Announcement PDF Sea Forest Limited ABN 46 631 662 283 Annual Report - 30 June 2024 Sea Forest Limited Directors' report 30 June 2024 1 The directors present their report, together with the financial statements, on the company for the year ended 30 June 2024. Directors The following persons were directors of the company during the whole of the financial year and up to the date of this report, unless otherwise stated: Stephen Turner (Chairman) Sam Elsom (Chief Executive Officer) Dion Cohen (Chief Financial Officer) – resigned as Director on 5 July 2024 Alex Berger Jeremy Atkin – resigned as Director on 5 August 2024 Mark Kirkby Patricia Akopiantz Roger Millichamp Principal activities During the financial year the principal continuing activities of the company consisted of the production of SeaFeedTM Amplify product, a synthetic product, which uses both active components derived from Asparagopsis seaweed and manufactured haloforms. In the production of these products, the company is involved in the: Cultivation of seaweed in both its marine farming and land-based operations, with significant innovation and improvement in marine farming operations, and the scaling of land-based production. Designing and operation of its processing plant that extracts and stabilises the bioactive compounds from the seaweed into a canola oil-based feed additive for ruminants. Significant research and development activities surrounding the culturing of Asparagopsis seaweed with a focus on the identification of high-performance isolates of the tetrasporophytes to support land-based production. Research is also focused on the design of sustained release and longer life methane abating livestock feed supplements. The development of optimal delivery mechanisms for its feed supplement, including pellets, lick-blocks and slow-release formulation of SeaFeedTM Review of operations The loss for the company after providing for income tax amounted to $6,883,479 (30 June 2023: $7,218,850). Information on the operations and financial position of the company and its business prospects are set out in the Message from the Chairman and CEO within the Annual Report. Significant changes in the state of affairs There were no significant changes in the state of affairs of the company during the financial year. Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the company's operations, the results of those operations, or the company's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the company and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the company. Environmental regulation Sea Forest’s current seaweed cultivation in Tasmania is governed by the provisions of the Marine Farming Planning Act 1995 and the Living Marine Resources Management Act 1995. Sea Forest either holds or is authorised to use the relevant licenses and permits for its activities under these Acts. Sea Forest Limited Directors' report 30 June 2024 2 Information on Executive directors Name: Stephen Turner Title: Executive Chairman Experience and expertise: Stephen has a record of delivering large scale greenfield projects with an emphasis on sustainability, mitigation of environmental impact, waste gas to energy conversion, and positive rehabilitation. He co-founded International Ferro Metals: a mining and smelting company which produced 4% of global ferrochrome supply and was listed on the LSE. For seven years Stephen was its CEO. He was also a founding director of South American Ferro Metals, a Brazilian iron ore producer that was listed on the ASX where he was CEO for three years. Stephen was for five years to 2014 also a non-executive director of Iluka Resources Limited, the world’s biggest producer of zircon and the world’s second largest producer of titanium oxide. Name: Sam Elsom Title: Chief Executive Officer Experience and expertise: Sam is a passionate environmentalist with over 15 years' experience in sustainability, having founded one of Australia’s first sustainable apparel businesses. He is credited with measuring social and environmental impacts across supply chains, as well as implementing satellite factories in India to support poor communities with income, training, clean water and education. Name: Dion Cohen (resigned as Director on 4 July 2024) Title: Chief Financial Officer and Company Secretary Experience and expertise: Dion is a Chartered Accountant with extensive experience in the resources and investment banking sectors. Over the past 15 years, he has played a pivotal role in several greenfield operations that have successfully transitioned to primary stock exchange listings. He has served as CFO for multiple companies listed on both the ASX and LSE. In addition to his corporate experience, Dion serves as a Director and Co-founder of the Forever Foundation, where he is intricately involved in the sustainability aspects of abatement calculations. He is currently spearheading the development of Farming For Tomorrow, a program designed to incentivise the reduction of greenhouse gas emissions by leveraging consumer premiums to fund abatement activities. The program provides retailers and consumers with a transparent, credible framework to mitigate the environmental impact of consumer products. Information on Non-Executive directors Name: Alex Berger Title: Non-executive director Experience and expertise: Alex brings to Sea Forest sophisticated investment banking capability. Following tenures at some of the world’s leading