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The9 LimitedM A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 1 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 02C h a ir m a n ’s S t a t e m e n t D e a r S h a r e h o ld e r s , T h e p a s t y e a r h a s b e e n s o m e m a j o r d e v e lo p m e n t s in o u r e n d e a v o u r s t o p la y a s ig n ifi c a n t r o le in t h e L it h iu m -io n b a t t e r y in d u s t r y w h ic h is in it s e a r ly s t a g e s . To w n s v ille h a d it s fe a s ib ilit y s t u d y fi n a lis e d a n d a p p ro v e d b y t h e Q u e e n s la n d S t a t e g o v e r n m e n t . W o r k o n t h e n e x t s t a g e s o f d e v e lo p m e n t a re n o w w e ll u n d e r w a y w it h p ro je c t p a r t n e r s . O u r fl a g s h ip p ro je c t in N e w Yo r k h a s t a k e n s o m e m a jo r s t e p s t o w a rd s p ro d u c t io n w it h fi n a n c in g fo r t h e p ro je c t n e a r in g c o m p le t io n . W e a re e x c it e d t o b e s o c lo s e t o p ro d u c t io n a n d b e in g o n e o f t h e m a jo r lit h iu m -io n c e ll m a n u fa c t u re r s in t h e U n it e d S t a t e s . D u r in g t h e la s t 1 2 m o n t h s w e h a v e in c re a s e d o u r o w n e r s h ip d ire c t ly a n d in d ire c t ly t o n e a r ly 5 8 % . O u r t e c h n o lo g ic a l a d v a n c e m e n t s in c o n ju n c t io n w it h o u r p a r t n e r C 4 V is p u t t in g u s o n t h e w o r ld s t a g e e s p e c ia lly w it h t h e E x t r a F a s t C h a rg in g b a t t e r y t e c h n o lo g y . S e v e r a l O E M ’s h a v e b e g u n d is c u s s io n s w it h M a g n is a n d C 4 V . O u r t e s t p ro g r a m w h ic h h a s y ie ld e d s ig n ifi c a n t re s u lt s h a s a d v a n c e d t o a n o p t im is e d c o m m e rc ia l c e ll p ro g r a m . N e w Yo r k S t a t e is a ls o fu n d in g a d e m o n s t r a t io n p ro g r a m t o p ro v e t h a t t h e e x t r a fa s t c h a rg in g t e c h n o lo g y w o u ld w o r k fo r N e w Yo r k ’s T r a n s it b u s e s , w h ic h n o t o n ly in c lu d e s C 4 V b u t a ls o B A E S y s t e m s a n d C o n s o lid a t e d E d is o n . N a c h u h a s re c e iv e d s o m e in t e re s t in re c e n t t im e s fo r b o t h o ff t a k e a n d fi n a n c in g . W it h a g lo b a l p u s h t o a lt e r n a t e s u p p ly a w a y fro m t r a d it io n a l C h in e s e s u p p ly , a ll b o d e s w e ll fo r t h e p ro je c t . O u r t e a m in T a n z a n ia h a s d o n e a b r illia n t jo b in a d v a n c in g t h e p ro je c t a n d w o r k in g w it h p o t e n t ia l o ff t a k e p a r t n e r s . D is t in g u is h e d P ro fe s s o r M . S t a n le y W h it t in g h a m w a s a w a rd e d w it h t h e N o b e l P r iz e fo r C h e m is t r y fo r h is in v e n t io n o f t h e L it h iu m -io n b a t t e r y . W e h a v e t h e h u g e h o n o u r h a v in g P ro fe s s o r W h it t in g h a m o n o u r b o a rd . R e c e n t ly , t h e C o m p a n y h a s b o ls t e re d it s s k ills a n d e x p e r t is e o n t h e B o a rd b y a p p o in t in g J a m e s D a c k a s E x e c u t iv e D ire c t o r a n d t h e H o n T ro y G r a n t a s N o n -E x e c u t iv e D ire c t o r. T h e ir q u a lit ie s w ill b e c r it ic a l a s t h e C o m p a n y m o v e s fo r w a rd . O u r S e n io r M a n a g e m e n t t e a m h a s a ls o b e e n s t re n g t h e n e d w it h t h e a p p o in t m e n t s o f J u r g e n B e h re n s a s C h ie f F in a n c ia l O ffi c e r, F r a n k G io rd a n o a s C o m p a n y S e c re t a r y , R o d C h it t e n d e n a s P ro je c t D ire c t o r fo r t h e N a c h u G r a p h it e P ro je c t a n d J a c k R o b e r t s o n a s S t r a t e g ic M a n a g e r fo r B a t t e r ie s . I w o u ld lik e t o t h a n k s h a re h o ld e r s fo r t h e ir o n g o in g s u p p o r t a n d fo r o u r t e a m a n d p a r t n e r s w h o a re w o r k in g n o n -s t o p t o m a k e s u re M a g n is is a h u g e s u c c e s s a n d re c e iv e s t h e re - r a t in g it d e s e r v e s . F r a n k P o u l l a s E X E C U T IV E C H A IR M A N M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 3 03R e v ie w o f O p e r a t io n s I M P A C T O F C O V I D -1 9 it s e c u re d a s ig n ifi c a n t m u lt i-y e a r o rd e r fro m t h e U n it e d K in g d o m G o v e r n m e n t . T h e C o m p a n y a n n o u n c e d o n 1 A p r il 2 0 2 0 t h a t it h a d im p le m e n t e d m e a s u re s t o s ig n ifi c a n t ly re d u c e a ll n o n - e s s e n t ia l o p e r a t in g e x p e n s e s a s a c o n s e q u e n c e o f t h e t h e n c u r re n t e v o lv in g m a r k e t c o n d it io n s c a u s e d b y t h e C O V ID -1 9 g lo b a l p a n d e m ic . T h o s e m a r k e t c o n d it io n s h a v e s in c e c o n t in u e d u n a b a t e d a s A u s t r a lia h a s w it n e s s e d t h e o n -g o in g e ff e c t s o f C O V ID -1 9 . L I T H I U M -I O N B A T T E R Y (L I B ) M A N U F A C T U R I N G A N D E N E R G Y S T O R A G E T h e fo r a y in t o L IB m a n u fa c t u r in g is b y n o s m a ll p a r t b e in g le d b y t h e p re s e n c e o f D is t in g u is h e d P ro fe s s o r S t a n le y W h it t in g h a m o n t h e M a g n is B o a rd o f D ire c t o r s . O n 9 O c t o b e r 2 0 1 9 , t h e R o y a l S w e d is h A c a d e m y o f S c ie n c e s a n n o u n c e d it s jo in t a w a rd o f t h e 2 0 1 9 N o b e l P r iz e in C h e m is t r y t o D is t in g u is h e d P ro fe s s o r W h it t in g h a m fo r h is p io n e e r in g c o n t r ib u t io n t o t h e d e v e lo p m e n t o f t h e lit h iu m io n b a t t e r y . B A T T E R Y T E C H N O L O G Y A n im p o r t t e c h n o lo g y p la n k o f M a g n is t h ro u g h it s c o n s o r t iu m p a r t n e r a n d in v e s t e e c o m p a n y C h a rg e C C C V (C 4 V ), a re b a t t e r y c e lls t h a t d o n o t u s e c o b a lt . T h e d e v e lo p m e n t o f t h e s e b a t t e r ie s t o w a rd s c o m m e rc ia lis a t io n h a s re c e n t ly b e e n a c c e le r a t e d t h ro u g h g re a t e r c o lla b o r a t io n w it h in d u s t r y p la y e r s . C 4 V a n n o u n c e d in M a y 2 0 1 9 t h a t it h a d s u p p lie d b a t t e r ie s t o a n o ff t a k e c u s t o m e r M a r it im e T a c t ic a l S y s t e m s (M a r t a c ) u s in g it s p ro p r ie t a r y B M L M P c a t h o d e t e c h n o lo g y fo r it s u n m a n n e d w a t e r a n d s u r fa c e v e s s e ls . T h e s e b a t t e r ie s w e re 2 0 K W in s iz e a n d t o b e u s e d in c o m m e rc ia l m a r in e v e s s e ls fo r d e m o n s t r a t io n a n d t e s t in g p u r p o s e s . M A R TA C is a n in n o v a t iv e p ro v id e r o f t h e M A N TA S lin e o f U n m a n n e d S u r fa c e V e h ic le s (U S V ) fo r s e v e r a l in d u s t r ie s in c lu d in g s e c u r it y , c o m m e rc ia l a n d s c ie n t ifi c m is s io n s a n d m a r k e t s . M A N TA S in t e g r a t e w it h a w id e a r r a y o f s e n s o r s a n d c o m m u n ic a t io n t e c h n o lo g ie s a n d o p e r a t e in d iv e r s e m a r it im e e n v iro n m e n t s w h e re o t h e r m a n n e d a n d u n m a n n e d s y s t e m s c a n n o t . In F e b r u a r y 2 0 2 0 , fo llo w in g a t w o -y e a r c o lla b o r a t io n , C 4 V e x p a n d e d o n t h is c o m m e rc ia l a g re e m e n t w it h M A R TA C . C 4 V w a s a b le t o d e m o n s t r a t e t h e a b ilit y o f t h e ir B M L M P t e c h n o lo g y , w h ic h le d t o a n o t h e r o rd e r fro m M A R TA C a f t e r T h e b a t t e r ie s p ro v id e d t o M A R TA C w e re in t h e s a m e fo r m a s b a t t e r ie s t h a t a re p la n n e d t o b e p ro d u c e d fro m t h e iM 3 N Y G ig a fa c t o r y in N e w Yo r k . M A R TA C c o n d u c t e d c r it ic a l t e s t p ro t o c o ls t o q u a lify C 4 V c e lls , fo llo w e d b y d e s ig n in g o f b a t t e r y p a c k s fo r h a r s h e n v iro n m e n t a n d e x t re m e lo a d a p p lic a t io n s . U p o n s u c c e s s fu l c o m p le t io n in 2 0 1 9 , C 4 V w a s g iv e n t h e o p p o r t u n it y t o s u p p ly m o re F ire s a fe T M b a t t e r ie s t o b e in t e g r a t e d in M A R TA C ’s fu lly a u t o n o m o u s h ig h -e n d m a r it im e v e s s e ls . E F C R E S U LT S C y c lin g re s u lt s fro m a