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Annual Report 2017
FARMAFORCE LIMITED ACN 167 748 843
CONTENTS
CorporateDirectory 2
Chair’sReport 3
OperatingandFinancialReview 4
Directors’Report 6
RemunerationReport 10
CorporateGovernanceStatement 16
LeadAuditor’sIndependenceDeclaration 28
FinancialStatements 29
NotestotheFinancialStatements 34
Directors’Declaration 53
IndependentAuditor’sReport 54
ASXAdditionalInformation 57
2
CORPORATE DIRECTORY
ACN
167748843
Directors
GeorgeElias,ChairDrGeorgeSyrmalisConTsigounisHarrySimeonidis,GeneralManager
CompanySecretary
GerardoIncollingo
GeneralManager
HarrySimeonidis
Registeredoffice
Level3,222ClarenceStreet
Sydney,NSW2000
Principalplaceofbusiness
Level3,222ClarenceStreet
Sydney,NSW2000
Shareregister
BoardroomPtyLimited
Level12,225GeorgeStreet
SydneyNSW2000
Auditors
RSMAustraliaPartners
Level13,60CastlereaghStreet
SydneyNSW2000
Stockexchangelistings
FarmaForceLimitedsharesarelistedontheAustralianSecuritiesExchange(ASX:FFC).
Websiteaddress
www.farmaforce.com.au
2017 ANNUAL REPORT
FARMAFORCELIMITED
CHAIR’SREPORT
2017 ANNUAL REPORT 3
CHAIR’S REPORT
This yearhas seenFarmaForceachieveyetmoremilestones.Our sales teamshave successfullywonnewcontractsandenhancedourreputationinourmarket.Thishastranslatedintoverypleasingrevenuegrowthover the last 12 months, now that we have entered into many more contracts with new and existingcustomers.
Revenueforthe12monthstoJune2017was$3.967Mup103%from$1.951Mforthecomparativeperiodlast year. This increase from the prior year is a result of the continued implementation of our businessdevelopmentstrategies.Thepre-tax lossfortheperiodwas$2.307Magainstapre-tax lossof$3.799Minthepriorcorrespondingperiod.
Netassetsasof30June2017were$(0.467M)comparedto$1.840Mat30June2016andcashbalanceswere$0.254Mcomparedwith$1.541Matthesametimelastyear.Thisisinlinewithourbudgetsandreflectsthesignificant initial costs incurred in establishing our presence in themarket and the building of our highlyrespectedsalesforce.
Ourleadershipteam,ledbyanaspirationalandcommittedgroupofexecutivemanagementandboardmembers,iscommittedtobuildingtheFarmaForcebusinessandconsistentlyaddingvaluetoourclients,shareholdersandemployees.
GeorgeElias
Chair
FARMAFORCELIMITED
OPERATINGANDFINANCIALREVIEW
2017 ANNUAL REPORT 4
OPERATING AND FINANCIAL REVIEW
TheOperatingandFinancialReview(“OFR”)isprovidedtoassistshareholders’understandingoftheperformanceofFarmaForceLimited(“FarmaForce”orthe“Company”)andthefactorsunderlyingtheCompany’sresultsandfinancialpositionfortheperiod1July2016to30June2017.
DetailthatcouldgiverisetolikelymaterialdetrimenttotheCompany(forexample,informationthatiscommerciallysensitive,isconfidentialorcouldgiveathirdpartycommercialadvantage)hasnotbeenincluded.
SUMMARYOFFINANCIALRESULTS
• Increasedmarketshare• Revenueincreaseof103%• Netlossaftertaxdecreasedby65%($1.5
million)
$Amillions FY17 FY16 Change
Revenue 4.0 2.0 2.0
Grossprofit 0.2 (0.7) 0.9
Lossaftertax (2.3) (3.8) 1.5
Cashusedinoperations (1.1) (3.6) 2.5
Duringtheyear,FarmaForceachieveditstargetincreaseinmarketsharebyactivelyseekingoutnewbusiness,andexecutingsalescontractsthatenableexistingsynergieswithcurrentteamsandmarketsegmentsitalreadyowns.ThiswaytheCompanyhasalsorealisedeconomiesofscale.
TheIncreaseinmarketsharehasresultedina103%increaseinrevenueinthepastyear,andacumulativerevenueincreaseof900%overthepasttwo-yearperiod.
Strongrevenuegrowthteamedwithattentiontomarginenhancementandcostcontainment,hasresultedinastrengtheninggrossprofitabilityandoperatingcashflowposition,withnetlossaftertaxreducingby$1.5million(65%)inFY17,andhaving$2.5millionlesscashbeingusedinoperations.
Accordingtorecentmarketresearchanalysis,Australia’spharmaceuticalmarketissettorisefromjustover$22.8billionin2016to$25.2billionby2020,registeringacompoundannualgrowthrate(CAGR)of2%.AtthesametimeFarmaForceisexpectedtobegrowingatdoubledigitrates.
Asthepharmaceuticalindustryisfundamentallychangingandreinventingthebusinessithasbeenfoundedon,FarmaForcecontinuestoevaluatethemarketgaptoensurewearemodifyingoursolutionsandprovidingthemosteffectiveoutcomestoourclients.
OPERATINGHIGHLIGHTS
• Wonthe2016‘SalesTeamAward’atthe12thAnnualPRIMEAwards;
• Nominatedforthe2017‘SalesTeamAward’forthe13thAnnualPRIMEAwards;
• NominatedbyHealthCarePractitioners(HCP)asthe#1CSOinAustralia;
• GrantedISOCertificationbecomingthefirstandonlyAustralianCSOwhichholdsISO9001:2008QualityManagementSystemscertification;
• Exceededtargetfornumberofnewactivationsofstrategicglobalpartnerships;
• NewGeneralManager,MrHarrySimeonidis,appointedinMarch2017.Harryhasover25years’experienceinthehealthcareindustryinAustraliaandAsia,andhasdemonstratedsuccessindrivingstrategyandtransformationtodelivervalueforstakeholders.
FARMAFORCEANDTHECHANGING
PHARMACEUTIALECOSYSTEM
Thepharmaceuticalindustryisevolvingtowardsarisksharing-risktransfermodelbeginningfromrisksharingagreementsbetweenreimbursementfrompayertopharmaceuticalcompany,andextending
FARMAFORCELIMITED
OPERATINGANDFINANCIALREVIEW(CONTINUED)
2017 ANNUAL REPORT 5
torisktransferenceofresearchanddevelopmentfromthepharmaceuticalcompanytobusinesspartners.
Thehighcostofnewdrugsandthepressurebeingappliedtopharmaceuticalcompaniesbypayersand/orGovernmentischangingthepharmaceuticalindustrybusinessmodel.
Beginningwiththepayerandultimatelypermeatingtheentiredrugdevelopmentecosystem,pharmaceuticalcompaniesareforcedtoforgerisksharing-profitsharingagreementswithnewfeeforservicebusinesspartners.
ThisisanentirelynewbusinessrealityandFarmaForceisoneofthefirstCSO’sgloballytobeproactivelybuildingtheselong-termpartnershipsofriskorprofitsharingwithitslargepharmaceuticalclients.
AdrugmayreceiveapprovalbyGovernmentauthorities,butthisdoesnotalwaysmeanthatthedrugwillbeeligibleforreimbursement.Payersareonthehuntforvalue,however,thereremainsgreatdisparityastowhatvalueisandhowitisrepresented.Whatisthedefinitionofvalue?Whodefinesit?Howisitbeingmeasured?Istheconceptofvaluethesamefromthepoint-of-viewofpharmaceuticalcompanyandfromthatofpayers?
Thesequestionshaveforcedtheindustrytostartconsideringvalue-basedpricingandpaymentschemes,real-worldevidenceutilisation,andpayer-pharmacollaboration.Thesenewdirectionsareripewithopportunitiesandchallengesthatwillshapethefuturepharmaindustrybusinessmodelaroundresearch,commercialisation,pricing,marketaccessandreimbursement.
ThisisnotanissueonlyinAustralia.Pricingandreimbursementpressuresinpharmaceuticalschemesareglobalandseemtobeinevitable.Trendstowardscostcuttingandvaluebasedassessmentscanalsobeseeninotherareasofhealthcare(e.g.outcomesbasedreimbursement)andinothercountrieswithpublichealthcarefunding.Theoverarchingdriverforchangeinpharmaceuticalistheshiftfromvolumetovalue.Inpricingterms,thisisashiftfromapay-for-pilltoapay-for-performancemodel.Essentially,paymentwillbegrantedtoproductsthatdemonstratevalueintermsofimprovedhealthoutcomesorloweredhealthcarecostwhencomparedtocompetitors.Apaymentmodel,
whichissometimesusedinterchangeablywiththepay-for-performanceconcept,iscalledconditionalreimbursement,whichgrantsreimbursementprovidedthatcertainconditionsaremet.Thisreimbursementmodelisnotaboutgettinga‘yes’ora‘no’fromtheregulatorsandpayers,ratheritisaboutgettinga‘maybe,’whichcanlaterbecomea‘yes’grantedthattherightamountandtypeofevidenceisproduced.
TheFarmaForcebusinessmodelandcorporatetheoryisbasedonthepremiseofriskandprofitsharingwithourclients.OurfinancialinvestmentintotheFarmaForcebusinessandoursubsequentgrowthratearereflectiveofthemarket’sneedsandexpectations.
AboutFarmaForce
FarmaForceisaspecialistContractSalesOrganisation(CSO)offeringinnovativesalessolutionstotheAustralianpharmaceuticalindustry,throughtheprovisionofabroadanduniquerangeofsalesforcesolutions.
FarmaForceprovidesabespokeresults-basedsolutiontoeveryclient,andistheonlypharmaceuticalCSOtoinvestinthirdpartydatasetswhichprovideobjectiveandactionableinsights,ensuringthatthesolutionprovidedisyieldingagreedresults.
AboutTheiQGroupGlobal
TheiQGroupGlobalprovidesaturnkeysolutionforlifesciencecompanies,spanningcorporateadvisoryandinvestmentbanking,throughtoresearch,development,commercialisationandsales.TheGroupfacilitatesanendtoendsolutionalongthedruglifecyclecreatingthemedicinesoftomorrow.
FARMAFORCELIMITED
DIRECTORS’REPORT
2017 ANNUAL REPORT 6
DIRECTORS’ REPORT
TheDirectorspresenttheirreporttogetherwiththefinancialstatementsofFarmaForceLimited(“FarmaForce”orthe“Company”)asatandfortheyearended30June2017.
DIRECTORS
ThenamesofDirectorswhoheldofficeoftheCompanyatanytimeduringthefinancialyearandatthedateofthisreport,togetherwithinformationontheirqualifications,experience,specialresponsibilities,otherlistedcompanydirectorshipsandotherdetails,aresetoutbelow.
GeorgeElias
IndependentNon-ExecutiveChairAppointed:2April2015
BachelorofCommerce(UniversityofNewSouthWales),DiplomaofFinancialPlanning(Dip.FP),MemberCPAAustralia,ASICRG146Compliant(Securities),CertifiedFinancialPlanner®memberoftheFinancialPlanningAssociationofAustralia.
Georgehasover30years’experienceinprovidingaccountingandbusinessadvisoryservices.Duringthisperiod,hehasbeeninvolvedinprovidingtaxationandbusinessadvicetosmallandmediumsizedenterprises,includingbusinessstructuring,cashflowforecasting,taxationandsuperannuationstructuresupportandadvice.
GeorgeiscurrentlytheprincipalatEliasFinancialServicesandhasbeenprovidingfinancialandaccountingadviceasprincipalsinceJuly1991.Hisbusinessandfinancialacumen,coupledwithhisexperienceindealingwithnecessaryskillstochairtheBoardandprovidestrategicleadershiptofaceanychallengesthatmayarise.
GeorgeservesasamemberoftheAuditandRiskCommitteeandtheRemunerationandNominationCommitteeofFarmaForceLimited.
DrGeorgeSyrmalis
Non-ExecutiveDirectorAppointed:24November2015
TrainedinNuclearMedicine-RadiationImmunology.
DrSyrmalisfoundedandledasCEOandChairofTheBionuclearGroupSA,(1995-2005)incorporatingAntisomaSA,BionuclearInstituteof
DiagnosisandTherapySA,BionuclearResearchandDevelopmentSA,andVitalcheckSA.
DrSyrmalisiscurrentlytheChairandExecutiveDirectorofiQnovateLtd,andExecutiveDirectorofiQXLimited.BothcompaniesarelistedontheNationalStockExchangeofAustralia.
ConTsigounis
Non-ExecutiveDirectorAppointed:22June2015
MemberoftheAustralianInstituteofCompanyDirectors.
Conhasover20years’experienceinbusinessandinvestorrelations,specificallyinthewholesaleandretailsectors.AsamemberoftheBoardofiQnovateLtdsinceitsinception,Conhasbeenresponsibleforexecutingthatcompany’sinvestorrelationsandcapitalraisingstrategy.HisexperienceinShareholderrelationshipmanagementgiveshimthenecessaryskillsettoassisttheCompanyattainitscorporateobjectives.
ConservesasamemberoftheAuditandRiskCommitteeandtheRemunerationandNominationCommitteeofFarmaForceLimited.
StamatiaTolias
IndependentNon-ExecutiveDirector
Appointed:2April2015Resigned:14August2017
BachelorofScience(Nursing),MastersDegree(MentalHealth),MemberNursesAssociation(Greece).
Stamatiacurrentlyworksasaresearchnurseinamentalhealthorganisationwhereshehasbeenemployedforthetwoandahalfyears.SheiscurrentlyundertakingstudiesforherPhDatthenationalKapodistrianUniversityofAthensandisexpectedtofurtherdevelopexpertiseinQualityUseofMedicines(QUM)principles.
TheCompanyderivesmanybenefitsfromStamatia’sunderstandingofinternationalstandardsofQUMprinciples.
FARMAFORCELIMITED
DIRECTORS’REPORT(CONTINUED)
2017 ANNUAL REPORT 7
DIRECTORS(CONTINUED)
HarrySimeonidis
ExecutiveDirectorandGeneralManagerAppointed:14August2017
Harryhasmorethan25years’experienceinthehealthcareindustryinAustraliaandAsia.PriortojoiningFarmaForce,hewastheChiefExecutiveOfficerofGEHealthcareAustraliaforovernineyearsandDirectorofGEHealthcarePtyLtdandotherrelatedGEHealthcarelegalentities.
Harryhasdemonstratedsuccessindrivingstrategyandtransformationtodelivervalueforstakeholders.
COMPANYSECRETARY
GerardoIncollingo
GerardowasappointedCompanySecretaryon22August2016.GerardoisManagingDirectorofLCIPartner’s,afirmofaccountants.
KelvinBoateng
KelvinBoatengwasFarmaForceLimited’sCompanySecretaryandHead,Legal&CommercialAffairsuntilhisresignationon12August2016.
PRINCIPALACTIVITIES
DuringtheyeartheprincipalactivityofFarmaForceLimitedwastheprovisionofservicesasacontractsalesorganisation.
DIVIDENDS
Nodividendshavebeenpaidordeclaredsincetheendofthepreviousfinancialyear,nordothedirectorsrecommendthedeclarationofadividend.
REVIEWOFOPERATIONS
InformationontheoperationsandfinancialpositionofFarmaForceanditsbusinessstrategiesandprospectsissetoutintheoperatingandfinancialreview(“OFR”)onpages4to5.
