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2011 annual report 2011 annual report Document Transcript

  • For personal use only algae.tec limited a renewable and sustainable energy company
  • contents Company Details 3For personal use only SECTION 1 - OVERVIEW Chairman’s Letter 6 Review of Operations 8 SECTION 2 - CORPORATE GOVERNANCE INFORMATION Corporate Governance Statement 14 Corporate Governance and Board Practices 17 Directors’ Report 20 SECTION 3 - CONSOLIDATED STATEMENT INFORMATION Consolidated Statement of Comprehensive Income 32 Consolidated Statement of Financial Position 33 Consolidated Statement of Equity 34 Consolidated Statement of Cash Flows 35 SECTION 4 - NOTES ON FINANCIALS STATEMENTS Notes of the Financial Statements 38 Director’s Declaration 66 Auditor’s Independence Declaration 67 Independent Auditor’s Report 68 SECTION 5 - SHAREHOLDER INFORMATION Shareholder Information 72 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 1
  • “Algae.Tec uses COmpaNy DETailS water, sunlight and nutrients to DirECTOrSFor personal use only grow algae that Roger Stroud Executive Chairman produces high- Peter Hatfull Managing Director value sustainable Earl McConchie Timothy Morrison Executive Director Non Executive Director fuels such as biodiesel and COmpaNy SECrETary jet fuel.” Peter Hatfull priNCipal rEgiSTErED OffiCE iN auSTralia Suite 9, 3 Centro Avenue Subiaco WA 6008 SharE rEgiSTEr Computershare Investor Services Pty Limited Level 2, 45 St George’s Terrace Perth WA 6000 auDiTOrS Somes and Cooke Jack Milner 1304 Hay Street 1400 Buford Highway, Suite G-4 West Perth WA 6005 Sugar Hill, GA 30518-8727 BaNkErS National Australia Bank Commonwealth Bank of Australia International Operations Business and Private Banking Level 3, Building B, Level 1, 38 Adelaide Street Rhodes Corporate Park Fremantle WA 6160 1 Homebush Bay Drive Rhodes NSW 2138 SECuriTiES ExChaNgE Australian Securities Exchange Frankfurt Stock Exchange New York Stock Exchange ASX FSE NYSE Level 5, 20 Bridge Street 60485 Frankfurt am Maim 11 Wall Street Sydney NSW 2000 Germany New York NY 10005 AEB GZA:GR ALGXY:US 2 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 3
  • OvErviEw OvErviEw Section 1 Section 1For personal use only OvErviEw LETTER FROM THE CHAIRMAN 6 REVIEW OF OPERATIONS 8 4 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 5
  • lETTEr frOm ThE ChairmaN Dear Shareholders I have just returned from visiting our excellent facility in Atlanta, Georgia in theFor personal use only United States. The research and development and training facility in Atlanta has How time flies when your AlgaeTec team is building an exciting company. been developed to a high standard by Earl McConchie and his team. The Facility is Since listing we have worked hard to achieve all the goals outlined in the prospectus. a credit to the company, and as an algae facility, ranks very high in its technical and Additionally, we have been assiduously developing a strategic network with significant manufacturing excellence. carbon emitters and large biofuel (biodiesel and jet fuel) consumers. The containers prepared for the Shoalhaven One Demonstration program, will be, AlgaeTec has attained a listing on the Frankfurt stock exchange, and on the OTC shortly after you receive this annual report, on the high seas bound for Sydney. as an American Depository Receipt (ADR) in the United States. We have maintained Permitting procedures have been completed, and should have been approved by the strong shareholder support in a very volatile and unpredictable stock market for time you read this letter. most of 2011. During the prospectus period onwards, AlgaeTec engaged an investor relations When the focus in our country and globally turns to fuel and energy, the phrase “we company, Dateline Media. This has raised the market’s awareness of the company’s live in interesting times” takes on a very topical resonance. Over this year there have potential, significantly. The dynamic AlgaeTec website reflects an extensive media been strategic developments in various countries in the arena of Carbon Abatement. coverage in Australia and abroad, in print, radio and through the visual mediums. We China and South Korea are considering some form of carbon tax, as is California. encourage all shareholders to refer to the website regularly. Both Australia and the United States have committed to specific financial support for We thank all shareholders for their support to date, and believe that the projects involved in the production of advanced biofuels (Algae in particular). Additional next 12 months will be very positive for AlgaeTec’s development towards a financial support in the form of fuel subsidies exists in both countries for fuel products profitable company. from algae. The genesis of AlgaeTec Limited’s algae production technology was over 8 years ago. During this time two specific global resource issues, namely food and water, have been critically focused upon. Many countries have embraced solutions enthusiastically, and in a manner consistent with their politically varied structures. Food and water are linked to the global population number and its extraordinary exponential growth. These commodities are inextricably linked to energy in all its forms, and in particular, transport fuels. Careful management of these scarce resources at a national and international level has never been more important. It is with this background that AlgaeTec’s business takes on its current global relevance. Roger Stroud AlgaeTec’s strategic goal is to embrace transport fuels in a very practical manner. Your Executive Chairman company intends to initiate the development and operation of commercial facilities in several countries, predominantly by way of joint venture. The primary focus will be on Australia, the United States, China, Brazil and Southern Europe. The products will be primarily Biodiesel and Grade A Jet Fuel. Discussions are underway with several companies in the various countries mentioned above, with the intention of negotiating either a joint venture at a facility level or at the country level. The Chinese discussions, as mentioned variously before, have changed from one party to another, and are progressing very well. 6 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 7
  • rEviEw Of OpEraTiONS rEviEw Of OpEraTiONS • Group overview • ASX Listing • Manildra Group • Chinese Strategic PartnersFor personal use only The year to 30 June 2011 was an extremely Algae.Tec Ltd released a prospectus On 20 August 2010, the Group announced On 20 August 2010, the Group announced significant period for Algae.Tec Ltd as it on 26 July 2010 with the aim of raising that it had signed a memorandum of the signing of a strategic relationship completed the transition to a publicly listed $7.5 million and listing on the Australian understanding with the Manildra Group. agreement with Pacific Minerals, a Group, and commenced the building of its Securities Exchange. The issue closed This MOU details the collaboration Hong Kong based Group, regarding the first full scale modules. in December 2010 once the minimum between the parties to build 2 full size commercialisation of its technology in of $5 million and 500 shareholders had demonstration modules at the Manildra China. The parties agreed to set up a Great strides have been made in following site in Nowra NSW. This arrangement joint venture company in China with the the goals set in our prospectus of positioning been achieved. The $5 million was adequate for the initial goals of the Group was strengthened in June 2011 when aim of identifying and progressing with Algae.Tec Limited at the forefront of the MOU was upgraded to a collaboration commercial applications of its technology. developing sustainable energy solutions, due to favourable exchange rates and considerable cost savings being achieved agreement. This agreement firms up and in developing a state of the art research details regarding the demonstration Roger Stroud visited China during the year and development and manufacturing centre through strategic partners. Shares were at the invitation of our joint venture partners issued at $0.20 with 28,346,668 receiving facility and details the understanding in Atlanta, Georgia. to build a commercial size plant on the and visited potential sites. The duration of quotation. With another 219,575,000 this specific MOU has since expired, but The period also saw the continuation of shares being issued to original founders same site once the demonstration plant is successful. negotiations are continuing with certain negotiations with a number of strategic and seed investors which were subject to identified parties and Roger Stroud is again partners to add certainty to each link in its restriction agreements, the total shares on These first modules are being built in the visiting China in October 2011. supply and value chain, and to form long issue post listing were 247,921,668 and Group’s facility in Atlanta and are on track to term strategic partnerships. giving a market capitalisation at listing of be shipped to the Nowra site in October 2011. $49,584,334. At the time of this report the It is anticipated that they will be operational on shareholders have grown to approximately target in the first quarter of 2012. This was 750 and the market capitalisation to a crucial step for the Group as it will allow it approximately $90 million, a very positive to obtain external validation of the Group’s result in a very negative market period. technology and commercial capability. “Algae.Tec Limited at the forefront of developing sustainable energy solutions.” The bLuE LINE represents the price or value of the security over the requested time frame. The actual price or value is shown on the left axis. The DARk GREEN bARS represent the turnover for the primary security. 8 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 9
  • “Australian rEviEw Of OpEraTiONS price on Carbon to • Frankfurt Exchange Projects have been set up to evaluate all accelerateFor personal use only methods of producing algae, not just the On 21 February, Algae.Tec Ltd was accepted to list on the Frankfurt Stock Exchange. Group’s enclosed bio reactor technology, up take of Germany has successfully positioned itself and this will allow us to be at the forefront of new developments. Numerous species Algae.Tec as the cleantech leader in the European Union and Algae.Tec Ltd considered it to be of algae are also continuously being grown and tested to ensure that we have the best Technology.” important to be listed on this exchange as strain for the required product. part of its globally focussed path. European governments continue to discuss • ADR Facility methods of restricting polluting companies and ways to encourage clean technologies Following the Group’s globalisation strategy, and it was considered important to raise our on 27 April 2011, the Group announced profile in Europe and have an easy trading that it had set up an American Depository platform for European investors. Receipt platform with the Bank of New York Mellon as managers of the programme. This level one programme will allow • Atlanta Facility American investors to invest directly in the One of the reasons for the listing of the Group Group’s stock. This also recognises the was to raise funds for the establishment of awareness and appetite for this technology a first class research and development and in this market place. The Group is currently commercial facility. On 17 March 2011 evaluating the benefits of improving this Algae.Tec Limited announced the opening of ADR platform to a full OTCQX listing. its 18,000sq ft facility in Atlanta Georgia. This facility is currently being used to build the first • DMG Media Marketing full size modules that will be established on the Manildra site in Nowra, NSW. During the year Algae.Tec Limited appointed DMG to handle our worldwide The facilities at this site have already led investor relations and media requirements. to further improvements to the Algae.Tec DMG have achieved a tremendous uplift in Limited technology, and new innovations the Group’s profile and in the awareness are always being devised and tested. of Algae.Tec Limited and its technology around the world. As partial compensation for the services received, and in recognition of the value of service, Algae.Tec Limited issued 1,000,000 shares to DMG on 9 March 2011. 10 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 11
