Australian Oilseeds Holdings Ltd 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto that appear elsewhere in this Annual Report on Form 10-K. See “Risk Factors” elsewhere in this Annual Report on Form 10-K for a discussion of certain risks associated with our business. The following discussion contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. The use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in other materials we release to the public. Unless the context otherwise requires, references in this Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Australian Oilseeds Holdings Ltd.,” “we,” “us,” “our” and the “Company” are intended to mean the business and operations of Australian Oilseeds Holdings Ltd. 41 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. 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”; 42 (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”). 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 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. Key Components of Consolidated Statements of Profit or Loss and Other Comprehensive Income Sales revenue Revenues consist of sales of edible oils, sales of protein meals and tolling revenue from oilseeds crushing activities. The Company’s edible oil sales comprise of two segments: sales of bulk oils to wholesalers who use it as food ingredients or white labeling; sales of packaged oils as the company’s own branding to major supermarket channels. Sales of protein meals are bulk sales and mainly distributed to local farmers and feedlots as protein supplements. Tolling revenue is the service charge fee of crushing oilseeds to produce edible oils and protein meals. 43 Cost of sales Cost of sales consist of costs directly related to the manufacturing process of edible oils and protein meals. It includes the cost of materials which mainly consist of the procurement cost of non-GMO canola seeds, canola seeds freight and storage cost from the suppliers, direct labor in the factory plant, occupancy costs of energy consumption of manufacturing process, depreciation expense of the crushing plant and relevant equipment and vehicles, and repairs and maintenance. General and Administrative expenses General and administrative expenses primarily consist of personnel expenses, professional fees, occupancy costs, depreciation expense, insurance expense, management fees, office expenses, security expenses, travel expenses, staff training expenses, utilities expenses, and subscription and dues expenses. Sales and marketing expenses Sales and marketing expenses primarily consist of sales directors’ salaries and supermarket promotion activities. Other income Other income primarily consists of fuel tax credit and recovery cost of freight and overdue interest. Recapitalization expense Recapitalization expense consists of the cost of listing recorded related to the difference in the fair value of the shares issued by the Company, the accounting acquirer, and the fair value of the SPAC’s, the accounting acquiree, and identifiable net assets. Finance expenses Finance expenses consist of interest paid related to bank loan and facility interest, related party loan interest and foreign exchange gain or loss. Change in fair value of warrant liabilities This consists of the change in fair value of certain warrant liabilities. Results of Operations The following selected consolidated financial data are derived from the audited financial statements of the Company for the years ended June 30, 2024 and 2023 and should be read in conjunction with our consolidated financial statements, the related notes and the rest of the section of this Report entitled “Key Components of Consolidated Statements of Operations.” The historical results are not necessarily indicative of the results of future operations. The following tables set forth our Consolidated Statements of Operations data for the periods presented: Year Ended June 30, 2024 Compared to the Year Ended June 30, 2023 2024 2023 Change % AUD$ AUD$ Sales revenue 33,727,222 29,049,345 4,677,877 16.1 % Cost of sales (27,810,782 ) (24,062,603 ) (3,748,179 ) 15.6 % Gross profit 5,916,440 4,986,742 929,698 18.6 % General and administrative expenses (3,224,843 ) (2,467,432 ) (757,411 ) 30.7 % Selling and marketing expenses (412,536 ) - (412,536 ) 100.0 % Other income 707,911 48,273 659,638 1,366.5 % Operating profit 2,986,972 2,567,583 419,389 16.3 % Finance expenses (835,813 ) (612,735 ) (223,078 ) 36.4 % Change in fair value of warrant liabilities 141,874 - 141,874 100.0 % Recapitalization expense (23,210,293 ) - (23,210,293 ) 100.0 % (Loss) Profit before income tax (20,917,260 ) 1,954,848 (22,872,108 ) (1,170.0 )% Income tax expense (313,421 ) (109,878 ) (203,543 ) 185.2 % (Loss) Profit for the year (21,230,681 ) 1,844,970 (23,075,651 ) (1,250.7 )% Other comprehensive income for the year, net of tax - - Total comprehensive (loss) income (21,230,681 ) 1,844,970 (23,075,651 ) (1,250.7 )% (Loss) Profit attributable to: Members of the parent entity (21,662,555 ) 1,432,693 (23,095,248 ) (1,612,0 )% Non-controlling interest 431,874 412,277 19,597 4.8 % Total (Loss) Income (21,230,681 ) 1,844,970 (23,075,651 ) (1,250,7 )% Total comprehensive (loss) income attributable to: Members of the parent entity (21,662,555 ) 1,432,693 (23,095,248 ) (1,612,0 )% Non-controlling interest 431,874 412,277 19,597 4.8 % Total (21,230,681 ) 1,844,970 (23,075,651 ) (1,250.7 )% 44 Revenue Year Ended June 30, 2024 2023 Change Change % Total revenue $ 33,727,222 $ 29,049,345 $ 4,677,877 16.1 % Sales revenue increased by AUD$4.7 million or 16.1% to AUD$33.7 million for the twelve-month period ended on June 30, 2024, compared to AUD$29.0 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 resulting from the Company’s expanded customer contracts. The following table summarizes the Company’s revenues disaggregated by product category: Year Ended June 30, 2024 2023 Change Change % Wholesale oils $ 11,481,072 $ 20,451,942 $ (8,970,870 ) (43.9 )% Hype protein meals 9,175,505 5,577,709 3,597,796 64.5 % Toll crushing service 222,095 2,156,827 (1,934,732 ) (89.7 )% Seeds - 664,000 (664,000 ) (100.0 )% Other sales 291,351 198,867 92,485 46.5 % Retail oils 12,557,199 - 12,557,199 100.0 % Total revenues $ 33,727,222 $ 29,049,345 $ 4,677,877 16.1 % Wholesale oils represented 34.0% of our revenue for the year ended June 30, 2024, compared to 70.5% for the year ended June 30, 2023, and decreased AUD$8,970,870, as compared to the prior year. Retail oils represented 37.2% of our revenue for the year ended June 30, 2024, compared to 0% for the year ended June 30, 2023, and increased AUD$12,557,199, as compared to the prior year. The primary driver for the revenue decrease in wholesale oils and the revenue increase in retail oils for the year ended June 30, 2024 compared to the previous year was due to the Company securing two supply contracts to supply 15 Costco Australia stores and 1,111 Woolworth Supermarkets national stores, Australia’s largest supermarket chain. The Company also developed three new SKU to target the retail consumers from 2024 through integrated marketing campaign with the supermarkets. Hype protein meals for the feed industry represented 27.2% of our revenue for the year ended June 30, 2024, compared to 19.2% for the year ended June 30, 2023, and increased AUD$3,597,796 as compared to the prior year. The primary driver for the revenue increase in hype protein meals for the year ended June 30, 2024, compared to the previous year was the market awareness of the company’s high quality and chemical free concept from local farmers, wholesalers and distributors. Toll crushing service, seeds, and other sales represent a small portion of our revenue. Those categories combined represented 0.7% of the revenue for the year ended June 30, 2024, compared to 7.4% for the year ended June 30, 2023, a decrease of $1,934,732 for the year ended June 30, 2024, as compared to the year ended June 30, 2023. Cost of Sales Year Ended June 30, 2024 2023 Change Change % Cost of material $ 17,432,898 $ 18,710,436 $ (1,277,538 ) (6.8 )% Cost of finished goods 5,273,627 - 5,273,627 100.0 % Freight and storage 2,112,109 1,615,464 496,644 30.7 % Depreciation 481,093 547,454 (66,361 ) (12.1 )% Occupancy costs 341,790 415,436 (73,646 ) (17.7 )% Labor costs 1,917,665 2,154,793 (237,128 ) (11.0 )% Repairs and maintenance 251,600 619,020 (367,420 ) (59.4 )% Total cost of sales $ 27,810,782 $ 24,062,603 $ 3,748,179 15.6 % The cost of sales for the year ended June 30, 2024 was AUD$27.8 million, an increase of AUD$3.7 million, or 15.6% as compared to the year ended June 30, 2023. The primary reason for the increase was in line with the increase in product sales. The cost component changed as a result of recognizing cost of finished goods when the oil products were sold in the retail market. The decrease gross margin was mainly due to the development of “Good Earth Oils” branding products in the retail market with support of strong marketing campaign. General and administrative expenses Year Ended June 30, 2024 2023 Change Change % General and administrative expenses $ 3,224,843 $ 2,467,432 $ (757,411 ) 30.7 % General and administrative expenses for the year ended June 30, 2024, were AUD$3.2 million, an increase of AUD$0.8 million, or 30.7%, compared to the year ended June 30, 2023. This increase was primarily due to the fact that the Company consolidated AUD$611,109 relevant costs from EDOC Acquisition Limited after the completion of business combination on 21 March 2024. Marketing expenses Year Ended June 30, 2024 2023 Change Change % Marketing expenses $ 412,536 $ - $ 412,536 100.0 % Marketing expenses for the year ended June 30, 2024 were AUD$0.4 million, an increase of AUD$0.4 million, or 100% compared to the year ended June 30, 2023. This increase was due to the Good Earth Oils Pty Ltd (“GEO”) sales team being established and promotion cost incurred within supermarket chains to increase brand awareness of our chemical free no-GMO edible oils within the consumer market. 