PART
I
Item
1. Identity of Directors, Senior Management and
Advisers
Not
applicable.
Item
2. Offer Statistics and Expected Timetable
Not
applicable.
Item
3. Key Information
A.
Selected
Financial Data.
The following
selected consolidated statements of operations and other
consolidated financial data for the fiscal years 2018, 2017, and
2016 have been derived from our audited consolidated financial
statements included elsewhere in this annual report. You should
read the selected consolidated financial data in conjunction with
our consolidated financial statements and related notes and
“Item 5 — Operating and Financial Review and
Prospects” included elsewhere in this annual report. Our
historical results do not necessarily indicate our expected results
for any future periods.
Our financial
statements have been prepared in Australian dollars and in
accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards
Board.
Income statement
data for the fiscal years ended June 30, 2018, 2017 and 2016 and
the balance sheet data as at June 30, 2018 and 2017 have been
derived from our audited financial statements that are included
elsewhere in this annual report. Income statement data for the
fiscal years ended June 30, 2015 and 2014 and the balance sheet
data as at June 30, 2016, 2015, and 2014 have been derived from our
audited financial statements that are not included in this annual
report.
|
|
$
2018 US$
(1)
|
|
|
|
2015 A$
|
2014 A$
|
|
Income
Statement data:
|
|
|
|
|
|
|
|
Total sales
revenue
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total other
income
|
1
|
2
|
8
|
42
|
7,271
|
9,684
|
|
Cost of
sales
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Employee benefits
expense
|
-
|
-
|
(467
)
|
(1091
)
|
(1,574
)
|
(1,377
)
|
|
Other income/
(expenses)
|
(156
)
|
(200
)
|
(4,050
)
|
(1,169
)
|
311
|
(4,053
)
|
|
Finance
costs
|
(2
)
|
(2
)
|
-
|
-
|
(1,815
)
|
(4,863
)
|
|
Profit/(loss) from
operations before income tax
|
(157
)
|
(202
)
|
(4,509
)
|
(2,218
)
|
4,193
|
(609
)
|
|
Income tax
(expense)/ benefit
|
-
|
-
|
(3
)
|
(1
)
|
(6
)
|
-
|
|
Profit/(loss) from
continuing operations
|
(157
)
|
(202
)
|
(4,512
)
|
(2,219
)
|
4,187
|
(609
)
|
|
Share of net
(loss)/profit of associate accounted for using the equity
method
|
-
|
-
|
(38
)
|
(110
)
|
37
|
-
|
|
Profit/(loss) for
the year from discontinued operations
|
-
|
-
|
-
|
-
|
24,133
|
(485
)
|
|
Net Profit /
(loss)
|
(157
)
|
(202
)
|
(4,550
)
|
(2,329
)
|
28,357
|
(1,094
)
|
|
Profit/(loss)
attributable to non-controlling interests
|
|
|
|
-
|
-
|
17
|
|
Profit/(loss)
attributable to members of the parent
|
(157
)
|
(202
)
|
(4,550
)
|
(2,329
)
|
28,357
|
(1,077
)
|
|
Basic and diluted
earnings / (loss) per share
(2)
|
(0.004
)
|
(0.005
)
|
(0.11
)
|
(0.06
)
|
0.91
|
(0.08
)
|
|
Weighted average
ordinary number of shares outstanding
(3)
|
40,870,275
|
40,870,275
|
40,870,275
|
40,870,275
|
31,253,837
|
13,377,124
|
|
Balance
Sheet data:
|
|
|
|
|
|
|
|
Total current
assets
|
148
|
200
|
398
|
2,522
|
8,851
|
4,002
|
|
Total
assets
|
148
|
200
|
399
|
6,171
|
12,621
|
4,049
|
|
Total current
liabilities
|
151
|
205
|
205
|
1,406
|
5,852
|
276
|
|
Total non-current
liabilities
|
-
|
-
|
-
|
-
|
-
|
15,125
|
|
Total
liabilities
|
151
|
205
|
205
|
1,406
|
5,852
|
15,400
|
|
Retained earnings/
(accumulated losses)
|
(1,269
)
|
(1,715
)
|
(1,513
)
|
3,037
|
5,366
|
(141,618
)
|
|
Total
Equity/(Deficit)
|
(4
)
|
(5
)
|
195
|
4,765
|
6,770
|
(11,351
)
|
|
Other
financial data:
|
|
|
|
|
|
|
|
Dividends per
share
|
—
|
|
-
|
—
|
—
|
—
|
(1)
The balance sheet
data has been translated into U.S. dollars from Australian dollars
based upon the noon buying rate of the City of New York for cable
transfers of Australian dollars, as certified for customs purposes
by the Federal Reserve Bank of New York on June 30, 2018, which
exchange rate was A$1.00 = US$0.7399. The income
statement data has been translated into U.S. dollars from
Australian dollars based upon the weighted average of the noon
buying rate of the City of New York for cable transfers of
Australian dollars, as certified for customs purposes by the
Federal Reserve Bank of New York for the period from July 1, 2017
to June 30, 2018 which was A$1.00 = US$0.7753. These
translations are merely for the convenience of the reader and
should not be construed as representations that the Australian
dollar amounts actually represent such U.S. dollar amounts or could
be converted into U.S. dollars at the rate indicated.
(2)
Net (loss)/profit
per ordinary share — basic and diluted is
calculated as net loss or net profit for the period divided by
adjusted weighted average number of ordinary shares outstanding for
the same period.
Exchange
Rate Information
The Australian
dollar is convertible into U.S. dollars at freely floating rates.
There are no legal restrictions on the flow of Australian dollars
between Australia and the United States.
For your
convenience, we have translated some Australian dollar amounts into
U.S. dollar amounts at the noon buying rate in The City of New York
for cable transfers in Australian dollars as certified for customs
purposes by the Federal Reserve Bank of New York (the “noon
buying rate”). On June 30, 2018, the noon buying rate for
Australian dollars into U.S. dollars was A$1.00 = US$0.7399. On
September 7, 2018, the noon buying rate for Australian dollars into
U.S. dollars was A$1.00 = U.S $ 0.7135.
We make no
representation that any Australian dollar or U.S. dollar amounts
could have been, or could be, converted into U.S. dollars or
Australian dollars, as the case may be, at any particular rate, the
rates stated below, or at all.
The following table
contains information for the noon buying rate for the Australian
dollar into U.S. dollars for the periods indicated.
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|
|
|
|
|
|
Fiscal
year ended June 30,
|
|
|
|
|
|
2012
|
1.0236
|
1.0323
|
1.1026
|
0.9453
|
|
2013
|
0.9165
|
1.0272
|
1.0591
|
0.9165
|
|
2014
|
0.9427
|
0.9186
|
0.9705
|
0.8715
|
|
2015
|
0.7704
|
0.8365
|
0.9488
|
0.7566
|
|
2016
|
0.7432
|
0.7289
|
0.7817
|
0.6855
|
|
2017
|
0.7676
|
0.7544
|
0.7733
|
0.7174
|
|
2018
|
0.7399
|
0.7753
|
0.8105
|
0.7355
|
|
Month
ended
|
|
|
|
|
|
April 30,
2018
|
0.7543
|
0.7684
|
0.7784
|
0.7543
|
|
May 31,
2018
|
0.7570
|
0.7525
|
0.7595
|
0.7445
|
|
June 30,
2018
|
0.7399
|
0.7498
|
0.7677
|
0.7355
|
|
July 31,
2018
|
0.7438
|
0.7403
|
0.7466
|
0.7322
|
|
August 31,
2018
|
0.7192
|
0.7325
|
0.7428
|
0.7192
|
|
September 30, 2018
(through September 7, 2018
|
0.7135
|
0.7174
|
0.7198
|
0.7135
|
|
|
(1)
(For the fiscal years, determined by averaging noon buying rates on
the last day of each full month during the fiscal
year.)
|
B.
Capitalization
and Indebtedness.
Not
applicable.
C.
Reasons
for the Offer and Use of Proceeds.
Not
applicable.
Set forth below are certain risks that we believe are applicable to
our business. You should carefully consider the risks described
below and the other information in this annual report, including
our consolidated financial statements and related notes included
elsewhere in this annual report, before you decide to buy, sell or
hold our ordinary shares. If any of the following risks actually
occurs, our business, prospects, financial condition and results of
operations could be materially harmed. Additional risks not
presently known to us, or risks that do not seem significant today,
may also impair our business operations in the future.
Risks
Related to Our Business
We may not be able to continue as a going concern.
We incurred an
operating loss for the year ended June 30, 2018 of A$0.2 million
(2017: A$4.6 million loss), we have a history of net losses and
there is a substantial doubt about our ability to continue as a
going concern. Net cash used by operating activities was A$0.19
million (2017: A$1.0 million used in operating activities). At
balance date, the current assets less current liabilities were a
deficit of A$4.9 thousand (2017: A$0.2 million) and the net assets
were a deficit of A$4.9 thousand (2017: A$0.2 million). At June 30,
2018, the Company has current liabilities of A$0.2 million (2017:
A$0.2 million). Our ordinary shares have been voluntarily suspended
from trading on the Australian Securities Exchange (ASX) from
November 25, 2016 and we may be ultimately delisted from the
ASX.
The ability of the
Group to continue as a going concern is dependent in the short term
on completion of an Reverse Take Over (RTO), securing an advance of
funds from a potential RTO candidate or generation of cash from an
equity placement.
These conditions
indicate a material uncertainty that cast a significant doubt about
the Group’s ability to continue as a going concern and,
therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of
business.
Management believe
there are sufficient funds to meet the Group’s working
capital requirements as at the date of this report, and that there
are reasonable grounds to believe that the Group will continue as a
going concern as a result of a combination of the following
reasons:
●
the Group has
received confirmation from its employees and Directors that they
have forgone all salary entitlements since 1 December 2016 and will
not call on their annual leave entitlements until the Group has a
clear ability to pay;
●
and management
expects the Group will be able to secure funding from completion of
a RTO or an alternative source.
Should the Group
not be able to continue as a going concern, it may be required to
realise its assets and discharge its liabilities other than in the
ordinary course of business, and at amounts that differ from those
stated in the financial statements. The financial report does
not include any adjustment relating to the recoverability and
classification of recorded assets or liabilities that might be
necessary should the entity note continue as a going
concern.
If the joint venture company in which we hold a 20% stake, carried
at $zero, is unable to commence with the currently stalled
biodiesel project, we may be unable to recover the cost of our
investment.
The refinery owned
by the joint venture company is currently unable to produce
biodiesel as it needs the completion of a technology refit and the
project has stalled due to an inability of the biodiesel refinery
operating entity to secure ongoing offtake sales contracts. If this
project does not commence we may be unable to recover the cost of
our investment.
If our 20% stake in the joint venture company, carried at $zero, is
unable to be sold, we may be unable to recover the cost of our
investment.
We are trying to
sell the 20% investment stake in the joint venture company, with no
interest to date. If we cant sell the 20% stake, we will not be
able to recover the cost of our investment.
If we are unable to generate sufficient earnings to offset the
costs from our primary business, our business and financial
condition will suffer a significant adverse effect.
We are in the
process of disposing of our investment, this investment has been
written down to zero the investment is dormant and is not
generating cash.
Earnings (in the
form of dividends) from our investment into FGV Green Energy, a
refinery joint venture company, which currently has no means of
producing operating income, may not exceed our expenses and
therefore we may not be able to generate enough revenue to reverse
our pattern of historical losses and negative cash flow, which
would have a significant adverse effect on our business and
financial condition.
We may not be able recover any funds from intercompany
loans.
The parent company
in our corporate structure advances funds to subsidiaries to fund
working capital requirements. The company’s subsidiaries may
not be able to repay or service these intercompany loans, which
would have a significant adverse effect on our business and
financial condition.
We may not be able to generate sufficient cash or raise further
cash through debt or equity means to fund new business
strategies.
Our ability to
enter into new business opportunities is limited by our existing
cash levels and/or our ability to raise further funding through
debt or equity. If we are unable to enter into a new business based
on our existing capital or if we are unable to raise further debt
or equity to enable us to enter into a new business, we may suffer
a significant adverse effect on our business and financial
condition.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that if the refinery of FGV
Green Energy does not meet prescribed international biofuels
legislative requirements, including the EPA requirements under
Renewable Fuels Standard (“RFS”), fuels produced from
palm oil may not be eligible for the subsidies which make it
economically feasible to sell biodiesel internationally, including
into the United States, which would limit the market opportunity
and would negatively impact our financial viability.
Under the
International Biofuels legislation, including the USA National
Renewable Fuel Standard, palm based (or palm based waste products)
biodiesel may not qualify as an approved biodiesel and be eligible
for economic subsidies or biofuel related benefits, including the
USA EPA’s EPA RINs. A RIN is a numeric code that is generated
by the producer or importer of renewable fuel representing gallons
of renewable fuel produced/imported and assigned to batches of
renewable fuel that are transferred or sold to others. RINs are
then turned into the EPA each year by petroleum refiners to prove
that they have blended the required amount of renewable fuel under
RFS. Therefore, biodiesel that does not generate a RIN may have a
very limited market in the U.S. If the refinery of FGV Green
Energy, in which we hold a 20% stake, is not able to meet these
requirements, our earnings from our investment in FGV Green Energy
will be reduced and we may suffer a significant adverse effect on
our business, financial performance and financial condition and
could cease operations.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that the refinery, in which we
hold a 20% stake, carried at $zero , and which Mission is in the
process of disposing of, may not be compliant under the European
Renewable Energy Directive, and, if so, our ability to sell
palm-based biodiesel into the European Union will be significantly
constrained and the results of our operations will be adversely
impacted.
Under the Renewable
Energy Directive, the entire pathway for palm based biodiesel
including the suppliers of raw materials and the production pathway
must be certified. Failure for the production facility to meet such
certification or failure by the suppliers of palm oil based
feedstock to satisfy the Renewable Energy Directive could affect
the refinery’s ability to sell palm-based biodiesel into the
European Union. Any limitation on the refinery’s ability to
sell biodiesel into the European Union could reduce our earnings
from our investment in FGV Green Energy and have a significant
adverse effect on our business, financial performance and financial
condition and could cause us to cease operations.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk in respect of the design and
technology of the refinery may be unable to meet future biodiesel
specifications and further capital expenditures may be
required.
The specifications
for biodiesel are continually evolving and are subject to further
change. Further capital expenditures may be required by FGV Green
Energy to ensure that the refinery meets new specifications. There
is also no assurance that the equipment and technology used in
capital improvements will achieve performance specifications. The
failure of utilized equipment and technology in this regard may
adversely affect the refinery, and as a result reduce our earnings.
In particular, the joint venture company, in which we own a 20%
interest, may retrofit the refinery with technology to be able to
utilize alternative feedstocks to produce biodiesel. If this
technology does not work as designed, this may reduce our earnings
from FGV Green Energy and adversely affect our financial
performance and financial position. Such capital expenditure is
likely to be significant in value.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk if the joint venture company
refinery is unable to be retrofitted as planned and it may not be
able to produce biodiesel.
The refinery owned
by the joint venture company is currently unable to produce
biodiesel and requires a significant technology retrofit, which if
not successful may result in the inability to produce biodiesel and
related products as anticipated. The inability to produce products
would significantly reduce our earnings and adversely affect our
financial performance and financial position.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk if the joint venture company
refinery is unable to raise debt or equity funding to complete the
retrofit, it would be unable to complete the project.
The refinery owned
by the joint venture company requires a significant amount of
capital to complete the technology retrofit, which if it is unable
to fund may result in the inability to complete the project as
anticipated. The inability to complete the project would
significantly adversely affect our financial performance and
financial position.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a further risk in respect of the
operation and maintenance of the refinery involves significant
risks that could result in disruptions in production or reduced
output.
If the refinery
becomes operational the operations of the refinery will be exposed
to significant risks, including:
●
failure of
equipment or processes;
●
operator or
maintenance errors;
●
extended and
unscheduled interruptions to production;
●
damage to equipment
and disaster whether arising from the actions or omissions by the
joint venture’s employees or from external
factors.
There are
operational hazards inherent in chemical manufacturing industries,
such as fires, explosions, abnormal pressures, blowouts, pipeline
ruptures, and transportation accidents. Some of these operational
hazards may cause personal injury or loss of life, severe damage to
or destruction of property and equipment or environmental damage,
and may result in suspension or termination of operations and the
imposition of civil or criminal penalties. In addition, insurance
may not be adequate to fully cover the potential operation hazards
described above, and the joint venture company may not be able to
renew its insurance on commercially reasonable terms or at all. The
joint venture company and/or our insurance coverage may not be
sufficient to cover our liability risks.”
We have a 20% interest (currently carried at $zero) in the refinery
and we have limited control over the financial and operating
policies of the joint venture company.
Our limited
shareholding and representation on the Board of the joint venture
company may limit our ability to influence the financial and
operating procedures of the company which may limit our ability to
generate a positive return for the Group.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk in respect if the joint
venture company is unable to generate profitable sales, this will
significantly reduce its ability to pay dividends, which may harm
our results of operations.
In 2018, our
earnings from our investment into FGV Green Energy was NIL. In
February 2015, we concluded the sale of our 250,000 tpa refinery to
the joint venture company, in which we now hold a 20% interest. We
have not received any dividends from our investment into the joint
venture company which purchased our refinery in 2015. We cannot
assure you that the joint venture company will be able to source
customers and establish and maintain long-term relationships with
such customers. If the joint venture company is unable to source
new customers, we may not be issued any earnings dividend and our
results of operations could be adversely
affected.
The refitting of
the refinery has stalled due to an inability of the biodiesel
refinery operating entity
to secure ongoing
offtake sales contracts and is awaiting a positive decision from
its owners as to whether to progress the project. The Company has
written the investment to $zero and are actively trying to dispose
of its 20% stake in the joint venture company.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk if the joint venture company
cannot find suitably qualified personnel to run the refinery, they
may be unable to enter into sales contracts which may result in
lost revenues and incurred costs.
The operation of
the refinery requires suitably qualified personnel. With the
current status of the refinery retrofitted with new technology
having stalled, the majority of personnel have been retrenched. The
ability to restart the refinery may be affected by an inability to
employ suitably trained staff by the joint venture
company.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that if the joint venture
company cannot get the refinery to run successfully after being
retrofitted with new technology, they may be unable to enter into
sales contracts which may result in lost revenues and incurred
costs.
With the refinery
planned retrofit with new technology now stalled, such
non-operation may result in significant costly technical and
mechanical delays if the decision were made to restart the retrofit
and production.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that if an increase in cost or
an interruption in the supply of feedstock to the refinery may
inhibit production and adversely affect our financial
performance.
If a retrofit of
technology were to be completed (currently stalled), the operation
of the refinery would be dependent on the ability of the joint
venture company to procure substantial quantities of suitable
quality feedstock.
If the retrofit
with the new technology proceeds and should the refinery return to
operations, the failure to procure a sufficient supply of raw
materials satisfying quality, quantity and cost requirements in a
timely manner could impair its ability to produce product or could
increase costs. Any interruption to the supply of suitable quality
feedstock may result in disruptions in production or reduced
output, which may materially and adversely affect the joint venture
company’s financial performance, which may be unable to issue
us dividends.
Additionally, the
joint venture company’s financial results, if retrofitting is
completed, will be substantially dependent on the prices of
feedstock. A substantial increase in feedstock price relative to
the value of the end saleable products would adversely affect
financial performance. Although the joint venture company may
attempt to offset the effects of fluctuations in prices by entering
into arrangements with its customers on a feedstock price plus
contract basis through which a predetermined margin over the price
of the feedstock is received, or by engaging in transactions that
involve exchange-traded futures contracts (or other contractual
arrangements securing future commodity prices), the amount and
duration of these hedging and risk mitigation activities may vary
substantially over time. These activities also involve substantial
risks.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that the joint venture company
may in the future experience, volatile capacity utilization which
may adversely affect the results of operations of the joint venture
company.
If the biodiesel
refinery were to be retrofitted and operations were to commence,
the joint venture company remains reliant on palm oil and
associated by-products as a feedstock. If the price of these
products is greater than the value of biodiesel, the joint venture
company may not be able to profitably sell biodiesel into the
immediate cash payment and delivery market. Its ability to supply
biodiesel profitably is based on having positive margins where the
input costs are lower than the value of refined product. The joint
venture company is unable to influence the price of input raw
materials or the price of biodiesel. Resultantly, the joint venture
company’s biodiesel profitability is reliant on the existence
of a positive spread between these two commodities. As the joint
venture company can only operate when a positive operating margin
exists, it has and expects to continue to have in the future
erratic capacity utilization, which may adversely affect its
results of operations and its ability to distribute earnings to
us.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that the joint venture company
may continue to suffer, low capacity utilization if the joint
venture company is unable to secure term contracts.
Given the
volatility of profit margins on biodiesel production due to
fluctuations in commodity pricing for palm oil and associated
products and the value of the finished product, we did not
historically produce biodiesel unless we had a committed contract
customer willing to accept pricing based on our cost of purchasing
feedstock and earning a positive margin from refining. The refinery
was planned to be retrofitted with new technology but this has
stalled, and the joint venture company currently has no customers
and no visibility on its ability to attract customers.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that the joint venture company
may continue to suffer, low capacity utilization if the joint
venture company is unable to secure material volumes of biodiesel
sales under the Malaysian Biodiesel mandate.
After numerous
years discussing the possible implementation of a biodiesel
blending mandate in Malaysia, the Malaysian Government introduced a
scheme to mandate a biodiesel blend into commercial diesel sales in
some areas of Malaysia. This scheme may grow or reduce depending on
Government support. In addition, the scheme was for a lower volume
than previously communicated to Malaysian Biodiesel producers. If
the scheme is not extended, or cancelled altogether, or
commercially viable quantities are not secured by the joint venture
company, this may adversely affect results of operations. The joint
venture company currently has no biodiesel sales contracts in
Malaysia and has no visibility towards further sales in
Malaysia.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that the joint venture company
may be unable to perform under an offtake agreement.
The joint venture
company
may not be
able to perform under any new offtake agreements, given that the
plan to retrofit the refinery is stalled. Additionally, any changes
in legislation in the local jurisdiction of the off-taker may
prohibit such sales, including into the United States.
The joint venture company may be unable to sell biodiesel if the
planned retrofit does not proceed.
The joint venture
company
may not be
able to produce and sell biodiesel and make a profit if the planned
retrofit does not proceed due to economic or other considerations.
The planned technology retrofit has stalled due to an inability of
the biodiesel refinery operating entity to secure ongoing offtake
sales contracts.
The joint venture company’s inability to meet margin calls on
hedged positions would adversely affect its financial
condition.
To maximize and
protect the profitability of an offtake agreement, the joint
venture company
may enter into
hedging positions to protect against commodity risk. Upon entering
the hedging positions and the inherent volatility in the commodity
markets, it will likely be required to make margin call payments
from time to time. Inability to meet such margin calls would
adversely affect the financial condition and financial performance
of the joint venture company.
The joint venture company may suffer losses due to sales of
competing products that infringe on its intellectual
property.