InformationintheOFRisprovidedtoenableshareholderstomakeaninformedassessmentabouttheCompany’sstrategiesandprospectsforfuturefinancialyears.DetailthatcouldgiverisetolikelymaterialdetrimenttotheCompany(forexample,informationthatiscommerciallysensitive,isconfidentialorcouldgiveathirdpartycommercialadvantage)hasnotbeenincluded.
SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS
TherehavebeennosignificantchangesinthestateofaffairsoftheCompanyduringtheyear.
SIGNIFICANTEVENTSAFTERTHEBALANCEDATE
TherehavebeennosignificanteventsoccurringafterthebalancedatewhichmayaffecttheCompany’soperationsorresultsofthoseoperationsortheCompany’sstateofaffairs.
LIKELYDEVELOPMENTSANDEXPECTEDRESULTS
OFOPERATIONS
LikelydevelopmentsintheoperationsoftheCompanyandtheexpectedresultsofthoseoperationsinfuturefinancialyearshavenotbeenincludedinthisreportastheinclusionofsuchinformationislikelytoresultinunreasonableprejudicetotheCompany.
ENVIRONMENTALREGULATION
TheDirectorsrecognisetheimportanceofenvironmentalandworkplacehealthandsafetyissues.TheDirectorsarecommittedtocompliancewithallrelevantlawsandregulationstoensuretheprotectionoftheenvironment,thecommunityandthehealthandsafetyofemployees.
TheoperationsoftheCompanyarenotsubjecttoanyparticularandsignificantenvironmentalregulationunderthelawsoftheCommonwealthofAustraliaoranyofitsstatesorterritories.
Basedonresultsofenquiriesmade,theBoardisnotawareofanysignificantbreachesofenvironmentalregulationsduringtheperiodcoveredbythisreport.
USEOFFUNDS
InaccordancewithASXListingRule4.10.19,theCompanystatesthatforthewholeofthereportingperiodithasusedthecashandassetsinaformreadilyconvertibletocashthatithadatthetimeofadmissioninawayconsistentwithitsbusinessobjectives.
TheCompanybelievesithasuseditscashinaconsistentmannertowhichwasdisclosedundertheReplacementProspectusdated10August2015.
FARMAFORCELIMITED
DIRECTORS’REPORT
2017 ANNUAL REPORT 8
MEETINGSOFDIRECTORS
ThenumberofDirectors’meetingsheld(includingmeetingsofcommitteesoftheBoard)andnumberofmeetingsattendedbyeachoftheDirectorsoftheCompanyduringthefinancialyeararesetoutinthetablebelow.HarrySimeonidiswasappointedsince30June2017andhisattendanceatBoardandCommitteemeetingswillbedisclosedinthe2018AnnualReport.
Director Fullmeetings
ofdirectors
Meetingsofcommittees
Audit&Risk
Management1
Remuneration
&Nomination2
A B A B A B
GeorgeElias 8 7 1 1 1 1
DrGeorgeSyrmalis 8 8 - - - -
ConTsigounis 8 8 - - 1 1
StamatiaTolias 8 4 1 1 1 1
A–Eligibletoattend B–Attended
1TheAudit&RiskManagementCommitteeiscomprisedofthreemembers,beingtwodirectorsandoneexternalconsultant,MrSpiroSakiris.MrSakirisattendedallAudit&RiskManagementCommitteemeetingsfortheperiod.ThecompositionoftheAudit&RiskManagementCommitteechangedon14August2017withthecessationofSpiroSakirisandtheappointmentofHarrySimeonidis.
2ThecompositionoftheRemuneration&NominationCommitteechangedonthe14August2017withtheresignationofStamatiaToliasandtheappointmentofHarrySimeonidis.
REMUNERATIONREPORT
TheRemunerationReportissetoutonpages10to15andformspartoftheDirectors’Reportfortheyearended30June2017.
DIRECTORSINTERESTS
TherelevantinterestsofeachDirectorintheequityoftheCompanyatthedateofthisreportaresetoutinthefollowingtable.
Director Numberof
OrdinaryShares
Numberof
Optionsover
OrdinaryShares
Numberofadditional
OrdinaryShares
subjecttoescrow
GeorgeElias 342,534 125,000 -
DrGeorgeSyrmalis 10,000 - -
ConTsigounis 39,500 - -
HarrySimeonidis - - -
StamatiaTolias - - -
INDEMNIFICATIONANDINSURANCEOFDIRECTORSANDOFFICERS
TheCompanyhas,duringthefinancialyear,paidaninsurancepremiuminrespectofaninsurancepolicyforthebenefitoftheCompanyandthosenamedandreferredtoaboveincludingtheDirectors,companysecretaries,officersandcertainemployeesoftheCompanyandrelatedbodiescorporateasdefinedintheinsurancepolicy.Theinsuranceisappropriatepursuanttosection199BoftheCorporatesAct2001.
Inaccordancewithcommercialpractice,theinsurancepolicyprohibitsdisclosureofthetermsofthepolicy,includingthenatureoftheliabilityinsuredagainstandtheamountofthepremium.
FARMAFORCELIMITED
DIRECTORS’REPORT(CONTINUED)
2017 ANNUAL REPORT 9
INDEMNIFICATIONOFAUDITORS
TheCompanyhasnot,duringorsincetheendofthefinancialyearended30June2017,indemnifiedoragreedtoindemnifytheauditoroftheCompanyoranyrelatedentityagainstaliabilityincurredbytheauditor.Duringthefinancialyear,theCompanyhasnotpaidapremiuminrespectofacontracttoinsuretheauditoroftheCompanyoranyrelatedentity.
PROCEEDINGSONBEHALFOFTHECOMPANY
NopersonhasappliedtotheCourtundersection237oftheCorporationsAct2001forleavetobringproceedingsonbehalfoftheCompany,ortointerveneinanyproceedingstowhichtheCompanyisaparty,forthepurposeoftakingresponsibilityonbehalfoftheCompanyforallorpartofthoseproceedings.
NoproceedingshavebeenbroughtorintervenedinonbehalfoftheCompanywithleaveoftheCourtundersection237oftheCorporationsAct2001.
NON-AUDITSERVICES
DuringtheyearRSMAustraliaPartners(“RSM”),theCompany’sauditor,hasperformedcertainotherservicesinadditiontotheauditandreviewofthefinancialstatementsandnotes.
TheBoardhasconsideredthenon-auditservicesprovidedduringtheyearbytheauditor,andissatisfiedthattheprovisionofthosenon-auditservicesduringtheyearbytheauditoriscompatiblewith,anddidnotcompromise,theauditorindependencerequirementoftheCorporationsAct2001(Cth).
DetailsoftheamountspaidtotheauditoroftheCompany,RSManditsnetworkfirmsforauditservicesprovidedduringtheyearended30June2017aredisclosedinnote22oftheconsolidatedfinancialstatements.
AUDITORINDEPENDENCE
Theauditor’sindependencedeclarationissetoutonpage28andformspartoftheDirectors’Reportfortheyearended30June2017.
ROUNDINGOFAMOUNTS
TheamountsintheconsolidatedfinancialstatementshavebeenroundedofftothenearestdollarinaccordancewithASICCorporationInstrument2016/191.
TheDirectors’ReportissignedinaccordancewitharesolutionoftheDirectors.
GeorgeEliasChair
Sydney
29September2017.
FARMAFORCELIMITED
REMUNERATIONREPORT(CONTINUED)
2017 ANNUAL REPORT 10
REMUNERATION REPORT (AUDITED)
ThisremunerationreportoutlinestheremunerationarrangementsforNon-ExecutiveDirectors,ExecutiveDirectorsandotherKeyManagementPersonnel(“KMP”)oftheCompanyforthefinancialyearended30June2017.
Theinformationinthisreporthasbeenauditedasrequiredbysection308(3C)oftheCorporationsAct2001.
Thereportispresentedunderthefollowingsections:
1. Keymanagementpersonnel(KMP)coveredinthisreport2. Remunerationgovernance3. ExecutiveKMPremunerationarrangements
A. RemunerationprinciplesandstrategyB. Detailofincentiveplans
4. ExecutiveKMPremunerationoutcomes(includinglinktoperformance)5. ExecutiveKMPcontractualarrangements6. Non-executivedirectorarrangements7. Additionaldisclosuresrelatingtooptionsandshares
1.KEYMANAGEMENTPERSONNEL
ThetablebelowoutlinestheKMPatanytimeduringthefinancialyear,andunlessotherwiseindicated,theywereKMPfortheentireyear.
Name Position TermasKMP
Non-ExecutiveDirectors
GeorgeElias Non-ExecutiveDirectorandChair Entireyear
ConTsigounis Non-ExecutiveDirector Entireyear
DrGeorgeSyrmalis Non-ExecutiveDirector Entireyear
StamatiaTolias Non-ExecutiveDirector Until14August2017
ExecutiveDirectors
HarrySimeonidis ExecutiveDirectorandGM Effective14August2017
GeneralManager Appointed27March2017to13August2017
StamatiaToliaswasamemberoftheKMPforthefullfinancialyearandceasedtobeaDirectoron14August2017.
2.REMUNERATIONGOVERNANCE
TheBoardhasestablishedaremunerationandnominationcommittee(“RNC”)whichiscurrentlycomprisedofthefollowingmembers:
Committeemember
GeorgeElias ChairofRNC
ConTsigounis Member
StamatiaTolias MemberuntilresignedasaDirectoron14August2017
FARMAFORCELIMITED
REMUNERATIONREPORT(CONTINUED)
2017 ANNUAL REPORT 11
2.REMUNERATIONGOVERNANCE(CONTINUED)
ThekeyresponsibilityoftheRNCistoassisttheBoardinitsoversightof:
• theremunerationframeworkandpolicyforExecutiveandemployeereward;
• thedeterminationofappropriateExecutivereward,includingadviceonstructure,quantumandmix;
• thedeterminationofachievementofperformancemeasuresincludedinanyvariableremunerationplan;
• compliancewithapplicablelegalandregulatoryrequirements;and
• boardsize,compositionandsuccessionplanning.
AfullcharteroutliningtheRNC’sresponsibilitiesisavailableat:www.farmaforce.com.au/corporate-governance/.
3.EXECUTIVEKMPREMUNERATIONARRANGEMENTS
3ARemunerationprinciplesandstrategy
TheremunerationpolicyofFarmaForcehasbeendesignedtoalignKMPobjectiveswithshareholderandbusinessobjectivesbyprovidingafixedremunerationcomponentandofferingspecificlong-termincentivesbasedonkeyperformanceareasaffectingthefinancialresults.
InFY17theexecutiveremunerationframeworkconsistedoffixedremunerationandshortandlong-termincentivesasoutlinedbelow.TheCompanyaimstorewardexecutiveswithalevelandmixofremunerationappropriatetotheirposition,responsibilitiesandperformancewithintheCompanyandalignedwithmarketpractice.RemunerationlevelsareconsideredannuallythrougharemunerationreviewwhichconsidersmarketdataandtheperformanceoftheCompanyandindividual.
3BDetailofincentiveplans
Short-termincentive(STI)
TheCompanyoperatesanannualSTIprogramavailabletoexecutivesandawardsacashincentivesubjecttotheattainmentofclearlydefinedkeyperformancemeasures.
AsummaryoftheExecutiveSTIplanineffectduringFY17isprovidedbelow:
Whoparticipates? HarrySimeonidis
HowisSTIdelivered? Cash
WhatistheSTIopportunity? Upto20%ofbasesalary
WhataretheperformanceconditionsforFY17?
Individualperformancegoalsagainstannualplans.
Howisperformanceassessed? Onanannualbasis,afterconsiderationofperformanceagainstkeyperformanceindicators(KPI).
NoSTIwasduefortestinginFY17asnoserviceperiodshadyetbeenmet.
Employeebenefitplan(EBP)
EBPgrantsaremadeannuallytoexecutivesinordertoalignremunerationwiththecreationofshareholdervalueoverthelong-term.
ThefollowingtableexplainsthekeyfeaturesoftheEBPawardsofferedtoExecutivesduringFY17.
FARMAFORCELIMITED
REMUNERATIONREPORT(CONTINUED)
2017 ANNUAL REPORT 12
3.EXECUTIVEKMPREMUNERATIONARRANGEMENTS(CONTINUED)
Employeebenefitplan(EBP)(continued)
Whoparticipates? AllemployeesoftheCompany.
HowisLongTermIncentive(LTI)delivered? Entitlementtosharesandperformancerights.
WhataretheperformanceconditionsfortheFY17grant?
Individualperformancegoalsagainstannualplans.
Howisperformanceassessed? Attheendoftherelevantperformanceperiod,theCompanywilldeterminewhetherandtowhatextenttheparticipanthassatisfiedtheapplicableperformancecriteria.
Whendoestheawardvest? Awardsvestafteratotalofthreeyears'continualservicefollowingachievementoftheapplicableperformancecriteria.
Howaregrantstreatedontermination? Theparticipantmustbeacurrentemployeeatvestingdateinordertobeentitledtoshares.
Howaregrantstreatedifachangeofcontroloccurs?
IfatakeoverbidorotherofferismadetoacquiresomeoralloftheissuedsharesoftheCompany,participantswillgenerallybeentitledtorequestthatallperformancerightsvestimmediately,regardlessofwhethertherelevantperformanceconditionshavebeensatisfied.
DoparticipantsreceivedistributionsordividendsonunvestedEBPgrants?
ParticipantsdonotreceivedistributionsordividendsonunvestedEBPgrants.
NoLTIwasduefortestinginFY17asnoserviceperiodshadyetbeenmet.
4.EXECUTIVEKMPREMUNERATIONOUTCOMESFOR2017
GroupperformanceanditslinktoSTI
KeyPerformanceIndicators(KPIs)aresetannually,withacertainlevelofconsultationwithKMP.Themeasuresarespecificallytailoredtotheareaeachindividualisinvolvedinandhasalevelofcontrolover.TheKPI’stargetareastheCompanybelievesholdgreaterpotentialforgroupexpansionandprofit,coveringfinancialandnon-financialaswellasshort-termandlong-termgoals.ThelevelsetforeachKPIisbasedonbudgetedfiguresfortheCompanyandrespectiveindustrystandards.
ThetablebelowprovidesasummaryoftheCompany’sperformanceinFY17.TheinformationbelowistakenintoaccountbytheBoardwhensettinganddeterminingshort-termandlong-termremunerationforKMP.
Noshort-termincentivepaymentsorEBPawardsweremadeintheperiodto30June2017or30June2016.
Shareperformance EarningsperformanceA$millions
Period Closingshare
priceat30June
Dividendper
share
EPS Revenue Lossaftertax
FY2017 $0.10 NIL ($1.81) $4.0 ($2.3)
FY2016 $0.14 NIL ($4.34) $2.0 ($3.8)
FY2015 NA^ NIL NA $0.0 ($2.0)
^FarmaForcelistedon27October2015at$0.31pershare.
FARMAFORCELIMITED
REMUNERATIONREPORT(CONTINUED)
2017 ANNUAL REPORT 13
4. EXECUTIVEKMPREMUNERATIONOUTCOMESFOR2017(CONTINUED)
ExecutiveKMPremunerationdisclosurefortheyearended30June2017
ThefollowingtableofexecutiveKMPremunerationhasbeenpreparedinaccordancewithaccountingstandardsandtheCorporationsAct2001requirements,fortheperiod1July2016to30June2017.
KMP ShortTerm Post
employ-
ment
Sharebased
payments
Total
Name Year Base
salary
Cash
bonus
Non-
cash
benefit
Other Super-
annuation
Options Shares Total Perfor-
mance
related
%
HarrySimeonidis
2017 65,423 - 1,464 - 6,055 - - 72,942 -
2016 - - - - - - - - -
Total
executive
KMP
2017 65,423 - 1,464 - 6,055 - - 72,942 -
2016 - - - - - - - - -
5. EXECUTIVEKMPCONTRACTUALARRANGEMENTS
RemunerationarrangementsforexecutiveKMPareformalisedinemploymentagreements.Thekeytermsandconditionsofexecutiveemploymentagreementsfortheyearended30June2017areoutlinedinthetablebelow.
