PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY - mercator.inmercator.in/investors/FinSub2017-18/PT Karya Putra Borneo 2018.pdf · dated September 10, 2007 of Hamid Gunawan, S.H., notary

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2018 AND INDEPENDENT AUDITOR’S REPORT

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY TABLE OF CONTENTS

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DIRECTORS’ STATEMENT LETTER INDEPENDENT AUDITOR’S REPORT CONSOLIDATED FINANCIAL STATEMENTS - For the year ended March 31, 2018

Consolidated Statement of Financial Position 1 Consolidated Statement of Profit or Loss and Other Comprehensive Income 3 Consolidated Statement of Changes in Equity 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6

SUPPLEMENTARY INFORMATION Statement of Financial Position – Parent Entity 43 Statement of Profit or Loss and Other Comprehensive Income – Parent Entity 45 Statement of Changes in Equity – Parent Entity 46 Statement of Cash Flows – Parent Entity 47

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MARCH 31, 2018

March 31, March 31,

Notes 2018 2017

US$ US$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 5 9,350,810 4,226,990

Trade accounts receivable from third parties 6 1,562,167 3,057,642

Other accounts receivable 7

Related parties 31 1,493,319 -

Third parties 389,255 64,671

Inventories 8 1,014,306 1,187,281

Prepaid taxes - 3,812

Prepayments and advances 553,432 233,723

Total Current Assets 14,363,289 8,774,119

NONCURRENT ASSETS

Deferred tax assets 28 120,144 137,549

Advance for purchase of property, plant and equipment 471,614 406,641

Property, plant and equipment - net of accumulated

depreciation and impairment loss of

US$ 7,586,789 in 2018 and

US$ 5,973,458 in 2017 9 20,642,859 21,586,252

Mining properties 10 17,129,324 13,546,030

Goodwill 11 2,556,456 2,556,456

Reclamation deposits 12 1,262,421 704,748

Other noncurrent assets 227,886 255,443

Total Noncurrent Assets 42,410,704 39,193,119

TOTAL ASSETS 56,773,993 47,967,238

See accompanying notes to consolidated financial statements

which are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MARCH 31, 2018 (Continued)

March 31, March 31,

Notes 2018 2017

US$ US$

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Trade accounts payable to third parties 13 5,407,603 2,253,053

Other accounts payable 14

Related parties 31 5,254,988 -

Third parties 587 4,002

Accrued expenses 15 908,150 2,325,235

Taxes payable 16 2,766,757 1,347,386

Advance from customers 17 4,180,408 1,123,767

Due to a related party 18,31 17,003,880 26,442,685

Total Current Liabilities 35,522,373 33,496,128

NONCURRENT LIABILITIES

Provision for reclamation 19 947,628 725,387

Employee benefits obligations 29 330,926 387,579

Total Noncurrent Liabilities 1,278,554 1,112,966

EQUITY

Capital stock - Rp 1,000,000 par value per share

Authorized - 200,000 shares in 2018 and 2017

Subscribed and paid-up - 78,000

shares in 2018 and 2017 20 6,011,375 6,011,375

Additional paid-in capital 21 34,972 34,972

Retained earnings 8,343,011 2,636,860

Equity attributable to the owners

of the Company 14,389,358 8,683,207

Non-controlling interests 22 5,583,708 4,674,937

Total Equity 19,973,066 13,358,144

TOTAL LIABILITIES AND EQUITY 56,773,993 47,967,238



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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED MARCH 31, 2018

Notes 2018 2017

US$ US$

SALES 23,31 41,088,965 52,573,993

COST OF GOODS SOLD 24 (19,063,221) (34,017,579)

GROSS PROFIT 22,025,744 18,556,414

Selling expenses 25 (4,606,953) (6,719,203)

General and administrative expenses 26 (2,855,218) (1,537,983)

Expense on account of disruption of business 30 (4,188,284) -

Financial charges 27 (1,375,565) (2,087,858)

Loss on foreign exchange - net 157,528 (118,664)

Others - net (278,754) (222,279)

PROFIT BEFORE TAX 8,878,498 7,870,427

TAX EXPENSE - NET 28 (2,355,723) (2,305,970)

NET PROFIT FOR THE YEAR 6,522,775 5,564,457

OTHER COMPREHENSIVE INCOME

Item that will not be reclassified subsequently

to profit or loss:

Remeasurement of defined benefit obligation - net of tax 92,147 (6,518)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 6,614,922 5,557,939

PROFIT ATTRIBUTABLE TO:

Owners of the Company 5,636,019 3,964,089

Non-controlling Interest 22 886,756 1,600,368

Net profit for the period 6,522,775 5,564,457

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:

Owners of the Company 5,706,151 3,961,931

Non-controlling Interest 22 908,771 1,596,008




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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Equity

Additional attributable

Capital paid-in Retained to owners of Non-controlling Total

Notes stock capital earnings the Company interests equity

US$ US$ US$ US$ US$ US$

Balance as of April 1, 2016 551,390 - (1,325,071) (773,681) 3,075,925 2,302,244

Issuance of new shares 20 5,459,985 - - 5,459,985 - 5,459,985

Additional paid-in capital 21 - 34,972 - 34,972 - 34,972

Tax amnesty - - - - 3,004 3,004

Net profit for the year - - 3,964,089 3,964,089 1,600,368 5,564,457

Other comprehensive income

for the year - - (2,158) (2,158) (4,360) (6,518)

Balance as of March 31, 2017 6,011,375 34,972 2,636,860 8,683,207 4,674,937 13,358,144

Net profit for the year - - 5,636,019 5,636,019 886,756 6,522,775

Other comprehensive income

for the year - - 70,132 70,132 22,015 92,147

Balance as of March 31, 2018 6,011,375 34,972 8,343,011 14,389,358 5,583,708 19,973,066



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CONSOLIDATED STATEMENT OF CASH FLOWS


2018 2017

US$ US$CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 8,878,498 7,870,427 Adjustments:

Depreciation expenses 1,618,071 2,397,781 Financial charges 1,375,565 2,087,858 Amortization expenses 836,031 4,119,944 Employee benefits obligations 79,511 148,785 Loss on disposal of property, plant and equipment 10,427 614,736 Foreign exchange (3,299) 2,349 Interest income (42,583) (17,470)

Operating cash flows before changes in working capital 12,752,221 17,224,410 Changes in working capital:

Trade accounts receivable from third parties 1,495,475 (2,193,187) Other accounts receivable (1,817,903) (62,593) Inventories 172,975 387,851 Prepaid taxes 3,812 23,572 Prepayments and advances (319,709) (13,286) Reclamation deposits (554,374) (11,723) Other noncurrent assets 27,557 (12,550) Trade accounts payable to third parties 3,154,550 (379,086) Other accounts payable 5,251,573 (18,712) Advance from customers 3,056,641 1,100,414 Accrued expenses (1,417,085) 1,560,658 Taxes payable 619,130 189,392 Provision for reclamation 222,241 136,540

Cash generated from operations 22,647,104 17,931,700 Payments of employee benefits (13,302) - Cash received from tax refund - 54,323 Payment of income tax (1,568,790) (1,299,343)

Net Cash Provided by Operating Activities 21,065,012 16,686,680

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of property, plant and equipment (685,105) (590,716) Acquisition of mining properties (4,419,325) (1,456,546) Advance for purchase of property, plant and equipment (64,973) (192) Interest income received 42,583 17,470 Proceeds from sale of property, plant and equipment - 9,602 Proceeds from issuance of capital - 5,488,000

Net Cash (Used in) Provided by Investing Activities (5,126,820) 3,467,618

CASH FLOWS FROM FINANCING ACTIVITIESPayment of due to related party (5,248,715) (15,768,626) Proceed from due to related party 961,570 -

Payment of financial charges (6,527,227) (441,787)

Net Cash Used in Financing Activities (10,814,372) (16,210,413)

NET INCREASE IN CASH AND CASH EQUIVALENTS 5,123,820 3,943,885

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,226,990 283,105

CASH AND CASH EQUIVALENTS AT END OF YEAR 9,350,810 4,226,990

See accompanying notes to consolidated financial statementswhich are an integral part of the consolidated financial statements.

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PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2018 AND FOR THE YEAR THEN ENDED

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1. GENERAL

a. Establishment and General Information PT Karya Putra Borneo (“the Company”) was established in Balikpapan based on deed No. 05 dated September 10, 2007 of Hamid Gunawan, S.H., notary in Balikpapan. The deed of establishment was approved by the Ministry of Justice and Human Rights of the Republic of Indonesia in its Decision Letter No. C-03412.HT.01.01-TH.2007 dated November 15, 2007. The Company’s articles of association have been amended several times, most recently by deed No. 11 of Aditya Putra Patria, SH. Mkn., notary in Bekasi, dated March 26, 2018 concerning the changes in shareholder’s address. This deed was approved by the Ministry of Justice and Human Rights of the Republic of Indonesia in his decision letter No. AHU-0042465.AH.01.11. Tahun 2018 dated March 26, 2018.