n u n o p t im is e d c o m m e rc ia l s iz e c e ll t o d a t e , u s in g C 4 V t e c h n o lo g y , h a s p ro d u c e d e x c it in g re s u lt s , w it h t h e c y c lin g life re t e n t io n o v e r 1 0 0 0 c y c le s , w it h a 6 m in u t e c h a r g e a n d 1 h o u r d is c h a rg e . T h e u n o p t im is e d c e ll is w it h in 9 9 % e n e rg y d e n s it y o f a re g u la r e n e r g y c e ll, w h ic h m e a n s m in im a l e n e rg y d e n s it y lo s s fo r a s u p e r fa s t c h a rg e c e ll. F o llo w in g t h e e x c it in g re s u lt s , a d e c is io n h a s b e e n m a d e t o c o m m e n c e t e s t in g o f E F C o n o p t im is e d c o m p o s it io n o f c o m m e rc ia l c e lls . B a t t e r y c e lls o p t im is e d fo r v e r y fa s t c h a r g in g a re re q u ire d t o m a x im is e c h a r g in g e n e rg y e ffi c ie n c y , b a t t e r y life a n d , m o s t im p o r t a n t ly , s a fe t y . M a g n is t e c h n o lo g y p a r t n e r, C 4 V , is a t t h e fo re fro n t o f t h is t e c h n o lo g y d e v e lo p m e n t a n d h a s b e e n w o r k in g w it h e n d u s e r s in c lu d in g c o m m e rc ia l E V m a n u fa c t u re r s , t o d e v e lo p a fu t u re p ro o f d e s ig n fo r E F C b a t t e r ie s , w it h a fo c u s o n lo w c o s t a n d s u s t a in a b le s u p p ly c h a in . S e v e r a l E u ro p e a n O E M ’s h a v e e x p re s s e d in t e re s t in t h e t e c h n o lo g y w it h in it ia l d is c u s s io n s b e in g u n d e r t a k e n w it h c o n fi d e n t ia lit y a g re e m e n t s h a v in g b e e n e x e c u t e d . N E W Y O R K D E M O N S T R A T IO N P R O G R A M A d e m o n s t r a t io n p ro g r a m in N e w Yo r k h a s c o m m e n c e d fo r a P u b lic T r a n s it Te c h n o lo g y a n d In n o v a t io n P ro g r a m fu n d e d b y N Y S E R D A , w it h a p ro p o s a l t o d e v e lo p E F C s y s t e m u t ilis in g e x t e n d e d -life b a t t e r ie s p ro v id e d b y C 4 V w it h it s B M L M P t e c h n o lo g y . T h e t e c h n o lo g y in p la n n e d t o b e d e v e lo p e d in B in g h a m t o n , N e w Yo r k U S , a n d t e s t e d a t B A E S y s t e m s b e fo re b e in g in s t a lle d fo r s o m e N e w Yo r k C it y b u s ro u t e s . T h e p la n is t o re m o v e 5 0 0 ,0 0 0 m e t r ic t o n s o f c a r b o n d io x id e a n n u a lly fro m t h e N e w Yo r k C it y m e t ro a re a , w h ils t in c re a s in g e n e r g y e ffi c ie n c y a n d lo w e r in g u p fro n t c o s t s v e r s u s t h e c u r re n t s y s t e m . 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 5 R e v ie w o f O p e r a t io n s C o n s o lid a t e d E d is o n w ill b e re s p o n s ib le fo r c h a rg in g , w it h b u s s t o p s e q u ip p e d w it h ro b o t ic a r m s t h a t h a v e t h e a b ilit y re a c h d o w n fro m t h e o v e r h e a d e le c t r ic w ire s a n d c o n n e c t t o t h e b u s e s ’ b a t t e r ie s t o re c h a rg e t h e m in 5 t o 1 0 m in u t e s . G R A P H IT E W it h re s p e c t t o G r a p h it e p ro c e s s in g , M a g n is c o n t in u e d t o o p t im is e it s p ro d u c t o ff e r in g fo r e m e r g in g g ro w t h a p p lic a t io n s s u c h a s L IB s . G r a p h it e is u s e d in t h e a n o d e o f t h e b a t t e r y a n d it is w h e re o x id a t io n t a k e s p la c e o f lit h iu m m e t a l t h a t is fo r m e d in t h e c h a rg in g o f t h e b a t t e r y . T h e fre e d e le c t ro n s fro m o x id a t io n fl o w o u t o f t h e b a t t e r y t o d is c h a rg e t h e s t o re d e n e rg y . M a g n is p ro c e s s o p t im is a t io n p ro g r a m s c o n t in u e t o re fi n e t h e a b ilit y t o p ro d u c e g r a p h it e p ro d u c t s w it h p u r it ie s r a n g in g fro m 9 9 t o 9 9 .9 5 % w it h o u t t h e u s e o f c h e m ic a l o r t h e r m a l p u r ifi c a t io n . T h e m illin g a n d fl o t a t io n s t e p s u s e d a s h ig h lig h t e d in t h e t a b le b e lo w a re m e c h a n ic a l p ro c e s s e s t h a t a re s ig n ifi c a n t ly lo w e r c o s t t h a n c u r re n t ly u s e d c h e m ic a l a n d t h e r m a l p u r ifi c a t io n p ro c e s s e s t h a t t y p ic a lly c o s t o v e r U S $ 1 ,0 0 0 /t . S t a g e P r o c e s s O v e r v ie w I n d ic a t iv e P u r it y (% T G C ) I n d ic a t iv e C o s t (U S $ /t ) Mine Processing Plant Downstream Stage 1 Downstream Stage 2 4 Steps of milling and flotation >99 5501 4 Steps of milling and flotation 99.8 Milling and Spheronisation steps 99.95 100 100 B a s e d o n 2 0 1 6 fe a s ib ilit y s t u d y Ta b le 1 – N a c h u p ro c e s s in g s te p s a n d in d ic a tiv e c o s t fo r m a k in g u n c o a te d s p h e ric a l g ra p h ite fo r L IB s T h e re a re c u r re n t ly fe w m in e s a b le t o p ro d u c e s u c h h ig h p u r it y g r a p h it e fl a k e w h ils t m a in t a in in g a la r g e fl a k e s iz e d is t r ib u t io n a lo n g w it h h ig h re c o v e r ie s . B a s e d o n re c e n t m a r k e t a n a ly s is a n d fe e d b a c k , a c o s t -e ff e c t iv e g re e n a n o d e w o u ld b e a n id e a l c a n d id a t e fo r t h e L IB in d u s t r y . E a r ly d e v e lo p m e n t c e ll t e s t in g o f a n a n o d e b le n d c o n t a in in g s p h e r ic a l c o a t e d m a t e r ia l d e r iv e d fro m N a c h u g r a p h it e h a s d e m o n s t r a t e d e x c e lle n t b a t t e r y p e r fo r m a n c e ; s h o w c a s in g 1 0 0 0 c y c le s a n d s t ill re t a in in g a ro u n d 9 0 % c a p a c it y . T h e s e e a r ly re s u lt s a re a n im p ro v e m e n t o v e r m o s t c o m m e rc ia lly a v a ila b le a n o d e m a t e r ia ls a n d w o r k o n c o a t in g o p t im is a t io n is e x p e c t e d t o c o n fi r m s ig n ifi c a n t p e r fo r m a n c e im p ro v e m e n t t a r g e t in g 8 0 % lo s s a f t e r 5 ,0 0 0 c y c le s . In t h e p a s t fe w y e a r s , M a g n is h a s r ig o ro u s ly t e s t e d t h e g r a p h it e q u a lit ie s fro m N a c h u a n d t h e o u t s t a n d in g p e r fo r m a n c e s a n d re s u lt s a c h ie v e d d u r in g t h is t im e h a s d ire c t e d a t t e n t io n t o fo c u s o n a m u lt i a p p ro a c h s t r a t e g y w h e re M a g n is h a s a ls o b e c o m e in v o lv e d in L IB p ro d u c t io n a n d d e v e lo p m e n t . T h e re h a s b e e n a n e s c a la t io n in re s o u rc e s d e v o t e d t o it s lit h iu m -io n c o m m e rc ia l a n o d e d e v e lo p m e n t p ro g r a m s . T h e s e re s o u rc e s in c lu d e a d d it io n a l d o w n s t re a m t e c h n ic a l e x p e r t is e a n d in d u s t r y le a d in g b a t t e r y t e s t fa c ilit ie s t o a llo w fo r c e lls a n d b a t t e r y fa b r ic a t io n d e v e lo p m e n t u t ilis in g N a c h u a n o d e m a t e r ia l. F ig u re 1 . C o m m e rc ia l s iz e 2 A h lith iu m io n c e ll s h o w c a s in g 1 0 0 0 c y c le s a n d a n e x c e lle n t c h a rg e -d is c h a rg e e ffi c ie n c y. 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 7 “ F u n d in g is n e a r in g c o m p le t io n w it h fi r s t p r o d u c t io n e x p e c t e d in 2 0 2 1 a t g ig a w a t t s c a le m a k in g it o n e o f t h e la r g e s t b a t t e r y p la n t s in t h e U n it e d S t a t e s . “ R e v ie w o f O p e r a t io n s C O N S O L I D A T I O N O F O W N E R S H I P I N I M P E R I U M 3 -N E W Y O R K L L C (I M 3 N Y ) O n 3 0 J u n e 2 0 2 0 M a g n is a n n o u n c e d t h e c o m p le t io n o f t h e p u rc h a s e t r a n s a c t io n t h a t in c re a s e d it s s h a re h o ld in g in iM 3 N Y t o 5 3 .3 9 % (o n a d ire c t s h a re h o ld in g b a s is ) a n d t o 5 7 .9 1 % (o n a d ire c t a n d in d ire c t s h a re h o ld in g b a s is ). T h e t r a n s a c t io n re s u lt e d in t h e a c q u is it io n o f B o s t o n E n e rg y a n d In n o v a t io n P t y L im it e d ’s (“B E I”) e n t ire s h a re h o ld in g , a s w e ll a s B o s t o n O p p o r t u n it ie s N o . 