DrGeorgeSyrmalisistheGroupChiefExecutiveOfficerandisemployedbythegroupparententityiQnovateLtd.DrGeorgeSyrmalisdoesnothaveanemploymentagreementwithFarmaForceLimitedinhiscapacityasiQNGroupCEO.
Executive Position Effective
date
Fixedannual
remuner-
ation1
Term Executive
notice
period
Company
notice
period2
Termination
payment
HarrySimeonidis
GeneralManager
27March2017
$267,950 Ongoing 3months 3months SubjecttotheterminationbenefitscapundertheCorporationsAct
1FixedAnnualRemunerationincludesbasesalaryof$243,950grosssalary,plus$24,000carallowance.2The
Companymayterminateemploymentimmediatelyandwithoutnoticeincertaincircumstances,including
wheretheexecutivehascommittedaseriousorpersistentbreachoftheiremploymentagreementorwheretheexecutivehasbeendishonestorfraudulentinthecourseofperformingtheirduties.
6. NON-EXECUTIVEDIRECTORARRANGEMENTS
DeterminationoffeesandmaximumaggregateNEDfeepool
TheConstitutionoftheCompanyprovidesthatnon-executivedirectors,otherthanaManagingDirectororanExecutiveDirector,areentitledtoDirector’sfeesasdeterminedbytheDirectors,butnotexceedinginaggregateforanyfinancialyear,themaximumsumthatisfromtimetotimeapprovedbytheCompanyinGeneralMeeting.Atthedateofthisreportthismaximumsumis$300,000(inclusiveofsuperannuation).
FARMAFORCELIMITED
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6. NON-EXECUTIVEARRANGEMENTS(CONTINUED)
Feepolicy
NEDfeesconsistofbasefeesandcommitteefees.ThepaymentofcommitteefeesrecognisestheadditionaltimecommitmentrequiredbyNEDswhoserveonboardcommittees.DirectorswhoalsochairtheAuditandRiskManagementCommitteeshallbeentitledtoanadditionalfeeof$5,000(includingsuperannuation)perannum.Thechairoftheboardattendsallcommitteemeetingsbutdoesnotreceiveanyadditionalcommitteefeesinadditiontobasefees.
NEDsmaybereimbursedforexpensesreasonablyincurredinattendingtotheCompany’saffairs.NEDsdonotreceiveretirementbenefits,nordotheyparticipateinanyincentiveprograms.
StatutoryremunerationtableforFY17
ThetablebelowsetsouttheelementsofNEDfeesandotherbenefitsprovidedduring2017.
Feesapplicablefor2017 Chair Member
Board $35,000 $35,000
AuditandRiskManagementCommittee $5,000 Nil
RemunerationandNominationCommittee Nil Nil
Superannuation Includedinaboveamounts.
Other Reimbursementoftravelandotherexpensesnecessarilyincurredinexercisingtheirduties.
Non-executiveremunerationdisclosurefortheyearended30June2017
Thefollowingtableofnon-executiveremunerationhasbeenpreparedinaccordancewithaccountingstandardsandtheCorporationsAct2001requirements,fortheperiod1July2016to30June2017.AllamountsareinAUD.
NED Year Boardand
Committeefees
Non-cash
benefits
Super-
annuation
Total Performance
Related%
GeorgeElias 2017 31,964 - 3,036 35,000 -
2016 29,669 - 2,818 32,487 -
StamatiaTolias 2017 35,000 - - 35,000 -
2016 32,487 - - 32,487 -
TotalNED 2017 66,964 - 3,036 70,000 -
2016 62,156 - 2,818 64,974 -
DrGeorgeSyrmalisisemployedbytheparententityofFarmaForce,iQnovateLtd(“iQN”),inthecapacityofGroupCEO.DrGeorgeSyrmalisdoesnotreceiveremunerationofanykindfromFarmaForceLimitedinhiscapacityastheiQNGroupCEO.
ConTsigounisisemployedbytheparententityofFarmaForce,iQnovateLtd,anddoesnotreceiveremunerationofanykindfromFarmaForceLimitedinhiscapacityasaNon-ExecutiveDirectorofFarmaForce.
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7.ADDITIONALDISCLOSURESRELATINGTOOPTIONSANDSHARES
MovementsinEquityHoldingsofKMP
ThefollowingtablesetsoutthemovementduringthereportingperiodinthenumberofordinarysharesinFarmaForceLimitedhelddirectly,indirectly,orbeneficiallybyKMPincludingtheirrelatedparties.
KMP Heldat1
July2016
Grantedas
remuneration
Received
onvesting
ofrights
Netchange
other^
Forfeited Heldat30
June2017
Non-executiveDirectors
GeorgeElias 275,000 - - 67,534 - 342,534
ConTsigounis - - - 39,500 - 39,500
DrGeorgeSyrmalis 10,000 - - - - 10,000
StamatiaTolias - - - - - -
ExecutiveDirectors
HarrySimeonidis - - - - - -
TotalKMP 285,000 - - 107,034 - 392,034
^On-marketpurchaseoffullypaidordinaryshares.
MovementsinOptionsHoldingsofKMP
Thefollowingtablesetsoutthemovementduringthereportingperiodinthenumberofpre-IPOOptionsinFarmaForceLimitedhelddirectly,indirectly,orbeneficiallybyKMPincludingtheirrelatedparties.
KMP Heldat1
July2016
No.granted
asremun-
eration
No.
vested
No.
cancelled
No.
forfeited
Heldat30
June2017
Non-executiveDirectors
GeorgeElias 125,000 - - - - 125,000
ConTsigounis - - - - - -
DrGeorgeSyrmalis - - - - - -
StamatiaTolias - - - - - -
ExecutiveDirectors
HarrySimeonidis - - - - - -
TotalKMP 125,000 - - - - 125,000
FARMAFORCELIMITEDCORPORATEGOVERNANCESTATEMENT
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CORPORATE GOVERNANCE STATEMENT
TheBoardofDirectorsofFarmaForceLimited(“FarmaForce”or“theCompany”)isresponsibleforthecorporategovernanceoftheCompany.TheBoardguidesandmonitorsthebusinessofFarmaForceonbehalfofitsshareholders.
FarmaForceanditsBoardcontinuetobefullycommittedtoachievinganddemonstratingthehigheststandardsofaccountabilityandtransparencyintheirreportingandseethecontinueddevelopmentoftheCompany’scorporategovernancepoliciesandpracticesasfundamentaltoFarmaForce’ssuccessfulgrowth.
TheBoardhasincludedinitscorporategovernancepoliciesthosematterscontainedintheAustralianSecuritiesExchangeCorporateGovernanceCouncil’sCorporateGovernancePrinciplesandRecommendations3rdEdition(“ASXRecommendations”)whereapplicable.However,theBoardalsorecognisesthatfulladoptionoftheASXRecommendationsmaynotbepracticalorprovidetheoptimalresultgiventheparticularcircumstancesoftheCompany.
Thiscorporategovernancestatementiseffectiveasat30September2017.IthasbeenapprovedbytheBoardofDirectorsandoutlinesFarmaForce’scorporategovernancepoliciesandpracticesthatithasadopted.
ASXCorporateGovernanceCouncilPrinciplesandRecommendations
RecommendationFollowed CommentbyFarmaForce
Principle1:LaysolidfoundationsformanagementandoversightAlistedentityshouldestablishanddisclosetherespectiverolesandresponsibilitiesofitsboardandmanagementandhowtheirperformanceismonitoredandevaluated.
Recommendation1.1Alistedentityshoulddisclose:
a) Therespectiverolesandresponsibilitiesofitsboardandmanagement;and
b) Thosemattersexpresslyreservedtotheboardandthosedelegatedtomanagement.
Yes TheBoardhasadoptedaBoardCharterwhichclearlysetsoutthewayFarmaForceisgovernedandarticulatesthedivisionofresponsibilitiesbetweentheBoardandtheExecutiveTeam.TheBoardisresponsiblefortheoveralloperationandstewardshipoftheCompanyand,inparticular,isresponsibleforthelong-termgrowthandprofitabilityoftheCompany.TheCharterwasmostrecentlyreviewedandamendedinJuly2015andmaybereviewedbytheBoardasrequired.AcopyoftheBoardCharterisavailableathttp://www.farmaforce.com.au/corporate-governance/.TheBoardhasestablishedtwoCommittees.Theyare:
• AuditandRiskCommittee;and• RemunerationandNominationCommittee
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RecommendationFollowed CommentbyFarmaForce
DelegationtotheExecutiveTeamTheBoardhasdelegatedtotheExecutiveTeamresponsibilityforimplementingFarmaForce’sstrategicdirectionandforthegeneralandoverallmanagementoftheCompany.
Recommendation1.2Alistedentityshould:a) Undertakeappropriatechecksbeforeappointinga
person,orputtingforwardtosecurityholdersacandidateforelection,asaDirector;and
b) Providesecurityholderswithallmaterialinformationinitspossessionrelevanttoadecisiononwhetherornottoelectorre-electaDirector.
Yes PriortoappointingaDirectororputtingforwardanewcandidateforelection,appropriatescreeningchecksareundertakenastotheperson’scriminalhistoryandbankruptcyhistory.WhenpresentingaDirectorforre-election,theCompanyprovidesshareholderswithallmaterialinformationintheCompany’spossessionrelevanttoadecisionwhetherornottoelectorre-electaDirector.
Recommendation1.3A listed entity shouldhave awritten agreementwitheach Director and Senior Executive setting out thetermsoftheirappointment.
Yes NewDirectorsconsenttoactasaDirectorandreceiveaformalletterofappointmentwhichsetsouttheirdutiesandresponsibilities,rights,remuneration,entitlementsandothertermsoftheirappointment.EachExecutiveisemployedunderaserviceagreementwhichsetsoutthetermsuponwhichtheyareemployedincludingdetailssuchasdutiesandresponsibilities,rights,termofemploymentandremuneration.TheServiceAgreementalsosetsoutthecircumstancesinwhichtheemploymentoftheExecutivemaybeterminatedbyeitherFarmaForceortheExecutive,includingdetailsofthenoticeperiodsrequiredtobegivenbyeitherparty,andtheamountspayabletotheExecutiveinlieuofnoticewhereapplicable.
Recommendation1.4The Company Secretary of a listed entity should beaccountable directly to theBoard, through theChair,onallmatterstodowiththeproperfunctioningoftheBoard.
Yes TheCompanySecretaryisresponsiblefortheoperationandmanagementoftheCompany’ssecretariatfunction.TheCompanySecretaryreportstotheChairman(onbehalfoftheBoard)withrespecttotheproperfunctioningoftheBoard.EachmemberoftheBoardhasaccesstotheCompanySecretary.TheappointmentandremovaloftheCompanySecretaryisdeterminedbytheBoard.
Recommendation1.5Alistedentityshould:a) Haveadiversitypolicywhichincludes
requirementsfortheBoardorarelevantcommitteeoftheBoardtosetmeasurableobjectivesforachievinggenderdiversityandto
No–ReferComments
FarmaForce’sDiversityPolicydescribesFarmaForce’sapproachtodiversityandinclusionandhowtheseattributesaretobeembeddedinFarmaForce’sculture.FarmaForceisanequalopportunityemployer,whichemploysandpromotesonthebasisofmerit.TheCompany’sDiversityPolicyextendsbeyondgenderandrecognizesthevaluecontributedtotheorganisationbyemployingpeoplewithvaryingskills,culturalbackgrounds,gender,ethnicityandexperience.FarmaForcebelievesitsdiverseworkforceis
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RecommendationFollowed CommentbyFarmaForce
assessannuallyboththeobjectivesandtheentity’sprogressinachievingthem;b) Disclosethatpolicyorasummaryofitc) Discloseattheendofeachreportingperiod
themeasurableobjectivesforachievinggenderdiversitysetbytheBoardorarelevantcommitteeoftheBoardinaccordancewiththeentity’sdiversitypolicyanditsprogresstowardsachievingthem,andeither:(i) Therespectiveproportionsofmenand
womenontheBoard,inseniorexecutivepositionsandacrossthewholeorganisation(includinghowtheentityhasdefined‘seniorexecutive’forthesepurposes);or
(ii) Iftheentityisa‘relevantemployer’undertheWorkplaceGenderEqualityAct,theentity’smostrecent“GenderEqualityIndicators”,asdefinedinandpublishedunderthatAct.
thekeytoitscontinuedgrowth,improvedproductivityandperformance.ThecompanydoesnothavemeasurableobjectivesinplaceanddoesnotcomplywithRecommendation1.5.However,theBoardfeelsthatthroughbeinganequalopportunityemployer,whichemploysandpromotesonthebasisofmerit,theCompanyisalreadyachievinggenderdiversitywithintheorganisationasreflectedinthefollowingtable:
TheCompany’sDiversityPolicyispublishedontheCompany’swebsiteat:http://www.farmaforce.com.au/corporate-governance/
Recommendation1.6Alistedentityshould:
a) HaveanddiscloseaprocessforperiodicallyevaluatingtheperformanceoftheBoard,itscommitteesandindividualDirectors;and
b) Disclose,inrelationtoeachreportingperiod,whetheraperformanceevaluationwasundertakeninthereportingperiodinaccordancewiththatprocess.
Yes EvaluationofBoardandIndividualDirectorsAsstatedintheBoardCharterandtheRemunerationandNominationCommitteeCharter,theCommitteehasdevelopedaprocessforperiodicallyevaluatingtheperformanceoftheBoardanditsCommittees.TheCompany’spoliciesprovidefortheBoardtoregularlyreviewitsownperformanceandtheperformanceofindividualDirectors.AnindependentreviewoftheperformanceoftheBoardmaybeconductedfromtimetotime.Asattheendofthereportingperiod,theCompanyhasnotconductedaperformanceevaluationinrelationtothereportingperiod.TheBoardintendstoconductaperformanceevaluationperiodically.
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Recommendation1.7Alistedentityshould:a) Haveanddiscloseaprocessforperiodically
evaluatingtheperformanceofitsseniorexecutives;and
b) Disclose,inrelationtoeachreportingperiod,whetheraperformanceevaluationwasundertakeninthereportingperiodinaccordancewiththatprocess.
Yes Theperformanceofseniorexecutivesisreviewedagainstspecificmeasurableandqualitativeindicatorssetoutintherelevantexecutive’sServiceAgreement,whichmayinclude:
Ø FinancialmeasureoftheCompany’sperformanceØ Achievementofstrategicobjectives;andØ Achievementofkeyoperationaltargets
DuringthereportingperiodperformanceevaluationsoftheseniorexecutiveswereundertakenbytheCompanyinaccordancewiththeseprocesses.
Principle2:StructuretheBoardtoaddvalueAlistedentityshouldhaveaBoardofanappropriatesize,composition,skillsandcommitmenttoenableittodischargeitsdutieseffectively
Recommendation2.1TheBoardofalistedentityshould:a) HaveaNominationCommitteewhich:(i) Hasatleastthreemembers,amajorityof
whomareindependentdirectors;and(ii) Ischairedbyanindependentdirector,anddisclose:(iii) ThecharteroftheCommittee;(iv) ThemembersoftheCommittee;(v) Asattheendofeachreportingperiod,the
numberoftimestheCommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings;or
b) IfitdoesnothaveaNominationCommittee,disclosethatfactandtheprocessesitemploystoaddressBoardsuccessionissuesandtoensurethattheBoardhastheappropriatebalanceofskills,knowledge,experience,independenceanddiversitytoenableittodischargeitsdutiesandresponsibilitieseffectively.
