Item 1. Business
Item
1. Business
Company
Overview
The
Company is a Cayman Islands exempted company that, directly and indirectly through its subsidiaries, is focused on the manufacture and
sale of chemical free, non-GMO, sustainable edible oils and products derived from oilseeds. The Company believes that transitioning from
a fossil fuel economy to a renewable and chemical free economy is the solution to many health problems the world is facing presently.
To that end, the Company is committed to working with suppliers and customers to eliminate chemicals from the edible oil production and
manufacturing systems to supply quality products such as non-GMO oilseeds and organic and non-organic food-grade oils to customers globally.
Over the past 20 years, Australian Oilseeds Investments Pty Ltd., an Australian proprietary company (“AOI”) has grown to
be the largest cold pressing oil plant in Australia, pressing strictly GMO free conventional and organic oilseeds.
Grower
Supply Contracts and Farming Methods
To
source the agricultural products for its business, the Company has a grower-supply contract base for oilseeds made up of local and regional
farmers and shareholders in New South Wales committed to sustainable, renewable and organic farming. The Company’s farmers employ
regenerative farming practices such as conservative tillage and minimal use of chemicals and fertilizer to grow produce with no residue
and increase carbon sequestration, thereby pulling more carbon from the atmosphere and sequestering higher carbon amounts in the soil.
5
These
grower-supply contracts (known universally as contract farming) provide for oilseeds on a fixed-acre or hectare-contract basis as well
as standard tonnage contracts for oil seeds. Contract farming is an agreement between farmers and processing firms for the production
and supply of agricultural products under forward agreements, frequently at predetermined prices. The basis of such production arrangements
is a commitment on the part of the farmer to provide a specific commodity in quantities and at quality standards determined by the purchaser
and a commitment on the part of the purchaser to support the farmer’s production and to purchase the commodity at harvest.
After
the Company determines with whom to contract for its oilseeds, the Company and the counterparty agree upon one or more contracts. The
contracts contain information about the plot of land (referred to as the “block”) on which the product is grown. For each
growing period, the grower-supply contract associates a harvest with a block. The harvest identifies the product and growing period.
Because a contract can span several growing periods, a block might have several harvests associated with it. The Company contracts to
purchase all of the output from a particular block. Typically, the contract manager manages the harvests at the block level because most
harvests for a block have similar characteristics, such as price. A grower-supply contract is a contract associated with a block and
harvest.
In
addition to the Company’s grower-supply contracts with local and regional farmers and shareholders in New South Wales, Energreen
Nutrition Australia Pty Ltd. provides supply-chain support for raw materials to the Company as an additional source of oilseeds supply.
In addition, the Company has an exclusive supply agreement for canola seed with Good Earth Growers, as a strategy partner who has committed
to reduce chemical residual in farming operation. Good Earth Growers was the first grain producer in Australia to be certified “ Chemical
Free Farmers. ” 1
The
Company’s is committed to working only with farmers and growers who are committed to sustainable, renewable and organic farming
methods, which stand in contrast to the manner that the majority of our food supply is grown, which traditional agriculture systems,
we believe, are degenerative, damaging the planet’s ecosystem at an alarming rate through loss of topsoil, loss of biodiversity,
desertification, habitat destruction, and air and water pollution; thus, degenerative agriculture is also a large contributor to climate
change. 2 The Company believes that farming must be performed in a more nature-friendly, biodiversity-supporting manner.
The
non-GMO chemical free oilseeds are then cold pressed, filtered and bottled by the Company into organic and non-organic food-grade oils,
vegetable protein meals and supplements in stock feed rations. Cold pressing involves pressing and grinding the oilseeds without the
use of chemicals and solvents at temperatures below 50 degrees Celsius, which results in oil and meals that retain nutritional values,
antioxidants and healthy omega fatty acids. 3 The Company works with various marketers and distributors to sell its products
in the Australian retail and selected export markets. The Company does business in Australia, New Zealand, Japan, and the United States
through the trademark “Good Earth Oils.” Moreover, the Company’s business strategy is aligned with the United Nations
(“UN”) Sustainable Development Goals (“SDGs”), tracking, and improving on metrics within target UN SDGs, as seen
in the following diagram:
1
Good Earth Growers | Australia’s first Chemical Free Farmers & Grain Producers.
2
See Frontiers | Agriculture’s Contribution to Climate Change and Role in Mitigation Is Distinct From Predominantly Fossil
CO2-Emitting Sectors (frontiersin.org).
3
See Introduction to cold pressed oils: Green technology, bioactive compounds, functionality, and applications (January 2020)
by Mohamed Fawzy Ramadan Hassnien.
6
The
Company’s Business Model in alignment to UN’s Sustainable Development Goals
The
Company believes that to make a true impact, they must materially advance progress towards meaningful environmental, social, and governance
goals, and even further advance the fulfillment of the UN Sustainable Development Goals (SDGs) 4 — giving due consideration to the potential impact
pathways for a given investment. The UN SDGs can only be realized with strong global partnerships and cooperation, which underpin the
vision of the Company’s subsidiaries since its inception. The SDGs identified by the United Nations provide a common pathway for
a better and more sustainable future.
The
Company believes that the SDGs in business is good business as they work in the spirit of partnership and pragmatism to make proper choices
now to improve life, in a sustainable way, for future generations by providing clear guidelines and targets for all countries to adopt
in accordance with their own priorities and the environmental challenges of the world at large. 5
The
Business Opportunity
Health
Benefits. Oilseeds are rich in various phytochemicals such as phenolic compounds, flavonoids, tocopherols, tocotrienols, polyphenols,
vitamins, minerals, protein, and fiber and are used in healthy vegetable oils, livestock feeds, medicines, biofuels, and other oleochemical
industrial purposes. Oilseeds are also a rich source of oil and fatty acids and are cholesterol free, all of which are often employed
in the extraction of oil.
4
See https://sdgs.un.org/goals
5
How 17 Companies Are Tackling Sustainable Development Goals (and Your Company Can, Too) — SDGfunders.
7
Vegetable
oil is an invaluable product used throughout the world. Cottonseed oil is cooking oil made from the seeds of Gossypium hirsutum and gossypium
herbarium cultivated for cotton plants, especially cotton fibre and animal feed, and like other oilseeds, such as sunflower seeds, cotton
seeds have an oily core surrounded by a hard outer shell. Oil is removed from the grain during processing. Oil is also extracted from
soybeans to use as a vegetable oil, which is the second most consumed oil. Soybean is used for extracting oil and for consumption as a
seed legume in human diet. Soybean meal is an important component of formulated poultry and fish meals. Soybean protein is referred to
as a “complete protein” due to its amino acid content. Soybean protein is well-known for its nutritional significance in
the treatment of heart disease and diabetes. 6
Oilseed
composition has been studied extensively, but recently has been thoroughly investigated, especially focusing on the phytochemicals representing
the minor components; this interest is connected with the activity of such compounds against cardiovascular diseases, lipid oxidation,
protein cross-linking and DNA mutations and homeostasis function, which prevent the attack of biomolecules by free radicals. 7
From
phytosterols to polyphenols, fat to polyphenols, many of the characteristic components of oilseeds are known to have positive effects
on health, capacity and well-being, and can be used to design functional foods. Vegetables, fruits and nuts, all rich in phenols, flavonoids,
isoflavonoids, phytosterols and phytic acid — essential bioactive compounds, provide considerable health benefits 8
such as alleviating major diseases and health conditions representing the highest causes of death worldwide, including cardiovascular
disease, cancer, diabetes, neurodegenerative diseases, and aging. We believe that these ameliorative characteristics will continue to
drive the demand for the Company’s products.
