FLUENCE CORPORATION LIMITED
ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2017
Fluence Corporation Limited (formerly Emefcy Group
Limited) ABN 52 127 734 196
Annual report - 31 December 2017
Contents
Corporate Directory
Directors' Report
Auditor's Independence Declaration
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Auditor's Report
Shareholder information
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Fluence Corporation Limited (formerly Emefcy Group Limited)
Corporate directory
Directors
Company Secretary
Registered Office
Principal Place of Business
Share Registry
Auditors
Solicitors
Bankers
Securities Quoted
Mr Richard Irving
Executive Chairman
Mr Ross Haghighat
Non-Executive Director
Mr Peter Marks
Non-Executive Director
Mr Robert Wale
Non-Executive Director
Mr Henry Charrabe (appointed 14 July 2017)
Managing Director and CEO
Dr Ramesh Rengarajan (appointed 14 July 2017)
Non-Executive Director
Mr Arnon Goldfarb (appointed 19 September 2017)
Non-Executive Director
Mr Ross Kennedy
Level 3, 62 Lygon Street
Carlton VIC 3053
Australia
Phone: +61 (0)3 9824 5254
Fax: +61 (0)3 9822 7735
10 Bank Street
8th Floor
White Plains New York 10606
United States of America
Phone: +1 212 572 5700
Boardroom Pty Ltd
Level 12, 225 George Street,
Sydney, New South Wales, 2000, Australia
Phone: 1300 737 760 (local)
Fax: +61 (0)2 9290 9600 (international)
BDO East Coast Partnership
Tower 4, Level 18, 727 Collins Street,
Melbourne, Victoria, 3008, Australia
Hall & Wilcox Lawyers
Level 11, Rialto South Tower, 525 Collins Street,
Melbourne, Victoria, 3000, Australia
National Australia Bank (NAB)
Melbourne, Victoria, Australia
Australian Securities Exchange
- Ordinary Fully Paid Shares (Code: FLC)
Website
www.fluencecorp.com
Fluence Corporation Limited
(formerly Emefcy Group Limited)
1
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
The directors present their report for the consolidated entity consisting of Fluence Corporation Limited (formerly
Emefcy Group Limited) and the entities it controlled at the end of, or during, the year ended 31 December 2017.
Throughout the report, the consolidated entity is referred to as the Group.
Directors
The following persons held office as directors of Fluence Corporation Limited (formerly Emefcy Group Limited)
during the financial year:
Mr Richard Irving, Executive Chairman
Mr Eytan Levy, Executive Director (resigned 31 August 2017)
Mr Ross Haghighat, Non-Executive Director
Mr Peter Marks, Non-Executive Director
Mr Robert Wale, Non-Executive Director
Mr Henry Charrabe, Managing Director and CEO (appointed 14 July 2017)
Dr Ramesh Rengarajan, Non-Executive Director (appointed 14 July 2017)
Mr Arnon Goldfarb, Non-Executive Director (appointed 19 September 2017)
Principal activities
On 14 July 2017, Emefcy Group Limited completed the acquisition of RWL Water Group to form Fluence
Corporation Limited.
Prior to the acquisition, the Group's principal activities were:
•
•
•
•
The research, development and commercialisation of innovative wastewater treatment systems
incorporating Membrane Aerated Biofilm Reactor ("MABR")
Implementing the multi-faceted China strategy;
Implementing the US strategy based on an initial Reuse as a Service ("RaaS") development phase and
appointment of regional manufacturing representatives; and
Developing the larger scale SUBRE (a submerged larger scale version of MABR) product ready for field
testing;
Subsequent to the acquisition, the Group's principal activities were:
• Offering an integrated range of services across the complete water cycle, from early stage evaluation with
•
•
established operations in North America, South America, the Middle East and Europe, Fluence is continuing
to expand into China’s rural wastewater treatment market.
In particular, Fluence is striving to become a leading global provider of fast-to-deploy decentralised and
packaged water and wastewater treatment solutions
Fluence has experience operating in over 70 countries worldwide and employs more than 300 highly trained
water professionals around the globe. The Group provides local, sustainable treatment and reuse solutions,
while empowering businesses and communities worldwide to make the most of their water resources.
Otherwise there were no other significant changes in the nature of the Group's principal activities during the
financial year.
Dividends
No dividends have been paid during the financial year. The directors do not recommend that a dividend be paid
in respect of the financial year (2016: $nil).
Review of operations
1
Financial performance in 2017
Following is a summary of the financial performance of the Group for the year ended 31 December 2017.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
2
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Review of operations (continued)
1
Financial performance in 2017 (continued)
These results reflect the performance of Emefcy Group Limited for the full twelve months and the results of RWL
Water Group for the period from the date of acquisition of 14 July 2017 to 31 December 2017. These financial
results should be read in association with the attached audited financial statements.
• Revenues for the year (Fluence since 1 January, RWL since 14 July) - $33.1 million,
• Revenues for the year on proforma basis as if the acquisition occurred at the beginning of the year - $58.0
million,
• Net loss for the year (Fluence since 1 January, RWL since 14 July) - $23.6 million,
• Net loss for the year on proforma basis as if the acquisition occurred at the beginning of the year - $29.2
million,
• Revenues by segments: Operating units - $33.9 million, P&I - $1.1 million, intersegment eliminations - $(1.8
million), no revenues are allocated to other (unallocated revenues to corporate).
• Net income/(loss) by segment: Operating units - $0.8 million, P&I - $(12.4 million), intersegment eliminations
-$1.9 million, unallocated loss - corporate - $(13.8 million).
2 Multiple milestones achieved in 2017
During 2017, Emefcy Group Limited successfully undertook the acquisition of the RWL Water Group, with all
acquisition-related integration activities completed to form Fluence Corporation Limited. This has enabled
Fluence to expand the global reach and market opportunities for its key products: desalination, wastewater
treatment and wastewater-to energy.
3 Notable successes include:
•
•
•
•
•
Innovation drove new market opportunities, including the first SUBRE product contract awarded to upgrade a
centralised wastewater treatment plant in Israel. SUBRE enables compliance with tighter nitrogen discharge
rules without using hazardous chemicals, while also increasing plant capacity and increase target markets;
The Group’s Chinese subsidiary was incorporated and its manufacturing facility in Jiangsu Province is now
operating. First production of MABR Modules was achieved in September 2017;
Progress in China with the signing of a framework agreement with partner Jiangsu Jinzi Environmental
Science and Technology Company. The agreement contemplates the delivery of six Containerized Smart
Packaged wastewater treatment plants based on Fluence’s MABR technology (C-MABR);
Exclusive memorandum of understanding (MOU) signed with an African nation to design and construct an
advanced water treatment plant;
€1.5 million contract signed with VINCI Construction Grands Projects (France) to supply three NIROBOX™
containerized seawater desalination units for the island of Mayotte;
• US Virgin Islands MABR installation received approval from the US Environmental Protection Agency;
• US$1.7 million contract executed with Irotop S.A., a leading Ecuadorian fish processing company, to purify
wastewater from its tuna and sardine processing and packing plants;
•
•
Agreement executed with Stanford University to deploy, test for compliance with USA environmental
regulations and measure the performance of Fluence's MABR wastewater treatment technology at Stanford’s
Codiga Resource Recovery Center. The MABR demonstration unit was commissioned in Q1 2018; and
Awarded the “2018 Global Decentralized Water & Wastewater Treatment Company of the Year” by Frost and
Sullivan who noted the key benefits of Fluence’s modular, decentralised systems, such as lower operating
cost, easier maintenance, and lower capital outlays.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
3
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Review of operations (continued)
3 Notable successes include: (continued)
4 Operating in markets with attractive fundamentals
Water scarcity is increasing due to global economic development and climate change. Communities are being
challenged to come up with viable solutions to overcome this problem.
Current centralised water treatment plants present major challenges to address this scarcity issue as they tend to
be landlocked, have aging infrastructure and increasingly cannot meet the demands for clean water. Moreover,
such centralised water treatment plants cannot be expanded easily, and upgrades are costly.
In response to these challenges, investment is being made in alternative decentralised solutions to address
capacity needs quickly and economically, and importantly meet growing regulatory requirements.
5 China
The rural wastewater treatment opportunity in China is estimated in the billions of dollars over the next five years.
The Chinese Government’s 13th five-year plan targets improved water quality nationwide by 2030, and mandates
local city officials improve sewage capacity and treatment. Currently only an estimated 10% of rural
that
wastewater is treated - the five-year plan is targetting an increase to 70%.
The sales momentum in China is building with several opportunities progressing.
A manufacturing facility in Changzhou China was established with first commercial production in the second half
of the financial year.
6 Africa
Fluence continues to build a pipeline of new opportunities that are converting into new contracts.
In early 2017, the Group won a second contract in Ethiopia to install a wastewater treatment system incorporating
MABR technology.
Progress is being made in negotiating the terms of a formal contract for the previously announced exclusive MOU
with an African nation to construct a large water treatment plant. Other key conditions to the project commencing,
which are typical for projects of this nature, include regulatory approvals and completing financing arrangements.
Subject to completing these pre-conditions, the project has the potential to generate revenues of more than
US$100 million for the Group. Potential revenues from this project are not included in our 2018 guidance.
In addition, Fluence has submitted several tenders for the provision of desalination water treatment in South
Africa and North Africa.
7
South America
Fluence is experiencing rapid expansion in South America with US$6 million of new contracts awarded in
Ecuador and Argentina during 2017, and the anticipated recommencement of activities under a contract in
Venezuela worth US$18 million in 2018.
To meet this growing demand across South America, Fluence is constructing a new manufacturing facility in
Argentina, which is scheduled to open in Q2 2018.
8
Europe
In Italy, Fluence is contracted to develop and build a wastewater-to-energy treatment plant for Avimecc, a poultry
meat processing company. This southern Italian plant processes approximately 40,000 chickens per day with
plans to increase capacity to 70,000. Avimecc expects to recoup the cost of the expanded operation through
energy recovery and waste reduction within 5 years of plant operation.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
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Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Review of operations (continued)
8
Europe (continued)
Worldwide regulations regarding total nitrogen content in treated effluent are becoming increasingly stricter. As a
result, the Group estimates the SUBRE market opportunity in Europe alone may be US$2 billion, with even larger
market potential in the US and China.
9 North America
The deployment of an MABR demonstration unit at the Código Resource Recovery Center (CR2C) at Stanford
University in California has been successfully achieved. This will serve as a demonstration plant and reference
site to underpin US sales.
10 Significant changes to the affairs of the entity
Following the acquisition of the RWL Water Group during 2017, Group revenues increased significantly. The
Group now has an expanded global footprint with operations in Argentina, Italy, Israel, USA, China and Middle
East. Further details of the financial impact of the acquisition, including positive goodwill on consolidation are set
out in Note 3 of the financial statements attached.
Likely developments and expected results of operations
The Group expects to continue to grow its global footprint through the design, manufacture and sale of smart
packaged plant solutions for water and wastewater treatment, based on the core product portfolio which has
been established:
• MABR for wastewater treatment;
• NiroboxTM for water desalination and treatment of brackish water;
•
•
Anaerobic Digester for processing waste sludge from food processing industries; particularly in the poultry
and fish industries.
TORNADO® subsurface aerators for extended aeration and activated sludge processes for lagoons and
oxidation ditch applications.
Revenues for the 2018 year will reflect a full year of revenues from the former RWL Water Group. Based on the
Group’s current backlog and pipeline of new tenders, revenue for 2018 is expected to be in the range of US$105
million to US$115 million. At start of the year, visibility of forecasted 2018 revenues was high, with approximately
70% (US $75 million) covered by the current backlog expected to be recognised in 2018.
Reflecting the changing mix of contracts in 2018, Gross Profit is anticipated to be in the range of US$22 million to
US$25 million. This reflects the lower gross profit margin during the construction phase of a large project in San
Quintin, Mexico.
Based on current backlog and pipeline, and consistent with historic experience, the Group anticipates bookings
and revenue to be weighted to the latter part of the year. We continue to target the achievement of a positive
EBITDA run rate at some time in 2019.
The Product and Innovation segment is focused on improving existing technologies, identifying opportunities for
cross fertilisation of technology ideas between different products in the Group, developing new technologies
the group is
applicable to water and wastewater treatment, and ensuring that
protected. An important priority for the Product & Innovation Group is the ongoing commerialisation of the
SUBRE technology solution for municipal wastewater treatment.
the intellectual property of
Events since the end of the financial year
No other matter or circumstance has arisen since 31 December 2017 that has significantly affected, or may
significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's
state of affairs in future financial years.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
5
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors
Richard Irving Executive Chairman
Qualifications
B. Sc. (First class honours) in Electrical Engineering, Manchester University, UK
M. Sc. Electrical Engineering, Manchester University, UK
Experience and
expertise
Richard Irving is the Executive Chairman of Fluence Corporation Limited. Prior to
Fluence Corporation, Mr. Irving served as Executive Chairman & Chairman of Emefcy
since 2010.
Based in Silicon Valley, Richard co-founded Pond Venture Partners in 1997 and
brings over 30 years’ experience in venture capital, business management, marketing
and engineering in technology companies including AT&T Bell Labs, AMD, and
Brooktree.
Richard has helped create over $3 billion in shareholder value through IPOs,
acquisitions, and private financings.
Past exits include LiveRail (Facebook), Gigle Networks (Broadcom), 4Home (Motorola
Mobility), Transitive (IBM), and Microcosm Communications (Conexant).
Richard also serves as a Venture Advisor to Samsung.
Other current public
company directorships
None
Former public
company directorships
in last 3 years
None
Special
responsibilities
Interest in shares
Interest in options
Executive Chairman
Member of the Remuneration and Nomination Committee
Richard has an indirect interest through Pond Venture Nominees III Limited in
36,264,579 shares in the Group.
Direct interest in:
500,000 Director options with an exercise price of A$0.30;
500,000 Director options with an exercise price of A$0.40;
950,000 Director options with an exercise price of A$1.20;
950,000 Director options with an exercise price of A$1.50
Contractual rights to
shares
Nil
Fluence Corporation Limited
(formerly Emefcy Group Limited)
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Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors (continued)
Eytan Levy Managing Director and Chief Executive Officer (resigned 31 August 2017)
Ross Haghighat Non-Executive Director
Qualifications
Experience and
expertise
B.Sc. and a Masters in Material Science in Organometallic Chemistry, Rutgers
University (USA). MBA, Boston College - Carroll School of Management (USA)
Ross Haghighat serves as a Non-Executive Director for Fluence Corporation. He has
over 30 years of experience in the technology sector as founder or co-founder of half
a dozen companies with a combined shareholder value exceeding $4.5B.
With over 20 years in operating and strategic roles and a decade in the investment
arena, he has helped to create a number of global enterprises in the private and
public space in the US, China, Australia and Europe. Mr. Haghighat was
Non-Executive Director for Emefcy from 2015.
He serves as Chairman for Triton Systems Group - a Global Investment and Product
Venturing firm. He serves as a Director at Aduro Biotech a clinical stage biopharma
(Nasdaq: ADRO), is Chairman of FRX Polymers, a specialty chemicals firm with
operations in the US, Europe, and China.
Aduro Biotech, Inc, Triton Systems, Inc, FRX Polymers, Inc, Redrock Biometrics, Inc.
Other current
directorships
Former directorships
in last 3 years
None
Special
responsibilities
Chair of the Remuneration and Nomination Committee and Member of the Audit and
Risk Committee.
Interest in shares
None
Interest in options
Direct interest in:
500,000 employee options with an exercise price of A$0.30;
500,000 employee options with an exercise price of A$0.40;
700,000 Director options with an exercise price of A$1.20;
700,000 Director options with an exercise price of A$1.50.
Contractual rights to
shares
None
Fluence Corporation Limited
(formerly Emefcy Group Limited)
7
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors (continued)
Peter Marks Non-Executive Director
Qualifications
Experience and
expertise
Other current
directorships
Former directorships
in last 3 years
B.Ec, LLB and Graduate Diploma in Commercial Law, Monash University, Melbourne,
Australia
MBA degree from the University of Edinburgh, Scotland
Peter Marks serves as Non-Executive Director for Fluence Corporation. Mr. Marks
has over 30 years of experience in corporate finance and investment banking,
specialising in capital raisings (for listed and unlisted companies), underwriting, IPOs,
corporate restructurings, and venture capital transactions with a focus on emerging
technologies and life sciences.
Furthermore, he has participated in over $3 billion in public and private capital
raisings, and has served as an Executive and Non-Executive Director of many entities
which have been listed on the ASX, NASDAQ and AIM markets.
Prana Biotechnology Limited (listed on ASX and NASDAQ) and Noxopharm Ltd
Armadale Capital plc (listed on AIM)
Special
responsibilities
Member of the Remuneration and Nomination Committee and Chair of the Audit and
Risk Committee.
Interest in shares
Indirect interest in 2,254,403 shares through Lampam Pty Ltd.
Interest in options
Direct interest in:
500,000 employee options with an exercise price of A$0.30;
500,000 employee options with an exercise price of A$0.40;
700,000 Director options with an exercise price of A$1.20;
700,000 Director options with an exercise price of A$1.50.
Contractual rights to
shares
None
Fluence Corporation Limited
(formerly Emefcy Group Limited)
8
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors (continued)
Rob Wale Non-Executive Director
Qualifications
Bachelor of Science (BSc), Mech. Eng, Uni of Wollongong (Aust).
Experience and
expertise
Robert Wale serves as Non-Executive Director for Fluence Corporation. Mr. Wale has
over 30 years of executive level experience within the global water industry in multiple
roles in Australia, the USA and throughout the Asia-Pacific region.
Prior to Fluence, he was the Non-Executive Director of Emefcy and Managing
Director of BlueSand Consulting. Throughout the years, Mr. Wale has had significant
experience managing businesses (e.g.; Memtec Limited, US Filter Inc., Veolia
Environment, Siemens Water etc) across the cycle, from early stage start up, through
commercialization to maturity and obtaining a global leadership position.
Robert has been a Director of the Company since 5 April 2016.
Other current
directorships
Former directorships
in last 3 years
Special
responsibilities
Nil
None
Development of the RaaS business model as a discrete project during part of 2017
and facilitated the successful MOU/agreement for supplying Stanford MABR
demonstration facility.
Interest in shares
None
Interest in options
Direct interest in:
500,000 Director options with an exercise price of 35 cents each;
750,000 Director options with an exercise price of A$1.20;
750,000 Director options with an exercise price of A$1.50.
Contractual rights to
shares
None
Fluence Corporation Limited
(formerly Emefcy Group Limited)
9
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors (continued)
Henry Charrabé Managing Director & CEO (appointed 14 July 2017)
Qualifications
Henry Charrabé serves as the Managing Director and Chief Executive Officer of
Fluence. He brings more than a decade of experience in developing water
management and investment solutions to his role at the Company.
Prior to the establishment of Fluence, Mr. Charrabé served as President and Chief
Executive Officer of RWL Water since its inception in 2010. During his tenure, Mr.
Charrabé was instrumental in establishing RWL Water as a global player through
strategic acquisitions and significant organic growth. Prior to RWL Water Mr.
Charrabé was a senior executive at RSL Investments Corp. in the United States and
Europe.
From 2003 to 2005, Mr. Charrabé served as Chief Operating Officer of W2W, an
electrocoagulation wastewater technology company.
Mr. Charrabé received a B.A. from the Freie Universität in Berlin and Tel Aviv
University. He earned an M.A. in Political Science and an M.A. in International
Economics and Finance, both from Brandeis University, as well as an M.A. in Public
Administration from the John F. Kennedy School of Government at Harvard
University.
Experience and
expertise
Henry was President and Chief Executive Officer of RWL Water up to the time of the
acquisition with Emefcy Group Limited on 14 July 2017.
Henry has been a Director of the Company since 14 July 2017.
Other current
directorships
Former directorships
in last 3 years
Special
responsibilities
Interest in shares
Nil
Nil
Nil
Nil
Interest in options
Direct interest in 11,191,336 Director options with an expiry price of A$0.93
Contractual rights to
shares
None
Fluence Corporation Limited
(formerly Emefcy Group Limited)
10
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors (continued)
Dr Ramesh Rengarajan Non-Executive Director (appointed 14 July 2017)
Qualifications
Dr. Ramesh serves as Non-Executive Director for Fluence Corporation. Currently he
is a partner at Eagletree Capital. Previously, Dr. Ramesh supported RWL Water’s
efforts to evaluate the best water treatment technologies and companies around the
world.