  • COrpOraTE gOvErNaNCE STaTEmENT COrpOraTE gOvErNaNCE STaTEmENT The Algae.Tec Limited Board is committed SharEhOlDErS COmpOSiTiON Of ThE BOarD iNDEpENDENTFor personal use only to protecting shareholders interests and The Shareholders of the Group elect Election of Board members is substantially prOfESSiONal aDviCE keeping investors fully informed about the Directors at the Annual General Meeting the province of the Shareholders in general Subject to the Chairman’s approval (not to be performance of the Group’s business. in accordance with the Constitution. All meeting, however, subject thereto, the Group unreasonably withheld), the Directors, at the The Directors have undertaken to perform directors, other than the Managing Director is committed to the following principles; Group’s expense, may obtain independent their duties with honesty, integrity, care and are subject to re-election by rotation within professional advice on issues arising in the three years. • The Board is to comprise of Directors course of their duties. diligence, according to the law and in a with a blend of skills, experience and manner that reflects the highest standards The Annual General meetings are held in attributes appropriate for the Group and iNTErNal CONTrOlS aND of governance. Perth. Shareholders have the opportunity its business; and maNagEmENT Of riSkS ThE BOarD Of DirECTOrS to express their views, ask questions The Board’s collective experience will enable about Group business and vote on items of • The principal criterion for the The Group’s Board of Directors is accurate identification of the principal risks business for resolution by shareholders at appointment of new Directors is their responsible for the corporate governance of that may affect the Group’s business. Key the Annual General Meeting. ability to add value to the Group and its the Group. The Board develops strategies operational risks and their management will business. for the Group, reviews strategic objectives be recurring items for deliberation at Board COmmuNiCaTiON wiTh and monitors performance against those No formal nomination committee or procedures meetings. SharEhOlDErS objectives. The goals of the corporate have been adopted for the identification, Algae.Tec Limited is committed to EThiCal STaNDarDS governance processes are to: complying with the continuous disclosure appointment and review of the Board membership, but an informal assessment The Board is committed to the establishment “The Board is obligations of the Corporations Act and • Maintain and increase Shareholder value the Australian Securities Exchange process, facilitated by the Chairman in consultation with the Group’s professional and maintenance of appropriate ethical standards. committed to the • Ensure a prudential and ethical basis for the Group’s conduct and activities; and Listing Rules. advisors, has been committed to by the Board. DirECTOrS’ SharE DEaliNgS establishment • Ensure compliance with the Group’s legal The Group keeps the market informed through its annual report, half year report BOarD COmmiTTEES The Board has adopted a Code of Conduct for Directors which establishes guidelines and maintenance The Board has established a separate and regulatory objectives. and by disclosing material developments to the ASX and the media as they occur. Audit Committee consisting of the for their conduct in matters such as ethical standards and conflicts of interests. The of appropriate Consistent with these goals, the Board assumes the following responsibilities: Chairman, the Managing Director and the independent Director. Code is based on that developed by the ethical • Developing initiatives for profit and rEmuNEraTiON arraNgEmENTS Australian Institute of Company Directors. standards.” asset growth • Directors must consult with the Chairman The remuneration of an Executive Director of the Board before dealing in shares or will be decided by the Board, without the • Reviewing the corporate, commercial and other securities of the Group affected Executive Director participating in financial performance of the Group on a that decision-making process. • Dealings in the Group’s shares or other regular basis; securities by related persons may be The total maximum remuneration of Non- • Acting on behalf of, and being carried out other than the period 2 executive Directors is the subject of a accountable to the Shareholders; and weeks prior and 1 day following the Shareholder resolution in accordance with date of announcement of the Group’s • Identifying business risks, and the Group’s Constitution, the Corporations annual or half yearly results or a major implementing actions to manage those Act and the ASX Listing Rules, as applicable. announcement leading, in the opinion of risks and corporate systems to assure The determination of Non-executive the Board, to a fully informed market. quality. Directors’ remuneration within that maximum will be made by the Board having Directors are prohibited from buying or The Group is committed to the circulation regard to the inputs and value to the Group selling Algae.Tec Limited shares at any of relevant materials to Directors in a of the respective contributions by each Non- time if they were aware of price sensitive timely manner to facilitate Directors’ executive Director. information that has not been made public. participation in the Board discussions on In accordance with the Corporations a fully-informed basis. The Board may award additional remuneration Act and the ASX Listing Rules, Directors to Non-executive Directors called upon to advise the Group of any transactions perform extra services or make special conducted by them in shares in the Group, exertions on behalf of the Group. which then informs the ASX of the details of the transaction. 14 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 15
  • COrpOraTE gOvErNaNCE STaTEmENT COrpOraTE gOvErNaNCE aND BOarD praCTiCES rETirEmENT, ElECTiON aND Algae.Tec Limited aims for best practice 1. lay SOliD fOuNDaTiONS fOr experience. The Group intends to seekFor personal use only CONTiNuaTiON iN OffiCE Of in the area of corporate governance and maNagEmENT aND OvErSighT out and appoint independent directors in DirECTOrS enhancement of its shareholders’ interest. The Directors monitor the business affairs the future. However, due to the current In accordance with the Constitution of Algae. The Chairman, the Directors’ and Company of the Group on behalf of the Shareholders limited size of the Group’s operations, it may Tec Limited, at each Annual General Meeting, Secretary are responsible for ensuring that and have formally adopted a corporate not be appropriate to appoint a majority of one-third (or a number nearest one-third the Group complies with best practice in its governance policy which is designed to independent directors for some time. The (excluding any other Director appointed by corporate governance on a day to day basis. encourage Directors to focus their attention Group feels the range of skills and breadth of the Directors either to fill a vacancy or as and on accountability, risk management and industry and professional expertise held by The Group’s main corporate governance and the Board members provides a sound basis addition to the existing Directors) must retire Board practices in place during the fiscal ethical conduct. by rotation: and for increasing the Group’s value. year 2011 are described in the next section The objective of Algae.Tec Limited’s governance • Any other Director who has held office and where appropriate, elsewhere in our framework is to allow the Board to: 3. prOmOTE EThiCal aND for three years or more since last being annual report, as indicated. rESpONSiBlE DECiSiON-makiNg elected; and • Provide strategic guidance for the Group Algae.Tec Limited is committed to We regularly review and update our corporate and effective oversight of management maintaining high ethical standards in its • Any other Director appointed to fill a governance practices. The Board evaluates • Facilitate board and management internal operations and its interaction with casual vacancy or as an addition to the and, where appropriate, implements relevant accountability to our shareholders shareholders, investors, stakeholders and existing Directors. proposals with the aim of ensuring that we through clearly defined roles and regulatory bodies. The Group does not continue to demonstrate our commitment to Accordingly, at the 2010 Annual General responsibility for the Board and executive consider the small size of the board and good corporate governance, having regard Meeting, Mr Roger Sydney Stroud, Mr Peter management; and management warrants a separate code to developments in market practice and Ernest Hatfull, Mr Garnet Earl McConchie of conduct. The Group has adopted and regulation. • Ensure a balance of appropriate authority and Mr Timothy Morrison retired as Directors applies a Corporate Governance Policy, a by rotation. All Directors being eligible We comply with the ASX Corporate to avoid individuals having sole authority. Trading Policy and the directors’ operate offered themselves for re-election and were Governance Council’s “Revised Principles under the Directors’ Code of Conduct. 2. STruCTurE ThE BOarD re-elected. of Good Corporate Governance and Best TO aDD valuE The Board meets on a regular basis and Practice Recommendations”. These Mr Roger Sydney Stroud and Mr Garnet As at the date of this report, the Board follows meeting guidelines set down to provisions require listed companies to report Earl McConchie, being the longest serving comprises four directors. Algae.Tec Limited’s ensure all directors are made aware of and on their main corporate governance practices Directors will retire by rotation at the 2011 constitution provides for a minimum of three have all necessary information to participate and require a Group to highlight any areas of Annual General Meeting and, being eligible, directors and not more than nine directors. in informed discussions on all agenda items. departure from the Recommendations of the will offer themselves for re-election. Council and explain that departure. The Board consists of an independent non- The Board and Management understand executive Director, Mr Timothy Morrison, the obligations for ethical and responsible who is not a major shareholder (i.e. neither decision making. he nor his associates hold more than 5% of the Group’s paid up capital and he has no association with any major shareholder). The Chairman, Mr Roger Stroud is currently not “The global independent nor are the other two directors, Mr Peter Hatfull and Mr Earl McConchie. market for Each of them are shareholders of the Group. Algae is poised Each of the directors has been appointed for their particular skills, expertise and for explosive growth in the next 10 years.” 16 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 17
  • COrpOraTE gOvErNaNCE aND BOarD praCTiCES COrpOraTE gOvErNaNCE aND BOarD praCTiCES 4. SafEguarD iNTEgriTy iN 6. auDiT aND COmpliaNCE 8. rESpECT ThE righTS Of 10. rEmuNEraTE fairly aNDFor personal use only fiNaNCial rEpOrTiNg COmmiTTEE SharEhOlDErS rESpONSiBly The Audit Committee assists the Board in Due to the current size of the organisation, The Directors recognise that for The Board has not established a fulfilling its responsibilities relating to the the creation of a separate audit committee shareholders of Algae.Tec Limited to be Remuneration Committee at this point in accounting and financial reporting practices was not seen as necessary for the year able to make informed decisions regarding the Group’s development. It is considered of the Group and monitors necessary to 30 June 2011. However, the Board their investment, they need relevant and that the size of the Board along with the statutory and regulatory compliance. currently regularly; timely information. The Board has approved level of activity of the Group renders this the use of third party Investor Relation impractical and the full Board considers The Audit committee functions include: • Monitor and review the effectiveness firms to ensure appropriate and frequent in detail all of the matters for which the of the Group’s control environment, communication with shareholders. directors are responsible. Remuneration • Providing assistance to the Board in reporting practices and responsibilities fulfilling its corporate governance and to the independent Director is by way of in the areas of accounting, risk The Group updates its website with all Director Fees only, with the level of such oversight responsibilities in relation to management and safeguard of assets. media releases during the year and has the Group’s risk management systems, fees, having been set by the Board to an made several presentations to market amount it considers to be commensurate for financial reporting, internal control • Review and approve internal audit plans representatives and financial analysts. structure and the internal and external including identified audit risk areas. a Group of its size and level of activity. audit functions. 