The Company’s head office is located at Menara Prima Tower 1, Jalan DR. Ide Anak Agung Gde Agung Blok 6.2, Kawasan Mega Kuningan, Jakarta, with its mining site located in Samarinda, East Kalimantan.

In accordance with article 3 of the Company’s articles of association, the scope of its activities is mainly to engage in coal mining activities. The Company started its commercial operations in July 2012. The Company and its subsidiary (the Group) had total number of employees of 155 and 189 at March 31, 2018 and 2017, respectively.

The Company belongs to a group of companies owned by Mercator Limited a group listed on the National Stock Exchange and Bombay Stock Exchange in India. The Company’s management at March 31, 2018 and 2017: March 31, 2018 March 31, 2017 Board of Commissioners President Commissioner : Adip Mittal

Commissioner : Kennedy Perkash Nanik : Atul Agarwal

Board of Directors President Director : Bharat Kumar Jain Director : Radhey Shyam Bansal : Kirtipal Singh Raheja : Vinay Kumar Malik : Sagar Vats Based on notarial deed No. 8 dated August 31, 2017 of Ida Faridah, S.H., M.Kn, the stockholders of the Company agree to appoint Mr. Radhey Shyam Bansal, Mr. Vinay Kumar Malik and Mr Sagar Vats as Directors of the Company; appoint Mr. Bharat Khumar Jain as President Director; appoint Mr. Kennedy Perkash Nanik as Commissioner and Mr. Adip Mittal as President Commissioner. Based on notarial deed No. 2 dated September 6, 2017 of Ida Faridah, S.H., M.Kn, the stockholders of the Company agree with the resignation of Mr. Kritipal Singh Raheja as Directors and Mr. Atul Agarwal as Commissioner of the Company.

b. Consolidated Subsidiary

Details of the Group’s subsidiary at the end of the reporting period are as follows:

Start of

Nature of Percentage of Commercial March 31, March 31,

Domicile Business Ownership Operations 2018 2017

US$ US$

PT Indo Perkasa (IPK) Jakarta Mining services 51% 2012 25,531,129 24,746,572

Subsidiary

Total

Assets Before Elimination

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2018 AND FOR THE YEAR THEN ENDED - Continued

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c. Mining and Other Rights 1. Based on decision of the Regents of Kutai Kartanegara regarding Approval of Production

Operation Mining Permit (IUP OP) No. 540/136/IUP-OP/MB-PBAT/VIII/2011 dated August 12, 2011, the Government issued IUP Exploration to the Company for the 914-hectare land in Loa Janan, Batuah Village, Kutai Kartanegara, East Kalimantan.

The IUP OP granted for 12 years includes the construction for 1 year, production for 10 years, and post-mining for 1 year. The permit expires on August 12, 2023.

2. Based on letter No. 503/194/IUJP/BPPMD-PTSP/II/2015 dated February 15, 2015,

IPK is granted mining service permit (Izin Usaha Jasa Pertambangan) by the Local Government of East Borneo for 5 years and can be extended.

3. Based on Dock Permit Letter No. 552.3/952/Dishub/VII/2011 dated July 1, 2011, the Government granted permit to IPK to operate a special dock located at the shipping line of Mahakam River as a mooring facility/ dock ship/ barge to its own interest to support the loading/unloading of coal of production.

4. Based on decision of Indonesia Investment Coordination Board (BKPM) regarding

Approval of Production Operating Permit (IUP OP) for foreign investment in coal commodity No.39/1/IUP/PMA/2016 dated November 15, 2016, the Government issued IUP to the Company for the 914-hectare land in Loa Janan, Batuah Village, Kutai Kartanegara, East Kalimantan valid until August 12, 2023.

d. Proven Reserve Based on the assessment of PT GMT Indonesia dated September 20, 2011, the proven reserve of Company’s coal is at 34,073,100 tonnes. As of March 31, 2018 and 2017, the management estimates that the proven reserve is at 26,315,967 and 28,277,089 tonnes (unaudited), respectively.

2. ADOPTION OF NEW AND REVISED STATEMENTS OF FINANCIAL ACCOUNTING

STANDARDS (“PSAK”) AND INTERPRETATIONS OF PSAK (“ISAK”)

a. Amendments/improvements and Interpretations to standards effective in the current year

In the current year, the Group has applied a number of amendments and an interpretation to PSAK that are relevant to its operations and effective for accounting period beginning on or after January 1, 2017. The application of the following amendments and intepretation to standards have not resulted to material impact to disclosures or on the amounts recognized in the current and prior year financial statements:

PSAK 1 (amendment): Presentation of Financial Statements about Disclosure Initiative;

PSAK 24 (improvement), Employee Benefits;

PSAK 58 (improvement), Non-current Assets Held for Sale and Discontinued Operations;

PSAK 60 (improvement), Financial Instruments: Disclosures;

ISAK 31, Scope Interpretation of PSAK 13: Investment Property; and

ISAK 32, Definition and Hierarchy of Financial Accounting Standards.


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b. Standards and amendments to standards issued not yet adopted

New standards and amendments to standards effective for periods beginning on or after January 1, 2018, with early application permitted are:

PSAK 2 (amendment), Statement of Cash Flows about Disclosure Initiative;

PSAK 13 (amendment), Transfers of Investment Property;

PSAK 15 (improvement), Investments in Associates and Joint Ventures;

PSAK 16 (Amendment): Property, Plant and Equipment – Agriculture: Bearer Plants;

PSAK 46 (amendment), Income Tax: Recognition on Deferred Tax Assets for Unrealized Losses;

PSAK 53 (amendment), Classification and Measurement of Share-based Payment Transactions;

PSAK 67 (improvement), Disclosures of Interest in Other Entities;

PSAK 69, Agriculture; and

PSAK 111, Wa’d Accounting. Interpretation to standard effective for periods beginning on or after January 1, 2019, with early application permitted is ISAK 33, Foreign Currency Transactions and Advance Consideration. Standards and amendments to standards effective for periods beginning on or after January 1, 2020, with early application permitted are:

PSAK 15 (amendment), Investments in Associates and Joint Ventures: Long Term Interest in Associate and Joint Ventures;

PSAK 62 (amendment), Insurance Contract: Applying PSAK 71: Financial Instruments with PSAK 62: Insurance Contracts;

PSAK 71, Financial Instruments;

PSAK 71 (amendment), Financial Instruments: Prepayment Features with Negative Compensation;

PSAK 72, Revenue from Contracts with Customers; and

PSAK 73, Leases.

As of the issuance date of the consolidated financial statements, the effects of adopting these standards, amendments and interpretation on the consolidated financial statements is not known nor reasonably estimable by management.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of Compliance The consolidated financial statements of the Group have been prepared in accordance with Indonesian Financial Accounting Standards. These financial statements are not intended to present the financial position, result of operations and cash flows in accordance with accounting principles and reporting practices generally accepted in other countries and jurisdictions.

b. Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.


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Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The consolidated statements of cash flows are prepared using the direct method with classifications of cash flows into operating, investing and financing activities.

c. Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved where the Company has the power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including (i) the size of the Company’s holding of voting rights relative to the size and dispersion of holding of the other vote holders; (ii) potential voting rights held by the Company, other vote holders or other parties; (iii) rights arising from other contractual arrangements; and (iv) any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expense of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interest. Total comprehensive income of subsidiaries is attributed to the owners of the Company and the non-controlling interest even if this results in the non-controlling interest having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interest in existing 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 interest and the non-controlling interest are adjusted to reflect the changes in their relative interest in the subsidiaries. Any difference between the amount by which the non-controlling interest are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.


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When the Group losses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. All amounts previously recognized in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable accounting standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under PSAK 55, Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

d. Business Combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree, and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value except for certain assets and liabilities that are measured in accordance with the relevant standards. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquire (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after the reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitles their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another accounting standard. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination.

Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured subsequent to reporting dates in accordance with PSAK 55 or PSAK 57; Provisions, Contigent Liabilities and Contigent Assets with the corresponding gain or loss being recognised in profit or loss.


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When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interests were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amount recognized as of that date.

e. Foreign Currency Transactions and Translation

The consolidated financial statements are measured and presented in U.S Dollar (US$), which is the functional currency for the financial statements. In preparing the consolidated financial statements of the Group, transactions in currencies other than the Group’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.

f. Transaction with Related Parties

A related party is a person or entity that is related to the Group (the reporting entity):

a. A person or a close member of that person’s family is related to the reporting entity if that person: i. has control or joint control over the reporting entity; ii. has significant influence over the reporting entity; or iii. is a member of the key management personnel of the reporting entity or of a parent

of the reporting entity.

b. An entity is related to the reporting entity if any of the following conditions applies:

i. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

ii. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

iii. Both entities are joint ventures of the same third party. iv. One entity is a joint venture of a third entity and the other entity is an associate of

the third entity. v. The entity is a post-employment benefit plan for the benefit of employees of either

the reporting entity, or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

vi. The entity is controlled or jointly controlled by a person identified in (a).