1 P t y L im it e d ’s (a s u b s id ia r y o f B E I) s h a re h o ld in g , in t h e U S b a s e d e n t it y , iM 3 N Y. T h e p u rc h a s e c o n s id e r a t io n fo r t h e in c re a s e d s h a re h o ld in g w a s U S $ 3 5 0 ,0 0 0 , w it h t h e p u rc h a s e t r a n s a c t io n c o m p le t e d o n 3 0 J u n e 2 0 2 0 . A n a d d it io n a l U S $ 1 5 0 ,0 0 0 b o n u s p a y m e n t is t o b e p a id t o B E I o n t h e c o n d it io n t h a t iM 3 N Y s u c c e s s fu lly s e c u re s p ro je c t fi n a n c e o r a jo in t v e n t u re a g re e m e n t w it h a n o ff t a k e p a r t n e r fo r t h e iM 3 N Y ’s b a t t e r y p la n t , w it h in a t w e lv e -m o n t h p e r io d . M a g n is n o w h a s a 5 3 .3 9 % d ire c t h o ld in g in iM 3 N Y. C 4 V h a s a d ire c t h o ld in g o f 4 5 .1 7 % , a n d t w o o t h e r c o m p a n ie s , P r im e t P re c is io n M a t e r ia ls In c a n d C & D A s s e m b ly In c , a re t h e o t h e r s h a re h o ld e r s in iM 3 N Y, o w n in g t h e re m a in in g 1 .4 4 % . A s a n n o u n c e d b y t h e C o m p a n y o n 3 0 S e p t e m b e r 2 0 1 9 , iM 3 N Y e q u ip m e n t w a s in d e p e n d e n t ly v a lu e d a t U S $ 7 1 .3 4 m illio n (A $ 1 1 5 .5 m illio n ) b y O ’B r ie n & G e re , a w h o lly -o w n e d s u b s id ia r y o f D u t c h e n g in e e r in g g ia n t R a m b o ll G ro u p . M a g n is is a ls o a 1 0 % s h a re h o ld e r o f C 4 V , a n d t h e re fo re fo llo w in g t h e B E I t r a n s a c t io n , it s t o t a l o w n e r s h ip in iM 3 N Y o n a d ire c t a n d in d ire c t b a s is is 5 7 .9 1 % . 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S F ig u re 2 : P ro p o s e d N e w Yo rk 1 G W h p la n t la y o u t F ig u re 3 . M a c h in e r y in N e w Yo rk P la n t F ig u re 4 . P a r t o f th e N e w Yo rk p ro d u c tio n p la n t N E W Y O R K Im p e r iu m 3 N e w Yo r k , In c o r p o r a t e d (iM 3 N Y ) is a c o m p a n y e s t a b lis h e d in t h e U S A t h a t o w n s b a t t e r y p la n t a s s e t s lo c a t e d in a p la n n e d L IB m a n u fa c t u r in g fa c ilit y b a s e d a t t h e H u ro n C a m p u s in E n d ic o t t , N e w Yo r k . iM 3 N Y p u rc h a s e d t h e p la n t e q u ip m e n t a n d m a c h in e r y w h ic h in c lu d e s o p e r a t io n s s u c h a s s lu r r y m a k in g t o c o a t in g t o c e ll a s s e m b ly a n d fo r m a t io n . O v e r t h e p a s t s ix m o n t h s , t h re e m a jo r re p o r t s w e re c o m m is s io n e d a n d c o m p le t e d t o re fi n e p ro je c t w o r k s , s c h e d u le s a n d c o s t s fo r d u e d ilig e n c e b y p ro s p e c t iv e fi n a n c ie r s . D e t a ile d e n g in e e r in g w o r k w a s c o m p le t e d b y D u t c h E n g in e e r in g g ia n t , R a m b o ll G ro u p (“R a m b o ll”), a n d a la r g e in d e p e n d e n t c o n s u lt in g fi r m w a s h ire d b y a p o t e n t ia l in v e s t o r t o c o m p le t e t h e fi n a n c ia l, t e c h n ic a l a n d b u s in e s s d u e d ilig e n c e o f iM 3 N Y. A p ro je c t t e a m o f c lo s e t o t w e n t y p e o p le fro m R u m b o ll w it h C 4 V (M a g n is b a t t e r y p a r t n e r ) a n d iM 3 N Y h a s p e r fo r m e d t h is re c e n t w o r k c o v e r in g p la n t la y o u t , fa c ilit y a n d u t ilit y d e s ig n , s a fe t y , e n v iro n m e n t , p ro c e s s , in v e n t o r y m a n a g e m e n t a n d o p e r a t io n s . A n in d e p e n d e n t v a lu a t io n c o m p le t e d b y O ’B r ie n & G e re , a w h o lly o w n e d s u b s id ia r y o f R a m b o ll, v a lu e d t h e e q u ip m e n t a t U S $ 7 1 .3 4 m illio n (A $ 1 0 5 .5 m illio n ), w it h M a g n is o w n e r s h ip a t n e a r ly 5 8 % in t h e p ro je c t . F u n d in g is n e a r in g c o m p le t io n w it h fi r s t p ro d u c t io n e x p e c t e d in 2 0 2 1 a t g ig a w a t t s c a le m a k in g it o n e o f t h e la rg e s t b a t t e r y p la n t s in t h e U n it e d S t a t e s . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 9 R e v ie w o f O p e r a t io n s T O W N S V IL L E S it e Im p e r iu m 3 To w n s v ille P t y L im it e d (“iM 3 T S V ”) h a s fi n a lis e d it s fe a s ib ilit y s t u d y (t h e “S t u d y ”) fo r a n 1 8 G W h lit h iu m - io n b a t t e r y c e ll m a n u fa c t u r in g fa c ilit y in To w n s v ille , Q u e e n s la n d . M a g n is o w n s o n e t h ird o f iM 3 T S V . A s a n n o u n c e d o n 5 J u n e 2 0 1 8 , fo r m a l a g re e m e n t s t o fa s t t r a c k t h e To w n s v ille b a t t e r y p la n t p ro je c t w e re s ig n e d w it h t h e fe a s ib ilit y s t u d y t o c o m m e n c e s h o r t ly a f t e r (A S X R e le a s e , 5 J u n e 2 0 1 8 ). T h e p ro je c t a ls o re c e iv e d a $ 3 .1 m illio n g r a n t fro m t h e Q u e e n s la n d G o v e r n m e n t (A S X R e le a s e , 2 7 A u g u s t 2 0 1 8 ). T h e fe a s ib ilit y s t u d y w a s u n d e r t a k e n t o d e v e lo p t h e d e t a ile d e n g in e e r in g p la n fo r t h e p ro je c t a n d t o e s t a b lis h fi n a n c ia l v ia b ilit y t o s u p p o r t s u b s e q u e n t in v e s t m e n t d e c is io n a n d p ro je c t fu n d in g . A s ig n ifi c a n t o u t c o m e o f t h e s t u d y w a s t o p h a s e t h e p ro je c t o v e r 3 s t a g e s o f 6 G W h s e a c h , fo r a t o t a l n o m in a l c a p a c it y o f 1 8 G W h . T h is n o t o n ly re d u c e s t h e u p fro n t c a p it a l e x p e n d it u re t o a m o re m a n a g e a b le A $ 1 .1 2 B fo r t h e fi r s t s t a g e , b u t a ls o a llo w s fo r p ro je c t e x p a n s io n t o o c c u r in lin e w it h d e v e lo p m e n t s in t e c h n o lo g y a n d t h e m a r k e t . F ig u re 5 . M o d e l im a g e o f p ro p o s e d iM 3 T S V p la n t. S t a g e 1 • B u ild in g W o r k s • R o a d W o r k s • E x t e r n a l W o r k s a n d S e r v ic e s T O TA L - S TA G E 1 S t a g e 2 • B u ild in g W o r k s • E x t e r n a l W o r k s a n d S e r v ic e s T O TA L - S TA G E 2 S t a g e 3 • B u ild in g W o r k s • E x t e r n a l W o r k s a n d S e r v ic e s T O TA L - S TA G E 3 C O N S T R U C T IO N C O N T IN G E N C Y T O T A L C O N S T R U C T I O N C O S T (e x c l. G S T ) T h e s it e is p a r t o f L a n s d o w n S t a t io n a p p ro x im a t e ly 4 0 k m s o u t h o f t h e To w n s v ille C B D w it h a t o t a l p ro p e r t y a re a o f 3 5 7 h e c t a re s (F ig u re s 1 a n d 2 ). It o ff e r s fl a t t e r r a in a n d is p re d o m in a n t ly v a c a n t la n d w it h lim it e d n a t u r a l v e g e t a t io n . S it u a t e d o n t h e w e s t e r n s id e o f t h e F lin d e r s H ig h w a y , b o u n d e d t o t h e n o r t h b y G h o s t G u m R o a d a n d s o u t h b y B id w illi R o a d , fo r m in g p a r t o f a n e w ‘g re e n ’ in d u s t r ia l w it h a t o t a l a re a o f a p p ro x im a t e ly 2 ,0 7 0 h e c t a re s w h ic h h a s n o w b e e n re z o n e d . E n v iro n m e n t a l a s s e s s m e n t s o f t h e s it e in c lu d in g fl o r a a n d fa u n a , s t o r m w a t e r, h y d ro lo g y a n d fl o o d in g , g e o t e c h n ic a l a n d c u lt u r a l h e r it a g e fo u n d n o m a jo r im p e d im e n t s t o d e v e lo p t h e p la n t a t t h is s it e (s u b je c t t o d e v e lo p m e n t c o n s e n t ). M a jo r in fr a s t r u c t u re a n d u t ilit ie s s u c h a s ro a d s , e le c t r ic it y a n d g a s a re a lre a d y in c lo s e p ro x im it y . C a p it a l C o s t iM 3 T S V ’s s t a g e d a p p ro a c h t o d e v e lo p in g t h e p ro je c t h a s s ig n ifi c a n t b e n e fi t s fo r fu n d in g a n d p ro d u c t d e v e lo p m e n t . To w n s v ille b a s e d q u a n t it y s u r v e y o r s R id e r L e v e t t B u c k n a ll (R L B ) c o m p le t e d a n in d e p e n d e n t re v ie w o f c a p it a l e x p e n d it u re s fo r e a c h s t a g e a s s h o w n b e lo w . T h e c o s t fo r s t a g e 1 is s lig h t ly h ig h e r t h a n s t a g e s 2 a n d 3 , d u e t o t h e n e e d fo r iM 3 T S V t o c o n t r ib u t e t o t h e c o s t o f e x t e n d in g s o m e t r u n k in fr a s t r u c t u re s e r v ic e s t o t h e s it e . “ T h e f e a s ib ilit y s t u d y w a s u n d e r t a k e n t o d e v e lo p t h e d e t a ile d e n g in e e r in g p la n f o r t h e p r o je c t a n d t o e s t a b lis h fi n a n c ia l v ia b ilit y t o s u p p o r t s u b s e q u e n t in v e s t m e n t d e c is io n a n d p r o je c t f u n d in g .” $ 9 4 4 ,3 6 0 ,1 7 3 1 4 ,3 8 6 ,5 7 2 1 6 3 ,5 9 4 ,3 2 2 1 ,1 2 2 ,3 4 1 ,0 6 7 9 2 0 ,7 6 3 ,0 5 5 2 3 ,8 9 1 ,0 1 0 9 4 4 ,6 5 4 ,0 6 5 9 3 3 ,0 0 3 ,8 