FUTURE FORESTS (FIJI) LIMITED FINANCIAL STATEMENTS 30 JUNE 2017

Transcription

1 FUTURE FORESTS (FIJI) LIMITED 30 JUNE 2017

2 I N D E X Page No. 1-3 report 4 declaration 5 Auditor's independence declaration 6-11 Independent audit report 12 Statement of profit or loss and other comprehensive income 13 Balance sheet 14 Statement of changes in equity 15 Statement of cash flow Notes to and forming part of the financial statements South Pacific Stock Exchange Listing Requirements

3 1 In accordance with a resolution of the Board of Directors, the Directors herewith submit the balance sheet of the company as at 30 June 2017, and the related statements of profit or loss and other comprehensive income, cash flow and changes in equity for the year ended on that date and report as follows: 1. DIRECTORS The following were Directors of the company at any time during the financial year and up to the date of this report: Mr Digby Bossley (resigned 14 July 2016) Mr James Dunn (resigned 30 June 2016) Mr Masum Buksh (resigned 30 June 2016) Mr Roderic Evers (appointed 16 June 2016) Mr Willibrord s Liebregts (appointed 16 June 2016) Mr Greg Cornwall (co-opted 13 July 2016 & appointed 28 December 2016) Mr Savenaca Seniloli (co-opted 15 September 2017) 2. PRINCIPAL ACTIVITIES AND OPERATIONS Future Forests (Fiji) in the growing of teak trees (Tectona grandis) for timber production and exports. The sale of teak seedlings and processing and selling sawn timber is the other core activities of the company. Natural disaster Severe Tropical Cyclone Winston (20 Feb 2016) has had significant impact on the company's operations and assets. 3. TRADING RESULTS The net profit/ (loss) for the company for the year ended 30 June 2017 was $19,245 (2016: Loss of $5,334,440). 4. DIVIDENDS The Directors recommend that no amounts be paid as dividend in respect of the year ended 30 June RESERVES The Directors recommend that no amounts be transferred to reserves for the year ended 30 June CURRENT ASSETS The D to ascertain that the current assets of the company were shown in the accounting records at a value equal to or below the value that would be expected to be realised in the ordinary course of business. At the date of this report, the Directors are not aware of any circumstances which would render the values attributable to the current assets in the accounts misleading.

4 2 continued 7. BASIS OF ACCOUNTING The financial statements of the company have been drawn up in accordance with the International Financial Reporting Standards and the requirements of law. The financial statements of the Company have been prepared on a going concern basis. The ability of the Company to continue as a going concern is dependent on several factors including its ability to generate new business and positive cash flows, and on-going support of the lenders. The directors are confident of the ability of the company to continue as a going concern, which contemplates continuity of business activities and the realisation of assets and the payment of liabilities in the normal course of business. 8. OTHER CIRCUMSTANCES have not in the opinion of the Directors been substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in the financial statements. 9. UNUSUAL TRANSACTIONS year have not in the opinion of the Directors been substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in the financial statements. 10. EVENTS SUBSEQUENT TO BALANCE DATE The company approved a Private Placement to issue up to 10,000,000 new shares to raise new capital in June The private placement was postponed due to financial anomalies discovered which required in-depth investigation to determine the extent of the same, which made it inappropriate to offer new shares whilst investigation were ongoing. The company obtained a mahogany license to purchase 3,000 cubic meter of mahogany logs per annum, for a period of 5 years. The company has approved nursery diversification to horticulture, agriculture and ornamental seedling production and sales. The company approved diversification into landscaping and other related commercial contracts. The company has recruited experienced managers to manage sawmill and nursery operations and landscaping contracts. No charge on the assets of the company has arisen since the end of the financial year to the date of this report to secure the liabilities of any other person. The company has surcharges payable to Fiji National Provident Fund (FNPF) amounting to $711,500 in relation to penalties and fees which has been disclosed as a contingent liability in the financial statements and which FNPF has confirmed that it will waive subject to the company settling all pending FNPF dues. The company has a contingent liability of $374,158 in relation to a services agreement with a third party to supply seedlings and provide related services signed in It had received some payments and in exchange had made partial delivery of the seedlings and provided services. Based on correspondence with the third party, the Directors are satisfied that the company has fulfilled its obligations and that no liabilities will arise for the company, whether it be for delivery of further seedlings or refund of any monies received thus far. No contingent or other liability has become enforceable or is likely to become enforceable within a period of twelve months after the date of this report which, in the opinion of the directors, will or may affect the ability of the company to meet its obligations as and when they fall due.