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vii. A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or a parent of the entity).

viii. The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.

g. Financial Assets

All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract which terms require delivery of the financial assets within the time frame established by the market concerned, and are initially measured at fair value plus transaction costs. The Group’s financial assets are classified as loans and receivables.

Loans and receivables

Cash and cash equivalent, except cash on hand, trade accounts receivables and that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortized cost using the effective interest method less impairment. Interest is recognized by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial. Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or where appropriate, a shorter period to the net carrying amount on initial recognition. Impairment of financial assets

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or

breach of contract, such as default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

the disappearance of an active market for that financial asset because of financial difficulties.

Loans and receivables that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis Objective evidence of impairment for a portfolio of receivables could include the Group’s past experiences of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.


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The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralised borrowing for the proceeds received. On derecognition of financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

On derecognition of financial asset other than its entirety (e.g., when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

h. Financial Liabilities and Equity Instruments

Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.


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Classification as debt or equity

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities at amortized cost

Financial liabilities, which include trade and other payables, and other borrowings, are initially measured at fair value, net of transaction costs, and subsequently measured at amortized cost using the effective interest method. Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

i. Netting of Financial Asset and Financial Liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the group has a legally enforceable right to set off the recognized amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy.

j. Cash and Cash Equivalents For cash flow presentation purposes, cash and cash equivalents consist of cash on hand and in banks and all unrestricted investments with maturities of three months or less from the date of placement.

k. Inventories Inventories are stated at cost or net realizable value, whichever is lower. Cost is determined using the weighted average method. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

l. Prepaid Expenses

Prepaid expenses are amortized over their beneficial periods using the straight-line method.

m. Property, Plant and Equipment

Property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated at cost, less accumulated depreciation and any accumulated impairment losses.


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Depreciation is recognized so as to write-off the cost of assets less residual values using the following method:

Depreciation Prior to

method Year 2017 April 1, 2016

Coal Crusher Plant Unit production 30,000,000 MT 60,000,000 MT

Land improvements Straight-line 10 - 20 years 20 years

Building Straight-line 20 years 20 years

Weight bridge Double declining 4 years 4 years

Vehicle Double declining/ 4 years 4 years

Straight-line

Heavy equipment Double declining/ 4 years 4 years

Straight-line

Furniture, fixture and office equipment Double declining 4 years 4 years

Unit of measure

Starting April 1, 2016, the Company changed the estimated useful lives of Coal Crusher Plant and Land Improvement, based on the Company’s assessment on the remaining estimated useful life of the assets. This change was applied prospectively.

The estimated useful lives, unit of production, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Land is stated at cost and is not depreciated.

The cost of maintenance and repairs is charged to operations as incurred. Other costs incurred subsequently to add to, replace part of, or service an item of property, plant and equipment, are recognised as asset if, and only if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. When assets are retired or otherwise disposed of, their carrying values are removed from the accounts and any resulting gain or loss is reflected in the profit or loss. Construction in progress is stated at cost. Construction in progress is transferred to the respective property, plant and equipment account when completed and ready for use.

n. Exploration and Evaluation Assets

Exploration and evaluation activity involves the search for mineral resources, determination of the technical feasibility and assessment of the commercial viability of the mineral resource. Exploration and evaluation expenditures comprise of costs that are directly attributable to:

acquisition of rights to explore;

topographical, geological, geochemical and geophysical studies;

exploratory drilling;

trenching and sampling; and

activities involved in evaluating the technical feasibility and commercial viability of extracting mineral resources.

Exploration and evaluation assets related to an area of interest is written-off as incurred, unless they are capitalised and carried forward, on an area of interest basis, provided one of the following conditions is met:


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(i) the costs are expected to be recovered through successful development and exploitation of the area of interest or, alternatively, by its sale; or

(ii) exploration activities in the area of interest have not yet reached the stage which permits

a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in or in relation to the area of interest are continuing.

Capitalised costs include costs directly related to exploration and evaluation activities in the relevant area of interest. General and administrative costs are allocated to an exploration or evaluation asset only to the extent that those costs can be related directly to operational activities in the relevant area of interest. Exploration and evaluation assets are recorded at cost less impairment charges. As the asset is not available for use, it is not depreciated. Exploration and evaluation assets are assessed for impairment if facts and circumstances indicate that impairment may exist. Exploration and evaluation assets are also tested for impairment once commercial reserves are found, before the assets are transferred to mining properties.

o. Mining Properties When mines are capable of operating in the manner intended by the management, exploration and evaluation assets are transferred to mining properties. Amortization is charged using the units of production method. Mining properties are tested for impairment in accordance with the policy described in Note 3q.

p. Goodwill

Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in subsequent period. On disposal of the subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

q. Impairment of Non-Financial Assets

At the end of each reporting period, the Group reviews the carrying amount of non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.


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Estimated recoverable amount is the higher of fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of the non-financial asset (cash generating unit) is less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount and an impairment loss is recognized immediately against earnings. Accounting policy for impairment of financial asset is explained in Note 3g and for impairment of goodwill in Note 3o.

r. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. As lessee Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

s. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

t. Revenue and Expense Recognition

Sale of Coal

Revenue from sale of coal is recognised when all of the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of the coal;

the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the coal sold;

the amount of revenue can be measured reliably;


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it is probable that the economic benefits associated with the transaction will flow to the Group; and

the cost incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of services

Revenue from contracts to provide services is recognised when the services are rendered.

Interest income

Interest income is accrued on time basis, by reference to the principal outstanding and at the applicable interest rate.

Expenses

Expenses are recognised when incurred.

u. Employee Benefits

The Group provides defined employee benefits to its employees in accordance with Labor Law No. 13/2003. No funding has been made to the defined benefit plans.

The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:

Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements).

Net interest expense or income

Remeasurement

The Group presents the first two components of defined benefit costs in profit or loss. Curtailment gains and losses are accounted for as past service costs.

v. Income Tax

The tax currently payable is based on taxable profit to the year. Taxable profit differs from profit before tax as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Current tax expense is determined based on the taxable income for the year computed using prevailing tax rates.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary differences arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary differences arises from the initial recognition of goodwill.


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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted, or substantively enacted, by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. The carrying amount of deferred tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items that are recognized outside of profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognized outside of profit or loss.

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In the application of the Group accounting policies, which are described in Note 3, the directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical Judgments in Applying Accounting Policies

In the process of applying the accounting policies described in Note 3, management has not made any critical judgment that has significant impact on the amounts recognised in the consolidated financial statements, apart from those involving estimates, which are dealt with below. Key Sources of Estimation Uncertainty

The key assumptions concerning future and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Impairment Loss on Loans and Receivables

The Group assesses its loans and receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in profit or loss, management makes judgment as to whether there is objective evidence that loss event has occurred. Management also makes judgment as to the methodology and assumptions for estimating the amount and timing of future cash flows which are reviewed regularly to reduce any difference between loss estimate and actual loss. The carrying amounts of loans and receivables are disclosed in Notes 5, 6 and 7.


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Estimated Useful Lives of Property, Plant and Equipment

The useful live of each item of the Group’s property, plant and equipment are estimated based on the period over which the asset is expected to be available for use. Such estimation is based on internal technical evaluation and experience with similar assets. The estimated useful lives of each asset is reviewed periodically and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the asset. It is possible, however, that future results of operations could be materially affected by changes in the amounts and timing of recorded expenses brought about by changes in the factors mentioned above.

A change in the estimated useful lives of any item of property, plant and equipment would affect the recorded depreciation expense and decrease in the carrying values of property, plant and equipment.

The carrying amounts of property, plant and equipment are disclosed in Note 9.

Estimated Coal Reserves

Proven reserves are estimates of the output that can be economically and legally exploited from the Group’s mining properties. The Group determines and report its mineral reserves under the principles incorporated in the Code for Reporting of Mineral Resources and Ore Reserves (the “JORC Code”) of the Australasian Joint Ore Reserves Committee (“JORC”). In order to estimate mineral reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, production techniques, stripping ratio, production costs, transport costs, commodity demand, commodity prices and exchange rates.

Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data are generated during the course of operations, estimates of reserves may change from period to period.

Employee benefits

The determination of employee benefits obligation is dependent on selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include among others, discount rate and rate of salary increase. Actual results that differ from the Group’s assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While it is believed that the Group’s assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Group’s employee benefits obligations (Note 30).

Impairment of Non-Financial Assets

The Group reviews its non-financial assets for any indication of impairment at each reporting date. If any such indication exist, management estimates the recoverable amount of the non-financial assets. Determining the value in use requires the estimation of cash flows expected to be generated from the continued use and ultimate disposition of such non-financial assets (cash generating unit) and a suitable discount rate in order to calculate the present value. While it is believed that the assumptions used in the estimation of the value in use of non-financial assets reflected in the financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse impact on the results of operations.


