTech Limited 26 the board to be independent directors; (b) if a director has an interest, position, association or relationship of the type described the ASX in Box 2.3 of Corporate Governance Principles and Recommendation (3rd Edition), but the board is of the opinion that it does not the compromise director, interest, position, association or relationship in question and an explanation of why the board is of that opinion; and the length of service of each director independence of the nature of the the (c) (b) The Board Charter requires Directors to disclose their interest, positions, associations that and relationships and requires the regularly is independence of Directors assessed by the light of in interests disclosed by Directors. Details of positions the associations and relationships are provided in the Annual Reports and Company website. the Board interests, Directors (c) The Board Charter provides the determination of the Directors’ terms and requires length of service of each Director to be disclosed. The length of service of each Director is provided in the Annual Reports and Company website. the for Recommendation 2.4 A majority of the board of a listed entity should be independent directors. YES Recommendation 2.5 YES The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. Recommendation 2.6 A listed entity should have a program for inducting new directors and providing development professional appropriate opportunities to for continuing directors develop and maintain the skills and knowledge needed to perform their role as a director effectively. YES The Board Charter requires that where practical the majority of the Board will be independent. Details of each Director’s independence are provided in the Annual Reports and Company website. The Board Charter provides that where practical, the Chairman of the Board will be a non- executive director. If the Chairman ceases to be independent the Board will consider appointing a lead independent Director. then for Directors. The Board that a specific The Board Charter states to procure is responsibility of the Board development appropriate professional is opportunities the approval and review of responsible professional induction development programs and procedures for Directors to ensure that they can effectively discharge their responsibilities. continuing for and Principle 3: Act ethically and responsibly Recommendation 3.1 A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. YES (a) The Corporate Code of Conduct applies to the Company’s directors, senior executives and employees. (b) The Company’s Corporate Code of Conduct is the Corporate Governance Plan which is on the Company’s website. in Schedule 2 of Principle 4: Safeguard integrity in financial reporting Recommendation 4.1 The board of a listed entity should: YES (a) have an audit committee which: (i) (ii) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and is chaired by an independent director, who is not the chair of the board, and disclose: (iii) (iv) the charter of the committee; the relevant qualifications and (a) Due to the size and nature of the existing Board and the magnitude of the Company’s operations the Company currently has no Audit and Risk Committee. Pursuant to Clause 4(h) of the Company’s Board Charter, the full Board carries out the duties that would ordinarily be assigned to the Audit and Risk Committee under the written terms of reference for that committee. The role and responsibilities of the Audit and Risk Committee are outlined in Schedule 3 of the Company’s Corporate Governance Plan available online on the Company’s website. The Board devote time at annual board 4 For personal use only ANNUAL REPORT Holista CollTech Limited 27 (v) experience of the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual the attendances members at those meetings; or of (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its financial reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Recommendation 4.2 The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. YES Recommendation 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. YES to the fulfilling meetings roles and responsibilities associated with maintaining the Company’s internal audit function and arrangements with external auditors. All members of the Board are involved in the Company’s audit function to ensure the proper maintenance of the entity and the integrity of all financial reporting. The Company’s Corporate Governance Plan states that a duty and responsibility of the Board is to ensure that before approving the entity’s financial statements for a financial period, the CEO and CFO have declared that in their opinion the financial records of the entity have been financial properly maintained and statements appropriate comply with accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed risk on the basis of a sound system of management and is operating effectively. internal control which that the the that The Company’s Corporate Governance Plan provides the Company’s external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. the Board must ensure Principle 5: Make timely and balanced disclosure Recommendation 5.1 A listed entity should: YES (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it. (a) The Board Charter provides details of the Company’s disclosure policy. In addition, Schedule 7 of the Corporate Governance Plan is entitled ‘Disclosure – Continuous the Company’s Disclosure’ and details disclosure requirements as required by the ASX Listing Rules and other relevant legislation. (b) The Board Charter and Schedule 7 of the Corporate Governance Plan are available on the Company website. Principle 6: Respect the rights of security holders Recommendation 6.1 A listed entity should provide information about itself and its governance to investors via its website. YES Recommendation 6.2 A listed entity should design and implement an investor relations program to facilitate effective YES the Company and its Information about governance the Corporate Governance Plan which can be found on the Company’s website. is available in the Company and its Information about governance the Corporate Governance Plan which can be found on the Company website. is available in Shareholder The Company has adopted a to Communications Strategy which aims promote two-way facilitate communication with investors. The Shareholder effective and For personal use only HOLISTA COLLTECH two-way communication with investors. Recommendation 6.3 A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. YES Recommendation 6.4 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. YES Holista CollTech Limited 28 Communications Strategy outlines a range of ways in which information is communicated to shareholders. The Shareholder Communication Strategy states that as a part of the Company’s developing investor relations program, Shareholders can register with the Company Secretary to receive email notifications of when an announcement is made by the Company to the ASX, including the release of the Annual Report, half yearly reports and quarterly reports. Links are made available to the Company’s website on which all information provided to the ASX is immediately posted. Shareholders are encouraged to participate at all EGMs and AGMs of the Company. Upon the despatch of any notice of meeting to Shareholders, the Company Secretary shall send out material with that notice of meeting stating that all Shareholders are encouraged to participate at the meeting. Security holders can register with the Company receive email notifications when an to announcement is made by the Company to the ASX. Shareholders queries should be referred to the Company Secretary at first instance. Principle 7: Recognise and manage risk Recommendation 7.1 The board of a listed entity should: YES (a) have a committee or committees to oversee risk, each of which: (i) least three members, a has at majority of whom are independent directors; and is chaired by an director, independent (ii) and disclose: the charter of the committee; (iii) (iv) the members of the committee; and (v) as at the end of each reporting period, the number of times the the committee met period individual attendances of the members at those meetings; or throughout the and (b) if it does not have a risk committee or committees (a) above, that satisfy disclose that fact and the process it employs for overseeing the entity’s risk management framework. Recommendation 7.2 The board or a committee of the board should: YES (a) review the entity’s risk management framework with management at least annually to satisfy itself that it continues to be sound, to determine whether there have been any changes in the material - Due to the size and nature of the existing Board and the magnitude of the Company’s operations the Company currently has no Audit and Risk Committee. Pursuant to Clause 4(h) of the Company’s Board Charter, the full Board currently carries out the duties that would ordinarily be assigned to the Audit and Risk Committee under the written terms of reference for that committee. The role and responsibilities of the Audit and Risk Committee are outlined in Schedule 3 of the Company’s Corporate Governance Plan available online on the Company’s website. to fulfilling The Board devote time at annual board meeting and responsibilities associated with overseeing risk and maintaining risk management framework and associated internal compliance and control procedures. the entity’s roles the (a) The for Company process risk internal compliance management and includes a requirement identify and measure risk, monitor the environment for emerging factors and trends that affect these risks, formulate risk management