The joint venture
company will
rely on a
combination of patents, trademarks, domain names and contractual
rights to protect its intellectual property. It cannot be assured
that the measures taken to protect the intellectual property rights
will be sufficient to prevent any misappropriation of the
intellectual property, or that competitors will not independently
develop alternative technologies that are equivalent or superior to
technologies based on the intellectual property. In the event that
the steps taken and the protection afforded by law do not
adequately safeguard the proprietary technology, the joint venture
company could suffer losses due to the sales of competing products
that exploit the intellectual property, and the joint venture
company’s profitability would be adversely affected, which
would in turn adversely affect our return on
investment.
If the joint venture company is subject to claims of infringement
of the intellectual property of others, the defense of these claims
could drain resources and any adverse determination could adversely
impact or halt biodiesel production.
The retrofit and
operation (should it proceed) of the biodiesel refinery will
include contracts for the supply of proprietary systems, over which
such suppliers have intellectual property that they have licensed
to the joint venture company. This intellectual property includes
the operating procedures and technical schematics of the retrofit
to the biodiesel refinery, which are required to operate and
maintain the plants. The unauthorized use or the infringement by
the joint venture company of another person’s intellectual
property right may adversely affect its financial performance and
in turn our financial performance.
To the best of our
knowledge, the patented refining process does not infringe on any
third party’s intellectual property rights. However,
intellectual property rights are complex and there exists the risk
that the process may infringe, or be alleged to infringe, another
party’s intellectual property rights.
The defense and
prosecution of intellectual property suits, patent opposition
proceedings and related legal and administrative proceedings can be
both costly and time consuming and may significantly divert the
efforts and resources of the joint venture company’s
technical and management personnel. An adverse determination in any
such litigation or proceedings to which the joint venture company
may become a party could subject it to significant liability to
third parties, require the joint venture company to seek licenses
from third parties, to pay ongoing royalties, or to redesign
products or manufacturing processes or subject the joint venture
company to injunctions prohibiting the manufacture and sale of
products or the use of technologies.
Any inability to obtain and
maintain all the required licenses and permits related to
the joint
venture company’s
business and the resulting
increased compliance costs may adversely affect financial
performance.
The joint venture
company is required to hold or obtain a number of licenses and
permits, including environmental and those related to materials
handling, in various jurisdictions in order to implement and
operate the business. We have no reason to believe that the
licenses will not be renewed, although renewal is not
assured.
The joint venture
company
is subject to environmental
regulations, the compliance with which imposes substantial costs on
the joint venture company
and the violation of which
could result in penalties and other
liabilities.
Laws dealing with
protection of the environment provide for penalties and other
liabilities for the violation of such laws and establish, in
certain circumstances, obligations to remediate facilities and
locations where operations are conducted. The joint venture company
will incur substantial costs in the future as part of continued
efforts to comply with these environmental laws and to avoid
violations of them.
Should operations
commence, the joint venture company may experience a significant
chemical or biodiesel spill at the refinery. If any of these events
occur or if the joint venture company otherwise fails to comply
with the applicable environmental or other regulations, the joint
venture company could be subject to significant monetary damages
and fines or suspensions of our operations, and the business
reputation and profitability could be adversely
affected.
Any amendments to
the environmental laws could impose substantial pollution control
measures that could require the joint venture company to make
significant expenditures to modify production process or change the
design of the products to limit actual or potential impact to the
environment. Moreover, new laws, new interpretations of existing
laws, increased governmental enforcement of environmental laws or
other developments could require the joint venture company to make
significant additional expenditures, which may adversely affect the
business, results of operations and financial
condition.
The joint venture company
and/or
our insurance coverage may
not be sufficient to cover our liability risks.
The joint venture
company and/or our insurance arrangements (if any) may not
adequately protect against liability for all losses, including but
not limited to environmental losses, property damage, public
liability or losses arising from business interruption and product
liability risk. Additionally, the existing insurance arrangements
may have lapsed and/or be unable to be renewed on commercially
reasonable terms or at all. Should sufficient insurance coverage be
unable to be maintained in the future or experience losses in
excess of the scope of the insurance coverage, the joint venture
company and/or our financial performance could be adversely
affected.
Changes in government
policy could adversely affect the joint venture company’s
business
.
The refinery and
its feedstock are located in Malaysia, and possible biodiesel sales
may be in the United States, Malaysia and Europe. In addition, the
equipment for the plant is imported from, and the products are sold
in various other countries. There is a risk that actions of a
government in any of these countries may adversely affect the joint
venture company’s ability to implement and operate its
business.
Government action
or policy change in relation to access to lands and infrastructure,
import and export regulations, environmental regulations, taxation,
royalties and subsidies could adversely affect the operations and
financial performance of the joint venture company. Generally,
however, a policy change in any of the jurisdictions in which the
joint venture company
operates, or
intends to operate, may inhibit its ability or the financial
viability of its operations to export feedstock oil or the refined
products that is marketed. This, in turn, could adversely affect
operations and financial performance.
The joint venture company and our financial performance may be
adversely affected by fluctuations in exchange rates.
The joint venture
company’s potential revenues and expenditures are potentially
denominated in a number of currencies, including U.S. dollars,
Euros, Australian dollars, Indonesian rupiah, and Malaysian
Ringgit. In addition our future earnings, which may be in the form
of dividends, are likely to be earned in Malaysian Ringgit, and we
hold cash in U.S. and Australian dollars to fund operations.
Historically, we have experienced losses due to un-hedged negative
changes in exchange rate. Additionally, we have experienced foreign
currency translation differences (which are held on our balance
sheet in the foreign currency translation reserve) as a result of
reporting consolidation of non-Australian subsidies. We have no
foreign currency hedging arrangements currently in place. As a
result, our financial performance may be adversely affected by
fluctuations in exchange rates.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that we may be unable to
retain our investment in our Malaysian biodiesel
project.
The Malaysian
biodiesel project joint venture agreement allows for capital calls
from shareholders where additional funds are required by the joint
venture company. The investment we hold in the Malaysian biodiesel
project may require us to inject further capital funds into the
project. If we have insufficient funds to meet such a capital call,
our shareholding may be diluted. This, in turn, could adversely
affect our operations and financial performance.
Risks
Related to Our Strategy
The proposed acquisition of Playup may not
materialize.
The proposed
acquisition of Playup Limited as discussed in detail in Item 4 may
not materialize due a number of factors outside our control
including but not limited to conditions precedent not being met.
Playup may not be able to raise the required capital within the
stipulated time frame, being the key condition precedent needed to
complete the transaction. In addition, the Company may not be able
to dispose of its stake in the Joint venture and it may not be able
to obtain the requisite Shareholder and Australian Securities
Exchange approvals to affect the transaction.
The proposed acquisition of Playup will introduce new risks to the
Company.
Should the proposed
acquisition of Playup (as discussed in detail in Item 4) proceed,
the Company and the group will be exposed to a number of new risks,
including (but not limited to) regulatory risk, future
profitability, liquidity risk, technology risk, competition,
business strategy, user engagement, key personal, foreign currency
risks, and other Government regulatory risk.
The joint venture company may not be able to restart refining
operations.
If we do not
dispose of the refining operations and if refitting of the refinery
commences and should more profitable opportunities present
themselves to the joint parties, there can be no assurance that the
joint venture company would be able to restart refining operations.
Further the joint venture company can make no assurances as to its
ability or cost thereof to attract necessary staff, obtain working
capital lines and re-commission the equipment. As at October 2018
there are no firm plans for such retrofitting to
commence.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) there is a risk that, should the joint
venture company decide to sell the assets, the joint venture
company may be unable to sell its assets for fair market value or
sell them at all.
If the joint
venture company sells its assets, it may not be able to realize its
original investment and as such upon the sale of its assets can
provide no assurance as to the realization of proceeds for us or
our shareholders.
We may be unable to sell our stake in the Joint Venture which may
affect our ability to proceed with the proposed Reverse Take Over
(RTO)
The Company may not
be able to dispose of its stake in the Joint Venture. A condition
precedent in the currently proposed RTO is for the Company to
dispose of the investment in the joint venture company. A failure
to dispose the stake in the Joint Venture may affect the ability of
the Company to conclude the currently proposed RTO. The Company has
approached prospective buyers without success to date.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) there is a risk that we may be unable
to continue our business in renewable energy or any other
industry.
If the Company has
not sold its stake in the joint venture company and if the joint
venture company sells all its assets, the Company may not be able
to find suitable projects to continue business in the renewable
energy sector. If this is the case, we may require shareholder
approval to change our strategic direction, may not qualify for ASX
listing and may not have sufficient capital beyond settling our
obligations to launch any new business activities.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be a risk that the joint venture
company’s future growth will depend on its ability to
establish and maintain strategic relationships with distributors
and feedstock suppliers.
The joint venture
company’s future growth, after it has managed to successfully
refit the plant, depends on its ability to establish and maintain
relationships with third parties, including distributors and
feedstock suppliers. It may not be able to establish strategic
relationships with third parties on satisfactory terms or at all,
and any arrangements that are entered into may not result in the
type of collaborative relationship with the third party that is
expected. Further, these third parties may not place sufficient
importance on their relationship with the joint venture
company
and may not
perform their obligations as agreed. Any failure to develop and
maintain satisfactory relationships with distributors and feedstock
suppliers would have a material adverse effect on the
business.
We currently are not generating revenue or earnings from operations
and thus we may be unable to fund our operational and capital
requirements and we may be unable to obtain adequate financing on
favorable terms to meet these needs.
We currently expect
that our cash resources will be used to fund operating losses. If
Mission has not disposed of its interest in its associate
(currently carried at $zero), or should the proposed RTO proceed,
we will require substantial working capital. We cannot assure you
that we will be successful in generating sufficient revenue and we
will require financing to meet our needs.
Our ability to
access equity and debt capital and trade financing on favorable
terms may be limited by factors such as:
●
the value of
another listed shell;
●
being suspended
from trading on the ASX and may be delisted;
●
general economic
and market conditions;
●
if Mission has not
disposed of its interest in the associate (currently carried at
$zero), conditions in energy markets;
●
credit availability
from banks or other lenders for us and our industry
peers;
●
if Mission has not
disposed of its interest in the associate (currently carried at
$zero), the operation of the refinery by the joint
venture;
●
our financial
performance;
●
our levels of
indebtedness; and
●
ability to meet any
ASX listing rule requirements.
Our ability to access equity capital is limited without shareholder
approval and we may be unable to obtain the required shareholder
approval to obtain financing in future equity
offerings.
Our ability to
access equity capital is also limited by ASX Listing Rule 7.1,
which provides that a company must not, subject to specified
exceptions (including approval by shareholders), issue or agree to
issue during any 12-month period any equity securities, or other
securities with rights to conversion to equity, if the number of
those securities exceeds 15% of the number of securities in the
same class on issue at the commencement of that 12-month period.
Our ability to issue shares in certain subsequent offerings will be
restricted by this 15% annual placement capacity to the extent that
we are unable to obtain shareholder approval of the additional
offerings. In addition, due to or suspension from trading on the
ASX, there may be additional restrictions on the ability for the
Company to raise capital from the issue of shares.
We are currently
looking beyond the energy sector for new revenue generating
projects which will require shareholder approval and may require
re-compliance with the Australian Securities Exchange listing rules
specified in chapters 1, 2 and 11.
We are currently
suspended from trading on the ASX since November 25, 2016 and in
order to re-commence trading on the ASX it is likely we would have
to re-comply with ASX Listing rules 1, 2 and 11.
Risks
Related to Our Industry
The proposed acquisition of Playup will introduce new industry
risks to the Company.
Should the proposed
acquisition of Playup (as discussed in detail in Item 4) proceed,
the Company and the group will be exposed to a number of new
industry risks, including (but not limited to) regulatory risk,
future profitability, liquidity risk, technology risk, competition,
business strategy, user engagement, key personal, foreign currency
risks, and other Government regulatory risk.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be exposure to industry risk in respect
of a decline in the price of diesel or other fuel sources or an
increase in their supply could constrain the selling price of the
joint venture company’s biodiesel.
Biodiesel prices
are influenced by market prices for petroleum diesel, the pricing
of which is affected by global and domestic market prices for crude
oil. The pricing of petroleum diesel is also subject to typical
market movements and decreases when there is an increase in supply
in the face of unchanged or decreased demand. To remain
competitive, the price of biodiesel tends to decrease as the price
of petroleum diesel decreases. As a result, any decline in
petroleum prices will likely lead to lower prices for biodiesel. If
the price of inputs, such as palm oil (or other) feedstock, is
greater than the price of biodiesel in the market, the joint
venture company
will be unable
to make profitable sales and production would likely be halted. The
joint venture company has not operated the refinery. Since selling
the refinery to the joint venture company earlier this year, the
refinery has remained shut down. Declines in the pricing of
biodiesel relative to the cost of the inputs for production may
cause the joint venture company to continue the halt in production
in the future, which may materially and adversely affect the joint
venture company’s performance.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be risk in respect of the biodiesel
industry being a relatively new industry and its continued
development is subject to a number of risks and
obstacles.
The joint venture
company’s intended primary product is biodiesel. The global
biodiesel industry is still developing as compared to
petroleum-based fuels. Biodiesel has experienced significant
fluctuations in growth during that last few years and demand for
biodiesel as the primary product may not grow as rapidly as
expected or at all. Biodiesel and the global biodiesel industry, as
a whole, also face a number of obstacles and drawbacks,
including:
●
gelling at lower
temperatures than petroleum diesel, which can require the use of
low percentage biodiesel blends in colder climates or the use of
heated fuel tanks;
●
potential water
contamination that can complicate handling and long-term
storage;
●
reluctance on the
part of some auto manufacturers and industry groups to endorse
biodiesel and their recommendations against the use of biodiesel or
high percentage biodiesel blends;
●
potentially reduced
fuel economy due to the lower energy content of biodiesel as
compared with petroleum diesel;
●
development of
alternative fuels and energy sources may reduce the demand for
biodiesel; and
●
potentially
impaired growth due to a lack of infrastructure such as dedicated
rail tanker cars and truck fleets, sufficient storage facilities,
and refining and blending facilities.
Delayed market
acceptance of the products may adversely affect pricing and
profitability. The lack of infrastructure to store, ship and
distribute the products may also increase logistical costs and
diminish profitability for the joint venture company.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be exposure to risk as the joint venture
company may be subjected to new or amended standards for biodiesel
from time to time and required to modify our production process or
procure alternate or additional feedstock.
New standards may
be introduced and existing standards may be amended or repealed
from time to time. The production of biodiesel that meets stringent
quality standards is complex. Concerns about fuel quality may
impact the ability to successfully market and sell biodiesel. If
the joint venture company is unable to produce biodiesel that meets
the industry quality standard, its credibility and the market
acceptance and sales of its biodiesel could be negatively affected.
In addition, actual or perceived problems with quality control in
the industry generally may lead to a lack of consumer confidence in
biodiesel. This could result in a decrease in demand or mandates
for biodiesel, with a resulting decrease in revenue for the joint
venture company.
A change to the
quality standards for biodiesel in any market in which the joint
venture company sells biodiesel may require it to modify its
production process or procure alternate or additional feedstock,
which may affect the joint venture company’s revenue and
expenditure and adversely affect its results of
operations.
If Mission has not disposed of its interest in its associate
(currently carried at $zero) and if refitting of the biodiesel
plant commences there will be exposure to risk as the joint venture
company faces significant competition from existing and new
competitors, as well as competing technologies and other clean
energy sources.
The primary product
is a substitute for mineral diesel and a global commodity and as
such is highly cost competitive. There are already many global
producers of biodiesel with which the joint venture company will
compete. While these existing competitors are limited by installed
refining capacity, it is expected that there may be further new
entrants into the market if economic opportunities present
themselves thereby increasing competition. In addition to existing
and new direct competitors, as a relatively new industry with
distribution channels still in the development stage, market forces
may limit the joint venture company’s access to end markets
or make costs of delivering product to end-users uncompetitive.
Future financial performance and earnings growth of the joint
venture company may be adversely affected if either of the above
occurs.
In addition, new
technologies may be developed or implemented for alternative energy
sources and products that use such energy sources. Advances in the
development of fuels other than biodiesel, or the development of
products that use energy sources other than diesel, such as
gasoline hybrid vehicles and plug-in electric vehicles, could
significantly reduce demand for biodiesel and thus affect the joint
venture company’s sales. Biodiesel also faces competition
from fuel additives that help petroleum diesel burn cleaner and
therefore reduce the comparative environmental benefits of
biodiesel in relation to petroleum diesel.
Other clean energy
sources such as liquefied petroleum gas, hydrogen and electricity
from clean sources may be more cost-effective to produce, store,
distribute or use, more environmentally friendly, or otherwise more
successfully developed for commercial production than the joint
venture company’s products. These other energy sources may
also receive greater government support than these products in the
form of subsidies, incentives or minimum use requirements. As a
result, demand for the products may decline and the business model
may no longer be viable and results of operations and financial
condition of the joint venture company may be materially adversely
affected. The introduction, increase in the availability or
reduction in costs of alternative energy sources may materially and
adversely affect the demand for products and financial
performance.
Any increase in
competition arising from an increase in the number or size of
competitors or from competing technologies or other clean energy
sources may result in price reductions, reduced gross profit
margins, loss of market share and departure of key management, any
of which could adversely affect the joint venture company’s
financial condition and profitability.
Risks
Related to Our Ordinary Shares
We may be unable to regain trading status on the Australian
Securities Exchange (ASX) and the Nasdaq for our
shares.
Under ASX listing
rules, on November 25, 2016, the Company was required to place its
securities traded on the ASX into suspension upon announcement of
the proposed takeover discussed in Item 4. A condition precedent in
the transaction is for the Company to obtain shareholders’
approval (as required under the ASX Listing rules) and for the
Company to re-comply with the ASX Listing rules. Should the Company
not be able to obtain these approvals (both from shareholders and
ASX) then the ordinary shares of the Company may not be available
again for trading on the ASX.
In addition, if the
acquisition of Playup (See items 4) does not proceed, the Company
will still have to re-comply with the ASX Listing rules in order
for its securities to be traded on the ASX. The Company may not be
able to regain re-compliance approval and trading status on the
ASX.
The planned RTO
with Playup indicates an intention for the combined entity to also
seek trading status on the Nasdaq. Should the Company not be able
to obtain these approvals (both from shareholders and the Nasdaq)
then the ordinary shares of the Company may not be available for
trading on the Nasdaq.
Unless an active trading market develops for our securities, you
may not be able to sell your ordinary shares.
Our ordinary shares
were delisted from trading on The NASDAQ Global Market effective
July 9, 2012 and currently trade on the OTC Markets Pink Sheets
under the symbol “MNELF”. In addition, our shares were
suspended from trading on the Australian Stock Exchange on November
25, 2016. There is currently no active market for the shares of the
Company and we can provide no assurances as to when or if there
will be a market for the shares in the Company. Although we are a
reporting company, currently there is only a limited trading market
for our ordinary shares and a more active trading market may never
develop or, if it does develop, may not be maintained. Failure to
develop or maintain an active trading market will have a generally
negative effect on the price of our ordinary shares, and you may be
unable to sell your ordinary shares or any attempted sale of such
ordinary shares may have the effect of lowering the market price,
and therefore, your investment could be a partial or complete
loss.
We may not be able to continue to have our shares actively traded
on alternative stock markets
Our ordinary shares
are currently suspended from trading on the ASX. Any change in
ASX’s policy or position as it relates to either the
resumption of quotation, continued quotation or continued
authorization to trade company securities may adversely affect the
ability to trade the Company’s securities.
As a foreign private issuer, we are expected to follow certain home
country corporate governance practices which may afford less
protection to holders of our ordinary shares.
As a foreign
private issuer, we are permitted to follow certain home country
corporate governance practices. As a company incorporated in
Australia and listed (but suspended from trading) on the ASX, we
expect to follow our home country practice with respect to the
composition of our board of directors and nominations committee and
executive sessions. The corporate governance practice and
requirements in Australia do not require us as to have a majority
of our board of directors to be independent, do not require us to
establish a nominations committee, and do not require us to hold
regular executive sessions where only independent directors shall
be present. Such Australian home country practices may afford less
protection to holders of our ordinary shares.
We may be classified as a passive foreign investment company, which
could result in adverse U.S. federal income tax consequences to
U.S. holders of our ordinary shares.
We may be a passive
foreign investment company, or PFIC, for U.S. federal income tax
purposes for our current fiscal year ending June 30, 2018. A
non-U.S. corporation will be considered a PFIC for any fiscal year
if either (1) at least 75% of its gross income is passive income or
(2) at least 50% of the value of its assets (based on an average of
the quarterly values of the assets during the fiscal year) is
attributable to assets that produce or are held for the production
of passive income. If we are a PFIC for any fiscal year during
which a U.S. holder (as defined in “Item 10.E - Additional
Information Taxation — U.S. Federal Income Tax
Considerations”) holds an ordinary share, certain adverse
U.S. federal income tax consequences could apply to such U.S.
holder. See “Item 10.E - Additional Information
Taxation — U.S. Federal Income Tax
Considerations — Passive Foreign Investment Company
Considerations.”
Investors may be unable to enforce your legal rights against
us.
We
are incorporated in Australia. Substantially all of our assets are
located outside of the United States. It may be difficult for
investors to enforce, outside of the United States, judgments
against us that are obtained in the United States in any such
actions, including actions predicated on civil liability provisions
of securities laws of the United States. In addition, all of our
directors and officers are nationals or residents of countries
outside of the United States, and all, or a substantial portion of,
their assets are outside of the United States. As a result, it may
be difficult for investors to serve process on these persons in the
United States or to enforce judgments against them obtained in
United States courts, including judgments predicated on civil
liability provisions of the securities laws of the United
States.
Currency fluctuations may adversely affect the price of our
ordinary shares.
Our ordinary shares
are quoted in Australian dollars on the ASX (currently suspended
from trading) and in U.S. dollars on the OTC Markets Pink Sheets.
Movements in the Australian dollar/U.S. dollar exchange rate may
adversely affect the U.S. dollar price of our ordinary shares. In
the past year the Australian dollar has generally remained
depreciated against the U.S. dollar. Any continuation of this trend
may affect the U.S. dollar price of our ordinary shares, even if
the price of our ordinary shares in Australian dollars increases or
remains unchanged. However, this trend may not continue and may be
reversed.
Risks
Relating to Takeovers
Australian takeovers laws may discourage takeover offers being made
for us or may discourage the acquisition of large numbers of our
ordinary shares.
We are incorporated
in Australia and are subject to the takeovers laws of Australia.
Among other things, we are subject to the Australian Corporations
Act 2001, or the Corporations Act. Subject to a range of
exceptions, the Corporations Act prohibits the acquisition of a
direct or indirect interest in our issued voting shares if the
acquisition of that interest will lead to a person’s voting
power in us increasing from 20% or below to more than 20%, or
increasing from a starting point that is above 20% and below 90%.