4 7 3 0 ,4 2 4 ,8 9 0 9 6 3 ,4 2 8 ,7 3 7 2 3 ,4 1 5 ,4 4 9 3 ,0 5 3 ,8 3 9 ,3 1 8 1 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S F ig u re 6 . A n a r tis t ’s im p re s s io n o f th e p ro p o s e d iM 3 T S V F a c to r y. M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 1 1 R e v ie w o f O p e r a t io n s F ig u re 7 . A n o t h e r a r tis t ’s im p re s s io n o f th e p ro p o s e d iM 3 T S V fa c to r y p la n t. F in a n c ia l A n a ly s is P ro je c t re v e n u e s a n d o p e ra t in g c o s t s w e re c o m p ile d u s in g c o n s e r v a t iv e in p u t s w h ic h w e re u s e d to c re a te a ro b u s t fi n a n c ia l m o d e l fo r t h e p ro je c t. T h is m o d e l e n a b le s d e t a ile d a n a ly s is a n d s c e n a r io te s t in g in c lu d in g p ro d u c t c h e m is t r ie s , p ro d u c t io n p a ra m e te rs a n d fi n a n c in g o p t io n s . T h e t a b le b e lo w s h o w s t h e k e y fi n a n c ia l m e t r ic s o f a c o n s e r v a t iv e b a s e c a s e a s s u m in g n o fi n a n c ia l in c e n t iv e s fro m g o v e r n m e n t a n d iM 3 T S V a c h ie v in g a n 8 0 % p ro d u c t io n y ie ld w it h s t a n d a rd p ro d u c t io n c o n fi g u ra t io n . N a t io n a l A u s t ra lia B a n k (‘N A B ’) w a s a p p o in te d a s iiM 3 T S V ’s fi n a n c ia l a d v is e r to a s s is t in d e v e lo p in g a p ro je c t fu n d in g s t ra te g y , w h ic h fo r m e d p a r t o f t h e s t u d y . P r o j e c t r e t u r n s (n o t e r m i n a l v a l u e N P V @ 3 0 -N o v -1 8 (‘0 0 0 ,0 0 0 ) P ro je c t P ro je c t a f t e r D e b t P ro je c t a f t e r D e b t & T a x 2 ,5 4 2 2 ,7 2 3 1 ,5 6 9 I R R 2 1 .5 % 2 8 % 2 1 5 1 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S N A C H U G R A P H IT E P R O J E C T T h e N a c h u G r a p h it e P ro je c t is lo c a t e d n e a r R u a n g w a , in t h e s o u t h -e a s t o f T a n z a n ia a n d a p p ro x im a t e ly 2 2 0 k m t o t h e T a n z a n ia n p o r t o f M t w a r a . T h e N a c h u G r a p h it e P ro je c t is s h o v e l re a d y w it h a S p e c ia l M in in g L ic e n c e (S M L ) S M L 5 5 0 /2 0 1 5 o n t h e p ro je c t g r a n t e d b y t h e M in is t r y o f E n e rg y a n d M in e r a ls (M E M ) o f T a n z a n ia in S e p t e m b e r 2 0 1 5 . T h e S M L w a s g r a n t e d t o U r a n e x T a n z a n ia L im it e d (U T Z ), a w h o lly -o w n e d s u b s id ia r y o f M a g n is . S p e c ia l E x p o r t Z o n e (S E Z ) le g is la t io n w a s in t ro d u c e d in T a n z a n ia in 2 0 0 6 . T h e le g is la t io n p ro v id e s in c e n t iv e s fo r c o m p a n ie s t o c re a t e v a lu e a d d it io n a n d a d v a n c e e m p lo y m e n t a n d d e v e lo p m e n t o f t h e c o u n t r y . S E Z lic e n c e s a re is s u e d b y t h e M in is t e r o f In d u s t r y a n d T r a d e w it h k e y b e n e fi t s in c lu d in g t h e e x e m p t io n fro m p a y m e n t o f c o r p o r a t e t a x fo r u p t o 1 0 y e a r s , t h e e x e m p t io n o f t a x e s a n d d u t ie s fo r m a c h in e r y , e q u ip m e n t a n d c o n s t r u c t io n m a t e r ia ls fo r t h e d e v e lo p m e n t o f S E Z in fr a s t r u c t u re a n d t h e e x e m p t io n fro m p a y m e n t o f w it h h o ld in g t a x o n re n t , d iv id e n d s a n d in t e re s t fo r 1 0 y e a r s . To d a t e , t h e m a jo r it y o f e x is t in g S E Z lic e n c e o w n e r s c o m e fro m t h e A g r ic u lt u re P ro c e s s in g , A s s e m b ly a n d E n g in e e r in g a n d Te x t ile a n d A p p a re l s e c t o r s . M a g n is w a s p ro v id e d a p p ro v a l b y t h e E x p o r t P ro c e s s in g Z o n e s A u t h o r it y (E P Z A ) in M a rc h 2 0 1 7 t o o p e r a t e w it h in a S E Z in T a n z a n ia w h ic h w ill a llo w t h e C o m p a n y t o a p p ly t h e a d v a n c e d t e c h n o lo g ie s it h a s b e e n d e v e lo p in g t o p ro d u c e v a lu e e n h a n c e d g r a p h it e p ro d u c t s . T h e S E Z u n d e r t h e ju r is d ic t io n o f t h e D e p a r t m e n t o f In d u s t r y , T r a d e a n d In v e s t m e n t , g o v e r n s t h e o p e r a t io n o f t h e g r a p h it e p ro c e s s in g p la n t a n d is n o t s u b je c t t o t h e c h a n g e s in t h e m in in g le g is la t io n a n n o u n c e d la t e in 2 0 1 7 . F o llo w in g t h e in t ro d u c t io n o f n e w m in in g s e c t o r le g is la t io n in T a n z a n ia d u r in g t h e s e c o n d h a lf o f 2 0 1 7 , M a g n is h a s c o n t in u e d t o p ro g re s s d is c u s s io n s w it h t h e G o v e r n m e n t o f T a n z a n ia (G O T ) re g a rd in g t h e d e v e lo p m e n t o f t h e m in in g a n d p ro c e s s in g p ro je c t s . T h e G O T h a s e x p re s s e d it s d e s ire t o s e e t h e im p le m e n t a t io n o f la rg e p ro je c t s t h a t w ill a d d s ig n ifi c a n t v a lu e t o t h e c o u n t r y ’s e c o n o m y a n d d e v e lo p m e n t . T h o s e d is c u s s io n s le d t o M a g n is s u b m it t in g a p ro p o s a l o u t lin in g t h a t t h e e n t ire N a c h u p ro c e s s in g p la n t w ill o p e r a t e u n d e r M a g n is Te c h n o lo g ie s T a n z a n ia L im it e d (M T T ), a w h o lly -o w n e d s u b s id ia r y o f M a g n is , in t h e S E Z lic e n c e a re a , w it h t h e p ro d u c t s fro m t h e S E Z c o n t in u in g t o T h e i m p a c t s o f t h e a m e n d e d S E Z o n M T T a n d U T Z i s s e t o u t i n t h e t a b l e b e l o w . U r a n e x T a n z a n i a L i m i t e d M a g n i s T e c h n o l o g i e s T a n z a n i a L i m i t e d G o v e r n m e n t J u r i s d i c t i o n : M in is t r y o f M in e r a ls G o v e r n m e n t J u r i s d i c t i o n : M in is t r y o f In d u s t r y , T r a d e a n d In v e s t m e n t S c o p e o f O p e r a t i o n s : O w n e r s h ip o f m in in g lic e n c e E s t a b lis h m in in g q u a r r y t o d e liv e r o re t o S E Z a n d in c lu d e s o p e r a t io n o f m in in g p it s a n d w a s t e s t o c k p ile s C o n t r a c t m in in g o p e r a t io n s C a p i t a l E x p e n d i t u r e ~ U S $ 4 0 m illio n S c o p e o f O p e r a t i o n s : O w n e r s h ip o f p ro c e s s in g p la n t in S E Z O w n e r s h ip o f u t ilit ie s in c lu d in g p o w e r p la n t lo c a t e d w it h in t h e S E Z O w n e r s h ip o f w a re h o u s e a n d p o r t s t o r a g e fa c ilit ie s G r a p h it e ro c k c r u s h in g , g r in d in g a n d fl o t a t io n c irc u it o p e r a t io n s fo r c o n c e n t r a t e p ro d u c t io n O p e r a t io n o f p u r ifi c a t io n o p e r a t io n s fo r h ig h p u r it y g r a p h it e p ro d u c t io n P ro c e s s in g o f h ig h p u r it y g r a p h it e t o m a k e v a lu e a d d e d p ro d u c t s fo r a p p lic a t io n s t h a t in c lu d e lit h iu m io n b a t t e r y M a r k e t in g a n d e x p o r t o f p ro d u c t s C a p i t a l E x p e n d i t u r e : ~ U S $ 2 3 0 m illio n I n c e n t i v e s : T a x a n d d u t y b re a k s F u ll o w n e r s h ip b y M a g n is In t e r n a t io n a l a r b it r a t io n N o re s t r ic t io n o f re t a in in g e a r n in g s o u t s id e o f T a n z a n ia M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 1 3 R e v ie w o f O p e r a t io n s F ig u re 8 . P ro p o s e d N a c h u G ra p h ite P ro je c t S ite la y o u t 1 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S b e a d v a n c e d g r a p h it e p ro d u c t s t h a t c a n b e m a d e u s in g M a g n is ’ p ro p r ie t a r y t e c h n o lo g y . C A P I T A L M A R K E T S M T T w ill in it ia lly p ro d u c e re fi n e d J u m b o a n d S u p e r J u m b o F la k e p ro d u c t s a n d s p h e ro id a l g r a p h it e p ro d u c t s fo r t h e L IB m a r k e t . U T Z w ill o p e r a t e u n d e r t h e la w s a n d re g u la t io n s a p p lic a b le t o t h e c o u n t r y ’s m in in g in d u s t r y u n d e r t h e M in is t r y o f M in e r a ls (p re v io u s ly M in is t r y o f E n e rg y a n d M in e r a ls ). T h e k e y c h a n g e u n d e r t h e a m e n d e d a g re e m e n t is t h a t M T T w ill n o w p u rc h a s e g r a p h it e o re d ire c t ly fro m U T Z , w h ic h is t h e h o ld e r o f t h e S M L fo r N a c h u . T h is d iff e r s fro m t h e p re v