LARK DISTILLING CO. LTD — Annual Report 2021

Aug 29, 2021

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(Formerly known as Australian Whisky Holdings Limited) ABN 62 104 600 544

Appendix 4E Preliminary Final Report – 30 June 2021 Provided to the ASX under Listing Rule 4.3A

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Lark Distilling Co. Ltd Corporate directory 30 June 2021

Directors Mr David Dearie (Non-Executive Chairman) Mr Geoff Bainbridge (Managing Director) Mr Warren Randall (Non-Executive Director) Ms Laura McBain (Non-Executive Director) Company secretary Ms Melanie Leydin Registered office Level 1 30 Argyle Street Hobart TAS 7000 Principal place of business Level 1 30 Argyle Street Hobart TAS 7000 Auditor Deloitte Level 8 22 Elizabeth Street Hobart TAS 7000 Stock exchange listing Lark Distilling Co. Ltd shares are listed on the Australian Securities Exchange (ASX code: LRK)

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Lark Distilling Co. Ltd Contents 30 June 2021

Appendix 4E 4 Review of operations 6 Statement of profit or loss and other comprehensive income 7 Statement of financial position 8 Statement of changes in equity 9 Statement of cash flows 10 Notes to the financial statements 11

3

Lark Distilling Co. Ltd Appendix 4E Preliminary final report

1. Company details

Name of entity: Lark Distilling Co. Ltd ABN: 62 104 600 544 Reporting period: For the year ended 30 June 2021 Previous period: For the year ended 30 June 2020

2. Results for announcement to the market

2. Results for announcement to the market
			$
Revenues from ordinary activities	up	126.5%to	16,542,984
Profit from ordinary activities after tax attributable to the owners of Lark
Distilling Co. Ltd	up	370.5%to	3,441,475
Profit for the year attributable to the owners of Lark Distilling Co. Ltd	up	370.5%to	3,441,475

Dividends

There were no dividends paid, recommended or declared during the current financial period.

Comments

Refer to attached review of operations for commentary over the results for the period.

3. Net tangible assets

Net tangible assets per ordinary security	Reporting period Cents 59.51	Previous period Cents 47.64

Net tangible assets excludes intangible assets, and right-of-use assets recognised under AASB 16 Leases.

4. Control gained/lost over entities

Not applicable.

5. Dividends

Current period

There were no dividends paid, recommended or declared during the current financial period.

Previous period

There were no dividends paid, recommended or declared during the previous financial period.

6. Dividend reinvestment plans

Not applicable.

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Lark Distilling Co. Ltd Appendix 4E Preliminary final report

7. Details of associates and joint venture entities

Not applicable.

8. Foreign entities

Details of origin of accounting standards used in compiling the report:

Not applicable.

9. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements are in the process of being audited.

10. Attachments

Details of attachments (if any):

The Preliminary Final Report of Lark Distilling Co. Ltd for the year ended 30 June 2021 is attached.

11. Signed

Signed _________

Date: 30 August 2021

David Dearie Non-Executive Chairman

5

Lark Distilling Co. Ltd Appendix 4E Review of Operation

Review of operations

Lark is proud to report profit before providing for income tax amounting to $1.05 million, which represents a $2.32m or 183% improvement over the previous corresponding period (30 June 2020: loss of $1.27 million).

Key highlights:

• Revenue from ordinary activities for the year 30 June 2021 was $16.54 million, up 126% compared to last year at $7.30 million.

• Net Sales Revenue (revenue after excise) for period was $12.92 million, up 98% year on year.

• Lark achieved an average Net Sales Revenue per Litre of $216, up 55% Year on year from $139 per litre.

• Gross Margin as a % of Net Revenue was 67% which represents an improvement year on year of 5.1 ppts.

• Litres under maturation increased by 54% to 1,093,073 as at 30 June 2021, from 711,313 litres as at 30 June 2020.

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The maturation market value is based on an estimated future net sales value which is equal to what the Group’s net sales value achieved today. The market value presented has an inherent risk in that the estimated net sales value will be achieved on maturation, therefore consideration needs to be given to market conditions at that point in time

• The value of the Whisky Bank based on maintaining the F21 NSR per Litre of $216 is estimated at $236m.