Global
Market Demand. The global oilseeds market in 2022 is estimated at $264.87 billion worldwide and is expected to grow to $340.44 billion
by 2026 at a compound annual growth rate (“CAGR”) of 5.7%, is projected to be worth $385.45 billion by 2030 9
and projected to be worth $385.45 billion by 2030. The growing usage of oilseeds in animal feed, as well as the need for healthy and
organic oilseed-processed goods, public-private collaborations in varietal development, and molecular breeding in oilseeds, are expected
to propel the growth of the oilseed market.
6
See Oilseed Market Size, Growth, Trends, Growth, Report 2022-2030 (precedenceresearch.com)
7
See Oilseeds as Functional Foods: Content and Composition of Many Phytochemicals and Therapeutic Alternatives | IntechOpen
8
See Id.
9
See Oilseeds Global Market Report 2022 by The Business Research Company.
8
The
Company believes that Australian-derived non-GMO oils are in high demand in Europe and other countries, in contrast to Canadian canola
oil which is mostly genetically modified in order to be tolerant to herbicides. 10 We believe that the global demand for
healthier, natural and chemical-free food products opens avenues for domestic and international economic activity and the Company is
an example of this trend. The Company intends to address this increased global demand for sustainable premium cold-pressed and non-GMO
products by expanding its existing cold-pressing capacity from 40,000 metric tons to 80,000 metric tons per annum. The Company is also
looking to establish a multi-seed crushing plant at Emerald, Queensland with a projected cold-pressing capacity of 80,000 metric tons
per annum by the end of 2023 to market itself as the largest cold-pressed player in the APAC region. According to a 2024 study, “Soybean
Oil Market Report 2024: Forecast by Consuming Countries, Producing Countries, Importing Countries, Exporting Countries to 2032,”
the market is accelerating, as the production of soybean oil has increased because of its demand by the population due to its nutritional
value. 11
Sunflower
Oil
Sunflower
seeds are used for the purpose of producing sunflower oil. Sunflower oil is extensively used as frying oil in food and as a lubricant
in cosmetic applications. It contains linoleic acid, a polyunsaturated fat and oleic acid, a monounsaturated fat. It also consists of
large amounts of Vitamin E. Unrefined sunflower oil is used as a salad dressing in Eastern European cuisines, as it contains omega-6
fatty acids and is very nutritious. Sunflower butter contains sunflower oil as well. When sunflower oil is extracted, the crushed seeds
are left behind, which are high in protein and dietary fiber and can be utilized as animal feed, fertilizer, or fuel. PEG-10 sunflower
glycerides are the polyethylene glycol derivatives of mono- and diglycerides generated from sunflower seed oil with an average of 10
moles of ethylene oxide and are a pale-yellow liquid with a “slightly fatty” odor.
Sunflower
glycerides PEG-10 is widely utilized in cosmetic compositions. When mixed with diesel in the tank, sunflower oil can be utilized to
run diesel engines. In frigid temperatures, viscosity is enhanced due to the high quantities of unsaturated fats. Because it is a rich
source of oil, ash calcium, carbohydrate and protein, the sunflower segment in this market is expected to grow at the quickest rate.
Sunflower seeds are widely employed in the feed business as sunflower meal, which is increasingly being used as an alternative for soybean
meal due to price considerations.
Rapeseed
Oil
Canola,
or rapeseed oil, is produced by Rapeseed, which is also known as rape or colza, which is a mustard plant cultivated for its seeds. Canola
oil is multifarious in nature, as it is used for cooking, as a soap and margarine ingredient, and as a lamp fuel (colza oil). Jet engines
use the liquefied form of oil to lubricate and can also be converted to biodiesel.
Fodder
is produced, as a result of the seeds which are left over after oil extraction. The plant can be used as a green manure and cover crops.
After soybean and palm oil, rapeseed was the world’s third-largest source of vegetable oil in 2000. After soybean, it is the world’s
second-largest source of protein meal. Rapeseed meal is produced as a by-product of the oil extraction process. A high-protein animal
feed is produced as a by-product, which is competitive with soybean. The feed is mostly used for cattle, although it is also used for
pigs and fowl. Natural rapeseed oil, on the other hand, includes 50% erucic acid and large quantities of glucosinolates, lowering the
nutritional value of rapeseed press cakes for animal feed.
A
study by Precedence Research in 2024 concluded that oilseeds used as a vegetable oil are not only high in protein, but also high in concentrated
energy. The expanding demand for vegetable oils in an ever-increasing number of homes is driving demand for oilseeds. Furthermore, the
growing need for biofuels in both developing and developed countries is propelling the oilseeds market forward. To meet the increasing
demand for oil around the world, farmers are increasingly turning to oilseeds to boost productivity.
10
See The GMO High-Risk List: Canola - The Non-GMO Project (nongmoproject.org)
11
Soybean Oil Market Report 2024: Forecast by Consuming (globenewswire.com)
9
In
the commercial sector, oilseeds are high in demand because of its various applications such as oilseeds like sunflower as a type of moisturizer
in cosmetic products. Oilseeds are India’s second-largest agricultural export after food grains. According to Precedence Research,
as people increasingly prioritize their health, they are choosing vegetable oil over animal fat. Linseed Oil, in addition to different
vegetable oils, is extensively used for manufacturing paints, varnishes, and lubricants. Oil-cake is used to feed cows and also as
a fertilizer for vegetation which includes cotton, tobacco, tea, and sugarcane. Oilseeds are also extensively utilized in the automobile
sector as a source of fuel. For example, sunflower oil is used in diesel engines to run it when mixed with diesel in the tank. In the
automobile paint industry, castor seed oil has been evaluated as a plasticizer and film forming. The seed meal had a low moisture content,
making it ideal for glossy auto paint.
Industry
Overview
According
to the 2024 study by Precedence Research, the global oilseed market size was valued at USD 249.05 billion in 2023, and it is projected
to be worth around USD 373.32 billion by 2033 making a CAGR of 4.13% during the forecast period 2024 to 2033. 12
Oilseeds
are grown primarily for obtaining oil. The major sources of edible oils are copra, cottonseed, palm kernel, peanut, rapeseed, soybean
and sunflower seed. Oil is extracted either by mechanical extraction processes in oil mills or by chemical extraction using solvents.
For example, the oil content in seeds ranges from 20% for soybean and 40% for sunflowers and rapeseed. After the extraction process,
the crushed seeds are further processed into animal feeds.
12
Oilseed Market Size, Growth, Trends, Growth, Report 2024-2033 (precedenceresearch.com)
10
The
soybeans segment contributed more than 59.14% of revenue share in 2023 globally in terms of volume. The market is expected to grow significantly
due to an increase in the consumption of soybeans which are used in the production of edible oils, fatty acids, soaps, biodiesels, and
animal feed; increases in the production of soybeans in Brazil, Argentina, and other countries; a surge in the global population which
has led to increases in demand for edible oils for preparing food products; and supportive government policies to increase agricultural
production of oil fuel and advancements in seed technologies and biotech traits, such as herbicide and insecticide resistance. The outbreak
of COVID-19 has also positively impacted the overall growth of the oilseeds market as more people consume and produce meals at home relying
on edible oils to cook healthier food. 13
According
to the 2024 study by Precedence Research, the Asia Pacific oilseed market size, which includes Australian, was valued at USD$87.46 billion
in 2023 and is expected to hit around USD$140.38 billion by 2033, growing at a CAGR of 37.7% from 2024 to 2033. Asia-Pacific leads the
oilseed market with a large market share of 35.12% in 2023 due to the growing food processing industry and increasing soybean production.