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5. CASH AND CASH EQUIVALENTS

March 31, March 31,

2018 2017

US$ US$

Cash on hand 5,067 79,363

Cash in banks

US Dollar

PT Bank Rakyat Indonesia (Persero) Tbk 3,430,953 -

PT Bank Mandiri (Persero) Tbk 593,025 740,536

PT Bank CIMB Niaga Tbk 296,345 -

PT Bank UOB Indonesia 11,277 -

PT Bank Sumitomo Mitsui Indonesia 7,195 -

PT Bank Danamon Indonesia Tbk - 697,473

Rupiah

PT Bank Rakyat Indonesia (Persero) Tbk 264,614 -

PT Bank Danamon Indonesia Tbk 111,134 111,224

PT Bank CIMB Niaga Tbk 16,042 -

PT Bank Mandiri (Persero) Tbk 15,158 98,394

Time deposits

US Dollar

PT Bank Danamon Indonesia Tbk 2,500,000 2,500,000

PT Bank UOB Indonesia 2,100,000 -

Total 9,350,810 4,226,990

Less restricted cash and cash equivalents:

US Dollar

PT Bank Mandiri (Persero) Tbk 3,001,654 -

PT Bank Danamon Indonesia Tbk 563,891 -



Rupiah

PT Bank Danamon Indonesia Tbk 110,759 -

PT Bank Mandiri (Persero) Tbk 27,329 -



Time deposits

US Dollar

PT Bank Danamon Indonesia Tbk 2,500,000 -

PT Bank UOB Indonesia 2,100,000 -

Total 8,609,674 -

Total cash and cash equivalent 741,136 4,226,990

The applicable interest rate per annum as follows:

March 31, March 31,

2018 2017

Time deposit

U.S. Dollar 0.25% - 0.75% 1.30%


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Newly appointed directors of the Company have frozen the operational bank accounts in PT Bank Danamon Indonesia Tbk, PT Bank UOB Indonesia, PT Bank Sumitomo Mitsui Indonesia and PT Bank Mandiri (Persero) Tbk on September 6, 2017. On June 8, 2018, all aforesaid banks have been unfrozen and the Company has utilized the fund since then.

6. TRADE ACCOUNTS RECEIVABLE FROM THIRD PARTIES

March 31, March 31,

2018 2017

US$ US$

a. By debtors

PT Gunung Samarinda 1,120,257 -

PT Baramulti Sukses Sarana 234,651 1,099,220

CV Mahakam Indah Jaya 115,332 -

PT Bara Daya Energy 70,470 -

PT Multi Harapan Utama 21,457 -

LG International Corp - 993,794

Gas Oil Division Limited - 896,811

PT Rinjani Kertanegara - 67,817

Total 1,562,167 3,057,642

b. Aging

Not yet due 1,446,835 1,099,220

Past due:

Under 30 days - 1,939,340

31 - 60 days - 19,082

More than 90 days 115,332 -

Total 1,562,167 3,057,642

c. By currency

Rupiah 1,327,413 24,035

U.S. Dollar 234,754 3,033,607

Total 1,562,167 3,057,642

No allowance for impairment loss was provided on receivables from third parties, as management believes that all such receivables are collectible.

7. OTHER ACCOUNTS RECEIVABLE

March 31, March 31,

2018 2017

US$ US$

Related parties (Note 31)

Mercator Limited 1,374,811 -

PT Bima Gema Permata 93,008 -

MCS Holding Pte. Ltd 25,500 -

Total 1,493,319 -


No allowance for impairment loss was provided on other accounts receivables from related and third parties as management believes that all such receivables are collectible.


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8. INVENTORIES

March 31, March 31,

2018 2017

US$ US$

Coal 569,976 906,562

Spareparts 438,470 224,941

Fuel 5,860 55,778

Total 1,014,306 1,187,281

Management believes that all inventories are usable and/or saleable, and an allowance for obsolescence and damaged of inventories is therefore deemed unnecessary.

9. PROPERTY, PLANT AND EQUIPMENT

April 1, 2017 Additions Deductions Reclassifications March 31, 2018

US$ US$ US$ US$ US$

At cost:

Land 7,514,874 1,232 - - 7,516,106

Land improvements 9,383,951 - - - 9,383,951

Coal crusher plant 7,744,817 - - - 7,744,817

Building 536,178 903 - - 537,081

Furniture, fixture and

office equipment 749,455 3,107 - - 752,562

Vehicles 568,420 162,493 15,167 - 715,746

Weight bridge 63,990 - - - 63,990

Heavy equipment 998,025 298,447 - - 1,296,472

Construction in progress - 218,923 - - 218,923

Total 27,559,710 685,105 15,167 - 28,229,648

Accumulated depreciation

and impairment loss:

Land improvements 1,996,965 419,189 - - 2,416,154

Coal crusher plant 2,513,735 682,721 - - 3,196,456

Building 149,382 32,202 - - 181,584



Vehicles 346,050 96,975 4,740 - 438,285

Weight bridge 63,936 54 - - 63,990

Heavy equipment 321,328 292,280 - - 613,608

Total 5,973,458 1,618,071 4,740 - 7,586,789

Net Carrying Value 21,586,252 20,642,859


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April 1, 2016 Additions Deductions Reclassifications March 31, 2017

US$ US$ US$ US$ US$

At cost:

Land 7,446,634 68,240 - - 7,514,874

Land improvements 10,133,984 - 750,033 - 9,383,951

Coal crusher plant 7,744,817 - - - 7,744,817

Building 447,346 63,956 - 24,876 536,178



Vehicles 568,420 - - - 568,420

Weight bridge 63,990 - - - 63,990

Heavy equipment 693,604 345,444 41,023 - 998,025

Construction in progress 8,113 16,763 - (24,876) -

Total 27,750,089 600,677 791,056 - 27,559,710

Accumulated depreciation

and impairment loss:

Land improvements 1,191,187 965,160 159,382 - 1,996,965

Coal crusher plant 1,551,766 961,969 - - 2,513,735

Building 115,818 33,564 - - 149,382



Vehicles 248,224 97,826 - - 346,050

Weight bridge 58,593 5,343 - - 63,936

Heavy equipment 70,748 257,916 7,336 - 321,328

Total 3,742,395 2,397,781 166,718 - 5,973,458

Net Carrying Value 24,007,694 21,586,252

Disposal of property, plant and equipment is as follows:

2018 2017

US$ US$

Proceeds - 9,602

Net carrying amount 10,427 624,338

Loss from disposal of property and equipment 10,427 614,736

Depreciation expense was allocated to the following:

2018 2017

US$ US$

Cost of goods sold (Note 24) 1,575,065 2,330,367

General and administrative expenses (Note 26) 43,006 67,414

Total 1,618,071 2,397,781


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10. MINING PROPERTIES

April 1, March 31,

2017 Additions 2018

US$ US$ US$

Cost 20,253,406 4,419,325 24,672,731

Accumulated amortization (6,707,376) (836,031) (7,543,407)

Net 13,546,030 17,129,324

April 1, March 31,

2016 Additions 2017

US$ US$ US$

Cost 18,796,860 1,456,546 20,253,406

Accumulated amortization (2,587,432) (4,119,944) (6,707,376)

Net 16,209,428 13,546,030

This account represent cost transferred from exploration and evaluation assets related to an area of interest, technical feasibility and commercial viability of which are demonstrable and subsequent cost to develop the mine to the production phase. All amortization expense is allocated to cost of goods sold (Note 24).

11. GOODWILL

This account represents goodwill from the acquisition of 51% equity ownership or 51 shares of IPK. The Company assessed the recoverable amount of goodwill and determined that there is no impairment of goodwill.

12. RECLAMATION DEPOSITS This account represents deposits for reclamation guarantee as required by local government.

March 31, March 31,

2018 2017

US$ US$

Opening balance 704,748 695,374

Addition 696,166 295,992

Refund (141,792) (284,269)

Foreign exchange difference 3,299 (2,349)

Ending balance of present value 1,262,421 704,748


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13. TRADE ACCOUNTS PAYABLE TO THIRD PARTIES

March 31, March 31,

2018 2017

US$ US$

CV Karmel Mulia 530,805 293,474

PT Multi Sarana Avindo 334,816 482,400

PT Sandiana Citra Mandiri 293,320 175,974

PT Pejantan Tangguh Abadi 286,724 -

PT Mahaguna Karya Indonesia 260,006 -

PT Petro Andalan Nusantara 211,808 147,233

PT Rante Mutiara Insani 164,174 -

PT Prima Sarana Gemilang 154,655 -

PT Inti Ansyar Persada 133,209 103,518

PT Multi Harapan Utama 124,324 -

PT Bintang Nusantara Linda 118,266 -

PT San Putra Jaya 112,103 79,518

CV Petasi Teknik Utama 110,559 -

CV Global Etam 108,453 -

PT Surya Citra Perkasa 108,357 -

PT. Zahrana Persada Utama 97,993 68,347

PT Indotrans Sejahtera 91,595 -

PT Anugerah Perkasa Lestari 67,910 -

PT Graha Prima Energy 60,395 60,396

CV Handal Trans Persada 52,817 54,566

PT Anugrah Paser Mandiri 44,759 69,212

CV Anugrah Sumber Wahana Rezeki 31,971 145,535

PT Mega Buana Teknik 30,224 66,762

PT Kalimantan Surya Rezeki - 227,455

Others (below US$ 50,000 each) 1,878,360 278,663

Total 5,407,603 2,253,053

14. OTHER ACCOUNTS PAYABLE

March 31, March 31,

2018 2017

US$ US$

Related parties (Note 31)