• During the period Lark received multiple awards and recognition for the quality of its products, including being nominated as one of four distillers for Worldwide Whisky Producer of the Year. In addition, 28 medals were received recognising multiple SKUs from the Core & Limited Release portfolio from numerous Whisky bodies and organisations around the world.

Financial Position

The net assets of Lark remain strong at $50.40 million as at 30 June 2021 (an increase of $13.02 million from 30 June 2020).

This increase is largely due to the following:

• Profit before income tax for the year of $1.05 million; driven by the following:

a) Gross profit of $8.65 million;

• b) Other income of $0.72 million;

• c) Operating expenses of $8.05 million;

• d) Net finance costs of $0.27 million.

• Lark’s net assets were strengthened via institutional placement of $8.85 million completed in September 2020.

• Lark’s working capital (current assets less current liabilities) is $15.21 million at 30 June 2021 (30 June 2020: $9.00 million).

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Lark Distilling Co. Ltd Statement of profit or loss and other comprehensive income For the year ended 30 June 2021

Note Revenue Revenue 2 Cost of sales 4 Gross profit Other income 3 Expenses Selling and distribution expenses 4 Administration expenses Employee benefit expense Depreciation and amortisation 5 Operating profit/(loss) Finance income 6 Finance costs 7 Profit/(loss) before income tax benefit Income tax benefit 8 Profit/(loss) after income tax benefit for the year attributable to the owners of Lark Distilling Co. Ltd 4 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax Total comprehensive income / (loss) for the year attributable to the owners of Lark Distilling Co. Ltd Basic earnings per share Diluted earnings per share	Consolidated 2021 2020 $ $ 16,542,984 7,302,136 (7,888,608) (3,260,042) 8,654,376 4,042,094 723,022 748,803 (1,889,273) (824,856) (2,981,975) (2,401,675) (2,985,221) (2,541,438) (205,798) (127,068) 1,315,131 (1,104,140) 2,167 19,117 (271,343) (187,273) 1,045,955 (1,272,296) 2,395,520 - 3,441,475 (1,272,296) 376 447 376 447 3,441,851 (1,271,849) Cents Cents 5.66 (2.34) 5.34 (2.34)
	8,654,376
	723,022 (1,889,273) (2,981,975) (2,985,221) (205,798)
	1,315,131 2,167 (271,343)
	1,045,955 2,395,520
	3,441,475 376
	376
	3,441,851
	Cents 5.66 5.34

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

7

Lark Distilling Co. Ltd Statement of financial position As at 30 June 2021

Note Assets Current assets Cash and cash equivalents 9 Trade and other receivables 10 Inventories 11 Prepaid assets 12 Total current assets Non-current assets Inventories 13 Property, plant and equipment 14 Right-of-use assets 15 Intangibles 16 Deferred tax 17 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 18 Financial liabilities 19 Employee benefits 20 Total current liabilities Non-current liabilities Trade and other payables Borrowings 21 Financial liabilities 22 Employee benefits Total non-current liabilities Total liabilities Net assets Equity Issued capital 23 Reserves 24 Accumulated losses 25 Total equity	Consolidated 2021 2020 $ $ 7,645,874 6,119,362 2,394,945 1,364,115 7,757,179 4,950,050 708,089 21,244 18,506,087 12,454,771 18,064,721 14,329,411 8,434,320 7,907,617 1,643,857 206,930 11,224,514 11,229,315 2,501,104 - 41,868,516 33,673,273 60,374,603 46,128,044 2,927,061 2,885,233 214,427 423,612 262,594 150,263 3,404,082 3,459,108 - 17,247 5,000,000 5,000,000 1,534,163 176,060 38,092 98,531 6,572,255 5,291,838 9,976,337 8,750,946 50,398,266 37,377,098 58,498,886 49,475,985 1,100,504 543,712 (9,201,124) (12,642,599) 50,398,266 37,377,098
	18,506,087
	18,064,721 8,434,320 1,643,857 11,224,514 2,501,104
	41,868,516
	60,374,603
	2,927,061 214,427 262,594
	3,404,082
	- 5,000,000 1,534,163 38,092
	6,572,255
	9,976,337
	50,398,266
	58,498,886 1,100,504 (9,201,124)
	50,398,266