Dr. Ramesh has held senior management positions at GE Water and Process
Technologies, including Chief Technology Officer (CTO), a role which he held for
more than four years. As CTO, Dr. Ramesh played a key role in the development and
implementation of the strategy that led to the creation of GE’s $2.5 billion global water
platform. While at GE, he also led the technology and engineering organisations for
GE Sensing, GE Security, and GE Fanuc. He also served on the board of GE’s Asia
Pacific American Forum.
In addition to his role at GE, Dr. Ramesh served in numerous senior management
roles over a two-decade career with A. Schulman, Inc., a global multi-billion-dollar
specialty chemicals manufacturer. He also served on the International Advisory Board
for the Ministry of Environment and Water, Government of Singapore from 2006-2016.
He currently serves on the board of Students2Science a non-profit organisation
serving inner-city schools by proving hands on lab training to teachers and students.
Dr Ramesh has been a Director of the Group since 14 July 2017.
Nil
Nil
Nil
Nil
Experience and
expertise
Other current
directorships
Former directorships
in last 3 years
Special
responsibilities
Interest in shares
Interest in options
Direct interest in 1,500,000 Director options with an expiry price of A$0.835
Contractual rights to
shares
None
Fluence Corporation Limited
(formerly Emefcy Group Limited)
11
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Information on directors (continued)
Arnon Goldfarb Non-Executive Director (appointed 19 September 2017)
Qualifications
Arnon Goldfarb serves as Non-Executive Director for Fluence Corporation. Currently
he is a partner at Israel Cleantech Ventures and has significant entrepreneurial
experience and interests in chemistry, materials and industrial processes.
Until early 2011, Arnon served as CEO of TMB Water, a water project company active
in desalination, aquaculture and water treatment efforts in Israel and abroad, and the
predecessor to RWL Water. Prior to establishing TMB in 2001, Arnon spent 17 years
with Israel Chemicals Ltd., where he served as Corporate VP for Business
Development and Chairman of the R&D, Fertilisers and Chemicals, and Ceramics
units. He was also a director at ICL’s Israel Desalination Engineering (IDE) subsidiary
as well as its potash, phosphate and bromine subsidiaries.
Previously, Arnon worked in the oil and gas industry in Israel and the US as a
production and facilities engineer with Superior Oil and Israel National Oil Co., and as
a production and field manager for Israel’s Sadot natural gas field.
Arnon serves as Chairman of Atlantium Technologies, as well as on the boards of
TGA, a waste treatment facility, and TSP, a chemical company. Arnon holds a B.Sc.
in chemistry from Hebrew University, Jerusalem, and a M.Sc. in Ocean Engineering
from University of Rhode Island, USA.
Arnon has been a director of the Group since 19 September 2017.
Nil
Nil
Nil
Nil
Nil
Experience and
expertise
Other current
directorships
Former directorships
in last 3 years
Special
responsibilities
Interest in shares
Interest in options
Contractual rights to
shares
None
Company secretary
The company secretary is Ross Kennedy. Ross Kennedy was appointed to the position of company secretary on
23 December 2015. Ross was previously Company Secretary and Executive General Manager of St Barbara
Limited for ten years. Ross is an experienced Company Secretary, holding the professional qualifications of
Fellow Governance Institute of Australia; Fellow Australian Institute of Company Directors; and Chartered
Accountant.
Meetings of directors
The number of meetings of the Group's Board of Directors and of each board committee held during the year
ended 31 December 2017, and the number of meetings attended by each director were:
Fluence Corporation Limited
(formerly Emefcy Group Limited)
12
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Meetings of directors (continued)
Emefcy - 1.1.17 to 13.7.17
Mr Richard Irving**
Mr Eytan Levy (resigned 31 August 2017)**
Mr Ross Haghighat
Mr Peter Marks
Mr Robert Wale**
Fluence - 14.7.17 to 31.12.17
Mr Richard Irving**
Mr Eytan Levy (resigned 31 August 2017)**
Mr Ross Haghighat
Mr Peter Marks
Mr Robert Wale**
Mr Henry Charrabe (appointed 14 July 2017)**
Dr Ramesh Rengarajan (appointed 14 July 2017)**
Mr Arnon Goldfarb (appointed 19 September 2017)**
Mr Ross Kennedy (Company secretary and audit committee
member)
Full
Board
A
7
7
7
7
7
Full
Board
A
8
5
7
8
8
8
6
3
B
7
7
7
7
7
B
8
5
8
8
8
8
8
3
Meetings of committees
Remuneration
and
Nomination
A
B
Audit
A
1
2
B
3
3
Meetings of committees
Remuneration
and
Nomination
Audit
A
2
3
B
3
3
A
-
1
1
B
1
1
1
1
1
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during
the year
** = Not a member of a Board Committee
In addition to the committee meeting held, numerous discussions took place between committee members in
relation to the integration of the employees of Emefcy Group Limited and RWL Water LLC which took place on 14
July 2017. There was also significant work undertaken by the committee in relation to the benchmarking of
revenue and remuneration design for the combined group - as described elsewhere in the Remuneration Report.
Environmental regulation
As a provider of water and wastewater treatment solutions, the Group is subject to environmental regulations in
each jurisdiction in which it operates. The C-MABR has demonstrated compliance to China Class 1A effluent
standards.The Group has deployed a MABR waste water solution in the US Virgin Islands, which is compliant to
USA EPA regulations. The consolidated entity is not subject to any other significant environmental regulation
under Australian Commonwealth or State law.
Remuneration report (Audited)
(a) Principles used to determine the nature and amount of remuneration
The directors present the Fluence Corporation Limited 2017 remuneration report, outlining key aspects of our
remuneration policy and framework, and remuneration awarded this year.
By way of introduction, 2017 was a year of significant change, particularly with the acquisition of RWL Water LLC
to form Fluence Corporation Limited, which took effect on 14 July 2017. The merger provided an immediate
global footprint for the development and distribution of decentralised water treatment solutions.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
13
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(a) Principles used to determine the nature and amount of remuneration (continued)
(continued)
In recognition of the significantly changed scale of business and responsibilities of the Board and executives, a
comprehensive remuneration benchmarking exercise was undertaken by Mercer Consulting - a global
remuneration consulting group - to determine market competitive remuneration for the combined group. Further
details are set out herein.
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is
competitive and appropriate for
the results delivered. The framework aligns executive reward with the
achievement of strategic objectives and the creation of value for shareholders, and conforms to the market best
practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies
the following key criteria for good reward governance practices:
• Competitiveness and reasonableness;
•
•
•
Acceptability to shareholders;
Performance linkage / alignment of executive compensation; and
Transparency.
Remuneration is aligned to shareholders’ interests and program participants’ interests as follows:
(a)
Alignment to shareholders' interests:
•
•
•
Has achievement of strategic goals as a core component of plan design;
Focuses on sustained growth in shareholder wealth, consisting of growth in share price and in
time, delivering constant or increasing return on assets as well as focusing the executives on key
non-financial drivers of value; and
Attracts and retains high calibre executives.
(b)
Alignment to program participants' interests:
•
•
•
Rewards capability and experience;
Reflects competitive reward for contribution to growth in shareholder wealth; and
Provides a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of Non-Executive Directors and executive
remuneration are separate.
Directors remuneration
Fees and payments to Non-Executive Directors reflect
Non-Executive Directors'
Committee with recommendations made to the full Board.
role.
fees and payments are reviewed annually by the Remuneration and Nomination
the demands and responsibilities of
their
Concurrently, with the acquisition of RWL Water Group to form Fluence Corporation Limited on 14 July 2017,
Mercer Consulting was engaged to advise on remuneration for the Executive Chair and Non-Executive Director
roles. Mercer is regarded as one of the world’s largest remuneration benchmarking and consulting services
companies. The firm was engaged by the Remuneration and Nomination Committee to recommend Executive
Chair and Non-Executive Directors' fees, including Board Committee fees, are appropriate for the demands on
being on the Board of a developing and global technology business, and as benchmarked against market rates
for comparable positions for peer companies.
The Board has determined that there will be no increase in Non-Executive Director fees for 2018.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
14
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(a) Principles used to determine the nature and amount of remuneration (continued)
Directors remuneration (continued)
The Executive Chair's fees are determined in parallel to the fees of other Non-Executive Directors, and also
based on comparative roles in the external market. The Executive Chairman does not participate in any
discussions relating to the determination of his own remuneration.
In view of the growing and developing nature of the company, Non-Executive Directors may also be engaged on
specific projects, on commercial arm’s length terms, where the executive team either does not have the same
skill sets or capacity. All such special purpose project arrangements are approved by the full Board with the
relevant Director abstaining.
Directors may receive share options but do not receive other incentives.
ASX listing rules require the aggregate Non-Executive Directors remuneration be determined periodically by a
general meeting. The most recent determination on 12 July 2017 was that shareholders approved an aggregate
remuneration of USD 767,000 (equivalent of AUD 1,000,000).
Executive remuneration
The consolidated entity aims to reward executives with a level and mix of remuneration based on their position
and responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has four components:
Base pay and non-monetary benefits;
Short-term performance incentives;
Share-based payments; and
•
•
•
• Other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
As mentioned earlier, executive remuneration levels were considered by reference to a detailed benchmarking
review of peer companies undertaken by Mercer Consulting.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, were reviewed by the
Remuneration and Nomination Committee based on the Mercer review following the acquisition of the RWL
Water Group to form Fluence Corporation Limited. The review also had regard to individual responsibilities,
performance and business unit performance.
Executives receive their fixed remuneration in the form of cash or other fringe benefits where it does not create
any additional costs to the consolidated entity and provides additional value to the executive.
A short-term incentive ('STI') program is planned to be designed to align the targets of the business units with the
targets of those executives responsible for meeting those targets. STI payments may be granted to executives
based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include meeting
or exceeding budget goals for the year.
The Board has determined that no discretionary short-term incentives will be payable to Executives in respect of
the 2017 year. Discretionary bonuses that were paid during the year for former Emefcy executives related to
bonuses earned during 2016. For Henry Charrabé and Philippe Laval, discretionary bonuses paid during the year
subsequent to the RWL Water acquisition were in respect of bonuses earned during a prior period as set out in
(b) details of remuneration below.
Long-term incentives ('LTI') include share-based payments. An employee option plan was originally approved by
shareholders on 17 November 2015. Options are awarded to executives as a long-term incentive and retention
incentive measures.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
15
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(a) Principles used to determine the nature and amount of remuneration (continued)
Executive remuneration (continued)
In the first six months of the year:
•
•
•
•
Employee options had an exercise price calculated as the five day VWAP up to the date of the option grant,
plus 10%.
For Israeli employees, options commence vesting after twelve months service and are fully vested after three
years and expire after four years.
For non-Israeli employees, options vest 100% after three years and expire after four years.
To be eligible to exercise performance options, an executive must remain in continuous employment with the
company up to and including the exercise date.
Subsequent to the acquisition of RWL Water Group, employee options were issued to former RWL Water
employees continuing in the business and below the level of executive at an exercise price of A$0.81 per option.
These options vest in equal quarterly instalments on each quarterly anniversary of 14 July 2017 (the deemed
option commencement date), until all of
these options have vested four years after the deemed option
commencement date, except for one tranche of options with an initial vesting date of 14 July 2017 and thereafter
quarterly vesting on the first day of each calendar quarter. All of these options will then expire on 10 September
2021.
The Board has subsequently established that the exercise price for employee options will be the 20-day Volume
Weighted Average Price up to the grant date, plus a 10% premium.
Consolidated entity performance and link to remuneration
The Board has resolved that no discretionary STI bonuses are payable to Executives in respect of the post-
acquisition period from 14 July 2017 to 31 December 2017.
The Remuneration and Nomination Committee is of the opinion that otherwise, the adoption of performance
based compensation will continue to increase shareholder wealth if maintained over the coming years.
Key management personnel bonuses in the future will be considered by the Remuneration and Nomination
Committee and the Board on the basis of both the individual’s and consolidated entity’s performance during the
financial year.
Directors consider that the option program and the exercise prices provide incentives to management and
Directors which are aligned with the interests of shareholders to lift the value of the company in the medium term.
Any remuneration derived by employees from the employee option program is directly linked to the improved
share price performance of the consolidated entity relative to the exercise price determined at the time of the
issue of the options.
(b) Details of remuneration
Amounts of remuneration (shown in USD)
The following tables show details of
management personnel
requirements of the accounting standards.
for
the remuneration expense recognised for the Group's executive key
the current and previous financial year measured in accordance with the
Remuneration for the year ended 31 December 2017 has been split between the period from 1 January 2017 to
13 July 2017 and 14 July 2017 to 31 December 2017, reflecting the material change in the company on
acquisition of RWL Water Group.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
16
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Directors and other key management personnel for the period 1 January 2017 to 13 July 2017 consisted of:
• Richard Irving - Executive Chairman
• Eytan Levy - Managing Director and CEO
• Peter Marks - Non-Executive Director
• Robert Wale - Non-Executive Director
• Ross Haghighat - Non-Executive Director
• Ross Kennedy - Company Secretary and Advisor to the Board
• Ronen Shechter - Chief Technology Officer
• Yaron Bar-Tal - Vice President of Engineering
• Lior Zitershpiler - Vice President of Finance
• Illan Wilf - Vice President of Global Sales and Business Development
Directors and other key management personnel for the period 14 July 2017 to 31 December 2017 consisted of:
• Richard Irving - Executive Chairman
• Henry Charrabe - Executive Director and Managing Director
• Eytan Levy - Executive Director (resigned 31 August 2017)
• Peter Marks - Non-Executive Director
• Robert Wale - Non-Executive Director
• Ross Haghighat - Non-Executive Director
• Ramesh Rengarajan - Non-Executive Director
• Arnon Goldfarb - Non-Executive Director
• Ross Kennedy - Company Secretary and Advisor to the Board
• Philippe Laval - Chief Operating Officer
• Robert Wowk - Chief Financial Officer
Fluence Corporation Limited
(formerly Emefcy Group Limited)
17
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Short-term benefits
Emefcy 1-1-17 to 13-7-17
Executive directors:
Richard Irving
Eytan Levy***
Total
Non-executive directors:
Peter Marks
Robert Wale
Ross Haghighat
Total
Other key management
personnel:
Ross Kennedy
Ronen Shechter
Standard
$
84,291
154,654
238,945
39,877
24,614
66,362
130,853
44,478
105,286
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payment
Equity settled
options
Total
Cash salary and fees
Total cash
salary and
fees inclusive
of special
projects
$
Special
projects
(Note 1)
$
Bonus
(Note 2) Non-monetary
$
$
$
$
$
$
$
-
-
53,680
53,680
23,006
-
84,291
154,654
238,945
39,877
78,294
66,362
184,533
-
55,710
55,710
-
-
-
-
67,484
105,286
-
25,912
-
-
-
-
-
-
-
-
-
-
29,405
29,405
-
-
-
-
-
20,677
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
139,671
139,671
-
-
-
-
-
-
84,291
379,440
463,731
39,877
78,294
66,362
184,533
67,484
151,875
Fluence Corporation Limited (formerly Emefcy
Group Limited)
18
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Emefcy 1-1-17 to 13-7-17
Short-term benefits
Yaron Bar-Tal
Lior Zitershpiler
Ilan Wilf
Total
Grand total
Standard
$
101,589
62,400
94,203
407,956
777,754
Cash salary and fees
Total cash
salary and
fees inclusive
of special
projects
$
101,589
62,400
94,203
430,962
854,440
Special
projects
(Note 1)
$
-
-
-
23,006
76,686
26,323
20,565
24,678
97,478
153,188
Bonus
(Note 2) Non-monetary
$
$
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payments
Equity settled
options
Total
-
-
-
-
-
$
16,480
10,921
15,779
63,857
93,262
$
$
-
-
-
-
-
-
-
-
-
-
$
$
149,267
4,875
97,136
3,250
254,333
119,673
127,798
720,095
267,469 1,368,359
Fluence Corporation Limited (formerly Emefcy
Group Limited)
19
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Fluence 14-7-17 to
31-12-17
Cash salary and fees
Superannuation
Long
service
leave
Short-term benefits
Post-employment
benefits
Long-term
benefits
Equity
settled
shares
Share-based
payments
Equity settled
options
Total
Total cash
salary and
fees inclusive
of special
projects
$
Special
projects
(Note 4)
$
-
-
-
-
-
-
-
-
-
88,253
335,189
423,442
52,019
42,796
52,018
44,688
23,790
215,311
Standard
$
88,253
335,189
423,442
52,019
42,796
52,018
44,688
23,790
215,311
42,944
76,686
119,630
Executive directors:
Richard Irving
Henry Charrabé (Note 3)**
Total
Non-executive directors:
Peter Marks
Robert Wale
Ross Haghighat
Ramesh Rengarajan
Arnon Goldfarb
Total
Other key management
personnel:
Ross Kennedy
Sign on
Bonus and
Deferred
Remuneration Non-monetary
$
$
$
$
$
$
$
-
300,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,795
17,795
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
124,395
36,142
902,867
249,883
286,025 1,027,262
26,631
79,313
24,899
43,574
-
174,417
78,650
122,109
76,917
88,262
23,790
389,728
16,415
136,045
Fluence Corporation Limited (formerly Emefcy
Group Limited)
20
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Fluence 14-7-17 to
31-12-17
Short-term benefits
Post-employment
benefits
Cash salary and fees
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payments
Equity settled
options
Total
Special
projects
(Note 4)
$
Total cash
salary and
fees inclusive
of special
projects
$
145,833
206,784
472,247
1,111,000
Standard
$
145,833
206,784
395,561
1,034,314
Phillippe Laval (Note 4)**
Robert Wowk
Total
Grand total
Grand total (1-1-17 to
780,115 3,359,800
31-12-17)
Note 1 Special Projects for Mr Wale comprised a detailed review of the USA market for MABR wastewater solutions. Special Projects for Mr Kennedy comprised additional
work for project managing the acquisition of the RWL Water Group.
-
-
-
17,795
-
-
76,686
76,686
1,965,440
1,812,068
111,057
153,372
503,188
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
35,789
-
52,204
$
231,622
206,784
574,451
512,646 1,991,441
Non-monetary
$
$
$
$
Bonus
$
50,000
-
50,000
350,000
Note 2 All bonuses paid to former Emefcy Directors and KMP in 2017 are discretionary bonuses relating to performance in the 2016 year. In respect of KMPs who were former
RWL Water employees, the bonuses paid in 2017 relate to the period prior to acquisition.
Note 3 Mr Charrabé received a $150,000 sign on fee for assuming the role of Managing Director & CEO of Fluence Corporation Limited, plus a deferred remuneration payment
of $150,000.
Note 4 Special Projects comprised additional work in relation to the integration of Emefcy Group Limited and RWL Water Group.
Fluence Corporation Limited (formerly Emefcy
Group Limited)
21
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
**Henry Charrabe and Phillippe Laval's percentage of remuneration subject to performance is 37.6% and 32.3% respectively.
***Eytan Levy's percentage of 2017 remuneration subject to performance is 0%.
All other directors have fixed remuneration with no performance hurdles.
Fluence Corporation Limited (formerly Emefcy
Group Limited)
22
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
2016
Short-term benefits
Cash salary and fees
Total cash
salary and
fees inclusive
of special
projects
$
Bonus
$
Standard
$
Special
projects*
$
Executive directors:
Richard Irving
Eytan Levy
Total
Non-executive directors:
Peter Marks
Phillip Hains
Robert Wale
Ross Haghighat
Total
Other key management
personnel:
Ross Kennedy
Ronen Shechter
130,136
244,591
374,727
60,234
11,164
22,544
74,586
168,528
59,863
172,089
55,773
-
55,773
44,618
-
15,029
55,773
115,420
185,909
244,591
430,500
104,852
11,164
37,573
130,359
283,948
-
114,896
114,896
-
-
-
-
-
7,436
-
67,299
172,089
7,436
24,606
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payment
Equity settled
options
Total
Non-monetary
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
44,641
44,641
-
-
-
-
-
-
30,709
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
77,202
186,878
264,080
80,045
-
69,366
77,202
226,613
263,111
591,006
854,117
184,897
11,164
106,939
207,561
510,561
4,538
-
79,273
227,404
Fluence Corporation Limited (formerly Emefcy
Group Limited)
23
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
2016
Short-term benefits
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payments
Equity settled
options
Total
Cash salary and fees
Total cash
salary and
fees inclusive
of special
projects
$
162,771
92,478
93,526
588,163
1,302,611
Special
projects*
$
Bonus
$
Non-monetary
$
$
$
226,895
14,781
Yaron Bar-Tal
141,023
9,854
Lior Zitershpiler
215,066
84,308
Ilan Wilf
113,481
889,661
Total
604,174 2,254,339
Grand total
*Short-term cash salary and fee remuneration, classified as ‘special projects,’ comprises remuneration paid to KMP’s in relation to one-off, ad hoc projects throughout the year.