The oilseeds market is segmented by oilseed type, product, breeding type, biotech trait and region. Based on oilseed type, the market
is categorized into copra, cottonseed, palm kernel, peanut, rapeseed, soybean and sunflower seed. By product, it is bifurcated into animal
feed and edible oil. Depending on breeding type, the market is segregated into genetically modified and conventional. On the basis of
biotech trait, the market is bifurcated into herbicide tolerant, insecticide resistant and other stacked traits. Region wise, the market
is analyzed across North America (the U.S., Canada, and Mexico), Europe (Germany, the Netherlands, Spain, France, Italy, the UK, Russia,
Ukraine and the rest of Europe), Asia-Pacific (China, India, Japan, Indonesia, South Korea and the rest of Asia-Pacific), and LAMEA (Brazil,
Argentina, Paraguay, South Africa and the rest of LAMEA).
The
Non-GMO Market Size and Opportunity
Non-genetically
modified organisms (non-GMO) food is prepared without ingredients derived from genetically engineered organisms. The rising awareness
amongst customers regarding the health benefits of non-GMO food consumption is anticipated to drive market growth. Moreover, environmentally-conscious
consumers are willing to pay a much higher price for sustainable products such as non-GMO and locally-produced foods since ethical considerations
are becoming important in their decision-making process. Several organizations are encouraging farmers to grow non-GMO food, which is
also likely to support market growth in the forthcoming years.
The
global non-GMO food market size was USD$740.65 billion in 2023 and is projected to grow from USD$895.36 billion in 2024 to USD$2,003.68
billion by 2032, growing at a CAGR of 11.94% during the 2024-2032 period according to a study released August 14, 2024, by Fortune Business
Insights. 14 North America dominated the non-GMO food market with a market share of 40.61% in 2023.
13
See https://theconversation.com/covid-19-reshaped-the-way-we-buy-prepare-and-consume-food-193069
14
Non-GMO Food Market Size, Trends & Growth | Forecast [2032] (fortunebusinessinsights.com)
11
Asia
Pacific is an emerging region in the market, and it is expected to grow at the highest CAGR in the forecast period. While there is a
major interest in the product among the higher-income, better-educated population in Korea, Japan, and Australia, consumers in China
and India drive demand expansion within the region according to the study by Fortune Business Insights. 15
The
Company’s Products and Strategy
The
Company produces organic food-grade oils and vegetable protein meals by means of cold pressing extraction from chemical and GMO-free
oilseeds. The Company’s vegetable oils include unrefined canola oil, premium canola oil, extra filtered canola oil, RBD canola
oil, safflower oil, sunflower oil, RBD sunflower oil, soyabean oil, linseed oil, extra virgin olive oil. The Company’s protein
meals include organic and non-organic cold pressed canola, sunflower, safflower, soybean and linseed meals. Protein meals are the
co-product of cold pressing extraction and are predominately used as a supplement in stockfeed rations. The meals are also used in rations
for protein, amino acids, fiber and fat depending on dietary requirements.
Premium
products include:
● Cold
pressed Canola oil
●
Cold
Pressed Soya bean oil
●
Sunflower
Oil
●
Cold
Pressed Canola Meal
●
Plant
Based Proteins
●
Sunflower
Meal
We
sell cold pressed vegetable oils and vegetable protein meals extracted from oil seeds. For fiscal years 2024 and 2023, we derived approximately
85% and 89%, respectively, of our total revenue from the sale of cold pressed vegetable oils with the balance from the sale of vegetable
protein meals extracted from oil seeds. The Company processes and sells high quality protein meal for the agricultural market (including
the feedstock industry) and is leveraging this by-product to expand into the plant-based meats and proteins markets. Presently, the Cootamundra
facility is capable of crushing canola, safflower and sunflower seeds with a current processing capacity of more than 33,000 metric tons
per annum. Edible oils and protein meal serve as the largest outlet for oilseed derivative products. The food industry demands healthy
oils for cooking and dining. A key example being Canola Oilseed — in which Australia produces over 15-20% of the global Canola
seed trade. Australian oilseed production, due to relative proximity and high-quality output, are well-placed to supply the rapidly expanding
consumer export markets of the Asia-Pacific as well as satisfy increased domestic demands.
The
Company enters into standard sales contracts with customers for the purchase of these products, which detail the duration and amount
of the product to be delivered during the course of the contract, compliance with applicable government regulations and tax payment obligations.
The
Company intends to address the increased global demand for sustainable premium cold-pressed and non-GMO products by expanding its existing
cold-pressing capacity from 33,000 metric tons to 65,0000 metric tons initially per annum through its new multi-seed crushing plant at
Emerald, Queensland with a projected cold-pressing capacity of 80,000 metric tons per annum allowing the Company to market itself as
the largest cold-pressed player in the APAC region.
15
Id.
12
The
Company’s Manufacturing Process
The
Company’s cold pressing oil plant is currently the largest in Australia and has seed processing capacity of up to 40,000 metric
tons per annum. “Cold pressing” refers to oils obtained through pressing and grinding oilseeds without the use of chemicals
or solvents at temperatures that do not exceed 122°F (50°C) and produces high energy canola meal used in stock feed by most species
of animals worldwide. As a result of cold pressing, oil and meal retain most of their nutritional values, antioxidants and healthy omega
fatty acids (including omega 3 and omega 6) and, including Polyunsaturated fatty acids (linoleic acid) that lower serum cholesterol and
.contain zinc and vitamins like vitamin A, C, E, D lecithin, potassium, bioflavonoids and phenols, which help in lowering cholesterol
levels in the blood, protecting the liver from oxidative damage, and suppressing oxidative stress. 16 Moreover, cold pressing
methods is safer as they avoid the use of Solvents like hexane and petroleum ether that can have deleterious effects on the human body
if the solvent plus oil mixture is not properly processed. Hexane can cause depression of the central nervous system and dermatitis.
Cold-pressed oils do not utilize such harmful chemicals for production. 17
Depiction
of the Oilseed Extraction Process via Cold Pressing
Research
and Development
Australian
Oilseeds Investments Pty Ltd., an Australian proprietary company (the “AOI”) was established in 1991 by community-based growers,
leaders and investors and commissioned its first oilseed processing plant in 1992, crushing more than 2,000 metric tons. Continuous research
and development of methodology has resulted in seed processing capacity of more than 35,000 metric tons per annum presently notwithstanding
using cold pressing methods that produce guaranteed non-GMO products. AOI continually engages in research and development on the improvement
of cold pressed oil extraction from safflower, sunflower and other oilseeds, plant-based meats and the usage of canola as an ingredient.
Additionally, AOI had the first oil processing plant in Australia to partially adopt renewable solar energy along with electricity to
run the plant concurrently. The plant currently abates 42.2 metric tons of CO2 (per month) with 568-kilowatt peak solar power. The Company
is aiming to become carbon neutral plant furthering its UN SDG goals.
16
See Cold-pressed oils VS Hot-pressed oils: Which one is better for your health?
| TheHealthSite.com
17
Cold Pressed Oils health benefits (yashkri.com)
13
Actual
Photo of the Company’s Cootamundra, Australia Facility Including its Solar Panels
Sales
and Marketing and Customer Contracts
During
the year ended June 30, 2024, the Company’s sales revenue increased by AUD$4.79 million or 16% to AUD$33.73 million for the twelve-month
period ended on June 30, 2024, compared to AUD$29.05 million for the twelve-month period ended June 30, 2023, primarily due to favorable
market conditions resulting from an increase in the demand for cold pressed canola oil.