Australian takeovers laws may discourage takeover offers being made
for us or may discourage the acquisition of large numbers of our
ordinary shares. This may have the ancillary effect of entrenching
our board of directors and may deprive or limit our
shareholders’ strategic opportunities to sell their ordinary
shares and may restrict the ability of our shareholders to obtain a
premium from such transactions.
Our Constitution and other Australian laws and regulations
applicable to us may adversely affect our ability to take actions
that could be beneficial to our shareholders.
As an Australian
company, we are subject to different corporate requirements than a
corporation organized under the laws of the United States. Our
Constitution, as well as the Corporations Act, set forth various
rights and obligations that are unique to us as an Australian
company. These requirements operate differently than from many U.S.
companies and may limit or otherwise adversely affect our ability
to take actions that could be beneficial to our shareholders. For
more information, you should carefully review the summary of these
matters set forth under the section entitled, “Item 10.B
— Additional Information — Memorandum and Articles of
Association” as well as our Constitution.
Item
4. Information on the Company
●
History
and Development of the Company.
Our legal and
commercial name is Mission NewEnergy Limited, which was
incorporated in Western Australia under the laws of Australia
(specifically, the Australian Corporations Act) in November 2005.
We are an Australian public company, limited by
shares.
In May 2006, we
conducted an initial public offering in Australia, raising A$27.0
million, and listed on the Australian Securities
Exchange.
In August 2006, we
commenced construction of our first biodiesel refinery with a
100,000 tonnes (30 million gallons) per year nameplate capacity at
an industrial hub in Port Kuantan, Malaysia along the eastern coast
of Malaysia.
In early calendar
2007, we commenced non-food biodiesel feedstock cultivation
operations in India. We focused on the cultivation of Jatropha
Curcas, or Jatropha, an inedible, low cost dedicated energy crop
with the intention to become self-sufficient with respect to our
feedstock supply and not in competition with the food
supply.
In April 2007,
recognizing the need to scale up both our feedstock cultivation and
biodiesel production operations, we completed a convertible note
offering and raised A$65.0 million in new capital. These funds were
raised to fund the expansion of our feedstock cultivation
operations in India and the construction of a second larger
biodiesel refinery
in Port Kuantan
with a 250,000 tonnes (75 million gallons) per year nameplate
capacity.
In mid-2008, we
commenced commercial operations of our first biodiesel refinery,
using locally sourced palm oil as feedstock.
Between May 2006
and January 2009, we raised approximately A$35.1 million in equity
capital from institutional investors in private placements to
complete the funding requirement for our second biodiesel refinery
and provide working capital.
In December 2009,
we entered into a long term biodiesel offtake agreement with
Valero.
In mid-2010, we
received our first commercial quantities of Jatropha oil from our
feedstock cultivation operations.
Also in mid-2010,
we commissioned our second biodiesel trans-esterification refinery
with a 250,000 tonnes (75 million gallons) per year nameplate
capacity.
In April 2011, we
conducted our initial public offering in the U.S., raising US$25.1
million, and listed on the NASDAQ Global Market.
On January 27,
2012, the Company launched a major re-structure including a
reduction in operating expenditure on all fronts, divestment of
non-core assets and efforts to raise additional capital. At the
same time, the Company announced that it would cease planting
further Jatropha acreage and dramatically downscale its field
operations.
On February 20,
2012, the Company announced a major initiative with the acquisition
of 85% of Oleovest, a special purpose company with a 70% interest
in a Joint Venture with PTPN111 (a state owned major palm oil
plantation company) to set up a downstream palm oil and
oleo-chemical complex in Indonesia.
On May 4, 2012, the
Company announced the final production runs in its Malaysian
refining operation. The refining assets were put in care and
maintenance.
On the July 9,
2012, the Company’s ordinary shares were formally delisted
from trading on the NASDAQ Global Market.
On July 11, 2012,
the Company announced that due to failure of material obligations
by PTPN111, it had terminated its joint venture in
Indonesia.
On October 8, 2012,
the Company announced that a placement of approximately 15% of its
outstanding equity raising approximately US$100,000 before
placement costs.
On October 19,
2012, the Company announced that its Indian operations had been
significantly downsized and that the Company was focused on
divesting its remaining Indian assets.
On November 23,
2012, the Company announced that it had successfully completed a
substantial restructuring of the convertible notes, with the key
changes being the elimination of the 4% annual cash coupon and a
change in the conversion ratio from 1:4 to 1:433 ordinary
shares.
On February 25,
2013, the Company announced that it had secured a US$5 million
working capital facility, which is to be used to fund the business
through the completion of the Company’s
re-structure.
On 17 April 2013,
the Company secured a short term financing facility to meet
operating costs in India secured over all shares in the Indian
subsidiary. Subsequently, the lender exercised its option to take
all shares in the Indian operations as full and final settlement of
the defaulted debt obligation.
On October 11,
2013, the Company completed the sale of its 100,000 tpa refinery to
Felda Global Group for US$11.5 million and A$7.5 million of
convertible note debt was settled from the proceeds.
On December 30,
2013, the Company announced that it had successfully completed a
substantial restructuring of the convertible notes, with the key
changes being the extension of the maturity date to December 31,
2018 and a 6% annual coupon, with coupon payments deferred to
December 31, 2015.
On April 30, 2014,
the Company announced that it had successfully completed an equity
raise of A$120,000 pursuant to shareholder approval to issue up to
100m shares.
On September 1,
2014, the Company announced that it had signed a joint venture and
plant purchase agreement for the sale of its 250,000 tpa
refinery.
On December 2,
2014, the Company announced that it successfully completed the
Indonesian Arbitration, receiving a US$3.36 million award. US$2
million was utilized to settle a portion of the convertible
notes.
On February 19,
2015, the Company announced that it successfully completed the
company transformation, including the sale of the 250,000 tpa
refinery to FGV Green Energy Sdn, a Malaysian registered Company.
The Company simultaneously acquired 100% of M2 Capital Sdn Bhd, a
Malaysian registered Company, which retains
a 20% interest in
FGV Green Energy. Mission Biofuels Sdn Bhd is 100% owned by the
Company and now operates as the Malaysian administrative
entity.US$12 million of the proceeds from the sale of the refinery
was used to fully settle the convertible notes. Also included was
the settlement of a material retention bonus for
executives
in the form of cash
and fifteen million ordinary shares (as approved by shareholders at
the annual meeting held on October 27, 2014), saving the company a
material amount of cash.
On March 1, 2015,
Oleovest PL and Mission Agro Energy Limited have been
deconsolidated from the Group financials pursuant to an agreement
with the Groups convertible note holders who took effective control
on that date.
On August 5, 2015,
the Company announced that it successfully settled the
long-standing dispute with the EPCC contractor of the 250,000 tpa
refinery with a payment of A$4 million.
On November 25,
2016, the Company announced its securities traded on the Australian
Securities Exchange (ASX) would be placed into suspension, at the
request of the Company, pending receipt of an announcement
regarding its proposed change of activities. The Companies
securities are to stay suspended on the ASX until the
Company
has either provided
information regarding its proposed change of activities as required
by Annexure A of ASX Guidance Note 12, or until the Company has
complied with Chapters 1 and 2 of the ASX Listing rules in
accordance with Listing Rule 11.1.3.
On December 5,
2016, the Company announced that it has entered into a heads of
agreement to acquire 100% of the business operations of Aus Group,
a leading manufacturer of buildings materials produced in
Australia. The transaction anticipated the Company wholly acquiring
the business operations of Aus Group with
consideration
comprising the
issue of shares in Mission and the provision of cash, more commonly
known as a reverse merger (“RTO”). The acquisition was
subject to conditions precedent by both AUS and Mission
being:
●
The completion of a
re-structure of AUS business operations and a pre-RTO funding round
by AUS to meet immediate growth working capital
requirements.
●
The completion of
shareholder and ASX approval by Mission
On June 14, 2017,
Datuk Mohamed Zain bin Mohamed Yusuf (Chairman), Admiral (Ret) Tan
Sri Dato’ Seri Mohd Anwar bin Haji Mohd Nor and Mohd Azlan
Bin Mohammed retired from the Board. In addition, MBT’s
Advisor to the Board, Mohamed Nizam Abdul Razak has also retired.
As from the date of the resignations
Dato’ Nathan
Mahalingam became Company Executive Chairman.
On January 19,
2018, the Company announced that the option to acquire Aus Group as
announced on 5 December 2016 has been terminated because Aus Group
had not been able to meet its required conditions
precedent.
On April 9, 2018,
the Company announced that it has entered into a heads of agreement
to acquire 100% of Playup Limited,
an
Australian Limited Company which is a fully operational Fantasy
Sports, Sports Betting and Online Gaming
Platform.
Key
Terms of the acquisition
●
Mission
shall be responsible for co-ordination and execution of the RTO
with the detailed assistance of the existing owners of
PLA;
●
Mission
shall assist with building an appropriate ASX listed Executive team
and Board to support existing PLA management team;
●
Mission
shall provide systems, protocols and corporate intellectual
property consistent with ASX best practices;
●
Existing
shareholders of Mission shall retain 5% of the merged company on a
fully diluted basis;
●
At
this stage given the conditions precedent, it is expected that the
transaction will be completed by 31 December 2018;
●
PlayUp
to cover RTO costs
●
In
certain events that the conditions precedents are not met by PLA,
it may be liable to pay a $250,000 break fee; and
The
acquisition is subject to conditions precedent by both PLA and
Mission namely:
●
PLA
Successful Completion of the ICO, measured by (1) completion by 30
August 2018 and (2) selling of over US$25m in
aggregate
●
The
completion of shareholder, ASX and NASDAQ approvals by
Mission
Regulatory
requirements:
NOTE: the ASX
expressed concern to MBT regarding the Proposed Transaction and the
suitability of the company for listing on the ASX post-completion
of the transaction. As a result, MBT may be unable to satisfy any
of the regulatory requirements of the ASX until ASX’s
concerns are first addressed by MBT.
MBT will continue to liaise with ASX to address
these concerns. As such investors or potential investors should
exercise caution.
●
The
transaction requires security holder approval under the ASX Listing
Rules and therefore may not proceed if that approval is not
forthcoming;
●
ASX
has an absolute discretion in deciding whether or not to re-admit
the entity to the official list and to quote its securities and
therefore the transaction may not proceed if ASX exercises that
discretion; These include satisfying the ASX that:
●
the
business is bona fide;
●
that
it has a structure and operations that are appropriate for a listed
entity;
●
that
it will comply with all applicable legal requirements in Australia
and in all jurisdictions where it is proposing to carry on
business; and
●
that
proper disclosure has been made to investors of the risks
(including emerging regulatory risks) involved.
●
the
ASX takes no responsibility for the contents of this
announcement;
●
MBT
is required to re-comply with the NASDAQ requirements for admission
and quotation and therefore the transaction may not proceed if
those requirements are not met.
Shareholder
Approval
The
acquisition, capital raising and number of other items concerning
the transaction are subject to shareholder approval, including
approval for a significant change to the nature and scale of
Missions activities as per ASX Chapter 11.
Prior to the
deadline we had commenced negotiations with Playup Ltd to extend
the proposed transaction beyond August 30, 2018. A revised deal was
agreed with Playup Ltd and announced to the market on October 3,
2018.
On October 3, 2018,
the Company announced that it has revised the agreement to acquire
Playup
Limited as originally announced
on April 9, 2018. Key revised terms of the deal
are:
●
Existing
shareholders of Mission shall be issued with such shares in the
merged company as equal to 4% of the fully diluted share capital.
Based on dilution of the subsequent fund raising at this time MBT
can provide no assurances as to its percentage ownership on a post
transaction basis if further capital funds are raised;
The
acquisition is subject to conditions precedent by both PLA and
Mission namely:
●
PLA
Successful Completion of the ICO or capital raising, measured by
(1) completion by 1 December 2018 and (2) raising aggregate
proceeds from either ICO or equity capital raising of
A$8m
●
The
completion of shareholder, ASX and NASDAQ approvals by
Mission.
In
the event that the transaction is not completed, Mission may be
required to re-comply with ASX listing rules in any
event.
In 2016 to date
minimum expenditure has occurred in respect of the refinery
refurbishment and there are no firm plans in place to complete the
refinery.
In December 2016
the Company started actively seeking buyers for its stake in the
biodiesel plant. No buyers have been found and Mission impaired its
held for sale investment to $zero.
We have incurred
the following capital expenditures over the last three fiscal
years:
|
|
2018
A$’000
|
2017
A$’000
|
2016
A$’000
|
|
Biodiesel
refinery
|
-
|
-
|
-
|
|
Land &
buildings
|
-
|
-
|
-
|
|
IT systems &
office equipment
|
-
|
-
|
3
|
|
Vehicles &
sundry equipment
|
-
|
-
|
-
|
Our principal
office is located at Unit B9, 431 Roberts Rd, Subiaco, Western
Australia 6008 Australia. Our telephone number is +61 8 6313 3975.
Our website address is www.missionnewenergy.com. Information on our
website and websites linked to it do not constitute part of this
annual report.
Recent
Developments
The Company’s
terminated Indonesian joint venture project, which had been
referred to arbitration in Indonesia, was settled pursuant to an
arbitrational award in December 2014. In February 2015, the
Company sold its 250,000 tpa refinery to a newly created entity FGV
Green Energy and retained a 20% share in this new joint venture
entity.
In December 2016
the Company started actively seeking buyers for its stake in the
biodiesel plant, no buyers have been found and Mission impaired its
held for sale investment to $zero.
In April 2018 the
Company announced that it has entered into a heads of agreement to
acquire 100% of the business operations of Playup Limited,
an Australian Limited Company which is
a fully operational Fantasy Sports, Sports Betting and Online
Gaming Platform
. The transaction will involve the Company
wholly acquiring Playup Limited with consideration comprising the
issue of shares in, more commonly known as a reverse merger
(“RTO”) whereby existing shareholders of the Company
are expected to be diluted by 96%.
Overview
Mission’s
only asset is its 20% share in a joint venture company. In December
2016 the Company started actively seeking buyers for its stake in
the biodiesel plant, no buyers have been found and Mission impaired
its held for sale investment to $zero.
The joint venture
company, in which Mission owns a 20% share, owns a 250,000 tpa
refinery which is currently in care and maintenance pending a
decision by the joint venture company to proceed with a technology
refit. Should the technology refit proceed, the joint venture
company intends to be a producer of biodiesel and wholesale
biodiesel distribution, focused on the government mandated markets
of the United States, Europe and Malaysia. The biodiesel refinery
is located at Port Kuantan, Malaysia, and has a nameplate capacity
of 75 million gallons-per-year. The production facility in Kuantan
is connected by two-way pipelines to a dedicated jetty 200 meters
away at an all-weather, deep sea, international port. The refinery
is currently non-operational and in care and
maintenance.
Mission have been
actively seeking to dispose of this interest since December 2016
and to date no offers for this business have been received and the
asset is recorded at $zero.
The business
operation of Playup Limited, being the potential business to be
acquired under the proposed RTO,
is a
fully operational Fantasy Sports, Sports Betting and Online Gaming
Platform
.
Our
Competitive Strengths
Nil
Next Generation Transesterification Technology
The refinery
technology proposed to be retrofitted to the biodiesel refinery is
expected to be based on Benefuel International Holdings
S.A.R.L.’s, or Benefuel’s technology which makes it
potentially an attractive technology for certain retrofit bolt on
technology providers. Should such technology providers emerge, the
joint venture company may be well positioned as partner, thereby
enabling it to operate its refining asset in a beneficial manner.
This project has stalled due to an inability of the biodiesel
refinery operating entity to secure ongoing offtake sales contracts
and the planned retrofit of new technology is on hold.
Our
Strategies
The Company is
focused on maximizing shareholder value through a positive return
from:
●
the acquisition of
Playup via a Reverse Takeover,
●
our investment in
the joint venture company owning a 250,000 tpa if Mission has not
disposed of its interest in its associate (currently carried at
$zero) and if refitting of the biodiesel plant commences,
and
●
looking for new
business opportunities.
Malaysian Asset
The Company is
trying to sell its investment in the joint venture company as part
of the transaction of acquiring Playup.
Should this
transaction not proceed, the Company would consider keeping its
investment in the Malaysian joint venture company while awaiting a
favorable change in operating conditions, or if deemed to be
economically beneficial to shareholders at that time, the Company
may still consider disposing its interest in the joint
venture.
Corporate
Opportunities
The Company will
continue to look at other related opportunities and projects on a
continued basis to enhance shareholder value.
Biodiesel Production (the following information is relevant should
the Company not succeed in selling the investment in the joint
venture company and should the joint venture company proceed with
the technology retrofit)
Refinery overview
The Company owns a
20% stake in a joint venture company that owns a 250,000 tpa
biodiesel refinery. The refinery is currently in care and
maintenance and is shut down.
For general market
acceptance, biodiesel sold to customers in the United States must
meet the technical standards of ASTM D6751, which specifies
multiple required properties of pure biodiesel (sometimes referred
to herein
as B100) for use as a blend
component with petroleum-based diesel fuel. This standard of ASTM
International, an open forum for the development of high-quality,
market-relevant international standards, specifies, among other
parameters, the maximum amounts of certain residual by-products
that can remain in the finished product after the conversion
process, including acid, free glycerin, total glycerin, water and
sediment content, sulphated ash, total sulphur, carbon residue and
phosphorous. The standard also specifies minimum flash point,
cetane numbers and copper corrosivity and ASTM has revised the
standards to include specifications for a Cold Soak Filter Test.
The test is intended to replicate performance of the biodiesel in
cold climates.
Biodiesel Conversion Process
The
biodiesel conversion process (transesterification) shown in the
diagram below is based on the Benefuels technology planned to be
retrofitted to the 250,000 tpa refinery (although the project is
currently stalled).
The biodiesel plant
consists of three process units: Pretreatment, Biodiesel
Production, and Biodiesel Distillation. The pretreatment unit
provides degumming, bleaching and water removal for feedstock,
which can include Crude Palm Oil (CPO), CPO blends with higher FFA
materials such as Palm Fatty Acid Distillates (PFAD), and other
waste oils such as Used Cooking Oil.
The Biodiesel
Production process uses a proprietary solid catalyst technology to
convert the pretreated oils and methanol into crude methyl esters
(biodiesel) and Glycerin. Glycerin is separated by gravity
decanting and purified in a falling film evaporator. The crude
biodiesel is flash evaporated in a falling film evaporator and then
distilled in a Vacuum Distillation Unit to remove impurities. The
finished biodiesel goes into proving tanks for final QA/QC testing
prior to transfer into storage tanks ready for
shipment.
Quality control
The
joint venture company, if in production, will typically employ
strict quality control procedures at each stage of the
manufacturing process.
The
joint venture company will establish systematic inspections at
various manufacturing stages, from raw material procurement to
finished product testing. Raw materials that fail to pass incoming
inspection will be returned to suppliers. We believe that the joint
venture company will be able to maintain the quality and
reliability of products through close monitoring of the
manufacturing processes by a quality control team and scheduled
maintenance of the equipment.
To
ensure the effectiveness of the quality control procedures, the
joint venture company will also provide periodic training to
production line employees. The quality control team will also
consist of experienced equipment maintenance technicians that
oversee the operation of the production facilities to avoid
unintended interruptions and minimize the amount of time required
for scheduled equipment maintenance.
The joint venture company’s management team
will implement policies to proactively safeguard against accidents.
In addition, the joint venture company management team will conduct
regular inspections and maintenance of the facilities to help
ensure product quality and safety.
Plant
Utilization & Operating History
Historic Biofuel Sales
When we owned our
own refineries, we sold our products via our own direct sale force
in the wholesale market. We historically have only sold our
biodiesel to oil trading companies. Generally, oil traders
aggregate biodiesel, blend it with mineral diesel and sell the
blended product to major oil companies who distribute the product
via their distribution channel to the end market. Sales to oil
trading companies are highly competitive and pricing fluctuates
with market conditions. Because we have not historically had
control of the costs of our feedstock, there have been few times
when we could procure feedstock at a price which we could convert
to biodiesel and sell profitably. Consequently, we did not fully
utilized our biodiesel production capacity, and in 2012, we put the
refinery into care and maintenance due to an inability for the
profit margin on limited sales to cover costs and subsequently sold
the refinery. Since then, no biodiesel was produced. All previous
contracts with customers have expired.
Refining By-product Sales
When we owned our
own refineries, we historically sold our glycerin and fatty acid
distillates ex works into the immediate cash payment and delivery
market.
Summary of Historic Sales
The group
historically generated operational revenue from agricultural
income, wind mill electricity generation and sale of crude jatropha
oil in India and the sale of biofuels and biofuel by products in
Malaysia. The Group has generated NIL operational income in the
last three financial years. The Indian operations were closed down
in 2012 and the Malaysian operations were put into care and
maintenance in the June 30, 2012 financial period with the 100,000
tpa refiner sold in October 2013 and the 250,000 tpa refinery sold
to the joint venture company in February 2015.
Competition and Competitive Dynamics
When we had our own
refineries, our primary product, biodiesel, sold in the liquid
fuels market. The liquid fuels market was and is a highly
competitive, large global market with many well established market
participants.
Historically, there
have been many entrants into the biodiesel market in the United
States and elsewhere in the world as governments encourage the use
of renewable energy and seek to reduce greenhouse gas emissions,
thus inviting new entrants into the market. Despite the over
capacity of biodiesel refining in much of the world, much of the
built capacity is rendered either uneconomic or non-competitive by
the limited number of long term offtake agreements, the limited
access to necessary working capital and the limited access to
sustainable feedstock.
Competitive Forces
We believe the
principal competitive factors for biodiesel producers are as
follows:
●
Scale.
Considerable refining
capacity to attract long term significant offtake
agreements.
●
Pricing
. A producer’s
ability to set pricing of products and the ability to use economies
of scale to secure competitive cost advantages to be able to price
biofuels below prevailing oil prices.
●
Technology
. A
producer’s ability to produce biodiesel and by-products
efficiently and to utilize low cost raw materials.
●
Sustainability
. Bearing in
mind social responsibility towards the environment, a
producer’s ability to produce biodiesel from sustainable
feedstock.
●
Access to Working Capital & Commodities
Risk Management
. A producer’s ability to
take advantage of positive spreads depends on having access to
working capital.
onnectivity to Existing Infrastructure
.
The distribution of product relies on the ability to
fit within the existing infrastructure.
Production
Safety and Environmental Matters
Safety
We had no material
safety issues while we operated our refineries, and none were
reported to us last year by the joint venture company.
Environment
When we had our own
refineries, we were committed to environmental protection that
complied with or exceeded local environmental standards, and we
will work to ensure the joint venture company does so as
well.
●
Organizational
Structure.
Our principal
subsidiaries at 30 June 2018 are set out below. Unless otherwise
stated, they have share capital consisting solely of ordinary
shares that are held directly by the Group, and the proportion of
ownership interests held equals the voting rights held by the
Group. The country of incorporation or registration is also their
principal place of business.