Such remuneration is not expected to re-occur in the future.
$
24,347
15,560
13,710
84,326
128,967
-
-
-
7,436
178,629
24,996
23,131
23,522
103,691
218,587
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
Standard
$
162,771
92,478
93,526
580,727
1,123,982
Bonuses paid in the 2016 financial year were discretionary bonuses approved by the Board relating to corporate and operating performance.
Fluence Corporation Limited (formerly Emefcy
Group Limited)
24
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of shares
The number of shares in the Group held during the period by each Director and other Key Management
Personnel, including their personally related parties, are set out below.
2017
Executive Directors
Richard Irving - see Note 1 below
Henry Charrebe (appointed 14 July
2017)
Eytan Levy (resigned 31 August
2017) - see Note 2 below
Non-Executive Directors
Peter Marks
Robert Wale
Ross Haghighat
Ramesh Rengarajan (appointed 14
July 2017)
Arnon Goldfarb (appointed 19
September 2017)
Key Management Personnel
Ross Kennedy
Ronen Shechther (1 January 2017
through 14 July 2017) - see Note 2
below
Yaron Bar-Tal (1 January 2017
through 14 July 2017) - see Note 2
below
Lior Zitershpiler (1 January 2017
through 14 July 2017) - see Note 2
below
Ilan Wilf (1 January 2017 through
14 July 2017)
Phillip Laval (Since 14 July 2017)
Robert Wowk (Since 14 July 2017)
Total
Balance at the
start of the
year
Received as
compensation
Options
exercised
Net change
other
Total
28,944,080
-
9,267,810
38,211,890
1,854,403
-
-
-
-
1,854,403
210,000
9,267,810
782,149
325,896
-
-
-
10,585,855
50,652,148
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,320,499
36,264,579
-
-
(9,267,810)
-
(1,947,311) 36,264,579
400,000
-
-
-
-
400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,254,403
-
-
-
-
2,254,403
210,000
(9,267,810)
(782,149)
(325,896)
-
-
-
(10,375,855)
-
-
-
-
-
-
210,000
-
400,000
(12,323,166) 38,728,982
Note 1 Richard Irving has an indirect interest through Pond Venture Nominees III Limited. During the year, Pond
Venture Nominees III Limited was allotted 7,320,499 additional shares in the Group as deferred consideration for
the achievement of a Second Milestone as defined in the original 2015 Emefcy Ltd sale agreement.
Note 2 A negative adjustment is shown where the person ceased to be a director or KMP during the year.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
25
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of shares (continued)
2016
Directors
Peter Marks
Phillip Hains (resigned 5 April
2016) - see Note 1 below
Robert Wale (appointed 5 April
2016)
Ross Haghighat
Executive directors
Richard Irving - see Note 2 below
Eytan Levy - see Note 2 below
Ross Kennedy
Ronen Schechter - see Note 2
below
Yaron Bar-Tal - see Note 2 below
Lior Zitershpiler - see Note 2 below
Ilan Wilf
Total
Balance at the
start of the
year
Received as
compensation
Options
exercised
Net change
other
Total
1,547,052
468,111
-
-
2,015,163
21,629,388
6,409,416
28,038,804
210,000
6,409,416
269,183
224,319
-
7,112,918
37,166,885
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
307,351
-
1,854,403
-
(468,111)
-
-
-
307,351
-
-
(468,111)
-
-
1,854,403
-
-
-
-
-
-
-
-
-
7,314,692
2,858,394
10,173,086
28,944,080
9,267,810
38,211,890
-
210,000
2,858,394
512,966
101,577
-
3,472,937
9,267,810
782,149
325,896
-
10,585,855
307,351
13,177,912
50,652,148
Note 1 A negative adjustment is shown where the person ceased to be a director or KMP during the year.
Note 2 Additional shares allotted as deferred consideration for the achievement of the First Milestone as defined
in the original 2015 Emefcy Ltd sale agreement.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
26
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of options
The number of options over ordinary shares in the Group held during the period by each Director and other Key Management Personnel, including their personally related
parties, are set out below. An Employee Option Plan was approved by shareholders on 17 November 2015. Refer to description of Long Term Incentives under executive
remuneration for details.
2017
Executive directors
Richard Irving
Henry Charrabe (Since 14 July 2017)
Eytan Levy (resigned 31 August 2017)
Directors
Peter Marks
Robert Wale
Ross Haghighat
Ramesh Rangarajan (Since 14 July 2017)
Key Management Personnel
Ross Kennedy
Ronen Shechter (1 January 2017 through 14 July 2017)
Yaron Bar-Tal (1 January 2017 through 14 July 2017)
Lior Zitershpiler (1 January 2017 through 14 July 2017)
Ilan Wilf (1 January 2017 through 14 July 2017)
Balance at
start of year
Granted as
compensation
Option
expired /
exercised
Net change
other
Balance at
end of year
Vested &
Exercisable*
Escrowed /
Unvested
1,000,000
-
4,000,000
5,000,000
1,900,000
11,191,336
1,000,000
14,091,336
-
-
-
-
-
-
(5,000,000)
(5,000,000)
2,900,000
11,191,336
-
14,091,336
1,000,000
699,458
-
1,699,458
1,900,000
10,491,878
-
12,391,878
1,400,000
500,000
1,000,000
-
2,900,000
200,000
-
265,768
177,178
1,500,000
1,400,000
1,500,000
1,400,000
1,500,000
5,800,000
500,000
-
-
-
-
(400,000)
-
-
-
(400,000)
-
-
-
-
-
-
-
-
-
-
-
-
(265,768)
(177,178)
(1,500,000)
2,400,000
2,000,000
2,400,000
1,500,000
8,300,000
700,000
-
-
-
-
1,000,000
250,000
1,000,000
-
2,250,000
-
-
-
-
-
1,400,000
1,750,000
1,400,000
1,500,000
6,050,000
700,000
-
-
-
-
Fluence Corporation Limited (formerly Emefcy
Group Limited)
27
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of options (continued)
2017
Philippe Laval (Since 14 July 2017)
Robert Wowk (Since 14 July 2017)
Balance at
start of year
Granted as
compensation
Option
expired /
exercised
Net change
other
Balance at
end of year
Vested &
Exercisable*
Escrowed /
Unvested
-
-
2,142,946
1,500,000
-
2,000,000
-
-
-
-
-
(1,942,946)
1,500,000
-
2,200,000
93,750
-
93,750
1,406,250
-
2,106,250
Total
10,042,946
21,891,336
(400,000)
(6,942,946)
24,591,336
4,043,208
20,548,128
Fluence Corporation Limited (formerly Emefcy
Group Limited)
28
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of options (continued)
2016
Directors
Peter Marks
Phillip Hains (resigned 5 April 2016)
Robert Wale (appointed 5 April 2016)
Ross Haghighat
Richard Irving
Eytan Levy
Key Management Personnel
Ross Kennedy
Ronen Shechter
Yaron Bar-Tal
Lior Zitershpiler
Ilan Wilf
Total
8,677,167
2,000,000
*Options vested and exercisable as at 31 December
Balance at
start of year
Granted as
compensation
Option
Expired
Net change
other
Balance at
end of year
Vested &
Exercisable*
Escrowed /
Unvested
1,707,351
326,870
-
1,000,000
1,000,000
4,000,000
8,034,221
200,000
-
265,768
177,178
-
642,946
-
-
500,000
-
-
-
500,000
-
-
-
-
1,500,000
1,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(307,351)
(326,870)
-
-
-
-
(634,221)
-
-
-
-
-
-
1,400,000
-
500,000
1,000,000
1,000,000
4,000,000
7,900,000
200,000
-
265,768
177,178
1,500,000
2,142,946
1,400,000
-
-
1,000,000
1,000,000
1,000,000
4,400,000
-
-
88,584
59,090
-
147,674
-
-
500,000
-
-
3,000,000
3,500,000
200,000
-
177,184
118,088
1,500,000
1,995,272
(634,221)
10,042,946
4,547,674
5,495,272
Fluence Corporation Limited (formerly Emefcy
Group Limited)
29
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year
For the period, options were issued to directors as approved by shareholders and to Key Management Personnel
under the Fluence Corporation Limited Employee Share Option Plan amended (2017). In accordance with AASB
2 Share Based Payments IGI 4, the tables include employee options agreed to be issued up to and including 31
December 2017, even though for registration with Israeli tax authorities and other reasons, they may not have
been formally granted as at 31 December 2017. Key Management Personnel options vest subject to the
employee continuing to be employed by the Group at the vesting date.
Details of options granted to directors and other key management personnel as compensation during the
reporting period are as follows:
No share based payments were made during the period 1 January 2017 to 13 July 2017.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
30
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year (continued)
Fluence 14-7-17 to 31-12-17
Grant date
No. of options
granted
No. of options
vested
Executive directors
Richard Irving
Henry Charrabe
Non-executive directors
Peter Marks
Robert Wale
Ross Haghighat
Ramesh Rengarajan
(Appointed 14 July 2017)
Arnon Goldfarb (Appointed 19
September 2017)
Key Management Personnel
Philippe Laval
14 July 2017
14 July 2017
31 May 2017
31 May 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
950,000
950,000
5,595,664
5,595,664
700,000
700,000
750,000
750,000
700,000
700,000
14 July 2017
1,500,000
-
-
-
-
670,314
-
-
-
-
-
-
-
-
-
31 May 2017
31 May 2017
750,000
750,000
89,844
-
Fair value per
option at grant
date
US$
Exercise price
AU$
Expiry date
Value of
options at
grant date
US$
171,860
138,533
1,791,760
1,353,072
126,633
102,077
135,679
109,368
126,633
102,077
1.20
1.50
0.93
0.93
1.20
1.50
1.20
1.50
1.20
1.50
13 July 2021
13 July 2021
25 May 2025
25 May 2025
13 July 2021
13 July 2021
13 July 2021
13 July 2021
13 July 2021
13 July 2021
0.835
13 July 2021
374,220
-
-
-
0.85
0.85
25 May 2025
25 May 2025
250,966
194,676
0.1809
0.1458
0.3202
0.2418
0.1809
0.1458
0.1809
0.1458
0.1809
0.1458
0.2495
-
0.3346
0.2596
Fluence Corporation Limited (formerly Emefcy
Group Limited)
31
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year (continued)
Robert Wowk
Ross Kennedy
Grant date
No. of options
granted
No. of options
vested
-
14 July 2017
14 July 2017
-
250,000
250,000
-
-
-
Fair value per
option at grant
date
US$
-
0.1809
0.1458
Exercise price
AU$
Expiry date
-
1.20
1.50
-
13 July 2021
13 July 2021
Value of
options at
grant date
US$
-
45,226
36,456
For the prior year ended 31 December 2016, options were issued to directors as part of the director remuneration packages, and as the Group was in the early stages of
restructuring, there are no performance conditions associated with these options.
Details of options granted to directors and other key management personnel as compensation during the prior financial year are as follows:
Fluence Corporation Limited (formerly Emefcy
Group Limited)
32
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year (continued)
2016
Non-Executive Directors
Peter Marks
Phillip Hains (resigned 5
April 2016)
Robert Wale (appointed 5
April 2016)
Ross Haghighat
Executive Directors
Richard Irving
Eytan Levy
Key Management
Personnel
Ross Kennedy
Ronen Shechter
Yaron Bar-Tal
Lior Zitershpiler
Ilan Wilf
Grant date
No. of options
granted
No. of options
vested
Fair value per
option at grant
date
US$
Exercise price
AU$
Expiry date
Value of
options at
grant date
US$
-
-
-
-
11 April 2016
-
-
500,000
-
-
-
-
-
-
-
-
-
15 June 2016
1 November
2016
-
-
-
-
-
-
-
1,000,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.2592
0.2592
-
250,000 AU0.35
250,000 AU0.35
-
13 April 2020
13 April 2020
-
-
-
-
-
-
-
-
0.3881
0.5344
-
-
-
-
-
-
-
-
-
-
AU0.93
-
-
-
-
31 May 2020
-
-
64,795
64,795
-
-
-
-
-
-
-
-
388,124
AU0.74
31 Oct 2019
267,193
Fluence Corporation Limited (formerly Emefcy
Group Limited)
33
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements
Remuneration and other terms of employment
agreements. Details of these agreements are as follows:
for key management personnel are formalised in service
Name:
Title:
Agreement commenced: December 18, 2015. Mr Irving was previously Non-Executive Chairman of Emefcy
Richard Irving
Executive Chairman
Term of agreement:
Details:
Limited Israel.
Open
Remuneration for the year ending 31 December 2017 comprised AU$100,000 to 13
July 2017 and AU$125,000 fees from 14 July 2017 to 31 December 2017 as
Executive Chairman. Remuneration is reviewed annually by the Remuneration and
Nomination Committee.
Name:
Title:
Agreement commenced: December 18, 2015. Mr Levy joined Emefcy Limited Israel in November 15, 2007.
Details:
Eytan Levy (resigned 31 August 2017)
Managing Director and Chief Executive Officer
Remuneration paid for the period 1 January 2017 to 31 August 2017 was $239,769.
Name:
Title:
Agreement commenced: December 18 2015
Term of agreement:
Details:
Ross Haghighat
Non-Executive Director
Open
Non-executive Director fees of US$64,200 to 13 July 2017 and US$73,000 fees from
14 July to 31 December 2017 (including Committee fees). Remuneration is reviewed
annually by the Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: May 12 2015
Term of agreement:
Details:
Peter Marks
Non-Executive Director
Open
Non-Executive Director fees of AU$32,097 fees to 13 July 2017 and AU$67,833 fees
from 14 July 2017 to 31 December 2017 (including Committee fees). Remuneration is
reviewed annually by the Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: April 5 2016
Term of agreement:
Details:
Robert Wale
Non-Executive Director
Open
Non-Executive Director fees of AU$32,097 fees to 13 July 2017 and AU$55,806 fees
from 14 July 2017 to 31 December 2017. Mr. Wale's consulting firm was engaged in a
special purpose project and received additional fees of AU$70,000 for the period 1
January 2017 to 31 August 2017. Remuneration is reviewed annually by the
Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: July 14 2017
Term of agreement:
Details:
Dr. Rengarajan Ramesh
Non-executive Director
Open
Non-executive director fees of AU$120,000 per annum. Remuneration is to be
reviewed annually by the Remuneration and Nomination Committee.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
34
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Name:
Title:
Agreement commenced: September 19 2017
Term of agreement:
Details:
Arnon Goldfarb
Non-executive Director
Open
Non-executive director fees of AU$120,000 per annum. Remuneration is to be
reviewed annually by the Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: May 26 2017
Term of agreement:
Details of remuneration:
Henry Charrabé
Managing Director and Chief Executive Officer
Initial two year term followed by automatic one year renewals.
Cash salary and
fees
US$600,000 (base
salary)
Henry
Charrabé
Bonuses and deferred
remuneration
US$150,000 (one-off sign-on fee). Health insurance and other health
Other Benefits
and welfare benefits for Mr.
Charrabé and his family (capped
at 30% of base salary).
Housing allowance of US$170,000
per annum.
US$150,000 (one-off guaranteed
minimum deferred remuneration
for 2017).
US$300,000 (year-end deferred
remuneration annually
commencing 2018).
Discretionary bonus in the target
amount of US$75,000, to be paid
annually (based on performance
metrics set by the Board).
A cash bonus of up to 100% of
base salary for outperformance on
one or more of his performance
metrics, measured annually.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
35
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Employment Based Option Remuneration:
Number of options
granted
5,595,668
Grant date
May 31 2017
Performance Based Option Remuneration
Number of options
granted
5,595,668
Grant date
May 31 2017
Option Value at
Grant Date
AU$0.93 (closing
market price of then
Emefcy ordinary
shares on the ASX
on grant date).
Option Value at
Grant Date
AU$0.93 (closing
market price of then
Emefcy ordinary
shares on the ASX
on grant date).
Exercise Price
Vesting Period
AU$0.93
Options will vest and
become exercisable
in equal instalments
at the end of each
consecutive three
(3) month period
over four (4) years,
commencing on
May 26, 2017
(Share Purchase
Agreement signing
date).
Exercise Price
Vesting Period
AU$0.93
Options are
exercisable in equal
annual instalments
at the end of each
consecutive twelve
(12)-month period
over a four (4)-year
period commencing
on the SPA Signing
Date.
Vesting of these
options will be
subject to meeting
performance criteria
established by the
Board.
If there is a change in control of the Company, however, all of the then unvested options will immediately vest
and become exercisable. In addition, all of the options will expire on the earlier of 60 days after termination of Mr
Charrabé’s employment and the 8th anniversary of the SPA Signing Date.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
36
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Notice Periods and Termination Payments
The table below sets out the different types of termination benefits that Mr Charrabé will receive following
different types of employment termination events.
Description of
benefit
Termination for
Cause
30 days’ notice
Termination events
Termination with
Good Reason
Termination
without Cause or
as a result of death
or disability
Applicable Notice Periods
90 days’ notice
(with further 30
day cure period)
90 days’ notice -
termination
without cause
Resignation
without Good
Reason
90 days’ notice
30 days upon
determining
disability; and
immediate
termination upon
death
Payable only to
termination date
Will continue to
receive for the
Severance Period.
Will continue to
receive for the
Severance Period.
Health insurance
plan and other
health and welfare
benefits; annual
housing allowance;
and base salary
No entitlement.
Year-end deferred
remuneration
commencing in
2018; and annual
discretionary bonus
11,191,336 options All unvested
options will lapse
on termination of
employment.
If terminated in
2018 or later, will
receive a pro-rated
payment based on
the part of the year
that he was
employed.
The options that
would have vested
during the
Severance Period
will vest at
termination, and
performance
criteria won’t apply.
If terminated in
2018 or later, will
receive a pro-rated
payment based on
the part of the year
that he was
employed.
If death or
disability, all
unvested options
immediately vest; if
termination without
Cause, the options
that would have
vested during the
Severance Period
will vest at
termination; in each
case, performance
criteria won’t apply.
Payable for one
year after
resignation if he
complies with his
non-competition
obligation during
this period, except
for the housing
allowance which is
payable only to
termination date.
No entitlement.
All unvested
options will lapse
on termination of
employment.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
37
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
The Severance Period referred to in the table above means, if terminated during the initial two year term of his
employment, the period from his termination through the remainder of the term plus 12 months, and, if terminated
after the end of the initial two year term, the 12 month period following termination.
Name:
Title:
Agreement commenced: 1 August 2017 (under a consulting agreement between Astaris SAS and Fluence)
Term of agreement:
Phillippe Laval
Chief Operating Officer
August 1 2017 for an initial two year term (the Consulting Term), which may be
extended or renewed at the end of the Consulting Term unless Fluence or Astaris
SAS gives 90 days’ written notice of termination, or gives notice of termination for
cause. The agreement may also be terminated on the disability of Phillippe Laval, or
his death.
Astaris SAS is entitled to receive a US$350,000 annual consulting fee and a
US$100,000 annual bonus. Astaris SAS is also entitled to receive a discretionary
bonus at the discretion of the CEO based on performance metrics established by the
CEO. No target amount is set for the discretionary bonus.
Astaris SAS was granted 1,500,000 options, with each option exercisable for one
ordinary share in Fluence upon payment of the exercise price of A$0.85. Half of these
options vest every three (3) months over four (4) years, while the other half vest in
annual instalments over 4 years based on achieving performance criteria. All options
(whether vested or unvested) will expire at the earlier of 60 days after any termination
of the consulting relationship (unless determined otherwise by the Board) or 5 pm
(Australian AEST) on the eighth (8th) anniversary of the SPA Signing Date.
Details:
Details of Remuneration:
Bonuses and deferred
remuneration
Philippe Laval
Cash salary and fees
US$350,000 (annual
consulting fee)
-
-
Other Benefits
-
-
-
Bonuses and deferred
remuneration
US$100,000 (deferred
remuneration payment)
- Discretionary bonus (at
the discretion of the CEO
based on performance
metrics set by the CEO -
no target amount)
- a cash bonus of up to
100% of the annual
consulting fee for out
performance on one or
more of his performance
metrics, measured
annually.
Employment Based Option Remuneration
Number of options
granted
750,000
Grant date
31 May 2017
Option Value at
Grant Date
AU$0.4503
Exercise Price
Vesting Period
AU$0.85
Options will vest
every three (3)
months over four (4)
years.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
38
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Performance Based Option Remuneration
Number of options
granted
750,000
Grant date
31 May 2017
Option Value at
Grant Date
AU$0.3493
Exercise Price
Vesting Period
AU$0.85
Options will vest in
annual instalments
over four (4) years
based on achieving
performance criteria.