9. rECOgNiSE aND maNagE riSk The remuneration for the executive directors • Oversee and appraise the quality of The Board acknowledges Principle 7 of is as disclosed in the Directors’ Report. • Monitoring compliance with the audits conducted and monitor their the ASX Corporate Governance Council Non – executive Directors do not receive Corporations Act, ASX Listing Rules and effectiveness. in its approach to risk management. The performance based bonuses and do not any matters outstanding with taxation • Monitor and evaluate compliance identification and effective management of participate in equity schemes of the Group, and other regulatory authorities. processes and adherence. risk is viewed as an essential part of the nor are they entitled to retirement allowances. • Nomination of external auditors; and Group’s approach to creating long-term There is currently no link between performance • An Audit Committee has been shareholder value. The Board determines and remuneration and there are no schemes • Overseeing the financial reporting established from 1 July 2011 however the Group’s risk profile and is responsible for for retirement benefits in existence. process. does not have a majority of independent overseeing and approving risk management Directors. strategy and policies, internal compliance The Board is responsible for determining the 5. NOmiNaTiON COmmiTTEE and internal control. remuneration of the Chief Executive Officer No formal nomination committee or 7. makiNg TimEly aND BalaNCED and senior executives. procedures have been adopted for the DiSClOSurE The Board’s collective experience will identification, appointment and review of The Group recognises the significance of enable accurate identification of the The Board of Directors and the Company the Board membership, but an informal continuous and timely disclosure and has principal risk that may affect the Group’s Secretary are responsible for the corporate assessment process, facilitated by the developed a strict Securities Trading Policy. business. Key operational risks and their governance of the Group and were guided Chairman in consultation with the Group’s This policy and ongoing formal and informal management will be recurring items for by the Director’s Code of Conduct, the professional advisors, has been committed meetings of the Directors and Management deliberation at Board Meetings. Corporate Governance Policy and the ASX to by the Board. ensures accountability and provision of Corporate Governance Council Revised relevant and timely information to all Principles of Good Corporate Governance shareholders and investors. during the financial year. The Board guides and monitors the business affairs of The Group includes continuous disclosure Algae.Tec Limited and its subsidiary on as a permanent item on the agenda for behalf of the shareholders to whom they Board meetings and in compliance with are accountable. ASX Listing rules. The Company Secretary is responsible for ensuring compliance with the continuous disclosure requirements and overseeing and authorising disclosure information to the ASX. All media releases which contain material price sensitive information must be approved by the Board prior to release to the ASX. 18 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 19
  • DirECTOrS’ rEpOrT DirECTOrS’ rEpOrT The directors submit herewith the annual DiviDENDS iNfOrmaTiON ON DirECTOrSFor personal use only financial report of Algae.Tec Limited. In No dividends were paid or recommended by DETailS Of ThE DirECTOrS’ qualifiCaTiONS aND ExpEriENCE arE SET OuT aS fOllOwS: order to comply with the provisions of the the Directors. Corporations Act 2001, the Directors report is as follows: SigNifiCaNT EvENTS afTEr ThE BalaNCE DaTE DirECTOrS There have been no significant events The names and particulars of the directors of occurring after the balance date which have the Company as at 30 June 2011 and at the significantly affected or may significantly date of this report are as follows. Directors affect the Group’s operations or results of were in office for the entire period. those operations or the Group’s state of affairs in future financial years. Mr Timothy Morrison Non - Executive Director ENvirONmENTal rEgulaTiONS Mr Peter Ernest Hatfull aND pErfOrmaNCE Managing Director and Company Secretary Algae.Tec Ltd will not be subjected to significant environmental regulations TimOThy mOrriSON pETEr ErNEST haTfull Garnet Earl McConchie under both the Commonwealth and Non Executive Director Managing Director and Company Secretary Executive Director State legislation. Tim Morrison currently is the acting CEO of Peter has over 30 years experience in a range Roger Sydney Stroud RGM Media Limited, an ASX listed company. of senior executive positions with Australian and Executive Chairman Prior to this, Tim was Director of Research and international companies. He has an extensive Development at Murdoch University. He had skill-set in the areas of business optimisation, priNCipal aCTiviTiES responsibility for the provisions of high level capital raising and Group restructuring. The principal activity of the Group is to support to the Pro Vice Chancellor (Research) produce algal oil and algal biomass for sale in the management of research and the Prior to becoming Managing Director of Algae. as feedstock to producers of biodiesel, jet commercialisation of the University’s Intellectual Tec Ltd, Peter was recently Managing Director fuel and ethanol. Property. His primary responsibility in this position of a leading integrated metal recycling and was to extend existing research relationships and contracting company, CMA Corporation Ltd, OpEraTiNg rESulTS based in Sydney, where he managed a period of to develop new links with business and industry. The consolidated comprehensive loss for dramatic growth and increased profitability. Prior His role was the key driver and catalyst for the year was $2,437,487 (2010: $410,174). The consolidated cash flow statement shows “The Directors University’s continuing development of global research and training, as well as its application to to this appointment, he held senior financial and Board positions in Australia, Africa and the UK. that cash and cash equivalents at year perform their economic and national benefit. He has particular experience in turnaround and slow growth situations, where companies have ending 30 June 2011 were $2,434,251 (2010: $9,779). duties with honesty, Prior to this position he was General Manager of Murdoch Link Pty Ltd, the commercial arm struggled to expand their business. This has required revitalising the business plan, attracting SigNifiCaNT ChaNgES iN integrity and care.” of Murdoch University, which is the dedicated investor funding and implementing profitable STaTE Of affairS provider of quality research consultancy services strategies. Peter is currently a director of GFR Please see ‘Review of Operations’ page 8. to the professions, industry and government. Group, Structerre Consulting, Barminco Pty Ltd and is based in Perth, WA. Tim has a BA (1st Hon) from Murdoch University, a Post Grad Diploma (Social Research Methods) from Peter graduated as a Chartered Accountant in the Murdoch, and an MBA (Financial Management) United Kingdom, where he worked for Coopers from the University of Western Australia and Lybrand (now PriceWaterhouseCoopers), and subsequently moved to Africa, where he interest in Shares and Options spent 8 years in Malawi. Peter moved to Perth Mr Timothy Morrison currently holds 2,000,000 in 1988. ordinary shares in Algae.Tec Limited. interest in Shares and Options Mr Peter Hatfull currently holds 9,557,865 ordinary shares in Algae.Tec Limited. 20 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 21
  • DirECTOrS’ rEpOrT DirECTOrS’ rEpOrT Subsequently Earl was employed with and overseeing the building of modern Lockwood Greene and Foster Wheeler brickworks in Perth, Roger providedFor personal use only Corporation. Earl has over 10 years of advisory services to mining and specific technical and business experience in manufacturing businesses for a number the biodiesel and glycerine industry sectors. of years. In the late 1990s, Roger began He is a founding director and controlling the process of building businesses in the shareholder of Teco.Bio LLC, and is based in renewable fuel sector, primarily biodiesel. Atlanta, Georgia where he has co-ordinated This included floating two separate the microalgae development. biodiesel companies. Roger is a founding director and controlling shareholder of Earl has received a BSc (Chem. Eng) Teco.bio LLC , and is based in Perth, WA. garNET Earl mCCONChiE rOgEr SyDNEy STrOuD from Virginia Polytechnic Institute & State Executive Director University, and a ME Chemical Engineering Executive Chairman Roger has received a BSc from Sydney from Texas A & M University. He is a Roger has over 35 years experience in University, majoring in Chemistry and Earl has over 35 years experience over a registered Professional Engineer, Member a variety of industries. He spent over Geology and a BA (Economics) from broad field of chemistry and associated of the National Society of Professional 10 years in finance in a number of Macquarie University. He is currently technologies, including global markets, Engineers, The American Institute of areas including credit, money market chairman of the “Centre for Research bulk chemicals and plastics, differentiated Chemical Engineers, and the Society of and investment banking for CitiNational into Energy for Sustainable Transport”, commodities and intermediates, specialty Plastic Engineers. (Citibank/National Mutual) merchant a collaborative of Curtin and Murdoch chemicals, polymers and interaction with bank, predominantly in Sydney. Universities based on Murdoch Campus. environmental sectors. interest in Shares and Options Mr Earl McConchie controls Dot-Bio Inc Following the above, he floated a mining interest in Shares and Options Earl’s field experience includes international business management, plant operations, which holds 50% of Teco.Bio LLC which in company, with a head office based Mr Roger Stroud controls Teco Pty Ltd and project engineering in the US, Europe turn holds 200 million shares. in Sydney, and undertook the role of which holds 50% of Teco.Bio LLC which (especially Germany, Holland, Switzerland, Managing Director for 8 years. After in turn holds 200 million shares. An additional 4,500,000 shares are held by UK and CIS), Latin America (Brazil, Argentina floating a manufacturing company, the immediate family of Mr Earl McConchie. and Mexico) and Asia (Korea, China and Australia). Earl was employed with Dow Chemical Company for 25 years. He served mEETiNgS Of DirECTOrS as Global Director for chemicals and plastics in the latter part of his employment. During the year ended 30 June 2011, the number of meetings of the Board of Directors and the number of meetings attended by each of the Directors are as follows: DirECTOr’S mEETiNg Number of meetings held 8 Number of meetings attended Mr Timothy Morrison 8 Mr Peter Ernest Hatfull 8 Garnet Earl McConchie 8 Roger Sydney Stroud 8 22 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 23