Set forth below is
the organizational structure of Mission NewEnergy
Limited:
The Company owns
100% of M2 Capital Sdn Bhd, a Malaysian registered Company, which
in turn owns 20% of FGV Green Energy Sdn, a Malaysian registered
Company formed to own the 250,000 tpa refinery sold by the Group
during that financial period. This biodiesel refinery in in care
and maintenance. Mission Biofuels Sdn Bhd is 100% owned and is now
the Malaysian administrative entity.
For a list of our
wholly-owned and indirectly owned subsidiaries, see Exhibit 8.1
filed hereto.
We own a 20% stake
in a joint venture company that owns a biodiesel production
facility (with a lease for the underlying land) that is located at
Port Kuantan, Malaysia. This 20% stake is up for sale and carried
at $zero.
The following is
further information about the biodiesel facility:
|
|
|
|
|
|
|
|
|
|
|
|
Biodiesel
Facility
|
|
Site
area(Acres)
|
|
Total
Planned Capacity
(1)
(million
gallonsper year)
|
|
Capacity
Utilization
(2)
(percentage)
|
|
Commissioning
Date
|
|
|
250,000 tpa
refinery owned by FGV Green Energy Sdn Bhd
|
|
|
6.0
|
|
|
|
75
|
|
|
|
0%
|
|
|
|
Project has
stalled
|
|
|
|
|
(1)
|
Nominal operating
capacity.
|
|
|
(2)
|
The total tonnage
produced during this period was NIL.
|
Our registered
administrative offices are located on premises comprising
approximately 60 square meters in an office building in Perth,
Australia.
We also lease
properties for purposes of office quarters in
Malaysia.
Item
4A. Unresolved Staff Comments
None.
Item
5. Operating and Financial Review and Prospects
You should read the following discussion and analysis of our
financial condition and results of operations in conjunction with
“Item 3.A — Selected Financial Data” and our
consolidated financial statements and related notes included
elsewhere in this annual report. This discussion may contain
forward-looking statements that involve risks and uncertainties.
Our actual results and the timing of selected events could differ
materially from those anticipated in these forward-looking
statements as a result of various factors, including, but not
limited to, those set forth under “Item 3.D — Risk
Factors” and elsewhere in this annual report.
Overview
We historically
were a producer of biodiesel that integrated sustainable biodiesel
feedstock cultivation, biodiesel production and wholesale biodiesel
distribution, focused on the government mandated markets of the
United States and Europe and Malaysia. We currently own a 20% share
in a joint venture company that owns a biodiesel refinery that is
in care and maintenance and was not operated during the fiscal
year.
The Companies 20%
stake in the joint venture company is currently being actively
marketed for sale, no buyers have been found and the asset has been
written down to $zero.
During fiscal 2018,
we made a net loss of A$0.2 million (2017: A$4.6 million loss). We
recognized revenues of A$0.002 million (A$0.007 million in fiscal
2017). The income in fiscal 2018 and 2017 was predominately
comprised of interest income. In addition, the long standing
dispute with the EPCC contractor was settled in August 2015, and as
of the date of this report, we have no non-current liabilities. On
April 9, 2018, the Company announced that it has entered into a
heads of agreement to acquire 100% of the business operations of
Playup Limited,
which is a fully
operational Fantasy Sports, Sports Betting and Online Gaming
Platform
. If the new ventures do not generate sufficient
revenue to fund the ongoing operating costs of the business, and if
we are unable to achieve our business strategies and objectives, we
may need to raise further equity or loan capital for the business
(See item 4 for further detail).
Biodiesel refining
Our interest in the
plant is currently in care and maintenance and Mission is actively
seeking buyers for its 20% stake, to date no buyer has been found
and the asset has been impaired to $zero.
Our first biodiesel
refinery plant began operations in fiscal 2008 under immediate cash
payment and delivery market and term contracts. Due to unattractive
refining margins and a slower than expected implementation of a
biodiesel mandate in Malaysia, capacity utilization was low and the
revenue generated from biodiesel sales and associated by-products
was insufficient to cover costs, and the refinery was put into care
and maintenance and ultimately sold.
The EPCC contractor
of our second biodiesel refinery had significant issues in handing
over a fully completed pre-treatment plant and the
transesterification unit to the Group and the matter ultimately
ended in arbitration. In February 2015, the sale of this refinery
was completed and in August 2015 a final settlement of the dispute
was agreed between the EPCC contractor and the Group. The Group
retained a 20% shareholding in the joint venture company to which
this refinery was sold.
Critical Accounting Policies
Our discussion and
analysis of our operating and financial performance and prospects
are based upon our consolidated financial statements. The
preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of
revenue, assets, liabilities and expenses. We re-evaluate our
estimates on an on-going basis. Our estimates are based on
historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results
may differ from these estimates under different assumptions or
conditions.
Our significant
accounting policies are more fully described in the notes to our
audited consolidated financial statements included elsewhere in
this annual report. However, critical accounting policies that
affect our more significant judgments and estimates used in the
preparation of our financial statements are set forth
below.
Principles of Consolidation
The consolidated
financial statements comprise the financial statements of Mission
NewEnergy Limited and its subsidiaries, as defined in Accounting
Standard AASB 127 ‘Separate Financial Statements’.
These include Mission Biofuels Sdn Bhd and M2 Capital Sdn Bhd. All
controlled entities have a 30 June financial year-end. The
Associate company has a 31 December year end.
All inter-company
balances and transactions between entities in the Consolidated
Group, including any unrealized profits or losses, have been
eliminated on consolidation. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the
policies applied by the parent entity.
Where controlled
entities have entered or left the Consolidated Group during the
year, their operating results have been included/excluded from the
date control was obtained or until the date control
ceased.
Non-controlling
interests in the equity and results of the entities that are
controlled are shown as a separate item in the consolidated
financial report.
Investments in associates/Non-Current Assets held for
sale
The Group owns 100%
of M2 Capital Sdn Bhd, a Malaysian subsidiary, which owns a 20%
stake in FGV Green Energy Sdn Bhd (FGVGE), a refinery joint venture
company. Investments in associates held by the parent entity,
Mission NewEnergy Limited, are reviewed for impairment if there is
any indication that the carrying amount may not be recoverable. The
carrying value of this investment is NIL.
During the current
financial year the Group announced an intention to undertake a new
Reverse Take Over (refer to the Director’ Report for further
details). Under the RTO arrangement the Group is required to
dispose of the shares held in 100% owned subsidiaries and the
Associate Joint Venture Company. The accounting standards require
assets held for sale to be separately disclosed on the statement of
financial position with the value of the investment into the joint
venture company to be accounted for at the lower of carrying value
or fair value less costs to sell.
In
assessing the carrying value of the investment, the following
factors were considered by the Directors:
o
Mission
does not hold a refining asset, however it holds a 20% share in the
refining JV,
o
This
refining JV is not a listed publicly traded entity with a readily
determinable share price, nor is there a ready market to sell the
20% holding,
o
Mission
does not have the voting or management rights to force any actions
on the JV company, (be that to commence refurbishment, sell the
asset as a going concern or for sell for scrap value),
o
Should
the JV company require further equity funding to undertake the
refurbishment the group has insufficient current cash proceeds to
protect its equity position and hence our shareholding position
would likely be diluted.
Management
has been unsuccessful to date in disposing of the investment,
however continues to seek buyers. The Directors impaired the
carrying value of the investment to NIL during the prior financial
year. Should the Group sell the refinery an impairment reversal is
expected to be recognised in the financial records of the Group, to
the extent of any consideration received, if any.
Since
that date Mission has been actively looking to dispose of its 20 %
stake, no such buyers were identified.
|
|
|
|
|
|
|
|
|
Impairment of
investment in associate
|
-
|
3,608,038
|
|
|
-
|
3,608,038
|
Impairment of assets
We assess
impairment of assets by evaluating conditions that may lead to
impairment of particular assets. Where an impairment trigger
exists, the recoverable amount of the asset is
determined.
Recently issued accounting pronouncements
There are no
recently issued accounting pronouncements that have had any
material impact to the financial reported position of the
Company.
Comparison
of Results of Operations
Fiscal 2018 compared with fiscal 2017
Revenue.
Interest
revenue decreased by A$6,253 (80% reduction) from A$7,777 in fiscal
2017 to A$1,524 in fiscal 2018.
Expenses.
Total
expenses decreased by A$4.3 million (95% decrease) from
A$4.5million in fiscal 2017 to A$0.2 million in fiscal 2018
principally due to impairment of investment in associate company in
fiscal 2017. Employee benefits expenses decreased A$0.4 million
from A$0.4 million in fiscal 2017 to A$0.0 million in fiscal 2018
primarily as a result of the continued Group restructure, cost
management and in particular the Directors agreeing to not take a
salary until the Company has sufficient funds. Foreign currency
losses decreased by A$0.006 million from a loss in fiscal 2017 of
A$0.01 million to a loss in fiscal 2018 of A$0.004 million. Other
expense decreased by A$0.1 million from A$0.3 million in fiscal
2017 to A$0.2 million in fiscal 2018 primarily due to a reduction
in legal costs and due diligence costs incurred in 2017 fiscal
year.
Finance cost
Finance costs of
A$2,450 were incurred in fiscal 2018. No finance cost incurred in
fiscal 2017.
Income tax.
Income tax expense decreased by A$3,117 from A$3,252 in
fiscal 2017 to an expense of A$135 in fiscal 2018.
Discontinued
operations.
There were no discontinued
operations in fiscal 2017 and fiscal 2018.
Loss for the year.
As a result of the foregoing, fiscal 2018 registered a
loss for the year of A$0.2 million, a decrease of A$4.4 million
from A$4.6 million loss in fiscal 2017.
Fiscal 2017 compared with fiscal 2016
Revenue.
Revenue
decreased by A$34,183 (81% reduction) from A$41,960 in fiscal 2016
to A$7,777 million in fiscal 2017. There was no revenue generated
from sales of product in these periods due to the refinery having
been shutdown and sold.
Expenses.
Total
expenses increased by A$2.3 million (100% increased) from A$2.3
million in fiscal 2016 to A$4.5 million in fiscal 2017 principally
due to impairment of investment in associate company in fiscal
2017. Employee benefits expenses decreased A$0.7 million from A$1.1
million in fiscal 2016 to A$0.4 million in fiscal 2017 primarily as
a result of the continued Group restructure and cost management.
Foreign currency losses decreased by A$0.3 million from a loss in
fiscal 2016 of A$0.3 million to a loss in fiscal 2017 of A$0.01
million, primarily as a result of non cash fair valuation of
intercompany loans. Other expense decreased by A$0.3 million from
A$0.6 million in fiscal 2016 to A$0.3 million in fiscal 2017
primarily due to a reduction in legal costs and costs associated
with the sale of the refinery incurred in the 2016 fiscal
year.
Finance cost
No finance cost was
incurred in fiscal 2016 and fiscal 2017.
Income tax.
Income tax expense increased by A$2,408 from A$844 in
fiscal 2016 to an expense of A$3,252 in fiscal 2017 as a result of
tax on interest earned on cash deposits in Malaysia.
Discontinued
operations.
There were no discontinued
operations in fiscal 2016 and fiscal 2017.
Loss for the year.
As a result of the foregoing, fiscal 2017 registered a
loss for the year of A$4.6 million, an increase of A$2.3 million
from A$2.3 million loss in fiscal 2016.
Impact
of Inflation
We do not believe
that inflation has had a material effect on our
business.
Effects
of Currency Fluctuations
Our presentation
currency is the Australian dollar. In accordance with IFRS, costs
not denominated in Australian dollars are re-measured in Australian
dollars, when recorded, at the prevailing exchange rates for the
purposes of our financial statements. Consequently, fluctuations in
the rates of exchange between the Australian dollar, Malaysian
Ringgit, Indian Rupee and the U.S. dollar affect the presentation
of our results of operations. An increase in the value of a
particular currency relative to the Australian dollar will reduce
the Australian dollar reporting value for transactions in that
particular currency, and a decrease in the value of that currency
relative to the Australian dollar will increase the Australian
dollar reporting value for those transactions.
The effect of
foreign currency translation is reflected in our financial
statements in the statements of changes in shareholders’
equity and is reported as accumulated foreign currency translation
reserve. We have not entered into any hedging arrangements to
mitigate the effects of currency fluctuations.
B.
Liquidity
and Capital Resources.
Overview
Our operations have
historically been financed primarily from the issuance of
convertible notes and equity securities to investors.
The following table
sets forth our consolidated cash flows since fiscal
2016.
|
|
2018
A$’000
|
2017
A$’000
|
2016
A$’000
|
|
Net cash (used in)
operating activities
|
(190
)
|
(979
)
|
(2,078
)
|
|
Net cash provided
by investingactivities
|
-
|
-
|
330
|
|
Net cash (used in)
financingactivities
|
-
|
-
|
-
|
|
Effect of exchange
rate changes on cash held in foreign currency
|
(2
)
|
(34
)
|
(2
)
|
|
Net movement in
cash and cash equivalents
|
(192
)
|
(1,013
)
|
(1,750
)
|
|
Cash and cash
equivalents at the beginning of the year
|
388
|
1,401
|
3,151
|
|
Cash and cash
equivalents at the end of the year
|
196
|
388
|
1,401
|
Fiscal 2018 compared with fiscal 2017
Net cash used in
operating activities is as a result of ongoing operating costs with
no group operating revenue.
There were NIL
investing or financing activities in fiscal year 2018.
Fiscal 2017 compared with fiscal 2016
Net cash used in
operating activities is as a result of ongoing operating costs with
no group operating revenue.
There were NIL
investing or financing activities in fiscal year 2017.
Bank facility
We do not currently
have any bank credit facilities.
Secured loans
We do not currently
have any secured loans.
Other material commitments
We do not have any
material commitments.
Warrants
There are no
outstanding warrants.
C.
Research
and Development, Patents and Licenses, etc.
Our expenditure on
research and development was Nil in fiscal years 2018, 2017 and
2016.
Other than as
disclosed elsewhere in this annual report, we are not aware of any
trends, uncertainties, demands, commitments or events that are
reasonably likely to have a material effect on our revenue, income,
profitability, liquidity or capital resources or that would cause
reported financial information not necessarily to be indicative of
future operating results or financial condition.
E.
Off-Balance
Sheet Arrangements.
We do not have any
material off-balance sheet commitments or
arrangements.
F.
Tabular
Disclosure of Contractual Obligations.
We do not have any
contractual commitments at June 30, 2018.
Item
6. Directors, Senior Management and Employees
A.
Directors
and Senior Management.
The following table
sets forth information of our directors and executive officers as
of the date of this annual report. The directors have served in
their respective capacities since their election or appointment and
will serve until the next annual general shareholders meeting or
until a successor is duly elected.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Dato’ Nathan
Mahalingam
|
|
60
|
|
Executive Chairman,
Chief Executive Officer and Director
|
|
Guy
Burnett
|
|
50
|
|
Chief Financial
Officer, Director and Company Secretary
|
|
James
Garton
|
|
41
|
|
Director and Head
of Corporate Finance/Mergers and Acquisitions
|
Dato’ Nathan Mahalingam
.
Dato’ Nathan has been Chief Executive Officer (formerly
having the title of Managing Director) and a Director of Mission
NewEnergy since 2005. He has over 25 years of management experience
in banking and finance, heavy industries and infrastructure
development. He has successfully implemented numerous start up
manufacturing operations in Malaysia during his tenure of service
with a large Malaysian conglomerate. Between 1995 and 2000, he
served as project director in the Westport Group, developers of one
of Malaysia’s largest privatized port and transhipment
facility. Dato’ Nathan has gained extensive project advisory,
corporate finance, mergers and acquisitions experience while
running his own boutique corporate advisory practice between 2000
and 2004. Dato’ Nathan took over the role of Executive
Chairman in June 2017 upon the retirement of the past
Chairman.
Guy Burnett.
Mr. Burnett
has been Chief Financial Officer (formerly having the title of
Finance Director) since 2008, a Director since 2009 and Company
Secretary of Mission NewEnergy since September 2010. He is a
Chartered Accountant and has worked as a financial professional in
several large corporations. Prior to joining Mission NewEnergy, Mr.
Burnett was Manager, Corporate Accounting & Tax with Western
Power (an electricity networks corporation owned by the Western
Australian government) from 2006 to 2008 and, before that, worked
as a financial accountant for Water Corporation from 2004 to 2005
and served as a Manager with KPMG from 2005 to 2006 where he
assisted clients with implementing International Financial
Reporting Standards.
James Garton
.
Mr. Garton Mr.
Garton has over 15 years’ experience in corporate finance,
working in investment banking. Prior to his current role, James was
has been Head of Corporate Finance and Mergers and
Acquisitions for
Mission since 2008. Mr. Garton joined Mission NewEnergy from U.S.
investment bank, FBR Capital Markets, where he was Vice President,
Investment Banking. Prior to FBR Capital Markets, he worked in
corporate finance and equity capital markets with Australian firm
BBY Limited. Before BBY, Mr. Garton worked in private equity with
the Australian advisory firm Investment Capital
Limited.
Family
Relationships
There are no family
relationships between any directors or executive officers of
Mission NewEnergy.
Arrangements
There are no known
arrangements or understandings with any major shareholders,
customers, suppliers or others pursuant to which any of our
officers or directors was selected as an officer or director of
Mission NewEnergy.
In fiscal year
2018, the aggregate remuneration we paid and that accrued to our
directors and senior management was A$0.0 million.
|
2018
|
|
|
|
|
Post-employment
Super Contribution
|
|
|
Dato’ Nathan
Mahalingam
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Mr. Guy
Burnett
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Mr. James
Garton
|
-
|
-
|
-
|
-
|
-
|
-
|
|
TOTAL
KEY MANAGEMENT PERSONNEL
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2017
|
|
|
|
|
Post-employment
Super Contribution
|
|
|
Non-Executive
Directors
|
|
|
|
|
|
|
|
Datuk Zain
Yusuf
|
22,916
|
-
|
-
|
-
|
-
|
22,916
|
|
Admiral (Ret) Tan
Sri Dato’ Sri Mohd Anwar bin Haji Mohd Nor
|
14,583
|
-
|
-
|
-
|
139
|
14,722
|
|
Mohd
Azlan
|
14,583
|
-
|
-
|
-
|
139
|
14,722
|
|
Total
Non-executive Directors
|
52,082
|
-
|
-
|
-
|
278
|
52,360
|
|
Dato’ Nathan
Mahalingam
|
104,167
|
-
|
-
|
-
|
-
|
104,167
|
|
Mr. Guy
Burnett
|
87,948
|
4,353
|
-
|
-
|
8,709
|
101,010
|
|
Mr. James
Garton
|
83,333
|
-
|
-
|
-
|
7,917
|
91,250
|
|
TOTAL
KEY MANAGEMENT PERSONNEL
|
327,530
|
4,353
|
-
|
-
|
16,904
|
348,787
|
Share
Based Compensation Plans
At the date of this
report, the Group has no Share Based Compensation
Plans.
Performance
Rights
At the date of this
annual report, the Group has no Performance Right Plans and there
were no performance rights issued in fiscal years 2016, 2017 and
2018.
Options
At the date of this
annual report, the Group has no Option Plans and there were no
options issued in fiscal years 2016, 2017 and 2018.
Retirement
Benefits
All employees
employed by Mission NewEnergy and its subsidiaries belong to
appropriate retirement schemes for each jurisdiction in which it
operates. All such employee retirement schemes are defined
contribution schemes and thus no amounts are required to be set
aside by us to meet any future retirement benefit
obligations.
Role
of the Board of Directors
The Board of
Mission is responsible for setting the Company’s strategic
direction and providing effective governance over Mission’s
affairs in conjunction with the overall supervision of the
Company’s business with the view of maximising shareholder
value. The Board’s key responsibilities are to:
●
chart the
direction, strategies and financial objectives for Mission and
monitor the implementation of those policies, strategies and
financial objectives;
●
keep updated about
the Group’s business and financial status;
●
provide oversight
and monitor compliance with regulatory requirements, ethical
standards, risk management, internal compliance and control, code
of conduct, legal compliance and external commitments;
●
appoint, evaluate
the performance of, determine the remuneration of, plan for the
succession of and, where appropriate, remove the Managing
Director/Group Chief Executive Officer, the Company Secretary and
the Finance Director/Chief Financial Officer;
●
exercise due care
and diligence and sound business judgment in the performance of
those functions and responsibilities; and
●
ensure that the
Board continues to have the mix of skills and experience necessary
to conduct Mission’s activities, and that appropriate
directors are selected and appointed as required.
The Group has a
formal process to educate new directors about the nature of the
business, current issues, the corporate strategy, the culture and
values of the Group, and the expectations of the Group concerning
performance of the directors. In addition directors are also
educated regarding meeting arrangements and director interaction
with each other, senior executives and other stakeholders.
Directors also have the opportunity to visit Group facilities and
meet with management to gain a better understanding of business
operations. Directors are given access to continuing education
opportunities to update and enhance their skill and
knowledge.
The Board has
adopted a Board Charter, which sets out in more detail the
responsibilities of the Board. The Board Charter sets out the
division of responsibility between the Board and management to
assist those affected by decisions to better understand the
respective accountabilities and contribution to Board and
management.
In accordance with
Mission’s Constitution, the Board delegates responsibility
for the day–to–day management of Mission to the
Executive Chairman/Managing Director/Group Chief Executive Officer
(subject to any limits of such delegated authority as determined by
the Board from time to time). Management as a whole is charged with
reporting to the Board on the performance of the
Company.
Board
structure and composition
The Board currently
is comprised of three directors, all of which are non-independent
executive directors. Details of each director’s skills,
expertise and background are contained within the directors’
report included with the company’s annual financial
statements lodged with the Australian Securities Exchange. The
Board considers the mix of skills and the diversity of Board
members when assessing the composition of the Board. The Board
assesses existing and the potential director’s skill to
ensure they have appropriate industry expertise in the
Group’s operating segments. In addition, the Board has
considered the current Board composition based on the existing
level of operations within the group.
Independence, in
this context, is defined to mean a non–executive director who
is free from any interest and any business or other relationship
that could, or could reasonably be perceived to, materially
interfere with the directors ability to act in the best interests
of Mission. The definition of independence in ASX Recommendation
2.1 is taken into account for this purpose.
Apart from the
Group CEO, Mission’s directors may not hold office for a
continuous period in excess of three years or past the third annual
general meeting following their appointment, whichever is longer,
without submitting for re–election. Directors are elected or
re–elected, as the case may be, by shareholders in a general
meeting. Directors may offer themselves for re–election. A
Director appointed by the directors (e.g., to fill a casual
vacancy) will hold office only until the conclusion of the next
annual general meeting of Mission but is eligible for
re–election at that meeting.
Under
Mission’s Constitution, voting requires a simple majority of
the Board. The Chairman does not hold a casting vote.
