LARK DISTILLING CO. LTD — Annual Report 2011

Aug 30, 2011

TO. 1300135638

ABN 93 059 273 111

Level 3, Suite 70 Pitt Street GPO Box 4231 Sydney NSW 2001 Australia Phone: +61 1300 134 875 +61 (02) 9233 4497 Fax: Email: ngeddes@austcosec.com.au Website: www.australiancompanysecretaries.com

Facsimile Cover Sheet

To: Company Announcements

ASX Company:

1300 135 638 Fax:

From: Nick Geddes

Date: 31 August 2011

Pages incl this cover page: 13

Please find attached the Montec International (MTI) Appendix 4E and accounts for lodgement.

Thanks,

Kind regards, Nick Geddes

MONTEC INTERNATIONAL LIMITED ABN 62 104 600 544 PRELIMINARY FINAL REPORT APPENDIX 4E FINANCIAL YEAR ENDED 30 JUNE 2011

$1.$ Details of the reporting period

Reporting period	Previous corresponding period
30 June 2011	30 June 2010

$\mathbf{z}$ . Results for announcement to the market

	Key Information	Current period	Previous corresponding period	Change %	Amount change
2.1	Revenues from ordinary activities	138,191	204,210	(32)	(66, 019)
2.2	Loss from ordinary activities after tax attributable to member	(329, 476) and a man and there are the company work	(527, 535)	(38)	(198, 059)
2.3	The total comprehensive loss for the period attributable to member	(312, 334)	(522, 509)	(40)	(210, 175)

2.4 Dividends/Distributions

No dividends declared in current or prior year.

• 2.5 Record date for determining entitlements to dividends N/A.
• 2.6 Refer point 14 below for explanation of figures in 2.1 to 2.3 above

$3.$ Statement of Comprehensive Income

Refer attached summary financial statements.

4. Statement of Financial Position

Refer attached summary financial statements.

5. Statement of Cash Flows

Refer attached summary financial statements.

Details of dividends or distributions 6.

N/A

$\overline{7}$ . Details of dividend reinvestment plan

$N/A$

1. Statement of Retained Earnings

Refer attached summary financial statements.

9. Net tangible assets per security

MONTEC INTERNATIONAL LIMITED ABN 62 104 600 544 PRELIMINARY FINAL REPORT APPENDIX 4E FINANCIAL YEAR ENDED 30 JUNE 2011

	2011	2010
Net tangible assets per ordinary share	\$(0.00013)	\$0.0008

1. Details of entities over which control has been gained or lost during the period

N/A

$11.$ Details of associates and joint venture entities

$N/A$

Other significant information $12.$

Refer point 14 below.

Accounting standards used by foreign entities $13.$

N/A

Commentary on results and explanatory information $14.$

The loss of the Group for the financial year after providing for income tax amounted to \$329,476 (2010: \$527,535).

Review of Operations

i. China business

During the year the Group scaled down Chinese operations to the level of minimum presence, and terminated all staff. Further, management continues to investigate other product opportunities, both within and outside the dairy category.

During December 2010, the Company has implemented a corporate restructure plan and has reduced its expenditure to be more in line with the forecast revenues of 2011. The restructure of the business included scaling down both Chinese and Australian operations to a minimum level. In addition, termination notices were issued to all employees. This together with the previously announced office relocation provided significant cost savings. The Company has also entered into payment schedules with regard to terminations and restructuring costs in line with its expected monthly cash receipts and available cash reserves.

An impairment review of the patent resulted in a reversal of impairment provision of \$115,000.

In May 2011, the Company acquired a loan in the amount of \$350,000 from Nebral Pty Ltd (Nebral) and Trandara Pty Ltd (Trandara). The funds acquired under this loan were advanced by the Company to Elisar Investments Pty Ltd (Ellsar) for the purposes of Ellsar subscribing for 1,750,000 fully paid ordinary shares in the capital of Bligh Mining Pty Ltd (Bligh). Ellsar is a special purpose vehicle that was established specifically for the purpose

MONTEC INTERNATIONAL LIMITED ABN 62 104 600 544 PRELIMINARY FINAL REPORT APPENDIX 4E FINANCIAL YEAR ENDED 30 JUNE 2011

of investing in Bligh. Bligh is a private company that was established to investigate and exploit mineral mining opportunities in the Republic of Indonesia.

Loan between Nebral, Trandara and the Company

The terms of the loan agreement are for 18 months, with interest at 8% per annum payable quarterly in arrears and convertible to ordinary shares at \$0.0025 per share, or assigning all of the Company's rights under the loan agreement and call option agreement it entered with Ellsar to Nebral and Trandara.

Loan between the Company and Ellsar

The terms of the loan agreement are for 18 months, with interest at 8% per annum payable quarterly in arrears and to repay the loan by either requiring Ellsar to issue shares to the Company at a deemed issue price of \$0.0000001 each or exercising a call option to acquire all of the issued capital of Ellsar at a purchase price of \$1.00.

ii. Australian royalties

Royalties from licences held in Australia have fallen \$49,813 (29%) to \$120,203 in 2011 (2010: \$170,016).