strategies and monitor the performance of risk management systems. Schedule 8 of to For personal use only ANNUAL REPORT Holista CollTech Limited 29 business risks the entity faces and to ensure that they remain within the risk appetite set by the board; and in relation to each reporting period, whether such a review has taken place. (b) disclose the Corporate Governance Plan is entitled ‘Disclosure – Risk Management’ and details the Company’s disclosure requirements with respect to the risk management review procedure and internal compliance and controls. (b) The Board Charter requires the Board to disclose the number of times the Board met throughout the relevant reporting period, and the members at those meetings. Details of the meetings will be provided in the Company’s Annual Report. individual attendances of the Recommendation 7.3 A listed entity should disclose: YES (a) if it has an internal audit function, how the function is structured and what role it performs; or Schedule 3 of the Company’s Corporate Plan provides for the internal audit function of the Company. The Board Charter outlines the monitoring, review and assessment of a range of internal audit functions and procedures. (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management control processes. internal and Recommendation 7.4 it has A listed entity should disclose whether, and if to economic, so how, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. regard YES Schedule 3 of the Company’s Corporate Plan details the Company’s risk management systems which assist in identifying and managing potential or apparent business, economic, environmental and social sustainability risks (if appropriate). Review of the Company’s risk management framework is conducted at least annually and reports are continually created by management on the the efficiency and effectiveness of Company’s risk management framework and associated internal compliance and control procedures. Principle 8: Remunerate fairly and responsibly Recommendation 8.1 The board of a listed entity should: YES (a) have a remuneration committee which: least (i) has at three members, a majority of whom are independent directors; and is chaired by an director, independent (ii) and disclose: (iii) (iv) (v) the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the the committee met period individual attendances of the members at those meetings; or throughout the and (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of for directors and senior executives and is ensuring remuneration remuneration that such Due to the size and nature of the existing board and the magnitude of the Company’s operations the Company currently has no Remuneration Committee. Pursuant the full Board Company’s Board Charter, currently carries out that would the Remuneration ordinarily be assigned Committee under the written terms of reference for that committee. to clause 4(h) of the the duties to The role and responsibilities of the Remuneration Committee are outlined in Schedule 4 of the Company’s Corporate Governance Plan available online on the Company’s website. the fulfilling roles and The Board devote time at annual board meetings to responsibilities associated with setting the level and composition of for Directors and senior executives and ensuring that such remuneration is appropriate and not excessive. remuneration For personal use only HOLISTA COLLTECH appropriate and not excessive. Recommendation 8.2 and regarding A listed entity should separately disclose its policies the practices remuneration of non-executive directors and the remuneration of executive directors and other senior executives and ensure that the different roles and responsibilities of non- executive directors compared to executive directors and other senior executives are reflected in the level and composition of their remuneration. Holista CollTech Limited 30 YES The Company’s Corporate Governance Plan requires the Board to disclose its policies and practices regarding the remuneration of non- executive, executive and other senior directors. Recommendation 8.3 A listed entity which has an equity-based remuneration scheme should: YES to enter (a) have a policy on whether participants are permitted transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. into (a) Company’s Corporate Governance Plan states that the Board is required to review, manage and disclose the policy (if any) on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme. The Board must review and approve any equity based plans. (b) A copy of Governance Plan Company’s website. the Company’s Corporate the is available on For personal use only ANNUAL REPORT 31 Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants 28 September 2015 Board of Directors Holista CollTech Limited Suite 12, Level 1 11 Ventnor Avenue West Perth WA 6005 Dear Directors PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au RE: HOLISTA COLLTECH LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Holista CollTech Limited. As Audit Director for the audit of the financial statements of Holista CollTech Limited for the year ended 30 June 2015, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Samir Tirodkar Director West Perth, Western Australia Liability limited by a scheme approved under Professional Standards Legislation 31 For personal use only HOLISTA COLLTECH 32 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Revenue from continuing operations Other income Raw materials and consumables used Depreciation expense Impairment Finance costs Share based payments Other expenses (Loss) after tax from continuing operations Loss for the year Other comprehensive income Notes 3 3 3 3 2015 $ 2014 $ 6,788,953 6,227,814 352,163 287,788 441,192 72,934 (2,616,483) (2,043,635) (2,180,081) (2,127,737) 11 & 12 (221,368) 12 26 3 4 - (159,287) (187,560) (927,287) (330,985) - (2,172,994) (2,143,914) (2,344,892) 107,771 (3,393,150) (150,756) 19,419 (42,985) (3,373,731) (42,985) (3,373,731) Exchange differences on translation of foreign operations Total comprehensive loss for the year (22,759) (31,443) (65,744) (3,405,174) Owners of the parent Non-controlling interest Total comprehensive loss attributable to :- Owners of the parent Non-controlling interest 33,488 (3,280,822) (76,473) (92,909) (42,985) (3,373,731) 28,204 (3,306,330) (93,948) (98,844) (65,744) (3,405,174) 6 6 0.02 0.02 (2.41) (2.41) For personal use onlyANNUAL REPORT 33 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Current Assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Deferred tax asset Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Other liabilities Deferred tax liability Current tax liability Total Current Liabilities Non-Current Liabilities Borrowings Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves (Accumulated losses) Total parent entity interest Non-controlling interest Total Equity Notes 7 8 10 9 11 12 9 4 13 14 13 4 4 14 15 16 16 17 2015 $ 497,766 1,782,314 1,010,682 179,612 3,470,374 2014 $ 1,511,648 1,225,409 695,700 186,673 3,619,430 1,305,455 1,374,843 189,190 16,271 - 1,510,916 4,981,291 1,126,154 773,015 - 826 114,081 2,014,076 676,011 676,011 2,690,087 2,291,204 188,921 23,585 36,802 1,624,151 5,243,581 637,410 1,101,023 69,162 - - 1,807,595 1,906,594 1,906,594 3,714,189 1,529,392 9,424,203 2,196,280 8,596,647 2,201,564 (9,136,762) (9,170,250) 2,483,721 1,627,961 (192,517) 2,291,204 (98,569) 1,529,392 For personal use onlyHOLISTA COLLTECH CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 34 Holista CollTech Limited Balance as at 1 July 2013 (Loss) for the year Exchange differences arising on translation of foreign operations Total comprehensive loss for the year Non-controlling interest Shares issued during the year Options issued - - - - 700,000 - Notes Issued Capital $ Compound Financial Instrument Accumulated Losses $ $ 7,554,145 412,502 (5,889,428) Option Reserve $ Foreign Currency Translation $ Non- controlling interest $ Total $ - - - - - - 2,242,994 - (15,922) - 2,061,297 - (92,909) (3,373,731) (25,508) (5,935) (31,443) (25,508) (98,844) (3,405,174) - - - - 275 275 - - - 700,000 2,242,994 (70,000) - - - - - - - (3,280,822) - (3,280,822) - - - Equity raising costs (70,000) Balance at 30 June 2014 15 & 16 8,184,145 412,502 (9,170,250) 2,242,994 (41,430) (98,569) 1,529,392 Balance as at 1 July 2014 Profit/ (loss) for the year Exchange differences arising on translation of foreign operations Total comprehensive loss for the year Shares issued during the year 8,184,145 412,502 (9,170,250) 2,242,994 (41,430) (98,569) 1,529,392 - - - - - - 33,488 - 33,488 1,102,557 (275,001) - - - - - - (76,473) (42,985) (5,284) (17,475) (22,759) (5,284) (93,948) (65,744) - - 827,556 Balance at 30 June 2015 15 & 16 9,286,702 137,501 (9,136,762) 2,242,994 (46,714) (192,517) 2,291,204 For personal use only ANNUAL REPORT 35 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 Notes 2015 $ 2014 $ Receipts from customers Payments to suppliers and employees Interest received Finance costs Net income tax received Net cash (used in) operating activities 7 (ii) Proceeds from the sale of property, plant and equipment Purchase of intellectual property Purchase of property, plant and equipment Loan repayments (paid to) related parties Net cash (used in) by investing activities Repayment of borrowings Proceeds from issue of shares Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 7 (i) 5,704,848 6,110,166 (6,027,297) (6,815,024) 17,281 (5,907) 306,842 (4,233) 1,700 (5,319) (113,142) - (116,761) 49,410 (1,872) 381,228 (276,092) 18,442 (57,662) (16,789) (283,074) (339,083) (699,525) (1,655,778) - 700,000 (699,525) (955,778) (820,519) (1,570,953) 1,326,477 2,864,983 (8,192) 497,766 32,447 1,326,477 For personal use onlyHOLISTA