Oorja (Batua) Pte. Ltd 4,284,959 -

Oorja Holding Pte. Ltd 970,029 -

Total 5,254,988 -



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15. ACCRUED EXPENSES

March 31, March 31,

2018 2017

US$ US$

Heavy equipment rent 261,439 822,675

Professional fees 210,004 317,106

Fuel 133,083 74,119

Hauling road 100,758 317,726

Bonus - 500,000

Royalty - 153,714

Others (below US$ 50,000 each) 202,866 139,895

Total 908,150 2,325,235

16. TAXES PAYABLES

March 31, March 31,

2018 2017

US$ US$

Corporate income tax (Note 28) 992,499 1,075,585

Income taxes

Article 4(2) 14,362 624

Article 15 9,058 28,939

Article 21 65,250 52,682

Article 23 119,464 2,868

Article 25 883,329 12,622

Article 26 175,411 -

Value-added Tax (VAT) 433,635 174,066

Tax penalty 54,524 -

Property and land tax 19,225 -

Total 2,766,757 1,347,386

17. ADVANCE FROM CUSTOMERS

March 31, March 31,

2018 2017

US$ US$

KTP Exports Pte. Ltd 2,565,659 -

PT Limas Tunggal 989,999 1,000,000

Sunrise Asia Mines and Minerals Pte. Ltd 624,750 -

Others - 123,767

Total 4,180,408 1,123,767


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18. DUE TO A RELATED PARTY

March 31, March 31,

2018 2017

US$ US$

Oorja Batua Pte. Ltd. 14,717,659 18,979,374

Accrued interest 2,286,221 7,463,311

Total 17,003,880 26,442,685

Due to a related party pertains to loan facility obtained from Oorja Batua Pte. Ltd. The details of loans are as follows:

On April 5, 2012, the Company obtained intercompany loan facility with maximum limit of US$ 15,000,000. This loan bears interest of LIBOR plus a fixed rate and is payable on demand. The outstanding balance of this facility as March 31, 2018 and 2017 amounted to US$ 4,335,547 and US$ 7,573,264, respectively.

On March 21, 2016, IPK entered into a loan agreement with maximum amount of US$ 20,000,000. The loan is secured by IPK’s share owned by the Company. The loan bears interest of 3 months LIBOR plus a fixed rate and payable on demand. The outstanding balance of this facility as March 31, 2018 and 2017 amounted to US$ 10,382,112 and US$ 11,406,110, respectively.

On December 11, 2017, the Company entered into a loan facility agreement maximum limit amounting to US$ 25,000,000. The loan bears a 12 months LIBOR plus a fixed interest rate and payable on demand. As of March 31, 2018, there is no outstanding balance of this facility since the Company not yet use the loan facility.

On December 11, 2017, IPK entered into a loan facility agreement maximum limit amounting to US$ 25,000,000. The loan bears a 12 months LIBOR plus a fixed interest rate and payable on demand. As of March 31, 2018, there is no outstanding balance of this facility since IPK not yet use the loan facility.

19. PROVISION FOR RECLAMATION

March 31, March 31,

2018 2017

US$ US$

Beginning balance 725,387 588,847

Provision during the year (Note 24) 316,247 147,860

Realisation (94,006) (11,320)

Total 947,628 725,387

This account pertains to the estimated liability for reclamation of the disturbed mine area at the end of the mine life. Management believes that the provision is adequate to cover all obligation for environmental rehabilitation. Management further believes that the provision is in accordance with the requirement of the existing regulation.


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20. CAPITAL STOCK

Number of Percentage of Total Paid-up

Name of Stockholders Shares Ownership Capital Stock

% US$

Oorja (Batua) Pte. Ltd. 35,100 45.00 2,705,119

PT Indo Karya Perdana 42,400 54.36 3,251,117

Ardiansyah Muchsin 500 0.64 55,139

Total 78,000 100.00 6,011,375

March 31, 2018 and 2017

21. ADDITIONAL PAID-IN CAPITAL This account represents the difference between the exchange rate on the date of the Company’s Article of Association and the exchange rate prevailing when the Company received payment for the capital stock subscriptions.

22. NON-CONTROLLING INTERESTS

As of March 31, 2018, non-controlling interest of subsidiary is PT Indo Karya Perdana. The non-controlling interest in net assets of subsidiary as of March 31, 2018 and 2017 amounted to US$ 5,583,708 and US$ 4,674,937, respectively, while the non-controlling interest in total comprehensive income in 2018 and 2017 amounted to US$ 908,771 and US$ 1,596,008, respectively.

Summarized financial information in respect of the Group’s subsidiary that has material non-controlling interest is set out below. The summarized financial information below represents amounts before intragroup eliminations.

March 31, 2018 March 31, 2017

US$ US$

PT Indo Perkasa

Current assets 5,083,290 3,420,316

Noncurrent assets 20,447,839 21,326,256

Total Assets 25,531,129 24,746,572

Current liabilities 13,965,148 15,006,960

Noncurrent liabilities 170,653 198,921

Total Liabilities 14,135,801 15,205,881

Revenue 11,308,200 16,908,562

Expenses 9,498,491 13,642,504

Profit for the year 1,809,709 3,266,058

Profit atributable to:

Owners of the Company 922,953 1,665,690

Non-controlling interest 886,756 1,600,368

Profit for the year 1,809,709 3,266,058


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March 31, 2018 March 31, 2017

US$ US$

Comprehensive income attributable to:

Owners of the Company 945,866 1,661,151

Non-controlling interest 908,771 1,596,008

Comprehensive income for the year 1,854,637 3,257,159

Net cash inflow (outflow) from:

Operating activities 3,602,556 6,743,752

Investing activities (527,889) (251,541)

Financing activities (2,110,398) (5,123,089)

23. SALES

2018 2017

US$ US$

Sales of coal 32,846,572 40,881,095

Hauling 4,121,197 5,926,648

Loading and crushing 4,121,196 5,766,250

Total 41,088,965 52,573,993

Nil and 55% in 2018 and 2017 of the above sales were made to related parties (Note 31).

24. COST OF GOODS SOLD

2018 2017

US$ US$

Transportation 3,404,327 5,544,251

Rental 3,047,467 4,656,457

Coal getting 2,098,587 3,582,178

Salaries and allowances 1,791,761 3,443,954

Depreciation (Note 9) 1,575,065 2,330,367

Stockpile operation 1,490,861 2,191,050

Crushing 1,344,704 2,047,457

Amortization (Note 10) 836,031 4,119,944

Repair and maintenance 670,300 1,161,273

Technical fees 447,687 1,313,443

Hauling road maintanance 365,822 205,878

Provision for reclamation (Note 19) 316,247 147,860

Housing expenses 312,438 475,916

Staff welfare 93,959 157,717

Community development 49,306 467,816

Security - 427,094

Freight and shipment expenses - 280,537

Others 882,073 983,650

Cost of goods manufactured 18,726,635 33,536,842

Coal finished goods

Beginning balance 906,562 1,387,299

Ending balance (569,976) (906,562)

Total 19,063,221 34,017,579


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25. SELLING EXPENSES

2018 2017

US$ US$

Loading retribution 1,787,662 3,021,320

Royalties 1,391,066 1,527,190

Technical fee 1,274,934 1,738,443

Loading fee 153,291 432,250

Total 4,606,953 6,719,203

26. GENERAL AND ADMINISTRATIVE EXPENSES

2018 2017

US$ US$

Salary and allowance 1,180,270 431,987

Professional fees 930,027 606,098

Permit 282,178 109,400

Office expenses 107,128 65,743

Travelling 76,324 47,711

Depreciation (Note 9) 43,006 67,414

Rental expenses 31,732 55,721

Others 204,553 153,909

Total 2,855,218 1,537,983

27. FINANCIAL CHARGES

2018 2017

US$ US$

Interest on due to a related party 1,350,135 2,034,265

Bank administration 22,877 37,558

Others 2,553 16,035

Total 1,375,565 2,087,858

28. INCOME TAXES

Tax expense of the Group consists of the following:

2018 2017

US$ US$

Current tax 2,369,033 2,356,869

Deferred tax (13,310) (50,899)

Tax expense 2,355,723 2,305,970


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Current Tax Reconciliation between profit before tax per consolidated statement of profit or loss and other comprehensive income and taxable income is as follows:

