FY24 ANNUAL REPORT Pure Foods Tasmania Limited (ASX : PFT) and Controlled Entities For the financial year ended 30 June 2024 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2023 2 Table of Contents Corporate Directory ................................................................................................................. 3 Who is Pure Foods Tasmania? ................................................................................................. 4 Executive Chairman’s Report ................................................................................................... 5 Directors’ Report ....................................................................................................................... 7 Remuneration Report ............................................................................................................ 11 Auditor’s Independence Declaration .................................................................................... 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income................. 17 Consolidated Statement of Financial Position ..................................................................... 19 Consolidated Statement of Changes in Equity ..................................................................... 20 Consolidated Statement of Cash Flows ................................................................................ 21 Notes to and Forming Part of the Financial Statements ..................................................... 22 Consolidated Entity Disclosure Statement ........................................................................... 51 Independent Auditor’s Report ............................................................................................... 52 Shareholder Information ....................................................................................................... 56 Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 2 Corporate Directory Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 3 Corporate Directory Registered Office 2/179 Murray Street Hobart, Tasmania 7000 Australia Postal Address 100-104 Mornington Road Mornington, Tasmania 7018 Australia Corporate Office 100-104 Mornington Road Mornington, Tasmania 7018 Tel: +61 (3) 6231 4233 Bankers Commonwealth Bank of Australia Share Registry Automic Registry Services Level 2, 267 St Georges Terrace Perth, Western Australia 6000 Australia Stock Exchange Listing Pure Foods Tasmania Limited is listed on the Australian Securities Exchange, code PFT. Auditor Wise Lord & Ferguson 160 Collins Street Hobart, Tasmania 7000 Australia Solicitors Page Seager 2/179 Murray Street Hobart, Tasmania 7000 Australia Board of Directors Malcolm McAully Non-Executive Chairman Michael Cooper Managing Director and CEO Ken Fleming Non-Executive Director Justin Hill Company Secretary Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 3 Who is Pure Foods Tasmania? Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 4 Who is Pure Foods Tasmania? Pure Foods Tasmania Pty Ltd (PFT) was formed in 2015 with the aim to enhance and promote Tasmania’s food and beverage businesses. PFT’s strategy is to develop new products within its existing brands and in the plant-based food market, to acquire complementary brands and businesses and to increase its market penetration and distribution for its suite of brands and products globally. PFT’s stable of brands and businesses include Woodbridge Smokehouse, Tasmanian Pate, Daly Potato Co., and The Cashew Creamery. Strategy PFT’s growth strategy encompasses several key themes: 1. organically grow its existing brands; 2. improve margins and capacity via automation of its production as products and brands reach scale; 3. secure key assets; and 4. grow via the acquisition of complementary/scalable products/brands/businesses to exploit product expansion opportunities. PFT brands are targeted at the “conscious consumer”, offering convenience and indulgent home entertaining products with a uniquely Tasmanian focus. Organic growth will be achieved through increased penetration of existing markets, entry into new markets and new product development. Executive Chairman’s Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 5 Executive Chairman’s Report Overview I was appointed Executive Chairman by the Board of Pure Foods Tasmania Limited (PFT) on 28 August 2024 following the decision by Michael Cooper to step down from the role of Managing Director. On 11 October, it was further announced that Michael will also be stepping down from the Board of PFT. In the light of these decisions, I have combined the Managing Director’s and Chairman’s reports. The 2024 financial year has been a transformative period for PFT. In the wake of the difficult economic climate and unrelenting inflationary pressures, the Company pivoted its medium-term strategy mid-year to address declining profitability and unsustainable operating costs. Since then and beyond the end of the FY24 year, PFT has reduced annual operating costs by $1.2m and further savings are planned to be realised in FY25. We remain committed to our ongoing longer-term strategy of continuing to refine our operations, focusing on sustainable profitability, and positioning the Company for future growth, which includes organic and non-organic growth. Financial Performance Revenue fell by 23% compared to FY23, primarily due to the strategic decision to cull products where margins were challenged, including: • several unprofitable product lines at Woodbridge Smokehouse, leading to a 38% drop in sales for the Division; and • discontinuing production of Daly Frozen and Potato & Gravy in the early part of Q3. While these decisions negatively impacted our topline, it was a necessary step to build a more sustainable operating base which will eventually result in improving our overall profitability. EBITDA for the year was a disappointing loss of $3.9m due to several factors, including: • Daly Potato orders exceeding production capacity and substantial increases in input costs, including labour overtime cost when the Company had to move to seven days production and three shifts a day in late 2023; incurring up to $1.3m loss; • a significant component ($450k) of the almost $1m write down of goodwill was attributed to Lauds Plant Based Foods which followed the sale of the division in December 23; • substantially elevated raw material/freight and packaging costs, particularly for salmon and dairy which have been at all-time highs, pressuring margins; and • continuing equipment sealing issues causing losses of more than $500k due to poor labour utilisation, low productivity and excessive overtime. To address these issues the Company ceased production of several SKU’s and took legal steps against the equipment supplier while implementing alternative packaging methods. The Board also initiated a preliminary review of other business units not performing well and the decision was made to sell Lauds Plant Based Foods. Outlook Looking ahead, PFT is well positioned for growth, and we anticipate an improvement in both the revenue and operating performance for the Company this financial year. We have also observed some easing of price pressures in the early months of FY25. We maintain ongoing dialogue with our advisors regarding acquisition opportunities. As stated above, the Company’s principal focus remains the existing business and aligning costs and revenues to build a more sustainable business. Executive Chairman’s Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 6 Other Matters On 16 October 2024, the ASX advised that the securities of PFT will be suspended from quotation in accordance with Listing Rule 17.3. The ASX determined that PFT’s financial position is not adequate to warrant the continued quotation of its securities and therefore PFT was in breach of Listing Rule 12.2. This decision was made following a detailed letter that the Company had submitted to the ASX in response to the concerns it had raised in relation to the Audit report. On 18 October, the Company released a statement advising that it was working with various stakeholders and advisers in respect of its financial position. These discussions are ongoing. The Company is focused on reducing costs and improving its operating performance and it is confident its FY25 results will be a substantial improvement on its FY24 results. Our People Michael Cooper announced his resignation as Managing Director and is stepping down from the Board on 14 October 2024. Michael and I worked closely now for several years to build a Tasmanian-based, premium food business. This last 12 months have been difficult and while the Board regrettably accepted Michael’s decision to step down, it was fully understandable. The Board thanks Michael for his leadership and support. During his tenure, he grew the customer base to over 3,000 and launched 25 new SKU’s into the market, while sales had grown by 65% over the previous four years. We wish him all the best. I was pleased to welcome the appointment of Robert Knight (Rob) to the Board of PFT as a Director, effective from Monday 14 October 2024. Rob has a strong background in marketing and in the retail sector. In tandem, the Company also announced that it had issued 13.33M shares at $0.03 per share (equal to $400,000) to Rob. The issue of shares represents approximately 9.85% of the then issued shares in the Company. The Board appreciates Robert’s confidence in the Company which was reinforced by the premium he paid for his investment, being 86% above the then 15-day VWAP of $0.016 share. The shares will be subject to voluntary escrow for a period of 12 months from their issue date. On behalf of the Board, I recognise our staff for their resilience, flexibility and their willingness to adapt to changing circumstances. Turning around a company is only possible if you have a great team of dedicated people working together. We look forward to achieving a positive future and making PFT a successful Company for the shareholders. Malcolm McAully Non-executive Chairman Pure Foods Tasmania Limited Date: 31 October 2024 Directors’ Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 7 Directors’ Report Pure Foods Tasmania Limited and its Controlled Entities Your Directors present their report on the consolidated entity (referred to herein as the Group) consisting of Pure Foods Tasmania Limited and its controlled entities for the financial year ended 30 June 2024. The information in the preceding operating and financial review forms part of this Directors’ report for the financial year ended 30 June 2024 and is to be read in conjunction with the following information: General Information Directors The following persons were Directors of the Group during or since the end of the financial year up to the date of this report: • Malcolm McAully Non-executive Chairman1 • Michael Cooper2 Managing Director • Ken Fleming Non-executive Director Dividends Paid or Recommended No dividends were paid or declared during the financial year. Indemnifying Officers or Auditor During the financial year, the Group paid a premium in respect of a contract insuring the Directors of the Group, the Group Secretary and all Executive Officers of the entity and any related body corporate against a liability incurred as a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Group or of any related corporate against a liability incurred as an officer or auditor. Proceedings on Behalf of the Group No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. 