A
substantial portion of the Company’s products are sold to its top five customers. In the year ended June 30, 2024, 64.8% of total
sales by the Company were to its top five customers. The Company’s top three customers accounted for 49.4% of total sales for the year end
June 30, 2024. The Company’s top five customers (and top three) as of yearend June 30, 2024, along with the total sales from each
customer, are summarized in the following table:
Customer
Total
Sales
As
of 30 June 2024
AUD$
Outstanding
Balance as of
30
June 2024
AUD$
Daabon
Organic Australia Pty Ltd.
6,026,698
1,703,927
Costco
Wholesale Australia
5,857,260
1,229,271
Energreen
Nutrition Australia Pty Ltd.
4,838,204
-
Hygain
NSW (Proprietary) Ltd.
3,306,466
250,845
100% Bottling
Company Pty Ltd.
1,911,641
-
If
the sales performance of any of the Company’s key customers declines or if they terminate their cooperation with us or start to cooperate
with any of the Company’s competitors, or if there is any modification as to the sales and purchase terms entered with any of our
key customers, our business, financial condition and revenue would be seriously impacted.
The
Company markets its products to wholesale distributors, such as Costco in Australia and New Zealand, which Costco Australian supply contract
has been extended to January 2025, and also directly to customers. The Company’s marketing reflects its pride
in using clean, renewable energy through cold-pressing techniques resulting in no chemicals or preservatives in its products.
The
Company’s subsidiary, Good Earth Oils, has a supply agreement with Costco Australia for 165,000 drums of Good Earth Cold Pressed
Canola Oil through June 2023, which supply agreement was renewed to February 2024 and again through mid-December 2024. The current contract
with Costco is for a commitment of 79,200 drums of 20-litre Good Earth Oils Cold Pressed Canola and Vegetable oils representing sales
of approximately AUD$3.2 million of sales through mid-December 2024. The Company will renegotiate the renewal of the contract with Costco
in November 2024, which has not yet commenced, given the current strong demand for Good Earth Oils products in Costco stores.
14
In
addition, the Company’s subsidiary, Good Earth Oils, has a supply agreement with Woolworth Grocery, currently Australia’s
largest supermarket chain for sales of (i) 4-litre tins of Good Earth Extra Virgin Olive from January 2024 to January 2025, annual sales
projected as AUD$3.9 million; and (ii) 2-litre tins of Good Earth Extra Virgin Olive and 5-litre tins of Good Earth Extra Virgin Olive
under a contract from September 2024 to September 2025, with annual sales projected at AUD$3.5 million. The Company is currently working
with Woolworth Grocery on the next major review with the proposal to increase its supply and range of oils under its expected
future contracts. Woolworth Grocery is anticipated to commit to a contract for 750mL Good Earth Oil Extra Virgin Vegetable Oil in its
March 2025 planogram ( i.e., a schematic drawing that shows a grocery store’s shelves and products.
Recently,
the Company’s subsidiary, Good Earth Oils, entered into a supply agreement with Coles Supermarket, with approximately 850 stores
in Australia, to provided 4-litre tins of Good Earth Oils Extra Virgin Canola Oil commencing in October 2024 to October 2025, with annual
sales projected at AUD$1.2 million.
Good
Earth Cold Pressed Canola Oil is packed with Omega-3 and Omega-6 and its ratio provides ideal nutrition. Good Earth Cold Pressed Canola
Oil meets very specific quality standards. For example, Good Earth Oils methods of oil extraction involve only “cold pressing,”
which refers to oils obtained through pressing and grinding of the oilseeds. Good Earth Oils does not use chemicals, preservatives or
solvents at temperatures that exceed 50oC, which means that its oils are also not altered by temperature. Accordingly, Good Earth Oils’
products retain an earthy taste and contain more of the natural antioxidants, vitamins and anti-inflammatory properties.
In
comparison, lower-cost conventional oils sold in supermarkets are heavily processed and extracted with hexane, which contaminates the
cooking oil. Further, high heat is used during processing, which turns polyunsaturated fats rancid or converts into dangerous trans fats.
Conventional cooking oils are produced using many toxic chemicals such as petroleum solvents and strong acids. Further, they go through
a refining process that uses high heat up to 200oC, which removes the natural aroma of the oil. Carcinogenic Glycidyl Esters and 3-MCPDs
are formed as a result of exposure to high temperatures.
The
Company’s subsidiary, Cootamundra Oilseeds Pty. Ltd. supplies all of Good Earth Oils branded edible oils. In addition,
Cootamundra Oilseeds Pty. Ltd. enters into three-months rolling contracts for the sales of its bulk oils to its main customers, such
as 100% Bottling Company Pty. Ltd., an Australian food, beverage and packaging business and leading supplier of package edible oils,
and Riverina Oils & Bio Energy Pty Ltd. a premier supplier of animal feed, grains and protein meals to domestic and export
markets who can distribute the products as private label in major supermarket chain. Daabon Organic Australia Pty Ltd and Costco
Wholesale Australia, represent two of the Company’s top five customers in terms of sales for fiscal year end June 30, 2024,
with sales totaled AUD$ 6,026,698 and AUD$ 5,857,260, respectively.
The
Company believes it will be able to gain market acceptance in light of cold pressed vegetable oils free of GMOs and particularly that
it will be a strong alternative choice to meet the growing international demand from countries such as the United States, Japan, Europe
and other regions for non-GMO and chemical free food graded oil and protein materials, especially as world oilseed consumption is increasing.
Rising incomes continue to lift Chinese demand for meat, and subsequently for high-protein animal feed such as soybean meal. In the short
term, more Chinese soybean consumption is expected to be sourced from domestic stocks. However, with continued growth in consumption,
demand for imports is expected to increase though there is no certainty of this result.
The
Company’s operations are reliant upon stable supply of electricity and access to transportation routes in order to optimally run
our oilseed grinding and extraction operations and/or deliver our products to customers. Our suppliers’ farming operations are
also reliant on access to water for the cultivation of oilseeds, which we then use to produce our products. Should we not have access
to reliable electricity supply, or should our suppliers have limited access to water or experience infrastructure challenges, this could
have a material adverse effect on our access to oil seeds and therefore our business, operating results, cash flows, financial condition
and future growth.
15
Intellectual
Property
The
Company does not currently hold any patents.
The
Company owns the following registered trademarks: Cootamundra Gold, Perfect Balance, and Good Earth Oils. In addition, the Company owns
the domains www.australianoilseeds.au and www.oilseeds.com.au .
Competition
The
Company has significant competition in the markets in which it operates based principally on price, foreign exchange rates, quality,
global supply, and alternative products, some of which are made from different raw materials than those utilized by the Company. Given
the commodity-based nature of its businesses, the Company, on an ongoing basis, focuses on managing unit costs and improving efficiency
through technological improvements, productivity enhancements, and regular evaluation of the Company’s asset portfolio. The Company’s
business is a vertically integrated business that provides ingredients and food products for food-grade consumption in a highly competitive
environment with a variety of companies offering the same products and services. The industry includes ingredient suppliers, contract
manufacturers, global fast moving consumer goods companies, and private label brands, as well as smaller companies that specialize in
specific niche markets.
The
Company focuses on staying ahead of the curve in terms of innovation and production solutions, focusing on consumer needs, expanding
into new markets, building strategic partnerships, and building a strong distribution network. The Company will need to extend extra
efforts to create awareness in the market through promotional activities to achieve market acceptance for its high-quality non-GMO food-grade
oils and protein meals.
Employees
The
Company has 21 full-time employees and 7 full-time equivalent contractors working at the factory and 8 full-time equivalent contractors
working for the management team. The Company believes its relationship with its employees and contractors is cooperative and its employees
and contractors share the same goals as management to industrialize oilseeds, making the products available worldwide.