5 continued No director of the company has, since the end of the previous financial year, received or become entitled to receive a benefit (other than a benefit included in the total amount of emoluments received or due and receivable by Directors shown in the company ) by reason of a contract made with the company or a related corporation with the director or with a firm of which the director is a member, or in a company in which the director has a substantial financial interest. For and on behalf of the Board Director Date Director Date

6 4 DIRECTORS DECLARATION The declaration by Directors is required by the Companies Act, The Directors of the Company have made a resolution that declares: (a) In the opinion of the Directors, the financial statements of the Company for the financial year ended 30 June 2017: (i) comply with the International Financial Reporting Standards and give a true and fair view of the financial position of the Company as at 30 June 2017 and of the performance and cash flows of the Company for the year ended 30 June 2017; and (ii) have been prepared in accordance with the Companies Act, (b) (c) The Directors have received independence declaration by auditors as required by Section 395 of the Companies Act, 2015; and At the date of this declaration, in the opinion of the Directors, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. For and on behalf of the Board of Directors and in accordance with a resolution of the Directors. Director Date Director Date

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8 6 To the Shareholders of Future Forests (Fiji) Limited Report on the audit of the financial statements Opinion We have audited the accompanying financial statements of Future Forests (Fiji) Limited (the Company, which comprise the balance sheet as at 30 June 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 30 June 2017, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Company in accordance with the ethical requirements of the International Ethics Standards Board for are relevant to our audit of the financial statements in Fiji, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Material Uncertainty Relating to Going Concern We draw attention to Note 2.1(c) in the financial statements, which indicates that the Company has negative cash flows from operating activities for the year ended 30 June 2017 of $122,595. As at year end, t current assets by $179,707 and the Company has accumulated losses of $6,073,949 as at that date. This, along with other matters as set forth in Note 2.1(c), indicate that a material uncertainty exists that may cast significant doubt on the to continue as a going concern. Our opinion is not modified in respect of this matter. PricewaterhouseCoopers, Level 8 Civic Tower, 272 Victoria Parade, Suva, Fiji. GPO Box 200, Suva, Fiji. T: (679) / , F: (679) PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

9 7 Emphasis of Matter We draw attention to Note 11 in the financial statements which relates to the basis used to maintain the carrying value of the plantation at $Nil. As noted in Note 11, the future value of the plantation depends on how the plantation recovers from the impact of Cyclone Winston and the rehabilitation works that is undertaken by the Company. Consequently the Company may be able to recover some of the value written down in last year financial statements. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section above, we have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter Valuation of Plantation (Refer to note 2.5 and 11 to the financial statements) The valuation of the plantation was considered a key audit matter as it represents the primary activity of the Company and value at year end involves judgement and estimates. As at 30 June 2016, the Company had resolved to write-down to $Nil its entire Teak plantation. This was due to extensive damages to the Rakiraki plantation sustained from tropical Cyclone Winston and poor silviculture management and damages caused by fire to the Sigatoka plantation. The Company in the current financial year has re-assessed its valuation of the plantation and concluded to maintain the carrying value of the asset at $Nil for reasons noted in note 11. How our audit addressed the key audit matter Our audit procedures included, amongst others, the following in response to the valuation of plantation: Understanding, evaluating and assessing the rational adopted by the Directors in maintaining their valuation of plantation at $Nil. Visiting certain compartments of the Rakiraki plantation to assess the condition and the rational of the Directors assessment. Sighting post-cyclone images of the different compartments of the plantation and comparing with recent images to assess the state and progress if any of the plantation. Considering whether a survey and an expert valuation could have been undertaken in order to determine the fair value of the plantation, taking into account its current state and availability of data for valuation purposes.