1 Executive Chairman from 30 August 2024. 2 Resigned as Managing Director on 30 August 2024 and as a Director on 14 October 2024. Directors’ Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 8 Non-Audit Services The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence. The following fees were paid or payable to WLF Accounting & Advisory for non-audit services provided during the year ended 30 June 2024: Details $ Advisory taxation services 23,500 Accounting assistance 4,600 28,100 Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2024 has been received and can be found on page 16 of the financial report. Information Relating to Directors and Group Secretary Director Details and Experience Malcolm McAully Malcolm McAully is an experienced Company Director having held roles over a diverse range of industry backgrounds including financial services, energy generation, waste management, agribusiness, technology manufacturing, human resource management, property development and food manufacturing. Malcolm was the Chairman of ASX Listed Pinnacle VRB (ASX: PCE) from 2004 to 2005 and remained Chairman when the company (following an acquisition) changed its name to Cougar Energy Limited (ASX: CXY) until 2013 when he resigned. Malcolm is also Chairman of Chaucer Energy Limited and several privately owned companies. Malcolm has held various executive management positions including National Manager of MLC Life when owned by the Lend Lease Group. He holds an MBA and qualifications in accounting, business management, mediation, turn around management and GAICD. Michael Cooper Michael Cooper is the Managing Director of PFT. Michael has over 29 years’ experience in senior executive roles in the food and beverage industry. He was the CEO and later Managing Director of Juicy Isle Pty Ltd (JI) and sold his family interest to Myer Family Investments. JI was the largest supplier of organic juice in Australia to Woolworths, Coles, and Costco. He was also a director (2012 – 2017) of Ausfec Ltd, a $550m revenue business. Ausfec was the major route to market distribution channel for global brands such as Cadbury, Nestle, Mars, Wrigley, Smith and SBA Snack Foods, Red Bull, and V Energy drinks. Michael is also a Director of Brand Tasmania, a Tasmanian State Authority created under the Brand Tasmania Act 2018. Michael joined the PFT Board in February 2017 and was appointed Managing Director on a part time basis in October 2018 and full time from April 2019. Ken Fleming Ken Fleming has extensive experience in capital markets and has held senior roles at Deutsche Bank (including Director; Global Co-ordinator – Telecommunications Technology), James Capel Australia and Tricom (Head of Research). He has also worked in the Australian public service (Canberra) and at KPMG (Melbourne). He is a Director of Castray Capital Pty Ltd and holds an Honours Degree in Economics and post graduate qualifications in economics and finance and is also a Fellow of the Financial Services Institute of Australia (FFIN). Directors’ Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 9 Director Details and Experience Justin Hill Justin is a Principal at Page Seager Lawyers – the largest law firm in Tasmania. Justin advises clients in a number of key industry sectors, including agribusiness, financial services, energy, and the not-for-profit sector. He specialises in mergers and acquisitions, governance and corporate structures and restructures. Justin also has significant experience in finance (including derivative transactions) and advising on raising capital for companies by way of equity and debt. He also assists with preparing contracts of employment and provides employment advice on transfer of businesses. Justin has a first-class honours degree in Commerce, a Master’s in Law from the University of Melbourne and a Graduate Diploma in Applied Finance and Investment. Before joining Page Seager as a Partner/Principal, Justin worked as in-house counsel for the investment banking division of Deutsche Bank in Sydney. Prior to working with Deutsche Bank, Justin was principal counsel in the institutional markets and investment division of National Australia Bank. Justin also practised for a number of years in the mergers and acquisitions team of Mallesons Stephen Jaques (now King & Wood Mallesons). Meetings of Directors During the financial year, 11 meetings of Directors (including committees of Directors) were held. Attendance by each Director during the year was as follows: Directors’ Meetings Eligible Meetings Meetings Attended Malcolm McAully 11 11 Michael Cooper 11 11 Ken Fleming 11 11 Remuneration of Directors and Senior Management Information about the remuneration of Directors and senior management is set out in the Remuneration Report. Review of Operations and Principal Activities The Group's principal activities at the commence of the financial year are outlined in the Chairman's report and listed in the Events Subsequent to Balance Date. Operating Results The loss after tax of the Group for the financial year attributable to the members of Pure Foods Tasmania Limited was ($3.9m) (2023: ($1.8m)). Directors’ Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 10 State of Affairs and Likely Developments In the opinion of the Directors there were no significant changes in the state of affairs of the Group and its controlled entities that occurred during the financial year under review not otherwise disclosed in this report or the accompanying financial report. Reference should be made to the subsequent events note for changes in the state of affairs after balance date. Events Subsequent to Balance Date There were no other matters or circumstances arising since the end of the reporting period that have significantly affected or may significantly affect the operations of the Group and the results of those operations or the state of the affairs of the Group in the financial period subsequent to 30 June 2024. On behalf of the Directors Malcolm McAully Non-executive Chairman Date: 30 September 2024 Remuneration Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 11 Remuneration Report Remuneration Policy The remuneration policy of the Group has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Group’s financial results. The Board of the Group believes the remuneration policy to be appropriate and effective in its ability to attract and retain high-quality KMP to run and manage the Group, as well as create goal congruence between Directors, executives, and shareholders. The Board’s policy for determining the nature and amount of remuneration for KMP of the Group is based on the following: • The remuneration policy is to be developed by the Board after professional advice is sought from independent external consultants. • All KMP receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options, and performance incentives. • Performance incentives are generally only paid once predetermined key performance indicators (KPIs) have been met. • Incentives paid in the form of options or rights are intended to align the interests of the Directors and Group with those of the shareholders. In this regard, KMP are prohibited from limiting risk attached to those instruments by use of derivatives or other means. • The Board reviews KMP packages annually by reference to the Group’s performance, executive performance, and comparable information from industry sectors. The performance of KMP is measured against criteria agreed biannually with each executive and is based predominantly on the forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses, and options. Any change must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth. KMP receive, at a minimum, a superannuation guarantee contribution required by the government, which, during the 2024 financial year was 11.0% of the individual’s average weekly ordinary time earnings (AWOTE). Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to KMP is valued at the cost to the Group and expensed. Remuneration Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 12 Performance-based Remuneration KPIs are set annually, with a certain level of consultation with KMP. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for Group expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based on budgeted figures for the Group and respective industry standards. Performance Conditions Linked to Remuneration The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the provision of various cash bonus reward schemes, specifically the incorporation of incentive payments based on the achievement of revenue targets, return on equity ratios and continued employment with the Group. Employment Details of Members of Key Management Personnel The term Key Management Personnel refers to those persons having the authority and responsibility for planning, directing, and controlling activities of the Group, directly or indirectly, and includes any Director of the Group (whether executive or otherwise). The KMP of the Group for the year ended 30 June 2024 were: Key Management Personnel Role Appointment Date Malcolm McAully Non-executive Chairman 1 September 2017 Michael Cooper3 Managing Director 1 February 2017 Ken Fleming Non-executive Director 29 July 2015 Phillip Excell4 Chief Financial Officer 20 March 2023 3 Resigned 30 August 2024 as Managing Director and as a Director on 14 October 2024. 