As
The Company expands, it believes it will be able to source personnel that can contribute to the technical, marketing and business development
aspects of the company.
Facilities
and Expansion
The
Company leases a 6.02-hectare property in Cootamundra, Australia, where the oilseed processing plant and ancillary buildings accommodating
the equipment, and facilities are located. The Company obtained an AUD$14 million
bank facility to fund the expansion of the Cootamundra facility. The Company has deployed the AUD$14 million bank facility as follows:
(i) AUD$4 million was allocated for equipment finance, (ii) AUD$8 million for construction costs to expand the facility, and (iii) AUD$2
million for business growth and working capital related to the crushing plant’s expansion.
The
Company has expanded its existing oil processing plant and is building a multi-oilseed crushing plant near Emerald in the Central Queensland
region that is expected to deliver a crucial expansion of the Company’s operational footprint. This facility will produce edible
oil feedstocks to meet the growing Asia-Pacific market, and bio-diesel feedstock to fuel the renewable energy revolution, to eventually
reach a total oilseed crushing capacity of 200 tons per day along with capabilities to bleach and deodorize the oilseeds at a capacity
of 50 tons per day.
The
construction of the new crushing and production plant in Queensland is projected to cost AUD$25 million. In connection with the funding
of the new Queensland plant, the Company has received government support through an Industrial Partnership Program through CQ Oilseeds
Pty Ltd. and its parent entity, Energreen Nutrition Australia Pty Ltd., in the amount of AUD$5 million of incentives plus a grant of
tax incentives. The balance of the capital stack to fund the plant includes AUD$3 million of funding generated from operating cashflow,
AUD$6 million to AUD$10 million in a bank funding facility for construction and equipment financing, and AUD$8 million to AUD$11 million
of equity funding to complete the new plant within 15 months. If the Company does not raise all or any of the AUD$8 million to AUD$11
million of equity funding, the Company intends to fund the shortfall from the Company’s operating cashflow, which would reduce
its results of operation. Upon completion of construction of the new facility, Energreen Nutrition Australia Pty Ltd. will transfer CQ
Oilseeds Pty Ltd. and its assets, including the new facility to the Company via a transfer agreement.
16
Central
Queensland is strategically placed to grow and develop a domestic oilseed processing sector in addition to a range of value-added industries.
The Company seeks to support the growth of its oilseed agricultural products through the development of its domestic capabilities to
deliver an internationally capable export industry and unlock Central Queensland’s bio futures sector through the success of this
project. This will be achieved by bringing the productive capacity and supply-chain efficiency that will enable the expansion of domestic
oilseed production and the commercial potential of oilseed products.
Crushing
infrastructure will play a major role in expanding and developing the production of oilseed crops in Central Queensland thus presenting
an opportunity for local farmers to diversify into higher value crops. The Central Queensland cropping region has a strong history of
oilseed production, but this capacity has largely disappeared due to a lack of essential processing infrastructure. Central Queensland
produces between 40,000 and 50,000 tons of seed per year but lacks the processing infrastructure to support downstream processing capabilities.
The
Australian processing capability for these products are now predominantly located in New South Wales and Victoria, which has directed
value-add activities interstate. Given the capacity and strength of the Queensland oilseed growing industry, and the commercial benefits
stemming from the efficient integration of processing and growing operations, this project will take the first step in reviving the oilseed
industry in Central Queensland and help to catalyze Australia’s bio futures sector. We believe that Queensland has the potential
to develop a $1 billion oilseed processing and value addition base industry similar to development cases in New South Wales and Victoria
where the oilseed crushing industry is contributing between $5 billion and $7 billion per annum to the respective economies.
The
current capacity of the Company’s primary processing site in Cootamundra, NSW was expanded in 2024 with expansion completed
with full operation in the expanded Cootamundra facility in August 2024. The Company is further expanding its processing capacity
to meet market demand and sees strategic commercial value in establishing a new processing plant near Emerald in close proximity to
Central Queensland growers under an affiliated entity, CQ Oilseeds Pty Ltd. The facility will be the first major crushing plant in
Queensland.
The
investment rationale to develop a greenfield facility in Emerald comes at a crucial time with consideration to inflation, surging fuel
costs, avoidance of global supply chain and related geopolitical tension and an increasing focus and commitment to sustainability. A
processing facility in Queensland will generate savings from inter-state freight cost, reduce carbon emissions and minimize the distribution
costs associated with supplying the northern and southern markets of Queensland with direct access to rail and the Gladstone Port.
17
The
Company expects to adhere to the following implementation methodology and associated project schedule:
General
Key
Milestone
Description
Pre-construction
Activities
1
Approvals
& Permissions
Start:
01 Sep 2022
End: 31 December 2024
●
Receiving Development Approval and EPA License
●
Offtake agreements with customers
●
Contract execution
●
Financial approvals
Construction
Activities
2
Factory
Building & Machinery
Phase
1:
Start:
January 2025
End: January 2026
Phase
l1:
Start:
January 2026
End: December 2026
●
Signing contracts with construction company
●
Procurement of construction materials
●
Placing equipment orders
●
Civil works
●
Site establishment
●
Construction site works (including foundations, factory shed, slab, frame and cladding)
●
Delivery and installation of equipment
●
Testing and commissioning
Commercial
Operations
3
Hiring
& Training
Start:
Sep 2025
End: March 2026
●
Commence hiring with senior management
●
Hire operational plant staff from local region
●
Training and development of the selected hires
●
Human Resources/Onboarding administration
4
Contracts
& Supply Chain Management
Start:
January 2025
End: December 2026
●
Signing contracts with suppliers and engagements with growers.
●
Distribution contract drafting
●
Logistics negotiations
●
Performance analysis to maximize operational supply output and financial performance
●
Risk mitigation
The
new and larger oil processing plant in Emerald, Queensland is expected to have a capacity to crush 200 tons of oilseeds per day. The
new Emerald plant is currently in development (see “Pre-construction Activities” in the table above). The Queensland
Government awarded a governmental grant of approximately AUD$5 million in funding and tax credits to support the Emerald, Queensland
facility. Approval of this funding occurred on December 14, 2023, with funding commenced in March 2024. The land lease for the
property underlying the Emerald, Queensland facility commenced in January 2023, and the local development was submitted and is now
under review by the local council. The groundbreaking will occur in the first quarter of 2025 calendar year with the construction
period expected from January 2025 to December 2026 and the receipt of the certificate of completion is expected in March 2025. The Company
expects the construction of the plant to require capital expenditures of AUD$24 million.
Regulatory
Environment
The
Company has foreign government approvals to import food grade oils to the United States. Specifically, Cootamundra Oilseeds Pty Ltd.
is registered with the U.S. Food and Drug Administration (FDA) pursuant to the Federal Food Drug and Cosmetic Act, as amended by the
Bioterrorism Act of 2002 and the FDA Food Safety Modernization Act as of December 9, 2022, which is effective through December 31,
2023. The Company has not sought “Organic” certification from the United States Department of Agriculture. Cootamundra
Oilseeds Pty Ltd. is registered through SAI Global as compliant with Good Manufacturing Practices and Hazard Analysis until January
14, 2026. Cootamundra Oilseeds Pty Ltd. is certified Halal compliant by Halal Australia until July 1, 2023. Cootamundra Oilseeds Pty
Ltd. is certified Kashrut by the Kashrut Authority of Australia and New Zealand until October 14, 2023 ( i.e., Kosher).
Cootamundra Oilseeds Pty Ltd. is verified Non-GMO for its “First Press Canola Oil” product and “Premium First
Pressed Canola Oil” product by the non-GMO Project until June 22, 2024.