COLLTECH 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: REPORTING ENTITY Holista CollTech Limited is a company domiciled in Australia. The Company’s registered address is Suite 12, Level 1, 11 30 June 2015 comprise the Company and its subsidiaries (together referred to as the ‘Group” and individually as “Group involved in development and commercialisation of food ingredients and ovine collagen. NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation accordance with the Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). b) Principles of Consolidation and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent 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 its power over the entity. A list of the subsidiaries is provided in Note 21. from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non- statement of comprehensive income c) Business combination Business combinations occur when an acquirer obtains control over one or more businesses. The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or business under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre- acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non- controlling interests The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of For personal use only ANNUAL REPORT 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, terms and conditions. d) Going Concern $4,233. Its current assets of $3,470,374 exceed the current liabilities of $1,563,606. activities and realisation of assets and settlement of liabilities in the ordinary course of business. The ability of the Group to continue to pay its debts as and when they fall due is dependent upon the Group’s ability to generate The Group’s cosmetic collagen business has continued to grow, generating revenue of $187,715 (2014: $115,070) from its Collagen Plant in Perth, Western Australia. Revenue from this business will continue to grow in the coming year with an order on hand of 3,500kg from Thailand to be delivered by December 2015. There is an expectation that more orders will be secured from January 2016 to June 2016 which promise to continue the growth of this business segment. During this reporting period, the Group has managed to produce small scale samples of its patented Food Grade Collagen for its potential customers. The potential customers are currently working on formulating the Food Grade Collagen into their food and/ or drinks. With this positive development, the Group plan to invest in some essential equipment at its Collie Plant to produce the Food Grade Collagen on a higher scale. We expect this equipment On the Healthy Food Ingredients, our marketing company, Litefood Inc. in the USA has continued to source potential Low Glycaemic Index (G.I.) formulation at the University of Sydney, Australia. We expect positive results from this trial support the commercialisation of the Food Grade Collagen and Healthy Food Ingredients business. With the further capital raising exercises is a possibility should the need arise. While the Group is optimistic that its Malaysian and Australian revenue will continue to grow and contribute positively in the future, it does realise the risk should uncertainty as to whether the Group will continue as a going concern and whether it will realise its assets and e) Income tax on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary difference and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. For personal use only HOLISTA COLLTECH 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and Deferred income tax liabilities are recognised for all taxable temporary differences except: • • • • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the account- ing profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recog- nition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Holista CollTech Limited recognises its own current and deferred tax amounts and those current tax liabilities, current tax assets and deferred tax assets arising from unused tax credits and unused tax losses which it has assumed from its controlled entities within the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts payable or receivable from or payable to other entities in the Group. Any difference between the amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) controlled entities in the tax consolidated group. f) Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. For personal use onlyANNUAL REPORT 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment instruments, by reference to observable market information where such instruments are held as assets. Where this Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate techniques selected by the Group are consistent with one or more of the following valuation approaches: - Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. - - into a single discounted present value. service capacity. the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair measurement can be categorised into as follows: For personal use only HOLISTA COLLTECH 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or (ii) When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. g) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. h) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Land and buildings are measured at fair value less accumulated depreciation on buildings and less any impairment losses recognised after the date of the revaluation. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Buildings - over 25 years Motor vehicles – over 10 years Plant and equipment - over 5 to 20 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each (i) Impairment The carrying values of plant and equipment are reviewed for impairment at each balance date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. For personal use onlyANNUAL REPORT 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to approximate fair value. Impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. For plant and equipment, impairment losses are recognised in the statement of comprehensive income in the cost of sales line item. However, because land and buildings are measured at revalued amounts, impairment losses on land and buildings are treated as a revaluation decrement. (iii) De-recognition and disposal are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds i) Financial Instruments Initial recognition and measurement purchase or sale of the asset. Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Amortised cost recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts over the expected life of the loss. For personal use onlyHOLISTA COLLTECH 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (ii) Loans and receivables quoted in an active market. Such assets are carried at amortised cost using the effective interest method. as well as through the amortisation process. (ii) Held-to-maturity investments held-to- maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at impaired, as well as through the amortisation process. (iv) Available-for-sale investments investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which market bid prices at the close of business on the balance date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument that is substantially the same, (v) Financial liabilities liability is derecognised. Impairment (i) Financial assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the For personal use onlyANNUAL REPORT 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. the asset does not exceed its amortised cost at the reversal date. (ii) Financial assets carried at cost If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the (iii) Available-for-sale investments If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss De-recognition (i) Financial assets derecognised when: • • • full without material delay to a third party under a ‘pass-through’ arrangement; or a) has transferred substantially all the risks and rewards of the asset, or b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay. When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash- settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. (ii) Financial liabilities de-recognition of the original liability and the recognition of a new liability, and the difference in the respective For personal use onlyHOLISTA COLLTECH 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) j) Interests in Joint Arrangements Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required. and accounted for using the equity method. Joint venture operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The Group’s interests in the assets, liabilities, revenue and expenses of Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the Group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party. k) Intangibles Other than Goodwill Intangible assets acquired separately Intangible assets acquired separately are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes in these accounting estimates being accounted for on a prospective basis. Internally generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: • • • • • • The technical feasibility of completing the intangible asset so that it will be available for use or sale; The intention to complete the intangible asset and use or sell it; The ability to use or sell the intangible asset; sell the intangible asset; and The ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. The following useful lives are used in the calculation of amortisation: Capitalised development Licences Software 5 years 10 years 4 years Intangible assets acquired in a business combination Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. r values can be measured reliably. For personal use only ANNUAL REPORT 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) l) Foreign currency translation Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic which is the parent entity’s functional currency. Group companies presentation currency, are translated as follows; § Assets and liabilities are translated at exchange rates prevailing at the end of the reporting period § Income and expenses are translated at average exchange rates for the period; and § Retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement the operation is disposed of. m) (i) Wages, salaries, annual leave and sick leave to be settled within 12 months of the balance date are recognised in other payables in respect of employees’ services up to the balance date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (ii) Long service leave value of expected future payments to be made in respect of services provided by employees up to the balance date. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the balance date on national government n) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. recognised as an interest expense. o) Cash and cash equivalents Cash comprises cash at bank and on hand. Cash equivalents are short term, highly liquid investments that are f cash and cash For personal use only HOLISTA COLLTECH 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) p) Revenue recognition Revenue is measured at fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Revenue is recognised to the (i) Sale of goods and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer. (ii) Rendering of services Revenue from the rendering of services is recognised by reference to the stage of completion of the contract. (iii) Interest income asset. q) Trade and other receivables Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally due for settlement within periods ranging from 15 days to 30 days. Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms. Factors considered by set equal to the difference between the carrying amount of the receivable and the present value of estimated future applied in determining the allowance. income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries comprehensive income. r) Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. s) Borrowing costs Borrowing costs are capitalised that are directly attributable to the acquisition, construction or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. t) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: For personal use onlyANNUAL REPORT 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) · · when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. u) Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred to compensate. Government grants relating to the purchase of property, plant and equipment are included in non- of the related assets. v) New and Amended Accounting Policies Adopted by the Group commencing 1 July 2014: Investment Entities – Amendments to AASB 10, AASB 12 and AASB 127 investment entity under AASB 10 Consolidated Financial Statements and must be applied retrospectively, subject to certain transition relief. The exception to consolidation requires investment entities to account for subsidiaries at AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets The amendments include the requirement to disclose additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. This amendment has resulted Offsetting Financial Assets and Financial Liabilities - Amendments to AASB 132 These amendments clarify the meaning of ’currently has a legally enforceable right to set-off’ and the criteria for non- simultaneous settlement mechanisms of clearing houses to qualify for offsetting and is applied retrospectively. These amendments have no impact on the Group, since none of the entities in the Group has any offsetting arrangements. AASB 2013-4 Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of Hedge Accounting These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria and retrospective application is required. These amendments have no impact on the Group as the Group has not novated any of its derivatives during the current or prior periods. Interpretation 21 Accounting for Levies Retrospective application is required for AASB Interpretation 21. This interpretation has For personal use only HOLISTA COLLTECH 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) no impact on the Group as it has applied the recognition principles under AASB 137 Provisions, Contingent Liabilities and Contingent Assets consistent with the requirements of AASB Interpretation 21 in prior years. AASB 2014-1 Amendments to Australian Accounting Standards The adoption AASB 2014-1 has required additional disclosures in our segment note. Other than that, the adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. New standards and interpretations not yet adopted. A number of new standards, amendments to standards and interpretations issued by the AASB which are not yet mandatorily applicable to the Group have not been applied The Group does not plan to adopt these standards early and the directors anticipate that adoption will not have a Standard/Interpretation Effective for annual reporting periods be- ginning on or after Expected to be initially applied in ending AASB 9 ‘Financial Instruments’ - and associated Amend- ing Standards 1 January 2018 30 June 2018 AASB 15 ‘Revenue from Contracts with Customers’ 1 January 2017 30 June 2017 Impairment of non-current assets The Group assesses at each balance date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash- generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each balance date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. For personal use onlyANNUAL REPORT 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) w) Interest-bearing loans and borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. The fair value of the liability portion of a convertible note is determined using a market interest rate for an equivalent non-convertible note. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the note. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects. extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. x) Issued capital are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration. y) (i) Investments in subsidiaries, associates and joint venture entities as set out below. rather than being deducted from the carrying amount of these investments. (ii) Share-based payments The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. For personal use only HOLISTA COLLTECH 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 3: REVENUE AND EXPENSES (a) Revenue Sales revenue Sale of goods Bank interest receivable (b) Other income Other on disposal of property, plant and equipment Proceeds on legal settlement Rebates Rental income Research and development tax offset Other income (c) Expenses Net (decrease)/ increase in inventories Raw materials and consumables used during production Distribution costs Advertising and promotion Other expenses Collie factory maintenance costs Research - current year expense (i) Consultancy & professional services Audit fees (note 24) Operating lease rental expense 2015 $ 2014 $ 6,771,672 6,178,404 17,281 49,410 6,788,953 6,227,814 833 - - 62,722 288,528 80 18,442 26,875 352 - 395,523 - 352,163 441,192 (287,788) 2,616,483 72,934 2,043,635 358,975 582,360 239,092 131,390 137,182 547,766 68,697 78,452 359,227 595,185 337,765 121,800 233,148 506,812 125,804 65,151 2,143,914 2,344,892 (i) Under an exclusivity arrangement with Quick Service Holding Pty Ltd (QSRH) and an agreement to jointly share research included here. For personal use onlyANNUAL REPORT 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 4: INCOME TAX (continued) The major components of tax expense are: Current tax om operations as follows: Income tax expense calculated at 30% Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Utilisation of previously unrecognised tax losses Current year tax losses not recognised Research and development tax offset exempted from tax 2015 $ 2014 $ 150,756 - 150,756 17,383 (36,802) (19,419) 177,701 32,331 )051,393,3( (1,017,945) (41,291) - (265,052) (86,558) 88,239 258,650 150,756 13,681 - 465,306 (160,430) (118,657) 95,263 734,486 (19,419) 1,976 Foreign tax losses not recognised Non-deductible expenditure Foreign income tax payable Timing differences hensive income Current Income tax payable in Malaysia Non-current Deferred tax assets Deferred tax liabilities Unrecognised deferred tax balances Deferred Tax Assets Tax losses Tax losses attributable to foreign subsidiaries Total deferred tax assets not brought to account ment of compre- 150,756 (19,419) 150,756 826 - - - 36,802 955,007 1,172,678 2,127,685 996,297 1,181,320 2,177,617 For personal use only HOLISTA COLLTECH 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 4: INCOME TAX (continued) The tax rates used in the above reconciliations is the corporate tax rate of 30% payable by the Australian corporate entity on The foreign tax payable relates to the Malaysian corporate entities, where the current corporate tax rate is 25%. The Malaysian corporate entities tax losses have unrecognised deferred tax assets in relation to unutilised tax losses carried forward for which and they may not be used to offset taxable NOTE 5: SEGMENT REPORTING General Information Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. Types of products and services by segment (i) Healthy Food ingredients and Food supplements .aisyalaM tuohguorht stnemelppus dna stneidergni doof fo elaselohw dna gnirutcafunam tcartnoc sesinagro tnemges ehT All products produced are aggregated as one reportable segment as the products are similar in nature, manufactured and distributed to a similar type of customers, and