No–ReferComments
TheBoardhasestablishedaRemunerationandNominationsCommittee.TheCommitteeiscurrentlycomprisedofMrGeorgeElias,MrConTsigounis(non-executiveDirectors)andMrHarrySimeonidis(executiveDirector).MsStamatiaToliawasanindependentmemberoftheCommitteeforthemajorityofthereportingperiod,resigningonthe14thAugust2017.MrSimeonidiswasappointedtotheCommitteeonthatdate.MrEliasistheChairmanoftheCommitteeandisconsideredbytheBoardtobeanindependentDirector.ForthemajorityofthereportingperiodtheCommitteecomprisedthreemembers,ofwhichtwowereindependent.Accordingly,fromthe14thAugust2017,theCommitteedoesnotcurrentlyhaveamajorityofindependentDirectorsanddoesnotcomplywithRecommendation2.1.GiventhesizeoftheCompany,theBoardisconfidentthattheCommitteehasthebreadthofexperiencenecessarytoeffectivelymeetalltherequirementsundertheCharter.TheCommitteehasadoptedaformalCharterthatisavailableonFarmaForce’swebsite.
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RecommendationFollowed CommentbyFarmaForce
Recommendation2.2AlistedentityshouldhaveanddiscloseaBoardSkillsMatrixsettingoutthemixofskillsanddiversitythattheBoardcurrentlyhasorislookingtoachieveinitsmembership.
No–ReferComments
FarmaForceseekstomaintainaBoardofDirectorswithabroadrangeofcommercialandotherskills,experiencesandknowledgerelevanttooverseeingthebusinessofacontractsalesorganisation.WhilsttheBoarddoesnothaveaformalBoardSkillsMatrix,andthereforedoesnotcomplywithRecommendation2.2,theBoarddoeshaveregardtotheexistingskillsetsofDirectorswhenconsideringnewappointments.
Recommendation2.3Alistedentityshoulddisclose:a) ThenamesoftheDirectorsconsideredbythe
BoardtobeindependentDirectors;b) IfaDirectorhasaninterest,position,association
orrelationshipofthetypedescribedinbox2.3buttheBoardisoftheopinionthatitdoesnotcompromisetheindependenceoftheDirector,thenatureoftheinterest,position,associationorrelationshipinquestionandanexplanationofwhytheBoardisofthatopinion;and
c) ThelengthofserviceofeachDirector.
Yes FarmaForceconsidersaDirectortobeindependentiftheDirectorisindependentofmanagementandfreeofanybusinessorotherrelationshipthatcouldmateriallyinterfere,orbeperceivedasinterfering,withtheexerciseofanunfetteredandindependentjudgementinrelationtomattersconcerningFarmaForce’sbusiness.MrGeorgeEliasisconsideredbytheBoardtobeanindependentmemberoftheBoard.ThelengthofserviceofeachDirectorisasfollows:
Ø MrGeorgeElias,2yearsand5months;Ø DrGeorgeSyrmalis,1yearand10months;Ø MrConTsigounis,2yearsand2months;Ø MrHarrySimeonidis,lessthan1month.
Recommendation2.4A majority of the Board of a listed entity should beindependentDirectors.
No–ReferComments
TheBoardiscomprisedoffourmembers(MrGeorgeElias,MrConTsigounis,DrGeorgeSyrmalis,andMrHarrySimeonidis)andhasamajorityofnon-executiveDirectors.MrEliasisconsideredbytheBoardtobeindependent.MrTsigounisandDrSyrmalisarenomineeDirectorsoftheCompany’smajorityshareholder,iQnovateLtd,andarenotconsideredindependent.Thefourthmember,MrSimeonidis,istheCompany’sonlyexecutiveDirector.Accordingly,theCompanydoesnothaveamajorityofindependentDirectorsanddoesnotcomplywithRecommendation2.4.TheBoardconsidersthistobeanappropriatealternativetotherequirementsforamajorityofindependentDirectorsconsideringthesizeandcomplexityofthebusiness.
Recommendation2.5TheChairoftheBoardofalistedentityshouldbeanindependentDirectorand,inparticular,shouldnotbethesamepersonastheCEOoftheentity.
Yes TheChairmanoftheBoardisMrGeorgeElias,anindependent,Non-executiveDirector.
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RecommendationFollowed CommentbyFarmaForce
Recommendation2.6AlistedentityshouldhaveaprogramforinductingnewDirectorsandprovideappropriateprofessionaldevelopmentopportunitiesforDirectorstodevelopandmaintaintheskillsandknowledgeneededtoperformtheirroleasDirectorseffectively.
Yes AnewDirectorisofferedaninductionandtrainingprogramabouttheCompany,itspoliciesandchartersandtheDirector’srolesandresponsibilities.NewDirectorsalsohavetheopportunitytomeetwithkeymanagementstaff.Aspartofitsongoingreviewofitsownperformanceandskillset,theBoardprovidedprofessionaldevelopmentopportunitiesbyupdatingDirectorsonskillsetsrequiredspecifictotheorganisation.
Principle3:ActEthicallyandresponsiblyAlistedentityshouldactethicallyandresponsibly
Recommendation3.1Alistedentityshould:
a) HaveacodeofconductforitsDirectors,seniorexecutivesandemployees;and
b) Disclosethatcodeorasummaryofit
Yes TheBoardinsistsonthehighestethicalstandardsfromallofficersandemployeesofFarmaForceandisconscioustoensureappropriatecorporateprofessionalconductatalltimes.Assuch,theBoardhasadoptedaCodeofConducttoprovideasetofguidingprincipleswhichmustbeobservedbyallDirectors,seniorexecutivesandemployeesofFarmaForce.AcopyoftheCodeofConductisavailableontheFarmaForcewebsite.
Principle4:SafeguardintegrityincorporatereportingAlistedentityshouldhaveformalandrigorousprocessesthatindependentlyverifyandsafeguardtheintegrityofitscorporatereporting
Recommendation4.1TheBoardofalistedentityshould:
a) HaveanAuditCommitteewhich:(i) Hasatleastthreemembers,allofwhom
areNon-executiveDirectorsandamajorityofwhomareindependentDirectors;and
(ii) IschairedbyanindependentDirector,whoisnotthechairoftheBoard,
anddisclose:(iii) TheCharteroftheCommittee;(iv) Therelevantqualificationsand
experienceofthemembersoftheCommittee;and
No–ReferComments
TheBoardhasestablishedanAuditandRiskCommitteetoprovideassistancetotheBoardandhasadoptedaformalCharterfortheCommittee.AcopyoftheCommittee’sCharterisavailableontheFarmaForcewebsite.Forthemajorityofthereportingperiod,theCommitteecomprisedthreemembers,ofwhichtwowereindependentDirectors,MrGeorgeEliasandMsStamatiaTolia.MsToliaresignedasaDirectoron14August2017.Therewasalsoanadditionalmemberbyinvitation,MrSpiroSakiris.TheCommitteemeton28August2017,followingthismeeting,MrSakirisceasedtobeanadditionalmemberbyinvitation.Consequently,from28August2017,theCommitteecomprisedonly2members,MrElias,(anindependentmember)andMrHarrySimeonidis(anon-independentExecutiveDirector).TheCompanydoesnotcomplywithRecommendation4.1.TheBoardconsidersthatthesizeoftheCommitteeisgenerallyappropriatewithregardstothesizeandcomplexityofthebusiness.Duringthesubsequentreportingperiod,theBoardwillconsiderwhetheritisnecessaryorappropriatetomakeafurtherappointmenttotheCommittee.ThequalificationsandexperienceofthemembersoftheCommittee,thenumberoftimes
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(v) Inrelationtoeachreportingperiod,thenumberoftimesthecommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings;or
b) IfitdoesnothaveanAuditCommittee,disclosethatfactandtheprocessesitemploysthatindependentlyverifyandsafeguardtheintegrityofitscorporatereporting,includingtheprocessesfortheappointmentandremovaloftheexternalauditorandtherotationoftheauditengagementpartner.
theCommitteehasmetandtherespectivememberattendeesduringthereportingperiodaredisclosedintheAnnualReport.
Recommendation4.2TheBoardofalistedentityshould,beforeitapprovestheentity’sfinancialstatementsforafinancialperiod,receivefromitsCEOandCFOadeclarationthat,intheiropinion,thefinancialrecordsoftheentityhavebeenproperlymaintainedandthatthefinancialstatementscomplywiththeappropriateaccountingstandardsandgiveatrueandfairviewofthefinancialpositionandperformanceoftheentityandthattheopinionhasbeenformedonthebasisofasoundsystemofriskmanagementandinternalcontrolwhichisoperatingeffectively.
Yes InadditiontotheroleoftheAuditandRiskCommitteeinreviewingandreportingonthefinancialstatements,priortothefinancialstatementsforafinancialyearbeingpresentedtotheBoardfortheirapproval,theCEOandCFOprovidetheBoardwithadeclarationthat,intheiropinion,thefinancialrecordsoftheCompanyhavebeenproperlymaintainedinaccordancewiththeCorporationsActandthatthefinancialstatementscomplywiththeappropriateaccountingstandardsandgiveatrueandfairviewofthefinancialpositionandperformanceoftheCompanyandtheiropinionhasbeenformedonthebasisofasoundsystemofriskmanagementandinternalcontrolwhichisoperatingeffectively.
Recommendation4.3AlistedentitythathasanAGMshouldensurethatitsexternalauditorattendsitsAGMandisavailabletoanswerquestionsfromsecurityholdersrelevanttotheaudit.
Yes TheAuditorisinvitedtoattendeachAnnualGeneralMeetingoftheCompany,andtobeavailabletoanswershareholderquestionsabouttheconductoftheauditandpreparationandcontentoftheAuditor’sReport.
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RecommendationFollowed CommentbyFarmaForce
Principle5:MaketimelyandbalanceddisclosureAlistedentityshouldmaketimelyandbalanceddisclosureofallmattersconcerningitthatareasonablepersonwouldexpecttohaveamaterialeffectonthepriceorvalueofitssecurities.
Recommendation5.1Alistedentityshould:
a) HaveawrittenpolicyforcomplyingwithitscontinuousdisclosureobligationsundertheListingRules;and
b) Disclosethatpolicyorasummaryofit.
Yes FarmaForcehasadoptedaContinuousDisclosurePolicytoensurethattheCompanyeffectivelydischargesitsdisclosureobligationsincompliancewiththeListingRulesinordertokeepthemarketinformedofeventsanddevelopmentsrelatingtotheCompanyanditsaffairs.TheFarmaForceContinuousDisclosurePolicyisavailableontheCompany’swebsite.
Principle6:RespecttherightsofsecurityholdersAlistedentityshouldrespecttherightsofitssecurityholdersbyprovidingthemwithappropriateinformationandfacilitiestoallowthemtoexercisethoserightseffectively.
Recommendation6.1Alistedentityshouldprovideinformationabout itselfanditsgovernancetoinvestorsviaitswebsite.
Yes TheFarmaForcewebsitecontainsinformationabouttheCompanywhichmayassistaninvestorinmakinganinformeddecisionabouttheCompany.TheCompany’swebsiteincludesinformationregardingitsgovernanceandrelevantpolicies:http://www.farmaforce.com.au/corporate-governance/
Recommendation6.2A listed entity should design and implement aninvestor relations program to facilitate effective two-waycommunicationwithinvestors.
Yes FarmaForcehasestablishedaformalShareholderCommunicationsStrategyandtakesappropriatemeasurestokeepshareholdersinformedaboutitsactivities.TheCompanycommunicateswithitsshareholdersthroughitsannualreport,disclosurestotheASX,attheAnnualGeneralMeeting(AGM)andviatheCompany’swebsite.Inaddition,shareholdershavetheopportunitytoelecttoreceiverelevantdocumentationelectronicallyfromtheCompany,viatheCompany’sRegistryandcancommunicatewiththeCompanyviaemail.Throughvariousmeansofcommunication,theCompanyaimstoprovideshareholderswithaclearandbalancedunderstandingoftheaimsandobjectivesoftheCompany.CopiesofallrelevantcorporategovernancedocumentsrelatingtotheCompanycanbefoundinthecorporategovernancesectionoftheCompany’swebsite.AllshareholdershavetheopportunitytoattendtheAnnualGeneralMeetingandsubmitquestions.
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Recommendation6.3Alistedentityshoulddisclosethepoliciesandprocessesithasinplacetofacilitateandencourageparticipationatmeetingsofsecurityholders.
Yes ShareholdersareencouragedtoattendandparticipateatGeneralMeetings.Accordingly,theBoardwillensurethatmeetingsareheldduringnormalbusinesshoursandatalocationconsideredtobemostconvenientforthegreatestpossiblenumberofshareholderstoattend.ThefulltextofnoticesandaccompanyingmaterialswillbeincludedonFarmaForce’swebsite.Informationwillbepresentedinaclearandconcisemanneranddesignedtoprovideshareholdersandthemarketwithfullandaccurateinformation.AttheAnnualGeneralMeeting,theChairmanfollowedtheprocessofaddressinganyrelevantquestionsfromshareholders.Inaddition,theCompanyensuredthattheCompany’sauditorattendedtheAGMorothermeetingsoftheCompanyandshareholderswereaffordedtheopportunityofaskingtheCompany’sAuditorquestionsregardingtheconductandcontentoftheaudit.
Recommendation6.4Alistedentityshouldgivesecurityholderstheoptiontoreceivecommunicationsfrom,andsendcommunicationsto,theentityanditssecurityregistryelectronically.
Yes FarmaForce encourages its shareholders to receive communications from it and its shareregistryelectronically.
Principle7:RecogniseandmanageriskAlistedentityshouldestablishasoundriskmanagementframeworkandperiodicallyreviewtheeffectivenessofthatframework.
Recommendation7.1TheBoardofalistedentityshould:a) HaveaCommitteeorCommitteestooversee
risk,eachofwhich:(i) Hasatleastthreemembers,amajorityof
whomareindependentdirectors;and(ii) Ischairedbyanindependentdirector,anddisclose(iii) TheCharteroftheCommittee(iv) ThemembersoftheCommittee;and(v) Asattheendofeachreportingperiod,the
numberoftimestheCommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings;or
No–ReferComments
The Board has overall responsibility to ensure that there is a sound system of riskmanagementandinternalcontrolsacrossthebusiness.DuetothesizeoftheCompanyandscaleofoperationsof itsbusiness,theCompanydoesnothaveaseparateRiskCommittee,butratheracombinedAuditandRiskCommittee.TheBoardhasdelegatedresponsibility for the identification,assessmentandmanagementof risks relatingofbothFarmaForce’s internal andexternal controls to FarmaForce’sAuditandRiskCommittee.Seeitem4.1fordetailsofthecompositionoftheAuditandRiskCommittee.The number of times the Committee has met and attendance by members during thereportingperiodisdisclosedintheCompanyAnnualReport.TheBoardconsidersthistobeanappropriatealternativetotherequirementsforamajorityof independent Directors on the Audit and Risk Committee considering the size andcomplexityofthebusiness.
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RecommendationFollowed CommentbyFarmaForce
b) IfitdoesnothaveaRiskCommitteeorCommitteesthatsatisfy(a)above,disclosethatfactandtheprocessesitemploysforoverseeingtheentity’sriskmanagementframework
Recommendation7.2TheBoardoraCommitteeoftheBoardshould:
a) Reviewtheentity’sriskmanagementframeworkatleastannuallytosatisfyitselfthatitcontinuestobesound;and
b) Disclose,inrelationtoeachreportingperiod,whethersuchareviewhastakenplace.