All options (whether vested or unvested) will expire at the earlier of 60 days after any termination of the
consulting relationship (unless determined otherwise by the Board) or 5 pm (Australian AEST) on the eighth (8th)
anniversary of the SPA Signing Date.
Notice Periods and Termination Payments
The table below sets out the different types of termination benefits that Astaris SAS (Consultant) will receive
following different types of consultation termination events.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
39
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Description of
benefit
Termination for
Cause
No notice period
Termination events
Termination without
Cause or due to a
Material Breach
Termination by
reason of Philippe
Laval’s death or
disability
Applicable Notice Periods
Immediate
termination upon
death
90 days’ notice (with a
30 day cure period in
the case of Material
Breach)
Terminated by the
Consultant other
than for a Material
Breach
90 days’ notice
Termination on
determining
disability after 90
consecutive days
or a total of 120
days in any 12
month period
Any accrued and
unpaid Annual
Consulting Fees to
the termination
date.
Any accrued and
unpaid Annual
Consulting Fees to
the termination
date.
Payable only if
earned but unpaid
as of the
termination date.
Payable only if
earned but unpaid
as of the
termination date.
All unvested
options immediately
vest.
All unvested
options will lapse
on termination of
engagement.
Any accrued and
unpaid Annual
Consulting Fees to
the termination
date.
Payable only if
earned but unpaid
as of the
termination date.
Annual
Consulting Fee
Deferred
remuneration;
and
Discretionary
Bonus (based
on
performance
metrics)
1,500,000
options
All unvested
options will lapse
on termination of
employment.
Annual Consulting Fees
accrued and unpaid to
the termination date, and
for the Severance Period
at the rate in effect
immediately prior to the
termination date.
Deferred remuneration
earned but unpaid as of
the termination date, and
a pro-rated bonus based
on the part of the year
elapsed to the
termination date.
Payment of earned but
unpaid Discretionary
Bonuses will be as
above, but based on
applicable performance
metrics.
The options that would
have vested during the
Severance Period will
vest at termination, and
performance criteria
won’t apply.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
40
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
The Severance Period referred to in the table above means, if terminated during the initial two year term of the
engagement, the period from the termination through the remainder of the term plus 6 months, and, if terminated
after the end of the initial two year term, the 6 month period following termination.
Name:
Title:
Agreement commenced: December 24 2015
Term of agreement:
Details:
Ross Kennedy
Company Secretary & Advisor to the Board
Notice period by either party of 60 days.
Mr Kennedy received fees through a private consulting company Milvian Bridge Pty
Ltd of A$23,000 per month from I January 2017 to 31 August 2017, inclusive of
special project fees, and A$14,000 per month from 1 September 2017 onwards. In
addition, Milvian Bridge also received fees totaling A$82,823 for consulting services
provided by another consultant.
Name:
Title:
Agreement commenced: Mr Shechter joined Emefcy Limited Israel in November 15, 2007
Term of agreement:
Details:
Ronen Shechter
Chief Technology Officer, Emefcy Limited
Notice period by either party of 90 Days
Mr Shechter ceased to be a Key Management Person from 14 July 2017.
Remuneration paid for the period 1 January 2017 to 14 July 2017 was $151,875.
Name:
Title:
Agreement commenced: Mr Bar-Tal joined Emefcy Limited Israel in May 8, 2013
Term of agreement:
Details:
Yaron Bar-Tal
Vice President of Engineering, Emefcy Limited
Notice period by either party of 90 Days
Mr Bar-Tal ceased to be a Key Management Person from 14 July 2017.
Remuneration paid for the period 1 January 2017 to 14 July 2017 was $144,392.
Name:
Title:
Agreement commenced: Mr Zitershpiler joined Emefcy Limited Israel in March 16, 2014
Term of agreement:
Details:
Lior Zitershpiler
Vice President of Finance
Notice period by either party of 30 Days
Mr Zitershpiler ceased to be a Key Management Person from 14 July 2017.
Remuneration paid for the period 1 January 2017 to 14 July 2017 was $93,866.
Name:
Title:
Agreement commenced: Mr Ilan Wilf joined Emefcy Limited Israel in May 30, 2016
Term of agreement:
Details:
Ilan Wilf
Vice President of Global Sales and Business Development, Emefcy Limited
Notice period by either party of 60 Days
Mr Wilf ceased to be a Key Management Person from 14 July 2017. Remuneration
paid for the period 1 January 2017 to 14 July 2017 was $134,660.
The 2016 Remuneration Report was approved by shareholders at the 2017 Annual General Meeting.
[This concludes the Remuneration Report, which has been audited]
Fluence Corporation Limited
(formerly Emefcy Group Limited)
41
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Shares under option
Unissued ordinary shares
Unissued ordinary shares of Fluence Corporation Limited (formerly Emefcy Group Limited) under option at the
date of this report are as follows:
Date options granted
Expiry date
Issue price of shares
Number under option
18 December 2015
18 December 2015
28 January 2016
28 January 2016
11 April 2016
29 February 2016
29 February 2016
29 February 2016
29 February 2016
23 March 2016
23 March 2016
23 March 2016
23 March 2016
17 May 2016
17 May 2016
18 May 2016
18 May 2016
15 June 2016
25 July 2016
25 July 2016
25 August 2016
23 September 2016
27 October 2016
1 November 2016
23 September 2016
9 February 2017
20 December 2016
9 February 2017
28 March 2017
8 March 2017
8 March 2017
5 May 2017
31 May 2017
31 May 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
19 July 2017
1 July 2017
7 September 2017
14 September 2017
19 September 2017
19 September 2017
14 July 2017
18 December 2018
18 December 2019
31 July 2018
31 January 2019
13 April 2020
23 December 2019
23 December 2019
28 February 2020
28 February 2020
23 March 2020
23 March 2020
12 April 2020
12 April 2020
16 May 2020
28 May 2020
18 May 2020
18 May 2021
31 May 2020
31 July 2018
25 July 2020
25 August 2020
25 September 2020
26 October 2020
31 October 2020
9 November 2020
9 February 2021
20 December 2020
10 January 2021
4 March 2021
31 March 2019
31 March 2019
3 May 2021
25 May 2025
25 May 2025
13 July 2021
13 July 2021
13 July 2021
25 May 2025
14 July 2019
6 July 2021
30 September 2019
13 November 2021
31 December 2020
31 December 2020
10 September 2021
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 35 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 59 cents
AU 59 cents
AU 40 cents
AU 40 cents
AU 93 cents
AU 64 cents
AU 79 cents
AU 87 cents
AU 1.00 dollar
AU 1.07 dollars
AU 74 cents
AU 1.00 dollar
AU 1.00 dollar
AU 87 cents
AU 84 cents
AU 82 cents
AU 72 cents
AU 72 cents
AU 86 cents
AU 93 cents
AU 85 cents
AU 1.20 dollars
AU 1.50 dollars
AU 84 cents
AU 84 cents
AU 0.72 cents
AU 97 cents
AU 75 cents
AU 86 cents
AU 95 cents
AU 1.10 dollars
AU 81 cents
2,500,000
2,500,000
1,940,000
1,940,000
500,000
431,473
431,473
100,000
100,000
75,000
75,000
50,000
50,000
400,000
100,000
1,000,000
1,000,000
1,000,000
500,000
250,000
325,000
200,000
350,000
500,000
200,000
350,000
75,000
25,000
1,000,000
2,000,000
1,000,000
175,000
11,191,336
1,500,000
3,850,000
3,850,000
1,500,000
350,000
300,000
100,000
750,000
1,140,000
1,500,000
1,000,000
4,604,000
52,778,282
Fluence Corporation Limited
(formerly Emefcy Group Limited)
42
Fluence Corporation Limited (formerly Emefcy Group Limited)
Directors' Report
31 December 2017
(continued)
Insurance of officers and indemnities
(a)
Insurance of officers
The Group has indemnified the Directors and executives of the Group for costs incurred, in their capacity as a
Director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Group paid a premium in respect of a contract to insure the Directors and
executives of the Group against a liability to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
(b) Indemnity of auditors
The Group has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of
the Group or any related entity against a liability incurred by the auditor.
During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the
Group or any related entity.
Proceedings on behalf of the group
the Corporations Act 2001 for leave to bring
No person has applied to the Court under section 237 of
proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the
purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year
are set out in Note 23 in the financial statements.
The board of directors has considered the position and, in accordance with advice received from the audit
committee, is satisfied that the provision of the non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of
non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the
impartiality and objectivity of the auditor
none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 45.
Rounding of amounts
The amounts contained in the directors’ report and in the financial report have been rounded to the nearest
$1,000 (where rounding is applicable) under the option available to the Company under ASIC Corporations
(Rounding in Financial/Directors’ Report) Legislative Instrument 2016/191. The Company is an entity in which the
Legislative Instrument applies.
Corporate Governance Statement
In accordance with ASX listing Rule 4.10.3, the Group’s Corporate Governance Statements can be found on its
website https://www.fluencecorp.com/investor-news/.
For and on behalf of the Directors
Fluence Corporation Limited
(formerly Emefcy Group Limited)
43
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF FLUENCE CORPORATION
LIMITED
As lead auditor of Fluence Corporation Limited for the year ended 31 December 2017, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Fluence Corporation Limited and the entities it controlled during the
period.
David Garvey
Partner
BDO East Coast Partnership
Melbourne, 29 March 2018
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Fluence Corporation Limited (formerly Emefcy Group Limited)
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2017
Revenues
Operating revenue
Other income
Testing
Expenses
Cost of sales
Research and development expenses
Sales and marketing expenses
General and administration expenses
Listing expense recognised
Other gains/(loss) - net
Finance income/(costs) - net
Loss before income tax
Income tax expense
Loss for the year
Loss for the year is attributable to:
Owners of Fluence Corporation Limited
Non-controlling interests
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Fluence Corporation Limited
Non-controlling interests
Losses per share from continuing operations attributable to the
ordinary equity holders of the Group:
Basic loss per share
Diluted loss per share
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
Notes
4
4
4
4
4
4
6
19
19
7
7
33,083
105
33,188
(27,230)
(5,970)
(6,299)
(17,940)
-
(1,191)
2,561
(22,881)
(687)
(23,568)
(23,664)
96
(23,568)
792
19
811
(2,007)
(2,045)
(950)
(4,942)
(1,000)
1,080
(12)
(9,065)
-
(9,065)
(9,065)
-
(9,065)
(721)
(24,289)
(881)
(9,946)
(24,385)
96
(24,289)
(9,946)
-
(9,946)
(0.07)
(0.07)
(0.04)
(0.04)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the accompanying notes. All amounts are presented in US dollars unless stated differently.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
46
Fluence Corporation Limited (formerly Emefcy Group Limited)
Consolidated Statement of Financial Position
As at 31 December 2017
ASSETS
Current assets
Cash and cash equivalents
Other financial assets
Trade and other receivables
Inventories
Prepayments
Other assets
Total current assets
Non-current assets
Other receivables
Investments accounted for using the equity method
Deferred tax assets
Property, plant and equipment
Intangible assets
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Deferred revenue
Other financial liabilities
Total current liabilities
Non-current liabilities
Other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Accumulated losses
Non-controlling interests
Total equity
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
Notes
8
8
9
10
11
9
12
6
13
14
11
15
6
16
17
15
15
16
6
18
20
19
75,153
4,786
26,684
18,538
3,876
2,873
131,910
260
495
1,921
7,114
60,167
2,790
72,747
22,871
134
712
452
205
-
24,374
50
-
-
1,039
2,134
-
3,223
204,657
27,597
27,811
1,145
72
27,711
38,173
1,000
95,912
2,595
878
1,671
5,144
101,056
103,601
156,898
(1,376)
(52,075)
103,447
154
103,601
1,372
-
-
123
-
1,000
2,495
1,039
-
-
1,039
3,534
24,063
53,129
(655)
(28,411)
24,063
-
24,063
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes. All amounts are presented in US dollars unless stated differently.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
47
Fluence Corporation Limited (formerly Emefcy Group Limited)
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Consolidated entity
Balance at 1 January 2016
Loss for the period
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of ordinary shares, net of transaction costs
Issue of options
Balance at 31 December 2016
Balance at 1 January 2017
Loss for the period
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of ordinary shares, net of transaction costs
Issue of options
Transactions with non-controlling interests
Balance at 31 December 2017
Contributed
equity
$'000
Notes
Other reserves
$'000
Accumulated
losses
$'000
Total
$'000
Non- controlling
interests
$'000
Total
equity
$'000
28,482
-
-
-
22,946
1,701
53,129
53,129
-
-
-
101,538
2,231
-
156,898
226
-
(881)
(881)
-
-
(655)
(655)
-
(721)
(721)
-
-
-
(1,376)
(19,346)
(9,065)
-
(9,065)
-
-
(28,411)
(28,411)
(23,664)
-
(23,664)
-
-
-
(52,075)
9,362
(9,065)
(881)
(9,946)
22,946
1,701
24,063
24,063
(23,664)
(721)
(24,385)
101,538
2,231
-
103,447
18
18
18
18
19
-
-
-
-
-
-
-
-
96
-
96
-
-
58
154
9,362
(9,065)
(881)
(9,946)
22,946
1,701
24,063
24,063
(23,568)
(721)
(24,289)
101,538
2,231
58
103,601
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Fluence Corporation Limited (formerly Emefcy
Group Limited)
48
Fluence Corporation Limited (formerly Emefcy Group Limited)
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Cash flows from operating activities
Receipt from customers
Payments to suppliers and employees
Royalties paid to chief scientist office (Israel)
Receipt from restricted cash
Interest received
Interest and other costs of finance paid
Income taxes paid
Net cash (outflow) from operating activities
Cash flows from investing activities
Payment for purchases of plant and equipment
Cash consideration of acquisition
Funds transferred to term deposit
Refund/ (Payment) of long term lease deposit
Proceeds from sale of property, plant and equipment
Proceeds from disposal of short-term deposits
Cash acquired as part of acquisition of RWL Water LLC
Net cash inflow (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of ordinary shares
Proceeds from exercise of share options
Repayment of borrowings
Transactions costs related to issue of ordinary shares
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
Notes
28,062
(56,395)
(67)
261
686
(144)
(870)
(28,467)
(3,717)
-
-
-
5
1,064
50,583
47,935
31,001
808
(634)
(476)
30,699
50,167
22,871
2,115
75,153
284
(7,452)
(12)
13
19
-
-
(7,148)
(368)
(1,000)
(115)
(47)
-
-
-
(1,530)
22,951
-
-
(86)
22,865
14,187
8,479
205
22,871
8
8
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
49
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
1 Summary of significant accounting policies
(a) Corporate information
The Financial Report of Fluence Corporation Limited (formerly Emefcy Group Limited) and its controlled entities
(the “Group”) for the year ended 31 December 2017 was authorised for issue in accordance with a resolution of
the Directors on the 29
day of March 2018. The Group changed its name effective on 14 July 2017.
th
Fluence Corporation Limited is a for profit listed public company limited by shares incorporated and domiciled in
Australia whose shares are publicly traded on the Australian Securities Exchange (“ASX”). The Group provides
fast-to-deploy, decentralized and packaged water and wastewater treatment solutions.
(b) Basis of preparation
These general purpose Financial Statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act
2001.
The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the
international accounting standards board.
The financial report has been prepared on an accruals basis and is based on historical costs, except for those
assets and liabilities measured at fair value. The financial report is presented in United States Dollars, which is
the Group’s presentation currency. All values are rounded to the nearest $1,000 (where rounding is applicable)
under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors' Report)
Legislative Instrument 2016/191. The Company is an entity in which the Legislative Instrument applies.
Management is required to make judgements, estimates and assumptions about carrying values of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the circumstance, the
results of which form the basis of making the judgements. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in 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.
Judgements made by management in the application of Australian Accounting Standards that have significant
effects on the financial statements and estimates with a significant risk of material adjustments in the next year
are disclosed, where applicable, in the relevant notes to the financial statements (refer to Note 1 (ab)).
Accounting policies are selected and applied in a manner which ensures that the resulting financial information
satisfies the concepts of relevance and reliability,
the underlying
transactions or other events is reported.
thereby ensuring that
the substance of
(i) Going concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of normal
business activities and the realisation of assets and discharge of liabilities in the normal course of business.
(ii) New and amended standards adopted by the group
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
All other accounting standards adopted by the Group are consistent with the most recent Annual Report for the
year ended 31 December 2016.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
50
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(b) Basis of preparation (continued)
(iii) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31
December 2017 reporting periods and have not been early adopted by the Group. The Group’s assessment of
the impact of these new standards and interpretations is set out below.
AASB 9: Financial Instruments and associated Amending Standards (applicable to annual reporting periods
beginning on or after 1 January 2018)
The Standard will be applicable retrospectively (subject to the provisions on hedge accounting) and includes
revised requirements for the classification and measurement of financial instruments, revised recognition and
derecognition requirements for financial instruments and simplified requirements for hedge accounting.
The final version of AASB 9 introduces a new expected-loss impairment model that will require more timely
recognition of expected credit losses. Specially, the new Standard requires entities to account for expected credit
losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a
more timely basis.
Although the Group anticipate that the adoption of AASB 9 will
Group has not finalised its assessment of the impact of AASB9.
impact the Group’s financial statements, the
AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods beginning on or after
1 January 2018, as deferred by AASB 2015-8: Amendments to Australian Accounting Standards - Effective Date
of AASB 15)
When effective, this Standard will replace the current accounting requirements applicable to revenue with a
single, principles-based model. Except for a limited number of exceptions, including leases, the new revenue
model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities
in the same line of business to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:
• identify the contract(s) with a customer;
• identify the performance obligations in the contract(s);
• determine the transaction price;
• allocate the transaction price to the performance obligations in the contract(s); and
• recognise revenue when (or as) the performance obligations are satisfied.
The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each
prior period presented per AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors (subject
to certain practical expedients in AASB 15); or recognise the cumulative effect of retrospective application to
incomplete contracts on the date of
initial application. There are also enhanced disclosure requirements
regarding revenue.
Although the Group anticipate that the adoption of AASB 15 will impact the Group’s financial statements, the
Group has not finalised its assessment of the impact of AASB 15.
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117:
Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the
requirement for leases to be classified as operating or finance leases.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
51
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(b) Basis of preparation (continued)
(iii) New standards and interpretations not yet adopted (continued)
The main changes introduced by the new Standard include:
• recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12
months of tenure and leases relating to low-value assets);
• depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and
unwinding of the liability in principal and interest components;
• variable lease payments that depend on an index or a rate are included in the initial measurement of the lease
liability using the index or rate at the commencement date;
• by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and
instead account for all components as a lease; and
• additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either
retrospectively apply the Standard to
comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an
adjustment to opening equity on the date of initial application.
Although the Group anticipate that the adoption of AASB 16 will impact the Group’s financial statements, the
Group has not finalised its assessment of the impact of AASB 16.
(c) Comparatives
Where necessary comparatives have been reclassified for consistency with the current period disclosures.
(i) Revision to Appendix 4E Preliminary Final Report for the year ended 31 December 2017
Items previously included in the Consolidated Statement of Cash Flows in the Appendix 4E Preliminary Final
Report for the year ended 31 December 2017 within ‘Acquired as part acquisition of RWL Water LLC’ have been
reclassified to operating activities to better reflect the nature of the cash flows.
As a result of this reclassification, for the year ending 31 December 2017, net cash outflows from operating
activities has decreased $1,609,000 to ($28,467,000). Net cash inflows from investing activities has decreased
$3,384,000 to $47,935,000. The ‘Effects of exchange rate changes on cash and cash equivalents’ has increased
$1,775,000 to $2,115,000.
Items previously included in the Consolidated Statement of Financial Position in the Appendix 4E Preliminary
Final Report for the year ended 31 December 2017 within ‘Trade and other payables’ have been separated into a
newly created category ‘Provisions’ to provide a more accurate and detailed presentation of the Group’s financial
position.
As a result of this reclassification, for the year ending 31 December 2017, ‘Trade and other payables’ have
decreased $27,711,000 to $27,811,000. The ‘Provisions’ balance has been presented as $27,711,000.
(d) Principles of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent company,
Fluence Group Limited, and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in
Note 27.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the
Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued
from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on
transactions between group entities are fully eliminated on consolidation.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
52
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(d) Principles of consolidation (continued)
Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure
uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable,
directly or indirectly, to the Group are presented as “non-controlling interests”.