Board
Diversity
The Board has a
formal diversity policy which states that Mission NewEnergy Limited
is committed to embedding a corporate culture that embraces
diversity through:
●
Recruitment on the
basis of competence and performance and selection of candidates
from a diverse pool of qualified candidates,
●
Maintaining
selection criteria that does not indirectly disadvantage people
from certain groups,
●
Providing equal
employment opportunities through performance and flexible working
practices,
●
Maintaining a safe
working environment and supportive culture by taking action against
inappropriate workplace and business behavior that is deemed as
unlawful (discrimination, harassment, bullying, vilification and
victimization),
●
Promoting diversity
across all levels of the business,
●
Undertaking
diversity initiatives and measuring their success,
●
Regularly surveying
our work climate, and
●
Establishing
measurable objectives in achieving gender diversity.
Since the
Company’s incorporation, given its cross-jurisdictional
operations in Australia and Malaysia, a diversity practice is
naturally in place.
Board
and management effectiveness
Responsibility for
the overall direction and management of Mission, its corporate
governance and the internal workings of Mission rests with the
Board, notwithstanding the delegation of certain functions to the
Managing Director/Group Chief Executive Officer and management
generally (such delegation effected at all times in accordance with
Mission’s Constitution and its corporate governance
policies). The Board has access, at the company’s expense, to
take independent professional advice after consultation with the
Chairman.
An evaluation
procedure in relation to the Board, individual directors and
Company executives was not completed during the 2018 financial year
due to the limited operating status of the Company. Traditionally,
the evaluations of the Board as a whole were facilitated through
the use of a questionnaire required to be completed by each Board
member, the results of which were summarised, discussed with the
Chairman of the Board and tabled for discussion at a Board Meeting.
Similarly each individual director was required to self assess his
performance and discuss the results with the Chairman. Individual
directors’ performance was evaluated by reference to the
Director’s contribution to monitoring and assessing
management performance in achieving strategies and budgets approved
by the Board (among other things). A similar process for review of
committees was undertaken during the 2015 and 2014 financial
year.
To ensure
management, as well as Board effectiveness, the Remuneration and
Nomination Committee has direct responsibility for evaluating the
performance of the Managing Director/Group Chief Executive Officer
and other executives.
Internal
control, risk management and financial reporting
The Board has
overall responsibility for Mission’s systems of internal
control. These systems are designed to ensure effective and
efficient operations, including financial reporting and compliance
with laws and regulations, with a view to managing the risk of
failure to achieve business objectives. It must be recognized,
however, that internal control systems can provide only reasonable
and not absolute assurance against the risk of material
loss.
The Board reviews
the effectiveness of the internal control systems and risk
management on an ongoing basis, and monitors risk through the Audit
and Risk Management Committee (see the Audit and Risk Management
Committee). The Board regularly receives information about the
financial position and performance of Mission. For annual and
half-yearly accounts released publicly, the Managing Director/Group
Chief Executive Officer and the Finance Director/Chief Financial
Officer sign-off to the Board:
●
the accuracy of the
accounts and that they represent a true and fair view, in all
material respects, of Missions financial condition and operational
results, and have been prepared in accordance with applicable
accounting standards; and
●
that the
representations are based on a system of risk management and
internal compliance and control relating to financial reporting
which implements the policies adopted by the Board, and that those
systems are operating efficiently and effectively in all material
respects.
In addition,
management has reported to the Board on the effectiveness of the
Company’s management of its material business
risks.
Internal
audit
The Group does not
have an Internal Auditor due to the restructure and significant
downsizing of the Group since fiscal year 2012.
Our risk management
policy is included in the Corporate Governance section of the
Company’s website.
Committees
of the Board of Directors
The Board has
established two permanent Board committees to assist the Board in
the performance of its functions:
●
the Audit and Risk
Management Committee; and
●
the Remuneration
and Nomination Committee.
Each committee has
a charter that sets out its purpose and responsibilities. The
committees are described further below.
The names of the
members of the two committees are set out in the directors’
report contained within the Company’s annual financial
statements.
Audit
and Risk Management Committee
The purpose of the
Audit and Risk Management Committee is to provide assistance to the
Board in its review of:
●
Mission’s
financial reporting, internal control structure and risk management
systems’;
●
the internal and
external audit functions; and
●
Mission’s
compliance with legal and regulatory requirements in relation to
the above.
The Audit and Risk
Management committee has specific responsibilities in relation to
Missions’ financial reporting process; the assessment of
accounting, financial and internal controls; the appointment of the
external auditor; the assessment of the external audit; the
independence of the external auditor; and setting the scope of the
external audit.
During the 2017
fiscal year, the Audit and Risk Management Committee comprised two
independent non–executive directors and one non-independent
non–executive director that have diverse and complementary
backgrounds. Since the retirement of the non-executive Directors,
the three executive Directors form the members of the Audit and
Risk Committee.
Remuneration and Nomination Committee
The purpose of the
Remuneration and Nomination Committee is to discharge the
Board’s responsibilities relating to the nomination and
selection of directors and the compensation of the Company’s
executives and directors.
The key
responsibilities of the Remuneration and Nomination Committee are
to:
●
ensure the
establishment and maintenance of a formal and transparent procedure
for the selection and appointment of new directors to the Board;
and
●
establish
transparent and coherent remuneration policies and practices, which
will enable Mission to attract, retain and motivate executives and
Directors who will create value for shareholders and to fairly and
responsibly reward executives.
During the 2017
fiscal year, the Remuneration and Nomination Committee comprised
two independent non–executive directors and one
non-independent non–executive director. Since the retirement
of the non-executive Directors, the three executive Directors form
the members of the Nomination and Remuneration
Committee.
We have a
remuneration policy that sets out the terms and conditions for the
Managing Director and other senior executives.
Disclosure
policy
Mission is
committed to promoting investor confidence and ensuring that
shareholders and the market have equal access to information and
are provided with timely and balanced disclosure of all material
matters concerning the Company. Additionally, Mission recognizes
its continuous disclosure obligations under the ASX Listing Rules
and the Corporations Act. To assist with these matters, the Board
has adopted a Continuous Disclosure and Shareholder Communication
Policy.
The Continuous
Disclosure and Shareholder Communication Policy allocates roles to
the Board and management in respect of identifying material
information and coordinating disclosure of that information where
required by the ASX Listing Rules.
The Policy also
identifies authorized company spokespersons and the processes
Mission has adopted to communicate effectively with its
shareholders. In addition to periodic reporting, Mission will
ensure that all relevant information concerning the Company is
placed on its website.
Code
of Conduct
The Board has
created a framework for managing the Company including internal
controls, business risk management processes and appropriate
ethical standards.
The Board has
adopted practices for maintaining confidence in the Company’s
integrity including promoting integrity, trust, fairness and
honesty in the way employees and directors’ conduct
themselves and Mission’s business, avoiding conflicts of
interest and not misusing company resources. A formal Code of
Conduct has been adopted for all employees and directors of
Mission.
Securities
Trading Policy
A Securities
Trading Policy has been adopted by the Board to set a standard of
conduct, which demonstrates Mission’s commitment to ensuring
awareness of the insider trading laws, and that employees and
directors’ comply with those laws. The Securities Trading
Policy imposes additional share trading restrictions on Directors,
the Company Secretary, executives and employees involved in monthly
financial accounting processes (“specified
persons”).
Under the
Securities Trading Policy, specified persons are only permitted to
buy and sell securities if they do not possess non–public
price sensitive information and trading occurs outside of specified
restricted periods. These periods are the periods commencing on the
first day of the month before the end of the half–year or
full year period and ending on the next business day after the
announcement of the results for that period. In addition, before a
specified person can deal in Mission’s securities they must
obtain clearance from the appropriate officer, confirming that
there is no reason why they cannot trade.
Ownership
of Equity settled Options and Performance rights
There are no
options or performance rights at the date of this
report.
As of June 30,
2018, we had three employees. The following table provides a
breakdown of our employees by main category of activity and
geographic location:
|
|
|
|
|
|
Finance, legal and
other administrative functions
|
0
|
2
|
1
|
Historic
Employees
|
For
the fiscal year ended June 30,
|
|
|
|
|
|
2015
|
-
|
2
|
5
|
-
|
|
2016
|
-
|
2
|
4
|
-
|
|
2017
|
-
|
2
|
1
|
-
|
|
2018
|
-
|
2
|
1
|
-
|
We believe that our
relations with employees are good and we have not experienced any
significant labor stoppages or disputes. Our employees are not
represented by labor unions or covered by a collective bargaining
agreement.
We typically enter
into a standard confidentiality and non-competition agreement with
our management and research and development personnel. Each of
these contracts includes a covenant that prohibits the relevant
personnel from engaging in any activities that compete with our
business during his or her employment with us and for two years
after their employment with us.
Insurance
We have insurance
policies covering all normal aspects of our business in line with
industry practices and the current state of
operations.
We believe that our
overall insurance coverage is consistent with the market practice
or the jurisdiction of operation. We also maintain appropriate
Directors and Officers Liability Insurance.
The following table
presents certain information regarding the beneficial ownership of
our ordinary shares based on total issued ordinary shares of
40,870,275 as of October 5, 2018 by:
●
each person known
by us through substantial shareholder notices filed with the
Australian Securities Exchange and SEC to be the beneficial owner
of more than 5% of our ordinary shares;
●
each of our
directors in office during the 2018 fiscal year;
●
each of our named
executive officers; and
●
all of our current
directors and executive officers as a group.
|
|
|
% of
issued ordinary shares
|
|
Principal
Shareholders
|
|
|
|
Pejuang Emas Sdn
Bhd
|
5,000,000
|
12.23
%
|
|
Kajaintharan
Sithambaran
|
5,000,000
|
12.23
%
|
|
Mohamed Nizam Abdul
Razak
|
2,500,000
|
6.12
%
|
|
Mohd Azlan Bin
Mohammed
|
2,500,000
|
6.12
%
|
|
Directors
and Executive Officers:
|
|
|
|
Dato’ Nathan
Mahalingam
(1)
|
5,612,956
|
13.73
%
|
|
James
Garton
|
5,112,051
|
12.51
%
|
|
Guy
Burnett
|
5,112,001
|
12.51
%
|
|
All directors and
executive officers as a group
|
|
|
|
|
(1)
|
Includes 492,957
shares held by Mission Equities Sdn Bhd., a company which
Dato’ Nathan Mahalingam, Mission NewEnergy’s Chief
Executive Officer, owns.
|
|
|
(2)
|
Held by Karisma
Inegrasi Sdn Bhd, which Mohd Azlan controls and is considered the
beneficial owner of the shares it holds.
|
Beneficial
ownership is determined according to the rules of the SEC and
generally means that a person has beneficial ownership of a
security if he or she possesses sole or shared voting or investment
power of that security, and includes options that are exercisable
within 60 days. Information with respect to beneficial ownership
has been furnished to us by each director, executive officer or 5%
or more shareholder, as the case may be.
Unless otherwise
indicated, to our knowledge, each shareholder possesses sole voting
and investment power over the ordinary shares listed, subject to
community property laws where applicable. None of our shareholders
has different voting rights from other shareholders after the
closing of this offer.
To the best of our
knowledge, there have not been any significant changes in the
ownership of our ordinary shares by major shareholders over the
past three years, except the beneficial ownership of:
|
|
●
|
Muraldir Menon sold
shares to Pejuand Emas Sdn Bhd registered with the ASX on July 6,
2018
|
|
|
●
|
Karisma Integrasi
Sdn Bhd sold 2,500,000 shares to Mohamed Nizam Abdul Razak and Mohd
Azlan Bin Mohammed each which were registered with the ASX on July
6, 2018
|
|
|
●
|
Nathan Mahalingam,
James Garton and Guy Burnett were each issued 5,000,000 shares on
February 19, 2015.
|
As of October 5,
2018, we had forty six holders of record in the United States with
a combined holding of 9,086,798 shares, representing 22.23% of our
total outstanding shares as of that date.
Item
7. Major Shareholders and Related Party Transactions
A.
Major
Shareholders and Related Party Transactions.
See “Item
6.E—Directors, Senior Management and Employees—Share
Ownership.”
B.
Related
Party Transactions.
Other than as
disclosed below, from July 1, 2017 through to June 30, 2018, we did
not enter into any transactions or loans between us and any (a)
enterprises that directly or indirectly through one or more
intermediaries, control or are controlled by, or are under common
control with us; (b) associates; (c) individuals owning, directly
or indirectly, an interest in our voting power that gives them
significant influence over us, and close members of any such
individual’s family; (d) key management personnel and close
members of such individuals’ families; or (e) enterprises in
which a substantial interest in the voting power is owned, directly
or indirectly by any person described in (c) or (d) or over which
such person is able to exercise significant influence. Refer to
note 23 of the financial statements included at the end of this
report for details of any related party transactions.
Loans
From time to time,
we have made loans to or received loans from our wholly owned
subsidiaries, including M2 Capital Sdn Bhd and Mission Biofuels Sdn
Bhd. Loans are repaid where possible and are given on interest free
terms. These inter-company loans are eliminated on
consolidation.
Management
rights with subsidiaries
From time to time,
we have been involved in transactions with wholly owned and
controlled subsidiaries. Such transactions between related parties
are on commercial terms and conditions no more favorable than those
available to other parties.
Rental
costs
During the period
we have paid a company controlled by Dato, Swaminathan Mahalingam
$7,800 office rental fee in Malaysia.
C.
Interests
of Experts and Counsel.
Not
applicable.
Item
8. Financial Information
A.
Consolidated
Statements and Other Financial Information.
Our consolidated
financial statements are set out in Item 18 of this annual
report.
Legal Proceedings
We are not involved
in any significant legal proceedings.
Dividend Distributions
We have never
declared or paid any cash dividends on our ordinary shares and we
do not anticipate paying any cash dividends in the foreseeable
future. Our Board’s current intention is to reinvest any
income in the continued development and operation of our
business.
Except as permitted
by the Corporations Act, under our Constitution dividends may only
be paid out of our profits.
Payment of cash
dividends, if any, in the future will be at the discretion of our
Board or, if our directors do not exercise their power to issue
dividends, our shareholders in a general meeting may exercise the
powers.
Even if our Board
decides to pay dividends, the form, frequency and amount will
depend upon our future operations and earnings, capital
requirements and surplus, general financial conditions, contractual
restrictions and other factors that the Board may deem
relevant.
Except as disclosed
elsewhere and below in this annual report, we have not experienced
any significant changes since the date of our audited consolidated
financial statements included in this annual report.
Item
9. The Offer and Listing
A.
Offer
and Listing Details.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended
|
|
|
|
|
$
A
|
$
A
|
|
|
|
|
|
June
30, 2019
|
|
|
|
|
|
|
|
First Quarter
(through September 10,2018)
|
0.13
|
0.04
|
|
|
0.04
(1)
|
0.036
(1)
|
|
June
30, 2018
|
|
|
|
|
|
|
|
First
Quarter
|
0.01
|
0.01
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
Second
Quarter
|
0.09
|
0.01
|
|
|
0.04
(1)
|
0.036
(1)
|
|
Third
Quarter
|
0.09
|
0.01
|
|
|
0.04
(1)
|
0.036
(1)
|
|
Fourth
Quarter
|
0.19
|
0.01
|
|
|
0.04
(1)
|
0.036
(1)
|
|
June
30, 2017
|
|
|
|
|
0.04
(1)
|
0.036
(1)
|
|
First
Quarter
|
0.06
|
0.02
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
Second
Quarter
|
0.03
|
0.02
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
Third
Quarter
|
0.02
|
0.02
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
Fourth
Quarter
|
0.02
|
0.01
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
June
30, 2016
|
|
|
|
|
0.04
(1)
|
0.036
(1)
|
|
First
Quarter
|
0.06
|
0.03
|
-
|
-
|
0.07
|
0.04
|
|
Second
Quarter
|
0.06
|
0.02
|
-
|
-
|
0.06
|
0.03
|
|
Third
Quarter
|
0.06
|
0.02
|
-
|
-
|
0.04
|
0.03
|
|
Fourth
Quarter
|
0.04
|
0.02
|
-
|
-
|
0.04
|
0.03
|
|
June
30, 2015
|
|
|
|
|
|
|
|
First
Quarter
|
0.02
|
0.01
|
-
|
-
|
0.01
|
0.01
|
|
Second
Quarter
|
0.02
|
0.01
|
-
|
-
|
0.01
|
0.01
|
|
Third
Quarter
|
0.16
|
0.01
|
-
|
-
|
0.26
|
0.001
|
|
Fourth
Quarter
|
0.12
|
0.03
|
-
|
-
|
0.15
|
0.04
|
|
June
30, 2014
|
|
|
|
|
|
|
|
First
Quarter
|
0.02
|
0.01
|
-
|
-
|
0.01
|
0.01
|
|
Second
Quarter
|
0.06
|
0.01
|
-
|
-
|
0.05
|
0.01
|
|
Third
Quarter
|
0.03
|
0.01
|
-
|
-
|
0.03
|
0.01
|
|
Fourth
Quarter
|
0.02
|
0.01
|
-
|
-
|
0.01
|
0.01
|
|
Month
ended
|
|
|
|
|
|
|
|
April
2018
|
0.18
|
0.01
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
May
2018
|
0.16
|
0.04
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
June
2018
|
0.19
|
0.07
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
July
2018
|
0.13
|
0.08
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
August
2018
|
0.12
|
0.04
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
Fiscal
year ended June 30,
|
|
|
|
|
|
|
|
2018
|
0.19
|
0.01
|
|
|
0.04
(1)
|
0.036
(1)
|
|
2017
|
0.06
|
0.01
|
-
|
-
|
0.04
(1)
|
0.036
(1)
|
|
2016
|
0.07
|
0.02
|
-
|
-
|
0.07
|
0.03
|
|
2015
|
0.12
|
0.035
|
-
|
-
|
0.15
|
0.04
|
|
2014
|
0.023
|
0.007
|
-
|
-
|
0.01
|
0.01
|
|
2013
|
0.02
|
0.02
|
-
|
-
|
0.05
|
0.05
|
|
2012
|
0.07
|
0.06
|
-
|
-
|
0.08
|
0.07
|
The table above
presents, for the periods indicated, the high and low market prices
for our ordinary shares reported on the ASX (symbol:
“MBT”) and the NASDAQ (symbol: MNEL) and the OTC
Markets Pink Sheets (symbol: MNELF) for the periods indicated. Our
ordinary shares were delisted from trading on the Nasdaq on July 9,
2012.
(1)
Our ordinary
shares were suspended from trading on the ASX on 25 November 2016.
All prices for the ASX values are in Australian dollars and do not
give effect to the 50-1 share consolidation that became effective
on April 4, 2011. All prices for the NASDAQ and OTC are in US
Dollars.
Not
applicable.
See “Item
9.A—The Offer and Listing—Offer and Listing
Details.”
Not
applicable.
Not
applicable.
F.
Expenses
of the Issue.
Not
applicable.
Item
10. Additional Information
Not
applicable.
B.
Memorandum
and Articles of Association.
Our
Constitution
We are a public
company limited by shares registered under the Corporations Act by
the Australian Securities and Investments Commission, or ASIC. Our
constituent document is a Constitution, which is similar in nature
to the by-laws of a company incorporated under the laws of a U.S.
state. Our Constitution does not provide for or prescribe any
specific objectives or purposes of Mission NewEnergy. Our
Constitution is subject to the terms of the ASX Listing Rules and
the Corporations Act. Our Constitution may be amended or repealed
and replaced by special resolution of shareholders, which is a
resolution passed by at least 75% of the votes cast by shareholders
entitled to vote on the resolution.
Under Australian
law, a company has the legal capacity and powers of an individual
both inside and outside Australia. The material provisions of our
Constitution are summarized below. This summary is not intended to
be complete, nor to constitute a definitive statement of the rights
and liabilities of our shareholders and is qualified in its
entirety by reference to the Constitution, which is available on
request.
Directors
Interested Directors
Except where
permitted by the Corporations Act, a director may not vote in
respect of any contract or arrangement in which the director has,
directly or indirectly, any material interest according to our
Constitution. Such director must not be counted in a quorum, must
not vote on the matter and must not be present at the meeting while
the matter is being considered.
Unless a relevant
exception applies, the Corporations Act requires directors of
Mission NewEnergy to provide disclosure of certain interests and
prohibits directors of companies listed on the ASX from voting on
matters in which they have a material personal interest and from
being present at the meeting while the matter is being considered.
In addition, the Corporations Act and the ASX Listing Rules require
shareholder approval of any provision of related party benefits to
our directors.
Directors’ Compensation
The Directors
agreed to take no fees or salary with effect 30 November
2016.
Borrowing Powers Exercisable by Directors
Pursuant to our
Constitution, the management and control of our business affairs
are vested in our Board. The Board has the power to raise or borrow
money. The Board may also charge any of our property or business or
any uncalled capital and may issue debentures or give any other
security for any of our debts, liabilities or obligations or of any
other person, in each case, in the manner and on terms it deems
fit.
Retirement of directors
Pursuant to our
Constitution, one third of directors other than the director who is
the Chief Executive Officer, must retire from office at every
annual general meeting. If the number of directors is not a
multiple of three then the number nearest to but not less than one
third must retire from office. The directors who retire in this
manner are required to be the directors or director longest in
office since last being elected. A director, other than the
director who is the Chief Executive Officer, must retire from
office at the conclusion of the third annual general meeting after
which the director was elected.
Share Qualifications
Our Constitution
provides that we may fix a share qualification for our directors in
general meeting. However, there are currently no requirements for
directors to own our shares in order to qualify as
directors.
Rights
and Restrictions on Classes of Shares
Subject to the
Corporations Act and the ASX Listing Rules, rights attaching to our
shares are detailed in our Constitution. Our Constitution provides
that any of our shares may be issued with preferred, deferred or
other special rights, whether in relation to dividends, voting,
return of share capital, payment of calls or otherwise as the Board
may determine from time to time. Except as provided by contract or
by our Constitution to the contrary, all unissued shares are under
the control of the Board which may grant options on the shares,
allot or otherwise dispose of the shares on the terms and
conditions and for the consideration it deems fit. Currently our
outstanding share capital consists of only one class of ordinary
shares.
Dividend Rights
The Board may from
time to time determine to pay dividends to shareholders. All
unclaimed dividends may be invested or otherwise made use of by the
Board for our benefit until claimed or otherwise disposed of in
accordance with our Constitution.
Voting Rights
Under our
Constitution, each shareholder has one vote determined by a show of
hands at a meeting of the shareholders. On a poll vote each
shareholder shall have one vote for each fully paid share and a
fractional vote for each share which is not fully paid, such
fraction being equivalent to the proportion of the amount which has
been paid to such date on that share. Under Australian law,
shareholders of a public company are not permitted to approve
corporate matters by written consent. Our Constitution does not
provide for cumulative voting.
Right to Share in our Profits
Subject to the
Corporations Act and pursuant to our Constitution, our shareholders
are entitled to participate in our profits only by payment of
dividends. The Board may from time to time determine to pay
dividends to the shareholders, however no dividend is payable
except out of our profits. A declaration by the Board as to the
amount of our profits is conclusive.
Rights to Share in the Surplus in the Event of
Liquidation
Our Constitution
provides for the right of shareholders to participate in a surplus
in the event of our liquidation. In certain circumstances, any
division may be otherwise than in accordance with the legal rights
of the contributories, and in particular, any class may be given
preferential or special rights or may be excluded altogether or in
part from participation in a surplus in the event of
liquidation.