Yes TheBoardofFarmaForceretainsoverallresponsibilityoftheCompany’sRiskManagementframeworkwiththeassistanceoftheAudit&RiskCommittee.Itunderstandsthatthemanagementofriskisacontinuousprocessandanintegralpartofgoodbusinessmanagementandcorporategovernance.TheCompanyoperateswithintheservicessector,andisthereforeexposedtoarangeofrisks,whichinclude(butarenotlimitedto)market,operational,regulatoryandreputationalrisks.TheAudit&RiskCommitteeisresponsiblefortheco-ordinationandcontinuedimprovementoftheRiskManagementFramework.TheRiskManagementFrameworkhasbeendesignedtoallowtheBoardtooverseetheriskmanagementprocesswithassistancefromtheAudit&RiskCommitteeandmanagement.TheBoardisresponsibleforsettingtheCompany’sriskappetiteandensuresthatitregularlyreviewstheriskprofileforthebusiness.DuringthereportingperiodtheAudit&RiskCommitteehasconsideredandreportedtotheBoardonareviewoftheCompany’sRiskManagementFramework.BoththeAudit&RiskCommitteeandtheBoardissatisfiedthattheRiskManagementFrameworkinplaceinrespectoftheCompanyissound.
Recommendation7.3Alistedentityshoulddisclose:
a) Ifithasaninternalauditfunction,howthefunctionisstructuredandwhatroleitperforms;or
b) Ifitdoesnothaveaninternalauditfunction,thatfactandtheprocessesitemploysforevaluatingandcontinuallyimprovingtheeffectivenessofitsriskmanagementandinternalcontrolprocesses.
Yes FarmaForcedoesnotatthistimehaveaninternalauditfunction.AtpresenttheCompanyhasinplacecomprehensiveprocessesforevaluatingandcontinuallyimprovingtheeffectivenessofitsRiskManagementFrameworkanditsinternalFinancialControlProcess.SeeRecommendation7.2aboveforfurtherdetails.TheBoardhasoverallresponsibilityfortheRiskManagementFrameworkincludingreceivingregularreportsfromtheAudit&RiskCommitteeontheriskprofileoftheCompany.TheAudit&RiskCommitteeprovidesassistancetotheBoardtofulfilitsoversightresponsibilityforriskmanagement.TheRiskManagementFrameworkhasbeendesignedtoallowtheBoardtooverseetheriskmanagementprocesswithassistancefromtheAudit&RiskCommitteeandmanagement.TheBoardisresponsibleforsettingtheCompany’sriskappetiteandensuresthatitreviewstheriskprofileforthebusiness.
FARMAFORCELIMITEDCORPORATEGOVERNANCESTATEMENT(CONTINUED)
2017 ANNUAL REPORT 26
ASXCorporateGovernanceCouncilPrinciplesandRecommendations
RecommendationFollowed CommentbyFarmaForce
Duringthereportingperiod,theAudit&RiskCommitteehasconsideredandreportedtotheBoardonareviewoftheCompany’sRiskManagementFramework.BoththeAudit&RiskCommitteeandtheBoardaresatisfiedthattheRiskManagementFrameworkinplaceinrespectoftheCompanyissound.TheBoardreceivesanannualassurancefromtheChiefExecutiveOfficerandtheChiefFinancialOfficerthatthedeclarationprovidedinaccordancewithsection295AoftheCorporationsActisfoundedonasoundsystemofriskmanagementandinternalcontrolandthatthesystemisoperatingeffectivelyinallmaterialrespectsinrelationtofinancialreportingrisks.
Recommendation7.4A listed entity should disclose whether it has anymaterial exposure to economic, environmental andsocial sustainability risks and, if it does, how itmanagesorintendstomanagethoserisks.
Yes TheBoarddoesnotbelievethattheCompanyhasanymaterialexposuretoeconomic,environmentalandsocialsustainabilityriskthatithasnotmitigatedtotheextentreasonablypracticable.TheBoardisresponsibleformanagingtheriskstheCompanyissubjectto.SeeRecommendations7.2and7.3forfurtherdetailsongeneralriskmanagement.TheCompanyisexposedtoordinarybusinessandeconomicrisksintheordinarycourseofbusiness.
Principle8:RemuneratefairlyandresponsiblyAlistedentityshouldpaydirectorremunerationsufficienttoattractandretainhighqualityDirectorsanddesignitsexecutiveremunerationtoattract,retainandmotivatehighqualityseniorexecutivesandtoaligntheirinterestswiththecreationofvalueforsecurityholders.
Recommendation8.1TheBoardofalistedentityshould:
a) Havearemunerationcommitteewhich:(i) Hasatleastthreemembers,amajorityof
whomareindependentDirectors;and(ii) IschairedbyanindependentDirector,Anddisclose,(iii) TheCharteroftheCommittee(iv) ThemembersoftheCommittee;and(v) Asattheendofeachreportingperiod,
thenumberoftimestheCommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings;or
No–ReferComments
TheBoardhasestablishedacombinedRemunerationandNominationCommitteetoassistandadviseitonremunerationandrecruitmentpoliciesandpractices(refertoRecommendation2.1).TheCommitteeiscomprisedofMrGeorgeElias,MrConTsigounis(Non-executiveDirectors)andMrHarrySimeonidis(ExecutiveDirector).MsStamatiaToliawasanindependentmemberoftheCommitteeforthemajorityofthereportingperiodresigningonthe14thAugust2017.MrSimeonidiswasappointedtotheCommitteeonthatdate.MrEliasistheChairoftheCommitteeandisconsideredbytheBoardtobeanindependentDirector.Forthemajorityofthereportingperiod,theCommitteecomprisedthreemembersofwhichtwowereindependent.Accordingly,theCommitteedoesnotcurrentlyhaveamajorityofindependentDirectorsandthereforedoesnotcomplywithRecommendation8.1.TheCommitteehasadoptedaformalCharterthatisavailableonFarmaForce’swebsite.
FARMAFORCELIMITEDCORPORATEGOVERNANCESTATEMENT(CONTINUED)
2017 ANNUAL REPORT 27
ASXCorporateGovernanceCouncilPrinciplesandRecommendations
RecommendationFollowed CommentbyFarmaForce
b) IfitdoesnothaveaRemunerationCommittee,disclosethatfactandtheprocessesitemploysforsettingthelevelandcompositionofremunerationfordirectorsandseniorexecutivesandensuringthatsuchremunerationisappropriateandnotexcessive.
ThenumberoftimestheCommitteehasmetandrespectiveattendancesbymembersduringthereportingperiodisdisclosedintheCompany’sannualreport.TheBoardconsidersthistobeanappropriatealternativetotherequirementsforamajorityofindependentDirectorsontheAuditandRiskCommitteeconsideringthesizeandcomplexityofthebusiness.
Recommendation8.2A listed entity should separately disclose its policiesand practices regarding the remuneration of non-executiveDirectorsandtheremunerationofexecutiveDirectorsandotherseniorexecutives.
Yes DetailsoftheremunerationpracticesandthelevelofremunerationpaidtoDirectorsandKeyManagementPersonnelissetoutintheRemunerationReportfoundintheCompany’sAnnualReport.
Recommendation8.3A listed entity which has an equity-basedremunerationschemeshould:
a) Haveapolicyonwhetherparticipantsarepermittedtoenterintotransactions(whetherthroughtheuseofderivativesorotherwise)whichlimittheeconomicriskofparticipatinginthescheme;and
b) Disclosethatpolicyorasummaryofit.
Yes TheCompanyhasinplaceanequitybasedEmployeeSharePlan,acopyofwhichwaslodgedwiththeASXon23October2015.Inaddition,asummaryofthetermsofthePlanweredetailedintheCompany’sprospectusdated10August2015.PursuanttotheCompany’sSecurityTradingPolicy(acopyofwhichwaslodgedwiththeASXon23October2015),DirectorsandkeymanagementpersonnelholdingsharesundertheEmployeeSharePlanmaynotdeal(includingsell,createasecurityinterestinorotherwisedisposeof)withthosesecuritieswithoutthepriorwrittenconsentoftheCompany.OtherwisetheCompanyhasnopolicyonwhetherparticipantsarepermittedtoenterintotransactions(whetherthroughtheuseofderivativesorotherwise)whichlimittheeconomicriskofparticipatinginthescheme.
28
AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of FarmaForce Limited for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS David Talbot Partner Sydney, NSW Dated: 29 September 2017
FARMAFORCELIMITEDSTATEMENTOFPROFITORLOSSFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 29
Indollars Note 2017 2016
Revenue 6 3,967,513 1,950,840
Costofsales (3,735,950) (2,670,861)
Grossprofit 231,563 (720,021)
Otherincome 7(a) 4,882 41,145
Expenses
Employeebenefitsexpense 7(c) (1,079,247) (1,008,639)
Overheadsharingcost (313,192) (691,820)
Depreciationexpense (48,515) (38,538)
Otherexpenses 7(d) (1,042,412) (1,379,206)
Financecosts 7(b) (2,553) (1,939)
Shareoflossofassociatedcompaniesnetoftax 19 (57,959) -
Lossbeforeincometax (2,307,433) (3,799,018)
Incometaxexpense 8 - -
Netlossfortheperiod (2,307,433) (3,799,018)
LosspersharefortheperiodattributabletotheordinaryequityholdersoftheCompany:
Note 2017 2016
Basiclosspershare(centspershare) 17 (1.81) (4.34)
Dilutedlosspershare(centspershare) 17 (1.81) (4.34)
The above statement of profit or loss should be read in conjunction with the accompanying notes to thefinancialstatements.
FARMAFORCELIMITEDSTATEMENTOFOTHERCOMPREHENSIVEINCOMEFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 30
Indollars Note 2017 2016
Netlossfortheperiod (2,307,433) (3,799,018)
Othercomprehensiveincome
Othercomprehensiveincomefortheyear - -
Othercomprehensiveincome/(loss)fortheperiod,netoftax - -
Totalcomprehensivelossfortheperiod (2,307,433) (3,799,018)
Theabovestatementofcomprehensiveincomeshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
FARMAFORCELIMITEDSTATEMENTOFFINANCIALPOSITIONFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 31
Indollars Note 2017 2016^
Assets
Currentassets
Cashandcashequivalents 9 254,321 1,541,546
Tradeandotherreceivables 10 396,953 155,918
Othercurrentassets 11 37,506 99,550
Totalcurrentassets 688,780 1,797,014
Non-currentassets
Tradeandotherreceivables - 380
Property,plantandequipment 12 220,516 240,259
Intangibleassets 13 151,995 -
InvestmentinAssociates 19 220,113 269,000
Deferredtaxassets 8 - -
Totalnon-currentassets 592,624 509,639
TotalAssets 1,281,404 2,306,653
Liabilities
Currentliabilities
Tradeandotherpayables 14 1,274,445 336,203
Deferredrevenue 233,003 54,980
Employeebenefitliabilities 15 241,263 75,344
Totalcurrentliabilities 1,748,711 466,527
Non-currentliabilities
Deferredtaxliabilities - -
Totalnon-currentliabilities - -
Totalliabilities 1,748,711 466,527
Netassets/(deficiency) (467,307) 1,840,126
EQUITY
Issuedcapital 16 8,068,859 8,068,859
Accumulatedlosses (8,536,166) (6,228,733)
Totalequity (467,307) 1,840,126
^Theabovecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationof:(a)employeebenefitliabilities,furtherdetailsofwhichareincludedinnote15;(b)provisionsforcustomerbaddebt,furtherdetailsofwhichareincludedinnote10;and(c)deferredrevenue,furtherdetailsofwhichareincludedinnote14.
Theabovestatementoffinancialpositionshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
FARMAFORCELIMITEDSTATEMENTOFCHANGESINEQUITYFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 32
IndollarsSharecapital
Accumulatedlosses
Total
Balanceat1July2016 8,068,859 (6,228,733) 1,840,126
Totalcomprehensivelossfortheperiod Lossfortheperiod - (2,307,433) (2,307,433)Othercomprehensivelossfortheperiod - - -
Totalcomprehensivelossfortheperiod - (2,307,433) (2,307,433)
Transactionswithownersrecordeddirectlyinequity
Transactionsfortheperiod - - -
Balanceat30June2017 8,068,859 (8,536,166) (467,307)
Balanceat1July2015 763,690 (2,429,715) (1,666,025)
Totalcomprehensivelossfortheperiod
Lossfortheperiod - (3,799,018) (3,799,018)Othercomprehensiveincomefortheperiod - - -
Totalcomprehensivelossfortheperiod - (3,799,018) (3,799,018)
Transactionwithownersrecordeddirectlyinequity
Issueofordinaryshares 5,459,545 - 5,459,545Issueofconvertiblenotes 2,903,961 - 2,903,961Capitalraisingcosts (1,058,337) - (1,058,337)
Balanceat30June2016 8,068,859 (6,228,733) 1,840,126
Theabovestatementofchanges inequityshouldberead inconjunctionwiththeaccompanyingnotes tothefinancialstatements.
FARMAFORCELIMITEDSTATEMENTOFCASHFLOWSFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 33
Indollars Note 2017 2016
Cashflowsfromoperatingactivities
Receiptsfromcustomers 4,306,514 1,921,504
Paymentstosuppliersandemployees (5,399,499) (5,549,008)
Interestreceived 2,882 41,145
Interestpaid (7,283) (1,939)
Netcashusedinoperatingactivities 21 (1,097,386) (3,588,298)
Cashflowsfrominvestingactivities
Investmentinassociates (9,072) (269,000)
Purchaseofproperty,plantandequipment (28,772) (125,618)
Paymentforintangibleassetworkinprogress (151,995) -
Netcashusedininvestingactivities (189,839) (394,618)
Cashflowsfromfinancingactivities
Proceedsfromissueofsharecapital - 5,459,545
Transactioncostsrelatedtoissueofsharecapital - (82,754)
Transactioncostsrelatedtoissueofconvertiblenotes - (1,058,337)
Netcashgeneratedfrom/(usedin)financingactivities - 4,318,454
Netdecreaseincashandcashequivalents (1,287,225) 335,538
Cashandcashequivalentsatthebeginningoftheperiod 1,541,546 1,206,008
Cashandcashequivalentsattheendoftheperiod 9 254,321 1,541,546
Theabovestatementofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotestothefinancialstatements.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTSFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 34
1. REPORTINGENTITY
FarmaForceLimited(“FarmaForce”orthe“Company”)isafor-profitcompanylimitedbyshareswhichisincorporatedanddomiciledinAustralia.
Thesefinancialstatementsasatandfortheyearended30June2017compriseoftheCompanyasanindividualentity,andwereauthorisedforissuebytheBoardofDirectorson28August2017.
2. STATEMENTOFCOMPLIANCE
ThefinancialstatementsaregeneralpurposefinancialstatementswhichhavebeenpreparedinaccordancewithAustralianAccountingStandards(“AASBs”)adoptedbytheAustralianAccountingStandardsBoard(“AASB”)andtheCorporationsAct2001.ThefinancialstatementscomplywithInternationalFinancialReportingStandards(“IFRS”)adoptedbytheInternationalAccountingStandardsBoard(“IASB”).
3. GOINGCONCERN
Thefinancialstatementshavebeenpreparedonthegoingconcernbasis,whichcontemplatescontinuityofnormalbusinessactivitiesandtherealisationofassetsanddischargeofliabilitiesinthenormalcourseofbusiness.