io u s a r r a n g e m e n t w h e re b y , it w a s a g re e d t h a t M T T w o u ld b u y g r a p h it e c o n c e n t r a t e fro m U T Z . T h e s a le p r ic e o f g r a p h it e o re fro m N a c h u , a s p e r t h e p ro p o s a l t o t h e G O T , w ill b e b a s e d o n a n a g re e d fo r m u la fo r t h e v a lu e o f t h e o re a t t h e g a t e w it h c o n s id e r a t io n t o in t e r n a t io n a l b e n c h m a r k p r ic in g t o e n s u re t r a n s p a re n c y . A t a p ro je c t le v e l, U T Z w ill c o n t ro l t h e m in in g o r q u a r r y o p e r a t io n s , w a t e r s u p p ly s y s t e m a n d t a ilin g s d a m o p e r a t io n , a n d w ill d e liv e r o re t o t h e M T T p ro c e s s in g p la n t . U T Z w ill a ls o o p e r a t e in a c c o rd a n c e w it h t h e le g is la t io n c h a n g e s m a d e in 2 0 1 7 re g a rd in g G O T p a r t ic ip a t io n . T h e S E Z is s it e d o v e r t h e o r ig in a l S M L p la n t in fr a s t r u c t u re lo c a t io n a llo w in g fo r c o n t in u e d b e s t c a s e e c o n o m ic s fo r o re t r a n s p o r t a t io n . M a g n is c o n t in u e s t o re a s s e s s t h e p re v io u s B F S w it h re v is e d p r ic in g a n d o b t a in s e p a r a t e C a p e x a n d O p e x c o s t s fo r b o t h M T T a n d U T Z . E n g in e e r in g , P ro c u re m e n t a n d C o n s t r u c t io n c o s t s a re c u r re n t ly b e in g s o u rc e d , t o g e t h e r w it h t h e a ll-im p o r t a n t p ro je c t fu n d in g o p p o r t u n it ie s . T h e S E Z a re a c o v e r s 2 0 6 h e c t a re s a n d h a s b e e n e x c is e d fro m t h e o r ig in a l N a c h u S M L . A m a p s h o w in g t h e S E Z lic e n c e a re a is s h o w n in t h e fi g u re b e lo w . W it h in t h e p a s t y e a r t h e p ro g re s s io n o f t h e S E Z d e v e lo p m e n t h a s in c lu d e d fo r m a l s u r v e y in g , c le a r in g o f la n d a n d p ro c e s s in g p la n t lo c a t io n b o u n d a r ie s , u p d a t e d e n g in e e r in g d e s ig n a n d la y o u t o f a d m in is t r a t io n a n d s u p p o r t s it e fa c ilit ie s t o b e in c lu d e d w it h in t h e S E Z . “ T h e N a c h u G r a p h it e P r o je c t is s h o v e l r e a d y w it h a S p e c ia l M in in g L ic e n c e (S M L ) S M L 5 5 0 /2 0 1 5 o n t h e p r o je c t g r a n t e d b y t h e M in is t r y o f E n e r g y a n d M in e r a ls (M E M ) o f T a n z a n ia in S e p t e m b e r 2 0 1 5 .” O n 2 7 S e p t e m b e r 2 0 2 0 , t h e C o m p a n y a n n o u n c e d t h a t it h a d e x e c u t e d a n a g re e m e n t t o s e c u re $ 8 m in fu n d in g fro m M id d le E a s t b a s e d N e g m a G ro u p . U n d e r t h e t e r m s o f t h e a g re e m e n t , N e g m a c o u ld p ro v id e u p t o $ 8 m o v e r t h e c o u r s e o f 1 2 m o n t h s w it h a m a x im u m m o n t h ly s u b s c r ip t io n o f $ 7 0 0 ,0 0 0 . C o m p a n y s h a re s w e re t o is s u e d a t a n 8 % d is c o u n t t o t h e p re v io u s t e n -d a y v o lu m e w e ig h t e d a v e r a g e p r ic e (‘V W A P ”). U n d e r t h e a g re e m e n t , t h e C o m p a n y h a d t h e fl e x ib ilit y t o c a ll t h e m o n t h ly a m o u n t s a n d c o u ld c a n c e l t h e a g re e m e n t a t a n y s t a g e w it h o u t p e n a lt y . T h e a g re e m e n t p ro v id e s a n o p t io n fo r a n a d d it io n a l s u b s c r ip t io n a m o u n t o f $ 4 m o n t h e s a m e t e r m s fo llo w in g c o m p le t io n o f t h e in it ia l 1 2 m o n t h t e r m . T h e fu n d s w e re u s e d fo r w o r k in g c a p it a l a n d a d v a n c in g a ll p ro je c t s . F o u r c a lls w e re re q u e s t e d d u r in g t h e fi n a n c ia l y e a r, w it h t h e re le v a n t d e t a ils s u m m a r is e d b e lo w : Is s u e D a t e S h a r e s Is s u e d 15/10/2019 21/11/2019 24/01/2020 22/04/2020 4,708,550 7,219,532 8,480,605 13,461,538 33,870,225 V W A P P e r S h a r e le s s 8 % A m o u n t R a s ie d $0.1487 $0.0970 $0.1179 $0.0520 $700,000 $700,000 $1,000,000 $700,000 $0.0915 $3,100,000 A c o m m it m e n t fe e o f $ 4 0 0 ,0 0 0 w a s p a y a b le b y t h e is s u e o f s h a re s o v e r t h e fi r s t fo u r m o n t h ly s u b s c r ip t io n s . O n 2 6 N o v e m b e r 2 0 1 9 , t h e C o m p a n y is s u e d 4 m u n lis t e d o p t io n s in t h e C o m p a n y t o N e g m a a t a n e x e rc is e p r ic e o f $ 0 .4 0 p e r s h a re w it h a n e x p ir y d a t e o f 3 0 A p r il 2 0 2 1 a s a fu r t h e r c o n d it io n o f t h e a g re e m e n t . A s a t 3 0 J u n e 2 0 2 0 , t h e C o m p a n y h a d 1 0 m u n lis t e d o p t io n s o u t s t a n d in g w it h v a r y in g e x p ir y d a t e s r a n g in g fro m 3 0 A p r il 2 0 2 1 t o 3 1 O c t o b e r 2 0 2 2 . T h e o p t io n s a ls o h a v e v a r y in g e x e rc is e p r ic e s r a n g in g fro m $ 0 .4 0 t o $ 0 .7 0 . O n 2 J u n e 2 0 2 0 , M a g n is a n n o u n c e d t h a t it h a d re c e iv e d c o m m it m e n t s fo r t h e p la c e m e n t o f 2 0 ,0 0 0 ,0 0 0 fu lly p a id o rd in a r y s h a re s a t $ 0 .0 7 5 p e r s h a re t o p ro fe s s io n a l, s o p h is t ic a t e d a n d in s t it u t io n a l in v e s t o r s t o r a is e $ 1 .5 m v ia a p la c e m e n t o f o rd in a r y s h a re s . T h e fu n d s r a is e d w e re u s e d t o s t re n g t h e n t h e b a la n c e s h e e t t o a llo w M a g n is t o c a p it a lis e o n c u r re n t a n d fu t u re g ro w t h o p p o r t u n it ie s in t h e b a t t e r y t e c h n o lo g y s e c t o r a n d t o fu n d t h e o n g o in g in v e s t m e n t in t h e fu t u re d e v e lo p m e n t o f t h e C o m p a n y ’s 1 0 0 % o w n e d N a c h u G r a p h it e p ro je c t . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 1 5 R e v ie w o f O p e r a t io n s D I R E C T O R M O V E M E N T S T h e H o n . W a r w ic k S m it h A O re s ig n e d a s a N o n -E x e c u t iv e D ire c t o r o f t h e C o m p a n y o n 1 J a n u a r y 2 0 2 0 a n d w a s re p la c e d b y fe llo w A L C a p it a l re p re s e n t a t iv e , M r S u b h a s D e G a m ia o n t h e s a m e d a t e . M r D e G a m ia s u b s e q u e n t ly re s ig n e d o n 2 5 F e b r u a r y 2 0 2 0 . M r M a rc V o g t s re t ire d a s t h e C o m p a n y ’s M a n a g in g D ire c t o r o n 3 1 J a n u a r y 2 0 2 0 a f t e r h a v in g b e e n a p p o in t e d t o t h a t ro le o n 1 5 N o v e m b e r 2 0 1 8 . M r L e s lie H o s k in g w a s a p p o in t e d a s t h e C o m p a n y ’s In t e r im M a n a g in g D ire c t o r o n t h e s a m e d a t e . H e s u b s e q u e n t ly re s ig n e d o n 2 4 F e b r u a r y 2 0 2 0 . N o n -E x e c u t iv e D ire c t o r M r J o h a n n J a c o b s , w h o h a d b e e n a D ire c t o r o f t h e C o m p a n y fo r 1 0 y e a r s , re t ire d o n 3 1 M a y 2 0 2 0 . T h e B o a rd w a s re fre s h e d w it h t h e a p p o in t m e n t o f M r J a m e s D a c k t o t h e B o a rd o n 1 5 J u n e 2 0 2 0 in h is c a p a c it y a s E x e c u t iv e D ire c t o r a n d w a s a ls o s o o n jo in e d o n t h e B o a rd o n 2 3 J u n e 2 0 2 0 b y t h e H o n T ro y G r a n t a s a N o n - E x e c u t iv e D ire c t o r. C O R P O R A T E G O V E R N A N C E R E V I E W T h e C o m p a n y a n n o u n c e d o n 1 5 M a y 2 0 2 0 t h a t it h a d c o m p le t e d a re v ie w o f it s c o r p o r a t e g o v e r n a n c e a r r a n g e m e n t s a n d p o lic ie s in o rd e r t o a lig n t h e C o m p a n y w it h t h e A S X C o r p o r a t e G o v e r n a n c e C o u n c il’s (C o u n c il’s ) re c o m m e n d e d b e s t p r a c t ic e s . T h e re v ie w t o o k in t o c o n s id e r a t io n c h a n g e s t h a t n e e d e d t o b e m a d e t o t h e C o m p a n y ’s c o r p o r a t e g o v e r n a n c e fr a m e w o r k g e n e r a lly in o rd e r t o t r a n s it io n t o t h e C o u n c il’s P r in c ip le s a n d R e c o m m e n d a t io n s p u b lis h e d in F e b r u a r y 2 0 1 9 (4 t h E d it io n ) fo r a p p lic a t io n t o A S X lis t e d c o m p a n ie s fro m 1 J u ly 2 0 2 0 . it s b u s in e s s a n d g e n e r a l p e r fo r m a n c e a n d w ill a s s is t in t h e p ro t e c t io n o f t h e in t e re s t s o f a ll s t a k e h o ld e r s o f t h e C o m p a n y . T h e B o a rd h a s a c le a r u n d e r s t a n d in g t