Supply
Chain from Central Queensland
The
Central Queensland region is a highly significant area within Queensland’s wider agricultural industry. Most regions in Australia
hold the ability to produce one broadacre crop per year. Crop planting windows in the Central Highlands region are wider, crops mature
faster (due to warm climate) and reduced risk of damage from frost. Given the right conditions, this enables an increased cropping intensity
of two crops to be planted and harvested in a year without penalties to yields.
18
As
of 2019, Central Queensland region has more than 400 operations growing grains, pulses and oilseeds primarily under rain grown production
conditions and more than 45,300 hectares of broadacre crops are grown under flood, lateral and pivot irrigation. The Australian Bureau
of Statistics values broadacre cropping at $103 million, making it the second largest agricultural activity in the Central Highlands.
The
Central Queensland cropping area can grow up to 65,000 to 70,000 tons of oilseed (primarily cottonseed and sunflower seed) per year.
During the early 2000’s, the region produced more than 80,000 hectares of sunflower seed. Now the region currently imports between
30,000 and 40,000 tons of sunflower oil per year.
Cooperative
Research Centre for Developing Northern Australia (CRCNA) and Grains Research and Development Corporation (GRDC) in partnership with
Farmacist and Savannah Ag Consulting (agronomists) conducted a three-year research experiment under the “Developing an oilseed
industry for North Queensland” project comparing the crop yield rates of several oilseed crops grown in Central and Northern QLD
to industry averages. The project trials were conducted from Emerald in Central Queensland to North Queensland featuring oilseed crops
including canola, Indian mustard, carinata, soybeans, linseed, nigella, sunflower, camelina, safflower and black sesame. Results have
shown that several oilseed crops produce the same or better yields in tropical Queensland compared to trials in temperate climates, alleviating
decades of industry assumptions around growing conditions in the regions. The clear standouts were canola which produced a 2.85 tons
per hectare yield, higher than the 2.54 tons per hectare outcome from the National Variety Trial (NVT) Roundup Ready trials, and safflower that had a 2.6 tons
per hectare yield and was over double the 1-1.2 tons per hectare.
Legal
Proceedings
From
time to time, we may become a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our
business. While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters
will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
There
were two cases involving the Company’s subsidiaries, Cowcumbla Investments Pty Ltd. and Cootamundra Oilseeds Pty Ltd., filed in
the Supreme Court of New South Wales in connection with a related party loan with a former director totaling AUD$1.2 million. Cowcumbla
Investments Pty Ltd. and Cootamundra Oilseeds Pty Ltd. recently settled these claims following their repayment of the amount due under
this related party loan in monthly instalments from January 2023 to April 2023. The cases pending against Cowcumbla Investments Pty Ltd.
and Cootamundra Oilseeds Pty Ltd. have concluded following the local mediation process held on 30 May 2023 and the payment of an additional
sum under this loan in the amount of AUD95,000 as final settlement on 1 June 2023. The Company does not expect to incur any further costs
in relation to the matter, however, the inherent uncertainties of any future litigation, and the ultimate cost and outcome of future
litigation cannot be established definitively.
Corporate
Information
Australian
Oilseeds Holdings Ltd. is a Cayman Islands exempted company (the “Company,” “we,” “us” or “Australian
Oilseeds”) formed on December 29, 2022.
The
Company’s subsidiaries include Australian Oilseeds Investments Pty Ltd., an Australian proprietary company; Good Earth Oils Pty
Ltd. an Australian proprietary company; Cowcumbla Investments Pty Ltd., an Australian proprietary company, which is 82.7% owned by the
Company and which wholly owns Cootamundra Oilseeds Pty Ltd., which is incorporated in Australia; CQ Oilseeds Pty Ltd., an Australian
proprietary company, and EDOC Acquisition Corp., a Cayman Islands exempted company.
The
Company is located at 126 – 142 Cowcumbla Street, Cootamundra and Site 2: 52 Fuller Drive Cootamundra and reachable by telephone
on +02 6942 4347.
19
The
information contained on our website is not incorporated by reference into this Annual Report, and you should not consider any information
contained on, or that can be accessed through, our website as part of this Annual Report or in deciding whether to purchase our Ordinary
Shares.
Recent
Developments
Closing
of Business Combination
On
March 21, 2024 (the “Closing Date”), Australian Oilseeds Holdings Limited., a Cayman Islands exempted company (“Australian
Oilseeds” or the “Company”), consummated the previously announced business combination pursuant to the Business Combination
Agreement, dated as of December 5, 2022 (as amended on March 31, 2023 and December 7, 2023 (the “Business Combination Agreement”),
between the Company, EDOC Acquisition Corp., a Cayman Islands exempted company (“EDOC”), American Physicians LLC, a Delaware
limited liability company, in the capacity as the representative, from and after the Closing Date for the shareholders of Purchaser and
the Company (other than the Sellers (as defined below)) in accordance with the terms and conditions of the Business Combination Agreement
(the “Purchaser Representative”), AOI Merger Sub, a Cayman Islands exempted company and a wholly-owned subsidiary of the
Company (“Merger Sub”), Australian Oilseeds Investments Pty Ltd., an Australian proprietary company (“AOI”),
Gary Seaton, in his capacity as the representative for the Sellers, in accordance with the terms and conditions of the Business Combination
Agreement (the “Seller Representative”), and each of the holders of AOI’s outstanding ordinary shares named on Annex
I to the Business Combination Agreement (the “Primary Sellers”), as amended from time to time, to include subsequent parties
that execute and deliver to Purchaser, the Company and AOI, a Joinder (the “Joining Sellers”), and the holders of AOI’s
outstanding ordinary shares who are bound by the provisions of the Business Combination Agreement pursuant to the drag-along rights set
forth in AOI’s memorandum and articles of association (the “Drag-Along Sellers,” and collectively with the Joining
Sellers, the “Sellers”). The transactions contemplated by the Business Combination Agreement are referred to herein as the
“Business Combination.”
Pursuant
to the Business Combination Agreement, on the Closing Date, EDOC merged with and into Merger Sub, with EDOC continuing as the surviving
entity (the “Merger”), as a result of which, EDOC became a wholly owned subsidiary of the Company, and each issued and outstanding
security of EDOC prior to the Closing Date was cancelled in exchange for the receipt of substantially identical securities of the Company.
Also on the Closing Date, the Company acquired all of the issued and outstanding ordinary shares of AOI (the “Purchased Shares”)
from the Sellers in exchange for the Company’s ordinary shares (“Company Ordinary Shares”) par value $0.0001 per share
(the “Share Exchange”). More specifically, pursuant to the Business Combination Agreement, at the effective time of the Business
Combination (the “Effective Time”):
(i)
Each
holder of EDOC pre-transaction privately-held Class A ordinary shares and the Class B ordinary share (the “EDOC Ordinary Shares”)
received Company Ordinary Shares, which are listed under the ticker “COOT” (less 200,000 Class A ordinary shares that
were forfeited by EDOC back to the Company);
(ii)
Each
holder of AOI ordinary shares received Company Ordinary Shares on a one-for-one basis (the “Exchange Shares”);
(iii)
Each
holder of EDOC’s public Class A ordinary shares received Company Ordinary Shares on a one-for-one basis;
(iv)
EDOC’s
warrants terminated and were exchanged for warrants of the Company (the “Warrants”), which Warrants are listed on the
Nasdaq under “COOTW”;
(v)
Each
holder of EDOC’s rights (the “Rights”) received 1/10 of a Company Ordinary Share for each such Right, as set forth
herein;
(vi)
EDOC’s
Rights were no longer be traded;
(vii)
EDOC’s
479,000 placement units (“Placement Units”) were exchanged for Company Ordinary Shares and Warrants of the Company; and
(viii)
EDOC’
$1,500,000 of convertible promissory notes that were convertible at Closing into Company Ordinary Shares (“Convertible Shares”)
and warrants (“Convertible Warrants”).