The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and
are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the
non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition,
non-controlling interests are attributed their share of profit or loss and each component of other comprehensive
income.
Non-controlling interests are shown separately within the equity section of the Statement of Financial Position
and Statement of Profit or Loss and Other Comprehensive Income.
(e) Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the
same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is
responsible for the allocation of resources to operating segments and assessing their performance.
(f) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is
recognised.
(i) Revenues on equipment sales
Revenue on equipment sales is recognised when all the following conditions have been satisfied: The Group has
transferred to the customer the significant risks and rewards of ownership of the goods, the Group retains neither
continuing managerial involvement nor effective control over the equipment sold, the amount of revenue can be
measured reliably, 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.
(ii) Revenues on engineering, procurement, construction ("EPC") contracts
Revenues are recognised by reference to the stage of completion of the contract activity at the balance date. The
Group uses the percentage of completion method to determine the appropriate amount to recognise in a given
period. The assessment of the stage of completion is dependent on the nature of the contract, but will generally
be based on the estimated proportion of the total contract costs which have been incurred to date. If a contract is
expected to be loss-making, a provision is recognised for the entire loss.
(iii) Revenues on services
Revenues on services are recognised by reference to the stage of completion of the transaction at the end of the
reporting period, if the outcome of the transaction can be reliably estimated. The following conditions need to be
satisfied: the amount of revenue can be measured reliably, it is probable that the economic benefits associated
with the transaction will flow to the Group, the stage of completion of the transaction at the end of the reporting
period can be measured reliably and the costs incurred for the transaction and the costs to complete the
transaction can be measured reliably. If the outcome of such a transaction cannot be estimated reliably, revenue
is recognised only to the extent that expenses recognised are recoverable.
(iv) Interest
Interest income is recognised using the effective interest method. When a receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income
on impaired loans is recognised using the original effective interest rate.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
53
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(g) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the
grant will be received and the group will comply with all attached conditions. Note 15 provides further information
on how the group accounts for government grants.
Government grants are recognised in profit and loss on a systematic basis over the periods in which the entity
recognises expenses for the related costs for which the grants are intended to compensate.
Grants received from the Government of Israel that are required to be repaid by payment of royalties on sales
revenue or refunded if relevant conditions are not met are recorded as other payables (refer to Note 15 for further
details).
(h) Leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks
and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.
(i) Employee benefits
(i) Wages and salaries
Wages and salaries include non-monetary benefits, annual leave and long service leave. These are recognised
and presented in different ways in the financial statements:
•
•
•
•
The liability for annual leave and the portion of long service leave expected to be paid within twelve months is
measured at the amount expected to be paid.
The liability for long service leave and annual leave expected to be paid after one year is measured as the
present value expected future payments to be made in respect of services provided by employees up to the
reporting date.
The liability for annual leave and the portion of long service leave that has vested at the reporting date
included in the current provision for employee benefits.
The portion of long service leave that has not vested at the reporting date is included in the non-current
provision for employee benefits.
(ii) Share-based payments
Employees (including senior executives) of
the Group receive remuneration in the form of share-based
payments, whereby employees render services as consideration for equity instruments (equity-settled
transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using
an appropriate valuation model, further details of which are given in Note People costs.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity (other
capital reserves), over the period in which the service and, where applicable, the performance conditions are
fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of
profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and
end of that period.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
54
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(i) Employee benefits (continued)
(ii) Share-based payments (continued)
Service and non-market performance conditions are not taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of
the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the
grant date fair value. Any other conditions attached to an award, but without an associated service requirement,
are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award
and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service
conditions have not been met. Where awards include a market or non-vesting condition, the transactions are
treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair
value of the unmodified award, provided the original terms of the award are met. An additional expense,
measured as at the date of modification, is recognised for any modification that increases the total fair value of
the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by
the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately
through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share.
(j) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the
amount of any non-controlling interests in the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the
acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in
administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by
the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition
date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted
for within equity. Contingent consideration classified as an asset or liability that is a financial
instrument and
within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with
the changes in fair value recognised in the statement of profit or loss in accordance with IAS 39. Other contingent
consideration that is not within the scope of IAS 39 is measured at fair value at each reporting date with changes
in fair value recognised in profit or loss.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the
acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or loss.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
55
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(j) Business combinations (continued)
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the
operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured
based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition date.
The measurement period ends on either of (i) 12 months from the date of the acquisition or (ii) when the acquirer
receives all the information possible to determine fair value.
(k)
Investment in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control over
those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control
is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the
parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to
determine control over subsidiaries.
The Group’s investments in its associate and joint venture are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The
carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the
associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included
in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint
venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there
has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its
share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses
resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of
the interest in the associate or joint venture.
The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of
the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling
interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as the
Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment
loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether
there is objective evidence that the investment in the associate or joint venture is impaired. If there is such
evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of
the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an
associate and a joint venture’ in the statement of profit or loss.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
56
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investment in associates and joint ventures (continued)
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures
and recognises any retained investment at its fair value. Any difference between the carrying amount of the
associate or joint venture upon loss of significant influence or joint control and the fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
(l)
Impairment of non financial assets
Impairment exits when the carrying value of an asset or cash generating unit exceeds its recoverable amount,
which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal
calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar
assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation
is based on a Discounted Cash Flow (DCF) model.
The cash flows are derived from the budget for the next five years and do not include restructuring activities that
the Group is not yet committed to or significant future investment that will enhance the performance of the assets
of the Cash Generating Unit (CGU) being tested.
The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future
cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill
and other intangibles with indefinite useful
lives recognised by the Group. The key assumptions used to
determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and
further explained in note 14 - intangible assets.
(m) Cash and cash equivalents
Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or less.
For the purposes of the consolidated statement of cash flow, cash and cash equivalents consist of cash and cash
equivalents as defined above.
(n) Restricted cash
Restricted cash is invested in highly liquid deposits, which are used mainly as security for guarantees provided to
lessors of office and production premises, bid bonds and performance guarantees.
(o) Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortized cost, less any
appropriate provision for estimated irrecoverable amounts.
An provision for impairment is made when there is objective evidence that the Group will not be able to collect the
debts. The criteria used to determine that there is objective evidence that an impairment loss has occurred
include whether the Financial Asset is past due and whether there is any other information regarding increased
credit risk associated with the Financial Asset. Bad debts which are known to be uncollectible are written-off
when identified.
(p) Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognised. AII other repairs and maintenance are charged to profit or
loss during the reporting period in which they are incurred.
Depreciation on plant and equipment is calculated using the straight-line method to allocate their cost or revalued
amounts, net of their residual values, over their estimated useful lives, as follows:
Fluence Corporation Limited
(formerly Emefcy Group Limited)
57
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(p) Property, plant and equipment (continued)
25-50 years
Buildings
Over the shorter of the term of the lease or useful life of an asset
Leasehold improvements
4-17 years
Production equipment
Office furniture and equipment
3-17 years
Computers and peripheral equipment 3-15 years
Vehicles
5-7 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount
is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds the carrying amount. These are included
in profit or loss.
(q) Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct
labour and an appropriate proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual
items of inventory on basis of First in-First out (FIFO). Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the sale.
(r) Foreign currency translation
(i) Functional Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’). The financial statements of
Fluence Corporation Limited (the parent entity of the Group) are measured in Australian Dollars which is that
entity’s functional currency.
(ii) Presentation Currency
The consolidated financial statements are presented in US Dollars, which is the Group’s presentation currency.
(iii) Translation and balances
Transactions in foreign currencies are converted to the functional currency at the exchange rate at the date of the
transaction. Amounts payable to and by the Group outstanding at reporting date and denominated in foreign
currencies have been converted to local currency using rates prevailing at the end of the financial year. All
exchange differences are taken to profit or loss.
(iv) Group companies
The results of foreign subsidiaries and the parent entity are translated to US Dollars at the exchange rate at the
date of the transaction. Assets and liabilities of foreign subsidiaries and the Australian parent are translated to US
Dollars at exchange rates prevailing at balance date. All resulting exchange differences are recognised in other
comprehensive income and in the foreign currency translation reserve in equity.
(v) Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences on translation of
controlled subsidiaries. Amounts are reclassified to profit or loss when the investment is disposed of.
foreign
(s)
Income tax
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
58
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(s)
Income tax (continued)
Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred
income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting loss nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be
utilised except where the deferred income tax asset relating to the deductible temporary differences arises from
the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of
transaction, affects neither the accounting loss nor taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
receivables and payables are stated with the amount of GST included.
•
Cash flows arising from operating activities are included in the consolidated statement of cash flow on a gross
basis (i.e. including GST) and the GST component of cash flows arising from investing and financing activities,
the taxation authority are classified as operating cash flows.
which is recoverable from, or payable to,
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority. The net amount of GST recoverable from or payable to, the taxation authority is included as
part of the receivables or payables in the consolidated statement of financial position.
(u) Intangible assets
Intangible assets are initially measured at cost. Following initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets
are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life
and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least
at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as
appropriate, which is a change in an accounting estimate. The amortisation expense on intangible assets with
finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible
asset.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
identifiable net assets of the acquired subsidiary at the date of acquisition.
Goodwill arising from acquisitions of subsidiaries, tested at least annually for impairment and carried at cost less
accumulated impairment losses. Any impairment is recognised immediately in the statement of profit or loss or
other comprehensive income. Subsequent reversals of impairment losses for goodwill are not recognised.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
59
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(u) Intangible assets (continued)
Research and development
Research costs are expensed as incurred.
An intangible asset arising from development expenditure on an internal project is recognised only when the
Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for
use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future
economic benefits, the availability of resources to complete the development and the ability to measure reliably
the expenditure attributable to the intangible asset during its development.
Following initial recognition of the development expenditure, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so
capitalised is amortised over the period of expected benefits from the related project.
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually
when the asset is not available for use, or more frequently when an indication of impairment arises during the
reporting period.
Amortisation commences when the assets are ready for use.
Concession Asset
An intangible asset arising from a concession arrangement. The group recognises an intangible asset to the
extent that it receives a right to charge users over the life of arrangement for the use of the asset. The intangible
asset in measured initially at cost. The intangible assets will be amortised over the useful life of the arrangement
and will be measured at cost less any accumulated amortisation and accumulated impairment losses.
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually
when the asset is not available for use, or more frequently when an indication of impairment arises during the
reporting period.
(v)
Impairment of non-financial assets
The carrying values of non-financial assets are tested for
circumstances indicate that the carrying amount may not be recoverable.
impairment whenever events or changes in
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets that suffer impairment are tested for possible reversal of
the
impairment whenever events or changes in circumstances indicate that the impairment may have reversed.
Impairment exists when the carrying value of an asset exceeds its estimated recoverable amount. The asset is
then written down to its recoverable amount.
(w) Trade and other payables
Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided
to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to
make future payments in respect of the purchase of these goods and services.
(x) Contributed equity
Ordinary shares are classified as equity. Any transaction costs arising on the issue of ordinary shares are
recognised directly in equity as a reduction (net of tax) of the share proceeds received.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
60
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(y) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the
obligation. Where applicable, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
liability.
Onerous contracts
An onerous contract is considered to exist where the Group has a contract under which the unavoidable cost of
meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations
existing under onerous contracts are recognised as a provision to the extent that the present obligations exceed
the benefits estimated to be received.
(z) Earnings per share
Basic earnings per share is calculated as net profit or loss attributable to members, adjusted to exclude costs of
servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for
any bonus element.
Diluted earnings per share is calculated as net profit or loss attributable to members, adjusted for:
•
•
•
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution
of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential
ordinary shares, adjusted for any bonus element.
(aa) Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part
of the initial measurement, except for financial assets at fair value through profit or loss. They are subsequently
measured at either amortised cost or fair value depending on their classification. Classification is determined
based on the purpose of the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or
have been transferred and the consolidated entity has transferred substantially all the risks and rewards of
ownership.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that
a financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty
of the issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a
borrower concessions due to economic or legal reasons that the lender would not otherwise do; it becomes
probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active
market for the financial asset; or observable data indicating that there is a measurable decrease in estimated
future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between the asset's
carrying amount and the present value of estimated future cash flows, discounted at the current market rate of
return for similar financial assets.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
61
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(aa) Investments and other financial assets (continued)
Fair value of assets and liabilities acquired on acquisition
Further to the acquisition of RWL Water Group during the financial year, an independent valuation firm was
engaged in order to perform a fair valuation of the net assets acquired and to determine the purchase price
allocation across the Cash Generating Units. The purchase price allocation was a key element
in the
determination of goodwill arising on the business combination and also facilitates the allocation of goodwill across
the Cash Generating Units and the subsequent impairment assessment. The purchase price allocation was
based on the pro-rata contribution of revenue and profitability and the relative contribution of each of the Cash
Generating Unit’s enterprise value. (Refer also to Note 14 Intangible assets, for further details).
(ab)Significant Accounting Estimates and Assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions
of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of certain assets and liabilities within the next annual reporting period are:
(i) Fair Value of Financial Liability
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
The Group assessed the fair value of the financial milestone payments and government grant liabilities, which
incorporate a number of key estimates and assumptions. For further details, please refer to note 15 Trade and
Other Payables.
Income tax
(ii)
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities
for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax
outcome of these matters is different from the carrying amounts, such differences will impact the current and
deferred tax provisions in the period in which such determination is made.
(iii) Share-based payment transactions
Under AASB 2 Share Based Payments, the consolidated entity must recognise the fair value of shares granted to
directors, employees and consultants as remuneration as an expense on a pro-rata basis over the vesting period
in profit or loss with a corresponding adjustment to equity.
The consolidated entity provides benefits to employees (including directors) of the consolidated entity in the form
of share based payment transactions, whereby employees render services in exchange for shares or rights over
shares ("equity-settled transactions").
Estimating fair value of share-based payment transactions requires determination of the most appropriate
valuation model, which depends on the terms and conditions of the grant. This estimate also requires
determination of the most appropriate inputs to the valuation model including the expected life of the share option
or appreciation right, volatility and dividend yield and making assumptions about them. For the measurement of
the fair value of equity-settled transactions with employees at the grant date, the Group uses a binominal model
for the options. The assumptions and models used for estimating fair value for share-based payment transactions
are disclosed in Note 5 - people costs.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
62
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
1 Summary of significant accounting policies (continued)
(ab)Significant Accounting Estimates and Assumptions (continued)
(iv) Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level
1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability.
Considerable judgement is required to determine what is significant to fair value and therefore which category the
asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These
include discounted cash flow analysis or the use of observable inputs that require significant adjustments based
on unobservable inputs.
Impairment of non financial assets
(v)
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount,
which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal
calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar
assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation
is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include
restructuring activities that the Group is not yet committed to or significant future investments that will enhance
the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate
used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation
purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful
lives
recognised by the Group. Refer to Note 14 for further detail.
(vi) Business Combination
As discussed in the notes, business combinations are initially accounted for on a provisional basis. The fair value
of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity
taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation
of
to the period the combination
occurred and may have an impact on the assets a liabilities, depreciation and amorisation reported.
the business combination accounting is retrospective, where applicable,
(vii) Revenue recognition on EPC contracts
The value of work performed using percentage completion method is used to determine revenue recognition on
EPC contracts. This measurement is an accounting judgment as management uses judgement to estimate costs
incurred to date as a percentage of total estimated costs.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
63
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
2 Segment information
During the current financial period on 14 July 2017, the Group acquired 100% of the shares in RWL Water LLC.
For further details, refer to the Business combination note 3. Prior to the acquisition, the Group recognised its
operations in Israel as an operating segment.
Post-acquisition, during the second half of the financial period, the Group conducted a review of internal reporting
to the Managing Director and CEO (the Chief Operating Decision Maker (CODM)) and identified two primary
reporting segments in assessing performance and determining the allocation of resources.
The revised segment disclosure replicates the manner in which the CODM monitors the business performance.
The CODM monitors business performance within a segment at loss before income tax and is measured
consistently with profit or loss in the consolidated financial statements. Prior year comparatives have been
restated so as to be presented in a consistent manner with the current year segment results.
Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with
third parties.
The Group's operating segments are:
• Operating Units (OUs) - These are defined as operating entities within the Group that earn revenues and incur
expenses that are reviewed by the CODM and their discrete financial information is available. OUs' include
Argentina, Italy, Israel, USA, China and Middle East. The OUs are aggregated into a single operating segment on
the basis that the OUs are similar in each of the following respects:
nature of the products and services;
nature of the production processes;
type or class of customer for their products and services;
methods used to distribute their products or provide their services; and
nature of the regulatory environment
•
•
•
•
•
• Product and Innovation Group (P&I) - Defined as the Research and Development vehicle within the Group.
2017
Segment revenue
Operating revenue
Unallocated revenue - corporate
Segment expense
Segment depreciation and
amortisation expense
Segment expense
Unallocated expenses - corporate
Segment results
Assets
Segment assets
Unallocated assets - corporate
Operating
Units
$'000
Production
and
Innovation
$'000
Intersegment
Elimination
$'000
Total
$'000
33,850
-
33,850
(327)
(32,759)
-
(33,086)
764
1,097
-
1,097
(1,759)
-
(1,759)
33,188
-
33,188
(343)
(13,191)
-
(13,534)
(12,437)
-
3,621
-
3,621
1,862
(670)
(42,329)
(13,757)
(56,756)
(23,568)
164,172
-
164,172
6,687
-
6,687
(40)
-
(40)
170,819
33,838
204,657
Fluence Corporation Limited
(formerly Emefcy Group Limited)
64
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
2 Segment information (continued)
2017
Liabilities
Segment liabilities
Unallocated liabilities - corporate
2017
Other information
External sales revenue by geographical segment
Property, plant and equipment by geographical
segment
2016
Segment revenue
Operating revenue
Unallocated revenue - corporate
Segment expense
Segment depreciation and amortisation expense
Segment expense
Unallocated expenses - corporate
Segment result
Assets
Segment assets
Unallocated assets - corporate
Liabilities
Segment liabilities
Unallocated liabilities - corporate
2016
Operating
Units
$'000
Production
and
Innovation
$'000
Intersegment
Elimination
$'000
Total
$'000
(90,635)
-
(90,635)
(3,930)
-
(3,930)
281
-
281
(94,284)
(6,772)
(101,056)
The Americas
$'000
Rest of the
World
$'000
Total
$'000
18,697
14,491
33,188
3,022
4,092
7,114
Operating
Units
$'000
Production
and
Innovation
$'000
Intersegment
Elimination
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
792
-
792
(299)
(5,875)
-
(6,174)
(5,382)
11,412
-
11,412
(2,222)
-
(2,222)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
792
19
811
(299)
(5,875)
(3,702)
(9,876)
(9,065)
11,412
16,185
27,597
(2,222)
(1,312)
(3,534)
The Americas
$'000
Rest of the
World
$'000
Total
$'000
Other information
External sales revenue by geographical segment
Property, plant and equipment by geographical segment
-
-
792
1,039
792
1,039
Fluence Corporation Limited
(formerly Emefcy Group Limited)
65
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
2 Segment information (continued)
Unallocated revenue
Unallocated revenue
Unallocated expenses
Other acquisition cash consideration
Other corporate expenses
Unallocated assets
Cash and cash equivalents
Other assets
Unallocated liabilities
Trade and other payables
Other liabilities
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
-
19
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
-
(13,757)
(13,757)
(1,000)
(2,702)
(3,702)
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
28,768
5,070
33,838
16,089
96
16,185
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
(5,772)
(1,000)
(6,772)
(312)
(1,000)
(1,312)
Intersegment transactions
Intersegment transactions are made at market rates. Intersegment transactions are eliminated on consolidation.
3 Business combination
(a) Summary of acquisition
On 14 July 2017 (the 'Completion Date'), Emefcy Group Ltd completed the acquisition of RWL Water LLC ('RWL')
from RSL Investments Corporation ('RSL') (the 'Transaction'). On 26 May 2017, the Emefcy Group Limited and
RWL Water LLC announced a binding agreement to combine the two groups to form Fluence Corporation Limited
(referred to hereafter as the 'Combined Group' or the 'Group'). The acquisition created a global provider of
innovative, decentralised water and wastewater treatment solutions for both municipal and industrial applications.
The acquirer assumed control of 100% of the acquired business with effect from 14 July 2017. The acquisition of
RWL included the following transactions:
Fluence Corporation Limited
(formerly Emefcy Group Limited)
66
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
3 Business combination (continued)
(a) Summary of acquisition (continued)
•
Fluence acquired 100% of RWL interests for a consideration comprising the issue of 100.5 million fully paid
ordinary shares ('Consideration shares') in Fluence to RSL as follows:
• 80% of the consideration shares on completion date (being 80.4 million fully paid ordinary shares).