10 8 Key audit matter Financial irregularities (Refer to note 23 to the financial statements) As indicated in note 23, the Company identified certain financial irregularities which had occurred over a period of time. It is considered a key audit matter in view of its alleged fraudulent nature and the potential for material misstatement to the financial statements. How our audit addressed the key audit matter Our audit procedures included, amongst others, the following in response to the financial irregularities: Discussing with Directors and understanding the nature and extent of irregularities noted as well as potential for other areas in the financial statements subject to the alleged fraud and on the results currently being reported. Reviewing documentation compiled by the Directors on the irregularities covering the following areas; purchase orders, supplier invoices, payment vouchers, bank statements, etc. and validating the same. Understanding and evaluating controls over the purchase and payables business process and validating the same through tests on a sample basis. Reconciling accrued supplier balances with supplier statements to identify and book unrecorded liabilities during the current reporting period. Obtaining statements from the statutory bodies, namely Fiji National Provident Fund and Fiji Revenue and Customs Services for Pay-as-you-Earn and Value Added Tax and checking the same against Company records and amounts recorded as either paid or accrued for in the financial statements. Performing extended sample tests over wages and salaries paid in cash during the year. Re-performing bank reconciliation at year and obtaining bank audit confirmations. Obtaining written representation from the Directors to confirm their responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and that they have communicated all instances of fraud known to them;

11 9 Other Information Directors and Management are responsible for the other information. The other information comprises the information included in the Company for the year ended 30 June 2017 (but does not include the financial ). Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements 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. Responsibilities of Directors and Management for the Financial Statements Directors and Management are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and with the requirements of the Fiji Companies Act 2015, and for such internal control as the Directors and Management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors and Management are responsible for assessing the Company licable, matters related to going concern and using the going concern basis of accounting unless the Directors and Management either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Directors and Management are responsible for overseeing the Company process. the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole is includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs 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 the financial statements.

12 10 As part of an audit in accordance with the ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors and management. Conclude on the appropriateness of the directors s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company as a going concern. If we conclude that a material uncertainty exists, we are required to draw the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with Directors and Management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide Directors and Management with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with Directors and Management, we determine those matters that were of most significance in the audit of the financial statements for the current period and are therefore the key a precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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14 12 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Notes Revenue 755, ,194 Plantation written-down during the year 11 - ( 4,664,392) Other income 7-1,653 Nursey, planting, administration and other costs ( 635,006) ( 816,491) Finance costs ( 100,867) ( 176,404) Profit/ (loss) before tax 6 19,245 ( 5,334,440) Income tax expense Profit/ (loss) for the year from continuing operations 19,245 ( 5,334,440) Other comprehensive income for the year: Gain on revaluation of freehold land (Net of tax) ,542 Total comprehensive income / (loss) for the year $ 19,245 ( 4,335,898) ========== ========= Basic earnings per share 18(a) $ 0.00 ($ 0.25) ========== ========= Diluted earnings per share 18(b) $ 0.00 ($ 0.23) ========== ========= The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

15 13 BALANCE SHEET FUTURE FORESTS (FIJI) LIMITED 30 JUNE 2017 CURRENT ASSETS Notes Cash on hand and at bank 9 12,444 ( 2,274) Trade and other receivables 10 17,636 7,990 Inventories 12 78,803 97,964 NON-CURRENT ASSETS 108, ,680 Plantations Property, plant & equipment 13 1,778,953 1,839,785 1,778,953 1,839,785 TOTAL ASSETS 1,887,836 1,943,465 CURRENT LIABILITIES Borrowings 14 65,967 63,273 Payables ,623 1,128,003 NON-CURRENT LIABILITIES 288,590 1,191,276 Borrowings , ,057 Convertible notes 15-1,383,255 Payables ,602 - Deferred capital gains tax liability 8 110, ,949 1,483,258 2,433,261 TOTAL LIABILITIES 1,771,848 3,624,537 NET ASSETS/ (LIABILITIES) $ 115,988 ($ 1,681,072) ========== ========== EQUITY Share capital 17 1,989, ,008 Share premium reserve 17 3,201,572 3,062,517 Convertible notes - equity component ,055 Asset revaluation reserve , ,542 Accumulated losses ( 6,073,949) ( 6,093,194) TOTAL EQUITY $ 115,988 ($1,681,072) ========== ========= The above balance sheet should be read in conjunction with the accompanying notes. These financial statements are approved in accordance with the resolution of the Board of Directors. For and on behalf of the Board Director Director