Redemption Provisions
There are no
redemption provisions in our Constitution in relation to ordinary
shares. Under our Constitution and subject to the Corporations Act,
any preference shares may be issued on the terms that they are, or
may at our option be, liable to be redeemed.
Sinking Fund Provisions
There are no
sinking fund provisions in our Constitution in relation to ordinary
shares.
Liability for Further Capital Calls
According to our
Constitution, the Board may make any calls from time to time upon
shareholders in respect of all monies unpaid on partly-paid shares,
subject to the terms upon which any of the partly-paid shares have
been issued. Each shareholder is liable to pay the amount of each
call in the manner, at the time, and at the place specified by the
Board. Calls may be made payable by installment.
Provisions Discriminating Against Holders of a Substantial Number
of Shares
There are no
provisions under our Constitution discriminating against any
existing or prospective holders of a substantial number of our
shares.
Variation of Share Rights
Our Constitution
provides that, unless otherwise provided by the terms of issue of
the shares of such class, the rights attaching to any class of
shares may, subject to the ASX Listing Rules, be varied with the
consent in writing of members with at least 75% of the votes in the
class or with the sanction of a special resolution passed at a
separate meeting of the holders of the shares of such class. These
conditions are not more significant than that required by the
Corporations Act.
General
Meetings of Shareholders
General meetings of
shareholders may be called by the Board. Except as permitted under
the Corporations Act, shareholders may not convene a meeting. Under
the Corporations Act, shareholders with at least 5% of the votes
which may be cast at a general meeting may call and arrange to hold
a general meeting. The Corporations Act requires the directors to
call and arrange to hold a general meeting on the request of
shareholders with at least 5% of the votes that may be cast at a
general meeting or at least 100 shareholders who are entitled to
vote at the general meeting. Twenty-eight days notice of the
proposed meeting of our shareholders is required under the
Corporations Act.
According to our
Constitution, the chairman of the general meeting may refuse
admission to or exclude from the meeting, any person who is in
possession of a picture recording or sound recording device, in
possession of a placard or banner, in possession of an object
considered by the chairman to be dangerous, offensive or liable to
cause disruption, any person who refuses to produce or permit
examination of any object, any person who behaves or threatens to
behave in a dangerous, offensive or destructive manner, or any
person who is not a director or one of our auditors, one of our
shareholders or a proxy, attorney or representative of one of our
shareholders.
Foreign
Ownership Regulation
There are no
limitations on the rights to own securities imposed by our
Constitution. However, acquisitions and proposed acquisitions of
shares in Australian companies may be subject to review and
approval by the Australian Federal Treasurer under the Foreign
Acquisitions and Takeovers Act 1975 (Commonwealth of Australia).
Generally this Act applies to acquisitions or proposed
acquisitions:
|
|
●
|
by a foreign
person, as defined in the Foreign Acquisitions and Takeovers Act,
or associated foreign persons which would result in such persons
having an interest in 15% or more of the issued shares of, or
control of 15% or more of the voting power in, an Australian
company; and
|
|
|
●
|
by non-associated
foreign persons which would result in such foreign person having an
interest in 40% or more of the issued shares of, or control of 40%
or more of the voting power in, an Australian company.
|
The Australian
Federal Treasurer may prevent a proposed acquisition in the above
categories or impose conditions on such acquisition if the
Treasurer is satisfied that the acquisition would be contrary to
the national interest. If a foreign person acquires shares or an
interest in shares in an Australian company in contravention of the
Act, the Australian Federal Treasurer may order the divestiture of
such person’s shares or interest in shares in the company.
The Australian Federal Treasurer may order divestiture pursuant to
the Act if he determines that the acquisition has resulted in that
foreign person, either alone or together with other non-associated
or associated foreign persons, controlling the company and that
such control is contrary to the national interest.
Ownership
Threshold
There are no
provisions in our Constitution that require a shareholder to
disclose ownership above a certain threshold. The Corporations Act,
however, requires a substantial shareholder to notify us and the
Australian Securities Exchange once a 5% interest in our shares is
obtained. Further, once a shareholder owns a 5% interest in us,
such shareholder must notify us and the Australian Securities
Exchange of any increase or decrease of 1% or more in its holding
of our shares. Such major shareholders are also required to file a
notice with the SEC on Schedule 13D or Schedule 13G.
Issues
of shares and Change in Capital
Subject to our
Constitution, the Corporations Act, the ASX Listing Rules and any
other applicable law, we may at any time issue shares and grant
options or warrants on any terms, with preferred, deferred or other
special rights and restrictions and for the consideration and other
terms that the directors determine. Our power to issue shares
includes the power to issue bonus shares (for which no
consideration is payable to Mission NewEnergy), preference shares
and partly paid shares.
Subject to the
requirements of our Constitution, the Corporations Act, the ASX
Listing Rules and any other applicable law, including relevant
shareholder approvals, we may consolidate or divide our share
capital into a larger or smaller number by resolution, reduce our
share capital (provided that the reduction is fair and reasonable
to our shareholders as a whole, and does not materially prejudice
our ability to pay creditors) or buy-back our shares whether under
an equal access buy-back or on a selective basis.
Change
of Control
Takeovers of listed
Australian public companies, such as Mission NewEnergy, are
regulated by, amongst other things, the Corporations Act which
prohibits the acquisition of a relevant interest in issued voting
shares in a listed company if the acquisition will lead to that
person’s or someone else’s voting power in the company
increasing from 20% or below to more than 20% or increasing from a
starting point that is above 20% and below 90%, subject to a range
of exceptions.
Generally, and
without limitation, a person will have a relevant interest in
securities if they:
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are the holder of
the securities;
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have power to
exercise, or control the exercise of, a right to vote attached to
the securities; or
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have the power to
dispose of, or control the exercise of a power to dispose of, the
securities (including any indirect or direct power or
control).
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If at a particular
time a person has a relevant interest in issued securities and the
person:
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has entered or
enters into an agreement with another person with respect to the
securities;
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has given or gives
another person an enforceable right, or has been or is given an
enforceable right by another person, in relation to the securities;
or
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has granted or
grants an option to, or has been or is granted an option by,
another person with respect to the securities,
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and the other
person would have a relevant interest in the securities if the
agreement were performed, the right enforced or the option
exercised, the other person is taken to already have a relevant
interest in the securities.
There are a number
of exceptions to the above prohibition on acquiring a relevant
interest in issued voting shares above 20%. In general terms, some
of the more significant exceptions include:
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when the
acquisition results from the acceptance of an offer under a formal
takeover bid;
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when the
acquisition is conducted on market by or on behalf of the bidder
under a takeover bid and the acquisition occurs during the bid
period;
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when shareholders
of the company approve the takeover by resolution passed at general
meeting;
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an acquisition by a
person if, throughout the 6 months before the acquisition, that
person, or any other person, has had voting power in the company of
at least 19% and as a result of the acquisition, none of the
relevant persons would have voting power in the company more than 3
percentage points higher than they had 6 months before the
acquisition;
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as a result of a
rights issue;
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as a result of
dividend reinvestment schemes;
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as a result of
underwriting arrangements;
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through operation
of law;
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an acquisition
which arises through the acquisition of a relevant interest in
another listed company;
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arising from an
auction of forfeited shares; or
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arising through a
compromise, arrangement, liquidation or buy-back.
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Breaches of the
takeovers provisions of the Corporations Act are criminal offences.
ASIC and the Australian Takeover Panel have a wide range of powers
relating to breaches of takeover provisions including the ability
to make orders canceling contracts, freezing transfers of, and
rights attached to, securities, and forcing a party to dispose of
securities. There are certain defenses to breaches of the takeovers
provisions provided in the Corporations Act.
Proportional
Takeovers
Our Constitution
indicates that where offers to purchase our shares have been made
under a proportional takeover scheme, we are prohibited from
registering, other than where a transfer is effected in accordance
with the takeover provisions (if any) under the ASTC Settlement
Rules, a transfer which would give effect to the contract resulting
from the acceptance of such an offer unless and until a resolution
to approve the proportional takeover scheme is approved at a
meeting by the persons entitled to vote on such resolution. The
offeror or an associate of the offeror is not entitled to vote on
such resolution. A person, other than an offeror or associate of
the offeror, who, as at the end of the day in which the first offer
under the proportional takeover scheme was made, held shares in
that class of shares, is entitled to one vote for each of the
shares held in that class.
Access
to and Inspection of Documents
Inspection of our
records is governed by the Corporations Act. Any member of the
public has the right to inspect or obtain copies of our registers
on the payment of a prescribed fee. Shareholders are not required
to pay a fee for inspection of our registers or minute books of the
meetings of shareholders. Other corporate records including minutes
of directors meetings, financial records and other documents are
not open for inspection by shareholders. Where a shareholder is
acting in good faith and an inspection is deemed to be made for a
proper purpose, a shareholder may apply to the court to make an
order for inspection of our books.
We have not entered
into any material contracts other than in the ordinary course of
business and other than those described in “Item
4—Information on the Company” or elsewhere in this
annual report on Form 20-F.
Under existing
Australian legislation, the Reserve Bank of Australia does not
prohibit the import and export of funds, and generally no
governmental permission is required for us to move funds in and out
of Australia. However, for the movement of funds to and from
“tax havens,” as specified by current regulations, a
tax clearance certificate must be obtained. The United States is
not a declared tax haven. Accordingly, at the present time,
remittances of any dividends, interest or other payments by us to
non-resident holders of our securities in the United States are not
restricted by exchange controls.
The following is a summary of material U.S. federal and Australian
income tax considerations to U.S. holders, as defined below, of the
acquisition, ownership and disposition of ordinary shares. This
discussion is based on the laws in force as at the date of this
annual report, and is subject to changes in the relevant income tax
law, including changes that could have retroactive effect. The
following summary does not take into account or discuss the tax
laws of any country or other taxing jurisdiction other than the
United States and Australia. Holders are advised to consult their
tax advisors concerning the overall tax consequences of the
acquisition, ownership and disposition of ordinary shares in their
particular circumstances. This discussion is not intended, and
should not be construed, as legal or professional tax
advice.
This summary does not describe U.S. federal estate and gift tax
considerations, or any state and local tax considerations within
the United States, and is not a comprehensive description of all
U.S. federal or Australian income tax considerations that may be
relevant to a decision to acquire or dispose of ordinary shares.
Furthermore, this summary does not address U.S. federal or
Australian income tax considerations relevant to holders subject to
taxing jurisdictions other than or in addition to the United States
and Australia, and does not address all possible categories of
holders, some of which may be subject to special tax
rules.
U.S.
Federal Income Tax Considerations
In this section, we
discuss material U.S. federal income tax considerations applicable
to an investment in ordinary shares by a U.S. holder, as defined
below, that will hold the ordinary shares as capital assets within
the meaning of Section 1221 of the Code. We do not discuss the tax
consequences to any particular holder nor any tax considerations
that may apply to holders subject to special tax rules, such as
banks, insurance companies, individual retirement and other
tax-deferred accounts, regulated investment companies, individuals
who are former U.S. citizens or former long-term U.S. residents,
dealers in securities or currencies, tax-exempt entities, persons
subject to the alternative minimum tax, persons that hold ordinary
shares as a position in a straddle or as part of a hedging,
constructive sale or conversion transaction for U.S. federal income
tax purposes, persons that have a functional currency other than
the U.S. dollar, persons that own (directly, indirectly or
constructively) 10% or more of our equity or persons that are not
U.S. holders.
In this section, a
“U.S. holder” means a beneficial owner of ordinary
shares that is, for U.S. federal income tax purposes:
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an individual who
is a citizen or resident of the United States for U.S. federal
income tax purposes;
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a corporation, or
other entity treated as a corporation for U.S. federal income tax
purposes, created or organized in or under the laws of the United
States or any state thereof or the District of
Columbia;
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an estate the
income of which is subject to U.S. federal income taxation
regardless of its source; or
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a trust (i) the
administration of which is subject to the primary supervision of a
court in the United States and for which one or more U.S. persons
have the authority to control all substantial decisions or (ii)
that has an election in effect under applicable income tax
regulations to be treated as a U.S. person.
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As used in this
section, a “non-U.S. holder” is a beneficial owner of
ordinary shares that is not a U.S. holder or an entity or
arrangement treated as a partnership for U.S. federal income tax
purposes.
If an entity or
arrangement treated as a partnership for U.S. federal income tax
purposes holds ordinary shares, the U.S. federal income tax
treatment of a partner generally will depend on the status of the
partner and the activities of the partnership. Partners of
partnerships that will hold ordinary shares should consult their
tax advisors.
You are urged to consult your own tax advisor with respect to the
U.S. federal, as well as state, local and non-U.S., tax
consequences to you of acquiring, owning and disposing of ordinary
shares in light of your particular circumstances, including the
possible effects of changes in U.S. federal and other tax
laws.
Dividends
Subject to the
passive foreign investment company rules, discussed below, U.S.
holders will include as dividend income the U.S. dollar value of
the gross amount of any distributions of cash or property (without
deduction for any withholding tax), other than certain pro rata
distributions of ordinary shares, with respect to ordinary shares
to the extent the distributions are made from our current or
accumulated earnings and profits, as determined for U.S. federal
income tax purposes. A U.S. holder will include the dividend income
at the time of receipt. To the extent, if any, that the amount of
any distribution by us exceeds our current and accumulated earnings
and profits, as so determined, the excess will be treated first as
a tax-free return of the U.S. holder’s tax basis in the
ordinary shares and thereafter as capital gain. Notwithstanding the
foregoing, we do not intend to maintain calculations of earnings
and profits, as determined for U.S. federal income tax purposes.
Consequently, any distributions generally will be reported as
dividend income for U.S. information reporting purposes. See
“Backup Withholding Tax and Information Reporting”
below. Dividends paid by us will not be eligible for the
dividends-received deduction generally allowed to U.S. corporate
shareholders.
Subject to the
passive foreign investment company rules, certain dividends
received by an individual U.S. holder (as well as certain trusts
and estates) from a “qualified foreign corporation” are
eligible for a preferential U.S. federal income tax rate (20%),
subject to certain minimum holding period requirements and other
limitations. A foreign corporation may be a “qualified
foreign corporation” if (it is eligible for the benefits of a
comprehensive income tax treaty with the United States which the
U.S. Secretary of Treasury determines is satisfactory for this
purpose and which includes an exchange of information program. We
expect to be considered a qualified foreign corporation with
respect to our ordinary shares because we believe we are eligible
for the benefits under the Double Taxation Convention between
Australia and the United States. Accordingly, dividends we pay
generally should be eligible for the reduced income tax rate.
However, the determination of whether a dividend qualifies for the
preferential tax rates must be made at the time the dividend is
paid. U.S. holders should consult their own tax
advisers.
Includible
distributions paid in Australian dollars, including any Australian
withholding taxes, will be included in the gross income of a U.S.
holder in a U.S. dollar amount calculated by reference to the
exchange rate in effect on the date of actual or constructive
receipt, regardless of whether the Australian dollars are converted
into U.S. dollars at that time. If Australian dollars are converted
into U.S. dollars on the date of actual or constructive receipt,
the tax basis of the U.S. holder in those Australian dollars will
be equal to their U.S dollar value on that date and, as a result, a
U.S. holder generally should not be required to recognize any
foreign exchange gain or loss.
If Australian
dollars so received are not converted into U.S. dollars on the date
of receipt, the U.S. holder will have a basis in the Australian
dollars equal to their U.S. dollar value on the date of receipt.
Any gain or loss on a subsequent conversion or other disposition of
the Australian dollars generally will be treated as ordinary income
or loss to such U.S. holder and generally such gain or loss will be
income or loss from sources within the United States for foreign
tax credit limitation purposes.
Dividends received
by a U.S. holder with respect to ordinary shares will be treated as
foreign source income, which may be relevant in calculating the
holder’s foreign tax credit limitation. The limitation on
foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For these purposes,
dividends will be categorized as “passive” or
“general” income depending on a U.S. holder’s
circumstance.
Subject to certain
complex limitations, a U.S. holder generally will be entitled, at
its option, to claim either a credit against its U.S. federal
income tax liability or a deduction in computing its U.S. federal
taxable income in respect of any Australian taxes withheld by us.
If a U.S. holder elects to claim a deduction, rather than a foreign
tax credit, for Australian taxes withheld by us for a particular
taxable year, the election will apply to all foreign taxes paid or
accrued by or on behalf of the U.S. holder in the particular
taxable year.
The availability of
the foreign tax credit and the application of the limitations on
its availability are fact specific. You are urged to consult your
own tax advisor as to the consequences of Australian withholding
taxes and the availability of a foreign tax credit or deduction.
See “Australian Tax Considerations — Taxation of
Dividends.”
Sale or Exchange of Ordinary Shares
Subject to the
passive foreign investment company rules, discussed below, a U.S.
holder generally will, for U.S. federal income tax purposes,
recognize capital gain or loss on a sale, exchange or other
disposition of ordinary shares equal to the difference between the
amount realized on the disposition and the U.S. holder’s tax
basis in the ordinary shares. This gain or loss recognized on a
sale, exchange or other disposition of ordinary shares will
generally be long-term capital gain or loss if the U.S. holder has
held the ordinary shares for more than one year. Generally, for
U.S. holders who are individuals (as well as certain trusts and
estates), long-term capital gains are subject to U.S. federal
income tax at preferential rates. For foreign tax credit limitation
purposes, gain or loss recognized upon a disposition generally will
be treated as from sources within the United States. The
deductibility of capital losses is subject to limitations for U.S.
federal income tax purposes.
You should consult
your own tax advisor regarding the availability of a foreign tax
credit or deduction in respect of any Australian tax imposed on a
sale or other disposition of ordinary shares. See “Australian
Tax Considerations — Tax on Sales or other Dispositions of
Shares.”
Passive Foreign Investment Company Considerations
The Code provides
special, generally adverse, rules regarding certain distributions
received by U.S. holders with respect to, and sales, exchanges and
other dispositions, including pledges, of shares of stock of, a
passive foreign investment company, or PFIC. A foreign corporation
will be treated as a PFIC for any taxable year if at least 75% of
its gross income for the taxable year is passive income or at least
50% of its gross assets during the taxable year, based on a
quarterly average and generally by value, produce or are held for
the production of passive income. Passive income for this purpose
generally includes, among other things, dividends, interest, rents,
royalties, gains from commodities and securities transactions and
gains from assets that produce passive income. In determining
whether a foreign corporation is a PFIC, a pro-rata portion of the
income and assets of each corporation in which it owns, directly or
indirectly, at least a 25% interest (by value) is taken into
account.
The determination
of whether or not we are a PFIC is a factual determination that
must be determined annually at the close of each taxable year.
Based on our business results for the last fiscal year and
composition of our assets, we believe that we may be a PFIC for
U.S. federal income tax purposes for the taxable year ended June
30, 2015. Similarly, based on our business projections and the
anticipated composition of our assets for the current and future
years, we may be a PFIC for the taxable year ended June 30, 2016.
It is also possible that we may become a PFIC in any future taxable
year.
If we are a PFIC
for any taxable year during which a U.S. holder holds ordinary
shares, any “excess distribution” that the holder
receives and any gain realized from a sale or other disposition
(including a pledge) of such ordinary shares will be subject to
special tax rules, unless the holder makes a mark-to-market
election or qualified electing fund election as discussed below.
Any distribution in a taxable year that is greater than 125% of the
average annual distribution received by a U.S. holder during the
shorter of the three preceding taxable years or such holder’s
holding period for the ordinary shares will be treated as an excess
distribution. Under these special tax rules:
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the excess
distribution or gain will be allocated ratably over the U.S.
holder’s holding period for the ordinary shares;
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the amount
allocated to the current taxable year, and any taxable year prior
to the first taxable year in which we were a PFIC, will be treated
as ordinary income; and
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the amount
allocated to each other year will be subject to income tax at the
highest rate in effect for that year and the interest charge
generally applicable to underpayments of tax will be imposed on the
resulting tax attributable to each such year.
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The tax liability
for amounts allocated to years prior to the year of disposition or
excess distribution cannot be offset by any net operating loss, and
gains (but not losses) realized on the transfer of the ordinary
shares cannot be treated as capital gains, even if the ordinary
shares are held as capital assets. In addition, non-corporate U.S.
holders will not be eligible for reduced rates of taxation on any
dividends received from us if we are a PFIC in the taxable year in
which such dividends are paid or in the preceding taxable
year.
If we are a PFIC
for any taxable year during which any of our non-United States
subsidiaries is also a PFIC, a U.S. holder of ordinary shares
during such year would be treated as owning a proportionate amount
(by value) of the shares of the lower-tier PFIC for purposes of the
application of these rules to such subsidiary. You should consult
your tax advisors regarding the tax consequences if the PFIC rules
apply to any of our subsidiaries.
Unless otherwise
provided by the U.S. Treasury, each U.S. shareholder of a PFIC is
required to file a Form 8621 and such other form as the U.S.
Treasury may require. If we are or become a PFIC, you should
consult your tax advisors regarding any reporting requirements that
may apply to you as a result of our status as a PFIC.
A U.S. holder may
avoid some of the adverse tax consequences of owning shares in a
PFIC by making a “qualified electing fund” election.
The availability of this election with respect to our ordinary
shares requires that we provide information to shareholders making
the election. We do not intend to provide you with the information
you would need to make or maintain a qualified electing fund
election and you will, therefore, not be able to make such an
election with respect to your ordinary shares.
Alternatively, a
U.S. holder owning marketable stock in a PFIC may make a
mark-to-market election to elect out of the tax treatment discussed
above. If a valid mark-to-market election for the ordinary shares
is made, the electing U.S. holder will include in income each year
an amount equal to the excess, if any, of the fair market value of
the ordinary shares as of the close of the holder’s taxable
year over the adjusted basis in such ordinary shares. The U.S.
holder is allowed a deduction for the excess, if any, of the
adjusted basis of the ordinary shares over their fair market value
as of the close of the holder’s taxable year. Deductions are
allowable, however, only to the extent of any net mark-to-market
gains on the ordinary shares included in the U.S. holder’s
income for prior taxable years. Amounts included in the U.S.
holder’s income under a mark-to-market election, as well as
gain on the actual sale or other disposition of the ordinary
shares, are treated as ordinary income. Ordinary loss treatment
also applies to the deductible portion of any mark-to-market loss
on the ordinary shares, as well as to any loss realized on the
actual sale or disposition of the ordinary shares, to the extent
the amount of such loss does not exceed the net mark-to-market
gains previously included for such ordinary shares. The tax basis
in the ordinary shares will be adjusted to reflect any such income
or loss amounts. A mark-to-market election will be effective for
the taxable year for which the election is made and all subsequent
taxable years unless the ordinary shares are no longer regularly
traded on an applicable exchange or the Internal Revenue Service
(“IRS”) consents to the revocation of the
election.
The mark-to-market
election is available only for stock which is regularly traded on
(i) a national securities exchange that is registered with the U.S.