4 Resigned 17 September 2024. Remuneration Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 13 Remuneration Expense Details for the Year Ended 30 June 2024 Short-term benefits Post-employment benefits Long-term benefits Equity-settled share- based payments Cash-settled share-based payments Terminati on benefits Total Salary, fees, and leave Profit share and bonuses Non- monetary Pension and superannuation Other Incentive plans LSL Shares/units Options/ rights KMP Year $ $ $ $ $ $ $ $ $ $ $ $ Malcolm McAully 2024 50,000 - - 5,500 - - - - - - - 55,500 2023 50,000 - - 5,250 - - - - - - - 55,250 Michael Cooper5 2024 302,732 - - 33,000 - - - - - - - 335,732 2023 300,771 - - 31,499 - - - - - - - 332,270 Ken Fleming 2024 36,000 - - 3,960 - - - - - - - 39,960 2023 36,000 - - 3,780 - - - - - - - 39,780 Charles Hughes6 2024 - - - - - - - - - - - - 2023 174,270 - - 17,779 - - - - - - - 192,049 Phillip Excell7 2024 200,600 - - 22,000 - - - - - - - 222,600 2023 57,842 - - 6,057 - - - - - - - 63,899 Total KMP 2024 589,332 - - 64,460 - - - - - - - 653,792 2023 618,883 - - 64,365 - - - - - - - 683,248 Securities Received that are not Performance-Related No members of KMP are entitled to receive securities that are not performance-based as part of their remuneration package. 5 Resigned 30 August 2024. 6 Resigned 21 April 2023. 7 Resigned 17 September 2024. Remuneration Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 14 KMP Shareholdings The number of ordinary shares held by each KMP of the Group during the financial year is as follows: Balance at Beginning of the Year Granted as Remuneration During the Year Issued on Exercise of Options During the Year Purchases During the Year Balance at End of Year Malcolm McAully8 2,599,518 - 280,886 - 2,880,404 Michael Cooper8 4,404,682 - 1,382,230 - 5,786,912 Ken Fleming8 2,668,975 - 625,500 - 3,294,475 Phillip Excell8 - 255,102 - - 255,102 8 Includes indirect shareholdings. Remuneration Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 15 Other Equity-Related KMP Transactions There have been no other transactions involving equity instruments apart from those described in the tables above relating to options, rights, and shareholdings. Other Transactions with KMP and/or their Related Parties There were no other transactions conducted between the Group and KMP or their related parties, apart from those disclosed above relating to equity, compensation, and loans, that were conducted other than in accordance with normal employee, customer, or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons. This Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors: Malcolm McAully Non-executive Chairman Date: 30 September 2024 Auditor’s Independence Declaration Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 16 Auditor’s Independence Declaration In accordance with section 307C of the Corporations Act 2001, we are pleased to provide the following declaration of independence to the Directors of Pure Foods Tasmania Limited. As the lead audit partner for the audit of the financial report of Pure Foods Tasmania Limited for the year ended 30 June 2024, we declare that, to the best of our 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. This declaration is in respect of Pure Foods Tasmania Limited and the entities it controlled during the period. Wise Lord & Ferguson Nick Carter Partner Wise Lord & Ferguson Date: 30 September 2024 Consolidated Statement of Profit or Loss and Other Comprehensive Income Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 17 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2024 Notes 2024 $ 2023 $ Revenue Revenue from continuing operations 6 7,442,902 8,748,338 Other income 6 51,816 979,190 Total Revenue 7,494,718 9,727,528 Expenses Cost of goods sold 7 7,346,394 7,701,421 Employment expenses 1,685,313 1,670,135 Occupancy, electricity, and telephone costs 238,066 187,896 Bad debts 798 16,983 Depreciation and amortisation 920,028 752,918 ASX listing fees and expenses 32,312 45,425 Finance costs 388,922 317,173 Impairment of assets 956,090 - Insurance 194,891 165,731 Legal and professional fees 191,986 245,804 Marketing expenses 55,301 85,916 Motor vehicle expenses 35,999 44,323 Repairs and maintenance 283,780 209,271 Other expenses 405,110 521,982 Total Expenses 12,734,990 11,964,978 Net Loss Before Income Tax (5,240,272) (2,237,450) Income tax benefit 8 1,358,877 410,117 Net Loss After Tax for the Year from Continuing Operations (3,881,395) (1,827,333) Discontinued Operations Loss from discontinued operations after tax (62,943) - Net Loss After Tax for the Year (3,944,338) (1,827,333) Other Comprehensive Income Other comprehensive loss net of tax - - Total Comprehensive Income (3,944,338) (1,827,333) Consolidated Statement of Profit or Loss and Other Comprehensive Income Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 18 Notes 2024 $ 2023 $ Net Profit for the Period Attributable to: Non-controlling interest - - Owners of Pure Foods Tasmania Limited (3,944,338) (1,827,333) (3,944,338) (1,827,333) Total Comprehensive Income for the Year is Attributable to: Non-controlling interest - - Owners of Pure Foods Tasmania Limited (3,944,338) (1,827,333) (3,944,338) (1,827,333) Earnings per Share From Continuing and Discontinued Operations: Basic loss per share (cents per share) 4 (0.033) (0.018) Diluted loss per share (cents per share) 4 (0.033) (0.018) From Continuing Operations: Basic loss per share (cents per share) 4 (0.033) (0.018) Diluted loss per share (cents per share) 4 (0.033) (0.018) The above statement should be read in conjunctions with the accompanying notes. Consolidated Statement of Financial Position Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 19 Consolidated Statement of Financial Position As at 30 June 2024 Notes 2024 $ 2023 $ Current Assets Cash and cash equivalents 18 1,078,661 3,468,766 Trade and other receivables 9 867,967 1,854,127 Inventories 10 1,132,025 1,535,255 Other assets 72,932 154,922 Total Current Assets 3,151,585 7,013,070 Non-Current Assets Property, plant and equipment 11 6,358,925 6,697,785 Right of use assets 12 357,227 486,251 Intangible assets 13 1,603,276 2,515,207 Deferred tax assets 8 4,215,010 3,019,811 Total Non-Current Assets 12,534,438 12,719,054 Total Assets 15,686,023 19,732,124 Current liabilities Trade and other payables 14 1,222,396 1,715,853 Lease liabilities 12 366,196 270,234 Provisions 15 172,015 219,817 Borrowings 16 2,937,644 2,913,779 Total Current Liabilities 4,698,251 5,119,683 Non-Current Liabilities Lease liabilities 12 7,920 229,199 Provisions 15 5,597 - Borrowings 16 1,449,151 1,019,779 Deferred tax liabilities 8 992,603 1,220,004 Total Non-Current Liabilities 2,455,271 2,468,982 Total Liabilities 7,153,522 7,588,665 Net Assets 8,532,501 12,143,459 Equity Contributed equity 17 19,191,163 18,857,783 Accumulated losses (10,658,662) (6,714,324) Total Equity 8,532,501 12,143,459 The above statement should be read in conjunctions with the accompanying notes. Consolidated Statement of Changes in Equity Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 20 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2024 Contributed Equity $ Accumulated Losses $ Total $ Balance at 1 July 2022 16,643,159 (4,886,991) 11,756,168 Loss for the year - (1,827,333) (1,827,333) Other comprehensive income - - - Total comprehensive income for the year - (1,827,333) (1,827,333) Issue of shares 5,926,721 - 5,926,721 Convertible notes redemption (3,450,000) - (3,450,000) Share issue costs (262,097) - (262,097) Balance at 30 June 2023 18,857,783 (6,714,324) 12,143,459 Balance at 1 July 2023 18,857,783 (6,714,324) 12,143,459 Loss for the year - (3,944,338) (3,944,338) Other comprehensive income - - - Total comprehensive income for the year - (3,944,338) (3,944,338) Issue of shares 471,904 - 471,904 Convertible notes redemption (140,000) - (140,000) Share issue costs 1,476 - 1,476 Balance at 30 June 2024 19,191,163 (10,658,662) 8,532,501 The above statement should be read in conjunctions with the accompanying notes. Consolidated Statement of Cash Flows Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 21 Consolidated Statement of Cash Flows For the Year Ended 30 June 2024 Notes 2024 $ 2023 $ Cash Flow from Operating Activities Receipts from customers 8,954,129 9,054,464 Payments to suppliers and employees (11,149,938) (11,356,122) Interest received 119,593 64,968 Income taxes paid - (42,742) Net Cash Flows Used in Operating Activities 18 (2,076,216) (2,279,432) Cash Flow from Investing Activities Payments for property, plant and equipment (760,695) (1,400,735) Net Cash Flows Used in Investing Activities (760,695) (1,400,735) Cash Flow from Financing Activities Proceeds from issue of shares 290,638 2,214,624 Net increase in borrowings 453,237 2,687,426 Principle elements for lease payments (297,069) (239,373) Net Cash Flows from Financing Activities 446,805 4,662,677 Net (decrease)/increase in cash held (2,390,105) 982,510 Cash and cash equivalents at the beginning of the year 3,468,766 2,486,256 Cash and Cash Equivalents at the End of the Year 18 1,078,661 3,468,766 The above statement should be read in conjunctions with the accompanying notes. Notes to and Forming Part of the Financial Statements | 1. Summary of Material Accounting Policies Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 22 Notes to and Forming Part of the Financial Statements For the Year Ended 30 June 2024 1. Summary of Material Accounting Policies Information (a) General Information The consolidated financial statements and notes represent those of Pure Foods Tasmania Limited and its Controlled Entities. Pure Foods Tasmania is a company incorporated in Australia, and whose shares are publicly traded on the Australian Securities Exchange (ASX). (b) Going Concern The financial statements of the Group have been prepared on the assumption that the Group will continue as a going concern. For the financial year ended 30 June 2024, the Group reported a net loss after tax of $3.9m (2023: $1.9m) and experienced net cash outflows from operating activities amounting to $2.2m (2023: $2.3m). As of 30 June 2024, the Group held cash and cash equivalents totalling $1.1m (2023: $3.5m) and had external borrowings of $4.4m (2023: $3.9m). In response to these financial challenges, the Group’s Directors have implemented several strategic initiatives to enhance the Group’s financial stability and operational performance. These initiatives began at the end of calendar 2023 with the sale of Lauds Plant Based Cheese. The ability of the Group to continue as a going concern is dependent on the unwavering commitment to these initiatives. These include a disciplined approach to managing input cost increases, implementing a range of cost reductions while also introducing other profitability enhancement measures and/or obtaining additional funding from alternative sources