  • DirECTOrS’ rEpOrT DirECTOrS’ rEpOrT iNSuraNCE aND iNDEmNiTiES Of OffiCErS aND DirECTOrS rEmuNEraTiON rEpOrT (auDiTED) Executive Directors PayFor personal use only The Group has not, during or since the financial year, in respect of any person who is or has been Principles used to determine the nature The remuneration of Executive Directors is a director, officer or auditor of the Group or a related body corporate, indemnified or made any and amount of remuneration fixed by the Directors and paid by way of relevant agreement for indemnifying against a liability incurred as a director, officer or auditor, salary or consultancy fee. The remuneration including costs and expenses in successfully defending legal proceedings. The Group is in the The Board is responsible for making recommendations on remuneration packages package properly reflects the person’s process of finalising Directors and Officers Liability Insurance at the date of this report. duties and responsibilities and that the and policies applicable to the Board members SharE OpTiONS and senior executives of the Group. remuneration is competitive in attracting, At the date of this report, the following options to acquire Ordinary shares of the Group retaining and motivating people of the The Board’s remuneration policy is to ensure highest quality. Directors and executives’ were on issue: the remuneration package reflects the remuneration is arrived at after consideration person’s duties and responsibilities and that of the level of expertise each director and graNT DaTE NumBEr ExErCiSE Expiry DaTE the remuneration is competitive in attracting, executive brings to the Group, the time priCE retaining and motivating people of the and commitment required to efficiently highest quality. Directors’ and executives’ and effectively perform the required tasks Unlisted Ordinary 12/01/2011 49,584,334 $ 0.75 12/01/2016 remuneration is arrived at after consideration and after reference to payments made to Options of the level of expertise each director and directors and executives in similar position executive brings to the Group, the time in other companies. Unlisted Ordinary 3/03/2011 5,000,000 $ 0.75 13/01/2014 and commitment required to efficiently Options and effectively perform the required tasks DETailS Of rEmuNEraTiON and after reference to payments made to Details of the remuneration of the directors of directors and executives in similar positions Algae.Tec Limited is set out in the following 54,584,334 in other companies. tables. The key management personnel of Algae.Tec Limited are: At this stage the remuneration reflects the prOCEEDiNgS ON BEhalf Of ThE grOup performance of the Group in a development Mr Peter Ernest Hatfull No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene stage in that the levels of remuneration are Managing Director and Company Secretary in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf at the low end of the market. As the Group of the Group for all or any part of those proceedings. Garnet Earl McConchie becomes revenue producing and shareholder Executive Director wealth increases, regular reviews will The Group was not a party to any such proceedings during the year. be conducted as to the remuneration of Roger Sydney Stroud NON-auDiT SErviCES directors and executives. Executive Chairman The Board of Directors, in accordance with advice from the audit committee, is satisfied that Non Executive Directors Pay Mr Timothy Morrison the provision of non-audit services during the year is compatible with the generated standard of Non - Executive Director independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied The Group’s Constitution provides that the that the services disclosed below did not compromise the external auditor’s independence for the remuneration of non-executive Directors following reasons: will be not more than the aggregate fixed sum determined by a general meeting. The • All non-audit services are reviewed and approved by the Board prior to commencement to aggregate remuneration for non-executive ensure they do not adversely affect the integrity and objectivity of the auditor, and Directors has been set an amount not to exceed $150,000 per annum. The Group • The nature of the services provided does not compromise the general principles relating pays its non-executive Director, Mr Timothy to auditor independence in accordance with APES 110: Code of Ethics for Professional Morrison, a fee of $40,000 per year. Accountants set by the Accounting Professional and Ethical Standards Board. fuTurE DEvElOpmENTS The current strategy of continuous improvement and adherence to quality control in existing markets, are expected to assist in the achievement of the consolidated group’s long term goal and development of new business opportunities. 24 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 25
  • DirECTOrS’ rEpOrT DirECTOrS’ rEpOrT rEmuNEraTiON rEpOrT (CONT) rEmuNEraTiON rEpOrT (CONT)For personal use only TaBlE Of BENEfiTS aND paymENTS fOr ThE yEar ENDED 30 JuNE 2011 TaBlE Of BENEfiTS aND paymENTS fOr ThE yEar ENDED 30 JuNE 2010 Short term benefits post- Share-based Short term benefits post- Share-based employment payment employment payment benefits benefits Salary Consulting Non Superannuation Shares/ Total Salary Consulting Non Superannuation Shares/ Total and fees monetary Options and fees monetary Options Directors Benefits Directors Benefits fees fees $ $ $ $ $ $ $ $ $ $ $ $ Key Management Key Management Personnel Personnel Roger Sydney - 135,000 - - - 135,000 Roger Sydney - 103,946 - - - 103,946 Stroud Stroud Peter Ernest Hatfull 90,000 - - 8,100 - 98,100 Peter Ernest Hatfull - 20,000 - - - 20,000 Garnet Earl 154,945 - - 4,352 - 159,297 Garnet Earl - 142,047 - - - 142,047 McConchie McConchie Tim Morrison - 30,000 - - - 30,000 Tim Morrison - - - - - - Total 244,945 165,000 - 12,452 - 422,397 Total 265,993 265,993 SECuriTiES rECEivED ThaT arE pErfOrmaNCE rElaTED No members of key management personnel are entitled to receive securities which are performance-based as part of their remuneration package. CaSh BONuSES, pErfOrmaNCE-rElaTED BONuSES aND SharE-BaSED paymENTS No cash bonuses, performance-related bonuses or share based payments were granted as remuneration during the year to key management personnel. SErviCE CONTraCTS Remuneration and other terms of employment for the Managing Director, Executive Director and other key management personnel are not formalised in service agreements. Service agreements will be entered into as the Group matures. OpTiONS aND righTS graNTED No options or rights were granted to key management personnel during the year. 26 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 27
  • DirECTOrS’ rEpOrT auDiTOr’S iNDEpENDENCE DEClaraTiONFor personal use only A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2011 is set out on page 67. auDiTOr Somes and Cooke continue in office in accordance with section 307C of the Corporations Act 2001. Signed at Perth, in accordance with a resolution of the directors, Peter Hatfull managing Director 30 September 2011 “Algae holds promise as a renewable future.” 28 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 29
  • CONSOliDaTED STaTEmENT Of COmprEhENSivE iNCOmE CONSOliDaTED STaTEmENT Of fiNaNCial pOSiTiON For the year ended 30 June 2011 As at 30 June 2011For personal use only CONSOliDaTED grOup CONSOliDaTED grOup 2011 2010 2011 2010 NOTES $ $ NOTES $ $ CuRRENT ASSETS INTEREST INCOME 21,282 - Cash and cash equivalents 8 2,434,251 9,779 Trade and other receivables 9 47,990 19,834 EXPENDITURE - Prepayments 10 63,554 221,448 Employee benefits expense (554,105) - TOTAL CuRRENT ASSETS 2,545,795 251,061 Depreciation and amortisation expense 11 (5,835) (291) Advertising (232,133) (6,100) NON CuRRENT ASSETS Property rent and lease payments (49,136) (22,081) Plant and equipment 11 127,554 2,436 Communication expense (17,175) (1,151) Other Receivables 20(d) 18,000 - Consultancy (315,651) (64,380) TOTAL NON CuRRENT ASSETS 145,554 2,436 Professional fees (358,920) (45) Travel expense (241,336) (88,251) TOTAL ASSETS 2,691,349 253,497 Other Expenses (265,206) (61) Finance costs (2,376) - CuRRENT LIAbILITIES Unrealised Exchange losses 21 (274,559) - Trade and other payables 13 81,386 56,671 Research Costs (173,417) (227,814) Provisions 14 10,820 - TOTAL CuRRENT LIAbILITIES 92,206 56,671 LOSS BEFORE INCOME TAX (2,468,567) (410,174) Income Tax Expense 6 - - NON CuRRENT LIAbILITIES Other non current liabilities - 7,000 NET LOSS ATTRIBUTABLE TO MEMBERS OF (2,468,567) (410,174) TOTAL NON CuRRENT LIAbILITIES - 7,000 THE GROUP TOTAL LIAbILITIES 92,206 63,671 Other Comprehensive Income 17 31,080 - TOTAL COMPREHENSIVE (LOSS) (2,437,487) (410,174) NET ASSETS 2,599,143 189,826 TOTAL COMPREHENSIVE (LOSS) EquITy ATTRIbuTAbLE TO MEMbERS OF THE GROuP (2,437,487) (410,174) Issued capital 15 5,446,804 600,000 Foreign Exchange Reserve 17 31,080 - Earnings per share (cents per share) Accumulated losses (2,878,741) (410,174) Basic earnings per share (cents per share) 16 (0.010) (0.002) TOTAL EquITy 2,599,143 189,826 Diluted earnings per share (cents per share) (0.010) (0.002) The above statement of comprehensive income should be read The above statement of comprehensive income should be read In conjunction with the accompanying notes In conjunction with the accompanying notes 32 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 33
  • CONSOliDaTED STaTEmENT Of ChaNgES iN EquiTy CONSOliDaTED STaTEmENT Of CaShflOwS For the year ended 30 June 2011 For the year ended 30 June 2011For personal use only Share Capital accumulated reserve Total Equity CONSOliDaTED grOup losses 2011 2010 $ $ $ $ NOTES $ $ bALANCE AT 1 JuLy 2009 - - - - CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period - (410,174) - (410,174) Payments to trade creditors, other creditors and (1,836,504) (390,672) Other comprehensive income/loss - - - - employees (inclusive of goods and services tax) Total comprehensive income/loss - (410,174) - (410,174) Interest paid (1,575) - for the year Interest received 15,179 - Share issued during the period 600,000 - - 600,000 Net cash outflows from operating activities 22 (1,822,900) (390,672) Share issue expenses - - - - bALANCE AT 30 JuNE 2010 600,000 (410,174) - 189,826 CASH FLOWS FROM INVESTING ACTIVITIES Loans to Directors (25,000) - SharE aCCumulaTED rESErvE TOTal EquiTy Payment for property, plant and equipment (130,953) (2,727) CapiTal lOSSES Net cash outflow from investing activities (155,953) (2,727) $ $ $ $ CASH FLOWS FROM FINANCING ACTIVITIES bALANCE AT 1 JuLy 2010 600,000 (410,174) - 189,826 Issue of shares net of capital raising costs 4,646,804 600,000 Loss for the period - (2,468,567) - (2,468,567) Proceeds from borrowings - 7,000 Other comprehensive income/loss - - 31,080 31,080 Prepaid issue costs - (203,822) Total comprehensive income/loss - (2,468,567) 31,080 (2,437,487) for the year Net cash flows from financing activities 4,646,804 403,178 Share issued during the period 5,325,987 - - 5,325,987 Share issue expenses (479,183) - - (479,183) Net increase in cash and cash equivalents 2,667,951 9,779 bALANCE AT 30 JuNE 2011 5,446,804 (2,878,741) 31,080 2,599,143 Effect of exchange rate translations 31,080 - Cash and cash equivalents at the beginning of the 9,779 - financial period The above statement of comprehensive income should be read In conjunction with the accompanying notes Effect of exchange rate changes of cash held in (274,559) - foreign currencies CASH AND CASH EquIVALENTS AT THE END 8 2,434,251 9,779 OF THE FINANCIAL PERIOD The above statement of comprehensive income should be read In conjunction with the accompanying notes 34 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 35
  • NOTES ON NOTES ON Section 4 Section 4For personal use only fiNaNCial fiNaNCial STaTEmENTS STaTEmENTS NOTES ON fiNaNCial STaTEmENTS NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - 1. Summary of significant accounting policies 38 - 2. Critical accounting estimates and judgements 47 - 3. Segment reporting 48 - 4. Expenses 48 - 5. Leases and commitments 48 - 6. Income tax expense 49 - 7. Auditors remuneration 50 - 8. Current assets – cash and cash equivalents 50 - 9. Current assets – trade and other receivables 51 - 10. Current assets - other 51 - 11. Non-current assets – property, plant and equipment 52 - 12. Non-current assets – intangible 53 - 13. Current liabilities – trade and other payables 54 - 14. Current liabilities – provisions 54 - 15. Contributed equity 54 - 16. Earnings per share 56 - 17. Reserves 56 - 18. Controlled entities 57 - 19. Key management personnel disclosures 57 - 20. Related party transactions 59 - 21. Financial risk management 60 - 22. Reconciliation of loss after tax to net 64 cash flows from operations - 23. Events subsequent to end of reporting period 64 - 24. Parent entity disclosures 64 - 25. Share-based payments 65 - 26. Contingent liabilities 65 DIRECTOR’S DECLARATION 66 AuDITOR’S INDEPENDENCE DECLARATION 67 INDEPENDENT AuDITOR’S REPORT 68 36 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 37