The above statement of financial position should be read in conjunction with the accompanying notes

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Lark Distilling Co. Ltd Statement of changes in equity For the year ended 30 June 2021

Lark Distilling Co. Ltd Statement of changes in equity For the year ended 30 June 2021
Consolidated Balance at 1 July 2019 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income / (loss) for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 23) Share-based payments Balance at 30 June 2020 Consolidated Balance at 1 July 2020 Profit after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 23) Share-based payments Issue of shares on exercise of unlisted options Balance at 30 June 2021	Issued capital $ 49,361,969 - -	Reserves $ 47,641 - 447	Retained profits $ (11,370,303) (1,272,296) -	Total equity $ 38,039,307 (1,272,296) 447
	- 114,016 -	447 - 495,624	(1,272,296) - -	(1,271,849) 114,016 495,624
	49,475,985	543,712	(12,642,599)	37,377,098
	Issued capital $ 49,475,985 - -	Reserves $ 543,712 - 376	Retained profits $ (12,642,599) 3,441,475 -	Total equity $ 37,377,098 3,441,475 376
	- 8,556,996 - 465,905	376 - 556,416 -	3,441,475 - - -	3,441,851 8,556,996 556,416 465,905
	58,498,886	1,100,504	(9,201,124)	50,398,266

The above statement of changes in equity should be read in conjunction with the accompanying notes

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Lark Distilling Co. Ltd Statement of cash flows For the year ended 30 June 2021

Note Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Purchase of inventory Interest paid Interest received Government grants received Net cash used in operating activities 27 Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Proceeds from the exercise of options Proceeds from borrowings Repayment of borrowings Payment of lease liabilities under AASB 16 Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 9	Consolidated 2021 2020 $ $ 16,566,804 8,348,262 (7,595,798) (3,858,586) (15,828,804) (7,887,738) (271,343) (163,315) 2,167 33,385 751,878 - (6,375,096) (3,527,992) (774,007) (1,330,644) (13,094) (244,996) 150,000 6,000 (637,101) (1,569,640) 8,857,503 - (406,091) - 465,905 - - 5,000,000 (296,915) (490,354) (81,693) (23,958) 8,538,709 4,485,688 1,526,512 (611,944) 6,119,362 6,731,306 7,645,874 6,119,362
	(6,375,096)
	(774,007) (13,094) 150,000
	(637,101)
	8,857,503 (406,091) 465,905 - (296,915) (81,693)
	8,538,709
	1,526,512 6,119,362
	7,645,874

The above statement of cash flows should be read in conjunction with the accompanying notes

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 1. General information

The following notes are disclosed to assist with understanding the preliminary financial report and are not intended to include all notes that will accompany the audited financial statements.

This preliminary financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The entity is involved in significant expansionary activity and as such, is currently cash absorbing. During the period the entity incurred a profit before tax of $1,045,955 (FY20: loss of $1,272,296) and had net cash outflows from operating activities of $6,375,096 (FY20: outflow of $3,527,992). As at 30 June 2021 the entity had cash and cash equivalents of $7,645,874 (FY20: $6,119,362).

The directors have approved a cash flow forecast which includes further expansionary activities in the production of newmake spirit for the FY2022 year which will absorb cash throughout FY2022 and beyond. Due to having no current contracted or legal obligations to increase production or undertake expansionary capital expenditure, the entity has the ability to undertake mitigating actions in response to any cash flow uncertainties or potential risks that may arise after the date of this report. Such actions include ceasing or reducing the level of expansionary whisky production, and the deferral or suspension of non-critical capital expenditure.

At the date of this report and having considered the current cash balance, cash flow forecasts and mitigating plans, the directors are confident that the Group will be able to continue as a going concern.