should it be required. Key initiatives are summarised as follows: • The Group has undertaken a comprehensive restructuring of its senior management and leadership team, aimed at improving operational efficiency, cost reduction and management focus. • A thorough end-to-end review of the Group’s operations is being conducted to identify and implement cost-saving measures across the production, delivery and customer supply chain process. This review has already led to the identification of operational efficiencies, cost savings and process improvements and which started late in calendar 2023. • On-going assessment of customer and product profitability with low or negative margin products exited. • Focus on increasing gross margins through negotiated, targeted price increases where possible with customers and continued identification of cost savings in raw material inputs, distribution channels and logistics. • Investigation into the ability of infrastructure to deliver increased volumes to provide greater scale in the covering of fixed input costs. • Continue to pursue strategic opportunities by way of acquisition to provide greater level of economies of scale. Given the risk associated with the timing and quantum of profitability improvement initiatives, there is a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern, and therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors believe that these strategic actions will not only stabilise the Group’s financial position but also position it for future revenue growth and improved profitability. Consequently, the Directors are confident that the Group will be able to continue as a going concern for the foreseeable future. Accordingly, the directors have prepared the consolidated annual report on a going concern basis. Notes to and Forming Part of the Financial Statements | 1. Summary of Material Accounting Policies Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 23 (c) Basis of Preparation These financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations and the Corporations Act 2001, as appropriate for-profit oriented entities. The financial statements cover the Group and its controlled entities as a group for the financial year ended 30 June 2024. The Company is a company limited by shares, incorporated, and domiciled in Australia. Separate financial statements for the Company as an individual entity are no longer presented as a consequence of a change to the Corporations Act 2001, however limited financial information for the Company as an individual entity is included in Note 21. The following is a summary of material accounting policies adopted by the Group in the preparation and presentation of the financial statements not elsewhere disclosed. The accounting policies have been consistently applied, unless otherwise stated. (d) Compliance with IFRS The financial statements comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (e) Historical Cost Convention The financial statements have been prepared under the historical cost convention. All amounts are presented in Australian dollars unless otherwise noted. (f) Principles of Consolidation The consolidated financial statements are those of the Group, comprising the parent entity and its controlled entities as defined in Accounting Standard AASB 10 Consolidated Financial Statements. Control is achieved when the Group: • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. (f) Principles of Consolidation (Continued) The Group reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Details of the controlled entities are contained in Note 22. Financial statements for controlled entities are prepared for the same reporting period as the parent entity. Controlled entities are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Non-controlling interests in the equity and results of the entities that are controlled are shown separately in the consolidated financial statements. The preparation of the financial statements of the Group requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies. Areas within the financial report which contain a higher degree of judgement or complexity, and items which are more likely to be materially adjusted due to estimates and assumptions turning out to be incorrect. Detailed information about each of these estimates and judgements are included in the notes to the financial statements together with the basis of calculation. The area involving significant estimates or judgements is the estimated value in use calculations for the assessment of the recoverable amount of goodwill. Notes to and Forming Part of the Financial Statements | 2. Segment Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 24 Estimates and judgements are continually evaluated. They are based on historical experience, information, and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. (g) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (h) New Standards and Interpretations Not Yet Adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2024 reporting periods and have not yet been adopted by the Group. There are no standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions. 2. Segment Information The operating segments are based upon the units identified in the operating reports reviewed by the Board and executive management, and are used to make strategic decisions, in conjunction with the quantitative thresholds established by AASB 8 Operating Segments. There are two identifiable and reportable segments: • Food – which incorporates all brands of the Group; and • Corporate and Other - which comprises corporate costs that are not directly attributable to the operational business units. Management measures the performance of the segments identified at the ‘net profit before tax’ level. Food $ Corporate and Other $ Total $ 30 June 2024 Total sales 7,442,902 - 7,442,902 Other income 43,934 7,882 51,816 Loss (5,205,793) (34,479) (5,240,272) Loss before income tax (5,240,272) Income tax benefit 1,358,877 Loss after income tax from continuing operations (3,881,395) Loss from discontinued operations after tax (62,943) Loss after income tax (3,944,338) Assets Assets 12,105,858 3,580,165 15,686,023 Total Assets 12,105,858 3,580,165 15,686,023 Liabilities Liabilities 5,946,304 1,207,218 7,153,522 Total Liabilities 5,946,304 1,207,218 7,153,522 Notes to and Forming Part of the Financial Statements | 2. Segment Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 25 Food $ Corporate and Other $ Total $ 30 June 2023 Total sales 8,748,338 - 8,748,338 Other income 408,833 570,357 979,190 Loss (1,673,204) (564,246) (2,237,450) Loss before income tax (2,237,450) Income tax benefit 410,117 Loss after income tax from continuing operations (1,827,333) Loss from discontinued operations after tax - Loss after income tax (1,827,333) Assets Assets 15,797,411 3,934,713 19,732,124 Total Assets 15,797,411 3,934,713 19,732,124 Liabilities Liabilities 6,282,060 1,306,605 7,588,665 Total Liabilities 6,282,060 1,306,605 7,588,665 Notes to and Forming Part of the Financial Statements | 3. Discontinued Operations Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 26 3. Discontinued Operations During the 2024 financial year, the Group announced its decision to dispose of the Lauds Plant-based Foods business, thereby discontinuing its operations in this business segment. This announcement was made subsequent to approval by the Group’s management and shareholders. The division was sold on 21 November 2023. Financial information relating to the discontinued operation to the date of sale is set out below. The financial performance of the discontinued operations to the date of sale is included in the loss from discontinued operations per the Consolidated Statement of Comprehensive Income, is as follows: 2024 $ 2023 $ Revenue 157,498 - Expenses 241,422 - Loss before income tax (83,924) - Income tax benefit 20,981 - Loss attributable to owners of Pure Foods Tasmania Limited (62,943) - The Group has not presented comparative information for the discontinued operations due to the unavailability of historical information. Notes to and Forming Part of the Financial Statements | 4. Earnings Per Share Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 27 4. Earnings Per Share 2024 $ 2023 $ From Continuing and Discontinued Operations: Basic earnings per share (0.033) (0.018) Diluted earnings per share (0.033) (0.018) From Continuing Operations: Basic earnings per share (0.033) (0.018) Diluted earnings per share (0.033) (0.018) Basic Weighted average number of ordinary shares outstanding during the period used in the calculation of basic earnings per share. 111,355,650 101,462,214 Diluted Weighted average number of ordinary shares and convertible redeemable preference shares outstanding and performance rights during the period used in the calculation of basic earnings per share. 111,355,650 102,672,281 5. Dividends to Shareholders No dividends have been paid or declared during the year ended 30 June 2024 (30 June 2023: nil). Notes to and Forming Part of the Financial Statements | 6. Revenue Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 28 6. Revenue 2024 $ 2023 $ Revenue from Continuing Operations Sales 7,442,902 8,748,338 Total Revenue from Continuing Operations 7,442,902 8,748,338 Other Income Interest received 119,593 133,037 Sundry income (67,777) 846,153 Total Other Income 51,816 979,190 Total Revenue 7,494,718 9,727,528 Recognition and Measurement The sale of goods is measured at the fair value of the consideration received net of any trade discounts and volume rebates allowed. The sale of goods represents a single performance obligation and accordingly, revenue is recognised in respect of these sales of goods at the point in time when control over the corresponding goods is transferred to the customer (i.e., at a point in time for sale of goods when the goods are delivered to the customer or transferred to the freight forwarder). Delivery occurs when the products have been shipped to the customer, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products, the acceptance provisions have lapsed, or the Group has objective evidence that all the criteria for acceptance have been satisfied. All revenue is stated net of the amount of goods and services tax (GST) where applicable. Interest Revenue Interest revenue is recognised on a proportional basis using the effective interest rate method. Notes to and Forming Part of the Financial Statements | 7. Expenses Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 29 7. Expenses 2024 $ 2023 $ Profit before income tax expense