20
In
connection with the closing of the Business Combination, EDOC and/or the Company entered into or amended, as applicable, certain agreements
with their vendors or service providers, including the underwriter in EDOC’s IPO, to pay various business combination transaction
expenses otherwise due at Closing, including deferral agreements with vendors or service providers, requiring deferred cash payments
by the registrant to such parties to be satisfied over specified time periods after Closing, and certain other fee modification agreements
with vendors or service providers pursuant to which such parties received newly issued Ordinary Shares at Closing and/or deferred cash
payments (or a combination of both). Pursuant to such agreements, an aggregate of 840,891 Company Ordinary Shares (694,391 to Arc Group
Limited and 146,500 to I-Bankers Securities, Inc.) were issued to such providers.
In
addition, in connection with the closing of the Business Combination, the Company closed the private placement of the Arena Warrants
and Debentures pursuant to the Securities Purchase Agreement dated August 23, 2023 between the Company, AOI, EDOC, certain AOI subsidiaries
and Arena Investors, LP (the “PIPE Investors”) and executed the Arena Transaction Documents including the 10% Original Issue
Discount Secured Convertible Debenture, the Arena Warrant, the Registration Rights Agreement and related documents.
In
addition, at the Closing, the Company, the Primary Sellers, the Purchaser Representative, the Seller Representative and the Escrow Agent
entered into an escrow agreement (the “Subscription Escrow Agreement”), pursuant to which a number of Exchange Shares equal
to 15% of the estimated Exchange Consideration issuable to the Sellers at the Closing (such Exchange Shares, together with any equity
securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted the “Escrow
Shares”) are subject to the restrictions of the Escrow Agreement and shall be held by the Escrow Agent, along with any dividends,
distributions or income thereon (together with the Escrow Shares, the “Escrow Property”) in a segregated account (the “Escrow
Account”) and disbursed in accordance with the Business Combination Agreement and the Subscription Escrow Agreement. The Escrow
Shares will be held in the Escrow Account for a period of 12 months after the Closing and shall be the sole and exclusive source of payment
for any post-Closing purchase price adjustment and for any post-closing indemnification claims (other than certain fraud claims and breaches
of AOI and the Sellers’ fundamental representations, as in the Business Combination Agreement). At the 12-month anniversary of
the Closing, on March 21, 2025, all remaining Escrow Property will be released to the Sellers in accordance with the Business Combination
Agreement. However, the amount of Escrow Property equal to the value of any pending and unresolved claims will remain in the Escrow Account
until finally resolved.
The
transaction was unanimously approved by the board of directors of EDOC and was approved at the extraordinary general meeting of EDOC’s
shareholders held on March 6, 2024 (the “Special Meeting”). EDOC’s shareholders also voted to approve all the other proposals
presented at the Special Meeting. As a result of the Business Combination, AOI and EDOC became wholly owned direct subsidiaries of the
Company. On March 22, 2024, the Ordinary Shares and public warrants of the Company (the “Public Warrants”) commenced trading
on the Nasdaq Global Market, or “Nasdaq,” under the symbols “COOT” and “COOTW,” respectively.
Lock-up
Agreements and Escrow Agreement
Pursuant
to lock-up agreements entered with the applicable party, all holders of Ordinary Shares as of the Closing, other than the PIPE Investors,
the EDOC’s public shareholders and certain Sellers of AOI holding a minority ownership, agreed, among other things, that such party’s
Ordinary Shares may not be transferred for a period after the Closing. Following the closing of the Business Combination, of the 23,224,102
Ordinary shares that were issued and outstanding as of the Closing Date, approximately 17,088,324 Ordinary Shares (or approximately 73.6%
of the total issued and outstanding Ordinary Shares) are subject to a lock-up for up (A) with respect to 50% of such Ordinary Shares,
during the period commencing from the Closing and ending on the earliest of (x) the six (6) month anniversary of the Closing Date, (y)
commencing after the three (3) month anniversary of the Closing, the date on which the closing sale price of the Ordinary Shares equals
or exceeds $12.50 per share for any twenty (20) trading days within any thirty (30) trading day period commencing after the Closing (or
if earlier, the date on which the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated
third party that results in all of the Company’s shareholders having the right to exchange their equity holdings in the Company
for cash, securities or other property) and (B) and with respect to the remaining 50% of such Ordinary Shares, during the period commencing
from the Closing and ending on the earlier or the date that is six (6) months after the date of the Closing (or if earlier, the date
on which the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party
that results in all of the Company’s shareholders having the right to exchange their equity holdings in the Company for cash, securities
or other property), (i) lend, offer, pledge (except as provided below), hypothecate, encumber, donate, assign, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any of such Ordinary Shares, (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such Ordinary Shares, or (iii)
publicly announce any intention to effect any transaction specified in clause (i) or (ii).
21
In
addition, at the Closing, the Company, the Primary Sellers, the Purchaser Representative, the Seller Representative and the Escrow Agent
entered into an escrow agreement (the “Subscription Escrow Agreement”), pursuant to which a number of Exchange Shares equal
to 15% of the estimated Exchange Consideration issuable to the Sellers at the Closing (such Exchange Shares, together with any equity
securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted the “Escrow
Shares”) are subject to the restrictions of the Escrow Agreement and shall be held by the Escrow Agent, along with any dividends,
distributions or income thereon (together with the Escrow Shares, the “Escrow Property”) in a segregated account (the “Escrow
Account”) and disbursed in accordance with the Business Combination Agreement and the Subscription Escrow Agreement. The Escrow
Shares will be held in the Escrow Account for a period of 12 months after the Closing and shall be the sole and exclusive source of payment
for any post-Closing purchase price adjustment and for any post-closing indemnification claims (other than certain fraud claims and breaches
of AOI and the Sellers’ fundamental representations, as in the Business Combination Agreement). At the 12-month anniversary of
the Closing, on March 21, 2025, all remaining Escrow Property will be released to the Sellers in accordance with the Business Combination
Agreement. However, the amount of Escrow Property equal to the value of any pending and unresolved claims will remain in the Escrow Account
until finally resolved.
Executive
Employment Agreements
In
connection with the Closing of the Business Combination, the Company has entered into employment agreements with two executive officers:
Gary Seaton (as the Chief Executive Officer) and Bob Wu (Chief Financial Officer). The employment agreements provide for at-will employment
that may be terminated by the Company with or without cause, by the executive with or without good reason, or mutually terminated by
the parties.
The
employment agreement for Gary Seaton provides for $150,000 annual salary and provides that Mr. Seaton’s employment is at will and
will continue until either Mr. Seaton or the Company notifies the other party at least 60 days written notice of intent to terminate
employment. If. Mr. Seaton’s employment is terminated by the Company without “cause”, he is entitled to receive (i)
continued base salary payments for 6 months following termination; (ii) accrued but unpaid base salary through the termination date;
(iii) reimbursement for any unreimbursed pre-approved reasonable business expenses incurred through the termination date; (iv) accrued
but unused annual leave days; and (v) all other payments, benefits, or fringe benefits to which he shall be entitled as of the termination
date under the terms of any applicable compensation arrangement or benefit, equity, or fringe benefit plan or program or grant.