Asdisclosedinthefinancialstatements,thecompanyincurredalossof$2,307,433andhadnetcashoutflowsfromoperatingactivitiesof$1,097,386fortheyearended30June2017.AsatthatdatetheCompanyhadnetcurrentliabilitiesof$1,059,931andnetliabilitiesof$467,307.
ThesefactorsmayprimafacieindicateamaterialuncertaintywhichmaycastsignificantdoubtastowhethertheCompanywillcontinueasagoingconcernandthereforewhetheritwillrealiseitsassetsandextinguishitsliabilitiesinthenormalcourseofbusinessandattheamountsstatedinthefinancialreport.However,theDirectorsbelievethattherearereasonablegroundstobelievethattheCompanywillbeabletocontinueasagoingconcern,afterconsiderationofthefollowingfactors:
• The continued trend of increasingmarket share as indicated in the financial statements is resulting inadditionalcustomercontractsonhandimprovingnetoperatingcashflow;
• Thecurrentliabilitiesinclude:
o anamountpayabletotheparentcompanyof$620,718.Theparentcompanywillallowthesefundstocontinuetobeutilisedbythecompanyasrequiredandwillprovideongoingsupport;
o $233,004deferredrevenuerepresentingdepositsreceivedinadvance;
• FromOctober2017,optionholderswillbeabletoexerciseupto19,302,500loyaltyoptionsreferredtoinNote16overtheensuing12monthsandasaresultthedirectorsbelieveadditionalcapitalwillberaised.
Accordingly,theDirectorsbelievethattheCompanywillbeabletocontinueasagoingconcernandthatitisappropriatetoadoptthegoingconcernbasisinthepreparationofthefinancialreport.
ThefinancialreportdoesnotincludeanyadjustmentsrelatingtotheamountsorclassificationofrecordedassetsorliabilitiesthatmightbenecessaryiftheCompanywerenottooperateasagoingconcern.
4. SIGNIFICANTACCOUNTINGPOLICIES
Thissectionsetsoutthesignificantaccountingpoliciesuponwhichthefinancialstatementsarepreparedasawhole.Specificaccountingpoliciesaredescribedintheirrespectivenotestothefinancialstatements.Thissectionalsoshowsinformationonnewaccountingstandards,amendmentsandinterpretations,andwhethertheyareeffectiveinthecurrentorlateryears.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 35
4.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)
Basisofpreparation
ThesefinancialstatementsarepresentedinAustraliandollars,whichistheCompany’sfunctionalcurrency.
TheCompanyisofakindreferredtoinASICCorporationsInstrument2016/191dated1April2016andinaccordancewiththatinstrument,allfinancialinformationpresentedinAustraliandollarshasbeenroundedtothenearestdollarunlessotherwisestated.
Thefinancialstatementshavebeenpreparedonthehistoricalcostbasis.
Theaccountingpolicieshavebeenconsistentlyappliedtoallperiodspresentedinthesefinancialstatements,unlessotherwisestated.
GoodsandServicesTax(“GST”)andValueAddedTax(“VAT”)
Revenues,expensesandassetsarerecognisednetoftheamountofrespectiveGSTorVAT,exceptwheretheamountofGSTorVATincurredisnotrecoverablefromtherelevanttaxationauthority.Inthesecircumstances,theGSTorVATisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.
ReceivablesandpayablesarestatedinclusiveoftheamountofGSTorVATreceivableorpayable.ThenetamountofGSTorVATrecoverablefrom,orpayableto,thetaxationauthorityisincludedwithotherpayablesinthestatementoffinancialposition.
Cashflowsarepresentedonagrossbasis.TheGSTorVATcomponentsofcashflowsarisingfrominvestingorfinancingactivitieswhicharerecoverablefrom,orpayabletotherelevanttaxationauthority,arepresentedasoperatingcashflowsinthestatementofcashflows.
Usesofjudgementsandestimates
Inpreparingthesefinancialstatements,managementhasmadejudgements,estimatesandassumptionsthataffecttheapplicationoftheCompany’saccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.
Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedprospectively.
(i) Judgements
Thejudgementswhichinvolveahigherdegreeofcomplexityorthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextperiodasfollows:
Investmentinassociates
TheDirectorshaveassessedwhethertheirequityinvestmentsbetween20%and50%representasignificantinfluenceoverthosecompanies.InassessingsignificantinfluencetheDirectorshaveconsideredthepercentageownershipinterest,representationontheBoardofDirectors,theinterchangeofmanagementpersonnel,andmaterialtransactionsbetweentheentities.PrimarilyonownershipinteresttheDirectorshaveconcludedthatallinvestmentsinwhichtheCompanyowns20%interestareregardedashavingsignificantinfluenceandhavethereforebeenequityaccountedanddisclosuresmadeinnote19.
Recoverabilityofinternallydevelopedintangibleassets
TheCompanycapitalisesdevelopmentcostswhentheymeetthecriteriasetoutinAASB138IntangibleAssets.ThedevelopmentcostscapitalisedrelatetoassetsthatwillbeutilisedbytheCompanyandnotexpectedtoresultinindividualrevenuestreams.TheDirectorsthereforeassesstherecoverabilityoftheinternallydevelopedintangibleassetsbyassessingtheirvalueinuse.BasedonthisassessmenttheDirectorshaveconcludedthatnoimpairmentisrequiredagainstthecarryingvalueoftheintangibleassetsincludedinnote13.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 36
4.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)
Useofjudgementsandestimates(continued)
(ii) Estimates
Informationaboutassumptionsandestimationuncertaintiesthathaveasignificantriskofresultinginamaterialadjustmentwithintheyearending30June2017areincludedinthenote15–Employeebenefitliabilities.
Newstandardsandinterpretationsnotyetadopted
Anumberofnewstandards,amendmentstostandardsandinterpretationsareeffectiveforannualperiodsbeginningafter1July2017,andhavenotbeenappliedinpreparingthesefinancialstatements.ThosewhichmayberelevanttotheCompanyaresetoutbelow.TheCompanydoesnotplantoadoptthesestandardsearly.
(i) AASB9FinancialInstruments
AASB9FinancialInstrumentsbecomesmandatoryfortheCompany’s2019financialstatementsandincludeschangestotheclassificationandmeasurementoffinancialassets,includinganewexpectedcreditlossmodelforcalculatingimpairment.Italsoincludesanewhedgeaccountingmodeltosimplifyhedgeaccountingrequirementsandmorecloselyalignhedgeaccountingwithriskmanagementactivities.
(ii) AASB15Revenuefromcontractswithcustomers
AASB15RevenuefromContractsbecomesmandatoryfortheCompany’s2019financialstatementsandoutlinesasinglecomprehensivemodelforentitiestouseinaccountingforrevenuearisingfromcontractswithcustomers;andreplacesAASB111ConstructionContract,AASB118Revenue,Interpretation13CustomerLoyaltyPrograms,Interpretation15AgreementsforConstructionofRealEstate,Interpretation18TransferofAssetsfromCustomersandInterpretation131Revenue-BarterTransactionsinvolvingAdvertisingServices.Thecoreprincipleisthatanentityrecognisesrevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.
(iii) AASB16Leases
AASB16LeasesbecomesmandatoryfortheCompany’s2020financialstatementsandremovestheclassificationofleasesbetweenfinanceandoperatingleases,effectivelytreatingallleasesasfinanceleasesforthelessee.Thepurposeistoprovidegreatertransparencyofalessee’sfinancialleverageandcapitalemployed.
TheCompanyhasnotyetdeterminedthepotentialeffectofthesestandardsontheCompany’sfuturefinancialstatements.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 37
5. OPERATINGSEGMENTS
TheCompanyhasidentifiedoperatingsegmentsbasedoninternalreportingthatisreviewedandusedbythechiefoperatingdecisionmakers(theGroupCEOandtheGeneralManager)inassessingtheperformanceoftherespectivesegments.Theoperatingsegmentsareidentifiedbymanagementbasedonthenatureofservicesprovided,witheachoperatingsegmentrepresentingastrategicbusinessthatservesadifferentsegmentofthemarket.
InFY17FarmaForceprovidedtwotypesofservicesbeing:(1)contractsalesandmarketingservicestoexternalcustomers;and(2)sharedservicestorelatedparties.Segmentanalysisofrevenueandgrossprofitisprovidedbelow.Informationonnetassetsbysegmentisnotprovidedtothechiefoperatingdecisionmakers.
Indollars 2017 2016
Revenue Contractsalesandmarketingservices 3,867,873 1,914,476Relatedpartyservices 99,640 36,364Totalrevenue 3,967,513 1,950,840
Grossprofit Contractsalesandmarketingservices 131,923 (756,385)Relatedpartyservices 99,640 36,364Totalgrossprofit 231,563 (720,021)
Informationongeographicalsegments
OnehundredpercentofFarmaForcerevenue,expensesandprofitarederivedinAustralia.
Relianceonmajorcustomers
Fourcustomersrepresentmorethan10%oftheconsolidatedrevenue.Totalrevenuefromthesemajorcustomersamountsto$3,341,365(84.2%)oftotalrevenue(2016:$1,757,238;90.1%).
6. REVENUE
Indollars 2017 2016
Provisionofcontractrevenue 3,867,873 1,914,476
Relatedpartyservicesrevenue 99,640 36,364
Totalrevenue 3,967,513 1,950,840
Significantaccountingpolicies
Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableaftertakingintoaccountanytradediscountsandvolumerebatesallowed.
TheCompanyrecognisesrevenuewhentheamountofrevenuecanbereliablymeasured,itisprobablethatfutureeconomicbenefitsassociatedwiththetransactionwillflowtotheCompanyandspecificcriteriarelatingtothetypeofrevenueasnotedbelow,hasbeensatisfied.
Anyconsiderationdeferredistreatedastheprovisionoffinanceandisdiscountedatarateofinterestthatisgenerallyacceptedinthemarketforsimilararrangements.Thedifferencebetweentheamountinitiallyrecognisedandtheamountultimatelyreceivedisinterestrevenue.
Allrevenueisstatednetoftheamountofgoodsandservicestax.
Renderingofservices
Revenueinrelationtorenderingofservicesisrecogniseddependingonwhethertheoutcomeoftheservicescanbeestimatedreliably.Iftheoutcomecanbeestimatedreliablythenthestageofcompletionoftheservicesisusedtodeterminetheappropriatelevelofrevenuetoberecognisedintheperiod.Iftheoutcomecannotbereliablyestimatedthenrevenueisrecognisedtotheextentofexpensesrecognisedthatarerecoverable.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 38
7. INCOMEANDEXPENSES
(a) Otherincome
Indollars 2017 2016
Interestincome 2,882 41,145
Rebatesandoffsets 2,000 -
Totalotherincome 4,882 41,145
(b) Financecosts
Indollars 2017 2016
Bankfees 2,519 1,512
Interestexpense 34 427
Totalfinancecosts 2,553 1,939
(c) Employeebenefitexpenses
Indollars 2017 2016
Wagesandsalaries 992,205 917,732
Compulsorysuperannuationcontributions 95,730 84,976
Increase/(decrease)inliabilityforannualleave (8,688) 5,931
Totalemployeebenefitsexpense 1,079,247 1,008,639
(d) Otherexpenses
Indollars 2017 2016
Accountingfees 41,105 22,230
Advertisingandmarketing 152,043 310,970
Insurance 46,336 40,642
Legalandconsultancyfees 115,646 89,120
Occupancycosts 23,498 25,616
Recruitmentfees 103,141 246,144
Softwarelicensingandsubscription 149,654 122,125
Travelandaccommodation 46,119 49,260
Other 364,870 473,099
Totalotherexpenses 1,042,412 1,379,206
Significantaccountingpolicies
Financecostincludesallinterest-relatedexpenses,otherthanthosearisingfromfinancialassetsatfairvaluethroughprofitorloss.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 39
8. INCOMETAXES
Reconciliationofincometaxtoaccountingprofit
Indollars 2017 2016
Lossfortheperiod (2,307,433) (3,799,018)Taxrate 27.5% 30%Taxbenefit (634,544) (1,139,706)
Addtaxeffectof: Expenditurenotallowableforincometaxpurposes 1,447 22,092Fixedassettimingdifferences 4,186 3,289Othertimingdifferences 695 55,177Adjustmentstodeferredtaxliability 24,784 19,022Deferredtaxassetsnotbroughttoaccount 603,432 1,040,126Incometaxexpense - -
Unrecogniseddeferredtaxassets
Deferredtaxassetswerenotrecognisedsinceutilisationofthetaxlossesagainstfuturetaxableprofitsisnotdeemedprobableintheforeseeablefuture(FY17:$2,319,693;FY16$1,904,984).
Significantaccountingpolicies
Currenttax
Theincometaxexpenseorbenefitfortheyearisthetaxpayableonthecurrentyear’staxableincomebasedontheapplicableincometaxrateforeachjurisdictionadjustedbychangesindeferredtaxassetsandliabilitiesattributabletotemporarydifferencesandtounusedtaxlosses.
ThecurrentincometaxchargeiscalculatedonthebasisofthetaxlawsenactedorsubstantivelyenactedattheendofthereportingperiodinthecountrieswheretheCompany’ssubsidiariesandassociatesoperateandgeneratetaxableincome.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespecttosituationsinwhichapplicabletaxregulationissubjecttointerpretation.Itestablishesprovisionswhereappropriateonthebasisofamountsexpectedtobepaidtothetaxauthorities.
Currenttaxisrecognisedinprofitorlossexcepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectlyinequity.Inthiscase,thetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequityrespectively.
Deferredtax
Deferredincometaxisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsintheconsolidatedfinancialstatements.Deferredincometaxisdeterminedusingtaxrates(andlaws)thathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiodandareexpectedtoapplywhentherelateddeferredincometaxassetisrealisedorthedeferredincometaxliabilityissettled.Deferredtaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtaxlossesonlyifitisprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandlosses.
DeferredtaxliabilitiesandassetsarenotrecognisedfortemporarydifferencesbetweenthecarryingamountandtaxbasesofinvestmentsinforeignoperationswhentheCompanyisabletocontrolthetimingofthereversalofthetemporarydifferencesanditisprobablethatthedifferenceswillnotreverseintheforeseeablefuture.
Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcurrenttaxassetsandliabilitiesandwhenthedeferredtaxbalancesrelatetothesametaxationauthority.Currenttaxassetsandtaxliabilitiesareoffsetwheretheentityhasalegallyenforceablerighttotheoffsetandintendseithertosettleonanetbasis,ortorealisetheassetandsettletheliabilitysimultaneously.Deferredtaxisrecognisedinprofitorloss,excepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectlyinequity.Inthiscase,thetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequityrespectively.
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9. CASH
Indollars 2017 2016
Bankbalances 254,321 1,541,546
10. TRADEANDOTHERRECEIVABLES
Indollars 2017 2016^
Tradereceivables 327,229 103,277
Otherreceivables 27,505 23,638
Relatedpartyreceivables 42,219 29,383
Totaltradeandotherreceivables 396,953 156,298
Current 396,953 155,918
Non-current - 380
Totaltradeandotherreceivables 396,953 156,298
^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationof:(a)customerdoubtfuldebtprovisionfromtradeandotherpayablestotradereceivables(FY16$113,138);and(b)prepaymentsfromtradeandotherreceivablestoothercurrentassets(FY16$99,550).
11. OTHERCURRENTASSETS
Indollars 2017 2016^
Prepayments 37,506 99,550
Totalothercurrentassets 37,506 99,550
^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofprepayments,fromtradeandotherreceivablestoothercurrentassets(FY16$99,550).