subject to a similar regulatory environment. (ii) Sheep collagen This operating segment is involved in the manufacture and distribution of cosmetic grade collagen. (iii) Corporate This segment supports operating segments (i) and (ii). Basis of accounting for purposes of reporting by operating segments (a) Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted (b) Intersegment transactions The three segments operate independently and there are no intersegment sales. (c) Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of the physical location. (d) Segment liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Segment liabilities include trade and other payables and certain direct borrowings. For personal use onlyANNUAL REPORT 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 Holista CollTech Limited NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 5: SEGMENT REPORTING (continued) NOTE 5: SEGMENT REPORTING (continued) (e) Segment Information (e) Segment Information (i) Segment performance (i) Segment performance 30 June 2015 REVENUE External sales Interest revenue Total segment revenue Reconciliation of segment revenue to group revenue Total Group revenue Segment net loss from Supplements Sheep Collagen Food Ingredients Corporate Total $ $ 6,583,957 187,715 - - 6,583,957 187,715 $ - - - $ $ - 6,771,672 17,281 17,281 17,281 6,788,953 6,788,953 continuing operations before tax 1,610,522 (387,459) (10,797) (1,104,495) 107,771 Net profit before tax from continuing operations 30 June 2014 REVENUE External sales Interest revenue 6,063,334 115,070 - - Total segment revenue 6,063,334 115,070 107,771 - - - - 6,178,404 49,410 49,410 49,410 6,227,814 6,227,814 Total Group revenue Segment net loss from continuing operations before tax Net loss before tax from continuing operations 1,410,703 (1,314,726) (28,868) (3,440,840) (3,373,731) (3,373,731) For personal use only HOLISTA COLLTECH 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 Holista CollTech Limited NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 5: SEGMENT REPORTING (continued) Holista CollTech Limited NOTE 5: SEGMENT REPORTING (continued) (ii) Segment assets NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (ii) Segment assets FOR THE YEAR ENDED 30 JUNE 2015 NOTE 5: SEGMENT REPORTING (continued) Supplements Sheep Collagen Food Ingredient Total $ $ $ $ (ii) Segment assets 30 June 2015 Segment assets 5,258,806 3,063,781 Supplements Sheep Collagen Food Ingredient 1,133 8,323,720 Total Reconciliation of segment assets to Group assets: $ $ Intersegment eliminations 30 June 2015 Total Group assets Segment assets Reconciliation of segment assets to Group assets: 30 June 2014 Intersegment eliminations Segment assets Total Group assets Reconciliation of segment assets to Group assets Intersegment eliminations 30 June 2014 Total Group assets Segment assets Reconciliation of segment assets to Group assets (iii) Segment liabilities Intersegment eliminations Total Group assets (iii) Segment liabilities (iii) Segment liabilities 30 June 2015 Segment liabilities Reconciliation of segment liabilities to Group liabilities: 30 June 2015 Intersegment eliminations Segment liabilities Total Group liabilities Reconciliation of segment liabilities to Group liabilities: Intersegment eliminations 30 June 2014 Total Group liabilities Segment liabilities Reconciliation of segment liabilities to Group liabilities: 30 June 2014 Intersegment eliminations Segment liabilities Total Group liabilities Reconciliation of segment liabilities to Group liabilities: Intersegment eliminations Total Group liabilities 5,258,806 3,063,781 4,720,993 3,086,399 4,720,993 3,086,399 Supplements $ Sheep Collagen $ $ $ (3,342,429) 4,981,291 1,133 8,323,720 (3,342,429) 3,638 7,811,030 4,981,291 (2,567,449) 5,243,581 3,638 7,811,030 (2,567,449) 5,243,581 Total Food Ingredients $ $ Supplements 2,071,739 Sheep 1,172,251 Collagen Food Ingredients Total 741,582 3,985,572 $ $ $ $ 2,071,739 1,172,251 (1,295,485) 741,582 3,985,572 2,690,087 (1,295,485) 2,379,280 1,540,819 349,644 4,269,743 2,690,087 2,379,280 1,540,819 (555,554) 349,644 4,269,743 3,714,189 (555,554) 3,714,189 For personal use only ANNUAL REPORT Holista CollTech Limited 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 5: SEGMENT REPORTING (continued) NOTE 5: SEGMENT REPORTING (continued) (iv) Revenue by geographical region (iv) Revenue by geographical region Revenue attributable to external customers excluding interest is disclosed below, based on the location of the external customer: Revenue attributable to external customers excluding interest is disclosed below, based on the location of the external customer: Australia Malaysia Total revenue (v) Assets by geographical region The location of segment assets by geographical location of the assets is disclosed below: Australia Malaysia United States Total assets 30 June 2015 30 June 2014 $ 187,715 6,583,957 6,771,672 $ 115,070 6,063,334 6,178,404 367,313 4,612,846 1,132 783,497 4,456,401 3,683 4,981,291 5,243,581 (vi) Major customers (vi) Major customers The Group has a number of customers to whom it provides both products and services. Within the Food Ingredients and Supplement The Group has a number of customers to whom it provides both products and services. Within the Food Ingredients and segment, the Group supplies to a number of retailers through one single external distributor who accounts for 75% of total revenue for Supplement segment, the Group supplies to a number of retailers through one single external distributor who accounts for 75% this segment. The Group supplies to a few external customers for the Sheep Collagen segment, where the major customer accounts of total revenue for this segment. The Group supplies to a few external customers for the Sheep Collagen segment, where the for 97% of revenue for this segment major customer accounts for 97% of revenue for this segment NOTE 6: EARNINGS PER SHARE NOTE 6: EARNINGS PER SHARE 2015 2015 2014 2014 Cents per share Cents per share Cents per share Cents per share Basic profit/ (loss) per share: Continuing operations Continuing operations Total basic profit/ (loss) per share Net profit/ (loss) Diluted profit/ (loss) per share Weighted average number of shares Effect of dilution Weighted average number of shares (diluted) Profit/ (loss) from continuing operations Weighted average number of shares Effect of dilution Weighted average number of shares (diluted) 0.02 0.02 0.02 0.02 33,488 33,488 0.02 0.02 33,488 151,036,656 - 163,600,758 33,488 151,036,656 - 163,600,758 (2.41) (2.41) (2.41) (2.41) (3,280,822) (3,280,822) (2.41) (3,280,822) (2.41) 135,868,121 - 135,868,121 (3,280,822) 135,868,121 - 135,868,121 For personal use only HOLISTA COLLTECH 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 7: CASH AND CASH EQUIVALENTS Current Cash at bank and on hand (i) Security deposits (ii) 2015 $ 63,605 434,161 497,766 2014 $ 181,060 1,330,588 1,511,648 deposited if other collateral is not available. These deposits are interest bearing and the interest is compounded and added to the principal. At 30 June 2015, the Group had available $140,123 (2014: $166,687) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. (i) Reconciliation to the Statement of Cash Flows: in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents Bank overdraft Security deposits ing activities (Loss) for the year after tax Depreciation Impairment losses Share based payment Finance costs (non cash) Write off non-controlling share capital Impairment of intangibles Net gain on disposal of property, plant & equipment - (increase) in receivables - (increase) in inventories - increase/(decrease) in payables - increase in prepayments - increase in tax provision 63,605 - 434,161 497,766 181,060 (185,171) 1,330,588 1,326,477 m operat- )589,24( )137,373,3( (5,057) 221,368 - - 84,442 - - - (556,905) (314,982) 488,744 7,060 114,082 (103,380) 187,560 782,729 2,172,994 330,526 274 57,948 - (77,573) (51,865) (346,132) - - Net cash used in operating activities )332,4( )290,672( For personal use only ANNUAL REPORT 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 7: CASH AND CASH EQUIVALENTS (continued) (iii) Restricted Funds The Groups total cash assets mentioned above included restricted bank accounts as follows (a) NOTE 8: CURRENT TRADE AND OTHER RECEIVABLES Trade receivables Other receivables . 