includes the following expenses: Cost of goods sold 7,346,394 7,701,421 Salaries and wages 1,548,065 1,544,554 Total Expenses 8,894,459 9,245,975 8. Income Tax Expense 2024 $ 2023 $ Income tax recognised in profit or loss: Tax benefit comprises: Current tax benefit - - Tax benefit from discontinued operations (20,981) - Deferred tax movements (1,358,877) (410,117) (1,379,857) (410,117) Deferred income tax benefit included in income tax expense comprises: (Increase)/decrease in deferred tax assets (1,152,456) (440,918) Increase/(decrease) in deferred tax liabilities (227,401) 30,801 (1,379,857) (410,117) Reconciliation of income tax expenses to prima facie tax on accounting profit: Loss before income tax expense (5,240,272) (2,237,450) Tax at 25.0% tax rate (2023: 25.0%) (1,310,069) (559,363) Tax effect of amounts which are not deductable 157 81,162 Under/overs in respect of prior year (6,222) 68,084 Listing costs recognised in equity (42,743) - (1,358,877) (410,117) Notes to and Forming Part of the Financial Statements | 8. Income Tax Expense Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 30 Reconciliation of Deferred Tax Assets Opening Balance $ Charged to Income $ Charged to Equity $ Closing Balance $ Deferred Tax Gross Deferred Tax Assets Provisions 54,955 (10,551) - 44,404 Trade and other payables 57,328 (47,764) - 9,564 Right-of-use assets 3,296 927 - 4,223 Share issue expenses 16,131 10,259 - 26,390 Tax losses 2,888,101 1,130,036 42,743 4,060,880 Capital losses - 69,549 - 69,549 3,019,811 1,152,456 42,743 4,215,010 Reconciliation of Deferred Tax Liabilities Opening Balance $ Charged to Income $ Charged to Equity $ Closing Balance $ Deferred Tax Gross Deferred Tax Liabilities Sundry debtors - 6,250 - 6,250 Prepayments 20,239 (9,639) - 10,600 Fixed assets 1,079,956 (121,098) - 958,858 Trading stock 22,241 (15,360) - 6,881 Goodwill and trademarks 86,834 (80,998) - 5,836 Business acquisition costs 10,655 (6,556) - 4,099 Product development 79 - - 79 1,220,004 (227,401) - 992,603 The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income for the current period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss or arising from a business combination. Notes to and Forming Part of the Financial Statements | 8. Income Tax Expense Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 31 A deferred tax liability shall be recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: (a) the initial recognition of goodwill; or (b) the initial recognition of an asset or liability in a transaction which: i. is not a business combination; and ii. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised, or the liability is settled, and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. When an investment property that is depreciable is held by the entity in a business model whose objective is to consume substantially all of the economic benefits embodied in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised, unless the deferred tax asset relating to temporary differences arises from the initial recognition of an asset or liability in a transaction that: • is not a business combination; and • at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled, and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists, and it is intended that net settlement or simultaneous realisation, and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation, and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax Consolidation The Company and its wholly owned Australian resident entities have formed a tax-consolidated Group and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated Group is PFT Limited. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated Group are recognised in the separate financial statements of the members of the tax-consolidated Group using the “separate taxpayer within group” approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated Group are recognised by the Company (as head entity in the tax-consolidated Group). Due to the existence of a tax funding arrangement between the entities in the tax- consolidated Group, amounts are recognised as payable to or receivable by the Company and each member of the Group in relation to the tax contribution amounts paid or payable between the Parent Entity and the other members of the tax-consolidated Group in accordance with the arrangement. Notes to and Forming Part of the Financial Statements | 9. Trade and Other Receivables Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 32 9. Trade and Other Receivables 2024 $ 2023 $ Trade receivables 756,545 1,338,074 Less loss allowance - - Other receivables 111,422 516,053 Total Trade and Other Receivables 867,967 1,854,127 Loss Allowance Movements in loss allowance are as follows: Carrying value at beginning of the year - - Increase/(decrease) in loss allowance - 16,983 Receivables written off as unrecoverable - (16,983) Unused amounts reversed - - Total Loss Allowance - - Trade receivables past due but not impaired Under one month 409,109 1,091,894 One to three months 571 246,180 Over three months 346,865 - Total trade receivables past due but not impaired 746,545 1,338,074 Recognition and Measurement The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The “receivables written off as unrecoverable” are all due to customers declaring bankruptcy, or term receivables that have now become unrecoverable. Current 30 Days 60 Days 90+ Days Total 30 June 2024 Expected loss rate (%) 0.0 0.0 0.0 0.0 0.0 Trade receivables gross carrying amount ($) 409,109 571 - 346,865 756,545 Loss allowance ($) - - - - - 30 June 2023 Expected loss rate (%) 0.0 0.0 0.0% 0.0 0.0 Trade receivables gross carrying amount ($) 1,091,894 171,639 74,541 - 1,338,074 Loss allowance ($) - - - - - Notes to and Forming Part of the Financial Statements | 10. Inventories Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 33 Fair Value of Trade and Other Receivables Due to the short-term nature of the current receivables, their carrying amount is approximate to fair value. Credit Risk The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties other than those receivables specifically provided for and mentioned within the loss allowance. The class of assets described as “trade and other receivables” is considered to be the main source of credit risk related to the Group. On a geographical basis, the Group has significant credit risk exposures in Australia. The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit loss. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtor, general economic conditions of the industry in which the debtor operates and an assessment of both the current and the forecast direction of conditions at the reporting date. There has been no change in the estimation techniques used or significant assumptions made during the current reporting period. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery; for example, when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. None of the trade receivables that have been written off are subject to enforcement activities. 10. Inventories 2024 $ 2023 $ Stock on hand 1,132,025 1,535,255 Total Inventories 1,132,025 1,535,255 Recognition and Measurement Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour, and an appropriate proportion of variable and fixed overheads. Notes to and Forming Part of the Financial Statements | 11. Property, Plant and Equipment Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 34 11. Property, Plant and Equipment 2024 $ 2023 $ Buildings Building at cost 1,855,905 1,827,237 Less: accumulated depreciation (206,601) (160,985) Total Buildings 1,649,304 1,666,252 Plant and Equipment Plant and equipment at cost 6,683,137 6,592,749 Less: accumulated depreciation (1,973,516) (1,561,216) Total Plant and Equipment 4,709,621 5,031,533 Total Property, Plant and Equipment 6,358,925 6,697,785 Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the financial year set out below: Carrying Value Building at Cost $ Plant and Equipment $ Total $ As at 1 July 2022 1,694,258 4,132,038 5,826,296 Additions 17,789 1,382,946 1,400,735 Disposals - - - Depreciation expense (45,795) (483,451) (529,246) Balance at 30 June 2023 1,666,252 5,031,533 6,697,785 As at 1 July 2023 1,666,252 5,031,533 6,697,785 Additions 28,668 624,016 652,684 Disposals - (372,292) (372,292) Depreciation expense (45,616) (573,636) (619,252) Balance at 30 June 2024 1,649,304 4,709,621 6,358,925 Notes to and Forming Part of the Financial Statements | 11. Property, Plant and Equipment Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 35 Recognition and Measurement Each class of plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised in profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the Consolidated Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Assets Depreciation Rate (%) Buildings 2.0 Plant and Equipment 5.0 – 33.0 The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. Gains shall not be classified as revenue. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. Notes to and Forming Part of the Financial Statements | 12. Right-of-use Assets and Lease Liabilities Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 36 12. Right-of-use Assets and Lease Liabilities 2024 $ 2023 $ Right-of-use Assets Buildings 1,320,140 1,148,388 Less: accumulated amortisation (962,913) (662,137) Total Right-of-use Assets 357,227 486,251 Set out below are the carrying amounts of the Group’s right-of-use assets and the movements during the period: Carrying Value Buildings $ Total $ As at 1 July 2023 486,251 486,251 Additions - - Lease modifications 171,752 171,752 Amortisation expense (300,776) (300,776) Balance as at 30 June 2024 357,227 357,227 Lease Liabilities Current 366,196 366,196 Non-current 7,920 7,920 Total Lease Liabilities 374,116 374,116 At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (lease with remaining lease term of 12 months or less) and leases of low value assets are recognised as an operating expense on a straight- line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • fixed lease payments less any lease incentives; • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options if the lessee is reasonably certain to exercise the options; • lease payments under extension options if lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability as mentioned above, any lease payments made at or before the commencement date as well as any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates exercising a purchase option, the specific asset is depreciated over the useful life of the underlying asset. Notes to and Forming Part of the Financial Statements | 13. Intangible Assets Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 37 13. Intangible Assets 2024 $ 2023 $ Intangibles 1,603,276 2,515,207 Total Intangible Assets 1,603,276 2,515,207 Carrying Value Intangibles $ Total $ As at 1 July 2023 2,515,207 2,515,207 Additions 44,159 44,159 Disposals (956,090) (956,090) Balance as at 30 June 2024 1,603,276 1,603,276 Goodwill relates to the acquisition of Tasmanian Pate, Daly Potato Co, The Cashew Creamery and Lauds Plant-Based Foods. Recognition and Measurement Goodwill Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of: • the consideration transferred at fair value; • any non-controlling interest (determined under either the fair value or proportionate interest method); and • the acquisition date fair value of any previously held equity interest over the acquisition date fair value of any identifiable assets acquired and liabilities assumed. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Group. When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between: i. the aggregate of the fair value of the consideration received and the fair value of any retained interest; and ii. the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e., reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable Accounting Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139: Financial Instruments: Recognition and Measurement, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units (CGU) or groups of cash-generating units, representing the lowest level at which goodwill is monitored and not larger Notes to and Forming Part of the Financial Statements | 13. Intangible Assets Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 38 than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. Impairment losses for goodwill are not subsequently reversed. During the financial year, the Board and management reviewed the internal reporting and the CGU’s of the Group. Given the expansion in brands and products, the management of CGU’s by individual brand was not aligned with the reporting of the Group. As such, a single CGU has created title ‘Pure Foods Tasmania Products’ which encompasses all brands of the business as they are intrinsically linked under the PFT brand. This aligns with the reporting to the Board at Group level. Recoverable Amount of Goodwill Impairment testing has been undertaken at 30 June 2024 for the CGU for goodwill or where there is an indication of impairment. The Group has 1 CGU for which impairment testing has been completed for goodwill – Pure Foods Tasmania Products. The recoverable amount for the CGU has been determined based on a value-in-use calculation which uses cash flow projections based on financial budgets and forecasts approved by management. Key assumptions used in the value-is-use calculations for the CGU is: Sales Growth Rate (5 year average) % Production Costs Growth Rate (5 year average) % Indirect Costs Growth Rate (5 year average) % Pre-Tax Discount Rate % Pure Foods Tasmania Products 12 8 6 15 Management has based the value-in-use calculations on budgets. These budgets use historical weighted average growth rates to project revenue. Costs are calculated considering historical gross margins as well as estimated weighted average inflation rates over the period, which are consistent with inflation rates applicable to the locations in which the CGU operate. Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment. Changes to key inputs within the value in use calculations: • Sales growth rate – Increased as at 30 June 2024 to reflect market growth rates, the strategic initiatives adopted by the Board and product price increases. • Production costs – Forecast to increase over the forecast period which is reflective gross margin improvement through a focus on value chain profitability and management of input costs. • Pre-tax discount rate – The discount rate represents the current market assessment of the risks relating to the relevant CGU. In performing the value in use calculations for the CGU, the Group has applied a pre-tax discount rate of 15%. Notes to and Forming Part of the Financial Statements | 13. Intangible Assets Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 39 Review Outcome In completing the impairment review based on the aforementioned, the – Pure Foods Tasmania Products CGU recorded an impairment of $0.912m, which has been recorded in the Income Statement. Based on the above the impairment charge reduced the carrying value of the intangible assets to $1.6m. Impairment testing will continue to be performed annually in respect of the remaining intangible assets. Other Intangible Assets Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model is applied to the class of intangible assets. The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on assets with finite lives, this expense is taken to the statement of comprehensive income. Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of indefinite lived intangibles annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Research and Development Costs Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. An entity shall assess whether the useful life of an intangible asset is finite or indefinite and, if finite, the length of, or number of production or similar units constituting, that useful life. An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on the analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable. Notes to and Forming Part of the Financial Statements | 14. Trade and Other Payable Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 40 14. Trade and Other Payable 2024 $ 2023 $ Trade and other payables 1,222,396 1,715,853 Total Trade and Other Payables 1,222,396 1,715,853 Recognition and Measurement Trade and other payables represent liabilities for goods and services received by the Group which remain unpaid at the end of the reporting period. The balance is recognised as a current liability with amounts paid in accordance with supplier trading terms. Due to the short-term nature of trade and other payables, the carrying value is reflective of fair value. 15. Provisions 2024 $ 2023 $ Current Employee benefits 172,015 219,817 Total Current Provisions 172,015 219,817 Non-current Employee benefits 5,597 - Total Non-Current Provisions 5,597 - Total Provisions 177,612 219,817 Recognition and Measurement Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries, and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any remeasurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. Notes to and Forming Part of the Financial Statements | 16. Borrowings Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 41 16. Borrowings 2024 $ 2023 $ Current Bank loan facility and equipment finance 2,937,644 2,913,779 Total Current Borrowings 2,937,644 2,913,779 Non-Current Bank loan facility and equipment finance 1,449,151 1,019,779 Total Non-Current Borrowings 1,449,151 1,019,779 Total Borrowings 4,386,795 3,933,558 Recognition and Measurement 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 amount is recognised in the consolidated income statement over the period of the borrowings using the effective interest method. Borrowings are removed from the balance sheet of the Group when the terms and obligations specified in the contract are discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party, and the consideration paid is recognised in the consolidated income statement as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Borrowing costs, including transaction fees, are recognised in the consolidated income statement in the period in which they are incurred. Financial Covenants The Group has in place an overdraft facility with the CBA as at 30 June 2024 for $1,500,000. There were no financial covenants in place as at 30 June 2024 for the overdraft facility. Secured Liabilities and Assets Pledged as Security The Group has entered into finance facilities with the Commonwealth Bank of Australia (CBA) and National Australia Bank these include: • $1.5m market rate loan secured against a $1.5m deposit facility with CBA with both maturing in November 2024; • $0.5m short-term secured loan with Amal Security Services and maturing in September 2024; • $1.4m asset finance liabilities with CBA which are secured over specific assets ranging with maturity dates from December 2024 to November 2028; and • $0.002m asset finance facility with NAB and maturing in September 2024. The Group also entered into a $1.0m capital investment loan from sophisticated investors that is unsecured and maturing in December 2026. Notes to and Forming Part of the Financial Statements | 17. Issued Capital Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 42 17. Issued Capital 2024 2023 No. Shares $ No. Shares $ Fully paid ordinary shares (post-consolidation) 122,092,288 19,191,163 109,739,914 18,857,783 Movement in Ordinary Capital Date Details Number of Shares (No.) $ 1 July 2023 Balance at beginning of period 109,739,914 18,857,783 Shares issued 12,352,374 471,904 Notes redeemed (net of costs) - (140,000) Issue costs - 1,476 Balance at end of period 122,092,288 19,191,163 In May 2024, the Group raised a total of $0.5m (including costs) from existing shareholders. This was facilitated by a rights issue. Terms and Conditions of Issued Capital Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of shares held. Share Options and Performance Rights Share options and performance rights do not entitle the holder to participate in dividends and the proceeds on winding up the Group. The holder is not entitled to vote at General Meetings. 