Significantaccountingpolicies
Tradereceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.Tradereceivablesaregenerallydueforsettlementwithin30-60days.Theyarepresentedascurrentassetsunlesscollectionisnotexpectedformorethan12monthsafterthereportingdate.
Collectabilityoftradereceivablesisreviewedonanongoingbasis.Debtswhichareknowntobeuncollectablearewrittenoffbyreducingthecarryingamountdirectly.Thelossisrecognisedinprofitorlosswithinotherexpenses.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainstotherexpensesintheprofitorloss.
Significantaccountingpolicies
Cashandcashequivalentsincludescashonhand,depositsheldatcallwithfinancialinstitutions,othershort-term,highlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorlessthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Forthestatementofcashflowspresentationpurposes,cashandcashequivalentsalsoincludesbankoverdrafts,whichareshownwithinborrowingsincurrentliabilitiesonthestatementoffinancialposition.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
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12. PROPERTY,PLANTANDEQUIPMENT
Reconciliationofcarryingamounts
Cost
Indollars
Furniture,fixturesand
fittings
Leaseholdimprovements
Plantandequipment
Total
Costat1July2015 13,588 73,977 85,407 172,972
Additions 21,728 84,034 19,855 125,617
Balanceat30June2016 35,316 158,011 105,262 298,589
Additions 1,498 - 27,274 28,772
Balanceat30June2017 36,814 158,011 132,536 327,361
Accumulateddepreciation
Indollars
Furniture,fixturesand
fittings
Leaseholdimprovements
Plantandequipment
Total
Balanceat1July2015 1,844 7,306 10,643 19,793
Depreciationexpense 3,000 12,522 23,015 38,537
Balanceat30June2016 4,844 19,828 33,658 58,330
Depreciationexpense 4,032 15,801 28,681 48,514
Balanceat30June2017 8,876 35,629 62,339 106,844
Carryingamounts
Indollars
Furniture,fixturesand
fittings
Leaseholdimprovements
Plantandequipment
Total
Balanceat30June2016 30,472 138,183 71,604 240,259
Balanceat30June2017 27,938 122,382 70,197 220,516
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
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12.PROPERTY,PLANTANDEQUIPMENT(CONTINUED)
Significantaccountingpolicies
Carryingvalue
Allproperty,plantandequipmentisstatedathistoricalcostlessdepreciationandimpairment.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.
Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothebusinessandthecostoftheitemcanbemeasuredreliably.Thecarryingamountofanycomponentaccountedforasaseparateassetisderecognisedwhenreplaced.Allotherrepairsandmaintenancearechargedtotheprofitorlossduringthereportingperiod.
Depreciation
Depreciationofassetsiscalculatedusingthestraight-linemethodtoallocatetheircost,netoftheirresidualvalues,overtheirestimatedusefullivesor,inthecaseofleaseholdimprovements,theshorterleasetermasfollows:
• Leaseholdimprovements–5to10years• Plantandequipment–5to10years• Furniture,fittingsandequipment–10to20years
Impairment
Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.
Gainsandlossesondisposal
Gainsandlossesondisposalsaredeterminedbycomparingproceedswiththecarryingamount.Theseareincludedinprofitorloss.
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13. INTANGIBLEASSETS
Indollars
Websiteandsoftware
Total
Balanceat30June2016 - -
Additions 151,995 151,995
Balanceat30June2017 151,995 151,995
Significantaccountingpolicies
Intangibleassetsacquiredseparatelyaremeasuredoninitialrecognitionatcost.Thecostofintangibleassetsacquiredinabusinesscombinationistheirfairvalueatthedateofacquisition.
Followinginitialrecognition,intangibleassetsarecarriedatcostlessanyaccumulatedamortisationandaccumulatedimpairmentlosses.Internallygeneratedintangibles,excludingcapitaliseddevelopmentcosts,arenotcapitalisedandtherelatedexpenditureisreflectedinprofitorlossintheperiodinwhichtheexpenditureisincurred.
Gainsorlossesarisingfromde-recognitionofanintangibleassetaremeasuredasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheassetandarerecognisedinthestatementofprofitorlossandothercomprehensiveincomewhentheassetisderecognised.
Amortisation
Intangibleassetswithfinitelivesareamortisedovertheusefuleconomiclife.Theamortisationperiodandtheamortisationmethodforanintangibleassetwithafiniteusefullifearereviewedatleastattheendofeachreportingperiod.Changesintheexpectedusefullifeortheexpectedpatternofconsumptionoffutureeconomicbenefitsembodiedintheassetareconsideredtomodifytheamortisationperiodormethod,asappropriate,andaretreatedaschangesinaccountingestimatesandadjustedonaprospectivebasis.Theamortisationexpenseonintangibleassetswithfinitelivesisrecognisedinthestatementofprofitorlossandothercomprehensiveincomeastheexpensecategorythatisconsistentwiththefunctionoftheintangibleassets.
Intangibleassetswithindefiniteusefullivesarenotamortised,butaretestedforimpairmentannually,eitherindividuallyoratthecash-generatingunitlevel.Theassessmentofindefinitelifeisreviewedannuallytodeterminewhethertheindefinitelifecontinuestobesupportable.Ifnot,thechangeinusefullifefromindefinitetofiniteismadeonaprospectivebasis.
Impairment
Intangibleassetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Otherassetsaretestedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.
Websiteandsoftware
Costsincurredinacquiringwebsitesoftwareandlicensesthatwillcontributetofuturefinancialbenefitsthroughrevenuegenerationand/orcostreductionarecapitalisedtosoftwareandsystems.Costscapitalisedincludeexternaldirectcostsofmaterialsandserviceanddirectpayrollandpayrollrelatedcostsofemployees’timespentontheproject.Amortisationiscalculatedonastraight-linebasisoverperiodsgenerallyrangingfromthreetofiveyears
Websitedevelopmentcostsincludeonlythosedirectlyattributabletothedevelopmentphaseandareonlyrecognisedfollowingcompletionoftechnicalfeasibilityandwherethebusinesshasanintentionandabilitytousetheasset.
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14. TRADEANDOTHERPAYABLES
Indollars 2017 2016^
Tradepayables 676,925 151,918
Sundrypayablesandaccruedexpenses 241,833 137,388
Relatedpartypayables 355,687 46,897
Totaltradeandotherpayables 1,274,445 336,203
Current 1,274,445 336,203
Non-current - -
Totaltradeandotherpayables 1,274,445 336,203
^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationof(a)prepaidincomefromsundrypayablestodeferredrevenue(FY16$54,980);and(b)doubtfuldebtprovisionfromsundrypayablestotradereceivables(FY16$113,138).
15. EMPLOYEEBENEFITLIABILITIES
Indollars 2017 2016^
Liabilityforannualleave 115,766 75,344
Liabilityforsuperannuation 125,497 -
Totalemployeebenefitliabilities 241,263 75,344
Current 241,263 75,344Non-current - -
Totalemployeebenefitliabilities 241,263 75,344
^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofliabilityforannualleave,fromtradeandotherpayablestoemployeebenefitliabilities(FY16$75,344).
Significantaccountingpolicies
Tradeandotherpayablesrepresentliabilitiesforgoodsandservicesprovidedtothebusinesspriortotheendofthefinancialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.Tradeandotherpayablesarepresentedascurrentliabilitiesunlesspaymentisnotduewithin12monthsfromthereportingdate.Theyarerecognisedinitiallyattheirfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.
Significantaccountingpolicies
Employeebenefitsrepresentsamountsaccruedforannualleaveandsuperannuation.Thecurrentportionforthisprovisionincludesthetotalamountaccruedforannualleaveentitlementsandtheamountsaccruedforlongserviceleaveentitlementsthathavevestedduetoemployeeshavingcompletedtherequiredperiodofservice.BasedonpastexperiencetheCompanydoesnotexpectthefullamountofannualleaveorlongserviceleavebalancesclassifiedascurrentliabilitiestobesettledinthenext12months.However,theseamountsmustbeclassifiedascurrentliabilitiessincetheCompanydoesnothaveanunconditionalrighttodeferthesettlementoftheseamountsintheeventemployeeswishtousetheirleaveentitlement.
TheCompanyrecognisesaliabilityforlongserviceleaveandannualleavemeasuredasthepresentvalueofexpectedfuturepaymentstobemadeinrespectofservicesprovidedbyemployeesuptothereportingdateusingtheprojectedunitcreditmethod.Considerationisgiventoexpectedfuturewageandsalarylevels,experienceofemployeedepartures,andperiodstoservice.Expectedfuturepaymentsarediscountedusingmarketyieldsatthereportingdateonnationalgovernmentbondswithtermstomaturityandcurrenciesthatmatch,ascloselyaspossible,theestimatedfuturecashoutflows.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
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16. ISSUEDCAPITAL
Numberofshares
$
Inissueat1July2015 1 1
Conversionofnotespreviouslyclassifiedasequity - 763,689
Conversionofnotespreviouslyclassifiedasliability 19,302,500 2,903,961
Issueofshares 108,198,479 5,459,545
Transactioncosts - (1,058,337)
Inissueat30June2016 127,500,980 8,068,859
Movementsthroughouttheperiod - -
Inissueat30June2017 127,500,980 8,068,859
AllordinarysharesrankequallywithregardtotheCompany’sresidualassets.Theholdersofthesesharesareentitledtoreceivedividendsasdeclaredfromtimetotime,andareentitledtoonevotepershareatgeneralmeetingsoftheCompany.
TheCompanydoesnothaveauthorisedcapitalorparvalueinrespectofitsshares.Allissuedsharesarefullypaid.
Dividends
NodividendsweredeclaredorpaidbytheCompanyfortheyear(2016:nil).
Loyaltyoptions
TheCompanyhas19,302,500Loyaltyoptionsonissueexercisableat20centseachbetween24to36monthsafterthedateofadmissionoftheCompany’ssharestotheOfficialListoftheASX,being23October2015.Theoptionholdersmustbeholdingtheunderlyingshares,beingoneshareforoneoption,tobeabletoexercisetheoption.
Capitalmanagement
ManagementcontrolthecapitaloftheCompanyinordertomaintainagooddebttoequityratio,providetheshareholderswithadequatereturnsandtoensurethattheCompanycanfunditsoperationsandcontinueasagoingconcern.
TheCompany’sdebtandcapitalincludeordinarysharecapitalandfinancialliabilities,supportedbyfinancialassets.Therearenoexternallyimposedcapitalrequirements.
Significantaccountingpolicies
Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.Transactioncostsarethecoststhatareincurreddirectlyinconnectionwiththeissueofthoseequityinstrumentsandwhichwouldnothavebeenincurredhadthoseinstrumentsnotbeenissued.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 46
17. EARNINGSPERSHARE(EPS)
The calculation of basic earnings per share has been based on the following loss attributable to ordinaryshareholdersandweighted-averagenumberofordinarysharesoutstanding.
Lossattributabletoordinaryshareholders
Indollars 2017 2016
LossfortheperiodattributabletoownersofFarmaForceLimited (2,307,433) (3,799,018)
Weighted-averagenumberofordinaryshares
Innumberofshares 2017 2016
Weighted-averagenumberofordinarysharesatendoftheperiod 127,500,980 87,439,197
Earningspershare
Incentspershare 2017 2016
Basiclosspershare (1.81) (4.34)
Dilutedlosspershare (1.81) (4.34)
BasicearningspershareiscalculatedasearningsfortheperiodattributabletotheCompanyovertheweightedaveragenumberofshares.
DilutedearningspershareiscalculatedasearningsfortheperiodattributabletotheCompanyovertheweightedaveragenumberofshareswhichhasbeenadjustedtoreflectthenumberofshareswhichwouldbeissuedifoutstandingoptionsandperformancerightsweretobeexercised.HoweverduetothestatutorylossattributabletotheCompanyforboththefinancialyearended30June2017andthecomparativeperiodended30June2016,theeffectoftheseinstrumentshasbeenexcludedfromthecalculationsofdilutedearningspershareforbothperiodsastheywouldreducethelosspershare.
18. FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT
Accountingclassificationsandfairvalues
TheCompanyhasfinancialassetsofcashandcashequivalents,tradeandotherreceivables.Allfinancialassetsarecarriedatamortisedcost,andnotmeasuredatfairvalue.Thecarryingamountisareasonableapproximationoffairvalueat30June2017.
TheCompanyhasfinancialliabilitiesoftradeandotherpayables.Thesefinancialliabilitiesarenotmeasuredatfairvalue,andthecarryingamountisareasonableapproximationoffairvalueat30June2017.
Financialriskmanagement
TherehavebeennosubstantivechangesinthetypesofrisktheCompanyisexposedto,howtheserisksarise,ortheBoard’sobjectives,policiesandprocessesformanagingormeasuringtheriskfromthepreviousperiod.TheCompanyhasexposuretothefollowingriskarisingfromfinancialinstruments:
• creditrisk–refer(ii)• liquidityrisk–refer(iii)
• marketrisk–refer(iv)
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
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18.FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT(CONTINUED)
(i) Riskmanagementframework
TheCompany’sBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheCompany’sriskmanagementframework.TheBoardofDirectorshasestablishedtheAuditandRiskManagementCommittee,whichisresponsiblefordevelopingandmonitoringtheCompany’sriskmanagementpolicies.ThecommitteereportsregularlytotheBoardofDirectorsonitsactivities.
TheCompany’sriskmanagementpoliciesareestablishedtoidentifyandanalysetheriskfacedbytheCompany,tosetappropriaterisklimitsandcontrolsandtomonitorrisksandadherencetolimits.RiskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheCompany’sactivities.TheCompany,throughitstrainingandmanagementstandardsandprocedures,aimstomaintainadisciplinedandconstructivecontrolenvironmentinwhichallworkplaceparticipantsunderstandtheirrolesandobligations.
TheBoardofDirectorshasalsoestablishedaFinanceCommittee,consistingofseniorexecutivesoftheCompany,whichmeetsonaregularbasistoanalysefinancialriskexposureandtoevaluatetreasurymanagementstrategiesinthecontextofthemostrecenteconomicconditionsandforecasts.Thefinancecommittee’soverallriskmanagementstrategyseekstoassisttheCompanyinmeetingitsfinancialtargets,whilstminimisingpotentialadverseeffectsonfinancialperformance.ThefinancecommitteeoperatesunderpoliciesapprovedbytheBoardofDirectors.
(ii) Creditrisk
Exposuretocreditriskrelatingtofinancialassetsarisesfromthepotentialnon-performancebycounterpartiesofcontractobligationsthatcouldleadtoafinanciallosstotheCompany.
TheCompanyhasnosignificantconcentrationofcreditriskwithrespecttoanysinglecounterpartyorgroupofcounterpartiesotherthanthosereceivablesspecificallyprovidedforandmentionedwithinnote10.
Tradeandotherreceivables
ThemainsourceofcreditrisktotheCompanyisconsideredtorelatetotheclassofassetsdescribedastradeandotherreceivables.Tradeandotherreceivablesthatareneitherpastdueorimpairedareconsideredtobeofhighcreditquality.Nocollateralisheldoverotherreceivables.
Impairment
Thebalanceoftradeandotherreceivablesthatwereagedover90daysandimpairedat30June2017is$113,138(2016:$124,452).Noincrease,reversaloramountshavebeenwrittenoffinrelationtothebalanceheldat30June2016.
Theagingofthetradeandotherreceivablesthatwerenotimpairedasat30June2017aresetoutinthefollowingtable.