h a t it is re s p o n s ib le fo r t h e C o m p a n y ’s c o r p o r a t e g o v e r n a n c e a n d re c o g n is e s t h e im p o r t a n c e o f t h is in e s t a b lis h in g a c c o u n t a b ilit ie s , m o n it o r in g a n d m a n a g in g r is k s , g u id in g a n d re g u la t in g a c t iv it ie s a n d o p t im is in g t h e C o m p a n y ’s o v e r a ll p e r fo r m a n c e . T h e B o a rd a ls o re c o g n is e s t h e n e e d fo r c o n t in u o u s im p ro v e m e n t a n d t o re g u la r ly re v ie w it s s y s t e m o f c o r p o r a t e g o v e r n a n c e . A s p a r t o f t h e c o r p o r a t e g o v e r n a n c e re v ie w , t h e B o a rd e s t a b lis h e d t h re e n e w B o a rd C o m m it t e e s , c o m p r is in g t h e fo llo w in g : (i) (ii) (iii) A u d it & R is k C o m m it t e e (re p la c in g t h e p re v io u s A u d it C o m m it t e e ); N o m in a t io n s a n d R e m u n e r a t io n C o m m it t e e (re p la c in g t h e p re v io u s R e m u n e r a t io n C o m m it t e e ); a n d H e a lt h , S a fe t y a n d S u s t a in a b ilit y C o m m it t e e (re p la c in g t h e p re v io u s S u s t a in a b ilit y C o m m it t e e ). A ls o p a r t o f t h e c o r p o r a t e g o v e r n a n c e re v ie w , w a s t h e a p p ro v a l b y t h e B o a rd o f t h e fo llo w in g B o a rd a n d C o m m it t e e C h a r t e r s a n d C o d e : (i) (ii) (iii) (iv ) (v ) B o a rd C h a r t e r ; A u d it & R is k C o m m it t e e C h a r t e r ; N o m in a t io n s a n d R e m u n e r a t io n C o m m it t e e C h a r t e r ; H e a lt h , S a fe t y a n d S u s t a in a b ilit y C h a r t e r ; a n d C o d e o f C o n d u c t . F in a lly , a s a n in t e g r a l p a r t o f C o r p o r a t e G o v e r n a n c e R e v ie w w a s t h e B o a rd a p p ro v a l o f t h e C o m p a n y ’s A n t i-B r ib e r y & C o r r u p t io n P o lic y a n d W h is t le b lo w e r P o lic y . S u b s e q u e n t ly , t h e B o a rd s e p a r a t e ly a p p ro v e d t h e C o m p a n y ’s C o n t in u o u s D is c lo s u re P o lic y o n 5 A u g u s t 2 0 2 0 a n d t h e D iv e r s it y P o lic y o n 1 0 S e p t e m b e r 2 0 2 0 . T h e a p p ro a c h t o c o r p o r a t e g o v e r n a n c e w ill b e m o re t h a n m e re ly o n e o f c o m p lia n c e a s g o o d c o r p o r a t e g o v e r n a n c e is e s s e n t ia l fo r t h e C o m p a n y ’s lo n g -t e r m s u s t a in a b ilit y o f C o p ie s o f t h e a b o v e n a m e d C o d e , C h a r t e r s a n d p o lic y d o c u m e n t s a re a c c e s s ib le v ia t h e C o m p a n y ’s w e b s it e : w w w .m a g n is .c o m .a u 1 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 04A n n u a l F in a n c ia l R e p o r t Y E A R E N D E D 3 0 J U N E 2 0 2 0 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 1 7 05D ire c t o r s ’ R e p o r t T h e D ire c t o r s p re s e n t t h e ir re p o r t , t o g e t h e r w it h t h e fi n a n c ia l s t a t e m e n t s , o n t h e c o n s o lid a t e d e n t it y (re fe r re d t o h e re a f t e r a s t h e ‘c o n s o lid a t e d e n t it y ’) c o n s is t in g o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d (re fe r re d t o h e re a f t e r a s t h e ‘C o m p a n y ’ o r ‘P a re n t E n t it y ’) a n d t h e e n t it ie s it c o n t ro lle d a t t h e e n d o f, o r d u r in g , t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 . D I R E C T O R S T h e fo llo w in g p e r s o n s w e re D ire c t o r s o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d d u r in g t h e w h o le o f t h e fi n a n c ia l y e a r a n d u p t o t h e d a t e o f t h is re p o r t , u n le s s o t h e r w is e s t a t e d : F r a n k P o u l l a s (E x e c u t i v e C h a i r m a n ) A p p o in t e d D ir e c t o r 1 0 S e p t e m b e r 2 0 1 0 , A p p o in t e d C h a ir m a n 2 9 A u g u s t 2 0 1 4 . F r a n k . h a s s p e n t o v e r t w o d e c a d e s w o r k in g in t h e t e c h n o lo g y , in v e s t m e n t b a n k in g a n d e n g in e e r in g s e c t o r s . O v e r t h e la s t 1 4 y e a r s F r a n k h a s b e e n in v o lv e d w it h a s s is t in g a n u m b e r o f p u b lic e n t it ie s w it h fu n d in g a n d s t r a t e g ic d ire c t io n w h ic h h a s re s u lt e d in in c re a s e d s h a re h o ld e r v a lu e . F r a n k is c u r re n t ly a d ire c t o r o f s e v e r a l c o m p a n ie s a n d c o n t in u e s t o c o n s u lt t o p u b lic c o m p a n ie s in v o lv e d o r lo o k in g a t e n t e r in g t h e L it h iu m -io n b a t t e r y m a t e r ia l s e c t o r. C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s : N o n e S p e c ia l r e s p o n s ib ilit ie s F r a n k is a m e m b e r o f t h e A u d it a n d R is k C o m m it t e e a n d a m e m b e r o f t h e H e a lt h , S a fe t y a n d S u s t a in a b ilit y C o m m it t e e . D i s t i n g u i s h e d P r o f e s s o r M i c h a e l S t a n l e y W h i t t i n g h a m (N o n -E x e c u t i v e D i r e c t o r ) A p p o in t e d D ir e c t o r 4 N o v e m b e r 2 0 1 6 . P ro fe s s o r S t a n le y W h it t in g h a m h a s o v e r fo u r d e c a d e s o f e x p e r ie n c e in t h e lit h iu m -io n b a t t e r y in d u s t r y a n d is b e s t k n o w n fo r b e in g a p io n e e r in t h e d e v e lo p m e n t o f lit h iu m -io n b a t t e r ie s w h ic h h a s e a r n e d h im t h e p re s t ig io u s a w a rd o f t h e 2 0 1 9 N o b e l P r iz e in S c ie n c e . G o v e r n o r o f N e w Yo r k S t a t e , A n d re w M . C u o m o , c o n g r a t u la t e d P ro fe s s o r W h it t in g h a m o n b e c o m in g a N o b e l la u re a t e a n d s a id t h a t “P ro fe s s o r W h it t in g h a m ’s w o r k h a s fa r -re a c h in g a p p lic a t io n s , in c lu d in g h e lp in g N e w Yo r k re a c h o u r g o a ls t o re d u c e c a r b o n e m is s io n s a n d a c h ie v e z e ro c a r b o n e le c t r ic it y b y 2 0 4 0 .” L ie u t e n a n t G o v e r n o r o f N e w Yo r k S t a t e , K a t h y H o c h u l, s a id “I h a d t h e p le a s u re o f m e e t in g w it h t h e “fa t h e r o f t h e lit h iu m b a t t e r y ” s e v e r a l t im e s a t B in g h a m t o n U n iv e r s it y t o d is c u s s o u r s t r id e s in b a t t e r y s t o r a g e fo r o u r e n e r g y fu t u re . N e w Yo r k e r s a re p ro u d o f P ro fe s s o r S t a n le y W h it t in g h a m ’s w e ll-d e s e r v e d re c o g n it io n a n d I c o n g r a t u la t e h im a n d h is c o -re c ip ie n t s fo r b e in g h o n o u re d w it h t h e N o b e l P r iz e in C h e m is t r y .” D u r in g h is illu s t r io u s c a re e r P ro fe s s o r W h it t in g h a m h a s h e a d e d la rg e p ro je c t s fo r t h e U S D e p a r t m e n t o f E n e r g y , E x x o n a n d S c h lu m b e rg e r. H e h a s 1 6 U S p a t e n t s a n d h a s b e e n in v o lv e d in w r it in g o v e r 3 4 0 p ie c e s o f s c ie n t ifi c a n d e n g in e e r in g lit e r a t u re . C u r re n t ly , h e is a D is t in g u is h e d P ro fe s s o r o f C h e m is t r y a n d M a t e r ia ls S c ie n c e a n d E n g in e e r in g a t B in g h a m t o n U n iv e r s it y w h ic h is p a r t o f t h e S t a t e U n iv e r s it y o f N e w Yo r k . P ro fe s s o r W h it t in g h a m is a ls o D ire c t o r o f t h e N o r t h E a s t C e n t e r fo r C h e m ic a l E n e r g y S t o r a g e (N E C C E S ), w h ic h is a n e ff o r t b e in g le d b y B in g h a m t o n U n iv e r s it y , a n d in c lu d e s a s p a r t n e r s R u t g e r s U n iv e r s it y , S t o n y B ro o k U n iv e r s it y , C a m b r id g e U n iv e r s it y , M IT , U n iv e r s it y o f M ic h ig a n , U n iv e r s it y o f C a lifo r n ia a t S a n t a B a r b a r a a n d U n iv e r s it y o f C a lifo r n ia a t S a n D ie g o . H e w a s e le c t e d a m e m b e r o f t h e N a t io n a l A c a d e m y o f E n g in e e r in g in 2 0 1 8 . P ro fe s s o r W h it t in g h a m h o ld s a B A , a n M A a n d a D P h il fro m O x fo rd U n iv e r s it y . C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s : N o n e S p e c ia l r e s p o n s ib ilit ie s M e m b e r o f t h e A u d it & R is k C o m m it t e e a n d t h e N o m in a t io n s & R e m u n e r a t io n C o m m it t e e . 