• 20% of the consideration shares on the release date (being 20.1 million fully paid ordinary shares).
The release date means the day immediately after the end of the Holdback Period. The holdback
Period means the twelve (12) month period beginning on the Completion Date and ending on the first
(1st) anniversary of the Completion Date.
• RSL is restricted from selling, transferring or otherwise disposing of any of the Consideration Shares for two
years commencing from the Completion Date according to conditions in the Share Purchase Agreement
dated 26 May 2017.
Details of the purchase consideration, the net assets acquired and goodwill are recognised as follows:
Purchase consideration (refer below):
Ordinary shares issued (100,500,000 shares)
Total purchase consideration*
*Non-cash transaction.
$'000
65,828
65,828
The fair value of the ordinary shares issued was based on the listed share price of the Group at 14 July 2017 of
$0.655 USD per share.
The provisional fair values of the identifiable assets and liabilities recognised as a result of the acquisition are as
follows:
Cash and cash equivalents
Restricted cash
Short term deposits
Trade and other receivables
Inventories
Prepayments
Other current assets
Intangible assets
PPE and other non-current assets (net)
Trade and other payables
Borrowings
Deferred revenues
Other non-current liabilities
Net identifiable assets acquired
Add: goodwill
Total purchase consideration
Fair value
$'000
50,583
1,683
3,969
26,642
4,646
4,576
741
1,225
9,304
(51,605)
(1,748)
(36,831)
(3,650)
9,535
56,293
65,828
Fluence Corporation Limited
(formerly Emefcy Group Limited)
67
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
3 Business combination (continued)
(a) Summary of acquisition (continued)
The goodwill arising on consolidation is attributed to workforce, experience and working methods of the acquired
Group, as well as other assets recognised as goodwill according to the requirements of IFRS 3 - Business
Combination, such as developed technology, process knowledge, reference list and order backlog. The fair value
of assets and liabilities acquired were determined based on a purchase price allocation undertaken by the Group.
RWL contributed US$32 million to Fluence Corporation Limited revenues (additional US$1 million was
contributed by Emefcy Group Limited) and US$2 million net profit to Fluence Corporation Limited net income post
acquisition.
The proforma below gives effect to the revenues and net loss of the combined entity for the current reporting year
as though the acquisition date for the business combination that occurred on 14 July 2017 had been as of the
beginning of the annual reporting period.
Proforma
Revenues
Net loss
2017
$'000
58,030
(29,214)
(b) Purchase consideration - cash outflow
Acquisition-related costs
Acquisition-related costs of US$3 million that were not directly attributable to the issue of shares are included in
general and administration in the Statement of Profit or Loss and in operating cash flows in the Statement of
Cash Flows.
4 Operating revenue and expenses
Consolidated entity
a
Operating revenue
Revenues on equipment sales
Revenues on EPC contracts
Revenues on services
Other
Research and development
Salaries and other employees related expenses
Depreciation
Occupancy
Professional fees
Materials
Other
Sales and marketing
Salaries and other employees related expenses
Occupancy
Professional fees
Marketing activities
Travel
Other
Fluence Corporation Limited
(formerly Emefcy Group Limited)
2017
$'000
17,795
11,113
2,777
1,398
33,083
2,129
193
179
216
3,238
15
5,970
3,488
38
197
1,293
886
397
6,299
2016
$'000
792
-
-
-
792
1,227
173
36
117
477
15
2,045
550
9
71
123
155
42
950
68
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
4 Operating revenue and expenses (continued)
a
General and administration
Salaries and other employees related expenses
Depreciation
Professional fees
Director expense
Bank charges
Insurance
Maintenance
Occupancy
Office expenses
Travel
Other
Other Gains/(Losses) - Net
Foreign exchange gain / (loss)
Fair value adjustment for shares in trust
Increase in provision
Loss from investments accounted for using the equity method
Other
Finance Income/(Costs) - Net
Interest income
Foreign exchange losses on foreign currency borrowings
Interest expense
Project financing and other
5 People costs
(a) Share-based payments
Employee Option Plan
Consolidated entity
2017
$'000
5,018
329
7,991
1,196
263
250
251
496
568
918
660
17,940
(1,382)
2,006
286
29
252
1,191
(1,514)
(1,474)
89
338
(2,561)
2016
$'000
1,762
34
1,059
1,005
12
72
33
13
60
497
395
4,942
(1,080)
-
-
-
-
(1,080)
-
-
-
12
12
A share option plan has been established by the consolidated entity and approved by shareholders at a general
meeting, whereby the consolidated entity may, at the discretion of the Board of Directors, grant options over
ordinary shares in the Group to certain key management personnel of the consolidated entity. The options are
issued for nil consideration and are granted in accordance with performance guidelines established by the
Remuneration and Nomination Committee.
Set out below are summaries of options granted under the plan:
Fluence Corporation Limited
(formerly Emefcy Group Limited)
69
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
5 People costs (continued)
(a) Share-based payments (continued)
Employee Option Plan (continued)
2017
Grant
date
a
Expiry
Date
Exercise
Price
Granted
Exercised
Vested
Cancelled /
Reversed
Balance at the
end of the year
Opening balance
09-02-17 09-02-21
01-01-17 20-12-21
09-02-17 10-01-21
28-03-17 04-03-21
08-03-17 31-03-19
08-03-17 31-03-19
04-05-17 03-05-21
31-05-17 25-05-25
31-05-17 25-05-25
14-07-17 13-07-21
14-07-17 13-07-21
14-07-17 13-07-21
14-07-17 25-05-25
19-07-17 14-07-19
1-07-17 06-07-21
07-08-17 30-09-09
14-09-07 13-11-21
19-09-17 31-12-20
19-09-17 31-12-20
14-07-17 10-09-21
Closing balance
A$1.00
A$0.87
A$0.84
A$0.82
A$0.72
A$0.72
A$0.86
A$0.93
A$0.85
A$1.20
A$1.50
A$0.84
A$0.84
A$0.72
A$0.97
A$0.75
A$0.86
A$0.95
A$0.95
A$0.81
30,499,536
350,000
75,000
25,000
1,000,000
2,000,000
1,000,000
175,000
11,191,336
1,500,000
3,850,000
3,850,000
1,500,000
350,000
300,000
100,000
750,000
1,140,000
1,500,000
1,000,000
4,604,000
66,759,872
(9,788,644)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9,788,644)
5,934,464
-
-
-
-
-
-
-
1,398,917
187,500
-
-
-
43,750
-
-
-
71,250
-
-
575,500
8,211,381
(4,192,946)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,192,946)
16,517,946
350,000
75,000
25,000
1,000,000
2,000,000
1,000,000
175,000
11,191,336
1,500,000
3,850,000
3,850,000
1,500,000
350,000
300,000
100,000
750,000
1,140,000
1,500,000
1,000,000
4,604,000
52,778,282
The opening balance has been adjusted to reflect the exercise, vesting and cancellation of options issued in the
prior period. Refer to note Contributed equity for details.
(i) Fair value of options granted
For the options granted during the current financial year, the valuation model inputs used to determine the fair
value at the grant date are outlined below. The expected volatility reflects the assumption that the historical
volatility is indicative of future trends, which may also not necessarily be the actual outcome.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
70
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
5 People costs (continued)
(a) Share-based payments (continued)
Employee Option Plan (continued)
(i) Fair value of options granted (continued)
Grant date Expiry Date
a
09-02-17
20-12-17
09-02-17
28-03-17
08-03-17
08-03-17
04-05-17
31-05-17
31-05-17
14-07-17
14-07-17
14-07-17
14-07-17
19-07-17
01-07-17
07-09-17
14-09-17
19-09-17
19-09-17
14-07-17
09-02-21
20-12-21
10-01-21
04-03-21
31-03-19
31-03-19
03-05-21
25-05-25
25-05-25
13-07-21
13-07-21
13-07-21
25-05-25
14-07-19
06-07-21
30-09-19
13-11-21
31-12-20
31-12-20
10-09-21
Share price at
grant date Exercise Price Dividend yield
Risk-free
interest rate
Fair value at
grant date
A$0.77
A$0.81
A$0.77
A$0.84
A$0.76
A$0.76
A$0.80
A$0.93
A$0.93
A$0.86
A$0.86
A$0.86
A$0.86
A$0.85
A$0.82
A$0.71
A$0.74
A$0.74
A$0.74
A$0.86
A$1.00
A$0.87
A$0.84
A$0.82
A$0.72
A$0.72
A$0.86
A$0.93
A$0.85
A$1.20
A$1.50
A$0.84
A$0.84
A$0.72
A$0.97
A$0.75
A$0.86
A$0.95
A$1.10
A$0.81
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
2.12
2.29
2.12
2.20
1.87
1.87
2.16
2.19
2.19
2.08
2.08
2.08
2.47
2.01
2.06
1.99
2.19
2.18
2.18
2.13
0.5030
0.5556
0.5254
0.5882
0.4167
0.4167
0.5480
0.3782
0.3998
0.2254
0.1743
0.3214
0.4028
0.2506
0.2918
0.1543
0.2385
0.1782
0.1484
0.3384
The weighted average remaining contractual life of options outstanding at year-end was 3.76 years.
The fair value of the options granted to employees is considered to represent the value of the employee services
received over the vesting period.
The weighted average fair value of options granted during the year was $0.2341. These values were calculated
using the binomial lattice, based on the Cox, Ross Rubinstein (1979) method applying the following inputs:
Weighted average exercise price: $0.65
Expected share price volatility: 50%
Since listed for trading on ASX in December 2015, the Group's share price was quite volatile with a wide range of
trading volumes. Therefore,
the expected volatility was determined based on typical volatility measure for
environmental and waste services companies.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
71
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
5 People costs (continued)
(a) Share-based payments (continued)
(a) Expenses arising from share-based payment transactions
Share based payment expense
Consultant Share based payments
Employee Share based payments
Director Share based payments
(b) Key Management Personnel Disclosures
Compensation
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
992
588
651
2,231
1,003
227
553
1,783
The aggregate compensation made to directors and other members of key management personnel of the Group
is set out below:
Short-term employee benefits
Post-employment benefits
Share based payments
Consolidated entity
31 December
2017
$
31 December
2016
$
2,468,628
111,057
780,115
3,359,800
1,521,198
128,967
604,174
2,254,339
The above Key Management Personnel disclosures represents the remuneration of Key Management Personnel
defined in the Remuneration Report and paid or payable for the 12 months ended 31 December 2017 and 31
December 2016.
For more information on Key Management Personnel Compensation disclosed under the Corporations Act 2001,
please refer to Remuneration Report contained under Directors’ Report.
6 Income tax
(a)
Income tax expense
The components of tax expense comprise:
a
Current tax
Current tax
Adjustments for current tax of prior periods
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Fluence Corporation Limited
(formerly Emefcy Group Limited)
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
687
-
-
-
687
-
-
-
-
-
72
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
6 Income tax (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
a
Current
Loss from continuing operations before income tax expense
The prima facie tax on profit from ordinary activities before income tax is
reconciled to income tax as follows:
Tax losses carried forward
Tax expense - Fluence Italy S.R.L.
Tax expense - Fluence Israel Ltd
Tax expense - Fluence Argentina
Income tax expense
(c) Deferred tax balances
(i) Deferred tax assets
a
The balance comprises temporary differences attributable to:
Tax losses
Unrealised foreign exchange gain/loss
Accrued work in progress
Accruals
License fee accrual
Doubtful debts provisions
Other
Provision for annual leave
Total Deferred tax assets
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
(22,881)
(9,065)
(6,864)
6,864
338
68
281
687
(2,443)
2,443
-
-
-
-
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
1,133
114
142
30
276
47
115
64
1,921
-
-
-
-
-
-
-
-
-
Fluence Corporation Limited
(formerly Emefcy Group Limited)
73
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
6 Income tax (continued)
(c) Deferred tax balances (continued)
(ii) Deferred tax liabilities
a
The balance comprises temporary differences attributable to:
Unrealised foreign exchange
Inventories/ Work in progress
Intangibles
Total Deferred tax liabilities
(d) Current tax liabilities
a
Current
Current tax liabilities
7 Loss per share
(a) Basic loss per share
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
55
949
667
1,671
-
-
-
-
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
72
72
-
-
Consolidated entity
31 December
2017
$
31 December
2016
$
Loss attributable to the ordinary equity holders of the Group
(0.07)
(0.04)
(b) Diluted loss per share
Consolidated entity
31 December
2017
$
31 December
2016
$
Loss attributable to the ordinary equity holders of the Group
(0.07)
(0.04)
(c) Reconciliation of earnings used in calculating earnings per share
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
Loss attributable to the ordinary equity holders of the Group used in calculating
basic earnings per share:
From continuing operations
(23,568)
(9,065)
Fluence Corporation Limited
(formerly Emefcy Group Limited)
74
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
7 Loss per share (continued)
(d) Weighted average number of shares used as the denominator
Consolidated entity
2016
2017
Number
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
319,728,992
214,111,481
The outstanding share options as at 31 December 2017 are considered to be anti-diilutive and therefore were
excluded from the diluted weighted average number of ordinary shares calculation.
8 Cash and cash equivalents, Other financial assets, Cash Flows
(a) Cash and cash equivalents
a
C
Cash and cash equivalents
(b) Other financial assets
a
C
Restricted cash
Short term deposits
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
75,153
22,871
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
1,674
3,112
4,786
134
-
134
Fluence Corporation Limited
(formerly Emefcy Group Limited)
75
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
8 Cash and cash equivalents, Other financial assets, Cash Flows (continued)
(c) Cash flow information
Reconciliation of loss after income tax to net cashflow from operating activities
a
Current
Loss before income tax
Adjustment for:
Depreciation and amortisation expenses
Bad debt expense
Reversal of inventory reserve
Warranty provision
Loss on disposal of property, plant and equipment
Share based payments expense
Post-employment benefit expense
Fair value adjustment on shares in trust
Provision for losses
Share of profits of associates and joint ventures
Finance costs - net
Equity issued for nil consideration
Foreign exchange differences
(Increase) in restricted cash
(Increase) in trade and other receivables
(Increase) in inventory
(Increase) in prepaid expenses
(Increase) in other current and non-current assets
Increase in trade and other payables
Increase in deferred revenues
Cash generated from operations
Interest received
Interest and other costs of finance paid
Net cash outflow from operating activities
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
(22,881)
(9,065)
688
185
(24)
52
(22)
2,231
(1,350)
2,006
409
29
(2,561)
-
(1,382)
(1,593)
(31,106)
(15,654)
(3,827)
(5,638)
12,578
38,851
(29,009)
686
(144)
(28,467)
299
-
-
-
-
-
-
62
123
-
1,000
1,783
(1,080)
-
(508)
-
-
(394)
632
-
(7,148)
-
-
(7,148)
Fluence Corporation Limited
(formerly Emefcy Group Limited)
76
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
9 Trade and Other Receivables
Current receivables - Trade receivables
Trade receivables
Provision for impairment - trade receivables
Current receivables - Other receivables
Unbilled receivables
VAT receivables
Income tax receivable
Other taxes receivable
Government Grants to be received
Other receivables
Non-current receivables
Long-term receivables
Provision for impairment - long-term receivables
10 Inventories
Raw materials
Work in progress
Finished goods - at cost
Inventory reserve
11 Other assets
a
Current assets
Shares in trust for the acquire of non-controlling interests
Other
Fluence Corporation Limited
(formerly Emefcy Group Limited)
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
21,808
(1,927)
19,881
1,809
3,211
582
984
70
147
6,803
26,684
1,531
(1,271)
260
223
-
223
-
105
-
80
302
2
489
712
50
-
50
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
4,299
13,924
535
(220)
18,538
270
182
-
-
452
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
2,178
695
2,873
-
-
-
77
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
11 Other assets (continued)
a
Non-current assets
Construction bond
Other
12 Investments accounted for using the equity method
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
2,400
390
2,790
-
-
-
Quoted fair value / Carrying
Amount
31 December 31 December
2016
$'000
2017
$'000
a
Name of entity
E.T.G.R Water
Infrastructure
Management
RWL WATER
MEXICO, S DE RL
DE CV.
Place of
business/
country of
incorporation
% of
ownership
interest
Nature of
relationship
Measurement
method
Israel
50%
Associate Equity method
Mexico
49% Joint Venture Equity method
428
67
495
-
-
-
As of 31 December 2017, the Group holds 50% interest in E.T.G.R Water Infrastructure Management partnership
and a 49% interest in RWL WATER MEXICO, S DE RL DE CV. These investments contributed $29,000 to
Fluence Corporation Limited net loss post acquisition, which is included in 'Other gains/(loss) - net'
in the
Consolidated Statement of Profit and Loss and Other Comprehensive Income.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
78
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
13 Property, plant and equipment
Consolidated entity
At 1 January 2017
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 31 December 2017
Opening net book amount
Business acquisition
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book amount
At 31 December 2017
Cost
Accumulation depreciation
Net book amount
Land and
buildings
$'000
Leasehold
improvements
$'000
Production
equipment
$'000
Office
furniture and
equipment
$'000
Computers
and
peripheral
equipment
$'000
Vehicles
$'000
Total
$'000
-
-
-
-
76
-
-
-
1
77
77
-
77
39
(6)
33
33
1,373
2,069
-
(60)
49
3,464
4,777
(1,313)
3,464
1,255
(331)
924
924
300
1,040
-
(144)
(58)
2,062
4,099
(2,037)
2,062
83
(52)
31
31
209
350
-
(56)
15
549
248
(197)
51
51
611
229
(3)
(207)
27
708
1,331
(782)
549
2,438
(1,730)
708
-
-
-
-
324
29
(15)
(67)
(17)
254
835
(581)
254
Fluence Corporation Limited (formerly Emefcy
Group Limited)
1,625
(586)
1,039
1,039
2,893
3,717
(18)
(534)
17
7,114
13,557
(6,443)
7,114
79
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
13 Property, plant and equipment (continued)
Consolidated entity
At 1 January 2016
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 31 December 2016
Opening net book amount
Additions
Depreciation charge
Exchange differences
Closing net book amount
At 31 December 2016
Cost
Accumulation depreciation
Net book amount
Land and
buildings
$'000
Leasehold
improvements
$'000
Production
equipment
$'000
Office
furniture and
equipment
$'000
Computers
and
peripheral
equipment
$'000
Vehicles
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
6
(2)
4
4
33
(3)
(1)
33
39
(6)
33
971
(219)
752
752
284
(108)
(4)
924
1,255
(331)
924
73
(47)
26
26
10
(5)
-
31
83
(52)
31
207
(165)
42
42
41
(30)
(2)
51
248
(197)
51
-
-
-
-
-
-
-
-
-
-
-
Fluence Corporation Limited (formerly Emefcy
Group Limited)
1,257
(433)
824
824
368
(146)
(7)
1,039
1,625
(586)
1,039
80
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
14 Intangible assets
Consolidated entity
Non-Current assets
Year ended 31 December 2016
Opening net book amount
Amortisation charge
Closing net book amount
Year ended 31 December 2017
Opening net book amount
Business acquisition
Additions
Amortisation charge
Currency translation differences
Closing net book amount
Capitalised
development
costs
$'000
Capitalised
concession
asset
$'000
Goodwill
$'000
Total
$'000
-
-
-
-
56,293
-
-
-
56,293
2,287
(153)
2,134
2,134
-
-
(167)
241
2,208
-
-
-
-
1,225
598
-
(157)
1,666
2,287
(153)
2,134
2,134
57,518
598
(167)
84
60,167
Impairment tests for goodwill
(i)
Goodwill is allocated to cash-generating units (CGU) as follows:
Israel CGU
Italy CGU
Other CGU
Goodwill
$'000
30,898
6,103
19,292
56,293
The allocation of goodwill between the three CGUs was performed by considering and equally weighted the
following:
1) The pro-rata contribution to profitability by each CGU;
2) The pro-rata contribution to revenue by each CGU;
3) The relative contribution to the total Group value by each CGU.
The relative contribution of each CGU to the total Group value was estimated using discounted cash flow
analysis. Each CGU’s discount rate was computed via a market-based weighted average cost of capital (WACC).
The Group have undertaken an impairment analysis during the year in accordance with AASB 136 by relying on
the following:
• Fair Value Less of Cost of Disposal (FVLCD) approach undertaken by reference to the arms’ length acquisition
paid at the date of acquisition and the valuation undertaken by an external expert for the transaction.