2018 2017

US$ US$

Profit before tax per consolidated statement

of profit or loss and other comprehensive income 8,878,498 7,870,427

Profit before tax of subsidiary 2,570,539 4,371,104

Profit before tax of the Company 6,307,959 3,499,323

Temporary differences :

Difference between commercial and fiscal depreciation 60,052 44,381

Provision for employee benefits 34,573 60,842

Total 94,625 105,223

Non-deductible expenses (nontaxable income):

Benefits in kind 58,377 134,294

Interest expenses 484 1,123,694

Interest income already subject to final tax (30,475) (15,474)

Others 43,228 61,860

Total 71,614 1,304,374

Taxable income 6,474,198 4,908,920

Current tax expense

The Company 1,618,549 1,227,230

Subsidiary 750,484 1,129,639

Total current tax expense 2,369,033 2,356,869

Less prepaid income tax:

Article 22 340,900 635,377

Article 23 - 402,839

Article 25 1,035,634 243,068

Total 1,376,534 1,281,284

Current tax payable (Note 16) 992,499 1,075,585

Deferred Tax The details of the Group's deferred tax assets are as follows:

Credited Charged to

(charged) other comprehensive

April 1, to profit or loss income March 31,

2017 for the year for the period 2018

US$ US$ US$ US$

Employee benefits obligation 96,896 18,703 (30,715) 84,884

Difference between commercial

and fiscal depreciation 40,653 (5,393) - 35,260

Deferred tax assets 137,549 13,310 (30,715) 120,144


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Credited to

Credited other comprehensive

April 1, to profit or loss income March 31,

2016 for the year for the period 2017

US$ US$ US$ US$

Employee benefits obligation 57,527 37,196 2,173 96,896

Difference between commercial

and fiscal depreciation 26,950 13,703 - 40,653

Deferred tax assets 84,477 50,899 2,173 137,549

A reconciliation between the tax expenses and the amounts computed by applying the effective tax rate to profit before tax per consolidated statement of profit or loss and other comprehensive income is as follows:

2018 2017

US$ US$

Profit before tax per consolidated statement

of profit or loss and other comprehensive income 8,878,497 7,870,427

Profit before tax of Subsidiary 2,570,539 4,371,104

Profit before tax of the Company 6,307,958 3,499,323

Tax expense at effective tax rates 1,576,990 874,831

Tax effect of nondeductible expenses (nontaxable income):

Benefits in kind 14,594 33,574

Interest expenses 121 280,924

Interest income already subject to final tax (7,619) (3,869)

Others 10,807 15,464

Total 17,903 326,093

Tax expense the Company 1,594,893 1,200,924

Tax expense of Subsidiary 760,830 1,105,046

Total tax expense 2,355,723 2,305,970

29. EMPLOYEE BENEFITS OBLIGATIONS The Group provides employee benefits for covering all the local permanent employees in accordance with Labor Law No. 13/2003. The number of employees entitled to the benefits are 155 and 189 as of March 31, 2018 and 2017, respectively. The defined benefit plan typically exposes the Group to actuarial risks such as: interest rate risk, longevity risk and salary risk. Interest risk A decrease in the bond interest rate will increase the plan liability.

Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.


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Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

Amounts recognized in the consolidated statement of profit or loss and other comprehensive income with respect to these employee benefits are as follows:

2018 2017

US$ US$

Current service cost 60,100 99,015

Interest costs 28,140 18,346

Effect of employee transfer - 7,752

Past service cost 3,721 24,447

Foreign exchange difference (12,450) (775)

Components of defined benefit costs

recognised in profit or loss 79,511 148,785

Component of defined benefit costs

recognised in other comprehensive income:

Actuarial (gains) losses (122,862) 8,691

Total (43,351) 157,476

The amounts included in the consolidated statement of financial position arising from the Group’s obligation in respect of the defined benefit plan is as follows:

March 31, March 31,

2018 2017

US$ US$

Present value of unfunded obligation 330,926 387,579

Movements in the present value of employee benefits obligations are as follows:

March 31, March 31,

2018 2017

US$ US$

Opening balance of present value

of unfunded obligation 387,579 230,103

Current service cost 60,100 99,015

Interest cost 28,140 18,346

Benefit paid (13,302) -

Past service cost 3,721 24,447

Effect of employee transfer - 7,752

Actuarial (gain) loss (122,862) 8,691

Effect of foreign exchange (12,450) (775)

Ending balance of present value

of unfunded obligation 330,926 387,579


- 35 -

The cost of providing employee benefits is calculated by PT Jasa Aktuaria Praptasentosa Gunajasa, an independent actuary. The actuarial calculation was carried out using the following key assumptions:

March 31, March 31,

2018 2017

Discount rate 7.3% per annum 7.5% per annum

Future salary increment rate 9.0% per annum 9.0% per annum

Mortality rate TMI - 2011 TMI - 2011

Disability rate 1% of TMI 2011 1% of TMI 2011

Resignation rate 5% per annum until age 5% per annum until age

29 then decrease 29 then decrease

linearly into 0% at linearly into 0% at

age 59 age 59

Normal retirement age 60 60

30. DISRUPTION OF BUSINESS

In September 2017, the shareholder of the Group has changed the Group’s directors and senior management, which has led to certain disruption of operation of the business for period approximately 4 months. Following the change of the Group’s directors and senior management, certain proceedings have been filed by new management of the Group, ultimate parent company and shareholder of the Group in Singapore and Indonesia against some of the former directors of the Group who has in turned initiated various proceedings against the company, shareholder of the Group and ultimate parent company. The Group has resumed its operation on 15 January 2018.

The Group has incurred expenses of US$ 4,188,284 for its fixed contractual commitment, salary cost, professional fees, consumable, maintenance and other overheads. The Group has incurred of US$ 520,660 for incremental legal expense and charge to general and administration expenses. The Group has written off debtors amounting to US$ 110,990 because of its non-realisability, which was mainly due to non-performance by old management during this period. Management believes that the above disruption of operation has no significant impact to the Group operation in the future. As of the issuance date the dispute between ultimate parent Company and former directors of the Group are under review of all parties for settlement.

31. NATURE OF RELATIONSHIP AND TRANSACTIONS WITH RELATED PARTIES

Nature of relationship

a. Mercator Limited is the ultimate controlling party of the Group.

b. Oorja (Batua) Pte. Ltd. and PT Indo Karya Perdana are the Company’s stockholders.

c. Related parties with the same ultimate parent with the Company: Oorja Holding Pte. Ltd.

MSC Holdings Pte. Ltd. PT Bima Gema Permata

PT Oorja Indo KGS PT Oorja Indo Petanggis Three

PT Oorja Indo Petanggis Four


- 36 -

Transactions with related parties

a. Sales to MCS Holdings Pte. Ltd. in 2018 and 2017 are amounted to nil and US$ 28,668,225, respectively.

b. The Group obtained loan from Oorja Batua Pte. Ltd. as described in Note 18.

c. The Company also entered into nontrade transactions with related parties as disclosed in Notes 7 and 14.

32. SIGNIFICANT COMMITMENTS, CONTINGENCIES AND AGREEMENTS

a. Based on road usage agreement between IPK and Bakungan Village dated March 10, 2008, which has been amended on June 2, 2008, IPK agreed to take responsibility for the repair and maintenance of 2 kilometers road at Bakungan Village and pay a hauling charge for each Metric Ton of coal that is hauled by IPK and its affiliate through the road. In exchange, IPK has rights to use the 30 kilometers road PT Cita for hauling. The agreement is valid for 30 years up to March 10, 2038. As of March 31, 2018, only one kilometer of the road is being used by IPK.

b. On July 15, 2010, the Company entered into an agreement with Adriansyah Muchsin (AM)

whereas AM will receive technical consultation fee based on the coal produced by the Company. This agreement is valid until the mining site is fully depleted. Based on Samarinda High Court verdict, AM has been proven guilty as AM has not provided any consultation service to the Company and therefore this agreement has been cancelled. AM has submitted appeal to the Supreme Court and based on Supreme Court verdict No. 2102 K/Pdt/2016 dated November 14, 2016, the appeal has been rejected.

c. On November 14, 2012, the Company signed an agreement with PT Sans Putra Jaya (SPJ) whereas SPJ will receive technical consultation fee from the Company’s coal sales. This agreement is valid until the mining site is fully depleted.

d. On February 2, 2015, the Company signed an agreement with PT Multi Sarana Avindo (MSA) to use the hauling road of MSA at agreed price per metric ton of coal hauled. This agreement is valid until August 12, 2023 which is the expiry date of the Company’s IUP.

e. On January 11, 2018, the Company signed an agreement with PT Mahaguna Karya Indonesia

(MKI) to use the hauling road of MKI at agreed price per metric ton of coal hauled. This agreement is valid until January 10, 2021 and shall continue to renew for such further period.

f. On February 1, 2018, the Company entered into an agreement with Andi Harun (AH) whereas

AH will receive legal and management consultation fee based on the coal produced by the Company. This agreement is valid until the mining site is fully depleted.

g. On March 26, 2014, IPK and PT Baramulti Suksessarana Tbk. (BSSR) entered into a port

loading agreement where IPK agreed to provide coal hauling and loading services for BSSR on an agreed price based on coal quantity loaded into barge. BSSR coal in the IPK’s stockpile shall not exceed 50,000 MT. The agreement is valid for three years and can be extended.