1 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S P e t e r T s e g a s (N o n -E x e c u t i v e D i r e c t o r ) M r J a m e s D a c k (E x e c u t i v e D i r e c t o r ) A p p o in t e d D ir e c t o r 1 6 J u n e 2 0 1 5 . A p p o in t e d D ir e c t o r 1 5 J u n e 2 0 2 0 . P e t e r h a s o v e r 2 0 y e a r s o f e x p e r ie n c e in T a n z a n ia w h e re h e ’s b e e n a re s id e n t fo r t h e p a s t 1 5 y e a r s . H e h a s w o r k e d t o e n g a g e b o t h t h e p r iv a t e a n d g o v e r n m e n t s e c t o r s o n a n u m b e r o f p ro je c t s a n d w a s M a n a g in g D ire c t o r o f T a n c o a l E n e rg y L t d w h ic h h e s u c c e s s fu lly t o o k fro m a n e x p lo r a t io n c o m p a n y , t o a J V w it h t h e T a n z a n ia n g o v e r n m e n t , a n d t h e n in t o p ro d u c t io n . C u r re n t a n d fo r m e r d ire c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h re e y e a r s : A d a v a le R e s o u rc e s L im it e d (A S X : A D D ) S p e c ia l r e s p o n s ib ilit ie s C h a ir m a n o f t h e H e a lt h , S a fe t y a n d S u s t a in a b ilit y C o m m it t e e . J a m e s h a s h a d a n illu s t r io u s b u s in e s s c a re e r in g o v e r n m e n t , p r iv a t e a n d p u b lic e n t e r p r is e s . H e e x p e r ie n c e d a s p e c t a c u la r r is e in t h e p u b lic s e c t o r, w h e re h e s t a r t e d h is c a re e r a s a p o r t e r a t S t V in c e n t ’s H o s p it a l, b e fo re a d v a n c in g h is w a y t o b e in g re s p o n s ib le fo r c o -o rd in a t in g t h e e n t ire N S W P u b lic H o s p it a l P a y ro ll S y s t e m in t h e In d u s t r ia l R e la t io n s D iv is io n o f t h e D e p a r t m e n t o f H e a lt h . In t h e la t e 1 9 8 0 ’s , h e s t a r t e d in t h e re a l e s t a t e in d u s t r y a s a fo u n d in g p a r t n e r in o n e o f t h e m o s t s u c c e s s fu l a n d re c o g n is e d re a l e s t a t e a g e n c y b r a n d s in A u s t r a lia . F o llo w in g h is s u c c e s s , J a m e s le f t t h e re a l e s t a t e in d u s t r y in 2 0 1 4 t o p u r s u e o t h e r v e n t u re s , a n d b e g a n h is o w n p r iv a t e in v e s t m e n t c o m p a n y , w h e re h e h a s t a k e n a la r g e p o s it io n in m a n y e n t it ie s in c lu d in g p u b lic c o m p a n ie s lis t e d lo c a lly a n d o v e r s e a s . J a m e s a ls o s it s o n t h e b o a rd o f d ire c t o r s fo r t h e P o lic e C it iz e n s Yo u t h C lu b s N S W (P C Y C ), a n o rg a n is a t io n t h a t h e h a s b e e n in v o lv e d w it h fo r m o re t h a n 4 0 y e a r s . D u r in g h is t im e w it h t h e P C Y C , J a m e s h a s h a d m a n y ro le s w h ic h h a v e h e lp e d t h e c o m m u n it y a n d t h o s e in n e e d . C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s : N o n e . S p e c ia l r e s p o n s ib ilit ie s M e m b e r o f t h e N o m in a t io n s & R e m u n e r a t io n C o m m it t e e M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 1 9 D ire c t o r s ’ R e p o r t H o n . T r o y G r a n t (N o n -E x e c u t i v e D i r e c t o r ) H o n . W a r w i c k S m i t h A O L L B (N o n - E x e c u t i v e D i r e c t o r ) A p p o in t e d D ir e c t o r 2 3 J u n e 2 0 2 0 A p p o in t e d 7 S e p t e m b e r 2 0 1 8 . R e s ig n e d 1 J a n u a r y 2 0 2 0 . T ro y h a s b u ilt a p h e n o m e n a l 3 0 y e a r c a re e r o f d is t in g u is h e d , d e c o r a t e d a n d a c c o m p lis h e d p u b lic s e r v ic e t o t h e p e o p le o f N e w S o u t h W a le s a c ro s s g o v e r n m e n t , la w e n fo rc e m e n t , e m e rg e n c y s e r v ic e s , s o c ia l ju s t ic e , c o m m u n it y , a n d c h a r it a b le e n d e a v o u r s . T ro y b e c a m e t h e S t a t e ’s y o u n g e s t p e r s o n t o h o ld t h e p o s it io n a s D e p u t y P re m ie r o f N e w S o u t h W a le s in 2 0 1 4 , jo in in g t h e n P re m ie r o f N e w S o u t h W a le s , M ik e B a ird , in t r a n s fo r m in g t h e N S W E c o n o m y a n d in d ire c t in g re c o rd in v e s t m e n t in t o N S W re g io n a l a re a s . D u r in g h is P a r lia m e n t a r y c a re e r, h e s e r v e d a c ro s s s e v e r a l M in is t e r ia l p o r t fo lio s d r a w in g re c o rd in v e s t m e n t a n d c h a n g e in P o lic e , E m e rg e n c y S e r v ic e s , J u s t ic e , H o s p it a lit y , G a m in g & R a c in g , a n d T h e A r t s . In a d d it io n , h e a ls o s e r v e d a s t h e M in is t e r fo r T r a d e & In v e s t m e n t , R e g io n a l In fr a s t r u c t u re & S e r v ic e s , & To u r is m a n d M a jo r E v e n t s . F o llo w in g a d is t in g u is h e d c a re e r in p u b lic s e r v ic e , T ro y e s t a b lis h e d a s u c c e s s fu l c o n s u lt in g & a d v is o r y fi r m in 2 0 1 9 , w h e re h e is c u r re n t ly c o n t r a c t e d a s a S t r a t e g ic A d v is o r t o a b ig fo u r a u d it in g fi r m , a w o r ld le a d in g t e c h n o lo g y c o m p a n y , a n d a d d in g t o a n a lre a d y im p re s s iv e lis t o f c lie n t s , h e ’s b e e n s o u g h t t o le a d re s o u rc in g p ro je c t s fo r a n u m b e r o f S t a t e G o v e r n m e n t s a c ro s s A u s t r a lia . T ro y is c u r re n t ly t h e C h a ir m a n o f R a c in g N S W ’s In t e g r it y A s s u r a n c e C o m m it t e e a n d D e p u t y C h a ir m a n o f In t e r n a t io n a l R u g b y L e a g u e L t d . H e h a s re c e n t ly b e e n a p p o in t e d a s a C o n jo in t P ro fe s s o r o f P r a c t ic e in P u b lic A d m in is t r a t io n w it h t h e U n iv e r s it y o f N e w c a s t le . C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in t h e la s t t h r e e y e a r s N o n e . S p e c ia l r e s p o n s ib ilit ie s C h a ir m a n o f t h e N o m in a t io n s a n d R e m u n e r a t io n C o m m it t e e , C h a ir m a n o f t h e A u d it & R is k C o m m it t e e a n d a M e m b e r o f t h e H e a lt h , S a fe t y a n d S u s t a in a b ilit y C o m m it t e e . W a r w ic k h a s e x t e n s iv e p u b lic p o lic y a n d c o m m e rc ia l a c u m e n a n d a w e a lt h o f e x p e r ie n c e fro m n a t io n a l a n d in t e r n a t io n a l b u s in e s s re la t io n s in a v a r ie t y o f in d u s t r ie s in c lu d in g p ro p e r t y , fi n a n c ia l s e r v ic e s , n a t u r a l re s o u rc e s , e n e r g y , t r a n s p o r t a t io n , h e a v y m a c h in e r y a n d e q u ip m e n t , h e a lt h , m e d ia , t e c h n o lo g y a n d e n t e r t a in m e n t . H e is C h a ir m a n A d v is o r y B o a rd - A u s t r a lia n C a p it a l E q u it y , h o ld e r s o f in t e re s t s in S e v e n G ro u p H o ld in g s o f w h ic h h e is a B o a rd D ire c t o r, C o a t e s H ire , W e s T r a c , a n d C a t e r p illa r in d u s t r ia l s e r v ic e s a n d e q u ip m e n t in W e s t e r n A u s t r a lia a n d N e w S o u t h W a le s . H e is E x e c u t iv e C h a ir m a n o f A L C a p it a l a n d A q u a la n d A u s t r a lia a n d D ire c t o r o f G lo b a l S t r a t e g y , S h a n g h a i S h e n g lo n g In v e s t m e n t G ro u p L im it e d . H e is a B o a rd D ire c t o r o f E s t ia H e a lt h L t d . H e is t h e C h a ir m a n o f O rd M in n e t t a n d A IM In v e s t m e n t M a n a g e m e n t . W it h t h e B u s in e s s C o u n c il o f A u s t r a lia , W a r w ic k is C h a ir m a n o f G lo b a l E n g a g e m e n t , C h a ir m a n o f t h e T r a d e a n d In v e s t m e n t G ro u p a n d C h a ir o f t h e C h in a L e a d e r s h ip G ro u p . H e h a s s e r v e d a s C h a ir m a n o f t h e A u s t r a lia -C h in a C o u n c il fo r o v e r 8 y e a r s a n d w a s t h e in a u g u r a l C h a ir o f t h e n e w ly fo r m e d N a t io n a l F o u n d a t io n fo r A u s t r a lia -C h in a R e la t io n s . In a d d it io n , h e is c u r re n t G lo b a l T r u s t e e o f t h e A s ia S o c ie t y a n d C h a ir m a n E m e r it u s o f t h e A s ia S o c ie t y in A u s t r a lia . D u r in g h is P a r lia m e n t a r y c a re e r s p a n n in g 1 5 y e a r s , M r. S m it h h e ld m a n y p o r t fo lio s a s a F e d e r a l G o v e r n m e n t M in is t e r in c lu d in g M in is t e r o f S p o r t , Te r r it o r ie s a n d L o c a l g o v e r n m e n t a lo n g w it h M in is t e r