45 Other Income Year Ended June 30, 2024 2023 Change Change % Other income $ 707,911 $ 48,273 $ 659,638 1,366.5 % Other income for the year ended June 30, 2024 was AUD$0.7 million, an increase of AUD$0.7 million, or 1,366.5% compared to the year ended June 30, 2023. This increase was primarily due to the negotiation to reduce certain transaction costs payable related to the purchase of EDOC. Change in Fair Value of Warrants Year Ended June 30, 2024 2023 Change Change % Change in fair value of warrant liabilities $ 141,874 $ - $ 141,874 100.0 % The change in the fair value of warrants for the year ended June 30, 2024 was AUD$0.1 million, an increase of AUD$0.1 million, or 100% as compared to the year ended June 30, 2023. The change in Warrant Fair Value was due to the closing of the Business Combination Agreement, the resulting fluctuations of the share market price, and the issuance of new warrants are part of the Arena securities purchase agreement. Recapitalization expense Year Ended June 30, 2024 2023 Change Change % Recapitalization expense $ 23,210,293 $ - $ 23,210,293 100.0 % Recapitalization expense increased by AUD$23.2 million or 100% to AUD$23.2 million for the twelve-month period ended on June 30, 2024 compared to AUD$0 for the twelve-month period ended on June 30, 2023, primarily due to the difference in the fair value of the shares issued by the accounting acquirer and the fair value of the accounting acquiree’s identifiable net assets at the close of the Business Combination. Finance expenses Year Ended June 30, 2024 2023 Change Change % Finance expenses $ 835,813 $ 612,735 $ 223,078 36.4 % Finance expenses increased by AUD$0.2 million or 36.4% to AUD$0.8 million for the twelve-month period ended on June 30, 2024 compared to AUD$0.6 million for the twelve-month period ended on June 30, 2023, primarily due to the fact that the Company began to utilize the AUD$8m trade facility provided by Commonwealth Bank of Australia to purchase canola oilseeds from the local farmers, the amortization of the convertible note discount of AUD$0.1 million and the interest accrual on the promissory notes with American Physicians LLC. Liquidity and Capital Resources As of June 30, 2024, our principal sources of liquidity were net proceeds received related to the Business Combination and cash received from customers. We incurred a loss after income tax of AUD$21,230,681 for fiscal year 2024 and incurred profit after tax of AUD$1,844,970 for fiscal year 2023. We were in a net current liability position of AUD$6,965,530 for the year ended 30 June 2024 and a net current liability position of AUD$678,768 for the year ended 30 June 2023. Net cash outflows from operating activities were AUD$2,184,930 for fiscal year 2024 and net cash inflows from operating activities were AUD$689,796 for fiscal year 2023. As at 30 June 2024 and 2023, the consolidated entity had cash in hand and at bank of AUD$514,140 and AUD$121,273, respectively. The financial statements have been prepared on a going concern basis, which contemplates continuity of normal activities and realization of assets and settlement of liabilities in the normal course of business. We conducted a reverse acquisition of EDOC Acquisition Limited “ADOC” through the deSPAC on 21 March 2024, the consolidated entity assumed AUD$5,248,824 of previously unpaid transaction costs charged by service providers of “ADOC”, AUD$1,216,928 promissory notes to American Physicians LLC and an AUD$1,533,742 convertible note to PIPE Investor ARENA as of 30 June 2024. In addition to the above unpaid costs incurred by ADOC, we incurred additional professional costs of AUD$1,031,301 in relation to the NASDAQ listing activities this current year, with the majority of the balances remaining unpaid as of 30 June 2024. Therefore, our ability to continue its business activities as a going concern is dependent upon us deriving sufficient cash from the business operation and being able to draw down additional long-term debt from the senior debt provider, Commonwealth Bank of Australia, who has provided a total facility loan of AUD$14,000,000 with unused facilities as at 30 June 2024 of AUD$8,000,000. In addition, we also have the ability to draw down an additional US$6 million of redeemable debentures from the existing PIPE investors or the executed US$50 million equity line of credit (ELOC) once the Company lodges the registration statement of the ELOC. The Company has determined that the Company’s sources of liquidity will be sufficient to meet the Company’s financing requirements for the one year period from the issuance of its consolidated financial statements. The following table shows the net cash and cash equivalents provided by (used in) operating activities, net cash and cash equivalents used in investing activities, and net cash and cash equivalents provided by financing activities during the periods presented: Year Ended June 30, 2024 June 30, 2023 Net cash provided by (used in) 392,865 (353,700 ) Operating activities $ (2,184,930 ) 689,796 Investing activities (3,975,622 ) (2,820,536 ) Financing Activities 6,553,419 1,777,040 Operating Activities As of June 30, 2024, our net cash and cash equivalents provided by (used in) operating activities consists of AUD$33,854,067 of cash receipts from customers and AUD$35,364,877 of payments to suppliers and employees including AUD$3,971,681 of canola seed stock purchase (5,421-ton stock on hand) for the preparation of the existing crushing plant that was commissioned July 2024. By comparison, the Company’s net cash and cash equivalents received in operating activities during the year ended June 2023, consists primarily of AUD$28,063,458 of cash receipts from customers and AUD$26,711,708 of payments to suppliers and employees. Investing Activities Our investing activities have consisted primarily of property and equipment purchases. Net cash and cash