Financial Position

The net assets of the Group have decreased by \$242,645 from 30 June 2010 to \$53,220 in 2011. This decrease is largely due to the following factors:

$\Box$ Operating expenses incurred during the year;

Reduced operations in China leading to a decline in sales revenues; partially $\Box$ offset by

Proceeds from share placement raising \$69,689. $\Box$

The Group's working capital, being current assets less current liabilities, has decreased from \$231,572 in 2010 to net current liabilities of \$46,924 in 2011.

$15.$ Audit

$\ddot{\phantom{0}}$

The report is based on accounts which are in the process of being audited.

MONTEC INTERNATIONAL LIMITED

ACN 104 600 544

CONSOLIDATED ENTITY

SUMMARY FINANCIAL STATEMENT

FOR THE YEAR ENDED 30 JUNE 2011

$\sim$

TABLE OF CONTENTS

Statement of Comprehensive Income
Statement of Financial Position	2
Statements of Changes in Equity	3
Statement of Cash Flow	3
Notes to the Summary Financial Statements

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2011

	Note		Consolidated Group
		2011	2010
		\$	5
Revenue		138,191	204,210
Raw materials sold/used		(9, 213)	(8, 827)
Compliance and professional fees		(145, 660)	(143, 518)
Advertising and marketing expenses		(818)	(26)
Employee benefits expenses		(267, 902)	(318, 310)
Administrative expenses		(49, 678)	(170, 015)
Travel expenses		(9.755)	(31, 633)
Insurance expenses		(25, 120)	(26, 840)
Depreciation and amortisation expense		(67.452)	(32, 576)
Impairment of PPE		(7,069)
Reversal of prior year impairment		115,000
Loss before income tax		(329, 476)	(527, 535)
Income tax expense
Loss for the year		(329, 476)	(527, 535)
Other comprehensive income
Exchange differences on translating foreign operations		17,142	5,026
Other comprehensive income for the period, net of tax		17,142	5,026
Total comprehensive income for the period		(312, 334)	(522,509)
Loss for the period attributable to members of the parent entity		(329, 476)	(527, 535)
Total comprehensive income for the period attributable to members of the parent entity		(312, 334)	(522, 509)
Basic and diluted earnings per share (cents per share)	1	(0.0009)	(0.002)

The Summary Financial Statements should be read in conjunction with the accompanying notes.

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

	Consolidated Group
	2011	2010
CURRENT ASSETS	\$	\$
Cash and cash equivalents	130,529	404.938
Trade and other receivables	31,137	55,762
Inventories		14.995
Other current assets	4,639	7,614
TOTAL CURRENT ASSETS	166,305	483,309
NON-CURRENT ASSETS
Plant and equipment		14,293
Financial assets	350,000
Intangible assets	100,144	50,000
TOTAL NON-CURRENT ASSETS	450,144	64,293
TOTAL ASSETS	616,449	547,602
CURRENT LIABILITIES
Trade and other payables	163,163	238,841
Short-term provisions	50,066	12,896
TOTAL CURRENT LIABILITIES	213,229	251,737
NON-CURRENT LIABILITIES
Financial liabilities	350,000
TOTAL NON-CURRENT LIABILITIES	350,000
TOTAL LIABILITIES	563,229	251,737
NET ASSETS	53,220	295,865
EQUITY
Issued capital	20,200,910	20,131,221
Reserves	155,622	679,646
Accumulated losses	(20, 303, 312)	(20, 515, 002)
TOTAL EQUITY	53,220	295,865

The Summary Financial Statements should be read in conjunction with the accompanying notes.

$\hat{\mathcal{A}}$

Montec International Limited ABN 104 600 544

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2011

	Reserves
Consolidated Group	Issued Accumulated Losses Capital \$ S		Share s	Foreign Options Exchange S	Total \$
Balance at 1 July 2009		19,629,084 (19,987,467)	541,166	133,454	316,237
Total comprehensive income for the period		(527, 535)	$\overline{\phantom{0}}$	5.026	(522, 509)
Shares issued during the year	619,458			$\blacksquare$	619,458
Share issue costs	(117, 321)			۰	(117, 321)
Balance at 30 June 2010		20, 131, 221 (20, 515, 002)	541,166	138,480	295,865
Total comprehensive income for the period		(329, 476)	$\qquad \qquad -$	17,142	(312, 334)
Employee options lapsed	₩		541, 166 (541, 166)	u,
Shares issued during the year	69,689				69,689
Balance at 30 June 2011		20,200,910 (20,303,312)	₩	155,622	53,220

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

	Consolidated Group
	2011	2010
	s	S
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers	136,588	185,927
Payments to suppliers and employees	(487, 144)	(663.847)
Interest received	6,458	16,548
Net cash used in operating activities	(344,098)	(461, 372)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property, plant and equipment		1,743
Net cash provided by investing activities		1,743
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares	69,689	619,458
Shares issue costs		(117, 321)
Net cash provided by financing activities	69,689	502,137
Net (decrease)/increase in cash and cash equivalents held	(274.409)	42,508
Cash and cash equivalents at start of year	404,938	362,430
Cash and cash equivalents at end of year	130,529	404,938

The Summary Financial Statements should be read in conjunction with the accompanying notes.