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS The financial report of Algae.Tec Limited (b) principles of Consolidation (c) Segment reporting differences on assets and liabilities, carriedFor personal use only and its subsidiary (the Group) for the year Operating segments are reported in a at fair value are reported as part of the fair Subsidiaries to 30 June 2011 was authorised for issue manner consistent with the internal reporting value gain or loss. in accordance with the directors meeting of The consolidated financial statements provided to the chief operating decision Friday 16 September 2011. Exchange difference arising on translation incorporate the assets and liabilities and maker. The chief operating decision maker, of foreign operations is transferred directly results of entities controlled by Algae.Tec who is responsible for allocating resources Algae.Tec Limited is a company limited to the Group’s foreign currency translation Limited (“Company” or “parent entity”) at the and assessing performance of the operating by shares, incorporated, and domiciled reserve in the statement of financial end of the reporting period. A controlled segments, has been identified as the in Australia. position. These differences are recognised entity is any entity over which Algae.Tec Board of Directors. in the statement of comprehensive 1. Summary Of SigNifiCaNT Limited has the power to govern the financial (d) foreign Currency Translation income in the period in which the operation aCCOuNTiNg pOliCiES and operating policies, so as to obtain is disposed. The principal accounting policies adopted in benefits from the entity’s activities, generally (i) Functional and presentation currency the preparation of the financial statements accompanying a shareholding of more than (e) leases one-half of the voting rights. Items included in the financial statements are set out below. These policies have Lease of assets under which the in the Group’s entity are measured been consistently applied to all the years In preparing the consolidated financial consolidated entity assumes substantially using the currency of the primary presented, unless otherwise stated. The statements, all inter-group balances all the risks and benefits of ownership are economic environment in which the entity financial statement is for the consolidated and transactions between entities in the classified as finance leases as distinct from operates (‘the functional currency’). The entity of Algae.Tec Limited and its subsidiary. consolidated group have been eliminated operating leases under which the lessor consolidated financial statements are on consolidation. Accounting policies of effectively retains substantially all such risk (a) Basis of preparation of the presented in Australian dollars which is subsidiaries have been changed where and benefits. Property, plant and equipment financial report the parent entity’s functional and necessary to ensure consistency with those acquired by finance leases is capitalised The financial report is a general purpose presentation currency. adopted by the parent entity. at the present value of the minimum lease financial report that has been prepared (ii) Transactions and balances payments as a finance lease asset and as in accordance with Australian Accounting Non-controlling interests, being the equity a corresponding lease liability from date Standards, Australian Accounting in a subsidiary not attributable, directly Foreign currency transactions are translated of inception of the lease. Lease assets interpretations, other authoritative or indirectly, to a parent, are shown into functional currency using the exchange are amortised over the period the entity pronouncements of the Australian separately within the Equity section of rates prevailing at the date of the transaction. is expected to benefit from the use of the Accounting Standards Board and the the consolidate Statement of Financial Foreign currency gains and losses resulting assets or the term of the lease whichever is Corporations Act 2001. Position and Statement of Comprehensive from the settlement of such transactions and shorter. Finance lease liabilities are reduced Income. The non-controlling interest in the from the transaction at year-end exchange rates by the component of principal repaid. COmpliaNCE wiTh ifrS of monetary assets and liabilities denominated net assets comprises their interest at the Lease payments are allocated between The financial statements of Algae.Tec in foreign currencies are recognised in profit date of the original business combination the principal component of the liability and Limited also comply with International or loss, except when deferred in equity as and their share of changes in equity since interest expense. Financial Reporting Standards (IFRS) as qualifying cash flow hedges. that date. issued by the International Accounting Standards Board (IASB). Non-monetary items that are measured at fair value in a foreign currency are translated Historical Cost convention using the exchange rates at the date when These financial statements have been the fair value was determined. Translation prepared on historical costs, modified, where applicable, by the measurement at fair value of selected non-current, financial assets and financial liabilities. 38 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 39
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS (f) research Costs An impairment loss is recognised in profit (i) Trade and Other payablesFor personal use only Expenditure during the research phase of a or loss immediately, unless the relevant Trade and other payables represent the liability outstanding at the end of the reporting period for project is recognised as an expense when asset is carried at fair value, in which goods and services received by the Group during the reporting period which remains unpaid. The incurred. Development costs are capitalised case the impairment loss is treated as a balance is recognised as a current liability with the amount being normally paid within 30 days of only when technical feasibility studies revaluating decrease. recognition of liability. identify that the project will deliver future Where an impairment loss subsequently economic benefits and these benefits can (j) property, plant and Equipment reverses, the carrying amount of the asset Plant and equipment is stated at cost less accumulated depreciation and any accumulated be measured reliably. (cash-generating unit) is increased to the impairment losses. Development costs have a finite life and are revised estimate of its recoverable amount, amortised on a systematic basis matched to but only to the extent that the increased Depreciation is calculated based upon the estimated useful life of the assets as follows: the future economic benefits over the useful carrying amount does not exceed the Computer Equipment 20% to 50% Straight Line life of the project. carrying amount that would have been determined had no impairment loss been Computer Software 25% Straight Line (g) impairment of assets recognised for the asset (cash-generating Office Equipment 20% Straight Line The Group reviews the carrying amounts of unit) in prior years. A reversal of an Furniture & Fittings 14.3% Straight Line its assets to determine whether there is any impairment loss is recognised in profit or indication that those assets have suffered Facility Improvements 14.3% Straight Line loss immediately, unless the relevant asset an impairment loss. If any such indication is carried at fair value, in which case the Plant and equipment 14.3% Straight Line exists, the recoverable amount of the asset reversal of the impairment loss is treated as Laboratory Systems 14.3% Straight Line is estimated in order to determine the extent a revaluation increase. Motor Vehicles 22.5% Diminishing Value of the impairment loss (if any). Where the asset does not generate cash flows that are (h) Cash and Cash Equivalents The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if independent from other assets, the Group Cash and cash equivalents comprise cash on appropriate, at each financial year end. estimates the recoverable amount of the cash- hand, cash in banks and short-term deposits generating unit to which the asset belongs. with an original maturity of three months or Gains and losses on disposal are determined by comparing proceeds with the carrying amount. less that are readily convertible to known These gains and losses are included in the statement of comprehensive income. When revalued Recoverable amount is the higher of fair amounts of cash and which are subject to assets are sold, amounts included in the revaluation surplus relating to that asset are transferred value less costs to sell and value in use. In an insignificant risk of changes in value. to retained earnings. assessing value in use, the estimated future cash flows are discounted to their present (k) Earnings per Share value using a pre-tax discount rate that Basic earnings per share is calculated as net loss attributable to members of the Group, adjusted reflects current market assessments of the to exclude any costs of servicing equity (other than dividends) and preference share dividends, time value of money and the risks specific divided by the weighted average number of ordinary shares, adjusted for any bonus element. to the asset for which the estimate of future cash flows have not be adjusted. If the recoverable amount of an asset (or cash- generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. 40 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 41
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS (l) goods and Services Tax (gST) Classification and subsequent (m) financial instruments (cont) (iv) Available-for-sale financial assetsFor personal use only Revenues, expenses and assets are measurement The Group does not designate any interests Available-for-sale financial assets are non- recognised net of the amount of GST, except Finance instruments are subsequently in subsidiaries, associates or joint venture derivative financial assets that are either not where the amount of GST incurred is not measured at fair value, amortised cost entities as being subject to the requirement suitable to be classified into other categories recoverable from the Australian Taxation using the effective interest rate method, of Accounting Standards specifically of financial assets due to their nature, or they Office (ATO). In these circumstances the or cost. applicable to financial instruments. are designated as such by management. GST is recognised as part of the cost of They comprise investments in the equity of acquisition of the asset or as part of an item Amortised cost is the amount at which the (i) Financial assets at fair value through profit or loss other entities where there is neither a fixed of the expense. Receivable s and payables financial asset or financial liability is measure maturity nor fixed or determinable payments. in the Statement of Financial Position are at initial recognition less principal repayments Financial assets are classified at “fair value shown inclusive of GST. and any reduction for impairment, and through profit or loss” when they are held They are subsequently measured at fair value adjusted for any cumulative amortisation of for trading for the purpose of short-term with changes in such fair value (i.e. gains or The net amount of GST recoverable from, the difference between that initial amount losses) recognised in other comprehensive or payable to, the ATO is included as a profit taking, derivatives not held for hedging and the maturity amount calculated using the purposes, or when they are designated as income (except for impairment losses current asset or liability in the Statement of effective interest method. and foreign exchange gains and losses). Financial Position. such to avoid an accounting mismatch or to enable performance evaluation where a When the financial asset is derecognised, Fair value is determined based on current bid the cumulative gain or loss pertaining to Cash Flows are included in the Statement prices for all quoted investments. Valuation Group of financial assets is managed by key of Cash Flows on a gross basis. The GST management of personnel on a fair value that asset previously recognised in other techniques are applied to determine the fair comprehensive income is reclassified into components of cash flows arising from value for all unlisted securities, including basis in accordance with a documented risk investing and financial activities which are management or investment strategy. Such profit or loss. recent arm’s length transactions, reference to recoverable from, or payable to, the ATO are similar instruments and option pricing models. assets are subsequently measure at fair Available-for-sale financial assets are classified as operating cash flows. value with changes in carrying value being included in non-current assets where they The effective interest method is used to included in profit or loss. are expected to be sold within 12 months (m) financial instruments allocate interest income or interest expense Financial assets and financial liabilities are (ii) Loans and receivables after the end of the reporting period. All over the relevant period and is equivalent other financial assets are classified as recognised when the entity becomes a party to the rate that discounts estimated future Loans receivables are non-derivative current assets. to the contractual provisions to the instrument. cash payment or receipts (including fees, financial assets with fixed or determinable For financial assets, this is equivalent to the transaction costs and other premiums or (n) Contributed Equity payments that are not quoted in an active date that the Group commits itself to either discounts) through the expected life (or Ordinary shares and options are classified market and are subsequently measured at the purchase or sale of the asset (i.e. trade when this cannot be reliably predicted, the as contributed equity. Incremental costs amortised cost. date accounting is adopted). contractual term) of the financial instrument directly attributable to the issue of new to the net carrying amount of the financial (iii) Held-to-maturity investments share or options are shown in equity as a Financial instruments are initially measured at fair value plus transaction costs, except asset or financial liability. Revisions Held-to-maturity investments are non- deduction, net of tax, from proceeds. where the instrument is classified “at fair to expected future net cash flows will derivative financial assets that have fixed value through profit or loss”, in which case necessitate an adjustment to the carrying maturities and fixed or determinable transaction costs are expensed to profit or value with a consequential recognition of an payments, and it is the Group’s intention to loss immediately. income or expense item in profit or loss. hold these investments to maturity. They are subsequently measure at amortised cost. 42 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 43