The FVLCD represents the recent arms-length transaction that reflects direct market evidence of the fair value
and an independent expert report which concluded the transaction price to be fair and reasonable.
Impairment testing adopted by the company for the RWL acquisition was undertaken subsequent to acquisition
and prior to balance date. At balance date the Group has also assessed goodwill for indicators of impairment
including the future prospects of the CGUs by reference to five year forecasts and the market capitalisation of
Fluence.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
81
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
14 Intangible assets (continued)
Impairment tests for goodwill (continued)
(i)
The fair value less costs to sell for the entire business at balance date attributed by external sources is indicated
by market capitalisation (level 1 in fair value hierarchy) - Number of shares on issue as at 31 December 2017:
411,279,194; Closing share price as at 31 December 2017: $0.535; Market capitalisation at 31 December 2017:
$220.0m; Net assets of the Company as at 31 December 2017: $103.6m.
Goodwill
Goodwill derives from the acquisition of RWL Water LLC. Please refer to note 3 - business combination for
further details.
Any excess of the fair value of the purchase consideration of an acquired business over the fair value of the
identifiable net assets (minus incidental expenses) is recorded as goodwill.
Goodwill is allocated to each cash generating units expected to benefit from the combination.
Goodwill is not amortised, but is measured at cost less any accumulated impairment losses. Impairment occurs
when a cash generating unit's recoverable amount falls below the carrying value of its net assets.
Capitalised development costs
Capitalised development costs relates to the development of wastewater treatment technology - Membrane
Aerated Bio Reactor (MABR). The nature of costs capitalised includes salaries and wages for research and
development staff, technical equipment, materials, patent costs and any other costs associated with developing
the wastewater treatment technologies. These assets are now currently being sold.
Capitalised development expenditure is stated at cost less accumulated amortisation less any impairment losses
are amortised over the period of expected future sales from the related projects which is estimated to be 15
years.
Concession contracts
This represents an intangible asset arising from a concession arrangement. The intangible asset gives the Group
the right for future charge of the customer for the use of the intangible assets. The concession asset is stated at
cost. The Concession asset starts to be amortised once the asset is ready for use and is amortised over the use
period of the asset.
15 Trade and other payables
a
Current
Trade payables
Accrued payroll liabilities
Accrued project expenses
Payable to non-controlling interests (i)
Other accruals
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
16,580
1,216
4,186
4,318
1,511
27,811
936
339
-
97
1,372
Fluence Corporation Limited
(formerly Emefcy Group Limited)
82
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
15 Trade and other payables (continued)
a
Non-current
Government grants (ii)
Other liabilities
a
Other financial liabilities
Acquisition milestone 2 payable (iii)
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
2,402
193
2,595
1,039
-
1,039
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
1,000
1,000
1,000
1,000
(i) Payable to non-controlling interests
In May 2017, the agreement was reached between RWL Water LLC Group (RWL) and the non-controlling
interests owners of its subsidiary in Argentina that RWL would buy out the remaining 30% ownership share and
become the sole owner of
its subsidiary in Argentina. The deal was contingent upon the Emefcy Group
acquisition of RWL, which took place on 14 July 2017. The consideration paid to non-controlling interests was
determined as $4,618,000 and included three components: $300,000 payable in cash; $4,018,000 payable when
the shares issued by Fluence corporation in relation to this transaction are sold; and $300,000 as contingent
consideration, payable when the certain performance conditions are met. The cash portion of the consideration
was paid in July 2017, leaving $4,318,000 unpaid as of 31 December 2017.
(ii) Government Grant Liability
The Group participates in programs sponsored by the Office of the Chief Scientist (“OCS”) of Israel, for the
support of research and development projects. In exchange for the Chief Scientist's participation in the programs,
the Group is required to pay royalties to the Chief Scientist at a rate between 3% and 4% of sales to end
customers of products developed with funds provided by the Chief Scientist, if and when such sales are
recognised. As of 31 December 2017, the Group has received grants amounted to US$2,603,000. As of
December 31, 2017 and 2016, the Group recognised a liability to the OCS in the amount of $2,010,000 and
$957,828, respectively for the obligation for future royalty payments. The recognition of a liability for the Group to
repay the grants from future royalty payments is based on its estimation at the end of each year. The discounted
rate used by the Group for the liability is 13.9%. As of 31 December 2017, royalties of US$15,600 have been
paid.
The Group has also participated in programs sponsored by the Ministry of National Infrastructures (“MNI”) of
Israel, for the support of research and development projects. In exchange for the MNI's participation in the
programs, the Group is required to pay royalties to the MNI at a rate of 5% of the sales to end customers of
products developed with funds provided by the MNI, if and when such sales are recognized. As of 31 December
2017, the Group received grants in the total amount of US$297,000. As of 31 December 2017 and 2016, the
Group recognized a liability to the MNI in the amount of $221,000 and $266,616, respectively. The exceptions of
the Group to pay the grants are based on its estimation at the end of each year. The discounted rate used by the
Group for the liability is 13.9%. As of 31 December 2017, royalties of US$43,000 have been paid.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
83
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
15 Trade and other payables (continued)
(iii) Acquisition milestone 2 payable
As a part of the transaction between Emefcy Group Limited and Emefcy Limited (Israel) in December 2015, a
maximum liability of $2million is payable to a shareholder of Emefcy Limited (Israel) on completion of the
acquisition in lieu of receiving shares in Emefcy Group Limited subsequent to the satisfaction of
the two
commercial milestones. The First Milestone was achieved and paid in 2016. The Second Milestone was achieved
at the end of the year 2017 and remained unpaid as of 31 December, 2017. The payment is expected to be
processed in the first half of the year 2018.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
84
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
16 Provisions
a
Current
Employee benefits
Provision - Onerous contracts (i)
Other
a
Non-current
Employee benefits
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
2,362
23,656
1,693
27,711
-
123
-
123
Consolidated entity
31 December 31 December
2016
$'000
2017
$'000
878
878
-
-
(i) Onerous contracts
Provision for onerous contracts arise from a specific project the Group had entered into in 2015. The Group took
all necessary precautions in order to ensure the profitability of the project including placing prepayments in
interest bearing short term bonds in the currency which most of its expenses were expected to occur.
17 Deferred revenue
Deferred revenue
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
38,173
-
Deferred revenue represents remaining pre-payments made primarily by one large customer upon entering into a
multi -year contract with the Group in 2015. The remaining work on the contract is on-going and expected to be
largely completed in FY2018, with some residual work completed in early 2019.
18 Contributed equity
Ordinary shares
Options
Share capital
31 December
2017
No.
31 December
2016
No.
31 December
2017
$'000
31 December
2016
$'000
435,368,167
52,778,282
488,146,449
279,551,054
18,742,946
298,294,000
152,810
4,088
156,898
51,271
1,858
53,129
Fluence Corporation Limited
(formerly Emefcy Group Limited)
85
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
18 Contributed equity (continued)
(a) Ordinary Shares - Fully Paid
Number of shares
$'000
Opening balance 1 January 2016
Private placement issued at AU$0.64 per share
Shares issued to consultants during the year
Exercise of options
Issue of deferred consideration shares
Transaction costs arising on share issue
Deferred consideration shares to be issued - Milestone 2
Balance 31 December 2016
Opening balance 1 January 2017
Shares issued to acquire RWL Water LLC
Private Placement at AU$0.84 per share
Shares issued for non-controlling interests buyout
Private Placement at AU$0.84 per share
Exercise of options
Issue of deferred consideration shares
Transaction costs arising on share issue
Deferred consideration shares to be issued - Milestone 2
Shares to be issued - RWL Water LLC group acquisition
(subject to holdback)
Balance 31 December 2017
Notes
(i)
(iii)
(ii)
(iii)
(ii)
177,437,410
49,400,000
150,000
7,563,644
22,500,000
257,051,054
-
22,500,000
279,551,054
Number of shares
257,051,054
80,400,000
30,537,848
6,245,264
16,309,001
2,225,000
18,511,027
411,279,194
-
3,988,973
20,100,000
435,368,167
28,325
22,596
81
355
-
51,357
(86)
-
51,271
$'000
51,271
65,828
20,000
4,018
10,900
802
-
152,819
(9)
-
-
152,810
(i) Deferred consideration - Milestone 1
The deferred consideration shares relate to the obligation for the Group to issue a further 22,500,000 shares to
Emefcy Limited (Israel) vendors upon the satisfaction of the first milestone that a module of the SABRE (Spiral
Aerobic Biofilm Reactor) has been delivered to the first customer’s site on, or before 18 June 2016. This
milestone was satisfied on 29th March 2016.
(ii) Deferred Consideration - Milestone 2
The deferred consideration shares relate to the obligation for the Group to issue a further 22,500,000 shares to
Emefcy Limited (Israel) vendors upon the satisfaction of the second milestone which is "Emefcy has entered into
firm contractual engagements representing an aggregate US$2 million (including all associated grants and
incentives) within 24 months of the date of completion of the transaction between Emefcy Group Limited and
Emefcy Limited (18 December 2015). This milestone was satisfied on 5 December 2017 and 22,500,000 shares
of the Group have been released to Emefcy Limited vendors. During the reporting period, 18,511,027 deferred
consideration shares were issued with the remaining 3,988,973 deferred consideration shares to be issued upon
completion of certain conditions based on timing as at 31 December 2017.
(iii) Transaction costs relating to share issues
Under AASB 132, incremental costs that are directly attributable to issuing new shares should be deducted from
equity. The share issue expense relates to costs directly attributable to the issuing of new shares, costs
associated with the listing have been deducted from equity.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in
proportion to the number of shares held. At shareholder meetings, each ordinary share is entitled to one vote
when a poll is called; otherwise each shareholder has one vote on a show of hands.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
86
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
18 Contributed equity (continued)
(b) Options
2016
w
Opening balance
Reversal of unlisted options issued to employees
Unlisted options issued to Directors pursuant to the prospectus
Unlisted options issued to employees
Unlisted options issued to consultants
Unlisted options issued to directors
Exercised options
Cancelled options
Balance at 31 December 2016
2017
w
Opening balance (i)
Unlisted options issued to employees
Unlisted options issued to consultants
Unlisted options issued to directors
Exercised options
Cancelled options
Balance at 31 December 2017
(c) Summary of all unlisted options in existence
Number of options
15,856,590
(2,642,946)
-
5,587,946
6,555,000
2,500,000
(7,563,644)
(1,550,000)
18,742,946
Number of options
18,742,946
19,978,336
10,250,000
6,032,000
(2,225,000)
-
52,778,282
$'000
157
-
289
282
921
264
-
(55)
1,858
$'000
1,858
1,221
588
1,223
(802)
4,088
Grant date
18 December 2015
18 December 2015
28 January 2016
28 January 2016
11 April 2016
29 February 2016
29 February 2016
29 February 2016
29 February 2016
23 March 2016
23 March 2016
23 March 2016
23 March 2016
17 May 2016
17 May 2016
18 May 2016
18 May 2016
15 June 2016
25 July 2016
25 July 2016
25 August 2016
23 September 2016
27 October 2016
1 November 2016
23 September 2016
9 February 2017
20 December 2016
Expiry date
18 December 2018
18 December 2019
31 July 2018
31 January 2019
13 April 2020
23 December 2019
23 December 2019
28 February 2020
28 February 2020
23 March 2020
23 March 2020
12 April 2020
12 April 2020
16 May 2020
28 May 2020
18 May 2020
18 May 2021
31 May 2020
31 July 2018
25 July 2020
25 July 2020
25 September 2020
26 October 2020
31 October 2020
9 November 2020
9 February 2021
20 December 2020
Exercise price
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 35 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 59 cents
AU 59 cents
AU 40 cents
AU 40 cents
AU 93 cents
AU 64 cents
AU 79 cents
AU 87 cents
AU 1.00 dollars
AU 1.07 dollars
AU 74 cents
AU 1.00 dollars
AU 1.00 dollars
AU 87 cents
Fluence Corporation Limited
(formerly Emefcy Group Limited)
Number under
option
2,500,000
2,500,000
1,940,000
1,940,000
500,000
431,473
431,473
100,000
100,000
75,000
75,000
50,000
50,000
400,000
100,000
1,000,000
1,000,000
1,000,000
500,000
250,000
325,000
200,000
350,000
500,000
200,000
350,000
75,000
87
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
18 Contributed equity (continued)
(v) Summary of all unlisted options in existence (continued)
9 February 2017
28 March 2017
28 March 2017
8 March 2017
4 May 2017
31 May 2017
31 May 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
19 July 2017
1 July 2017
7 September 2017
14 September 2017
19 September 2017
19 September 2017
14 July 2017
10 January 2021
4 March 2021
31 March 2019
31 March 2019
3 May 2021
25 May 2025
25 May 2025
13 July 2021
13 July 2021
13 July 2021
25 May 2025
14 July 2019
6 July 2021
30 September 2019
13 November 2021
31 December 2020
31 December 2020
10 September 2021
AU 84 cents
AU 82 cents
AU 72 cents
AU 72 cents
AU 86 cents
AU 93 cents
AU 85 cents
AU 1.2 dollars
AU 1.5 dollars
AU 84 cents
AU 84 cents
AU 72 cents
AU 97 cents
AU 75 cents
AU 86 cents
AU 95 cents
AU 1.10 dollars
AU 81 cents
The general terms and conditions of the options are detailed in the Directors' Report.
19 Non-controlling interests
a
Opening Balance at 1 January 2017
Contributed equity
Profit for the year attributable to non-controlling interests
Closing Balance at 31 December 2017
Consolidated entity
31 December
2017
$'000
-
58
96
154
25,000
1,000,000
2,000,000
1,000,000
175,000
11,191,336
1,500,000
3,850,000
3,850,000
1,500,000
350,000
300,000
100,000
750,000
1,140,000
1,500,000
1,000,000
4,604,000
52,778,282
The group has three subsidiaries with non-controlling interests, none of which are material to the group.
(i) Desaladora Kenton SA de CV, Mexico was founded in December, 2015 by RWL Water LLC group ('RWL') and
Mexican partners in order to invest in the project to build, finance, operate and transfer (BOT) a seawater
desalination plant in San Quintin, Baja California, Mexico. RWL holds the 51% ownership share in Desaladora
Kenton SA de CV. Since the acquisition of RWL on 14 July 2017, Desaladora Kenton SA de CV received
approximately $58,000 capital contributions from its non-controlling interests partners.
(ii) Constructora Kenton SA de CV, Mexico was founded in May, 2016 by RWL and Mexican partners in order to
act as the EPC contractor for the project to build, finance, operate and transfer (BOT) a seawater desalination
plant in San Quintin, Baja California, Mexico. RWL holds the 51% ownership share in Constructora Kenton SA de
CV. Constructora Kenton SA de CV did not receive any capital contributions from its non-controlling interests
partners in 2017.
(iii) RWL acquired the 70% share in Acquavit Ltda., Brazil in March 2017. Acquavit Ltda. delivers water and
wastewater treatment projects to industrial and municipal clients. The company has expertise in advanced
oxidation, disinfection processes, membrane systems, ion exchange systems, water and wastewater treatment
units, and water reuse systems.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
88
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
20 Other reserves
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
Foreign currency translation reserve
(1,376)
(655)
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences on translation of
controlled subsidiaries. Amounts are reclassified to profit or loss when the investment is disposed of.
foreign
21 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk
and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance
of the Group. The Group uses different methods to measure different types of risk to which it is exposed.
The Board provides principles for overall risk management, as well as policies covering specific areas, such as
foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency
risk through foreign exchange rate fluctuations.
Foreign exchange rate risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the Group’s functional currency.
The carrying amounts of
reporting date are as follows:
the Group’s foreign currency denominated monetary assets and liabilities at
the
Consolidated entity
Assets
Liabilities
ILS
$'000
EUR
$'000
31 December 2017
AUD
$'000
ARS
$'000
RMB
$'000
2,466
(7,738)
(5,272)
5,798
(11,534)
(5,736)
869
(628)
241
4,645
(479)
4,166
117
(90)
27
A strengthening or weakening of 10% of the United States Dollar against the following currencies would have an
equal and opposite effect on loss after tax and equity as outlined below. The analysis assumes that all other
variables, in particular interest rates, remain constant.
The use of 10% was determined based on the analysis of ILS, EUR, AUD, ARS and RMB change, on an
absolute value basis, between 31 December 2016 and 31 December 2017. The average change of these
currencies within this period was approximately 10%.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
89
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
21 Financial risk management (continued)
(a) Market risk (continued)
(i) Foreign exchange risk (continued)
w
Israeli New Shekel (ISL)
Euro (EUR)
Australian Dollar (AUD)
Argentina Peso (ARS)
Renminbi (RMB)
2017
+10%/-10%
$'000
(527)/527
(574)/574
24/(24)
417/(417)
3/(3)
2016
+10%/-10%
$'000
655/(655)
1/(1)
175/(175)
-
-
Interest rate risk
(ii)
The Group is exposed to interest rate risks via the cash and cash equivalents that it holds. Interest rate risk is the
risk that a financial
instruments value will fluctuate as a result of changes in market interest rates and the
effective weighted average interest rates on classes of financial assets and financial liabilities.
Instruments with cash flow risk
Cash and cash equivalents
Consolidated entity
31 December
2017
$'000
31 December
2016
$'000
75,153
22,871
An increase or decrease of 1% in interest rates at the reporting date would have the following increase/
(decrease) effect on after tax loss and equity. The analysis assumes that all other variables remain constant.
The use of 1% was determine based on analysis of the US Federal Funds rates change, on an absolute value
basis, between December 2015, December 2016 and December 2017. The average change of rate was 0.7%.
w
Cash and cash equivalents
(b) Credit risk
2017
+1%/-1%
$'000
799/(799)
2016
+1%/-1%
$'000
230/(230)
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group closely monitors the activities of its counterparties and controls the access to its
intellectual property which enables it to ensure the prompt collection of customers’ balances. The Group’s main
financial assets are cash and cash equivalents as well as trade and other receivables and represent the Group’s
maximum exposure to credit risk in connection with its financial assets. Trade and other receivables are carried
on the balance sheet net of bad and doubtful debt provisions estimated by management based on prior year
experience and an evaluation of prevailing economic circumstances. Wherever possible and commercially
practical the Group holds cash with major financial institutions in various regions.
Maturity profile
The table below analyses the consolidated entity’s financial assets into relevant maturity groupings based on the
aging profile at the reporting date. The amounts disclosed in the table are the aging profiles of trade and other
receivables for the Group.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
90
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
21 Financial risk management (continued)
(b) Credit risk (continued)
Contractual maturities of financial assets
At 31 December 2017
Trade receivables
Other receivables
Contractual maturities of financial assets
At 31 December 2016
Trade receivables
Other receivables
(c) Liquidity risk
Less than
6 months
$'000
Greater
than 6
months
$'000
Total
contractual
cash flows
$'000
17,525
217
17,742
2,356
260
2,616
19,881
477
20,358
Less than
6 months
$'000
Greater
than 6
months
$'000
Total
contractual
cash flows
$'000
223
304
527
-
50
50
223
354
577
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall
due. Prudent liquidity risk management implies maintaining sufficient cash balances and access to equity funding
when needed.
Maturity profile
The table below analyses the consolidated entity’s financial liabilities into relevant maturity groupings based on
the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are
the contracted undisclosed cash flows.
Contractual maturities of financial liabilities
At 31 December 2017
Trade and other payables
Borrowings
Other financial liabilities
At 31 December 2016
Trade and other payables
Borrowings
Other financial liabilities
Greater
than 6
months
$'000
Total
contractual
cash
flows
$'000
Less than
6 months
$'000
27,499
1,043
1,000
29,542
1,372
-
-
1,372
2,907
102
-
3,009
1,039
-
1,000
2,039
30,406
1,145
1,000
32,551
2,411
-
1,000
3,411
Fluence Corporation Limited
(formerly Emefcy Group Limited)
91
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
21 Financial risk management (continued)
(c) Liquidity risk (continued)
Maturity profile (continued)
(d) Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going
concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or
achieve an optimal capital structure, the Group may issue new shares or reduce its capital, subject to the
provisions of the Group's constitution. The capital structure of the Group consists of equity attributed to equity
holders of
reserves and accumulated losses. By monitoring
undiscounted cash flow forecasts and actual cash flows provided to the Board by the Group's Management the
Board monitors the need to raise additional equity from the equity markets.
the Group, comprising contributed equity,
(i) Loan covenants
Under the terms of the borrowing facilities in one of Group’s subsidiaries, the Group is required to comply with the
following covenants:
• Minimum tangible equity of 15 million NIS ( Israel Shekels) and
•
Tangible equity of least 10% of total assets.