16 14 STATEMENT OF CHANGES IN EQUITY Note Share capital Share premium reserve Convertible notes - equity component Asset revaluation reserve Accumulated losses Total Balance as at 30 June ,008 3,062, ,055 - ( 758,754) 2,654,826 Comprehensive income Loss for the year ( 5,334,440) ( 5,334,440) Gain on asset revaluation - net of tax , ,542 Total comprehensive income ,542 ( 5,334,440) ( 4,335,898) Balance as at 30 June 2016 $ 212,008 $ 3,062,517 $ 139,055 $ 998,542 ($ 6,093,194) ($ 1,681,072) Comprehensive income Loss for the year ,245 19,245 Additional shares issued via Private placement , ,000 Convertible notes reclassified to equity Convertible notes reclassified to share premium 15 1,397, ,397, ,055 ( 139,055) Total comprehensive income 1,777, ,055 ( 139,055) - 19,245 1,797,060 Balance as at 30 June 2017 $ 1,989,823 $ 3,201,572 $ - $ 998,542 ($ 6,073,949) $ 115,988 ============ =========== ============ =========== ============ ============= The above statement of changes in equity should be read in conjunction with the accompanying notes.

17 STATEMENT OF CASH FLOW Cash flows from operating activities Note Proceeds from customers 369, ,805 Payments to suppliers and employees ( 402,664) ( 324,637) Cash used in operations ( 32,989) 13,168 Interest received - 4,291 Interest paid ( 89,606) ( 176,404) Net cash used in operating activities ( 122,595) ( 158,945) Cash flows from investing activities Net proceeds from held-to-maturity investments - 155,000 Acquisition of property, plant and equipment ( 11,708) ( 41,601) Net cash (used in)/ from investing activities ( 11,708) 113,399 Cash flows from financing activities Loan from/ (repayment of loan) to directors and management 63,130 ( 9,000) Loan from other related parties - 74,861 Proceeds from issue of shares 140,132 Net repayment of borrowings ( 54,241) ( 14,453) Net cash from financing activities 149,021 51,408 Net increase in cash on hand and at bank 14,718 5,862 Cash on hand and at bank at the beginning of the financial year ( 2,274) ( 8,136) Cash on hand and at bank at the end of the financial year 9 12,444 ($ 2,274) ========= ========= 15 The above statement of cash flow should be read in conjunction with the accompanying notes.

18 16 NOTES TO AND FORMING PART OF THE 1. GENERAL INFORMATION Future Forests (Fiji) Limited specialises in the growing of teak trees (Tectona grandis) for timber production and export. The sale of teak seedlings and processing and selling sawn timber is the other core activities of the company. The company is a public company incorporated and domiciled in Fiji and is listed on the South Pacific Stock Exchange (SPSE). Pursuant to Cyclone Winston and the significant damages it 2016 The address of the registered office is at 414 Victoria Parade, Suva. The financial statements were authorised for issue by the Board of Directors on 17 October SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied by the company except where otherwise indicated. 2.1 Basis of preparation The financial statements have been prepared in accordance with the requirements of the Fiji Companies Act, 2015 and International Financial Reporting Standards (IFRS). They have been prepared under the historical cost convention except where specifically stated to be at fair value. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5. (a) New and amended standards adopted by the company There are no IFRSs or IFRS IC interpretations that are effective for the first time for the financial year beginning on or after 1 July 2016 that have a material impact on the company. (b) New standards, amendments and interpretations issued but not effective A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 July 2016, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the company, except the following set out below: Topic Key Requirements Effective Date Addresses the classification, measurement and Annual periods recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. beginning on or after 1 January 2018 IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset

19 17 NOTES TO AND FORMING PART OF THE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.1 Basis of preparation - continued (b) New standards, amendments and interpretations issued but not effective - continued Topic Key Requirements Effective Date IFRS 9, Investments in equity instruments are required to be Annual periods continued measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. beginning on or after 1 January 2018 IFRS 15, contracts with IFRS 16, This standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. elated interpretations. Replaces the current guidance in IAS 17. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Under IAS 17, a lessee was required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires a lessee to recognise a lease liability -ofvirtually all lease contracts. Included is an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. The standard is effective for accounting periods beginning on or after 1 January Annual periods beginning on or after 1 January 2017 Annual periods beginning on or after 1 January 2019 with earlier application permitted if IFRS 15, from Contracts is also applied. The company is yet to assess the impact of the above standards and intends to adopt the standards no later than the accounting period in which they become effective.