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS (o) Taxation Deferred tax assets and liabilities are (p) Employee leave Benefits (i) Rendering of servicesFor personal use only measured at the tax rates that are expected (i) Current Tax to apply to the year(s) when the asset and (i) Wages, salaries, annual leave Consulting services are performed by the liability giving rise to them are realised or and sick leave parent for the Group’s controlled entity. Current tax is calculated by reference to Revenue is recognised by reference to the the amount of income taxes payable or settled, based on tax rates (and tax laws) that Liabilities for wages and salaries, including have been enacted or substantively enacted actual labour hours delivered at standard recoverable in respect of the taxable profit non-monetary benefits, annual leave and rates and direct expenses incurred. or tax loss for the year. It is calculated by reporting date. The measurement of accumulating sick leave expected to be using tax rates and tax laws that have deferred tax liabilities and asset reflects the settled within 12 months of the reporting (ii) Interest income been enacted or substantively enacted tax consequences that would follow from the date are recognised in other payables in manner in which the Group expects at the Interest revenue is recognised on a time by reporting date. Current tax for current respect of employees’ services up to the report date, to recover or settle the carrying proportionate basis that takes into account and prior years is recognised as a liability reporting date. They are measured at the amount of its assets and liabilities. the effective yield on the financial asset. (or asset) to the extent that it is unpaid amounts expected to be paid when the (or refundable). Deferred tax assets and liabilities are offset liabilities are settled. Liabilities for non- (r) Share-based payment when they relate to income taxes levied by accumulating sick leave are recognised Transactions (ii) Deferred Tax the same taxation authority and the Group when the leave is taken and are measured The Group provides benefits to its directors, Deferred tax is accounted for using the intends to settle its current tax assets and at the rates paid or payable. employees and consultants (including senior comprehensive balance sheet liability liabilities on the net basis. executives) of the Group in the form of share- (ii) Long service leave method in respect of temporary differences based payments, whereby employees render arising from differences between the carrying (iii) Current and deferred tax for the year. The liability for long service leave is services in exchange for shares or rights amount of assets and liabilities in the Current and deferred tax is recognised as an recognised in the provision for employees over shares (equity-settled transactions). Financial Information and the corresponding expense or income in the income statement, benefits and measured as the present value tax base of those items. The cost of these equity-settled transactions except when it relates to items credited or of expected future payments to be made in is measured by reference to the fair value of debited directly to equity, in which case respect of services provided by employees up In principle, deferred tax liabilities are recognised the equity instruments at the date at which the deferred tax is also recognised directly to the reporting date. Consideration is given for all taxable temporary differences. Deferred they are granted. in equity, or where it arises from the initial to expected future wage and salary levels, tax assets are recognised to the extent that it accounting for a business combination, in experience of employee departures, and In valuing equity-settled transactions, is probable that sufficient taxable amounts will which case it is taken into account in the period of service. Expected future payments no account is taken of any performance be available against which deductible temporary determination of good or excess. are discounted using market yields at the conditions, other than conditions linked to differences or unused tax losses and tax offsets reporting date of national government bonds the price of shares of Algae.Tec Limited can be utilised. However, deferred tax assets with terms to maturity and currencies that (market conditions) if applicable. and liabilities are not recognised if the temporary match, as closely as possible, the estimated differences giving rise to them arise from the future cash outflows. initial recognition of assets and liabilities (other than as a result of a business combination) that (q) revenue recognition affects neither taxable income nor accounting Revenue is recognised and measured at profit. Furthermore, a deferred tax liability is the fair value of the consideration received not recognised in relation to taxable temporary or receivable to the extent it is probable differences arising from goodwill. that the economic benefits will flow to the consolidated entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. 44 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 45
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS (r) Share-based payment The dilutive effect, if any, of outstanding (s) New accounting Standards 2. CriTiCal aCCOuNTiNgFor personal use only Transactions (cont) options is reflected as additional share for application in future ESTimaTES aND JuDgEmENTS The cost of equity-settled transactions is dilution in the computation of earnings periods (cont) Estimates and judgements are continually recognised, together with a corresponding per share. • Removing the requirements to separate evaluated and are based on historical increase in equity, over the period in which (s) New accounting Standards and fair value embedded derivatives for experience and other factors, including the performance and/or service conditions for application in future financial assets carried at amortised cost expectations of future events that may are fulfilled, ending on the date on which the periods have a financial impact on the entity and relevant employees become fully entitled to • Allowing an irrevocable election on initial that are believed to be reasonable under the The AASB has issued new and amended recognition to present gains and losses on the award (the vesting period). circumstances. accounting standards and interpretations investments in equity instruments that are The cumulative expense recognised for that have mandatory application dates for not held for trading in other comprehensive (a) Critical accounting estimates and equity-settled transactions at each reporting future reporting periods. The Group has income. Dividends in respect of these assumptions date until vesting date reflects (i) the extent decided against early adoption of these investments that are a return on investment to which the vesting period has expired and standards. A discussion of those future can be recognised in profit or loss and there The group makes estimates and assumptions (ii) the Group’s best estimate of the number requirements and their impact on the Group is no impairment or recycling on disposal of concerning the future. The resulting of equity instruments that will ultimately vest. is as follows: the instrument, and accounting estimates will, by definition, No adjustment is made for the likelihood of seldom equal the related actual results. • AASB 9: Financial instruments and AASB • Reclassifying financial assets where there The estimates and assumptions that have market performance conditions being met as 2009-11: Amendments to Australian is a change in an entity’s business model a significant risk of causing a material the effect of these conditions is included in Accounting Standards arising from as they are initially classified based on: adjustment to the carrying amounts of assets the determination of fair value at grant date. AASB 9 (AASB 1,3,4,5,7,101,102,108,112, and liabilities within the next financial year are The statement of comprehensive income (a) The objective of the entity’s business 118,121,127,128,131,132,136,139, discussed below. charge or credit for a period represents the model for managing financial assets, and 1023 & 1038 and Interpretations 10 & 12) movement in cumulative expense recognised Income taxes (applicable for annual reporting periods (b) The characteristics of the contractual as at the beginning and end of that period. commencing on or alter 1 January 2013). cash flows. The group is subject to income taxes in No expense is recognised for awards that Australia. The group estimates its tax liabilities These standards are applicable retrospectively • AASB 124: Related Party Disclosures do not ultimately vest, except for awards based on the understanding of the tax laws and amend the classification and measurement (applicable for annual reporting where vesting is only conditional upon a and advice from tax experts. Where the final of financial assets. The Group has not yet periods commencing on or after market condition. If the terms of an equity- tax outcome of these matters is different determined the potential impact on the 1 January 2011) settled award are modified, as a minimum from the amounts that were initially recorded, financial statements. an expense is recognised as if the terms had such differences will impact the current and This standard removes the requirement not been modified. In addition, and expense The changes made to accounting deferred income tax assets and liabilities in for government related entities to disclose is recognised for any modification that requirements include: the period such determinations are made. details of all transactions with the increases the total fair value of the share- • Simplifying the classifications of financial government and other government related In addition, the group has recognised based payment arrangement, or is otherwise assets into those carried at amortised entities and clarifies the definition of a deferred tax assets relating to carried beneficial to the employee, as measure at cost and those carried at fair value. related party to remove inconsistencies and forward tax losses to the extent there are the date of modification. simplify the structure of the standard. No sufficient taxable temporary differences If an equity-settled award is cancelled, it • Simplifying the requirements for changes are expected to materially affect (deferred tax liabilities) relating to the same is treated as if it had vested on the date embedded derivatives the Group. taxation authority and the same subsidiary of cancellation, and any expense not yet • Removing the tainting rules associate against which the unused tax losses can The Group does not anticipate early adoption recognised for the award is recognised with held-to-maturity assets be utilised. of any of the above accounting standards. immediately. However, if a new award is substituted for the cancelled award and Other Australian Accounting Standards designated as a replacement award on issued but not yet effective are not expected the date that it is granted, the cancelled to result in significant accounting policy or and new award are treated as if they were disclosure changes. a modification of the original award, as described in the previous paragraph. 46 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 47