Indollars 2017 2016
Neitherpastduenorimpaired 385,639 144,604
30to90dayspastduebutnotimpaired - -
Over90dayspastduebutnotimpaired 11,314 11,314
Totaltradeandotherreceivablesnotimpaired 396,953 155,918
Cashandcashequivalents
TheCompanyheldcashandcashequivalentsof$254,321at30June2017.Thecashandcashequivalentsareheldwithbankandfinancialinstitutioncounterparties,whichareratedAA-toAA+,basedonratingagencyStandardandPoor’sratings.
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18.FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT(CONTINUED)
(iii) Liquidityrisk
LiquidityriskistheriskthattheCompanywillencounterdifficultyinmeetingtheobligationsassociatedwithitsfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.TheCompany’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillhavesufficientliquiditytomeetitsliabilitieswhentheyaredue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheCompany’sreputation.
TheCompanyhasaninterestfree,$2millionworkingcapitalloanfacilityinplacewithitsparententityiQnovateLtd.Thebalanceofthisfacilityasat30June2017wasnil(2016:nil).
TheCompanyaimstomaintaincashatalevelappropriatetofundoperations.At30June2017,theexpectedcashflowsfromtradeandotherreceivablesmaturingwithintwomonthswere$369,448.
IndollarsWithin1year 1to5years Over5years Total
2017 2016 2017 2016 2017 2016 2017 2016
Non-derivativefinancialliabilities
Tradeandotherpayables 1,274,445 391,183 - - - - 1,274,445 391,183
(iv) Marketrisk
Marketriskistheriskthatchangesinmarketprices–suchasforeignexchangerates,interestratesandequityprices–willaffecttheCompany’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturn.
Currencyrisk
TheCompany’sexposuretoforeigncurrencyriskislimitedduetothenaturalhedgeaffordedtotheCompanybypurchasingandsellinginAUD.
TheCompanydoesnotholdanyforeigncurrencycontracts.
FARMAFORCELIMITEDNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
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19. INVESTMENTINASSOCIATES
Thepercentageownershipinterestisequivalenttothepercentagevotingrightsforallinvestments.
Entityname Countryofincorporation
Ownershipinterest2017
Ownershipinterest2016
Associates
NewFrontierHoldingsLLC(“NewFrontier”) USA 20% 20%
NereidEnterprisesPtyLtd AUS 20% 20%
NereidEnterprisesLLC USA 20% 20%
NereidEnterprisesPtyLtdprovidescorporateeventsandpromotionalservicestothehealthcareindustryandrelatedpartiesofFarmaForceLimited.
Summaryfinancialinformation
Noneoftheassociatesarelistedonastockexchange.Theinvestmentsinassociatesisequityaccountedusingauditedfinancialinformation.
InAUD 2017 2016
(i) Summarisedstatementofcomprehensiveincome
Revenue - -
Lossaftertax (152,778) (134,096)Othercomprehensiveincome/(loss) (2,921) 32,373Totalcomprehensiveloss (155,699) (101,723)Dividendsreceivedfromassociate - -
(ii) Summarisedbalancesheet
Totalassets 1,205,807 1,246,927
Totalliabilities 105,242 3,650
Netassetsasatreportingdate 1,100,565 1,243,277
Company’sownershipinterest 20% 20%
Carryingvalueat30June220,113248,655^
^TheFY2016movementincarryingvalueof$20,335wasimmaterial,andrecognisedinthecurrentyearstatementofprofitorloss.
Significantaccountingpolicies
AssociatesareallentitiesoverwhichtheCompanyhassignificantinfluencebutnotcontrol,generallyaccompanyingashareholdingbetween20%and50%ofthevotingrights.InvestmentsinassociatesareaccountedforintheCompany’sfinancialstatementsusingtheequitymethodofaccounting,afterinitiallybeingrecognisedatcost.
TheCompany’sshareoftheassociatespost-acquisitionprofitsorlossesarerecognisedinthestatementofprofitorloss,anditsshareofpost-acquisitionmovementsinreservesisrecognisedinreserves.Thecumulativepostacquisitionmovementsareadjustedagainstthecarryingamountoftheinvestment.Dividendsreceivablefromassociatesreducethecarryingamountoftheinvestment.WhentheCompany’sshareoflossesinanequalorexceedsitsinterestintheassociate,includingsecuredandunsecuredreceivables,theCompanydoesnotrecognisefurtherlosses,unlessithasincurredobligationsormadepaymentsonbehalfoftheassociate.
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20. TRANSACTIONSWITHRELATEDPARTIES
(i) EntitiesexercisingcontrolovertheCompany
Theultimateparententity,whichexercisescontrolovertheCompany,isiQnovateLtd(“iQN”)whichisincorporatedinAustraliaandowns70.59%ofFarmaForceLimited.
DrGeorgeSyrmalisisCEO,Chair,ExecutiveDirectorandasubstantialshareholderofiQN.MrConTsigounisisExecutiveDirectorandasubstantialshareholderofiQN.
(ii) Parententitytransactions
Transactionswiththeparententityareonnormalcommercialtermsandconditionsnomorefavorablethanthoseavailabletootherpartiesunlessotherwisestated.
Theaggregatevalueoftransactionsandoutstandingbalancesrelatingtotheparententity,iQnovateLtd,aresetoutinthefollowingtable.
Indollars 2017 2016
Consultingfees 99,640 18,182
Totalrevenuereceivedfromparententity 99,640 36,364
Officeandsharedservicescosts 220,775 802,556
Totalexpenditurepaidtoparententity 220,775 802,556
Tradepayableamountsowingtoparententity 303,599 -
Loanfacility^amountsowningtoparententity - -
Totalamountsowingtotheparententity 303,599 -
^TheCompanyhasaninterestfree,$2millionworkingcapitalloanfacilityinplacewithitsparententityiQnovateLtd.Thebalanceowingunderthisfacilityasat30June2017wasnil(2016:nil).
(iii) Keymanagementpersonnelcompensation
Thekeymanagementpersonnelcompensationissetoutinthetablebelow.
Indollars 2017 2016
Short-termemployeebenefits 133,851 139,003
Post-employmentbenefits 9,091 10,118
Totalkeymanagementpersonnelcompensation 142,942 149,121
CompensationoftheCompany’skeymanagementpersonnelincludessalariesandnon-cashbenefits.ExecutiveofficersalsoparticipateintheCompany’semployeeincentiveplan.
FurtherdetailsofkeymanagementpersonnelcompensationareincludedintheRemunerationReportwithintheDirectors’Report.
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20.TRANSACTIONSWITHRELATEDPARTIES(CONTINUED)
(iv) Transactionswithotherrelatedparties
FarmaForcetransactedwiththefollowingrelatedcompanies.Transactionswithotherrelatedpartiesareonnormalcommercialtermsandconditionsnomorefavourablethanthoseavailabletootherpartiesunlessotherwisestated.
Entityname Relationship
ClinicalResearchCorporationPtyLtd Subsidiariesofcommonultimateparententity
iQXLimited Commondirectorshipand/keymanagementpersonnel
iQ3CorpLtd Commondirectorshipand/keymanagementpersonnel
Theaggregatevalueoftransactionsandoutstandingbalancesrelatingtootherrelatedpartiesaresetoutinthefollowingtable.
Indollars 2017 2016
Consultingfees - 18,182
Totalrevenuereceivedfromotherrelatedparties - 18,182
Officeandsharedservicescosts 92,417 118,588
Consultancyfees 8,842 30,811
Companysecretarialservices - 36,000
Totalexpenditurepaidtoparententity 101,259 185,399
Tradereceivableamountsowingfromotherrelatedparties 42,219 29,383
Tradepayableamountsowingtootherrelatedparties 52,018 46,897
Netamountsowingtootherrelatedparties 9,799 17,514
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21. RECONCILIATIONOFCASHFLOWSFROMOPERATINGACTIVITIES
Indollars 2017 2016
Cashflowsfromoperatingactivities
Lossfortheperiod (2,307,433) (3,799,018)Adjustmentsfor: IPOlistingcosts - 82,754Depreciation 48,515 38,538Shareoflossofassociatedcompanies 57,959 - (2,200,959) (3,677,726)
Changesin: Tradeandotherreceivables (240,655) (74,841)Otherassets 62,044 -Tradeandotherpayables 1,063,738 313,848
Incomeinadvance 178,024 (149,579)Employeebenefits 40,422 -
1,103,573 89,428
Netcashusedinoperatingactivities (1,097,386) (3,588,298)
22. AUDITORS’REMUNERATION
Indollars 2017 2016
Auditandreviewservices
AuditorsoftheCompanyatJune2017-RSM 25,000 -
AuditorsoftheCompanyatDecember2016-FortunityOtherauditors
4,000 15,000
Otherservices
AuditorsoftheCompanyatJune2017–RSM 2,500 -
AuditorsoftheCompanyatDecember2016–Fortunity - -
Otherauditors - -
23. SUBSEQUENTEVENTS
Therehasnotarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreportanyitem,transactionoreventofamaterialandunusualnaturelikely,intheopinionoftheDirectorstoaffectsignificantlytheoperationsorstateofaffairsoftheCompanyinfuturefinancialyears.
FARMAFORCELIMITEDDIRECTORS’DECLARATIONFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 53
1. IntheopinionoftheBoardofDirectorsofFarmaForceLimited(“theCompany”):
a. theconsolidatedfinancialstatementsandnotesthataresetoutonpages29to52areinaccordancewiththeCorporationsAct2001,including:
I. givingatrueandfairviewofthefinancialpositionasat30June2017oftheCompanyperformanceforthefinancialyearendedonthatdate;and
II. complyingwithAustralianAccountingStandardsandtheCorporationsRegulations2001;and
b. therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.
2. TheDirectorshavebeengiventhedeclarationsrequiredbySection295AoftheCorporationsAct2001fromthechiefexecutiveofficerandchieffinancialofficerforthefinancialyearended30June2017.
3. TheDirectorsdrawattentiontonote2totheconsolidatedfinancialstatements,whichincludesastatementofcompliancewithInternationalFinancialReportingStandards.
SignedinaccordancewitharesolutionofDirectors.
GeorgeEliasChair
Sydney
29September2017
54
INDEPENDENT AUDITOR’S REPORT To the Members of FarmaForce Limited
Opinion
We have audited the financial report of FarmaForce Limited. (the Company), which comprises the statement of financial position as at 30 June 2017, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's financial position as at 30 June 2017 and of its financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Company in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
55
Key Audit Matter How our audit addressed this matter
Recognition of Revenue
Refer to Note 6 in the financial statements
Revenue recognition was considered a key audit
matter, as it material and important to the company’s
profitability.
In addition we focused on revenue recognition as the
company’s business involves entering into fixed
price contracts for the provision of contract sales and
marketing. Revenue on these contracts are
recognised over time as the service is provided and
this may differ from payments received from the
customer, resulting in deferred revenue. There may
also be significant management judgment in
determining the extent to which services have been
delivered, and in identifying potentially onerous
contracts.
Our audit procedures in relation to the recognition of
revenue included:
Assessing whether the Company’s revenue recognition policies were in compliance with Australian Accounting Standards
Evaluating, and testing the operating effectiveness, of management’s controls related to revenue recognition
Inspection of sales contracts and agreeing terms of the contract, the stage of completion, and recalculating revenue recognised.
Carrying value of internally developed intangible assets
Refer to note 13 in the financial statements
The closing net book value of all internally developed
assets was $151,995. The costs of building
applications and web-site platforms are capitalised
as intangible assets, where the expenditure
demonstrable value and the technical and
commercial feasibility is assured.
Management has to exercise judgment in
determining which costs can be capitalised and
when performing an impairment review. The
materiality of judgments involved has caused us to
identify these as key audit risks.
Our audit procedures in relation to the carrying value
of internally developed intangible assets included:
Reviewing management’s identification of the
development projects being undertaken, and their
assessment of whether they meet the criteria for
recognition as intangible assets in accordance with
AASB 138 Intangible Assets
Testing amounts capitalised in the period to
assess whether expenses incurred were directly
attributable to the projects identified, and therefore
eligible for capitalisation.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Company's annual report for the year ended 30 June 2017, but does not include the financial report and
the auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
56
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Company to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This
description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 15 of the directors' report for the year ended
30 June 2017.
In our opinion, the Remuneration Report of FarmaForce Limited., for the year ended 30 June 2017, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
David Talbot
Partner
RSM Australia Partners
Sydney, 29 September 2017
FARMAFORCELIMITEDASXADDITIONALINFORMATIONFORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 57
ASX ADDITIONAL INFORMATION
AdditionalinformationrequiredbytheASXLimitedRulesandnotdisclosedelsewhereinthisreportissetoutbelow.Theinformationiscurrentasat11August2017.
SHAREHOLDINGS
Substantialshareholders
Thenumberofsharesheldbysubstantialshareholdersandtheirassociatesaresetoutbelow:
Shareholder Numberofordinary
sharesheld
Percentageofcapitalheld
iQnovateLtd 90,000,000 70.59%
Totalsubstantialshareholders 90,000,000 70.59%
Distributionofequitysecurityholders
Category Numberofholders
Percentageofcapitalheld
1–1,000 4 0.0%
1,001–5,000 12 0.0%
5,001–10,000 142 0.8%
10,001–100,000 190 6.4%
100,001andover 87 92.8%
Total 435 100.0%
Shareholderswithlessthanmarketableparcel
Thereare11shareholderseachwithanunmarketableparcelofsharesbeingaholdingof3,846orless,foracombinedtotalof17,940shares.Thisisbasedonaclosingpriceof13centspershareat11August2017andrepresents0.0141%ofthefullypaidordinarysharesonissue.
Sharessubjecttoescrow
Thearenosecuritiessubjecttoescrow.
Unquotedequitysecurities
Thearenounquotedredeemablepreferencesharesorredeemableconvertiblenotesonissue.
SECURITIESEXCHANGE
TheCompanyislistedontheAustralianSecuritiesExchange.TheHomeexchangeisSydney.
FARMAFORCELIMITEDASXADDITIONALINFORMATION(CONTINUED)FORTHEYEARENDED30JUNE2017
2017 ANNUAL REPORT 58
OTHERINFORMATION
FarmaForceLimitedisdomiciledinincorporatedanddomiciledinAustralia,isapubliclylistedcompanylimitedbyshares.
ON-MARKETBUY-BACK
Thereisnocurrenton-marketbuy-back.
TWENTYLARGESTSHAREHOLDERS
Shareholder Numberofordinary
sharesheld
Percentageofcapitalheld
iQnovateLtd 90,000,000 70.59%
PriorityOneGroupPtyLtd 2,775,000 2.18%
BasimFinancePtyLtd 1,333,333 1.05%
iQ3CorpLtd 1,275,009 1.00%
ColinJOdamsPtyLtd 1,000,000 0.78%
AchellesNomineesPtyLtd 930,000 0.73%
MrYWang 844,333 0.66%
MsJStapleton 750,000 0.59%
BartelmPtyLtd 675,000 0.53%
AsgardCapitalManagementLtd 667,000 0.52%
PharmlouPtyLtd 603,920 0.47%
LienPtyLtd 600,000 0.47%
SimosSuperFund 535,890 0.42%
FranzeHoldingsPtyLtd 500,000 0.39%
MrIMacewenStevenson&MsKHynes 500,000 0.39%
SiJiaCorpPtyLtd 500,000 0.39%
MrWBurns&MsRBurns 500,000 0.39%
MrDMorato&MsSMorato 500,000 0.39%
MrMin-ChungYu 457,499 0.36%
KarantziasInvestmentsPtyLtd 451,000 0.35%
Totaltwentylargestshareholders 105,397,984 82.65%
Level 3 222 Clarence St, Sydney NSW Australia 2000
Tel: +61 2 8239 5400 Fax: +61 2 8362 9547 info@farmaforce.com.au farmaforce.com.au
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