equivalents used in investing activities during the year ended June 30, 2024, consisted of AUD$3,975,622 of purchased property and equipment. By comparison, the Company’s net cash and cash equivalents used in investing activities during the year ended June 30, 2023, consisted primarily of AUD$2,820,536 of purchased property and equipment. Financing Activities Net cash flows from financing activities were AUD$1,777,040 for the year ended June 30, 2023, which primarily from related party loan. By comparison, the Company’s net cash flows from financing activities was AUD$6,553,419 for the year ended June 30, 2024, which primarily consisted of AUD$4,000,000 asset financing from Commonwealth Bank of Australia and the net cash inflow of AUD$2,578,062 from the related party loans. Furthermore, the Company raised up the net cash inflow of USD336,282, which primarily consists of USD$1,000,000 of convertible note from PIPE Investor Arena and USD$1,926,282 remaining fund in SPAC trust account, but they were partially offset by debenture issued cost and the payment of transaction costs to various suppliers who provided the listing compliance and underwrite services. Last, AUD$98,754 was paid for the finance lease.” Non-IFRS Financial Measure In addition to providing financial measurements based on IFRS, we provide an additional financial metric that is not prepared in accordance with IFRS, or non-IFRS financial measure. We use this non-IFRS financial measure, in addition to IFRS financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation, and to evaluate our financial performance. This non-IFRS financial measure is Adjusted EBITDA, as discussed below. 46 We believe that this non-IFRS financial measure reflects our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as it facilitates comparing financial results across accounting periods and to those of peer companies. We also believe that this non-IFRS financial measure enables investors to evaluate our operating results and future prospects in the same manner as we do. This non-IFRS financial measure may exclude expenses and gains that may be unusual in nature, infrequent, or not reflective of our ongoing operating results. The non-IFRS financial measure does not replace the presentation of our IFRS financial measures and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with IFRS. We consider Adjusted EBITDA to be an important indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Adjusted EBITDA eliminates items that we do not consider to be part of our core operations. We define Adjusted EBITDA as IFRS net loss excluding the following items: interest income; income taxes; depreciation and amortization of tangible and intangible assets; unit and stock-based compensation; Business Combination transaction expenses; and other non-recurring items that may arise from time to time. The non-IFRS adjustments, and our basis for excluding them from our non-IFRS financial measure, are outlined below: ● Unit and Stock-based compensation – Although unit and stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the derived stock price at the time of grant, varying valuation methodologies, subjective assumptions, and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to interpret; therefore, we believe it is useful to exclude unit and stock-based compensation from our non-IFRS financial measures to highlight the performance of our business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies. ● Business Combination transaction expenses – Business Combination transaction expenses represent the expenses incurred solely related to the Business Combination, which we completed on March 21, 2024. It primarily includes investment banker fees, legal fees, professional fees for accountants, transaction fees, advisory fees, due diligence costs, certain other professional fees, and other direct costs associated with strategic activities. These amounts are impacted by the timing of the Business Combination. We exclude Business Combination transaction expenses from our non-IFRS financial measures to provide a useful comparison of our operating results to prior periods and to our peer companies because such amounts vary significantly based on the magnitude of the Business Combination transaction and do not reflect our core operations. The following table reconciles IFRS net profit to Adjusted EBITDA during the periods presented (in thousands): Year Ended June 30, 2024 Year Ended June 30, 2023 Net (Loss) Profit $ (21,230,681 ) $ 1,844,970 Interest Expense $ 835,813 $ 612,735 Depreciation and amortization $ 498,566 $ 571,899 Recapitalization expense $ 23,210,293 $ - Change in fair value of warrant liabilities $ (141,874 ) $ - Income taxes $ 313,421 $ 109,878 Business combination transaction expenses $ 611,109 $ 404,491 Adjusted EBITDA $ 4,096,647 $ 3,543,973 47 Contractual Obligations and Commitments and Liquidity Outlook Our ability to continue as a going concern is dependent upon our ability to generate cashflows from operations and draw down additional long-term debt from the senior debt provider, Commonwealth Bank of Australia, who has provided a total facility loan of AUD$14,000,000 with unused facilities as at 30 June 2024 of AUD$8,000,000 and draw down an additional US$6 million of redeemable debentures from the