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS 2. CriTiCal aCCOuNTiNg ESTimaTES aND JuDgEmENTS (CONT) 5. lEaSES aND COmmiTmENTS (CONT)For personal use only (b) Critical judgements in applying the entity’s accounting policies CONSOliDaTED Estimated impairment of noncurrent assets 2011 2010 The group makes estimates and assumptions concerning the future. The resulting accounting $ $ estimates will, by definition, seldom equal the related actual results. 3. SEgmENT rEpOrTiNg Commitments in relation to the rental of a A segment is a component of the consolidated entity that engages in business activities to photocopier/printer/fax machine contracted provide products or services within a particular economic environment. The Company operates for at the reporting date but not recognised predominantly in the environmental and energy industry and a single geographic segment. as liabilities payable: 4. ExpENSES Within 1 year 5,089 - Loss before income tax includes the following specific expenses: Later than 1 year but within 5 years 14,420 - CONSOliDaTED Later than 5 years - - 2011 2010 Rental is for 48 months from 2 May 2011 $ $ at a fixed rate of $424.10 per month. 6. iNCOmE Tax ExpENSE Depreciation Plant and Equipment 5,835 291 CONSOliDaTED Share based payments 200,000 - 2011 2010 Interest Expense 1,575 - $ $ Unrealised Exchange 274,559 - (a) Reconciliation of Income Tax Research Costs 173,417 227,814 expense to prima facie tax payable: Profit/(Loss) before income tax (2,468,567) (410,174) 5. lEaSES aND COmmiTmENTS Prima facie income tax at 30% (740,570) (123,052) Commitments in relation to a property lease Tax effect of amounts not assessable/deductible contracted for at the reporting date but not in calculating taxable income: recognised as liabilities payable: Non-deductible expenses 1,063 - Within 1 year 5,250 35,000 Share based payments 54,545 - Later than 1 year but within 5 years - - Gross income tax expense/(benefit) (684,962) - Later than 5 years - - Lease term was 18 months from 24 March 2010 at rental of $30,000 per annum. 2 months Future income tax benefit not brought to account 684,962 123,052 remain on current lease with an option for a further 12 months. Rent review was conducted in Income tax expense/(benefit) recognised - - March 2011 and will be reviewed again in March 2012. 48 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 49
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS (b) Deferred Tax Assets 9. CurrENT aSSETS – TraDE aND OThEr rECEivaBlESFor personal use only The potential deferred tax asset arising from the tax losses and temporary differences CONSOliDaTED have not been recognised as an asset because recovery of tax losses is not yet probable. 2011 2010 $ $ CONSOliDaTED Accrued Income 258 - 2011 2010 GST 47,277 - $ $ Other receivables 455 19,834 Provisions 47,990 19,834 Annual Leave 3,246 8,100 Accrued Superannuation 1,485 - 10. CurrENT aSSETS - OThEr Foreign Exchange Gains/Losses 82,368 - CONSOliDaTED Borrowing costs (Profit/Loss) 77,671 - 2011 2010 Equity raising costs (Profit/Loss) 6,244 - $ $ Equity raising costs (Equity) 105,404 - Australian Tax Losses 480,485 123,052 Prepayments 63,554 221,448 Gross Deferred Tax Assets 756,903 131,152 63,554 221,448 Unrecognised deferred tax assets relating (756,903) (131,152) to the above temporary differences Deferred Tas Assets Recognised - - 7. auDiTOrS rEmuNEraTiON CONSOliDaTED 2011 2010 $ $ Auditing the Groups financial statement Somes and Cooke – Holding Company Auditor 27,250 7,500 Jack Milner – Subsidiary Company Auditor 9,669 - 36,919 7,500 8. CurrENT aSSETS – CaSh aND CaSh EquivalENTS CONSOliDaTED 2011 2010 $ $ Cash at bank and on hand 2,380,840 9,779 Deposit at call 53,411 - 2,434,251 9,779 50 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 51
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS 11. NON-CurrENT aSSETS – prOpErTy, plaNT aND EquipmENT 2011 TOTal p&E C&E O&E f&i l&S mvFor personal use only CONSOliDaTED $ $ $ $ $ $ $ 2011 2010 CONSOliDaTED $ $ Carrying amount of 2,436 - 2,436 - - - - plant and Equipment 1 July 2010 Plant and Equipment - at cost 80,044 - Additions 130,789 80,044 10,050 19,020 4,217 6,094 11,364 Less: Accumulated depreciation (2,141) - Disposals - - - - - - - 77,903 - Depreciation / (5,834) (2,256) (1,849) (672) (169) (47) (841) amortisation expense Computer Equipment Currency exchange 163 115 13 26 9 - - Computer Equipment - at cost 12,776 2,727 reserve effect Less: Accumulated depreciation (2,126) (291) Carrying amount 127,554 77,903 10,650 18,374 4,057 6,047 10,523 10,650 2436 at 30 June 2011 Office Equipment Office Equipment - at cost 19,020 - 2010 TOTal p&E C&E O&E f&i l&S mv Less: Accumulated depreciation (646) - $ $ $ $ $ $ $ 18,374 - CONSOliDaTED facility improvements Carrying amount of - - - - - - - Facility Improvements - at cost 4,217 - 1 July 2009 Less: Accumulated depreciation (160) - Additions 2,727 - 2,727 - - - - 4,057 - Disposals - - - - - - - laboratory Systems Depreciation / (291) - (291) - - - - amortisation expense Laboratory Systems - at cost 6,094 - Carrying amount 2,436 - 2,436 - - - - Less: Accumulated depreciation (47) - at 30 June 2010 6,047 - motor vehicles Motor Vehicles - at cost 11,364 - 12. NON-CurrENT aSSETS - iNTaNgiBlE As at the date of this report, the Company has no Intangible Non Current Assets. Less: Accumulated depreciation (841) - 10,523 - Totals Asset at cost 133,515 2,727 Less: Accumulated depreciation (5,961) (291) 127,554 2,436 52 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 53
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS 13. CurrENT liaBiliTiES – rECONCiliaTiON Of CONSOliDaTED SharE mOvEmENTSFor personal use only TraDE aND OThEr payaBlES CONSOliDaTED NO Of SharES $ 2011 2010 Balance at 30 June 2010 222,291,667 600,000 $ $ Issue of shares via IPO 25,430,001 5,085,987 Trade payables 29,047 56,671 Issue of shares via placement - - Other payables 52,339 - Issues of shares as consideration 200,000 40,000 81,386 56,671 of Investor Relations Issue of shares through other activities - - fair valuE Share based payments 1,000,000 200,000 Due to the short term nature of these payables, their carrying value is assumed to approximate Exercise of options through year - - their fair value. Balance at 30 June 2011 248,921,668 5,925,987 iNTErEST raTE, fOrEigN ExChaNgE aND liquiDiTy riSk Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 21. SharE OpTiONS At the date of this report, the following options to acquire Ordinary shares of the company were 14. CurrENT liaBiliTiES – prOviSiONS on issue: CONSOliDaTED Number Exercise Expiry Date 2011 2010 price Unlisted ordinary options 5,000,000 0.75 13/1/2014 $ $ Unlisted ordinary options 49,584,334 0.75 12/1/2016 Provisions for Annual Leave 10,820 - 10,820 - 54,584,334 0.75 - CapiTal maNagEmENT 15. CONTriBuTED EquiTy The Management controls the capital of the Group in order to maintain a good debt to equity ratio, CONSOliDaTED proved the shareholders with adequate returns and ensure that the Group can fund its operations 2011 2010 and continue as a going concern. $ $ The Group’s debt and capital includes ordinary shares financial liabilities, supported by financial assets. Balance at start of the year 600,000 600,000 There are no externally imposed capital requirements. Ordinary shares 5,325,987 - Management effectively manages the Group’s capital by assessing the Group’s financial risks and Cost of issue of shares (479,183) - adjusting its capital structure in response to changes in risks and in the market. These responses Balance at end of financial year 5,446,804 600,000 include the management of debt levels, distributions to shareholders and share issues. 54 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 55
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS 16. EarNiNgS pEr SharE 18. CONTrOllED ENTiTiESFor personal use only 2011 2010 COuNTry Of OrDiNary SharE CONSOliDaTED CENTS CENTS iNCOrpOraTiON EquiTy iNTErEST Basic earnings per share 2011 2010 Loss attributable to the ordinary owners of the Group % % (0.010) (0.002) Diluted earnings per share parent Entity Loss from continuing operations attributable to the (0.010) (0.002) Algae.Tec Limited Australia 100% 100% ordinary owners of the Group Controlled Entity 2011 2010 Algae Energy Inc USA 100% 100% $ $ 19. kEy maNagEmENT pErSONNEl DiSClOSurES reconciliation of earnings used in key management personnel calculating earnings per share The following persons were directors of the Company during the financial year. Loss attributable to the ordinary owners of the Group (2,468,567) (410,174) used in calculating basic earnings per share Roger Stroud Executive Chairman Peter Hatfull Managing Director/Company Secretary 2011 2010 Earl McConchie Executive Director NumBEr NumBEr Timothy Morrison Non Executive Director weighted average number of shares kEy maNagEmENT pErSONNEl COmpENSaTiON used as the denominator As at the date to this report the directors have relevant interest in shares and have received Weighted average number of ordinary shares on 235,703,366 222,291,667 remuneration by way of salary and consulting fees and this is set out in remuneration report within issue used in the calculation of basic EPS the Directors Report section. CONSOliDaTED Diluted earnings per share are calculated after classifying all options on issue remaining 2011 2010 unconverted at 30 June 2011 as potential ordinary shares. As at 30 June 2011, the Company $ $ has on issue 54,584,334 options over unissued capital and has incurred a net loss. As the notional exercise prices of these options is greater than the current market price of the shares, they have not been included in the calculations of the diluted earnings per share as they are anti- Short term employee benefits 409,945 265,993 dilutive for the period presented. Post-employment benefits 12,452 - 17. rESErvES Share based payments - - CONSOliDaTED 422,397 265,993 2011 2010 $ $ Further information on key management personnel can be found in the remuneration report within the director’s report. Foreign Exchange Reserve 31,080 - Equity instrument disclosures relating to key management personnel The foreign currency translation reserve records the foreign currency differences arising from the The number of shares in the Group held during the financial year by each Director of Algae.Tec translation of foreign operations and the equity accounting of foreign associates. Limited, including their personally-related entities, is set out as follows: 56 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 57
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS 19. kEy maNagEmENT pErSONNEl DiSClOSurES (CONT) DirECTOrS aND ExECuTivES EquiTy hOlDiNg: (CONT)For personal use only 1. Other changes refer to shares issued to the founders of the company. DirECTOrS aND ExECuTivES EquiTy hOlDiNg: 2. By virtue of Section608 (3) of the Corporations Act, as Mr Stroud controls Teco Pty Ltd which Fully paid ordinary shares issued by Algae.Tec Limited holds 50% of Teco.Bio LLC which in turn holds 200 million Shares. held at 1 granted as received Other 3. By virtue of Section 608(3) of the Corporations Act, as Mr McConchie controls Dot-Bio Inc July 2010 Compensation on exercise change which holds 50% of Teco.Bio LLC which in turn holds 200 million Shares. Related parties of of options Mr McConchie together hold 4.5 million Shares. No. No. No. No.1 held at 30 OpTiON hOlDiNgS June 2011 The Directors do not hold any options in the Group during the financial year or for the prior Roger 200,000,0002 - - 321,549 200,321,549 financial years. Stroud 20. rElaTED parTy TraNSaCTiONS Peter 8,000,000 - - 1,497,565 9,497,565 Hatfull (a) parent entities Garnet Earl 204,500,000 3 - - - 204,500,000 The legal and ultimate parent entity within the Group is Algae.Tec Limited. McConchie (b) Subsidiaries Timothy 2,000,000 - - - 2,000,000 Interests in subsidiaries are set out in note 18. Morrison (c) key management personnel 1. Other changes refer to shares acquired on the market Disclosures relating to key management personnel are set out in note 19. 2. By virtue of Section608 (3) of the Corporations Act, as Mr Stroud controls Teco Pty Ltd which (d) Borrowings to/transactions with related parties holds 50% of Teco.Bio LLC which in turn holds 200 million Shares. The following loans occurred with related parties: 3. By virtue of Section 608(3) of the Corporations Act, as Mr McConchie controls Dot-Bio Inc which holds 50% of Teco.Bio LLC which in turn holds 200 million Shares. Related parties of CONSOliDaTED Mr McConchie together hold 4.5 million Shares. 2011 2010 DirECTOrS aND ExECuTivES EquiTy hOlDiNg: $ $ Fully paid ordinary shares issued by Algae.Tec Limited loan to roger Stroud held at 1 granted as received Other Balance at beginning of the year - - July 2009 Compensation on exercise change Loan drawdown 18,000 - of options Loan repayment - - No. No. No. No.1 held at 30 Balance at end of the year 18,000 - June 2010 The loan provided to Roger Stroud is an unsecured loan comprising of the consideration payable Roger - - - 200,000,0002 200,000,0002 by R Stroud. The loan has been provided interest free and will be repaid as deductions from his Stroud consulting fees as monthly installments, not exceeding 12 months from 1 July 2011. Peter - - - 8,000,000 8,000,000 Hatfull Garnet Earl - - - 204,500,0003 204,500,0003 McConchie Timothy - - - 2,000,000 2,000,000 Morrison 58 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 59