2015 $ 2014 $ 1,743,714 38,600 1,174,568 50,841 1,782,314 1,225,409 (i) the average credit period on sales of goods and rendering of services is 55 days. Interest is not charged. No allowance has been made for estimated irrecoverable trade receivable amounts arising from the past sale of goods and rendering of services, determined by reference to past default experience. Sales in Malaysian entities are either on a cash basis or via a distributor. The terms of payment from this distributor are 50% after net 45 days and 50% after net 65 days. Aging of past due but not impaired 0 – 30 days 30 – 60 days 60 – 90 days 90 - 120 days Total NOTE 9: OTHER FINANCIAL ASSETS Current Prepayments Non Current Legal settlement proceeds due Loan – Malaysia Pharmaceutical Society Total NOTE 10: INVENTORIES Raw materials - at cost Finished goods - at cost 310,793 83,349 21,674 90,668 506,484 6,644 21,235 3,904 1,172 32,955 179,612 186,673 15,148 1,123 16,271 2015 $ 403,526 607,156 1,010,682 20,501 3,084 23,585 2014 $ 361,254 334,446 695,700 For personal use onlyHOLISTA COLLTECH 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 11: PROPERTY, PLANT AND EQUIPMENT Year ended 30 June 2015 At 1 July 2015, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year Foreign currency exchange differences At 30 June 2015, net of accumulated depreciation and impairment At 30 June 2015 Cost Accumulated depreciation and impairment Net carrying amount Freehold land Plant and Motor and building equipment vehicles $ $ $ Total $ 844,759 432,400 97,684 1,374,843 - - (20,465) 35,058 113,142 (1,899) - - 113,142 (1,899) (175,168) (25,735) (221,368) 1,346 4,333 40,737 859,352 369,821 76,282 1,305,455 2,491,804 1,944,208 (1,632,452) (1,574,387) 859,352 369,821 127,136 (50,854) 76,282 4,563,148 (3,257,693) 1,305,455 The useful life of the assets was estimated as follows for both 2015 and 2014: Buildings Plant and equipment Motor vehicles 20 years 5 to 15 years 10 years hire purchase contracts. The carrying value of property, plant and equipment temporarily idle is $ nil (2014 $ nil). Leased assets and assets under hire ses and hire purchase contracts at 30 June 2015 is $76,282 Freehold land and building $ Plant and equipment $ Motor vehicles $ Total $ Year ended 30 June 2014 At 1 July 2013, net of accumulated depreciation and impairment 1,875,991 500,175 - 2,376,166 Additions Disposals Impairment Depreciation charge for the year Foreign currency exchange differences At 30 June 2014, net of accumulated depreciation and impairment - - (927,287) (78,962) (24,983) 844,759 16,796 122,104 138,900 - - - - (83,787) (24,811) (784) 432,400 391 97,684 - (927,287) (187,560) (25,376) 1,374,843 For personal use only ANNUAL REPORT 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 11: PROPERTY, PLANT AND EQUIPMENT (continued) At 30 June 2014 Cost Accumulated depreciation and impairment Net carrying amount Impairment Disclosure 2,451,790 1,925,580 (1,607,031) (1,493,180) 844,759 432,400 122,104 (24,420) 97,684 4,499,474 (3,124,631) 1,374,843 Collagen Extraction Facility in Collie, Western Australia This facility was built on land subject to a 20 years lease entered into in June 2004. The facility buildings have a carrying value of $nil as at 30 June 2015 (2014: $986,519). Whilst this extraction facility has been largely inactive since its completion in 2005, year as received from a customer in Thailand. world cosmetic collagen. NOTE 12: INTANGIBLE ASSETS Year ended 30 June 2015 Opening balance Additions Disposals Amortisation charge Impairment losses Foreign currency exchange differences Year ended 30 June 2014 Opening balance Additions Disposals Amortisation charge Impairment losses Foreign currency exchange differences Patents and licences $ 188,921 5,319 - (8,303) - 3,253 189,190 Patents and licences $ 189,219 57,662 - - (57,947) (13) 188,921 Total $ 188,921 5,319 - (8,303) - 3,253 189,190 Total $ 189,219 57,662 - - (57,947) (13) 188,921 For personal use onlyHOLISTA COLLTECH 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 13: TRADE AND OTHER PAYABLES Trade payables (i) Non-trade creditors Other payables Unearned income (i) Trade payables are non-interest bearing and are normally settled on 30-day terms Secured Bank overdraft Total secured borrowings 2015 $ 459,036 667,118 1,126,154 - - - - 2014 $ 290,001 347,409 637,410 69,162 69,162 185,171 185,171 NOTE 14: INTEREST-BEARING LOANS AND BORROWINGS Borrowings shown in the Statement of Financial Position relate to borrowings through the Malaysia Companies, National Australia Bank and convertible loan note holders are listed as follows: Current Bankers acceptance Bank overdraft Credit card Financial leases Term loans: (1) Convertible notes (a) Total Current Non-Current After 1 year but not later than 5 years Term loans: (1) Financial leases Convertible notes (a) After 5 years Term loans: (1) Financial leases Total Non-Current 2015 $ 273,015 - (316) 13,474 36,372 450,470 773,015 166,557 60,895 - 227,451 434,480 14,080 448,560 676,011 2014 $ 627,914 185,171 (280) 255,121 33,097 - 1,101,023 151,559 55,797 1,209,088 1,416,444 460,998 29,152 490,150 1,906,594 For personal use onlyANNUAL REPORT 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 14: INTEREST-BEARING LOANS AND BORROWINGS (continued) The borrowings of the Group and the Company are secured by the following:- Term loan (1): 1) As principal Instrument, an “all monies” Facilities Agreement stamped to the amount of facilities advanced; 2) Company; 3) Corporate Guarantee by subsidiary company for $823,949; and 4) Personal Guarantee for $823,949 by a Director of the subsidiary company. Bankers’ Acceptance and bank overdraft: 5) Facility Agreement; 6) 7) Memorandum of Deposit and letter of set off; 8) Corporate Guarantee by a subsidiary company; and 9) Joint and several guarantees from certain Directors. The bankers acceptance and bank overdraft bear interest of 4.81% to 8.50% (2014: 4.62% to 8.16%). The term Loan (1) is repayable over 240 monthly instalments (principal plus interest) of $5,271 which commenced on 1 July 2008. The term loan bears interest rates ranging from 4.90% to 6.93% (2014: 4.71% to 6.66%) per annum. Convertible notes The parent entity issued 1,500,000 convertible notes for $1.5 million on 17 June 2013 to director Mr. Chan Heng Fai. The notes and any accrued interest (payable at 1% per annum) are convertible into ordinary shares of the parent entity, at the option of the holder, or repayable on 17 June 2016. The convertible notes will be convertible in to shares at the Issue Price ($0.08). On the 24 September 2014 1,000,000 of the notes were converted to equity. • Face value of notes issued • Other equity securities – value of conversion rights • Non-current liability • Current liability 2015 $ 500,000 78,031 (127,561) - 450,470 2014 $ 1,500,000 121,590 (412,502) 1,209,088 - For personal use only HOLISTA COLLTECH 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 14: INTEREST-BEARING LOANS AND BORROWINGS (continued) Assets pledged as security The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are: Current Floating charge Cash and cash equivalents Inventories Total assets pledged as security Non-Current First mortgage Freehold land and buildings Floating charge Total non-current assets pledged as security Total assets pledged as security Financing facilities available Total facilities: • Bank overdraft • Bank loan • Trade facilities • Convertible notes • Finance lease Facilities used at balance date • Bank overdraft • Bank loan • Trade facilities • Convertible notes • Finance lease Facilities unused at balance date • Bank overdraft • Trade facilities Total facilities Facilities used at balance date Facilities unused at balance date 497,766 1,010,682 1,508,448 859,352 - 859,352 2,367,800 otiated and were available: 2015 $ - 637,408 413,138 450,470 88,449 1,589,465 2015 $ - 637,408 273,015 450,470 88,449 1,449,342 - 140,123 140,123 1,589,465 (1,449,342) 140,123 1,511,648 695,700 2,207,348 844,759 - 844,759 3,052,107 2014 $ 329,580 645,654 982,147 1,209,088 340,070 3,506,539 2014 $ 185,171 645,654 627,914 1,209,088 340,070 3,007,897 144,409 354,233 498,642 3,506,539 (3,007,897) 498,642 For personal use onlyANNUAL REPORT 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 15: ISSUED CAPITAL 154,001,549 Ordinary shares issued and fully paid Convertible notes 500,000 (2014: 1,500,000)– value of conversion rights 2015 $ 9,286,702 137,501 9,424,203 2014 $ 8,184,145 412,502 8,596,647 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. Movements in ordinary share capital of the Company during the last two year were as follows; Date Details No. of Shares Issue Price $ 01/07/2013 Opening balance 16/12/2013 Shares issued Less: costs on issue of shares 30/06/2014 Closing balance 129,603,281 11,666,667 141,269,948 $0.06 7,554,145 700,000 (70,000) 8,184,145 Date Details No. of Shares Issue Price $ 01/07/2014 Opening balance 24/09/2014 Shares issued on conversion of convertible notes 30/06/2015 Closing balance 141,269,948 12,731,601 154,001,549 $0.08 8,184,145 1,102,557 9,286,702 NOTE 16: ACCUMULATED LOSSES AND RESERVES Accumulated Losses Movements in accumulated losses were as follows: Reserves Compositions of reserves were as follows: Foreign currency translation reserve Options reserve 2015 $ (9,170,250) 33,488 (9,136,762) 2014 $ (5,889,428) (3,280,822) (9,170,250) 2015 $ (46,714) 2,242,994 2,196,280 2014 $ (41,430) 2,242,994 2,201,564 For personal use onlyHOLISTA COLLTECH 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 16: ACCUMULATED LOSSES AND RESERVES (continued) Movements in options reserve during the last year: Foreign currency translation reserve (a) Options reserve (b) Nature and purpose of reserves (a) Foreign currency translation reserve statements of foreign subsidiaries. (b) Option reserve 2015 $ (5,284) - (5,284) 2014 $ (25,508) 2,242,994 2,217,486 The option reserve records items recognised as expenses on valuation of share options. There are 25,333,333 options outstanding at year end. Share options The company has previously had an employee share option scheme under which options to subscribe for the Group’s shares have been granted to certain executives and other employees. No options have been issued during the year under this scheme (2014: nil). NOTE 17: NON-CONTROLLING INTEREST Reconciliation of non-controlling interest in controlled entities: Opening balance Share of current year loss after income tax Share of current year translation reserve Share capital NOTE 18: FINANCIAL INSTRUMENTS (a) Capital risk management 2015 $ (98,569) (76,473) (17,475) - (192,517) 2014 $ - (92,909) (5,935) 275 (98,569) The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2011. The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses. None of the Group’s entities are subject to externally imposed capital requirements. dividends and general administrative outgoings. Gearing levels are reviewed by the Board on a regular basis in line with its target gearing ratio, the cost of capital and the risks associated with each class of capital. For personal use onlyANNUAL REPORT 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 18: FINANCIAL INSTRUMENTS (continued) Financial assets Cash and cash equivalents (i) Trade and other receivables Other assets Financial liabilities (at amortised cost) Trade and other payables Borrowings (current and non-current) 2015 $ 2014 $ 497,766 1,782,314 16,271 1,126,154 1,449,026 1,511,648 1,225,409 23,585 637,410 3,007,617 (i) Cash and cash equivalents comprise restricted amounts which all have varied maturity dates within the next 12 months. (c) Financial risk management objective The Group is exposed to market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity (d) Market risk foreign currency and commodity price risk including foreign exchange forward contracts to hedge the exchange rate and commodity price risk arising on its production. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period. (i) Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate exchange contracts. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the balance date expressed in Australian dollars are as follows: Liabilities 2015 $ 2014 $ Assets 2015 $ 2014 $ Malaysian ringgit 2,071,738 2,379,280 3,253,872 3,086,190 Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. For personal use onlyHOLISTA COLLTECH 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 18: FINANCIAL INSTRUMENTS (continued) Other equity (ii) RM impact Consolidated Company 2015 $ 81,805 189,153 2014 $ 63,474 154,558 2015 $ - - 2014 $ - - (i) This is mainly attributable to the exposure outstanding on receivables and payables at year end in the Group (ii) Interest rate risk management borrowings. risk management section of this note (iii) Interest rate risk sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non- held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the change in interest rates. At balance date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s: to interest rates on its variable rate borrowings. The Group’s sensitivity to interest rates has decreased during the current period mainly due to the reduction in variable rate debt instruments and the increase in interest rate swaps. (e) Credit risk management rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. An analysis of the credit quality of trade and other receivables that are neither past due is as follows. Customers with external credit rating Other customers - four or more years trading history with the Group - less than four years or more trading history with the Group 2015 $ - 1,276,992 466,722 1,743,714 2014 $ - 1,140,253 34,315 1,174,568 For personal use only ANNUAL REPORT 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 18: FINANCIAL INSTRUMENTS (continued) (f) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing liabilities. Less than 1 Month $ 1-3 Months $ 3 months- 1 year $ 2015 Non-interest bearing Finance lease liabilities (4.56%) Variable interest rate instruments (5.45%) Fixed interest rate instruments (3.18%) - 1,436 195,208 8,561 205,205 - 2,873 77,808 16,816 97,496 Less than 1 Month $ 1-3 Months $ 3 months- 1 year $ 2014 Non-interest bearing Finance lease liabilities Variable interest rate instruments Fixed interest rate instruments - 29,853 189,686 9,705 229,244 - 59,705 436,575 22,732 519,012 NOTE 19: COMMITMENTS Operating lease commitments - Group as lessee 1-5 years 5+ years $ - $ - - - 147,863 147,863 - 12,927 71,213 - 526,318 539,245 - 388,321 459,534 1-5 years 5+ years $ - 96,548 $ - - 105,810 330,655 1,962,118 83,656 - 183,254 28,106 97,446 280,333 2,192,966 414,311 The Group has entered into commercial leases on certain motor vehicles and items of machinery. These leases have an average life of between 3 and 7 years with no renewal option included in the contracts. There are no restrictions placed upon the lessee by entering into these leases. annum. The Group has a 20 year lease entered into in June 2004 for a site in Collie, Western Australia. The rent for this site is $9,742 increased by CPI per hectare per annum. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: For personal use onlyHOLISTA COLLTECH 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 19: COMMITMENTS (continued) Within one year Consolidated Parent 2015 $ 25,426 39,171 39,172 2014 $ 13,979 39,171 48,965 103,769 102,115 2015 $ 9,973 39,171 39,172 92,486 2014 $ 9,793 39,171 48,965 97,929 Finance lease and hire purchase commitments - Group as lessee minimum lease payments are as follows: Consolidated Within one year Total minimum lease payments Present value of minimum lease payments 2015 2014 Present value Of lease Payments $ Minimum Lease Payments $ Present value Of lease Payments $ 17,014 65,676 14,185 96,875 - 96,875 272,812 66,216 30,333 369,360 (29,290) 340,070 257,731 63,077 29,673 350,481 - 350,481 Minimum Lease Payments $ 17,236 68,944 14,347 100,527 (12,078) 88,449 Capital commitments At 30 June 2015 the Group has no capital commitments that have not otherwise been booked as a liability (2014 $ Nil). NOTE 20: RELATED PARTY DISCLOSURE Transactions with related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. For personal use onlyANNUAL REPORT 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 Consolidated Parent 2015 $ 2014 $ 2015 $ 2014 $ NOTE 20: RELATED PARTY DISCLOSURE (continued) The following transactions occurred with related parties Transactions with iGalen Sdn Bhd . Mdm Nora Hassan is a director of the Malaysian Parent and shareholder of iGalen Sdn Bhd. - - Sales Purchases - Rental income - - Talks and seminars Purchase of membership package Director fee paid to Mdm Nora Hassan Legal services fee paid to Sumita K & Associates for provision of legal advice. Mrs Sumita’s husband is a director of Holista CollTech Limited Director fee paid to Mrs Sumita The following amounts have been advanced to related parties 64,956 (36,391) 62,722 (163,774) (3,485) 4,181 8,363 12,544 (50,882) - - - - - - 8,062 12,093 20,155 Amounts due from iGalen Sdn Bhd. Mdm Nora Hassan is a director of the Malaysian Parent and shareholder of iGalen Sdn Bhd Consolidated Parent 2015 $ 2014 $ 2015 $ 204,131 204,131 - - - - Lite Food Inc is 74% owned by the Group with the remaining 26% being held by private shareholders including our director Mr. Chan Heng Fai. NOTE 21: INTEREST IN SUBSIDIARIES Set out below are the Group’s subsidiaries at 30 June 2015. The subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the Group and the proportion of ownership interest held equals the voting rights held by the group. Each subsidiaries country of incorporation is also its principal place of business. - - - - - - - - - - - - - - - - 2014 $ - - For personal use onlyHOLISTA COLLTECH 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 21: INTEREST IN SUBSIDIARIES (continued) Name Holista Biotech Sdn Bhd Total Health Concept Sdn Bhd Alterni (M) Sdn Bhd Medi Botanics Sdn Bhd Lite Food Inc Country of Incorporation Malaysia Malaysia Malaysia Malaysia United States of America Ownership Interest Held by the Group 2015 100% 100% 100% 100% 74% 2014 100% 100% 100% 100% 74% Proportion of Non-controlling Interests 2015 2014 - - - - - - - - 26% 26% Summarised Financial Information of Subsidiaries with Material Non-controlling Interests material to the Group: Summarised Financial Position Current assets Non-current assets Current liabilities Non-current liabilities Net liabilities Carrying amount of non-controlling interests Summarised Financial Performance Revenue (Loss) after tax Other comprehensive income after tax Total comprehensive income (Loss) attributable to non-controlling interests Distributions paid to non-controlling interests The information above is before intercompany eliminations Lite Food Inc 30 June 2015 $ 30 June 2014 $ 1,133 - (52) (741,531) (740,450) (192,517) 3,683 - (43) (349 602) (345,962) (98,569) Year ended 30 June 2015 $ Year ended 30 June 2014 $ - - (294,130) (357,344) - (294,130) (76,473) - - (357,344) (92,909) - For personal use only ANNUAL REPORT 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 21: INTEREST IN SUBSIDIARIES (continued) Summarised Cash Flow Information Net cash used in operating activities Net cash from investing activities Effect of exchange rates on cash holdings in foreign currencies Net decrease in cash and cash equivalents Lite Food Inc 30 June 2015 $ 30 June 2014 $ (294,130) 291,580 - - 2,550 (357,027) 350,386 - 10,324 3,683 NOTE 22: PARENT ENTITY DISCLOSURES Holista CollTech Limited is the ultimate Australian parent entity and ultimate parent of the Group. Holista CollTech Limited did not enter into any trading transactions with any related party during the year. Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated losses Reserves Total Equity Financial performance (Loss) for the year Other comprehensive income Total comprehensive (loss) 30 June 2015 $ 30 June 2014 $ 80,438 2,987,839 3,068,277 726,277 450,470 1,176,747 1,891,530 7,933,129 (8,284,593) 2,242,994 1,891,530 382,782 2,712,057 3,094,839 340,172 1,209,087 1,549,259 1,545,580 7,105,572 (7,802,986) 2,242,994 1,545,580 Year ended 30 June 2015 $ Year ended 30 June 2014 $ (481,607) (3,610,372) - - (481,607) (3,610,372) For personal use onlyHOLISTA COLLTECH 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 22: PARENT ENTITY DISCLOSURES (continued) The parent company has no capital commitments at 30 June 2015 (2014:Nil). The parent company has not entered into any guarantees on behalf of subsidiary entities. The parent company commitments are disclosed in Note 19. NOTE 23: EVENTS AFTER THE REPORTING PERIOD NOTE 24: AUDITOR’S REMUNERATION 2015 $ 2014 $ Amounts received or due and receivable by Grant Thornton Audit Pty Ltd for: Amounts received or due and receivable by Stantons International Audit and Consulting for: Amounts received or due and receivable by Russell Bedford LC & Company for other entity in the Group 48,862 27,000 other entity in the Group - 62,447 Amounts received or due and receivable by auditors of group entities 21,186 70,048 36,357 125,804 NOTE 25: DIRECTORS AND EXECUTIVES DISCLOSURES (a) (i) Details of Key Management Personnel Directors Dato’ Dr Rajen Manicka Mr. Daniel O’Connor Mr. Chan Heng Fai (ii) Executives Mr Kong Hon Khien Mr Jay Stephenson Non Executive Director Non Executive Director Company Secretary Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report. The totals of remuneration paid to the key management personnel of the Company are as follows. For personal use only ANNUAL REPORT 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 25: DIRECTORS AND EXECUTIVES DISCLOSURES (continued) Total key management personnel compensation (b) Loans to Key Management Personnel There are no loans to directors or executives. 