Note 2. Revenue

Note 2. Revenue
Whisky revenue Gin revenue Other revenue	Consolidated 2021 2020 $ $ 11,705,953 4,765,509 3,764,285 1,360,944 1,072,746 1,175,683 16,542,984 7,302,136
	16,542,984

Revenue recognition

The Group recognises revenue as follows:

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and returns, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined and consistently applied using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability.

Sale of goods

Revenue derived from all sale of inventories to customers are recognised at the time of delivery, except for online sales which are recognised on dispatch of goods.

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 2. Revenue (continued)

All revenue is stated net of the amount of goods and services tax (GST).

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Other revenue

Other revenue is a combination of Hospitality sales of Non-Lark products, as well as Slainte, Brandy, Rum & Sanitiser and is recognised when it is received or when the right to receive payment is established.

Note 3. Other income

R&D grant income Government grant income Excise rebates Gain on sale of Overeem brand Other income Other income	Consolidated 2021 2020 $ $ 92,878 30,185 451,000 336,457 100,000 100,000 - 165,000 79,144 117,161	Consolidated 2021 2020 $ $ 92,878 30,185 451,000 336,457 100,000 100,000 - 165,000 79,144 117,161
	723,022	748,803

Government grant income

Government grant income relates to $351,000 of JobKeeper and $100,000 of Cashflow Boost payments received in response to COVID-19.

Gain on sale of Overeem brand

On 19 February 2020 the Group executed a binding Heads of Agreement with Sawford Distillery Pty Ltd for the sale of the Overeem Single Malt Whisky trademark and limited whisky inventory.

Note 4. Profit / loss before income tax expense

Profit / loss before income tax determined after Cost of goods sold Directors and consulting fees Selling and marketing expenses Legal fees Occupancy costs Transport, travel and entertainment	Consolidated 2021 2020 (7,888,608) (3,260,042) (1,016,443) (1,042,725) (1,889,273) (824,857) (120,634) (336,307) (337,428) (234,674) (132,912) (98,840)	Consolidated 2021 2020 (7,888,608) (3,260,042) (1,016,443) (1,042,725) (1,889,273) (824,857) (120,634) (336,307) (337,428) (234,674) (132,912) (98,840)
	(11,385,298)	(5,797,445)

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 5. Depreciation and amortisation

Note 5. Depreciation and amortisation
Depreciation of property, plant and equipment Amortisation of intangibles Depreciation of right-of-use assets Depreciation capitalised into inventory	Consolidated 2021 2020 $ $ 97,304 48,097 17,895 47,135 90,599 31,836 205,798 127,068 235,785 171,406
	205,798
	235,785

Note 6. Finance income

Interest income Note 7. Finance costs Interest expense Bank and other fees	Consolidated 2021 2020 $ $ 2,167 19,117 Consolidated 2021 2020 $ $ 259,563 147,672 11,780 39,601 271,343 187,273
	271,343

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 8. Income tax benefit

Income tax benefit Deferred tax - origination and reversal of temporary differences Aggregate income tax benefit Deferred tax included in income tax benefit comprises: Increase in deferred tax assets (note 17) Numerical reconciliation of income tax benefit and tax at the statutory rate Profit/(loss) before income tax benefit Tax at the statutory tax rate of 26% (2020: 27.5%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Share-based payments R&D offset income Cashflow boost Other Tax losses not recognised Prior period tax losses now recognised Year 1 deferred tax assets and liabilities now recognised Income tax benefit Amounts credited directly to equity Deferred tax assets (note 17) Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 26% (2020: 27.5%)	Consolidated 2021 2020 $ $ (2,395,520) - (2,395,520) - (2,395,520) - 1,045,955 (1,272,296) 271,948 (349,881) 144,668 148,687 (23,684) (8,300) (26,000) - 38,317 - 405,249 (209,494) - 209,494 (2,321,500) - (479,269) - (2,395,520) - Consolidated 2021 2020 $ $ (105,584) - 18,177,860 27,106,708 4,726,244 7,454,345
	18,177,860
	4,726,244

The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed and future taxable profits are available to offset against the carry forward tax losses.