20 18 NOTES TO AND FORMING PART OF THE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued 2.1 Basis of preparation - continued (c) Going concern The company has negative cash flows from operating activities for the year ended 30 June 2017 of $122,595 (2016: $158,945) As at year end, its current liabilities exceeded its current assets by $179,707 and the company has accumulated losses of $6,073,949 as at that date. These matters indicate the existence of a material uncertainty which may cast a doubt about the ability of the company to continue as a going concern. At the beginning of the financial year the company had payables of $84,775 and incurred costs of $55,500 relating to damages sustained from Tropical Cyclone Winston. These were mainly paid from the June 2016 private placement and capital raising. These payables and costs had a direct impact on the negative cash flow from the operating activities. The financial statements have been prepared on a going concern basis which contemplates continuity of business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The business sustained significant damages from Tropical Cyclone Winston. In order to sustain the operations, the company has been pursuing other revenue sources of cash flow including sawmilling operations, sale of seedlings and consulting services. Sawmill operations and seedling sales have provided the bulk of revenue with sawmilling operations generating most of the revenue in the 4 th Quarter of June 2017 financial year. Subsequent to year end, the company was issued with a Mahogany license from Fiji Hardwood Corporation Limited to purchase 3,000 cubic metres of Mahogany logs per annum for five years, which the company looks to process into sawn timber and sell for on-going sustainability of the company. Directors and certain shareholders have provided loans to the company for financing purposes. The directors are also confident of the continued support from their major financier, the Fiji Development Bank. Having undertaken cashflow projections for the next 12 months and taking into account all the above factors, the Directors consider the application of the going concern principle to be appropriate in the preparation of the financial statements of the company. 2.2 Property, plant and equipment All property, plant and equipment, other than Freehold land, is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Freehold land is carried at fair value. The fair value is based on valuations by external independent valuers and is undertaken on a periodical basis. Increases in the carrying amount arising on revaluation of land is credited to other comprehensive income and shown as asset revaluation

21 19 NOTES TO AND FORMING PART OF THE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued 2.2 Property, plant and equipment - continued Property, plant and equipment, with the exception of freehold land, are depreciated at rates calculated to write off each asset over its estimated useful life. The rates and methods of depreciation used are: Rate Method Motor Vehicles 20% Straight line Computer Software 40% Straight line Equipment 12% - 24% Straight line Building 2.5% Straight line Freehold land is not depreciated. Profits and losses on disposal (if any) of property, plant and equipment are taken into account in determining the results for the year. 2.3 Current and deferred income tax The tax expense for the period comprises current and deferred tax. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 2.4 Trade and other creditors These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. 2.5 Plantations Plantations are stated at fair value less estimated costs to sell at the harvesting stage. Fair value less costs to sell is determined using the present value of expected future cash flows using the market price of the estimated recoverable wood volumes expected from the plantations based on a 22 year rotation less costs to sell at the point of harvest and net of forestry, harvesting, roading and transport costs. The valuation is based on certain key assumptions and best estimates. These assumptions and estimates have been determined by the directors using the most recent information and market data available and may not reflect the actual value. The gain or loss on initial recognition and subsequent changes in fair value less costs to sell of the plantations is recognised in profit or loss in the period in which it arise. The plantation is being carried at $Nil value for reasons noted in Note 11.

22 20 NOTES TO AND FORMING PART OF THE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued 2.6 Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle. Net realisable value is the estimated selling price in the ordinary course of business, less selling expenses. 2.7 Revenue recognition Revenue consists of sale of teak tree seedlings and processing and selling sawn timber. It is recognised at invoice price once goods have been delivered to the customer. 2.8 Financial assets The company classifies its financial assets into held to maturity and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities where the management has the positive intention and ability to hold to maturity. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The company 2.9 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that have been impaired are reviewed for possible reversal of the impairment at each reporting date Compound financial instruments convertible notes Compound financial instruments issued by the company comprise convertible notes that are convertible to shares at the end of 5 years or earlier at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. Upon conversion, the liability component will be transferred to equity at the prevailing carrying amount of the convertible note. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

23 21 NOTES TO AND FORMING PART OF THE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued 2.11 Employee entitlements Liabilities for wages and salaries and annual leave are recognised and are measured as the amount services up to that date Cash and cash equivalent Cash on hand and at bank are carried in the balance sheet at cost Segment information A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The company only sells seedlings at this point in time and operates predominantly in one geographical segment and therefore no segment disclosures have been made in the financial statements Basic earnings per share Basic earnings per share are determined by dividing the profit for the year of the company by the weighted average number of ordinary shares in issue during the financial year. Diluted earnings per share Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has one category of dilutive potential ordinary share being the convertible notes. The convertible note is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense Share-based payments The company operates a number of equity-settled, share-based compensation plans, under which the company provided equity instruments as compensation for services received from directors and consultants. The value of the services received in exchange for the grant of the shares is recognised as an expense Reporting currency All figures are reported in Fijian currency Comparative figures Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period.