existing PIPE investors or the executed US$50 million equity line of credit (ELOC) once the Company lodges the registration statement of the ELOC. The Company has determined that the Company’s sources of liquidity will be sufficient to meet the Company’s financing requirements for the one year period from the issuance of its consolidated financial statements but there can no assurance these sources are sufficient to fund our capital expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps management is taking will be successful. Our future capital requirements will also depend on additional factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, and the cost of any future acquisitions of technology or businesses. In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. Material Accounting Policies and Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements which have been prepared in accordance with International Financial Reporting Standards (IFRS). In preparing our financial statements, we make estimates, assumptions, and judgments that can have a significant impact on our reported revenue, results of operations, and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet during and as of the reporting periods. These estimates, assumptions, and judgments are necessary because future events and their effects on our results and the value of our assets cannot be determined with certainty and are based on our historical experience and on other assumptions that we believe to be reasonable under the circumstances. These estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a prolonged period of time. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates. We believe that the assumptions and estimates associated with the following material accounting policies involve significant judgment and thus have the most significant potential impact on our Consolidated Financial Statements. Revenue Recognition We generate revenue from the sale of products and services. A description of our revenue recognition policies is included in Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Although most of our sales agreements contain standard terms and conditions, certain agreements contain multiple performance obligations or non-standard terms and conditions. For customer contracts that contain more than one performance obligation, we allocate the total transaction consideration to each performance obligation based on the relative stand-alone selling price of each performance obligation within the contract. We rely on either observable standalone sales or an expected cost plus a margin approach to determine the standalone selling price of offerings, depending on the nature of the performance obligation. As we further discuss in Note 2, Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, for contracts with customers entered into during fiscal years 2024 and 2023, revenue from the sales of our products increased by AUD$4.68 million or 16.1% 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. 48 Stock-based Compensation Following the Business Combination, the Company has authorized 555,000,000 shares including 500,000,000 Class A Ordinary Shares, 50,000,000 Class B Ordinary Shares, and 5,000,000 Preference Shares, each of par value $0.0001 per share. In addition, the Company has three classes of warrants ( i.e. , Public Warrants, Private Warrants and PIPE Warrants) issued and outstanding. The assumptions used in calculating the fair value of stock-based compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. Warrant transactions PIPE Warrants to purchase our Ordinary Shares are accounted for as liability or instruments based on the terms of the warrant agreements. The warrants issued by us are accounted for as liability instruments under IFRS 9 due to the rights of the grantee to require cash settlement. Private Warrants and Representative Warrants to purchase units accounted for as liability instruments represent the warrants issued to significant shareholders and related parties. Penny Warrants are a contingently issuable instrument to issue the Company’s shares and are accounted for as a financial liability. Public Warrants are accounted for as equity instruments due to our ability to settle the warrants through the issuance of units. In order to calculate warrant charges, we used the Monte Carlo simulations, which required key inputs including volatility and risk-free interest rate and certain unobservable inputs for which there is little or no market data, requiring us to develop our own assumptions. We estimated the fair value of unvested warrants, considered to be probable to be vesting, at the time. Based on that estimated fair value, we determined warrant charges, which were recorded as a reduction of the transaction price. Off-Balance Sheet Arrangements As of June 30, 2024, we had no off-balance sheet arrangements as defined in Instruction 8 to Item 303(b) of Regulation S-K. Recently Adopted Accounting Pronouncements See Note 2 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recently adopted accounting standards. Recently Issued Accounting Pronouncements See Note 3 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of certain recently issued accounting standards which may impact our financial statements in future reporting periods.