The franking account balance as at 30 June 2021 was NIL (June 2020: NIL).

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 9. Current assets - cash and cash equivalents

Note 9. Current assets - cash and cash equivalents
Cash on hand Cash at bank	Consolidated 2021 2020 $ $ 2,410 3,767 7,643,464 6,115,595 7,645,874 6,119,362
	7,645,874

Accounting policy for cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts.

Note 10. Current assets - trade and other receivables

Trade receivables Other receivables Expected future credit losses Deposits paid	Consolidated 2021 2020 $ $ 2,306,857 1,228,265 40,609 110,554 (8,082) (20,828) 55,561 46,124 2,394,945 1,364,115
	2,394,945

Accounting policy for trade and other receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.

Note 11. Current assets - inventories

Raw materials - at cost Work in progress - at cost Finished goods - at cost Inventory in casks Provision for obsolescence	Consolidated 2021 2020 $ $ 1,726,275 1,486,300 2,226,867 784,961 1,163,852 346,094 2,801,691 2,332,695 (161,506) - 7,757,179 4,950,050
	7,757,179

Accounting policy for inventories

Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'weighted average' basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Work in progress inventory reflects whisky and gin currently in production but not yet bottled or barrelled.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 12. Current assets - Prepaid assets

Prepaid wood Prepaid packaging and other Note 13. Non-current assets - inventories Inventory in casks	Consolidated 2021 2020 $ $ 98,716 - 609,373 21,244 708,089 21,244 Consolidated 2021 2020 $ $ 18,064,721 14,329,411

Non-current inventory represents whisky in casks that is expected to be maturing for at least a further 12 months. The company does not expect these casks to be decanted or sold within the next 12 months.

Note 14. Non-current assets - property, plant and equipment

Land - at cost Impairment Building improvements - at cost Less: Accumulated depreciation Plant, equipment & production assets - at cost Less: Accumulated depreciation Motor vehicles - at cost Less: Accumulated depreciation Capital work in progress	Consolidated 2021 2020 $ $ 4,564,644 4,564,644 (529,683) (529,683) 4,034,961 4,034,961 515,743 166,885 (66,265) (11,421) 449,478 155,464 4,345,421 3,689,468 (1,097,433) (888,931) 3,247,988 2,800,537 154,044 154,044 (92,800) (82,639) 61,244 71,405 640,649 845,250 8,434,320 7,907,617
	4,034,961
	515,743 (66,265)
	449,478
	4,345,421 (1,097,433)
	3,247,988
	154,044 (92,800)
	61,244
	640,649
	8,434,320

Accounting policy for property, plant and equipment

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 14. Non-current assets - property, plant and equipment (continued)

Freehold land is not depreciated.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit and loss.

The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Freehold improvements	2.5%
Office and computer equipment	25% - 33%
Plant, machinery & production assets	5% - 33%
Motor vehicles	10% - 20%

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.

Note 15. Non-current assets - right-of-use assets

Note 15. Non-current assets - right-of-use assets
Land and buildings - right-of-use Less: Accumulated depreciation	Consolidated 2021 2020 $ $ 1,766,452 238,766 (122,595) (31,836) 1,643,857 206,930
	1,643,857

Accounting policy for right-of-use assets

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.

The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 16. Non-current assets - intangibles

Note 16. Non-current assets - intangibles
Goodwill - at cost Intangible assets - at cost Less: Accumulated amortisation	Consolidated 2021 2020 $ $ 10,934,839 10,934,839 474,845 461,752 (185,170) (167,276) 289,675 294,476 11,224,514 11,229,315
	474,845 (185,170)
	289,675
	11,224,514

Accounting policy for intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Goodwill

Goodwill is carried at cost less any accumulated impairment losses.

Goodwill is calculated as the excess of the sum of:

(i) the consideration transferred;

(ii) any non-controlling interest (determined under either the full goodwill or proportionate interest method); and (iii) the acquisition date fair value of any previously held equity interest;

over the acquisition date fair value of any identifiable assets acquired and liabilities assumed.