24 22 NOTES TO AND FORMING PART OF THE 3. FINANCIAL RISK MANAGEMENT Financial risk factors foreign exchange risk, cash flow interest rate risk, fair value interest rate risk and commodity price risk), unpredictability of financial markets and seeks to minimise potential adverse effects on the comp Risk management is carried out by management, using policies as advised by the Board of Directors. Management identifies and evaluates financial risks, and assists the Board in developing policies for overall risk management. (a) (i) Market risk Foreign exchange risk The company exposure to foreign currency risk is minimal. n foreign currencies is limited and hence its (ii) Cash flow interest rate risk and fair value interest rate risk As the company has no significant interestcash flows are substantially independent of changes in market interest rates. of plantations. -term borrowings, convertible notes and fair value The company has a borrowing which has a fixed interest rate of 5% up until June 2018 and is subject to review thereafter. This limits volatility in interest rates applicable to the borrowing and the Convertible notes pay fixed interest of 7.5% on each note per annum and therefore exposure to changes in interest rate is minimal. The convertible notes issued in 2012 were measured at fair value on initial recognition using an interest rate of 10.15% as the discount rate. These convertible notes are not subject to fair value re-measurement in the future. As such, the company to fair value interest rate risk is minimal. (b) Credit risk Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the investments. Credit risk arises from cash on hand and at bank, deposits with banks and financial institutions. For banks and financial institutions, only reputable parties are acceptable.

25 NOTES TO AND FORMING PART OF THE 3. FINANCIAL RISK MANAGEMENT - continued Financial risk factors - continued 23 (c) Liquidity risk Sound liquidity risk management requires maintaining sufficient cash in the business to meet its present obligations. Management constantly monitors the forward cash requirements of the business to ensure liquidity reserves in the form of cash and cash reserves can meet these requirements. set out below on an undiscounted basis: s borrowings and liabilities at 30 June, 2017 is Up to 1 to 2 to Over Total 1 year 2 years 5 years 5 years $ As at 2017 Borrowings (Note 14) 65,967 69, , , ,674 Payables (Note 16) 222, , ,225 Total $ 288,590 $ 557,944 $ 229,929 $ 584,436 $ 1,660,899 ======== ========= ========= ========= ========== As at 2016 Borrowings (Note 14) 63,273 66, , ,006 1,002,330 Convertible notes (Note 15) 1,383, ,383,255 Payables (Note 16) 1,128, ,128,003 Total $2,574,531 $ 66,510 $ 220,541 $ 652,006 $ 3,513,588 ======== ========= ========= ========= ========= 4. CAPITAL RISK MANAGEMENT continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital and be in compliance with statutory requirements. In order to maintain or adjust the capital structure, the company may issue new shares or sell assets to reduce debt. The company has been operating with limited cash reserves, which is projected to continue for the remainder of the next financial year. Refer to Note 2.1 (c) for comments o continue as a going concern.

26 24 NOTES TO AND FORMING PART OF THE 5. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of financial statements require management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: Note 2.8: Financial assets Note 2.9: Impairment of non-financial assets Note 2.5 and Note 11: Plantations Note 15: Compound financial instruments convertible notes 6. PROFIT BEFORE INCOME TAX Profit before income tax has been determined after: Charging as expense: Auditors remuneration: Audit fees 10,000 10,000 Other services 12,300 9,376 Depreciation 72,540 93,082 Loss on disposal of property, plant and equipment - 34,839 Directors fees - 18,000 Salaries and wages 227, ,183 FNPF 58,730 24,588 The current year salaries and wages expense includes an accrual of $120,000 remuneration for Chairman/Executive director. It is expected that this will be settled in exchange of new shares. The current directors have waived the entitlement of $6,000 per annum per director as directors fees for the financial year to reduce cash constraints whilst rebuilding the company. 7. OTHER INCOME Interest income - 1,653 $ NIL $ 1,653 =========== ==========