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS (e) motor vehicle The Group holds the following financial instruments:For personal use only A second hand motor vehicle for general use of the Group and its employees (and designated as a “pool” vehicle), garaged overnight on the Group’s premises, was purchased from a relative of CONSOliDaTED Roger Stroud at fair market value of $12,500 including GST. 2011 2010 (f) A prepayment of $60,000 was made to Roger Stroud in June 2011 being an advance of $ $ consulting fees for July and August and is shown as a prepayment in the accounts. financial assets Cash and cash equivalents 2,434,251 9,779 (g) Prior to the listing of the Company, various expenses were incurred and paid for by the Trade and other payables 47,990 19,834 Directors. These monies were repaid to the Directors upon receipt from the sale of shares. Other financial assets 18,000 221,448 Peter Hatfull $ 102,269.11 2,500,241 251,061 Roger Stroud $ 140,983.09 CONSOliDaTED (h) Amounts of A$173,417 (US$161,454) were paid to Dot.Bio prior to the listing of Algae.Tec 2011 2010 Limited. Dot.Bio is controlled by Mr Earl McConchie. $ $ Date US$ Financial Liabilities 21/07/2010 6,475.00 Trade and other payables 81,386 56,671 30/07/2010 5,975.00 81,386 56,671 18/08/2010 9,975.00 (a) market risk 30/08/2010 9,975.00 (i) Foreign exchange risk 16/09/2010 8,975.00 Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial 18/10/2010 7,495.00 instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group 26/11/2010 22,975.00 holds financial instruments which are other than the AUD functional currency of the Group. 16/12/2010 9,634.00 With instruments being held by overseas operations, fluctuations in the US Dollar may impact on 12/01/2011 79,975.00 the Group’s financial results unless those exposures are appropriately hedged. 161,454.00 The ongoing development of the technology is to be carried out in the USA and is fully funded by the capital raisings to date. The prospectus used an exchange rate of USD $0.75 to AUD for its projections of cost. In February 2011, with the USD 0.982 against AUD it was decided (i) Five members of Mr Earl McConchie’s immediate family were employed by Algae Energy Inc to purchase USD $2,946,000(AUD $3,000,000) effectively fixing the cost of the short term during the year. The Group paid the family members a total of A$149,415 (US$139,108) as development expenditure. salaries and wages. The continuing rise in the AUD since the purchase of USD in February has given rise to a substantial 21. fiNaNCial riSk maNagEmENT unrealised exchange loss in the USD cash holdings for the year. The Group’s operations expose it to various financial risks including market, credit, liquidity It is the Group’s policy that future US development costs will be assessed at regular intervals and cash flow risks. Risk management programmes and policies are employed to mitigate the and where deemed appropriate, further purchase of USD will occur to minimise exchange rate potential adverse effects of these exposures on the results of the Group. exposure of US expenditure. Financial risk management is carried out by the Board on a regular basis by reviewing current and The following table shows the foreign currency risk on the financial assets and liabilities of the potential sources of funding, cash flow and operating/capital expenditure forecasts, to manage Groups operations denominated in currencies other that the functional currency of the operations. credit, liquidity and cash flow risk. This included all cash holdings of USD. 60 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 61
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS CONSOliDaTED (c) liquidity riskFor personal use only Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its 2011 2010 debts or otherwise meeting its obligations related to financial liabilities. The Group manages this uSD$ uSD$ risk through the following mechanisms. financial assets - Preparing forward looking cash flow analysis in relation to its operational, investing and Cash and cash equivalents 1,820,624 - financing activities; Trade and other receivables 9,470 - - Obtaining funding from a variety of sources; 1,830,094 - - Maintaining a reputable credit profile; - Managing credit risk related to financial assets; financial liabilities Trade and other payables 17,167 - - Only investing surplus cash with major financial institutions; and 17,167 - - Comparing the maturity profile of financial liabilities with the realisation profile Net exposure 1,812,927 - of financial assets. The Group’s policy is to ensure no more than 30% of borrowing should mature in any 12-month period. (ii) Consolidated Entity - sensitivity Based on financial instruments held at 30 June 2011, had the Australian dollar weakened/ (d) fair value estimation strengthened by 20% against the US dollar with all other variables held constant, the Consolidated The fair value of financial assets and financial liabilities must be estimated for recognition and Entity’s post-tax profit/loss for the year and equity would have been $332,708 lower/higher, measurement or for disclosure purposes. mainly as a result of foreign exchange gains/losses on translation of US dollar denominated The carrying value of all financial assets and liabilities are assumed to approximate their fair financial instruments as detailed in the above table. values due to their short term nature. (iii) Cash flow and fair value interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. At the date of this report, the Group was not exposed to interest rate risk due to negative long/ short term borrowings. “Further (b) Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, improvements deposits with banks and financial institutions, including outstanding receivables. For banks and to the Algae.Tec financial institutions, only major Australian banking institutions are used. For customers, individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. technology are The maximum exposure to credit risk at the end of the reporting period is the carrying amount already being of the financial assets. The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Group. Cash is only tested using the held in AA credit rated financial institution. new improved facility.” 62 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 63
  • NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS NOTES TO aND fOrmiNg parT Of ThE fiNaNCial STaTEmENTS 22. rECONCiliaTiON Of lOSS afTEr Tax TO NET CaSh flOwS 24. parENT ENTiTy DiSClOSurES (CONT)For personal use only frOm OpEraTiONS. a. financial information 2011 2010 CONSOliDaTED $ $ 2010 2011 $ $ Loss from ordinary activities after tax 1,859 ,013 410,174 Other Comprehensive Income - - Loss after income tax (2,468,567) (410,174) Total Comprehensive loss 1,859,013 410,174 Adjustment for non cash items: Current Assets 2,086,101 251,061 Depreciation of non-current assets 5,835 291 Non Current Assets 1,118,802 2,436 Amortisation of non-current assets - - Total Assets 3,204,903 253,497 Foreign exchange translation 274,559 - Employee share options - - Current Liabilities 45,286 56,671 Net (gain)/loss on disposal of property, plant - - Non Current Liabilities (18,000) 7,000 and equipment Total Liabilities 27,286 63,671 Share based payments 200,000 - Fair value change in derivatives - - Net assets 3,177,617 189,826 Change in assets and liabilities Share Holder Equity (Increase)/decrease in trade and other (28,156) (19,834) Issue Capital 5,885,987 600,000 receivables Capital Raising Costs (439,183) - (Increase)/decrease in deferred tax assets - - Share Options Reserve - - (Increase)/decrease in prepayments 157,894 (17,626) Convertible Note Reserve - - (Decrease)/increase in trade and other 35,535 56,671 Accumulated Losses (2,269,187) (410,174) payables Total Equity 3,177,617 189,826 Net cash flow from operating activities (1,822,900) (390,672) 23. EvENTS SuBSEquENT TO END Of rEpOrTiNg pEriOD b. guarantees There has been no significant event occurring after balance date which has significantly affected Algae.Tec Limited has not issued any guarantees to any subsidiaries. It is however committed to or may significantly affect the Group’s operations or results of those operations or the Group’s the ongoing funding of its American subsidiary Algae Energy Inc. state of affairs in future financial years. c. Other Commitments 24. parENT ENTiTy DiSClOSurES Algae.Tec Limited has no commitments to acquire property, plant and equipment, and has no The following information has been extracted from the books and records of the parent and has contingent liabilities. been prepared in accordance with the accounting standards. 25. SharE-BaSED paymENTS A share based payment of 1,000,000 shares @ $0.20 per share was made on 10 May 2011 to DMG Group in consideration of advertising services provided to Algae.Tec Ltd following the initial IPO through to June 2011. 26. CONTiNgENT liaBiliTiES Algae.Tec Limited has no contingent liabilities. 64 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 65
  • DirECTOr’S DEClaraTiON In the opinion of the Directors’ of Algae.Tec Limited (“the Group”)For personal use only (a) The financial statements and the notes and the additional disclosures included in the directors’ report designated as audited in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2011 and its performance for the year ended that date; and (ii) Complying with Accounting Standards and Corporations Regulations 2001, and: (b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011. Signed in accordance with a resolution of the Directors made pursuant to s295(5) of the Corporations Act 2001. On behalf of the Board Roger Stroud Executive Chairman 30 September 2011 Perth, Western Australia 66 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 67
  • For personal use only 68 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 69
  • SharEhOlDEr SharEhOlDEr Section 5 Section 5For personal use only iNfOrmaTiON iNfOrmaTiON SharEhOlDEr iNfOrmaTiON SHAREHOLDER INFORMATION - A. Distribution of equity securities 72 - B. Equity Security Holders 73 - C. Substantial holders 73 - D. Voting Rights 75 70 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 71
  • SharEhOlDEr iNfOrmaTiON SharEhOlDEr iNfOrmaTiON The shareholder information set out below was applicable as at 31 July 2011. B. Equity Security holdersFor personal use only a. Distribution of equity securities Twenty largest quoted equity security holders Analysis of numbers of equity security holders by size of holding: The names of the twenty largest holders of quoted ordinary shares are listed below: Ordinary Shares listed Options unlisted Options SharEhOlDErS NumBEr hElD pErCENTagE Of iSSuED SharES 1-1000 11,078 - - Teco Bio LLC 200,000,001 80.35 1,001 - 5,000 393,577 - - Mr Peter Ernest Hatfull 8,095,000 3.25 5,001 - 10,000 3,217,941 - - FMR Investments Pty Ltd 5,000,000 2.01 10,001 - 100,000 6,496,876 - - Mrs Jeanette McConchie 2,400,000 0.96 100,001 and over 238,802,196 - 54,584,334 Mr Timothy Morrison 2,000,000 0.80 248,921,668 - 54,584,334 Tinkler Investments Pty Ltd <Tinkler Family A/C> 1,610,000 0.65 The Lawsons Company Pty Ltd 1,300,000 0.52 Mr Joseph Chung <TH & TH Chung Super Fund A/C> 1,250,000 0.50 Hover Holdings Pty Ltd 1,250,000 0.50 Ms Susan Fitzpatrick-Napier <The Susan Self Man S/F> 1,000,000 0.40 Moltoni Super Pty Ltd <Moltoni Super Fund A/C> 950,000 0.38 Mr Peter Ernest Hatfull + Mrs Julie Ellen Hatfull 922,286 0.37 Bordeaux Holdings Pty Ltd 750,000 0.30 Mr Duncan Neil Preston 750,000 0.30 Mr Graham Woolford 745,714 0.30 Mr Tralan McConchie 700,000 0.28 Mr Stephen Crotty 625,000 0.25 Mrs Marie Denise Alban 589,000 0.24 Moltoni Corporation Pty Ltd 577,000 0.23 Ms Andrea Lyle 500,000 0.20 231,014,001 92.79 C. Substantial holders Substantial holders in the company are set out below: OrDiNary SharES NumBEr hElD pErCENTagE Of iSSuED SharES Teco.Bio LLC 200,000,001 80.35 72 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 73
  • “Algae.Tec SharEhOlDEr iNfOrmaTiON Limited is committed D. voting rights to protectingFor personal use only The voting rights attaching each class of security are set out below. Shareholders Ordinary shares interest.” On a show of hands, each member present in person and each other person present as a proxy of a member has one vote. On a poll each member present in person has one vote for each fully paid share held by the member and each person present as a proxy of a member has one vote for each fully paid share held by the member that the proxy represents. 74 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 75
  • NOTESFor personal use only 76 | ALGAE.TEC ANNUAL REPORT - 30.06.11 ALGAE.TEC ANNUAL REPORT - 30.06.11 | 77
  • For personal use only algaE.TEC limiTED Copyright in this document is the property of ALGAE.TEC ABN 16 124 544 190 LIMITED. This document may not be reproduced in whole or in part without the prior written consent of ALGAE.TEC LIMITED. ALGAE.TEC LIMITED may seek both injunctive relief restraining Suite 9, 3 Centro Avenue the unauthorised use of this document (or any part thereof) and Subiaco, Perth, an accounting for profits against any person who reproduces this Western Australia 6008 document (or any part thereof) without written consent. www.algaetec.com.au © ALGAE.TEC LIMITED 2011 78 | ALGAE.TEC ANNUAL REPORT - 30.06.11