2024 (No.) 2023 (No.) Movement in Options Balance at beginning of the year - 2,800,000 Options granted to facilitate raising of debt 10,166,670 Options redeemed/lapsed - (2,800,000) Balance at End of the Year 10,166,670 - Recognition and Measurement Ordinary shares are classified as equity, with ordinary share capital being recognised at fair value of consideration received by the Group. Transaction costs arising on the issue of ordinary shares are recognised equity as a reduction of the share proceeds received. Notes to and Forming Part of the Financial Statements | 18. Cash Flow Reconciliation Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 43 18. Cash Flow Reconciliation 2024 $ 2023 $ Cash and Cash Equivalents Cash and cash equivalents 1,078,661 3,468,766 Total Cash and Cash Equivalents 1,078,661 3,468,766 Recognition and Measurement Cash and cash equivalents include cash on hand and at banks and short-term deposits with an original maturity of three months or less held at call with financial institutions. Reconciliation of Cash and Cash Equivalents to the Statement of Cash Flows For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks and short-term deposits at call, net of outstanding bank overdrafts. Cash and cash equivalents as at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: 2024 $ 2023 $ Loss after income tax (3,944,338) (1,827,333) Adjustments for Non-Cash Items: Depreciation and amortisation 920,028 752,918 Bad debts 798 16,983 Intangible asset write-offs 956,090 28,971 Share-based payments 42,742 - Loss on disposal of assets 436,144 - Changes in Assets/Liabilities: (Increase)/decrease in trade and other receivables 1,067,352 (535,439) (Increase)/decrease in inventories 403,230 (209,948) (Increase)/decrease in deferred taxes (1,422,600) (452,859) Increase/(decrease) in trade and other payables (493,457) (21,717) Increase/(decrease) in provisions (42,205) (31,008) Net Cash Used in Operating Activities (2,076,216) (2,279,432) Notes to and Forming Part of the Financial Statements | 19. Financial Risk Management Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 44 19. Financial Risk Management The Group’s principal financial instruments comprise receivables, payables, cash, and short-term deposits. The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security. The main risks arising from the Group’s financial instruments are price risk, credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risk to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for commodity prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The Board reviews and agrees policies for managing each of these risks as summarised in the following. Primary responsibility for identification and control of financial risks rests with the Managing Director under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below, including, interest rate risk, credit allowances, and future cash flow forecast projections. The carrying amounts of the Group’s financial assets and liabilities at balance date were equal to their fair value. Recognition and Measurement Classification The Group classifies its financial instruments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its financial instruments at the time of initial recognition. Financial Assets at Fair Value through Profit or Loss Upon initial recognition a financial asset or financial liability is designated as at fair value through profit or loss when: (a) An entire contract containing one or more embedded derivatives is designated as a financial asset or financial liability at fair value through profit and loss. (b) Doing so results in more relevant information, because either: i. It eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising gains or losses on them on different bases. ii. A group of financial assets, financial liabilities or both is managed, and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the Group is provided internally on that basis to key management personnel. Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured are not designated as at fair value through profit or loss. Present investment strategy is to keep assets in a highly liquid state and almost all of the investment assets are held in cash. A gain or loss arising from a change in the fair value of a financial asset or financial liability classified as at fair value through profit or loss is recognised in the consolidated statement of profit or loss and other comprehensive income. Non-listed investments, for which fair value cannot be reliably measured, are carried at cost, and tested for impairment. Notes to and Forming Part of the Financial Statements | 19. Financial Risk Management Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 45 Loans and Receivables Loan and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate method. Financial Liabilities Financial liabilities include trade payables, other creditors, and loans from third parties including inter- company balances and loans from / or other amounts due to Director-related entities. Non-derivative financial liabilities are recognised at amortised cost, comprising original debt, less principal payments, and amortisation. Risk Exposures and Responses: Interest Rate Risk The Group’s exposure to market interest rates is related primarily to the Group’s cash deposits. At balance sheet date, the Group had the following mix of financial assets exposed to Australian and variable interest rate risks that are not designated as cash flow hedges: 2024 $ 2023 $ Financial assets 867,967 1,854,127 Cash and cash equivalents 1,078,661 3,468,766 Net Exposure 1,946,628 5,322,893 The Group regularly analyses its interest rate opportunity and exposure. Within this analysis consideration is given to existing positions and alternative arrangements for its deposits. The following sensitivity analysis is based on the interest rate opportunity/risk relating to cash deposits at balance date. At 30 June 2024, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post-tax profit/(loss) and equity would have been affected as follows: 2024 $ 2023 $ Judgements of reasonably possible movements: + 0.5% (50 basis points) 9,733 26,614 - 0.5% (50 basis points) (9,733) (26,614) Notes to and Forming Part of the Financial Statements | 19. Financial Risk Management Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 46 Liquidity Risk Liquidity Risk is the risk that the Group, although balance sheet solvent, cannot meet or generate sufficient cash resources to meet its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has 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 and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. All current liabilities fall due within normal trade terms, which are generally 30 days. Credit Risk Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note. The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. The risks are regularly monitored. The Group applies the AASB 9 simplified approach to measuring expected credit losses as disclosed in Note 9. Receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Fair Value The method for estimating fair value is outlined in the relevant notes to the financial statements. All financial assets held at fair value are valued based on the principles outlined in AASB 7 in relation to Level 1 of the hierarchy of fair values, being quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Notes to and Forming Part of the Financial Statements | 20. Capital Management Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 47 20. Capital Management When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the Group. Management is constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, the Board may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 2024 $ 2023 $ Debt Borrowings 4,386,795 3,933,558 Trade and other payables 1,222,396 1,715,853 Total Debt 5,609,191 5,649,411 Less cash and cash equivalents 1,078,661 3,468,766 Net (Cash)/Debt 4,530,530 2,180,645 Total Equity 8,532,501 12,143,459 Total Capital 19,191,163 18,857,783 Gearing ratio (total debt / total equity) 65.7% 46.5% 21. Parent Entity Information 2024 $ 2023 $ Financial Position Assets Current assets - 1,029,221 Non-current assets 18,790,064 17,226,626 Total Assets 18,790,064 18,255,847 Liabilities Current liabilities 1,097 3,693 Non-current liabilities 1,074,532 1,220,004 Total Liabilities 1,075,629 1,223,697 Net Assets 17,714,435 17,032,150 Contributed equity 17,714,435 17,032,150 Financial Performance Total revenue 7,882 570,357 Profit/(Loss) for the Period (518,386) 165,573 Notes to and Forming Part of the Financial Statements | 22. Subsidiaries Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 48 22. Subsidiaries Equity Holding Entity Country of Incorporation 2024 % 2023 % PFT Holdings Pty Ltd Australia 100 100 PFT No 1 Pty Ltd Australia 100 100 PFT No 2 Pty Ltd Australia 100 100 PFT No 3 Pty Ltd Australia 100 100 The Cashew Creamery Pty Ltd Australia 100 100 New Pastures Plant-Based Foods Pty Ltd Australia 100 100 23. Contingent Liabilities and Assets There are no matters which the Group consider would result in a contingent liability or asset as at the date of this report. Notes to and Forming Part of the Financial Statements | 24. Commitments for Expenditure Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 49 24. Commitments for Expenditure 2024 $ 2023 $ Capital Commitments – Capital Expenditure Projects Payable: Not longer than one year - - Longer than one year but no longer than five years - - Longer than five years - - Total Capital Commitments – Capital Expenditure Projects - - Other Commitments – Operating Expenditure Operating expenditure contracted but not included in the financial statements: Payable: Not longer than one year - - Longer than one year but no longer than five years - - Longer than five years - - Total Other Commitments – Operating Expenditure - - 25. Events Occurring After Balance Date The Board is not aware of any matter or circumstance not otherwise dealt within these financial statements that has significantly or may significantly affect the operation of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years. Notes to and Forming Part of the Financial Statements | 26. Related Party Transactions Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 50 26. Related Party Transactions 2024 $ 2023 $ Key Management Personnel Compensation The aggregate compensation of the key management personnel of the Group is set out below: Short-term benefits 503,332 491,759 Post-employment benefits 55,000 51,030 Total Key Management Personnel Compensation 558,332 542,789 Transactions with Related Parties The Group acquired the following goods and services as follows: Ken Fleming for consulting services 25,972 26,119 Total Transactions with Related Parties 25,972 26,119 27. Auditor’s Remuneration 2024 $ 2023 $ Auditors of the parent entity 44,500 42,000 Other assurance services - - Total Auditor’s Remuneration 44,500 42,000 Consolidated Entity Disclosure Statement Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 51 Consolidated Entity Disclosure Statement For the Year Ended 30 June 2024 Name of entity Type of entity Trustee, partner or participant in joint venture % of share capital held Country of incorporation Australian or foreign resident (for tax purposes Pure Foods Tasmania Limited Body Corporate N/A N/A Australia Australia Pure Foods Tasmania Holdings Pty Ltd Body Corporate N/A 100 Australia Australia Pure Foods Tasmania No1 Pty Ltd <”Tasmanian Pate”> Body Corporate N/A 100 Australia Australia Pure Foods Tasmania No2 Pty Ltd <”The Woodbridge Smoke House”> Body Corporate N/A 100 Australia Australia Pure Foods Tasmanian No3 Pty Ltd <”Daly Potato Company”> Body Corporate N/A 100 Australia Australia New Pastures Plant Based Foods Pty Ltd Body Corporate N/A 100 Australia Australia The Cashew Creamery Pty Ltd Body Corporate N/A 100 Australia Australia In accordance with a resolution of the Directors of Pure Foods Tasmania Limited, the Directors of the Group declare that: 1. The financial statements and notes, as set out on pages 15 to 56 are in accordance with the Corporations Act 2001 and: a. Comply with Australian Accounting Standards applicable to the Consolidated Group, which, as stated in the accounting policies to the financial statements, constitutes compliance with International Financial Reporting Standards; and b. Give a true and fair view of the financial position as at 30 June 2024 and of the performance for the year ended on that date of the Consolidated Group; 2. In the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; 3. The Consolidated Entity Disclosure Statement, required by section 295(3A) of the Corporations Act 2001, is true and correct; and 4. The Directors have been given the declaration required by section 295A of the Corporations Act 2001 from the Chief Executive Officer for the financial year ended 30 June 2024. Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. Malcolm McAully Non-executive Chairman Date: 30 September 2024 Independent Auditor’s Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 52 Independent Auditor’s Report to the Members of Pure Foods Tasmania Limited Qualified Opinion We have audited the financial report of Pure Foods Tasmania Limited (the Company and its controlled entities (the Group)), which comprises the Consolidated Statement of Financial Position as at 30 June 2024, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of material accounting policies, the Consolidated Entity Disclosure Statement, and the Directors’ Declaration. In our opinion, except for the material uncertainty regarding going concern, the Basis for Qualified Opinion section of our report, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the consolidated financial position of the Group as at 30 June 2024 and of its consolidated financial performance for the year then ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Qualified Opinion We draw attention to Note 1 in the financial report, which indicates that the Group have incurred a net loss of $3.9m and a net cash outflow from operations of $2.2m during the year ended 30 June 2024, and, as of that date, the Group’s current liabilities exceeded its current assets by $1.5m. The Group has not been able to provide appropriate corroborating documents to support that it has secured sufficient replacement refinancing for the next 12 months to support the going concern assumption. These conditions, along with other matters set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the Directors of the Group, would be in the same terms if given to the Directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Independent Auditor’s Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 53 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of the most significance in our audit of the financial report for the year ended 30 June 2024. These matters were addressed in the context of our audit of the financial report as a whole, and forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Valuation of goodwill – refer Note 12 in the Financial Report The Group holds intangible assets totalling $1.6m as at 30 June 2024, of which $1.28m relates to goodwill. Under Australian Accounting Standards, the Group is required to assess goodwill for impairment at least annually. The Group performed an impairment assessment for the Pure Foods Tasmania Products cash generating unit (CGU), calculating the value in use of the net assets in the CGU. The valuation model used by the Group to perform the impairment assessment is based on budget forecasts. The Group identified an impairment for the CGU of $0.6m for goodwill. We assessed whether the Group’s determination of CGU was consistent with our understanding of the nature of the Group’s operations and internal Group reporting. We assessed management’s conclusions around allocating Pure Foods Tasmania Products as a CGU. We tested the mathematical accuracy and integrity of the calculation in the model. To evaluate the model, we performed the following procedures, amongst others: • Compared model inputs to the 2023 financial year budget; • Assessed historical performance of the CGU; and • Assessed forecast growth assumptions. We assessed the discount rate used in the impairment assessment by comparing to comparable companies. We performed sensitivity analysis which highlighted that the CGU’s are sensitivity to changes in key assumptions. We recalculated the change in growth rates and discount rates which would result in an impairment and also evaluated the adequacy of the disclosures in Note 12 in light of the requirements of Australian Accounting Standards. Other Information The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2024 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The Directors of the Group are responsible for the preparation of: i. the financial report (other than the Consolidated Entity Disclosure Statement) that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; and ii. the Consolidated Entity Disclosure Statement that is true and correct in accordance with the Corporations Act 2001; and Independent Auditor’s Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 54 for such internal control as the Directors determine is necessary to enable the preparation of: i. the financial report (other than the Consolidated Entity Disclosure Statement) that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and ii. the Consolidated Entity Disclosure Statement that is true and correct and is free of misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure, and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision, and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Independent Auditor’s Report Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 55 Report on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 17 of the Directors’ Report for the year ended 30 June 2024. In our opinion, the Remuneration Report of Pure Foods Tasmania Limited for the year ended 30 June 2024 complies with s300A of the Corporations Act 2001. Responsibilities The Directors of the Group are responsible for the preparation and presentation of the Remuneration Report in accordance with s 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. Wise Lord & Ferguson Nick Carter Partner Wise Lord & Ferguson Date: 30 September 2024 Shareholder Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 56 Shareholder Information For the Year Ended 30 June 2024 Corporate Governance The Directors support the principals of good corporate governance. The Company continued to follow best practice recommendations as set out by the ASX Corporate Governance Council. Where the Company has not followed best practice for any recommendation, explanation is given in the Corporate Governance Statement which is available at the Company’s website at purefoodstas.com/investors/corporate-governance/ . Shareholder Information A. Distribution of Equity Securities Analysis of numbers of equity security holders by size of holding as at 30 June 2024: Holding Range No. Holders Total Units % Issued Share Capital Above 0 up to and including 1,000 493 229,201 0.19 Above 1,000 up to and including 5,000 560 1,500,529 1.23 Above 5,000 up to and including 10,000 248 1,956,169 1.60 Above 10,000 up to and including 100,000 404 12,998,302 10.65 Above 100,000 158 105,408,087 86.33 Total 1,863 122,092,288 100 Unmarketable parcels 1,429 5,366,975 4.4% Number of restricted securities or securities subject to voluntary escrow. Voluntary escrow ends 2 December 2024 1 100,000 0.08% Shareholder Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 57 B. Equity Security Holders Twenty largest quoted equity security holders as at 30 June 2024. The names of the twenty largest holders of quoted equity securities are listed below (some are grouped where the holdings are deemed to be controlled by the same entity): Position Holder Name Holdings % Issued Share Capital 1 Quality Life Pty Ltd 8,320,381 6.81 2 Ilwella Pty Ltd 6,000,000 4.91 3 Willar Pty Ltd 5,786,912 4.74 4 Mr Timothy Tulloch Brock Lewis & Mrs Catherine Anne Lewis 4,623,969 3.79 5 Krisami Investments Pty Ltd 4,500,000 3.69 6 JAF Capital Pty Ltd 4,420,000 3.62 7 MSG Pty Ltd 3,776,617 3.09 8 Rottcodd Pty Ltd 3,294,475 2.70 9 Glenlore Super Pty Ltd 3,018,237 2.47 10 HSBC Custody Nominees (Australia) Limited 3,012,799 2.47 11 BFADM Pty Ltd 2,729,492 2.24 12 Daly Potato Company Pty Ltd 2,279,608 1.87 13 Jomalco Pty Ltd 2,100,000 1.72 14 MFA Capital Pty Ltd 1,960,000 1.61 15 Suetone Pty Ltd 1,620,000 1.33 16 Pampho Pty Ltd 1,603,587 1.31 17 Mapukul Pty Ltd 1,570,000 1.29 18 Bensam Investments Pty Ltd 1,527,341 1.25 19 Mr Timothy Bird 1,405,137 1.15 20 Mr Craig McCourtie 1,334,602 1.09 Total Top 20 holders of ordinary shares 64,883,157 53.14% Total remaining holders balance 57,209,131 46.86% Total holders balance of ordinary shares 122,092,288 100% C. Substantial Shareholders The names of the substantial holders in the Company as at 30 June 2024: Holder name Holdings % issued share capital Quality Life Pty Ltd 8,320,381 6.81 Shareholder Information Pure Foods Tasmania Limited ABN 13 112 682 158 | Annual Report for the Financial Year ending 30 June 2024 58 D. Number of Holders of Equity Securities Description of equity securities Number on issue Number of holders Name of holders with 20% or more Fully paid ordinary shares 122,092,288 1,863 N/A Options exercisable at $0.10 with expiration date of 3 January 2026 6,666,670 10 Quality Life Pty Ltd Options exercisable at $0.059 with expiration date of 30 April 2025 3,500,000 1 Amal Security Services Pty Ltd Number of securities subject to voluntary escrow 100,000 1 N/A E. Voting Rights The voting rights attached to ordinary shares are set out below: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. F. Use of Cash Cash and assets readily convertible to cash held by the Group for the reporting period were used in a way consistent with its business strategy and objectives. Pure Foods Tasmania Pty Ltd Level 2 / 179 Murray Street, Hobart, Tasmania 7000 Phone: +61 (3) 6231 4233 Email: office@purefoodstas.com www.purefoodstas.com