27 25 NOTES TO AND FORMING PART OF THE 8. INCOME TAX 8.1 Income Tax Expense Operating profit/ (loss) before income tax 19,245 ( 5,334,440) ========== ========= Prima facie income tax 10% (2016: 10%) 1,925 ( 533,444) Tax effect of: Plantation written- down during the year - 466,439 Other temporary differences 1,881 4,525 Tax losses for which no deferred tax asset was recognised - 64,958 Tax effect of losses brought into account ( 168) Temporary differences on movement in provisions and differences in tax and accounting depreciation not brought to account ( 3,638) ( 2,478) Income tax expense $ Nil $ Nil =========== ========== 8.2 Deferred tax asset Potential deferred income tax asset arising from accumulated tax losses amounting to $ 1,807,305 (2016: $2,586,795) has not been recognised as an asset because it is not probable that future taxable profits will be available against which the deferred tax assets can be utilised. Tax losses of $778,011 were forfeited in the current year. 8.3 Deferred capital gains tax liability The company has booked deferred capital gains tax liability at $110,949 (2016:$ 110,949) that may arise if its freehold land were to be sold at year end at its fair value as at that date. The capital gains tax is provided is accordance with the Capital Gain Tax Decree 2011 at the rate of 10%. 9. CASH AND CASH EQUIVALENT For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and on hand and bank overdraft. Cash and cash equivalents at the end of the year as shown in the cash flow statement are reconciled to the balance sheet as follows: Cash on hand 1,612 - Cash at bank 10,832 ( 2,274) $ 12,444 ($ 2,274) ========== =========

28 26 NOTES TO AND FORMING PART OF THE 10. TRADE AND OTHER RECEIVABLES Trade receivables 24,576 15,759 Less: provision for impairment of trade receivables ( 15,759) ( 15,759) 8,817 - Owing from related parties 75,613 75,613 Less: provision for impairment on owing from related parties ( 75,613) ( 75,613) - - Prepayments 6,998 7,990 Other receivable 1,821 - $ 17,636 $ 7,990 ========= ========= As of 30 June 2017, trade receivables of $8,769 (2016: $Nil) were fully performing. As of 30 June 2017, trade receivables of $48 (2016: $Nil) were past due but not impaired. These relate to customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: Over 1 month - - Over 2 months 48 - $ 48 $ Nil =========== ========== The individually impaired receivables mainly relate to balances that are either in dispute or where the customer is facing financial difficulties. The ageing of these receivables is as follows: Over 1 month - - Over 2 months 15,759 15,759 $ 15,759 $ 15,759 =========== =========

29 27 NOTES TO AND FORMING PART OF THE 10. TRADE AND OTHER RECEIVABLES - continued Movements in the provision for impairment of trade and other receivables are as follows: At 1 July 91,372 91,694 Provision for impaired receivables - - Provision utilized during the year ( - ) ( 322) At 30 June $ 91,372 $ 91,372 =========== ========= The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. Due to their short-term nature, the carrying values of the above assets are representative of their fair value. The company does not hold any collateral as security. 11. PLANTATIONS The company owns approximately 244 hectares (2016: 229 hectares) of teak plantations and its principal business activity comprises the growing of teak trees (Tectonis grandis) for timber production and exports. The company established 15 hectares of Teak in Nalawa Ra province by planting 13,500 Teak seedlings under the SPC EU Reforest Fiji grant funding made available by the European Union. The company is yet to be reimbursed. On 20 February 2016, category 5 Severe Tropical Cyclone Winston (TC Winston) made landfall in Ra province on the island of Viti nursery in Ra Province and devastated them. TC Winston stripped the teak trees of all leaves and bark, and most trees were broken halfway or had fallen over. Many trees died as a result of TC Winston. During the wet season Jan-May 2017, Teak trees started to coppice and regrow. No silviculture practices were applied to the trees during this period to allow the trees to recover and to avoid further damage to the trees. The state of the Teak plantations remains the same as at 30 June The board of directors are of the opinion that, as at 30 June 2017 and 30 September 2017, it is not possible to determine the level and extent of permanent damage to the teak plantations and the level and extent of the potential of the teak plantations to recover from TC Winston. The board of directors has approved a resolution to maintain the written down value of the FFF teak plantations in Ra Province to $Nil as at 30 June 2017 on the basis that the plantation is as at balance date of not much value given the extent of damages sustained and the limited number and slow recovery of the remaining trees.