NOTES TO THE SUMMARY FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

NOTE 1: EARNINGS PER SHARE

a. Reconciliation of earnings to net loss
Net loss	(329,476)	(527.535)
Earnings used in the calculation of basic and diluted EPS	(329.476)	(527, 535)
b. Applying AASB 133:
Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS	356,188,438	260 936 141
Weighted average number of options outstanding not treated as dilutive		20,800,000 (i)
Weighted average number of ordinary shares outstanding during the year used in calculation of dilutive EPS	356,188,438	260.936.141

(i) As options exercise prices are in excess of the average market price for ordinary shares and the Company has made a loss during the year, they are considered anti-dilutive.

NOTE 2: SEGMENT REPORTING

Identification of reportable segments

Montec International Limited has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group has only one line of business, that being the sale and marketing of monounsaturated dairy technology and products in Australia and China. Operating segments are therefore determined on the same basis.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter segment transactions

Segment revenues, expenses and results include transfers between segments. The prices charged on inter-segment transactions are the same as those charged for similar goods to parties outside of the consolidated group at an arm's length. These transfers are eliminated on consolidation.

Segment assets

Assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis.

Segment liabilities

Liabilities consist principally of accounts payable, employee entitlements, accrued expenses, provisions and borrowings.

$\hat{\boldsymbol{\theta}}$

Montec International Limited ABN 104 600 544

NOTES TO THE SUMMARY FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2011

NOTE 2: SEGMENT REPORTING (CONTINUED)

				Consolidated
	Australia	China	Eliminations	Group
	\$	\$	S	\$
2011 REVENUE
External sales	132,162	6,029		138,191
Total sales revenue	132,162	6,029	$\overline{a}$	138,191
Total revenue				138,191
SEGMENT RESULT
Expenses	(233, 163)	(234, 504)		(467, 667)
Loss before income tax expense				(329, 476)
Income tax expense
Loss after income tax expense				(329, 476)
ASSETS
Segment assets	545,338	316,985	(245.874)	616,449
Total assets	545,338	316,985	(245, 874)	616,449
LIABILITIES
Segment liabilities	461,448	347,655	(245, 874)	563,229
Total liabilities	461,448	347,655	(245, 874)	563,229
OTHER
Depreciation and amortisation of segment assets	49,730	17,722		67,452
OTHER NON-CASH SEGMENT INCOME
Reversal of impairment of patents and acquired rights	(115,000)			(115,000)
OTHER NON-CASH SEGMENT EXPENSES
Impairment of loan in subsidiary	10,083		(10, 083)

$\sim$

NOTES TO THE SUMMARY FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2011

NOTE 2: SEGMENT REPORTING (CONTINUED)

				Consolidated
	Australia	China	Eliminations	Group
	\$	\$	\$	\$
2010
REVENUE External sales				204,210
	186,564	17,646
Total sales revenue	186,564	17,646	۰	204,210
Total revenue				204,210
SEGMENT RESULT
Expenses	(411, 036)	(320, 709)	٠	(731, 745)
Loss before income tax expense				(527, 535)
Income tax expense
Loss after income tax expense				(527, 535)
ASSETS
Segment assets	319,954	509,491	(281, 843)	547,602
Total assets	319,954	509,491	(281, 843)	547,602
LIABILITIES
Segment liabilities	111,217	422,363	(281, 843)	251.737
Total liabilities	111,217	422,363	(281, 843)	251,737
OTHER
Depreciation and amortisation of segment assets	15,158	17,418		32,576
OTHER NON-CASH SEGMENT EXPENSES
Impairment of loan in subsidiary	44,018		(44.018)

Major customer

The Group has a number of customers to which it provides products and services. The Group supplies one single customer in the Australia segment which accounts for 87% of external revenue (2010: 83%).

NOTES TO THE SUMMARY FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2011

NOTE 3: EVENTS SUBSEQUENT TO REPORTING DATE

On 29 July 2011, the Company entered into a Convertible Note Agreement with Malachite Resources Limited (ASX: MAR) to provide \$500,000 in funding to MAR secured by convertible notes. However, the Convertible Note Agreement was terminated on the basis that MTI was unable to obtain the required regulatory approvals to proceed with the subscription for convertible notes in MAR and satisfy one of the Agreement's conditions precedent. Further the Company has entered into a Convertible Note Agreement to raise \$200,000 to be applied to the working capital needs of the Company. The Convertible Note is issued for 18 months, with interest at 12% per annum payable quarterly in arrears and convertible to ordinary shares at \$0.0025 per share. Except for the matters discussed above no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

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