Securities and Exchange Commission, (ii) NASDAQ, or (iii) an
exchange or market that the U.S. Secretary of the Treasury
determines has rules sufficient to ensure that the market price
represents a legitimate and sound fair market value. Our ordinary
shares are listed on the ASX and, consequently, we expect that,
assuming the ordinary shares are so listed and are regularly
traded, the mark-to-market election would be available to you were
we to be or become a PFIC.
U.S. holders are
urged to contact their own tax advisors regarding the determination
of whether we are a PFIC and the tax consequences of such
status.
Net Investment Income Tax
Certain U.S.
Holders who are individuals, estates, or trusts must pay a 3.8% tax
on, among other things, dividends and capital gains from the sale
or other disposition of shares of common stock.
Backup Withholding Tax and Information Reporting
Requirements
U.S. holders that
are “exempt recipients” (such as corporations)
generally will not be subject to U.S. backup withholding tax and
related information reporting requirements on payments of dividends
on, and the proceeds from the disposition of, ordinary shares
unless, when required, they fail to demonstrate their exempt
status. Other U.S. holders (including individuals) generally will
be subject to U.S. backup withholding tax at the applicable
statutory rate, currently 28%, in respect of any payments of
dividends on, and the proceeds from the disposition of, ordinary
shares if they fail to furnish their correct taxpayer
identification number or otherwise fail to comply with applicable
backup withholding requirements. Information reporting requirements
generally will apply to payments of dividends on, and the proceeds
from the disposition of, ordinary shares to a U.S. holder that is
not an exempt recipient. U.S. holders who are required to establish
their exempt status generally must provide IRS Form W-9 (Request
for Taxpayer Identification Number and Certification).
Backup withholding
is not an additional tax. Amounts withheld as backup withholding
may be credited against a U.S. holder’s U.S. federal income
tax liability. A U.S. holder may obtain a refund of any amounts
withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service in a
timely manner and furnishing any required information.
U.S. holders are
urged to contact their own tax advisors as to their qualification
for an exemption from backup withholding tax and the procedure for
obtaining this exemption.
Certain U.S.
Holders who are individuals may be required to report information
relating to an interest in our ordinary shares, subject to certain
exceptions. U.S. Holders are urged to consult their tax advisers
regarding their reporting obligation in connection with their
ownership and disposition of our ordinary shares.
The discussion above is not intended to constitute a complete
analysis of all tax considerations applicable to an investment in
ordinary shares. You should consult with your own tax advisor
concerning the tax consequences to you in your particular
situation.
Australian
Tax Considerations
In this section, we
discuss the material Australian income tax considerations related
to the acquisition, ownership and disposal by the absolute
beneficial owners of the ordinary shares. This discussion does not
address all aspects of Australian income tax law which may be
important to particular investors in light of their individual
investment circumstances, such as shares held by investors subject
to special tax rules (for example, financial institutions,
insurance companies or tax exempt organizations). In addition, this
summary does not discuss any foreign or state tax considerations,
other than transfer duty. Prospective investors are urged to
consult their tax advisors regarding the Australian and foreign
income and other tax considerations of the purchase, ownership and
disposition of the shares. This summary is based upon the premise
that the holder is not an Australian tax resident.
Taxation of Dividends
Australia operates
a dividend imputation system under which dividends may be declared
to be ‘franked’ to the extent of tax paid on company
profits. Fully franked dividends are not subject to dividend
withholding tax. Dividends payable to non-Australian resident
shareholders that are not operating from an Australian permanent
establishment (Foreign Shareholders) will be subject to dividend
withholding tax, to the extent the dividends are not foreign
sourced and declared to be conduit foreign income (CFI) and are
unfranked. Dividend withholding tax will be imposed at 30%, unless
a shareholder is a resident of a country with which Australia has a
double taxation agreement and qualifies for the benefits of the
treaty. Under the provisions of the current Double Taxation
Convention between Australia and the United States, the Australian
tax withheld on unfranked dividends that are not CFI paid by us to
which a resident of the United States is beneficially entitled is
limited to 15%.
If a company that
is a non-Australian resident shareholder owns a 10% or more
interest, the Australian tax withheld on dividends paid by us to
which a resident of the United States is beneficially entitled is
limited to 5%. In limited circumstances the rate of withholding can
be reduced to nil.
Tax on Sales or other Dispositions of Shares — Capital gains
tax
Foreign
Shareholders will not be subject to Australian capital gains tax on
the gain made on a sale or other disposal of our shares, unless
they, together with associates, hold 10% or more of our issued
capital, at the time of disposal or for 12 months of the last 2
years.
Foreign Shareholder
who, together with associates, owns a 10% or more interest would be
subject to Australian capital gains tax if more than 50% of our
direct or indirect assets determined by reference to market value,
consists of Australian land, leasehold interests or Australian
mining, quarrying or prospecting rights. Double Taxation Convention
between the United States and Australia is unlikely to limit the
amount of this taxable gain. Australian capital gains tax applies
to net capital gains at a taxpayer’s marginal tax rate but
for certain shareholders a discount of the capital gain may apply
if the shares have been held for 12 months or more. For
individuals, this discount is 50%, which may not be available for
non-resident shareholders. Net capital gains are calculated after
reduction for capital losses, which may only be offset against
capital gains. Non-resident shareholders are urged to obtain tax
advise as required.
Tax on Sales or other Dispositions of Shares — Shareholders
Holding Shares on Revenue Account
Some Foreign
shareholders may hold shares on revenue rather than on capital
account, for example, share traders. These shareholders may have
the gains made on the sale or other disposal of the shares included
in their assessable income under the ordinary income provisions of
the income tax law, if the gains are sourced in
Australia.
Non-Australian
resident shareholders assessable under these ordinary income
provisions in respect of gains made on shares held on revenue
account would be assessed for such gains at the Australian tax
rates for non-Australian residents, which start at a marginal rate
of 32.5%. Some relief from Australian income tax may be available
to such non-Australian resident shareholders under the Double
Taxation Convention between the United States and
Australia.
To the extent an
amount would be included in a non-Australian resident
shareholder’s assessable income under both the capital gains
tax provisions and the ordinary income provisions, the capital gain
amount would generally be reduced, so that the shareholder would
not be subject to double tax on any part of the income gain or
capital gain.
Dual Residency
If a shareholder
were a resident of both Australia and the United States under those
countries’ domestic taxation laws, that shareholder may be
subject to tax as an Australian resident. If, however, the
shareholder is determined to be a U.S. resident for the purposes of
the Double Taxation Convention between the United States and
Australia, the Australian tax would be subject to limitation by the
Double Taxation Convention. Shareholders should obtain specialist
taxation advice in these circumstances.
Transfer Duty
No transfer duty is
payable by Australian residents or foreign residents on the trading
of shares that are quoted on the ASX or NASDAQ/OTC.
Australian Death Duty
Australia does not
have estate or death duties. As a general rate, no capital gains
tax liability is realized upon the inheritance of a deceased
person’s shares. The disposal of inherited shares by
beneficiaries, may, however, give rise to a capital gains tax
liability if the gain falls within the scope of Australia’s
jurisdiction to tax (as discussed above).
Goods and Services Tax
The issue or
transfer of shares will not incur Australian goods and services
tax.
F.
Dividends
and Paying Agents.
Not
applicable.
Not
applicable.
We are subject to
the periodic reporting and other informational requirements of the
Exchange Act as applicable to foreign private issuers. Under the
Exchange Act, we are required to file reports, including annual
reports on Form 20-F, and other information with the SEC. All
information filed with the SEC is available through the SEC’s
Electronic Data Gathering, Analysis and Retrieval system (EDGAR),
which may be accessed through the SEC’s website at
www.sec.gov. Information filed with the SEC may also be inspected
and copied at the public reference room maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549. You can request copies
of these documents upon payment of a duplicating fee, by writing to
the SEC. Please visit the SEC’s website at www.sec.gov for
further information on the SEC’s public reference
room.
As a foreign
private issuer, we are exempt under the Exchange Act from, among
other things, the rules prescribing the furnishing and content of
proxy statements, and our executive officers, directors and
principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of
the Exchange Act.
I.
Subsidiary
Information
Not
applicable.
Item
11. Quantitative and Qualitative Disclosures About Market
Risk
Our business
activities are exposed to a variety of market risks, including
credit risk, foreign currency risk, interest rate risk and
commodity risk.
Credit Risk
There is no credit
risk for receivables at June 30, 2018 in the refining
operations.
Foreign Exchange Risk
The Group operates
internationally through a number of subsidiaries and is thus
exposed to fluctuations in foreign currencies, arising from the
foreign currencies held in its bank accounts and the translation of
results from investments in foreign operations. The foreign
exchange exposures are primarily to the Malaysian Ringgit and the
US dollar.
Foreign currency
risks arising from expected expenditure in foreign currencies are
managed by holding cash in that currency. Foreign currency
translation risk is not hedged, with translation differences being
reflected in the foreign currency translation reserve.
Group
sensitivity
At June 30, 2018,
if foreign currencies had changed by -/+ 10%, with all other
variables held constant, the following financial impacts would have
been recorded by the Group:
Effect on cash and
cash equivalent – A$ 11,238 lower / A$9,194 higher (2017:A$
6,229 lower/ A$ 18,624 higher)
Profit and Loss
would have been – A$ 11,238 lower / A$9,194 higher (2017:A$
6,229 lower/ A$ 18,624 higher)
Hedging of Foreign
Currency Risk
At financial report
date the Group had no forward exchange contracts in
place.
Interest Rate Risk
Interest rate risk
has historically been managed with a mixture of fixed and floating
rate deposits, fixed rate convertible note debt and floating rate
debt. For further details on interest rate risk refer to the table
below under liquidity risk. The group has no debt at June 30,
2017.
Group sensitivity
At 30 June 2018, if
interest rates had changed by -/+ 25 basis points, with all other
variables held constant, the following financial impacts would have
been recorded by the Group;
● Effect
on post tax profit – A$ Nil lower/higher (2016: A$ Nil
lower/higher)
● Equity
would have been – A$ Nil lower/higher (2016: A$ Nil
lower/higher)
Commodity Risk
As there was no
inventory held as at June 30, 2018, the Group has no exposure to
market prices of input costs into the production of
biodiesel.
Item
12. Description of Securities Other than Equity
Securities
Not
applicable.
Not
applicable.
Not
applicable.
D.
American
Depositary Shares.
Not
applicable.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
HOW NUMBERS ARE
CALCULATED
This
section provides additional information about those individual line
items in the financial statements that the Directors consider most
relevant in the context of the operations of the entity,
including:
(a)
information and accounting policies that are relevant for an
understanding of the items recognised in the financial statements.
Accounting policies specific to an item of disclosure are included
with that disclosure in these Financial Statements,
(b)
analysis and sub-totals, including segment
information,
(c)
information about estimates and judgements made in relation to
particular items.
1.
Nature of operations and
general information
Mission
NewEnergy Limited is a company domiciled in Australia (ACN: 117 065
719) and:
●
listed on the ASX
(MBT). Currently the shares on the ASX are in voluntary
suspension;
●
continues to work
with potential entities to complete a RTO;
●
that has a 20%
interest in an Associate owning a 250,000 tpa (approx. 75 million
gallon p.a.) biodiesel refinery, located in Malaysia. The 20%
interest investment is carried at NIL value as the project has
stalled due to an inability of the biodiesel refinery operating
entity to secure ongoing offtake sales contracts.
Statement of compliance
The
financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards
(AASB’s) (including Australian interpretations) issued by the
Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The consolidated financial report of the Group complies
with International Financial Reporting Standards (IFRSs) and
Interpretations issued by the International Accounting Standards
Board (IASB). Mission NewEnergy Limited is a for-profit entity for
the purpose of preparing the financial statements.
These
accounting policies have been consistently applied by each entity
in the Group and are consistent with those of the previous
year.
Basis of measurement
The
financial report has been prepared on an accruals basis and is
based on historical costs. All amounts shown are in Australian
dollars ($A) unless otherwise stated.
Significant matters
Going concern
The Group incurred a net operating loss for the year ended
30 June 2018 of $202,114 loss (2017: $4,550,604 loss) and incurred
net cash outflows from operating activities of $189,859 (2017:
$978,724 used). At 30 June 2018 the Group had net a working
capital deficit of $4,926 (2017 : 192,768 surplus). At 19 September
2018 the Group had a cash balance of $125,636 and payable
liabilities of around $11,758 (excluding leave liability of
$183,885, which the employees have agreed not to pay down unless
the Group has sufficient cash resources to pay)
.
The Group currently has no source of
income and the cash balance is expected to be exhausted within 10
months based on the 2018/19 forecast profile prepared by
management, unless the Group is able to secure a further source of
funding.
The ability of the Group to continue as a going concern is
dependent in the short term on completion of an RTO, securing an
advance of funds from a potential RTO candidate or generation of
cash from an equity placement.
These
conditions indicate a material uncertainty that cast a significant
doubt about the Group’s ability to continue as a going
concern and, therefore, that it may be unable to realise its assets
and discharge its liabilities in the normal course of
business.
Management
believe there are sufficient funds to meet the Group’s
working capital requirements as at the date of this report, and
that there are reasonable grounds to believe that the Group will
continue as a going concern as a result of a combination of the
following reasons:
●
the Group has
received confirmation from its employees and Directors that they
have forgone all salary entitlements since 1 December 2016 and will
not call on their annual leave entitlements until the Group has a
clear ability to pay; and
●
management expects
the Group will be able to secure funding from completion of a RTO
or an alternative source.
Should
the Group not be able to continue as a going concern, it may be
required to realise its assets and discharge its liabilities other
than in the ordinary course of business, and at amounts that differ
from those stated in the financial statements. The financial
report does not include any adjustment relating to the
recoverability and classification of recorded assets or liabilities
that might be necessary should the entity note continue as a going
concern.
Carrying value of investment in associate
The
Group owns 100% of M2 Capital Sdn Bhd, a Malaysian subsidiary,
which owns a 20% stake in FGV Green Energy Sdn Bhd (FGVGE), a
refinery joint venture company (see note 15). This project has
stalled.
The
Group’s investment in associate which is fully impaired
(2017: fully impaired), please refer to note 15 and 16 for further
information.
Goods and Services Tax (GST)
Revenues,
expenses and assets are recognised net of the amount of GST, except
where the amount of GST incurred is not recoverable from the
Australian Tax Office. In these circumstances the GST is recognised
as part of the cost of acquisition of the asset or as part of an
item of the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST
Functional and Presentation currency
The
consolidated financial statements are presented in Australian
Dollars. The functional currencies of the operating units are as
follows:
●
Malaysian
investments (20% investment in Associate) - Malaysian
Ringgit
●
Other –
Australian Dollar.
The
Board of Directors approved this financial report on 21 September
2018.
3.
New, revised or amending
Accounting Standards and Interpretations adopted
The
Group has adopted all of the new, revised or amending Accounting
Standards and Interpretations issued by the AASB that are mandatory
for the current reporting period. The adoption of these Accounting
Standards and Interpretations did not have a material impact on the
financial performance or position of the consolidated
entity.
Any
new, revised or amending Accounting Standards or Interpretations
that are not yet mandatory have not been early
adopted.
4.
New Accounting Standards and
Interpretations not yet mandatory or early adopted
Australian
Accounting Standards and Interpretations that have recently been
issued or amended but are not yet mandatory, have not been early
adopted by the consolidated entity for period ended 30 June 2018.
The consolidated entity's assessment of the impact of these new or
amended Accounting Standards and Interpretations, most relevant to
the consolidated entity, are set out below.
AASB 9 Financial Instruments
These amendments must be applied for financial years commencing on
or after 1 January 2018. Therefore application date for the Company
will be 1 July 2018.
AASB 9
addresses the classification, measurement and de-recognition of
financial assets and financial liabilities, it also sets out new
rules for hedge accounting. There will be no impact on the
Company’s classification or measurement for financial assets
and financial liabilities, currently the Group holds no financial
instruments that would it would have paid the amortised cost for.
The new hedging rules align hedge accounting more closely with the
Company’s risk management practices. As a general rule it
will be easier to apply hedge accounting going forward. The new
standard also introduces expanded disclosure requirements and
changes in presentation. Currently the Group does not enter into
derivative contracts.
AASB 15 Revenue from Contracts with Customers
These amendments must be applied
for annual reporting
periods beginning on or after 1 January 2018. Therefore application
date for the Company will be 1 July 2018.
An entity will recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. This means that our Associate
once in production, will only recognize revenue when control of
goods or services is transferred, rather than on transfer of risks
and rewards as is currently the case under IAS 18
Revenue.
AASB 16 Leases
AASB 16 eliminates the operating and finance lease classifications
for lessees currently accounted for under AASB 117 Leases. It
instead requires an entity to bring most leases onto its statement
of financial position in a similar way to how existing finance
leases are treated under AASB 117. An entity will be required to
recognise a lease liability and a right of use asset in its
statement of financial position for most leases.
There are some optional exemptions for leases with a period of 12
months or less and for low value leases. The application date of
this standard is for annual reporting periods beginning on or after
1 January 2019. Due to the recent release of this standard, the
group has not yet made a detailed assessment of the impact of this
standard.
It is not expected that there will be any material impact on the
financial statements when these amendments are
adopted.
|
Segment
Report – 2018
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Interest
received
|
-
|
1,524
|
1,524
|
|
Total
segment revenue
|
-
|
1,524
|
1,524
|
|
Depreciation and
amortisation
|
(1,898
)
|
-
|
(1,898
)
|
|
Finance
costs
|
-
|
(2,450
)
|
(2,450
)
|
|
Impairment of
investment in associate
|
-
|
-
|
-
|
|
Other
expenses
|
(31,490
)
|
(167,665
)
|
(199,155
)
|
|
Segment result
before tax
|
(33,388
)
|
(168,591
)
|
(201,979
)
|
|
Income tax
expense
|
(135
)
|
-
|
(135
)
|
|
Net
(loss) for the year
|
|
|
(202,114
)
|
|
|
|
|
|
|
Non-current Segment
assets
|
-
|
-
|
-
|
|
Total Segment
assets
|
9,844
|
189,835
|
199,679
|
|
Segment
liabilities
|
(340
)
|
(204,265
)
|
(204,605
)
|
|
|
|
|
|
|
Segment
Report – 2017
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Interest
received
|
2,744
|
5,028
|
7,772
|
|
Other
income
|
-
|
5
|
5
|
|
Total
segment revenue
|
2,744
|
5,033
|
7,777
|
|
Employee benefits
expense
|
(70,590
)
|
(34,679
)
|
(105,269
)
|
|
Executive Directors
benefits expense
|
(15,991
)
|
(293,600
)
|
(309,591
)
|
|
Non-Executive
Directors benefits expenses
|
-
|
(52,360
)
|
(52,360
)
|
|
Depreciation and
amortisation
|
(487
)
|
-
|
(487
)
|
|
Impairment of
investment in associate
|
(3,608,038
)
|
-
|
(3,608,038
)
|
|
Other
expenses
|
(169,139
)
|
(272,071
)
|
(441,210
)
|
|
Share of net loss
of associate accounted for using the equity method
|
(38,174
)
|
-
|
(38,174
)
|
|
Segment result
before tax
|
(3,899,675
)
|
(647,677
)
|
(4,547,352
)
|
|
Income tax
expense
|
(3,252
)
|
-
|
(3,252
)
|
|
Net
(loss) for the year
|
|
|
(4,550,604
)
|
|
|
|
|
|
|
Non-current Segment
assets
|
1,748
|
-
|
1,748
|
|
Total Segment
assets
|
40,499
|
358,974
|
399,473
|
|
Segment
liabilities
|
(3,864
)
|
(201,093
)
|
(204,957
)
|
|
|
|
|
|
|
Accounting Policies: Segment reporting
The
Group Chief Executive Officer is the Chief operating decision
maker. The reportable segments presented are in line with the
segmental information reported during the financial year to the
Group Chief Executive Officer.
Segment
revenues and expenses are those directly attributable to the
segments and include any joint revenue and expenses where a
reasonable basis of allocation exists. Segment assets include all
assets used by a segment and consist principally of cash,
receivables, inventories, intangibles and property, plant and
equipment, net of allowances and accumulated depreciation and
amortisation. Segment liabilities consist principally of payables,
employee benefits, accrued expenses and borrowings. Segment assets
and liabilities do not include deferred income taxes. Segments
exclude discontinued operations.
Intersegment Transfers:
There are no intersegment
transfers.
Business and Geographical Segments:
The Group had one key
business segment, being biodiesel, which is located in
Malaysia.
|
|
|
|
|
|
|
6a) Director and
Employee benefits expense
|
|
|
|
|
Wages and
Salaries
|
-
|
450,318
|
1,041,974
|
|
Contribution to
defined contribution plans
|
-
|
16,902
|
48,660
|
|
|
-
|
467,220
|
1,090,634
|
|
6b) Other
expenses:
|
|
|
|
|
Audit
fees
|
26,816
|
46,748
|
66,748
|
|
Computer
maintenance & consumables
|
-
|
592
|
6,114
|
|
Communication
expenses
|
7,976
|
14,725
|
28,773
|
|
Insurance
costs
|
58,192
|
78,004
|
91,138
|
|
Legal
fees
|
14,787
|
52,508
|
152,961
|
|
Plant sale and
operating costs
|
|
|
188,185
|
|
Due diligence
costs
|
-
|
73,145
|
|
|
Other
administrative costs
|
13,319
|
32,895
|
52,273
|
|
Total
|
121,090
|
298,617
|
586,192
|
|
|
|
|
|
|
a. The components
of tax expense comprise
|
|
|
|
|
Current
tax
|
(135
)
|
(3,252
)
|
(844
)
|
|
Deferred
tax
|
-
|
-
|
-
|
|
|
(135
)
|
(3,252
)
|
(844
)
|
|
b. The prima facie
tax on the (loss) from ordinary activities before income tax is
reconciled to the income tax as follows:
|
|
|
|
|
Accounting (loss)
before tax
|
(201,979
)
|
(4,509,178
)
|
(2,217,694
)
|
|
Prima facie tax
(benefit on (loss) from ordinary activities before income tax at
27.5%
|
(55,544
)
|
(1,352,753
)
|
(665,308
)
|
|
Adjusted
for:
|
|
|
|
|
Tax effect
of:
|
|
|
|
|
●
losses not brought
to account
|
55,409
|
1,349,501
|
664,464
|
|
|
(135
)
|
(3,252
)
|
(844
)
|
|
Add:
|
|
|
|
|
Over provision for
income tax in prior year
|
-
|
-
|
|
|
Income tax
attributable to entity
|
(135
)
|
(3,252
)
|
(844
)
|
|
|
|
|
|
|
The applicable
weighted average effective current tax rate is as
follows:
|
0
%
|
0
%
|
0
%
|
Deferred
tax assets on temporary differences and losses are not recognised
because it is not probable that future taxable profit will be
available against which the unused tax losses can be used and may
be subject to continuity of ownership and business
test.
At both
period ends the Group has not recognised any current or deferred
tax liabilities or assets.