On June 8, 2015, this agreement has been amended to extend to 4 years with minimum quantity of 1 million MT per year and to adjust the coal hauling and loading rate based on coal market price every three months.


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On August 29, 2017, this agreement has been amended to extend to March 25, 2023 with minimum quantity of 2 million to 3 million MT per year and to adjust the coal hauling and loading rate based on coal market price every three months.

h. On May 8, 2013, IPK and CV Kutai Kumala Energy (KKE) entered into an agreement where the Company will provide coal hauling service to KKE on an agreed price based on coal quantity loaded into barge. The agreement is valid until KKE’s mining rights expired.

On April 17, 2017, this agreement period has been extended until April 16, 2018.

i. On May 24, 2017, IPK and CV Mahakam Indah Jaya (MIJ) entered into an agreement where the Company will give permission to MIJ for utilizing port of loading facility to support MIJ’s mining operation on agreed price based on coal quantity loaded. The agreement is valid for three years up to May 23, 2020.

j. On January 18, 2018, IPK and PT Multi Harapan Utama (MHU) entered into an agreement where the Company will provide coal stockpile management services, coal crushing and loading services to MHU on agreed price based on coal quantity loaded into barge, with minimum quantity of 2 million MT per year. The agreement is valid for three years up to January 18, 2021.

k. On December 13, 2017, IPK and PT Mahaguna Karya Indonesia (MKI) engaged in consultancy agreement for jetty service management. IPK shall pay to MKI as 20% of the gross profit from the operation of the Terminal for Your Own Interest (TUKS). Gross profit calculation made with the following provisions: 1. Revenue from TUKS is revenue earned by IPK from TUKS operations only and exclude revenue from hauling road operation; 2. Direct and indirect expenses related to operation of TUKS, exclusive bank interest and taxes. Agreement shall valid until expiration of the Company licenses or termination agreed by both parties. As of March 31, 2018, the Company has not implemented term in this agreement since company has experienced loss as an impact during disruption on business in the current year.

33. MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

As of March 31, 2018 and 2017, the Group’s monetary assets and liabilities in currency other than functional currency are as follows:

Equivalent in Equivalent in

Rp '000 US$ Rp '000 US$

Assets

Cash and cash equivalents 6,183,680 449,526 3,849,516 288,981

Trade accounts receivable 18,259,893 1,327,413 320,170 24,035

Reclamation deposits 17,365,863 1,262,421 9,387,948 704,748

Other noncurrent assets 1,733,930 126,049 1,252,933 94,057

Total 3,165,409 1,111,821

Liabilities

Trade accounts payable 74,387,001 5,407,604 28,978,557 2,175,404

Other accounts payable 8,075 587 53,311 4,002

Taxes payable 38,059,509 2,766,757 17,948,528 1,347,386

Accrued expenses 8,772,270 637,705 15,731,155 1,180,929

Total 8,812,653 4,707,721

Net Monetary Liabilities (5,647,244) (3,595,900)

March 31, 2018 March 31, 2017

The conversion rates used by the Group as of July 20, 2018, March 31, 2018 and 2017 are US$ 0.069, US$ 0.073 and US$ 0.075 per Rp 1,000, respectively.


- 38 -

34. CATEGORIES AND CLASSES OF FINANCIAL INSTRUMENTS

March 31, March 31,

2018 2017

US$ US$

LOANS AND RECEIVABLES

Current Financial Assets

Cash in banks 4,750,810 1,647,627

Time deposits 4,600,000 2,500,000

Trade accounts receivable from third parties 1,562,167 3,057,642

Other accounts receivable 1,882,574 64,671

Noncurrent Financial Assets

Reclamation deposits 1,262,421 704,748

Other noncurrent assets 126,049 94,057

Total 14,184,021 8,068,745

LIABILITIES AT AMORTIZED COST

Current Financial Liabilities

Trade accounts payable 5,407,603 2,253,053

Other accounts payable 5,255,575 4,002

Accrued expenses 908,150 2,325,235

Due to a related party 17,003,880 26,442,685

Total 28,575,208 31,024,975

The Group has no financial asset categorized as at Fair Value Through Profit or Loss (FVTPL), held to maturity or available-for-sale nor a financial liability categorized as at FVTPL.

35. FINANCIAL INSTRUMENTS, FINANCIAL RISK AND CAPITAL RISK MANAGEMENT a. Capital Risk Management

The Group manages its capital risk to ensure that it will be able to continue as a going concern, in addition to maximizing the profits of the shareholders through the optimization of the balance of debt and equity. The Group’s capital structure consists of debt (Note 18) offset by cash and cash equivalents (Note 5) and equity shareholders consisting of capital stock (Note 20), additional paid-in capital (Note 21), retained earnings and non-controlling interests.

The Board of Directors of the Group periodically reviews the Group’s capital structure. As part of this review, the Board of Directors considers the cost of capital and related risks. The gearing ratio as of March 31, 2018 and 2017 are as follows:

March 31, 2018 March 31, 2017

US$ US$


Cash and cash equivalents (9,350,810) (4,226,990)

Net debt 7,653,070 22,215,695

Equity 19,973,065 13,358,144

Net debt to equity ratio 38% 166%


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b. Financial Risk Management Objectives and Policies The Group’s overall financial risk management and policies seek to ensure that adequate financial resources are available for operation and development of their business, while managing their exposure to foreign exchange risk, interest risk, credit risk and liquidity risk. i. Foreign currency risk management

The Group is exposed to the effect of foreign currency exchange rate fluctuation mainly because of foreign currency denominated transactions such as purchases of inventories and expenses denominated in foreign currency. The Group manages the foreign currency exposure by matching, as far as possible, receipts and payments in each individual currency. The Group’s net open foreign currency exposure as of reporting date is disclosed in Note 33. Foreign currency sensitivity analysis

The Group is mainly exposed to Indonesian Rupiah for the operation expenses.

The following table details the Group’s sensitivity to a 1.18% and 2.47% increase and decrease in the US$ against Rupiah in March 31, 2018 and 2017, respectively. 1.18% and 2.47% are the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 1.18% and 2.47% change in foreign currency rates as of March 31, 2018 and 2017. A positive number below indicates an increase in profit or equity where the US$ strengthens 1.18% and 2.47% in March 31, 2018 and 2017, respectively, against the relevant currency. For a 1.18% and 2.47% weakening of the US$ against the relevant currency in March 31, 2018 and 2017, there would be a comparable impact on the profit or equity, and the balances below would be negative.

2018 2017

US$ US$

Profit (67,244) 65,076

IDR Impact

In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

ii. Interest rate risk management The Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates. There is no interest rate hedging activities in place at March 31, 2018 and 2017. The sensitivity analysis below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.


- 40 -

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group profit for the period ended March 31, 2018 and 2017 would decrease/increase by US$ 73,588 and US$ 94,898, respectively. This is mainly attributable to the Group exposure to interest rates on its variable rate borrowings.

iii. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligation resulting in a loss to the Group. The Group’s credit risk is primarily attributed to its cash in banks and other accounts receivable. The Group places its bank balances with credit worthy financial institutions. Other accounts receivable are entered with respected and credit worthy third party company. The Group’s exposure and its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management annually. The carrying amounts of financial assets recorded in the consolidated financial statements, net of any allowance for losses represents the Group’s exposure to credit risk.

iv. Liquidity risk management

The liquidity risk of the Group arises mainly from funding requirements to pay its liabilities and support its business activities.

The Group maintains sufficient funds to finance its ongoing working capital requirements using loan obtained from a related party.

Liquidity and interest risk tables

The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay.

% US$ US$ US$ US$

March 31, 2018

Non-interest bearing

Trade accounts payable

to third parties - 907,640 1,634,577 2,865,386 5,407,603

Other accounts payable - - 5,255,575 - 5,255,575

Accrued expenses - - 908,150 - 908,150

Variable interest rate instrument

Due to a related party 7.41 - - 17,276,441 17,276,441

907,640 7,798,302 20,141,827 28,847,769

March 31, 2017



to third parties - 788,569 1,126,527 337,957 2,253,053

Other accounts payable - - 4,002 - 4,002

Accrued expenses - 465,047 1,278,879 581,309 2,325,235

Variable interest rate instrument

Due to a related party 7.11 - - 26,780,112 26,780,112

1,253,616 2,409,408 27,699,378 31,362,402

1-3 months

Less than 1

month

3 months to 1

year

Weighted

average

effective Total


- 41 -

The following table details the Group's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group's liquidity risk management as the liquidity is managed on a net asset and liability basis.