The Group has complied with this covenant throughout the reporting period.
22 Recognised fair value measurements
Fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed are categorised according to the fair value
hierarchy as follows:
•
•
•
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly or indirectly; and
Level 3 - Inputs for the assets or liability that are not based on observable market data (unobservable inputs).
2017
a
Recurring fair value measurements
Assets
Cash equivalents
Short-term deposits
Financial liabilities
Acquisition milestone 2 payable
Government grant liability
2016
a
Recurring fair value measurements
Financial liabilities
Acquisition milestone 2 payable
Government grant liability
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
33,262
3,112
36,374
-
-
-
-
-
-
-
-
-
1,000
2,402
3,402
33,262
3,112
36,374
1,000
2,402
3,402
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
-
-
1,000
1,224
2,224
1,000
1,224
2,224
Fluence Corporation Limited
(formerly Emefcy Group Limited)
92
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
22 Recognised fair value measurements (continued)
Fair value hierarchy (continued)
Disclosed fair values
The group also has assets and liabilities which are not measured at fair value, but for which fair values are
disclosed in the notes to the financial statements.
Due to their short-term nature, the carrying amount of trade and other receivables, trade and other payables and
provisions are assumed to approximate their fair values because the impact of discounting is not significant.
Valuation techniques and assumptions used to derive Level 3 fair values recognised in the financial
statements
The fair value of the government grant liability is determined by the expected time period that the grant liability is
to be repaid from the royalty stream from future revenue discounted over time at a rate of 13.9% (2016: 13.7%)
Reconciliation of Level 3 fair value movements
The following table sets out the movements in Level 3 fair values for recurring measurements.
Opening Balance at 1 January 2016
Adjustment to fair value of liability
Closing Balance at 31 December 2016
Payment
Adjustment to fair value of liability
Closing Balance at 31 December 2017
23 Remuneration of auditors
Audit and other assurance services
Audit and review of financial statements - BDO East Coast Partnership
Audit and review of financial statements - BDO related practices
Audit and review of financial statements - Mazars
a
Other services
BDO - Non-assurance services (i)
Mazars - Non-assurance services (ii)
Government grant
$'000
1,175
49
1,224
67
1,111
2,402
Consolidated entity
2017
$
159,092
159,800
302,118
621,010
159,571
40,689
200,260
2016
$
53,214
23,600
-
76,814
13,973
13,973
(i) BDO non-assurance services relate to the provision of services in connection with the acquisition and tax
related services.
(ii) Mazars non-assurance services relate to the provision of tax related services.
24 Commitments and Contingent Liabilities
(a) Commitments
(i) The Group leases premises for the year ended 31 December 2017. The aggregate minimum rental
commitments under the non-cancellable rent agreements as at 31 December 2017 are $2,549 thousands (2016:
$1,160 thousands).
(ii) The Group leases its motor vehicles under lease agreements. As at 31 December 2017, the minimum
payment under these operating leases is $803 thousands (2016: $49 thousands).
Fluence Corporation Limited
(formerly Emefcy Group Limited)
93
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
24 Commitments and Contingent Liabilities (continued)
(a) Commitments (continued)
(iii) As at 31 December 2017 the group provided bank guarantees for fulfilment of a lease commitment, for bid
bonds and for performance guarantees for its projects in the amount of $4,226 thousands.
(iv) The Group has a government grant liability of $2,402 thousands for more details refer to Note 15- Trade and
other payables.
(b) Contingent liabilities
The Group was subject to a claim during the year. The Directors will vigorously defend this claim and are
confident that it will be successfully defended.
25 Related party transactions
Parent entity
Fluence Corporation Limited is the legal parent entity in the consolidated entity.
Subsidiaries
Interests in subsidiaries are set out in note 27.
Key management personnel
Disclosures relating to key management personnel are set out in note 5 and the remuneration report in the
directors' report.
Loans to/from related parties
Fluence Israel Limited has a long-term receivable from its associate, ETGR Water Infrastructure Management in
the amount of $260,000, on which the interest receivable is accrued at $9,000. Fluence Israel Limited also has a
balance payable to its non-controlling interests, Libra Ingenieros Civiles SA de CV and RJ Ingenieria of $137,000
and $57,000, on which the interest payable was accrued at $10,000 and $2,000 for the year 2017 post
acquisition.
Other than the issue of shares and options, no other related party transactions have been entered into between
key management personnel and the Group during the financial year 2017 and 2016.
Other transactions with related parties
Fluence Corporation LLC engaged the former sole member's management company, RSL Management, to
process the payroll for a number of Fluence Corporation LLC employees during the transition period. The
services, including the payroll and benefits paid to those employees, amounted to approximately $617,000 for the
year 2017 post acquisition, of which approximately $27,000 was accrued as of 31 December 2017. Fluence
Corporation LLC also paid approximately $100,000 for consulting services provided by the former CFO for the
year 2017 post acquisition, of which approximately $10,000 was accrued as of 31 December 2017.
Fluence Corporation LLC had the liability to pay to the non-controlling interest parties for the buyout of their
ownership share in Fluence Argentina. The liability of $4,018,000 accrued as of 31 December 2017 was fully paid
in January 2018.
Fluence Italy S.R.L leases its operating facilities from TMR Immobiliare S.r.l. (TMR), which is an Italian private
limited liability company in which two employees (former minority shareholders’ of the company) are members.
The lease requires Fluence Italy to pay an annual rent in twelve monthly installments plus all management
expenses of the property and the cost of utilities. The lease expires in December 2018. The lease is automatically
renewed for another six years unless either party gives written notice. Rent expense on this lease was
approximately $48,000 for the year 2017 post acquisition. The balance future commitment is approximately
$116,000 for the year 2018.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
94
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
25 Related party transactions (continued)
Other transactions with related parties (continued)
Fluence USA Inc. leases its Ohio sales office from Bear Cabin 14 LLC, (“Bear Cabin”), a limited liability company
in which the majority stockholder is an RWL Water USA employee. The lease, renewed in September 2017 for 12
months, requires Fluence USA to pay a monthly base rent. Rent expense on this lease was approximately
$10,000 for the year 2017 post acquisition. The balance future commitment is $18,000 for the year 2018.
Fluence USA Inc. purchases goods from Waste Water Depot, LLC, a limited liability company in which an
employee of Fluence USA is the member. Goods and services purchased were approximately $90,000 for the
year 2017 post acquisition.
26 Parent entity financial information
Summary financial information
The functional currency of the parent entity is Australian Dollars. The individual Financial Statements for the
parent entity show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Reserves
Accumulated losses
Total Equity
Loss for the period
Total comprehensive loss
31 December
2017
$'000
AUD
31 December
2016
$'000
AUD
-
31,125
130,759
2,107
7,270
178,054
(2,812)
(51,753)
123,489
(41,197)
(41,197)
-
21,029
33,900
1,814
1,814
44,812
(2,170)
(10,556)
32,086
(7,871)
(7,871)
Fluence Corporation Limited
(formerly Emefcy Group Limited)
95
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
26 Parent entity financial information (continued)
Summary financial information (continued)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has not entered into any guarantees in the current or prior financial year in relation to debts of
its subsidiaries.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group as disclosed in note 1.
Contractual commitments and Contingent Liabilities
At 31 December 2017 Fluence Corporation Limited had no contractual commitment and contingent liabilities.
27 Subsidiaries
Name
Parent Entity
Fluence Corporation Limited
Subsidiaries of Fluence Corporation Limited
Emefcy Limited (Israel)
Emefcy Hong Kong Limited
Subsidiaries of Emefcy Hong Kong Limited
Emefcy China Limited
Subsidiaries of Fluence Corporation Limited
Fluence Corporation LLC
Subsidiaries of Fluence Corporation LLC
Nirosoft Trading (1987) Limited
Fluence Investments Limited
Subsidiaries of Investments Limited
RWL Desal Holding
Desaladora Kenton
Fluence Israel Limited
Subsidiaries of Israel Limited
VIC Water Systems
Nirosoft Industries Limited
Nirosoft Australia Limited
Nirosoft Cyprus Limited
Nirosoft Industries Limited - Chile Branch
Nirosoft Industries Limited - Sucursal Colombia
Central America SA de CV
S.D.L Technologies Limited
Constructora Kenton SA de CV
ETGR Water Infrastructure Management
RWL Water Mexico
Fluence Argentina
Subsidiaries of Fluence Argentina
Acquavit Ltd
Fluence Middle East
Fluence Italy S.R.L
Subsidiaries of Fluence Italy S.R.L
RWL Water France
Fluence USA Inc.
Place of
incorporation
Ownership interest
2017
2016
Australia
Israel
Hong Kong
China
USA
Israel
United Kingdom
Mexico
Mexico
Israel
Australia
Cyprus
Australia
Cyprus
Chile
Colombia
Central America
Israel
Mexico
Israel
Mexico
South America
Brazil
UAE
Italy
France
USA
N/A
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
50%
49%
100%
70%
100%
100%
100%
100%
N/A
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Fluence Corporation Limited
(formerly Emefcy Group Limited)
96
Fluence Corporation Limited (formerly Emefcy Group Limited)
Notes to the Consolidated Financial Statements
31 December 2017
(continued)
28 Events occurring after the reporting period
No matters or circumstances have arisen since the end of the reporting period which significantly affected or may
significantly affect the operations of the economic entity, the result of those operations or the state of affairs of the
economic entity in subsequent financial years.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
97
Fluence Corporation
Directors'
31 December 2017
Declaration
Limited
(formerly
Emefcy Group Limited)
In the directors'
opinion:
(a)the Financial
Statements
and notes set out on pages 46
to 96 are in accordance
with the Corporations
Act
2001, including:
(i) complying
mandatory
with Australian
professional
Standards,
and
requirements,
Accounting
reporting
the Corporations
Regulations
2001 and other
(ii)giving
and of its performance
a true and fair view of the consolidated
for the year ended on that date, and
to believe
that the Group will
entity's
(b)there are reasonable grounds
financial
position
2017
as at 31 December
be able to pay its debts as and when they
become due and payable.
Note 1 (b) confirms
issued
by the International
Accounting
Statements
Standards
also comply with International
Board.
Financial
that the Financial
Reporting
Standards
as
This declaration
is made in accordance
with a resolution
of directors.
Ma ng Director
29 arch 2018
New York
and CEO
Fluence Corporation Limited
(formerly
Emefcy Group Limited)
98
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Fluence Corporation Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Fluence Corporation Limited (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 31 December 2017,
the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial report, including a summary of significant accounting policies and the
directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Business combination and provisional
acquisition accounting
How the matter was addressed in our audit
On 14 July 2017, Fluence Corporation Limited
(Fluence) (formerly Emefcy Group Limited)
acquired RWL Water LLC (RWL).
Acquisition consideration consisted of 100.5
million fully paid ordinary shares in Fluence for
all of the issued capital in RWL, with Fluence
being identified as the acquirer.
The Group has provisionally recognised goodwill
of $56.3m arising from the acquisition of RWL.
An independent expert was engaged by the Group
to conduct a purchase price allocation across the
three Cash Generating Units (CGU) identified by
Fluence.
As outlined in Note 14, the directors’ assessment
of the purchase price allocation involves
significant accounting estimation and requires
judgement by management in relation to the
future growth rates, discount rates and expected
cash flows for each CGU to which goodwill has
been allocated.
Due to the extent of judgement and complexity
associated with acquisition accounting, including
assessing the fair value of assets and liabilities
acquired and estimating the value of any
intangibles arising from the business combination,
this was considered a key audit matter.
Refer to Note 1(j) for the business combination
accounting policy; Note 3 Business combination
for the details of the acquisition of RWL Water
LLC; and Note 14 Intangible assets for the details
of the directors’ assessment of the purchase
price allocation.
Our audit strategy to address the risks
associated with business combination and
provisional acquisition accounting included but
were not limited to:
• Reviewing the sale and purchase agreement
and related documentation to understand the
terms and obligations under the agreement
including the consideration.
• Evaluating management’s assessment of the
transaction including the identity of the
acquirer in accordance with Accounting
Standards.
•
Involving BDO IFRS technical experts in
relation to management’s assessment
identifying the acquirer.
• Agreeing the determination of goodwill at
acquisition date prepared by the Group’s
valuation expert.
• Critically evaluating the Group’s
classification of CGU’s and the purchase
price allocation of goodwill to the CGU’s
based on our understanding of the business.
• Auditing the fair value of assets and
liabilities acquired at acquisition date under
the sale and purchase agreement.
• Evaluating the adequacy of the disclosures
relating to the business combination within
the financial report.
Assessment of the carrying value of goodwill
How the matter was addressed in our audit
As disclosed in Note 3 and 14 to the financial
report, the Group has provisionally recognised
goodwill of $56.3m arising from the acquisition of
RWL.
Australian Accounting Standards require an
annual assessment of impairment of the goodwill
intangible asset. As disclosed in Note 14, goodwill
has been tested for impairment subsequent to
acquisition and prior to balance date. At balance
date management has also assessed for indicators
of impairment.
This is a key audit matter due to the extent of
judgement and complexity associated with the
assessment of the carrying value of goodwill.
Refer to Note 1(u) for the intangible asset
accounting policy; Note 1(ab) for a summary of
key accounting estimates relating to goodwill;
and Note 14 Intangible assets for the details of
goodwill recognised and the directors’
assessment of the recoverability of goodwill.
Our audit procedures included but were not
limited to:
• Challenging the methodology and
assumptions contained in management’s
goodwill impairment assessment position
paper.
• Engaging our internal valuation experts to
assist in our audit of management’s chosen
impairment assessment approach (i.e. fair-
value less cost to sell (FVLCS)).
• Engaging our internal valuation experts to
review the goodwill allocations between
CGU’s.
• Reading and considering the disclosures in
the financial report to ensure compliance
with the relevant accounting standard.
Audit strategy for overseas operations
How the matter was addressed in our audit
The Group’s structure comprises significant
overseas operations. The existence of such
operations heightens the importance of engaging
with the component auditor to mitigate the risk
associated with delivering an audit in a location
and regulatory environment other than Australia.
Refer to Note 1(d) for the consolidation
accounting policy and Note 27 for details of
controlled entities.
Our audit strategy to address the risks
associated with there being significant overseas
operations included but were not limited to:
•
•
•
Gaining an understanding of the Group, its
components and the environment they
operate in to identify the risks of material
misstatement to the Group financial
report.
Designing, implementing, monitoring and
executing a global audit strategy with
appropriate protocols and quality control
review mechanisms to ensure that it was
performed in accordance with the audit
plan.
Engaging component auditors, including
non-BDO member firms. As part of this we
evaluated their understanding of the
ethical requirements and their professional
competence, and ensured they were
competent and independent.
•
Discussing with the component auditors:
― The business and audit activities that
were significant to the group audit
through regular teleconferences
throughout the audit.
― The susceptibility of the component
auditor’s financial information to
material misstatement from fraud and
error.
•
In instances where the component auditor
was a BDO member firm, an Australian
team undertook a detailed review of the
component auditor’s working papers.
• Where the component auditors were non-
BDO member firms we engaged a local BDO
auditor to perform a quality control review
of the auditor’s working papers at each
overseas location.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in the Directors’ Report for the year ended 31 December 2017, but does not
include the financial report and our auditor’s report thereon, which we obtained prior to the date of
this auditor’s report, and the Shareholder Information, which is expected to be made available to us
after that date.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
When we read the Shareholder Information, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and will request that it is
corrected. If it is not corrected, we will seek to have the matter appropriately brought to the
attention of users for whom our report is prepared.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 13 to 41 of the directors’ report for the
year ended 31 December 2017.
In our opinion, the Remuneration Report of Fluence Corporation Limited, for the year ended 31
December 2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO East Coast Partnership
David Garvey
Partner
Melbourne, 29 March 2018
Fluence Corporation Limited (formerly Emefcy Group Limited)
Shareholder information
31 December 2017
The shareholder information set out below was applicable as at 12 April 2018.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Class of equity security
Shares
Ordinary shares
Options
174,299
2,295,271
4,109,396
40,757,264
367,931,937
415,268,167
-
288,000
-
5,054,000
47,616,282
52,958,282
There were 580 holders of less than marketable parcel of ordinary shares.
All issued ordinary shares carry one vote per share.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of Ordinary Fully Paid Ordinary Shareholders are listed below:
Shareholders ordinary shares
RSL INVESTMENTS CORPORATION
POND VENTURE NOMINEES 111 LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) lIMITED
ESOP MANAGEMENT & TRUST SERVICES LTD
CITICORP NOMINEES PTY LIMITED
EMPLOYEE EQUITY ADMINISTRATION PTY LTD
PLAN B VENTURES I LLC
JAGEN PTY LTD
MR HAO JING
J P MORGAN NOMINEES AUSTRALIA LIMITED
PLAN B VENTURES II LLC
MR EYTAN LEVY
JOHN W KING NOMINEES PTY LTD
UBS NOMINEES PTY LTD
DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS
MRS QUNYAN WU
LAMPAM PTY LTD
CS FOURTH NOMINEES PTY LIMITED
DR STUART LLOYD PHILLIPS &
ACN 075 312 980 PTY LTD
Total balance of remaining holders
Ordinary shares
Number held
Percentage of
issued shares
110,937,848
36,264,579
25,658,315
17,803,539
16,921,046
14,166,593
12,104,532
11,644,393
9,100,000
8,318,320
7,902,619
7,000,000
3,791,504
3,685,549
3,422,500
2,456,941
2,254,403
2,208,840
2,040,000
1,674,907
115,911,739
415,268,167
26.72%
8.73%
6.18%
4.29%
4.08%
3.41%
2.92%
2.80%
2.19%
2.00%
1.90%
1.69%
.91%
.89%
.82%
.59%
.54%
.53%
.49%
.40%
27.91%
100.00%
Fluence Corporation Limited
(formerly Emefcy Group Limited)
105
Fluence Corporation Limited (formerly Emefcy Group Limited)
Shareholder information
31 December 2017
(continued)
B. Equity security holders (continued)
Unlisted options
Class of
options
Total number
granted
Lowest
exercise
price
Highest
exercise
price
Earliest expiry
date
Latest expiry
date
Number of
holders
Director
options
ESOP
Management
and Trust
Services as
the trustee
under the
ESOP for
Israeli
employees
Options
issued to
advisors
Total
27,391,336
$0.30
$1.50
31 July 2018
13 July 2021
7
17,136,946
$0.30
$1.50
31 July 2018
11 May 2022
304
8,430,000
$0.15
$0.95
5 June 2017
52,958,282
31 December
2020
7
318
Share options do not carry the right to vote.
C. Substantial holders
Substantial holders in the Group are set out below:
RSL INVESTMENTS CORPORATION
POND VENTURE NOMINEES 111 LIMITED
Total Number of Shares Held by Substantial Shareholders
Number
held
Percentage
110,937,848
36,264,579
147,202,427
26.72%
8.73%
35.45%
Fluence Corporation Limited
(formerly Emefcy Group Limited)
106
Fluence Corporation Limited (formerly Emefcy Group Limited)
Shareholder information
31 December 2017
(continued)
Shareholder enquiries
Shareholders with enquiries about their shareholdings should contact the share registry:
Boardroom Pty Ltd
Level 12, 225 George Street, Sydney, NSW, 2000, Australia
Telephone: 1300 737 760 (local), +61 2 9290 9600 (international)
Email: enquiries@boardroomlimited.com.au
Change of address, change of name, consolidation of shareholdings
Shareholders should contact the Share Registry to obtain details of the procedure required for any of these
changes.
Annual report
Shareholders do not automatically receive a hard copy of the Group's Annual Report unless they notify the Share
Registry in writing. An electronic copy of
the Annual Report can be viewed on the Group's website:
www.fluencecorp.com
Tax file numbers
It is important that Australian resident Shareholders, including children, have their tax file number or exemption
details noted by the Share Registry.
CHESS (Clearing House Electronic Subregister System)
Shareholders wishing to move to uncertified holdings under the Australian Securities Exchange CHESS system
should contact their stockbroker.
Uncertified share register
Shareholding statements are issued at the end of each month that there is a transaction that alters the balance of
an individual/company's holding.
Company Secretary
The name of the Company Secretary is Mr Ross Kennedy.
Registered office
The address of the registered office is Level 3, 62 Lygon Street, Carlton Victoria 3053, Australia.
Phone: + 61 3 9824 5254
Stock exchange listing
Quotation has been granted for all the ordinary shares of the Group on all member exchanges of the Australia
Securities Exchange Limited.
Fluence Corporation Limited
(formerly Emefcy Group Limited)
107
www.fluencecorp.com