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective note to the financial statements disclosing the business combination.

Under the full goodwill method, the fair value of the non-controlling interest is determined using valuation techniques which make the maximum use of market information where available.

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments.

Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cashgenerating units, representing the lowest level at which goodwill is monitored and not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of.

Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill.

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Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 16. Non-current assets - intangibles (continued)

Other intangible assets

Other intangible assets including patents and trademarks and the whisky barrel fund, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Amortisation

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straightline method over their estimated useful lives, and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful lives for current and comparative periods are as follows:

Intangible asset	Useful life
Intangible assets	5-8 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Note 17. Non-current assets - deferred tax

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes.

Deferred tax liabilities comprises taxable temporary differences attributable to: Amounts recognised in profit or loss: Fixed assets and right of use assets Prepayments Total deferred tax liability recognised in profit or loss	Consolidated 2021 2020 $ $ (530,099) - (27,955) -	Consolidated 2021 2020 $ $ (530,099) - (27,955) -
	(558,054)	-

19

Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 17. Non-current assets - deferred tax (continued)

Deferred tax asset comprises deductible temporary differences attributable to: Amounts recognised in profit or loss: Tax losses Provisions and accruals Other liabilities Capital raising costs Foreign exchange Total deferred tax asset recognised in profit or loss Amounts recognised in equity: Transaction costs on share issue Net deferred tax asset Movements: Opening balance Credited to profit or loss (note 8) Credited to equity (note 8) Closing balance Note 18. Current liabilities - trade and other payables Trade payables Sundry creditors and accrued expenses Other payables

Consolidated 2021 2020 $ $ 2,122,071 - 148,970 - 443,389 - 226,543 - 12,601 - 2,953,574 - 105,584 - 2,501,104 - - - 2,395,520 - 105,584 - 2,501,104 - Consolidated 2021 2020 $ $ 1,825,198 1,010,227 488,299 1,377,569 613,564 497,437 2,927,061 2,885,233

2,927,061

20

Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 19. Current liabilities - financial liabilities

Note 19. Current liabilities - financial liabilities
Barrel Finance and Logistics Motor vehicles lease Lease liability	Consolidated 2021 2020 $ $ 48,877 329,570 30,794 47,016 134,756 47,026 214,427 423,612
	214,427

Accounting policy for financial liabilities

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Note 20. Current liabilities - employee benefits

Note 20. Current liabilities - employee benefits
Employee benefits Accounting policy for employee benefits	Consolidated 2021 2020 $ $ 262,594 150,263

Short-term employee benefits

Provision is made for the consolidated group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year, have been measured at the amounts expected to be paid when the liability is settled plus related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

Contributions are made by the consolidated group to employee superannuation funds and are charged as expenses when incurred.

Note 21. Non-current liabilities - borrowings

Loan - Quality Life Pty Ltd	Consolidated 2021 2020 $ $ 5,000,000 5,000,000

The key terms of the loan are as follows:

• Facility amount up to AUD $5,000,000 (fully drawn as at 30 June 2021);

• Term is 5 years after initial drawdown (initial drawdown in March 2020);

• Interest rate of 4% per annum plus the RBA published cash rate paid quarterly; - Interest only loan with principal due at the end of the term.

21

Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 21. Non-current liabilities - borrowings (continued)

Total secured liabilities

The total secured liabilities (current and non-current) are as follows:

Loan - Quality Life Pty Ltd

Consolidated	Consolidated
2021	2020
$	$
5,000,000	5,000,000

Assets pledged as security

The loan is secured by a registered security interest in real property and whisky held by the Group.