2015 $ 466,016 68,127 534,143 2014 $ 428,989 50,703 479,692 (c) Other transactions and balances with Key Management Personnel other than transactions disclosed in Note 20, the Company had the following transactions with Key Management Personel during the year. Balance at beginning of year $ Conversion during the year $ Convertible notes (i) 1,515,000 (1,000,000) Total 1,515,000 (1,000,000) Repayment $ - - Interest charged $ 7,350 7,350 Exchange difference $ - - Balance at end of year $ 522,350 522,350 (i) The convertible note agreement was entered into with director Mr. Chan Heng Fai for a period of 3 years with interest charged at 1% per annum. The fair value of the convertible notes at 30 June 2015 was $450,470 (2014: $1,209,087). NOTE 26: SHARE BASED PAYMENTS The company made no share based payments during the year ended 30 June 2015. The company made the following share based payments during the year ended 30 June 2014: Warrants issued On 27 November 2013, 23,333,333 warrants were granted to interests associate non-executive director Mr Chan Heng Fai as approved by shareholders at the Annual General Meeting held on the 27 November 2013. The warrants entitle the holder to take up ordinary shares at an exercise price of $0.06 each. The warrants are exercisable on or before 17 December 2018. The warrants have no vesting conditions, hold no voting rights and are transferable. A portion of the fair value of the warrants ($70,000) has been treated as equity raising costs (refer note 4) with the balance being expensed. i) Fair value of warrants The fair value of the warrants granted during the year to Mr Chan Heng Fai was $0.09. This value has been calculated using the Black-Scholes option pricing model applying the following inputs; Market price of shares: $0.12 Estimated share price volatility: 81.06% For personal use only HOLISTA COLLTECH 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 26: SHARE BASED PAYMENTS (continued) Risk-free interest rate: 3.36% Options issued On 11 June 2014, 2,000,000 options were granted to a patent consultant as approved by the board of directors. The options entitle the holder to take up ordinary shares at an exercise price of $0.10 each. The options are exercisable on or before 1 August 2017. The options have no vesting conditions, hold no voting rights and are transferable. i) Fair value of options The fair value of the options granted during the year to the patent consultant was $0.0046. This value has been calculated using the Black-Scholes option pricing model applying the following inputs; Market price of shares: Estimated share price volatility: Risk-free interest rate: $0.045 50.58% 2.72% Reconciliation of outstanding share options The number and weighted average exercise prices (WAEP) of, and movements in, share options during the year Outstanding at 1 July Granted during the year Forfeited during the year Exercised during the year Outstanding at 30 June Exercisable at 30 June Number of options 2015 25,333,333 - - - WAEP 2015 Number of options 2014 WAEP 2014 $0.06 - - - - 25,333,333 - - 25,333,333 25,333,333 $0.06 $0.06 25,333,333 25,333,333 - $0.06 - - $0.06 $0.06 The options outstanding at 30 June 2015 have an exercise price in the range of $0.06 to $0.10 (2014: $0.06) and weighted average remaining contractual life of 3 years (2014: 4 years). The weighted average share price at the date of exercise for share options exercised in 2015 was nil as no options were exercised (2014: nil). NOTE 27: CONTINGENT LIABILITIES The Company has no contingent liabilities at 30 June 2015. For personal use only ANNUAL REPORT 75 DIRECTORS’ DECLARATION 1. In the opinion of the directors of Holista CollTech Limited (the ‘Company’): a. i. performance for the year then ended; and ii. complying with Australian Accounting Standards, the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements. iii. The remuneration disclosures contained in the Remuneration Report comply with s300A of the Corporations Act 2001 b. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. c. issued by the International Accounting Standards Board. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with ended 30 June 2015. This declaration is signed in accordance with a resolution of the Board of Directors. _______________________________ Dato’ Dr Rajen Manicka Director Dated this 28 day of September 2015 For personal use onlyHOLISTA COLLTECH 76 Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HOLISTA COLLTECH LIMITED Report on the Financial Report We have audited the accompanying financial report of Holista CollTech Limited, which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation 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 is free from material misstatement, whether due to fraud or error. In note 2 a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an An audit also includes evaluating the opinion on the effectiveness of the entity’s internal control. appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 76 Liability limited by a scheme approved under Professional Standards Legislation For personal use only ANNUAL REPORT 77 Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of Holista CollTech Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in note 2 a). Emphasis of Matter Regarding Going Concern Without qualification to the opinion expressed above, attention is drawn to the following matter: As referred to in Note 2 d) to the consolidated financial statements, the consolidated financial statements have been prepared on a going concern basis. At 30 June 2015 the consolidated entity had cash and cash equivalents totalling $497,766 (including restricted cash of $434,161), working capital of $1,456,298 and has incurred a profit before tax for the year of $107,771. The ability of the Company and consolidated entity to continue as going concerns is subject to the future profitability of the Company and consolidated entity. In the event that the consolidated entity is not successful in maintaining profitability, the Company and its subsidiaries may not be able to meet their liabilities as and when they fall due and the realisable value of the Company’s and its subsidiaries assets may be significantly less than book values. Report on the Remuneration Report We have audited the remuneration report included in pages 16 to 23 of the directors’ report for the year ended 30 June 2015. 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 Auditor’s opinion In our opinion the remuneration report of Holista CollTech Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Samir Tirodkar Director West Perth, Western Australia 28 September 2015 77 For personal use only HOLISTA COLLTECH Additional Information for Listed Public Companies 78 Additional information included in accordance with the Listing Rules of the Australian Securities Exchange Limited. The information is current as at 31 August 2015. 1. Shareholdings a) Substantial shareholders of Holista CollTech Limited: Name of shareholder Dato’ Dr Rajen Manicka Mr Chan Heng Fai Franjack Pty Ltd + Aurjoe Pty Ltd b) Distribution of equity – Listed securities: Size of holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Shares held 73,914,400 20,898,268 6,726,665 Number of Shareholders 233 234 105 164 52 788 At the date of this report there were 413 shareholders who held less than a marketable parcel of shares holding 497,363 shares. For personal use onlyANNUAL REPORT 79 Additional Information for Listed Public Companies c) 20 Largest Shareholders – Ordinary Shares: DR. RAJENDRAN MARNICKAVASAGAR HENGFAI BUSINESS DEVELOPMENT PTE LTD FRANJACK PTY LTD + AURJOE PTY LTD MS SARINDERJIT KAUR DR FATHIL MOHAMED FAIRVIEW HOLDINGS PTY LTD MR CHEOK HUAT AW HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CHANDRA SEKARAN P PERUMAL MR RAVINDRAN GOVINDAN MR KOK WAH ONG DBS VICKERS SECURITIES (SINGAPORE) PTE LTD THANK KEATING PTY LTD FAIRVIEW HOLDINGS PTY LTD UOB KAY HIAN PRIVATE LIMITED BAKERSFIELD HOLDINGS PTY LTD MRS SHIVANI KAMALANATHAN RHB SECURITIES SINGAPORE PTE LTD IRSS NOMINEES (21) LIMITED LIFESCIENCE SECURITIES LTD d) Stock Exchange Listing Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital 73,914,400 20,898,268 6,726,665 6,625,000 4,311,274 4,029,564 4,000,000 3,440,873 3,333,333 2,061,119 1,817,746 1,760,000 1,300,000 1,085,436 793,181 786,666 738,089 711,666 660,000 600,000 48.00 13.57 4.37 4.30 2.80 2.62 2.60 2.23 2.16 1.34 1.18 1.14 0.84 0.70 0.52 0.51 0.48 0.46 0.43 0.39 139,593,280 90.64 Listed securities in Holista CollTech Limited (HCT) are quoted on all member exchanges of the Australian Securities Exchange. For personal use onlyHOLISTA COLLTECH Holista CollTech Limited ABN 24 094 515 992 Suite 12, Level 1, 11 Ventnor Avenue, West Perth, WA 6005 Tel : (+618) 6141 3500 Fax : (+618) 6141 3599 www.holistaco.com For personal use only

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