financial institutions, Alex spearheaded private asset development enterprises that originated, capitalised and delivered major projects in both the African and Asia Pacific regions that were focused on carbon abatement and climate change. Accordingly, Alex affords Sea Forest access to sustainable development capital channels and global carbon asset markets. Sea Forest Limited Directors' report 30 June 2024 3 Name: Jeremy Atkin (resigned on 5 August 2024) Title: Non-executive director Experience and expertise: Jeremy is an experienced consultant with an extensive track-record of driving innovation within companies ranging from start-ups through to large enterprises within the technology, media and retail sectors. Jeremy is an active investor in early-stage start- ups with a focus on sustainability and brings a broad network of connections within the Australian venture capital community and the broader agriculture sector. Mr Atkin commenced an executive engagement with Sea Forest Limited on 5 August 2024 which will terminate on 5 January 2025. Name: Mark Kirkby Title: Non-executive director Experience and expertise: Mark Kirkby is a Chartered Accountant and works for the PGA Group as its Commercial Director. Mark is a member of PGA’s Advisory and Investment Committees and provides support as a non-executive director to the group’s various operating businesses. Mark has experience in chairing Finance, Audit and Risk Committees. Prior to joining PGA, Mark held various senior financial executive roles in diverse industry sectors for both listed and unlisted companies. Name: Patricia Akopiantz Title: Non-executive director Experience and expertise: Patricia has deep expertise across the consumer-facing landscape having spent over 35 years as an ASX Board Director and Senior Manager in companies including Coles Myer, Energy Australia, Ramsay Healthcare, AMP, McKinsey, and David Jones. She is a Co-Founder of Assembly Climate Capital which invests in companies that can significantly impact climate change. She is a Member of the Climate Change Authority, an independent statutory body established to provide expert advice to the Australian Government. As Chair of Environmental Leadership Australia, she works to build bi- partisan support for climate action. Patty is also a Non-Executive Director of KPMG Australia and The Hunger Project. Name: Roger Millichamp Title: Non-executive director Experience and expertise: Roger gained a Master's degree in Natural Sciences at Oxford University followed by an MBA and Diploma in Marketing. Roger has over 25 years International General Management experience working in Australia, China, UK, Latin America, Africa / Middle East, Eastern Europe and Southeast Asia. Roger has a passion for business development, and he has multi-market experience in the following areas: sales and marketing, research and development, regulatory and scientific affairs, patent litigation, business development, and manufacturing / supply chain across multiple industries. Roger recently led the Apotex business in Australia for 12 years which under his leadership became a leader in the pharmaceutical market and developed very strong strategic partnerships in the global industry. Company secretary The company secretary is Mr Dion Cohen. Mr Cohen was appointed to the position of company secretary 22 October 2019. Sea Forest Limited Directors' report 30 June 2024 4 Meetings of directors The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2024, and the number of meetings attended by each director were: Full Board Nomination and Remuneration Committee Audit and Risk Committee Attended Held Attended Held Attended Held Stephen Turner 5 5 - - - - Sam Elsom 5 5 - - - - Dion Cohen 5 5 - - 4 7 Alexander Berger 5 5 4 4 7 7 Jeremy Atkin 5 5 4 4 - - Mark Kirkby 5 5 - - 7 7 Patricia Akopiantz 5 5 - - 7 7 Roger Millichamp 5 5 4 4 - - Shareholder options There were no outstanding shareholder options at 30 June 2024. A total number of 3,125,000 employee options have been issued under the Sea Forest Share Option Plan (refer note 29). Going Concern During the year the company incurred a loss after tax of $6,883,479 (30 June 2023: $7,218,850), net operating cash outflows of $1,514,671 (30 June 2023: $2,446,408), net investing cash outflows of $204,612 (30 June 2023: $10,530,321), and financing cash outflows of $468,168 (30 June 2023: inflow of $9,566,043). As at 30 June 2024 the company has cash and cash equivalents, of $12,958,399 (30 June 2023: $15,145,850) and term deposits of $7,329,901 (30 June 2023: $7,000,000). The company has unfortunately faced another year of subdued sales. The company continues to engage with regulators, local and international retailers, and major Beef and Dairy operators to secure commercial sales agreements. The company has also undertaken an internal operational review to maximise operating cost efficiencies. While the Board and management are confident that the company has sufficient cash to remain operational through calendar 2025, its ongoing ability to continue as a going concern, recover the carrying value of its assets and meet its commitments as and when they fall due is dependent upon securing additional funding. A key factor contributing to these uncertainties is the slower-than-anticipated market uptake of our product, which has negatively impacted revenue generation. The Board and management are actively exploring funding options and considering implementing