Note 22. Non-current liabilities - financial liabilities

Note 22. Non-current liabilities - financial liabilities
Lease liability Note 23. Equity - issued capital 2021 Shares Ordinary shares - fully paid 63,069,350 Movements in ordinary share capital Details Date Balance 1 July 2019 Issue of shares to settle liabilities 16 March 2020 Issue of shares to settle liabilities 16 March 2020 Consolidation of shares on 30 for 1 basis 28 April 2020 Balance 30 June 2020 Issue of shares 23 September 2020 Issue of shares on conversion of Performance Rights 7 January 2021 Issue of shares on exercise of unlisted options 12 March 2021 Issue of shares on exercise of unlisted options 26 March 2021 Issue of shares on exercise of unlisted options 15 April 2021 Transactions costs for period Balance 30 June 2021	2021 Shares 63,069,350		Consolidated 2021 2020 $ $ 1,534,163 176,060 Consolidated 2020 2021 2020 Shares $ $ 54,452,878 58,498,886 49,475,985	Consolidated 2021 2020 $ $ 1,534,163 176,060
					2020 $ 49,475,985
			Shares Issue price 1,630,579,441 2,297,436 $0.039 718,121 $0.034 (1,579,142,120) $0.000 54,452,878 8,052,334 $1.100 150,000 $0.000 138,046 $0.900 138,046 $1.125 138,046 $1.350 - $0.000 63,069,350		$ 49,361,969 89,600 24,416 -
					49,475,985 8,857,567 - 124,241 155,302 186,362 (300,571)
					58,498,886

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

22

Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 23. Equity - issued capital (continued)

Share buy-back

There is no current on-market share buy-back.

Note 24. Equity - reserves

Note 24. Equity - reserves
Foreign currency reserve Share-based payments reserve	Consolidated 2021 2020 $ $ 48,464 48,088 1,052,040 495,624
	1,100,504	543,712

Foreign currency reserve

The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.

Share-based payments reserve

The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services.

Note 25. Equity - accumulated losses

Accumulated losses at the beginning of the financial year Profit/(loss) after income tax benefit for the year Accumulated losses at the end of the financial year	Consolidated 2021 2020 $ $ (12,642,599) (11,370,303) 3,441,475 (1,272,296)	Consolidated 2021 2020 $ $ (12,642,599) (11,370,303) 3,441,475 (1,272,296)
	(9,201,124)	(12,642,599)

23

Lark Distilling Co. Ltd Notes to the financial statements 30 June 2021

Note 26. Interests in subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy:

accordance with the accounting policy:
		Ownership interest
Name	Principal place of business /	2021	2020
	Country of incorporation	%	%
Australian Whisky Holdings Bothwell Pty Ltd	Level 1, 30 Argyle Street, Hobart	100.00%	100.00%
	TAS 7000
Australian Whisky Holdings Services Pty Ltd	Level 1, 30 Argyle Street, Hobart	100.00%	100.00%
	TAS 7000
Australian Whisky Holdings Management Pty Ltd	Level 1, 30 Argyle Street, Hobart	100.00%	100.00%
	TAS 7000
Aowei Liquor Industries Beijing Limited (former	Beijing PRC 100022	100.00%	100.00%
name Beijing Montec Commercial Limited)
Australian Whisky Holdings (HK) Limited (former	Kowloon, Hong Kong	100.00%	100.00%
name Montec International (HK) Limited)
Lark Distillery Pty Ltd	40 Denholms Road, Cambridge,	100.00%	100.00%
	TAS 7170

Note 27. Reconciliation of profit/(loss) after income tax to net cash used in operating activities

Profit/(loss) after income tax benefit for the year Adjustments for: Depreciation and amortisation Movement in deferred taxes recognised to equity Payables settled via share issue Non-cash share based payments Change in operating assets and liabilities: Increase in trade and other receivables Increase in inventories Increase in deferred tax assets Decrease/(increase) in prepayments Increase in other provisions Decrease in financial assets Decrease/Increase in trade creditors and accruals Net cash used in operating activities

Consolidated 2021 2020 $ $ 3,441,475 (1,272,296) 205,798 298,492 105,584 - - 114,016 556,792 496,071 (1,884,981) (862,490) (6,542,439) (4,503,373) (2,501,104) - (686,845) 18,124 51,892 29,110 - 300,000 878,732 1,854,354 (6,375,096) (3,527,992)

(6,375,096)

24