Deferred
tax assets on losses to a value of $2.9 million (2017: $2.8
million) to date are not brought to account due to not being
probable of being recovered. In addition, deferred tax assets for
deductible temporary differences of A$3.1 million (2017: A$3.1
million).
|
Accounting Policy: Income Tax
The
charge for current income tax expense is based on the profit/(loss)
for the year adjusted for any non-assessable or disallowed items.
It is calculated using the tax rates that have been enacted or are
substantially enacted by the reporting date.
Deferred
tax is accounted for using the balance sheet liability method in
respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial
statements. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable
profit or loss.
Deferred
tax is calculated at the tax rates that are expected to apply to
the period when the asset is realised or liability is settled.
Deferred tax is credited in the Statement of profit or loss, except
where it relates to items that may be credited directly to equity,
in which case the deferred tax is adjusted directly against
equity.
Deferred
income tax assets are recognised to the extent that it is probable
that future tax profits will be available against which deductible
temporary differences can be utilised.
The
amount of benefits brought to account or which may be realised in
the future is based on the assumption that no adverse change will
occur in income taxation legislation and the anticipation that the
Group will derive sufficient future assessable income to enable the
benefit to be realised and comply with the conditions of
deductibility imposed by the law.
|
|
|
|
|
|
|
a. Reconciliation
of earnings to profit or loss
|
|
|
|
|
Earnings used in
calculation of both ordinary and dilutive EPS
|
(202,114
)
|
(4,550,604
)
|
(2,328,545
)
|
|
b. Earnings used in
calculation of both ordinary and dilutive EPS for ongoing
operations
|
(202,114
)
|
(4,550,604
)
|
(2,328,545
)
|
|
c. Weighted average
number of ordinary shares outstanding during the year used in
calculating basic EPS
|
40,870,275
|
40,870,275
|
40,870,275
|
|
Effect
of:
|
|
|
|
|
Weighted average
number of ordinary shares outstanding during the year used in
calculating dilutive EPS
|
40,870,275
|
40,870,275
|
40,870,275
|
|
Accounting policy: Earnings per share
Basic
earnings per share are calculated by dividing the profit
attributable to owners of the company, excluding costs of servicing
equity other than ordinary shares, by the weighted average number
of ordinary shares outstanding during the financial
year.
Diluted
earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account the after tax effect
of interest and other financing costs associated with the dilutive
potential ordinary shares, and the weighted average number of
additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary
shares.
|
9.
Cash and cash
equivalents
|
|
|
|
|
|
Cash at bank and in
hand
|
102,705
|
147,673
|
271,158
|
|
Short-term bank
deposits
|
92,896
|
240,167
|
1,129,380
|
|
|
195,601
|
387,840
|
1,400,538
|
See
note 17, Financial Instruments, for information on risk exposures
for cash and cash equivalents.
|
Accounting policy: Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand, deposits held at call
with banks, other short-term highly liquid investments with
original maturities of 3 months or less.
|
10.
Trade and Other
Receivables
|
|
|
|
|
CURRENT
|
|
|
|
Other
receivables
|
-
|
6,134
|
|
TOTAL
|
-
|
6,134
|
At each
reporting date, the Board assesses the likely timing of
recoverability of receivables and bases this assessment on a number
of assumptions and estimates. Please refer to note 17 for a
discussion around credit risk, provisioning and age analysis of
financial assets.
|
CURRENT
|
|
|
|
Unsecured
liabilities:
|
|
|
|
Trade
payables
|
9,730
|
82
|
|
Sundry payables and
accrued expenses
|
10,990
|
20,990
|
|
|
20,720
|
21,072
|
|
CURRENT
|
|
|
|
Provision for
leave
|
183,885
|
183,885
|
|
|
183,885
|
183,885
|
|
The
group has received confirmation from its employees and Directors
that they will not call on their annual leave entitlements until
the group has a clear ability to pay.
|
Fully
paid ordinary shares (Issued and authorised)
|
|
|
|
|
|
|
|
At the beginning of
reporting period
|
40,870,275
|
523,197
|
40,870,275
|
523,197
|
|
Ordinary shares
issued
|
-
|
-
|
-
|
-
|
|
At
reporting date
|
40,870,275
|
523,197
|
40,870,275
|
523,197
|
Ordinary
shares participate in dividends and the proceeds on winding up of
the parent entity in proportion to the number of shares held. At
shareholder meetings each ordinary share is entitled to one vote
when a poll is called, otherwise each shareholder has one vote on a
show of hands.
There
were no warrants, performance rights or options in existence at
reporting date.
|
Accounting policy: Contributed equity
Ordinary
shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
|
|
Reconciliation
of Cash Flow from Operations with (Loss) after Income
Tax
|
|
|
|
|
(Loss) after income
tax
|
(202,114
)
|
(4,550,604
)
|
(2,328,545
)
|
|
Non
cash flows in profit / (loss)
|
|
|
|
|
Depreciation of
plant and equipment – continued operations
|
1,898
|
487
|
175
|
|
Share of net
loss/(profit) of associate
|
-
|
38,174
|
110,007
|
|
Provision for
employee benefits
|
-
|
(2,826
)
|
9,094
|
|
Other non cash
adjustments
|
-
|
4,436
|
-
|
|
Impairment of
associate
|
-
|
3,608,038
|
-
|
|
Net
cash (used in) operating activities before change in assets and
liabilities
|
(200,216
)
|
(902,295
)
|
(2,209,269
)
|
|
|
|
|
|
|
Change in assets
and liabilities
|
|
|
|
|
Decrease in
receivables
|
-
|
1,091
|
75,730
|
|
(Increase) /
decrease in other assets
|
6,471
|
(4,691
)
|
36,022
|
|
(Increase) in
creditors and accruals
|
(377
)
|
(87,870
)
|
(325,926
)
|
|
Foreign Currency
Adjustments
|
4,263
|
15,041
|
345,810
|
|
|
10,357
|
(76,429
)
|
131,636
|
|
|
|
|
|
|
Cash
(used in) operations
|
(189,859
)
|
(978,724
)
|
(2,077,633
)
|
There
were no non-cash investing activities during the reported
periods.
Cash
flows are presented in the statement of cash flows on a gross
basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash
flows.
This
section provides information which will help users understand how
the group structure affects the financial position and performance
of the group as a whole. In particular, there is information
about:
●
changes to the structure that occurred during the year as a result
of business combinations and the disposal of a discontinued
operation
●
transactions with non-controlling interests and interests in joint
ventures.
A list
of subsidiaries is provided in note 15. This note also discloses
details about the group’s equity accounted
investments.
15.
Investments in subsidiaries,
unconsolidated entities and associates
(a)
Subsidiaries
The
Group’s subsidiaries at 30 June 2018 are set out below.
Unless otherwise stated, they have share capital consisting solely
of ordinary shares that are held directly by the Group, and the
proportion of ownership interests held equals the voting rights
held by the Group. The country of incorporation or registration is
also their principal place of business.
|
|
|
|
Ownership
interest held by non-controlling interests
|
|
|
|
Country
of Incorporation
|
|
|
|
|
Principal
activities
|
|
A.
Controlled Entities Consolidated
|
|
|
|
|
|
|
|
Parent
Entity:
|
|
|
|
|
|
|
|
Mission NewEnergy
Limited
|
Australia
|
|
|
|
|
|
|
Subsidiaries
of Mission NewEnergy Limited:
|
|
|
|
|
|
|
|
Mission Biofuels
Sdn Bhd
|
Malaysia
|
100
|
100
|
-
|
-
|
Administrative
entity
|
|
M2 Capital Sdn
Bhd
|
Malaysia
|
100
|
100
|
-
|
-
|
Holds 20% of FGV
Green Energy SB
|
|
B.
Associates
|
|
|
|
|
|
|
|
Felda Green Energy
Sdn Bhd
|
Malaysia
|
20
|
20
|
80
|
80
|
Biodiesel
refining
|
Set out
below is the associate of the group as at 30 June 2018. The entity
listed below has share capital consisting solely of ordinary
shares, which are held directly by the group. The country of
incorporation or registration is also their principal place of
business, and the proportion of ownership interest is the same as
the proportion of voting rights held.
|
|
|
|
|
|
|
Name
of entity
|
Country
of Incorporation
|
|
|
Nature
of relationship
|
Measurement
method
|
|
|
|
FGV Green Energy
Sdn Bhd
|
Malaysia
|
20
|
20
|
Associate
|
Equity
method
|
-
|
-
|
|
|
|
Summarised
statement of comprehensive income
|
|
|
|
(Loss)/Profit from
operations
|
(194,886
)
|
(354,842
)
|
|
The Groups share of
(Loss)/profit from operations
|
-
|
(38,174
)
|
|
|
|
Summarised
statement of financial position
|
|
|
|
Cash and cash
equivalents
|
16,496
|
74,158
|
|
Other current
assets
|
85,209
|
230,602
|
|
Non-current
assets
|
37,852,240
|
33,125,295
|
|
Current
liabilities
|
(21,967,251
)
|
(18,775,207
)
|
|
Non-current
financial liabilities
|
-
|
-
|
|
Net
Assets
|
15,986,694
|
14,654,848
|
|
Accounting policy: Principles of Consolidation
The
consolidated financial statements comprise the financial statements
of Mission NewEnergy Limited and its subsidiaries, as defined in
Accounting Standard AASB 127 ‘Consolidated and Separate
Financial Statements’. These include Mission Biofuels Sdn Bhd
and M2 Capital Sdn Bhd. A list of controlled and associate entities
with details of acquisitions and disposals is contained in this
note. All controlled entities have a 30 June financial year-end.
The Associate company has a 31 December year end.
All
inter-company balances and transactions between entities in the
Consolidated Group, including any unrealised profits or losses,
have been eliminated on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies applied by the parent
entity.
Where
controlled entities have entered or left the Consolidated Group
during the year, their operating results have been
included/excluded from the date control was obtained or until the
date control ceased.
Non-controlling
interests in the equity and results of the entities that are
controlled are shown as a separate item in the consolidated
financial report.
Foreign Currency Transactions and Balances
Functional
and presentation currency
The
functional currency of each of the Group’s entities is
measured using the currency of the primary economic environment in
which that entity operates. The consolidated financial statements
are presented in Australian dollars which is the parent
entity’s functional and presentation currency.
Transaction
and balances
Foreign
currency transactions are translated into functional currency using
the exchange rates prevailing at the date of the transaction.
Foreign currency monetary items are translated at the year-end
exchange rate. Non-monetary items measured at historical cost
continue to be carried at the exchange rate at the date of the
transaction. Non-monetary items measured at fair value are reported
at the exchange rate at the date when fair values were
determined.
Exchange
differences arising on the translation of monetary items are
recognised in the Statement of profit or loss, except where
deferred in equity as a qualifying cash flow or net investment
hedge.
Exchange
differences arising on the translation of non-monetary items are
recognised directly in equity to the extent that the gain or loss
is directly recognised in equity, otherwise the exchange difference
is recognised in the Statement of Profit or Loss.
Group
companies
The
financial results and position of foreign operations whose
functional currency is different from the Group’s
presentation currency are translated as follows:
●
assets and
liabilities are translated at year-end exchange rates prevailing at
that reporting date;
●
income and expenses
are translated at average exchange rates for the period where this
is not materially different from the rate at the date of the
transaction; and
●
retained earnings
are translated at the exchange rates prevailing at the date of the
transaction.
Exchange
differences arising on translation of foreign operations are
transferred directly to the Group’s foreign currency
translation reserve in the statement of financial position. These
differences are recognised in the Statement of Profit or Loss in
the period in which the operation is disposed.
|
This
section of the notes discusses the groups exposure to various risks
and shows how these could affect the Groups financial position and
performance.
16.
Critical Accounting Estimates
and Judgments
The
preparation of annual financial reports requires the Board to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expenses. The Board evaluates estimates and
judgments incorporated into the financial report based on
historical knowledge and best available current information.
Estimates assume a reasonable expectation of future events and are
based on current trends and economic data, obtained both externally
and within the Group. Actual results may differ from these
estimates.
Except
as described below, in preparing this consolidated financial
report, the significant judgements made by management in applying
the Group’s accounting policies and the key sources of
estimation uncertainty were the same as those that were applied to
the consolidated financial report as at end for the year ended 30
June 2018. During the twelve months ended 30 June 2018 management
reviewed its estimates in respect of:
Impairment of assets
The
Group assesses impairment of assets at each reporting date by
evaluating conditions specific to the Group that may lead to
impairment. Where an impairment trigger exists, the recoverable
amount of the asset is determined.
Investments in subsidiaries
Investments
held by the parent entity, Mission NewEnergy Limited, are reviewed
for impairment if there is any indication that the carrying amount
may not be recoverable. The recoverable amount is assessed by
reference to the higher of ‘value in use’ (being the
net present value of expected future cash flows of the relevant
cash generating unit) and ‘fair value less costs to
sell’.
In line
with the impairment of the carrying value of assets in the
subsidiaries, the parent entity has impaired the value of all
subsidiaries to zero. This accounting adjustment has no impact on
the cash flows or the Consolidated Financial Statements of the
Group. Refer to note 24: Parent Information for further
details.
Investments in associates/Non-Current Assets held for
sale
The
Group owns 100% of M2 Capital Sdn Bhd, a Malaysian subsidiary,
which owns a 20% stake in FGV Green Energy Sdn Bhd (FGVGE), a
refinery joint venture company. Investments in associates held by
the parent entity, Mission NewEnergy Limited, are reviewed for
impairment if there is any indication that the carrying amount may
not be recoverable.
During
the prior financial year the Group announced an intention to
undertake a Reverse Take Over (refer to the Director’ Report
for further details). Under the RTO arrangement the Group was
required to dispose of the shares held in the Associate Joint
Venture Company. The accounting standards require assets held for
sale to be separately disclosed on statement of financial position
with the value of the investment into the joint venture company to
be accounted for at the lower of carrying value or fair value less
costs to sell.
In assessing the carrying value of the investment, the following
factors were considered by the Directors:
o
Mission
does not hold a refining asset, however it holds a 20% share in the
refining JV,
o
This
refining JV is not a listed publically traded entity with a readily
determinable share price, nor is there a ready market to sell the
20% holding,
o
Mission
does not have the voting or management rights to force any actions
on the JV company, (be that to commence refurbishment, sell the
asset as a going concern or for sell for scrap value),
o
Should
the JV company require further equity funding to undertake the
refurbishment the group has insufficient current cash proceeds to
protect its equity position and hence our shareholding position
would likely be diluted.
Given that the Group had entered into this agreement in December
2016 which required the sale of its 100% stake in M2 Capital, which
owns the 20% stake in the JV company and the delays being
experienced with the project, management has been unsuccessful to
date in disposing of the investment, however continues to actively
seek buyers. Accordingly the Directors deemed it prudent to impair
the carrying value of the investment to NIL during the prior
financial year. Should the Group sell the refinery an impairment
reversal is expected to be recognised in the financial records of
the Group. As the project remains stalled at 30 June 2018, the
carrying value is retained at NIL.
|
|
|
|
|
|
|
|
|
Impairment of
investment in associate
|
-
|
3,608,038
|
|
|
-
|
3,608,038
|
17.
Financial Instruments and
Financial Risk Management
Financial
Risk Management
The
Group has a financial risk management policy in place and the
financial risks are overseen by the Board. The Group’s
financial instruments consist mainly of deposits with banks, other
financial assets and accounts payable.
The
principal risks the Group is exposed to through its financial
instruments are interest rate risk, foreign currency risk,
liquidity risk and credit risk.
The
Group does not have any financial assets carried at fair value
therefore no further disclosure in relation to the fair value
hierarchy is presented. In addition the group does not have any
financial instruments that are subject to recurring or
non-recurring fair value measurements.
As at
30 June 2018 and 30 June 2017 the group held the following
financial instruments:
|
|
|
|
|
Financial
assets
|
|
|
|
Cash and cash
equivalents
|
195,601
|
387,840
|
|
Receivables
(Current)
|
-
|
6,134
|
|
Financial
liabilities
|
|
|
|
Trade and other
payables
|
20,720
|
21,072
|
The
fair value of cash and cash equivalents, other financial assets,
receivables, trade and other payables and current loans are
short-term instruments in nature whose carrying value is equivalent
to fair value.
Interest rate risk
Interest
rate risk is managed with floating rate deposits.
Group sensitivity
At 30
June 2018, if interest rates had changed by -/+ 25 basis points,
with all other variables held constant, the following financial
impacts would have been recorded by the Group;
●
Effect on post tax
profit – A$NIL lower/higher (2017: A$ Nil
lower/higher)
●
Equity would have
been – A$NIL lower/higher (2017: A$ Nil
lower/higher)
Foreign currency risk
The
Group holds its 20% share of the refinery through a number of
international subsidiaries and is thus exposed to fluctuations in
foreign currencies, arising from the foreign currencies held in its
bank accounts, and the translation of results from the
international subsidiaries. The foreign exchange exposures are
primarily to the Malaysian Ringgit and the US dollar.
Foreign
currency risks arising from commitments in foreign currencies are
managed by holding cash in that currency. Foreign currency
translation risk is not hedged, with translation differences being
reflected in the foreign currency translation reserve.
Group sensitivity
At 30
June 2018, if foreign currencies had changed by -/+ 10%, with all
other variables held constant, the following financial impacts
would have been recorded by the Group;
Effect
on cash and cash equivalent – A$11,238 lower / A$9,194 higher
(2017: A$6,229 lower/ A$ 18,624 higher)
Profit
and Loss would have been – A$11,238 lower / A$9,194 higher
(2017: A$6,229 lower/ A$ 18,624 higher)
Hedging of Foreign Currency Risk
At
financial report date the Group had no forward exchange contracts
in place.
Credit risk
The
following table sets out the credit quality of financial
assets:
|
|
|
|
|
Cash and Cash
Equivalents
|
|
|
|
Counterparties with external credit rating (Standard and
Poors)
|
|
|
|
A-1+
(Australian)
|
189,836
|
358,974
|
|
P-2
(Malaysia)
|
5,765
|
28,866
|
|
|
195,601
|
387,840
|
|
Receivables
|
|
|
|
Counterparties without external credit rating
|
|
|
|
Group
1
|
-
|
6,134
|
Commodity Risk
As there was no inventory held as at 30 June 2018, the Group has no
direct exposure to
market prices of input costs into the
production of biodiesel.
Liquidity risk
|
|
|
|
Weighted
Average Interest Rate
|
|
|
|
|
|
|
|
|
$
|
|
$
%
|
|
|
Financial Assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
195,601
|
387,840
|
1.02
|
1.28
|
|
Loans
and Receivables
|
-
|
6,134
|
-
|
-
|
|
|
195,601
|
393,974
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
204,605
|
204,957
|
|
|
The
Group manages liquidity risk by monitoring forecast cash flows and
ensuring that adequate cash is maintained to meet known
liabilities. The Group has no current source of income and has
negotiated with key management personnel to not take salaries or
Directors fees.
|
Accounting policy: Financial Instruments
Recognition
Financial
instruments are initially measured at fair value on trade date,
which includes transaction costs (except where the instrument is
classified as ‘fair value through profit or loss’ in
which case transaction costs are expensed to profit or loss
immediately), when the related contractual rights or obligations
exist. Subsequent to initial recognition these instruments are
measured as set out below.
|
Management
controls the capital of the Group in order to maintain an
appropriate debt to equity ratio, provide the shareholders with
adequate returns and ensure that the Group can fund its operations
and continue as a going concern. Due to the stage that the business
is in, managements approach would be to fund the business with
equity where required. Management reviews historic and forecast
cash flows on a regular basis in order to determine funding
needs.
The
Group has no debt and capital includes ordinary share capital,
supported by financial assets.
This
section of the notes provides information about items that are not
recognised in the financial statements as they do not (yet) satisfy
the recognition criteria.
19.
Capital and Leasing
Commitments
The
group has no operating lease or capital expenditure
commitments.
20.
Contingent Liabilities and
Contingent Assets
The
Group is not aware of any contingent liabilities or contingent
assets as at 30 June 2018
.
21.
Events occurring after the
reporting period
There
have been no significant subsequent events up until the date of
signing this Financial Report.
This
section of the notes includes other information that must be
disclosed to comply with the accounting standards and other
pronouncements, but that is not immediately related to individual
line items in the financial statements.
|
|
|
|
|
Audit
services
|
|
|
|
Remuneration of the
auditor of the parent entity for:
|
|
|
|
●
auditing or
reviewing the financial reports – BDO Audit (WA) Pty
Ltd
|
26,816
|
36,837
|
During
the period a subsidiary in the Group leased a portion of office
space from a company owned by the Chief Executive Officer at a cost
of around A$650 per month. The lease is on a month to month
basis.
There
were no other transactions with related parties during the period
other than with subsidiaries which were 100% wholly
owned.
Key
management personnel compensation
|
|
|
|
|
Short-term employee
benefits
|
-
|
331,883
|
|
Post-employment
benefits
|
-
|
16,904
|
|
|
-
|
348,787
|
24.
Parent entity
information
|
|
|
|
|
Information
relating to Mission NewEnergy Limited:
|
$
|
$
|
|
Current
assets
|
189,835
|
358,974
|
|
Non-current
assets
|
-
|
-
|
|
Total
assets
|
189,835
|
358,974
|
|
Current
liabilities
|
(204,265
)
|
(201,093
)
|
|
Total
liabilities
|
(204,265
)
|
(201,093
)
|
|
Net asset surplus /
(deficit)
|
(14,430
)
|
157,881
|
|
Issued
capital
|
418,635
|
418,635
|
|
Opening Retained
Profit / (Loss)
|
(410,755
)
|
3,957,431
|
|
Share based
payments reserve
|
150,000
|
150,000
|
|
Total
shareholders’ equity/deficit
|
(157,880
)
|
(4,526,066
)
|
|
(Loss) of the
parent entity during the year
|
(172,310
)
|
(4,368,185
)
|
|
Total
shareholders’ equity deficit/(surplus)
|
14,430
|
(157,881
)
|
|
|
|
|
|
Details of any
contingent liabilities of the parent entity
|
-
|
-
|
|
Details of any
contractual commitments by the parent entity for the acquisition of
property, plant or equipment.
|
-
|
-
|
The
parent entity is not aware of any other contingent liabilities or
contingent assets as at 30 June 2018
.
The
registered office of the company is: Mission NewEnergy Limited,
Unit B9, 431 Roberts Road, Subiaco, WA 6008,
Australia.
The principal places of business are:
|
Australia
|
Mission NewEnergy Limited
Head Office Unit B9, 431 Roberts
Rd, Subiaco, Western Australia, 6008, Australia.
|
|
Malaysia
|
Mission Biofuels Sdn Bhd
M2 Capital Sdn Bhd
No 5E
Nadayu 28 Dagang
Jalan
PJS 11/7
Bandar
Sunway
47500
Subang Jaya
Selangor,
Malaysia
|
26.
Authorisation of financial
statements
The
consolidated financial statements for the year ended 30 June 2018
(including comparatives) were approved by the Board of Directors on
21 September 2018.
Dato’ Nathan Mahalingam
Director