further cost-reduction measures to address these financial challenges, and accordingly, have prepared the 30 June 2024 financial statements on a going concern basis. At this time, the Board and management believe that the company’s assets are realisable for an amount not less than their recorded value as at 30 June 2024. Accordingly, no adjustments, other than those recorded within the financial statements, have been made relating to the recoverability and classification of the asset carrying amounts or the amounts and classification of liabilities that may be necessary should the company not continue as a going concern. Indemnity and insurance of officers The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. Sea Forest Limited Directors' report 30 June 2024 5 Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ ___________________________ Stephen Turner Sam Elsom Director Director 28 October 2024 SEA FOREST LIMITED ABN: 46 631 662 283 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF SEA FOREST LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2024 there have been no contraventions of: (i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Name of Firm Logicca Assurance Pty Limited Name of Partner Peter Hersh OAM Date 28 October 2024 Address Level 9, 151 Macquarie Street, Sydney NSW 2000 Sea Forest Limited Contents 30 June 2024 7 Statement of profit or loss and other comprehensive income 8 Statement of financial position 9 Statement of changes in equity 10 Statement of cash flows 11 Notes to the financial statements 12 Directors' declaration 31 Independent auditor's report to the members of Sea Forest Limited 32 General information The financial statements cover Sea Forest Limited as an individual entity. The financial statements are presented in Australian dollars, which is Sea Forest Limited's functional and presentation currency. Sea Forest Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: 488 Freestone Point Road, Triabunna, TAS 7190 A description of the nature of the company's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 28 October 2024. The directors have the power to amend and reissue the financial statements. Sea Forest Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2024 Note 2024 2023 $ $ The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 8 Revenue 3 5,532,128 6,238,249 Expenses Consulting expense (327,350) (224,572) Depreciation and amortisation expense (1,696,137) (1,385,899) Employee benefits expense (5,962,841) (4,846,760) Finance costs 4 (446,278) (365,614) Impairment of assets 9,12 (444,704) (2,648,598) Loan impairment expense 7 - (167,003) Loss on disposal of assets (221,405) (142,373) Operating expenses (3,316,892) (3,676,280) Total expenses (12,415,607) (13,457,099) Loss before income tax expense (6,883,479) (7,218,850) Income tax expense 5 - - Loss after income tax expense for the year attributable to the owners of Sea Forest Limited 23 (6,883,479) (7,218,850) Other comprehensive loss for the year, net of tax - - Total comprehensive loss for the year attributable to the owners of Sea Forest Limited (6,883,479) (7,218,850) Sea Forest Limited Statement of financial position As at 30 June 2024 Note 2024 2023 $ $ The above statement of financial position should be read in conjunction with the accompanying notes 9 Assets Current assets Cash and cash equivalents 6 12,958,399 15,145,850 Trade and other receivables 7 2,688,598 5,785,911 Prepayments 8 979,306 969,812 Inventories 9 3,321,773 1,316,527 Cash on deposits 10 7,329,901 7,000,000 Other current assets 11 - 215,924 Total current assets 27,277,977 30,434,024 Non-current assets Property, plant and equipment 12 16,614,977 18,702,435 Right-of-use assets 13 5,601,642 4,648,971 Total non-current assets 22,216,619 23,351,406 Total assets 49,494,596 53,785,430 Liabilities Current liabilities Trade and other payables 14 1,268,224 1,472,366 Lease liabilities 15 89,137 80,413 Employee benefits 16 602,909 411,902 Other 17 3,216,172 1,522,141 Total current liabilities 5,176,442 3,486,822 Non-current liabilities Lease liabilities 18 6,352,166 5,199,682 Employee benefits 19 105,598 56,774 Deferred Income 20 4,123,398 4,995,778 Total non-current liabilities 10,581,162 10,252,234 Total liabilities 15,757,604 13,739,056 Net assets 33,736,992 40,046,374 Equity Issued capital 21 55,853,528 55,853,528 Reserves 22 1,273,196 699,099 Accumulated losses 23 (23,389,732) (16,506,253) Total equity 33,736,992 40,046,374 Sea Forest Limited Statement of changes in equity For the year ended 30 June 2024 The above statement of changes in equity should be read in conjunction with the accompanying notes 10 Issued Reserves Accumulated capital losses Total equity $ $ $ $ Balance at 1 July 2022 46,448,389 266,664 (9,287,403) 37,427,650 Loss after income tax expense for the year - - (7,218,850) (7,218,850) Other comprehensive loss for the year, net of tax - - - - Total comprehensive loss for the year - - (7,218,850) (7,218,850) Share-based payments (note 29) - 432,435 - 432,435 Issue of shares (net of share issue expenses) 9,405,139 - - 9,405,139 Balance at 30 June 2023 55,853,528 699,099 (16,506,253) 40,046,374 Issued Reserves Accumulated capital losses Total equity $ $ $ $ Balance at 1 July 2023 55,853,528 699,099 (16,506,253) 40,046,374 Loss after income tax expense for the year - - (6,883,479) (6,883,479) Other comprehensive loss for the year, net of tax - - - - Total comprehensive loss for the year - - (6,883,479) (6,883,479) Share-based payments (note 29) - 574,097 - 574,097 Balance at 30 June 2024 55,853,528 1,273,196 (23,389,732) 33,736,992 Sea Forest Limited Statement of cash flows For the year ended 30 June 2024 Note 2024 2023 $ $ The above statement of cash flows should be read in conjunction with the accompanying notes 11 Cash flows from operating activities Receipts from customers and others (inclusive of GST) 1,501,072 788,207 Payments to suppliers (inclusive of GST) (10,828,372) (10,234,293) Government Grants and subsidies 2,223,911 1,837,855 Research and Development rebate 4,702,949 4,852,481 (2,400,440) (2,755,750) Interest received 885,769 309,342 Net cash used in operating activities (1,514,671) (2,446,408) Cash flows from investing activities Payments for term deposits (329,901) (7,000,000) Payments for property, plant and equipment 12 (744,623) (3,336,747) Payments for deposits - (215,923) Proceeds from disposal of property, plant and equipment 869,912 22,349 Net cash used in investing activities (204,612) (10,530,321) Cash flows from financing activities Proceeds from issue of shares 21 - 9,405,139 Repayment of lease liabilities (468,168) 160,904 Net cash from/(used in) financing activities (468,168) 9,566,043 Net decrease in cash and cash equivalents (2,187,451) (3,410,686) Cash and cash equivalents at the beginning of the financial year 15,145,850 18,556,536 Cash and cash equivalents at the end of the financial year 6 12,958,399 15,145,850 The above cash and cash equivalents excludes cash on term deposits of $7.3M (refer Note 10). Sea Forest Limited Notes to the financial statements 30 June 2024 12 Note 1. Material accounting policy information The accounting policies that are material to the company are set out below. The accounting policies adopted are consistent with those of the previous financial year, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The company has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Going concern During the year the company incurred a loss after tax of $6,883,479 (30 June 2023: $7,218,850), net operating cash outflows of $1,514,671 (30 June 2023: $2,446,408), net investing cash outflows of $204,612 (30 June 2023: $10,530,321), and financing cash outflows of $468,168 (30 June 2023: inflow of $9,566,043). As at 30 June 2024 the company has cash and cash equivalents, of $12,958,399 (30 June 2023: $15,145,850) and term deposits of $7,329,901 (30 June 2023: $7,000,000). The company has unfortunately faced another year of subdued sales. The company continues to engage with regulators, local and international retailers, and major Beef and Dairy operators to secure commercial sales agreements. The company has also undertaken an internal operational review to maximise operating cost efficiencies. While the Board and management are confident that the company has sufficient cash to remain operational through calendar 2025, its ongoing ability to continue as a going concern, recover the carrying value of its assets and meet its commitments as and when they fall due is dependent upon securing additional funding. A key factor contributing to these uncertainties is the slower-than-anticipated market uptake of our product, which has negatively impacted revenue generation. The Board and management are actively exploring funding options and considering implementing further cost-reduction measures to address these financial challenges, and accordingly, have prepared the 30 June 2024 financial statements on a going concern basis. At this time, the Board and management believe that the company’s assets are realisable for an amount not less than their recorded value as at 30 June 2024. Accordingly, no adjustments, other than those recorded within the financial statements, have been made relating to the recoverability and classification of the asset carrying amounts or the amounts and classification of liabilities that may be necessary should the company not continue as a going concern. Basis of preparation These general purpose financial statements have been prepared in accordance with the Australian Accounting Standards - Simplified Disclosures issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented Tier 2 entities. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Sea Forest Limited Notes to the financial statements 30 June 2024 Note 1. Material accounting policy information (continued) 13 Revenue recognition The company recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the company is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the company: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed price or an hourly rate. Government grants Grants from the government are recognised at their fair value where there is a reasonable likelihood that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets Deferral and presentation of government grants Government grants are deducted in calculating the carrying amount of the related grant asset. The grant is recognised in profit or loss over the life of a depreciable asset by way of a reduced depreciation expense. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. Sea Forest Limited Notes to the financial statements 30 June 2024 Note 1. Material accounting policy information (continued) 14 An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the company's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the company's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables hav