% US$ US$ US$ US$ US$

March 31, 2018


Cash on hand - 5,067 - - - 5,067

Trade accounts receivable

from third parties - 1,190,727 256,108 115,332 1,562,167

Other accounts receivable - - 389,255 1,493,319 - 1,882,574

Reclamation deposits - - - - 1,262,421 1,262,421

Other noncurrent assets - - - - 126,049 126,049

Variable interest rate instruments

Cash in banks 0.01% - 1% 4,745,743 - - - 4,745,743

Fixed interest rate instruments

Time deposit 0.25% - 1.3% - 4,600,000 - - 4,600,000

5,941,537 5,245,363 1,608,651 1,388,470 14,184,021

1-3 months

Less than

1 month

3 months to

1 year

Weighted

average

effective Total1-5 years

% US$ US$ US$ US$ US$

March 31, 2017


Cash on hand - 79,363 - - - 79,363

Trade accounts receivable - 1,890,605 1,167,037 - - 3,057,642

Other accounts receivable - - 64,671 - - 64,671

Reclamation deposits - - - - 704,748 704,748

Other noncurrent assets - - - - 94,057 94,057

Variable interest rate instruments

Cash in banks 0.5 1,648,314 - - - 1,648,314

Fixed interest rate instruments

Time deposit 1.3 - 2,508,125 - - 2,508,125

3,618,282 3,739,833 - 798,805 8,156,920

1-3 months

Less than

1 month

3 months

to 1 year

Weighted

average

effective Total1-5 years

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

c. Fair Value of Financial Instruments

Management believes that the carrying amounts of financial assets and liabilities recorded in the consolidated financial statements approximate their fair values because of their short-term maturities or carry market rates of interest.


- 42 -

36. SUPPLEMENTAL DISCLOSURES ON NONCASH INVESTING ACTIVITIES The Group has investing activity transaction which did not affect cash and cash equivalents and hence not included in the consolidated statement of cash flows with the detail as follows:

2018 2017

US$ US$

Increase in property, plant and equipment

through tax amnesty - 9,961

37. SUPPLEMENTARY INFORMATION The financial information of the parent entity only presented the statements of financial position, statements of profit or loss and other comprehensive income, statements of changes in equity, and statements of cash flows information. Financial information of the parent entity only are presented on page 43 to 47. The parent entity only financial information follow the accounting policies use in the preparation of the consolidated financial statement that are described in note 3, except for investment in subsidiary which is accounted for use the cost method.

38. MANAGEMENT RESPONSIBILITY AND APPROVAL OF CONSOLIDATED FINANCIAL

STATEMENTS The preparation and fair presentation of the consolidated financial statements on pages 1 to 42 were the responsibilities of the management, and were approved by the Directors and authorized for issue on July 20, 2018.

********

PT KARYA PUTRA BORNEO

SUPPLEMENTARY INFORMATION

STATEMENT OF FINANCIAL POSITION - PARENT ENTITY

MARCH 31, 2018

March 31, 2018 March 31, 2017

US$ US$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 6,877,829 2,718,278

Trade account receivable from third parties 1,190,727 1,890,605

Other account receivable

Related parties 1,436,596 -


Inventories 685,638 1,064,371

Prepaid taxes - 3,812

Prepayments and advances 541,387 132,387

Total Current Assets 11,091,377 5,872,046

NONCURRENT ASSETS

Deferred tax assets 83,397 75,480

Investment in shares of stock 5,267,402 5,267,402

Advance for purchase of property and equipment 283,116 218,143

Property and equipment - net accumulated

depreciation of US$ 1,247,289 of at March 31, 2018

and US$ 971,279 of at March 31, 2017 572,443 691,219

Mining properties 17,129,324 13,546,030

Due from third parties 2,078 2,078

Reclamation deposit 1,262,421 704,748

Other assets 75,707 74,788

Total Noncurrent Assets 24,675,888 20,579,888

TOTAL ASSETS 35,767,265 26,451,934

- 43 -



STATEMENT OF FINANCIAL POSITION - PARENT ENTITY

MARCH 31, 2018 (Continued)

March 31, 2018 March 31, 2017

US$ US$

LIABILITIES AND EQUITY

CURRENT LIABILITIES


Related party 1,813,456 520,321

Third parties 4,063,168 1,706,866

Other accounts payable

Related parties 5,254,988 -


Accrued expenses 406,787 1,306,210

Taxes payable 1,591,015 335,487

Advance from customers 4,180,408 1,000,000


Total Current Liabilities 23,370,682 19,009,491

NONCURRENT LIABILITIES

Provision for reclamation 947,628 725,387

Employee benefits obligations 160,272 188,657

Total Noncurrent Liabilities 1,107,900 914,044

EQUITY

Capital stock - Rp 1,000,000 par value per share

Authorized - 200,000 shares in 2018 and 2017

Subscribed and paid-up - 78,000 shares in 2018 and 2017 6,011,375 6,011,375

Additional paid in capital 31,846 31,846

Retained earnings 5,245,462 485,178

Total Equity 11,288,683 6,528,399

TOTAL LIABILITIES AND EQUITY 35,767,265 26,451,934

- 44 -



STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME - PARENT ENTITY


2018 2017

US$ US$

SALES 32,846,572 40,881,095

COST OF GOODS SOLD 14,345,083 26,040,932

GROSS PROFIT 18,501,489 14,840,163

Selling expenses (6,139,856) (9,327,035)

General and administrative expenses (2,595,177) (997,386)

Expenses incurred during disruption period (2,965,002) -

Financial charges (627,639) (1,162,670)

Interest income 30,475 52,286

Others 103,667 93,965

PROFIT BEFORE TAX 6,307,957 3,499,323

TAX EXPENSE - NET (1,594,891) (1,200,924)

PROFIT FOR THE YEAR 4,713,066 2,298,399

OTHER COMPREHENSIVE INCOME

Item that will not be reclassified subsequently to profit or loss:

Remeasurement of defined benefit obligation, net of tax 47,218 2,381


- 45 -



STATEMENT OF CHANGES IN EQUITY - PARENT ENTITY


Additional

paid-in Retained

Capital stock capital earnings Total equity

US$ US$ US$ US$

Balance as of April 1, 2016 551,390 - (1,815,602) (1,264,212)

Issuance of new shares 5,459,985 - - 5,459,985

Additional paid-in capital - 31,846 - 31,846

Net profit for the year - - 2,298,399 2,298,399

Other comprehensive income for the year - - 2,381 2,381

Balance as of March 31, 2017 6,011,375 31,846 485,178 6,528,399

Net profit for the year - - 4,713,066 4,713,066

Other comprehensive income for the year - - 47,218 47,218

Balance as of March 31, 2018 6,011,375 31,846 5,245,462 11,288,683

- 46 -



STATEMENT OF CASH FLOWS - PARENT ENTITY


2018 2017

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 6,307,957 3,499,323

Adjustments:

Amortization expenses 836,031 4,119,944

Financial charges 627,639 1,162,670

Depreciation expenses 275,992 243,538

Post-employment benefit 39,270 60,842

Foreign exchange difference (3,299) 2,349

Cash Provided by Operating Activities 8,083,590 9,088,666

Changes in working capital:

Trade accounts receivable from third parties 699,878 (1,417,090)

Other account receivable (1,733,203) (62,593)

Inventories 378,733 355,150

Prepayments and advances (409,000) 18,628

Prepaid taxes 3,812 (3,812)

Reclamation deposits (554,374) (11,723)

Other assets (919) (9,151)

Trade accounts payables 3,649,437 838,306

Other accounts payable 5,251,573 (27,881)

Accrued expenses (899,423) 988,299

Taxes payable 303,928 33,636

Advance from customer 3,180,408 1,000,000

Provision for reclamation 222,241 136,540

Cash generated from operations 18,176,681 10,926,975

Cash received from tax refund - 42,539

Payments of employee benefits (4,697) -

Payments of income tax (666,950) (972,487)

Net Cash Provided by Operating Activities 17,505,034 9,997,027

CASH FLOWS FROM INVESTING ACTIVITIES

Cash received from a related party - 13,063,759

Acquisition mining properties (4,419,325) (1,456,546)

Acquisition property and equipment (157,216) (329,573)

Advance for purchase of property and equipment (64,973) (192)

Net Cash (Used in) Provided by Investing Activities (4,641,514) 11,277,448

CASH FLOWS FROM FINANCING ACTIVITIES

Payment to a related party (4,174,717) (24,148,735)

Payment of financial charges (5,466,254) (38,977)

Proceed from due to related party 937,002

Proceeds from issuance of capital - 5,488,000

Net Cash Used in Financing Activities (8,703,969) (18,699,712)

NET INCREASE IN CASH

AND CASH EQUIVALENTS 4,159,551 2,574,763

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,718,278 143,515

CASH AND CASH EQUIVALENTS AT END OF YEAR 6,877,829 2,718,278

- 47 -

Documents

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY - mercator.inmercator.in/investors/FinSub2017-18/PT Karya Putra Borneo 2018.pdf · dated September 10, 2007 of Hamid Gunawan, S.H., notary