Simultaneously
with the Closing, the Company intends to enter into an executive employment agreement with Bob Wu as Chief Financial Officer. The executive
employment agreement with Mr. Wu provides that Mr. Wu will hold the position of Chief Financial Officer of the Company with a base annual
salary of $100,000. Under the agreement, Mr. Wu’s employment is at will and will continue until either Mr. Wu or the Company
notifies the other party at least 60 days written notice of intent to terminate employment. If. Mr. Wu’s employment is terminated
by the Company without “cause”, he is entitled to receive (i) continued base salary payments for 6 months following termination;
(ii) accrued but unpaid base salary through the termination date; (iii) reimbursement for any unreimbursed pre-approved reasonable business
expenses incurred through the termination date; (iv) accrued but unused annual leave days; and (v) all other payments, benefits, or fringe
benefits to which he shall be entitled as of the termination date under the terms of any applicable compensation arrangement or benefit,
equity, or fringe benefit plan or program or grant.
22
“Cause”
is defined in the executive employment agreement to mean (i) the Executive’s willful failure to perform Executive’s duties
(other than any such failure resulting from incapacity due to physical or mental illness); (ii) the Executive’s willful failure
to comply with any valid and legal directive of the Board or the Company; (iii) the Executive’s willful engagement in dishonesty,
illegal conduct, or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates; (iv) the Executive’s
embezzlement, misappropriation, or fraud, whether or not related to the Executive’s employment with the Company; (v) the Executive’s
conviction of or plea of guilty or nolo contendere to a crime that constitutes a major indictable offence or a crime involving moral
turpitude, if such felony or other crime is work-related, materially impairs the Executive’s ability to perform services for the
Company, or results in material/reputational or financial harm to the Company or its affiliates; (vi) the Executive’s material
violation of the Company’s written policies or codes of conduct, including written policies related to discrimination, harassment,
performance of illegal or unethical activities, and ethical misconduct; (vii) the Executive’s willful unauthorized disclosure of
Confidential Information (as defined below); (viii) the Executive’s material breach of any material obligation under this Agreement
or any other written agreement between the Executive and the Company; or (ix) the Executive’s engagement in conduct that brings
or is reasonably likely to bring the Company negative publicity or into public disgrace, embarrassment, or disrepute. In addition, the
executive’s employment shall be deemed to have terminated for Cause if, on the date the executive’s employment terminates,
facts and circumstances exist that would have justified a termination for Cause, even if such facts and circumstances are discovered
after such termination.
Securities
Purchase Agreement
In
connection with the closing of the Business Combination, the Company closed the private placement, pursuant to the private offering rules
under the Securities Act of 1933, as amended (the “Securities Act”), of the Arena Warrants and Debentures pursuant to the
Securities Purchase Agreement dated August 23, 2023 between the Company, AOI, EDOC, certain AOI subsidiaries and Arena Investors, LP
(the “PIPE Investors”) and executed the Arena Transaction Documents including the 10% Original Issue Discount Secured Convertible
Debenture, the Arena Warrant, the Registration Rights Agreement and related documents. The Ordinary Shares pursuant to the Arena Warrants
grant the PIPE Investors the right to purchase the number of Ordinary Shares underlying the Warrants equal to 25% of the total principal
amount of the related Debenture purchased by the PIPE Investor on the applicable closing date divided by 92.5% of the average of the
three (3) lowest daily VWAP of the Ordinary Shares for the ten (10) consecutive trading day period ended on the last trading day immediately
preceding such closing date, subject to adjustment upon the occurrence of certain events as set forth in such Arena Warrant be exercisable
at the exercise price set forth in the Arena Warrants, as may be adjusted pursuant to the terms of the Arena Warrants.
Data
Privacy
In
connection with the operation of the Company and its subsidiaries’ business, we store, process and transmit data, including information
about our business, employees, suppliers and customers. Unauthorized disclosure or loss of sensitive or confidential data may occur through
a variety of methods. These include, but are not limited to, systems failure, employee negligence, fraud or misappropriation, or unauthorized
access to or through our information systems, whether by our employees or third parties, including a cyberattack by computer programmers,
hackers, members of organized crime and/or state-sponsored organizations, who may develop and deploy viruses, worms or other malicious
software programs.
We
take action to mitigate these risks by (a) keeping our software and security systems up to date, (b) using strong passwords and two factor
authorization on all online accounts, (c) providing IT security training to employees to identify scam emails and building internal procedures
to verify suspicious requests, (d) backing up all data daily and storing the backup offline and online, (e) using a VPN to encrypt internet
traffic and protect against cyberattacks when assessing sensitive data, (f) developing and implementing an incident response plan to
ensure a rapid and effective response in case of a cyberattack, and (g) partnering with a cybersecurity company to conduct regular intranet
and employee laptop checks.
23
Nonetheless,
there can be no assurance that we will prevent all instances of improper disclosure or loss of sensitive or confidential information.
Such disclosure, loss or breach could harm our reputation and subject us to government sanctions and liability under our contracts and
laws that protect sensitive or personal data and confidential information, resulting in increased costs or loss of revenues. It is possible
that security controls over sensitive or confidential data and other practices we follow may not prevent the improper access to, disclosure
of, or loss of such information. The potential risk of security breaches and cyberattacks may increase as we introduce new services and
offerings. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various
jurisdictions in which we provide services. Any failure or perceived failure to successfully manage the collection, use, disclosure,
or security of personal information or other privacy-related matters, or any failure to comply with changing regulatory requirements
in this area, could result in legal liability or impairment to our reputation in the marketplace.
Organizational
Structure
The
following is a current organizational chart of our Company:
Human
Capital Resources
Our
workforce is comprised of approximately 21 employees (as of June 30, 2024), including approximately 7 full-time equivalent contractors
(references herein to “employees” include to the employees of our subsidiaries). Our Board of Directors and its committees
oversee human capital matters through regular reporting from management and advisors.
Diversity,
Equity and Inclusion
We
are committed to fostering a culture of inclusion that embraces and supports our patients, colleagues, partners, physicians and communities.
Our policies prohibit discrimination on the basis of age, gender, disability, race, color, ancestry, citizenship, religion, pregnancy,
sexual orientation, gender identity or expression, national origin, medical condition, marital status, veteran status, payment source
or ability, or any other basis prohibited by federal, state or local law.
24
Compensation
and Benefits
We
provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs
(which vary by location) include a 2024 Stock Option Plan, a 401(k) Plan, health care and insurance benefits, health savings and flexible
spending accounts, paid time off, family leave, family care resources, flexible work schedules, employee assistance programs, tuition
and student loan assistance and on-site services, such as cafeterias and fitness centers, among many others.
Facilities
The
Company’s headquarters is located at 126 – 142 Cowcumbla Street, Cootamundra and Site 2: 52 Fuller Drive Cootamundra and
its telephone number is +02 6942 4347, where we own and occupy the factory land with an aggregate area of approximately 60,200
square meters. and Site 2: 52 Fuller Drive Cootamundra where with an aggregate floor area of approximately 7,169 square meters
from unrelated third parties under operating lease agreements. The Company recorded the lease agreement as a right-to-use asset in the financial statements under IFRS16. We believe the current
office space is adequate for our current operations and is adequate for our anticipated future needs.
Implications
of Being an Emerging Growth Company
As
a company with less than $1.235 billion in revenues during our last fiscal year, we qualify as an emerging growth company as defined
in the Jumpstart Our Business Startups Act (“JOBS Act”) enacted in 2012. As an emerging growth company, we expect to take
advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not
limited to:
●
being
permitted to present only two years of audited financial statements, in addition to any required unaudited interim financial statements,
with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
disclosure in this Annual Report on Form 10-K;
●
not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley
Act”);
●
reduced
disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
●
exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.