A s s is t in g t h e P r im e M in is t e r o n t h e O ly m p ic G a m e s in S y d n e y a n d M in is t e r o f F a m ily S e r v ic e s . V a r io u s S h a d o w M in is t e r ro le s in c lu d e d C o m m u n ic a t io n s , P r iv a t is a t io n , A b o r ig in a l A ff a ir s a n d S c ie n c e a n d E n e rg y a n d L e a d e r o f t h e H o u s e o f R e p re s e n t a t iv e s . P re v io u s ly , W a r w ic k w a s a n E x e c u t iv e D ire c t o r w it h t h e M a c q u a r ie B a n k G ro u p (A S X : M Q G ), C h a ir m a n N e w S o u t h W a le s a n d A u s t r a lia n C a p it a l Te r r it o r y a n d fo r m e r S e n io r M a n a g in g D ire c t o r fo r t h e A N Z B a n k in g G ro u p L im it e d (A S X : A N Z ), C h a ir m a n o f E *T R A D E L im it e d , C h a ir m a n o f t h e A u s t r a lia n S p o r t s C o m m is s io n a n d A u s t r a lia ’s fi r s t Te le c o m m u n ic a t io n s O m b u d s m a n . H e h a s re c e iv e d a C e n t e n a r y M e d a l a n d h a s t w ic e b e e n a w a rd e d a n O rd e r o f A u s t r a lia . C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s : S e v e n G ro u p H o ld in g s (A S X : S V W ); E s t ia H e a lt h L im it e d (A S X : E H E ) S p e c ia l r e s p o n s ib ilit ie s N o n e 2 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S M a r c V o g t s (M a n a g i n g D i r e c t o r ) L e s l i e H o s k i n g (I n t e r i m M a n a g i n g D i r e c t o r ) A p p o in t e d D ir e c t o r 2 N o v e m b e r 2 0 1 6 . A p p o in t e d M a n a g in g D ir e c t o r 1 5 N o v e m b e r 2 0 1 8 . R e t ir e d 3 1 J a n u a r y 2 0 2 0 . A p p o in t e d D ir e c t o r 5 M a r c h 2 0 1 9 . A p p o in t e d I n t e r im M a n a g in g D ir e c t o r 3 1 J a n u a r y 2 0 2 0 . R e s ig n e d 2 1 F e b r u a r y 2 0 2 0 . M a rc is a p ro je c t e x e c u t iv e w it h o v e r fo u r d e c a d e s o f e x p e r ie n c e in t h e m in in g in d u s t r y a n d o v e r 3 0 y e a r s o f e x p e r ie n c e a s a S e n io r E x e c u t iv e in m a jo r p ro je c t s in S o u t h A fr ic a , M a d a g a s c a r, A u s t r a lia , C a n a d a , C h ile , P a p u a N e w G u in e a a n d U S A . M a rc h a s h e ld P ro je c t E x e c u t iv e D ire c t o r ro le s fo r t h e lik e s o f B H P B illit o n a n d R io T in t o d u r in g h is c a re e r. In re c e n t ro le s , M a rc w a s P ro je c t D ire c t o r fo r t h e Q M M P ro je c t in M a d a g a s c a r fo r R io T in t o , V ic e P re s id e n t fo r P ro je c t M a n a g e m e n t fo r B H P B illit o n a n d V ic e P re s id e n t fo r a ll U r a n iu m P ro je c t s in c lu d in g O ly m p ic D a m fo r B H P B illit o n . P r io r t o a s s u m in g t h e M a n a g in g D ire c t o r ro le a t M a g n is , M a rc w a s t h e fo u n d a t io n a l C h ie f E x e c u t iv e O ffi c e r o f t h e J o h n G r ill C e n t re fo r P ro je c t L e a d e r s h ip a t t h e U n iv e r s it y o f S y d n e y , a w o r ld le a d in g p ro je c t le a d e r s h ip e x e c u t iv e e d u c a t io n fo r v a lu e c re a t io n a n d re a lis a t io n in la r g e -s c a le p ro je c t s . M a rc h o ld s a B a c h e lo r o f S c ie n c e in Q u a n t it y S u r v e y in g (B S c Q S ) fro m t h e U n iv e r s it y o f C a p e To w n , S o u t h A fr ic a . A s p a r t o f h is c a re e r a d v a n c e m e n t a t R io T in t o a n d B H P, h e c o m p le t e d n u m e ro u s in t e r n a l e x e c u t iv e le a d e r s h ip p ro g r a m s . C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s : N o n e S p e c ia l r e s p o n s ib ilit ie s F o r m e r R e m u n e r a t io n C o m m it t e e M e m b e r. L e s h a s a lo n g a n d d is t in g u is h e d c a re e r w h ic h s p a n s o v e r fo u r d e c a d e s in A u s t r a lia n b u s in e s s w it h a s t ro n g fo c u s in t h e e n e r g y a n d t h e g lo b a l fu t u re s in d u s t r ie s . C u r re n t ly , h e is s e r v in g a s a n In d e p e n d e n t N o n -E x e c u t iv e D ire c t o r o f A G L E n e r g y L im it e d (A S X : A G L ) a n d is a n A d ju n c t P ro fe s s o r o f t h e U n iv e r s it y o f S y d n e y J o h n G r ill C e n t re fo r P ro je c t L e a d e r s h ip . P re v io u s ly L e s w a s t h e C h ie f E x e c u t iv e O ffi c e r a n d M a n a g in g D ire c t o r o f t h e S y d n e y F u t u re s E x c h a n g e , C h a ir m a n o f A d e la id e B r ig h t o n L im it e d (A S X : A B C ), C h ie f E x e c u t iv e O ffi c e r o f A x is s A u s t r a lia a n A u s t r a lia n G o v e r n m e n t in w a rd in v e s t m e n t a g e n c y u s e d t o p ro m o t e A u s t r a lia a s a g lo b a l fi n a n c ia l s e r v ic e a n d a D ire c t o r a t t h e A u s t r a lia n G o v e r n m e n t ’s In d u s t r y R e s e a rc h a n d D e v e lo p m e n t B o a rd . In t h e d o m e s t ic e n e r g y in d u s t r y , L e s h a s s e r v e d a s t h e C h ie f E x e c u t iv e O ffi c e r a n d M a n a g in g D ire c t o r a t N a t io n a l E le c t r ic it y M a r k e t M a n a g e m e n t C o m p a n y (N E M M C O ), D ire c t o r o f t h e A u s t r a lia n E n e rg y M a r k e t O p e r a t o r (A E M O ), T h e C a r b o n M a r k e t In s t it u t e L im it e d a n d In n o v a t io n A u s t r a lia P t y L t d . C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s A G L E n e r g y L im it e d (A S X : A G L ); A d e la id e B r ig h t o n L im it e d (A S X : A B C ) S p e c ia l r e s p o n s ib ilit ie s F o r m e r S u s t a in a b ilit y C o m m it t e e M e m b e r. M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 2 1 S u b h a s D e G a m i a [N o n -E x e c u t i v e D i r e c t o r ] J o h a n n C J o o s t e -J a c o b s (N o n -E x e c u t i v e D i r e c t o r ) A p p o in t e d D ir e c t o r 1 J a n u a r y 2 0 2 0 . R e s ig n e d 2 5 F e b r u a r y 2 0 2 0 . S u b h a s is a s e n io r fi n a n c ia l s e r v ic e s e x e c u t iv e w it h e x t e n s iv e in t e r n a t io n a l e x p e r ie n c e a n d a c o n s is t e n t re c o rd o f v a lu e c re a t io n a c ro s s d iv e r s e ro le s in e s t a b lis h e d a n d e m e rg in g m a r k e t s . S u b h a s ’ le a d e r s h ip e x p e r ie n c e h a s in c lu d e d s e v e r a l s e n io r m a n a g e m e n t ro le s w it h A N Z B a n k in g G ro u p L im it e d a c ro s s A u s t r a lia a n d A s ia , in c lu d in g C o u n t r y C E O fo r A N Z in In d ia , a n d a s E x e c u t iv e D ire c t o r In t e r n a t io n a l B a n k in g b a s e d in A u s t r a lia . M r D e G a m ia h o ld s a n E x e c u t iv e M B A fro m M e lb o u r n e B u s in e s s S c h o o l, (M t E liz a C a m p u s ), a G r a d u a t e D ip lo m a in B a n k in g fro m M a s s e y U n iv e r s it y , N e w Z e a la n d , a n d a B a c h e lo r o f C o m m e rc e & A d m in is t r a t io n (w it h H o n o u r s ) fro m V ic t o r ia U n iv e r s it y o f W e llin g t o n , N e w Z e a la n d . H e is a m e m b e r o f C h a r t e re d A c c o u n t a n t s A u s t r a lia a n d N e w Z e a la n d , a F e llo w o f F IN S IA , a n d a G r a d u a t e M e m b e r o f t h e A u s t r a lia n In s t it u t e o f C o m p a n y D ire c t o r s (G A IC D ), C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s N o n e . S p e c ia l r e s p o n s ib ilit ie s N o n e . A p p o in t e d 2 7 A u g u s t 2 0 1 0 . R e t ir e d 3 1 M a y 2 0 2 0 . J o h a n n h a s m o re t h a n 3 5 y e a r s o f e x p e r ie n c e in t h e re s o u rc e s e c t o r w h e re h e h a s m a n a g e d e s t a b lis h e d c o m p a n ie s , a c q u is it io n s , e x p a n s io n s a n d s t a r t -u p m in in g o p e r a t io n s in A u s t r a lia , S o u t h A fr ic a a n d In d o n e s ia . H e is c u r re n t ly E x e c u t iv e C h a ir m a n o f K in g Is la n d S c h e e lit e L im it e d a n d a N o n -E x e c u t iv e D ire c t o r o f E r in b a r L im it e d (d e lis t e d in J a n u a r y 2 0 1 6 a n d p re v io u s ly k n o w n a s A u s t r a lia n Z irc o n N L ). J o h a n n h o ld s a B a c h e lo r o f A c c o u n t in g fro m t h e U n iv e r s it y o f N a t a l in S o u t h A fr ic a , a n d a M a s t e r o f B u s in e s s L e a d e r s h ip fro m t h e U n iv e r s it y o f S o u t h A fr ic a , (c o r re s p o n d e n c e e q u iv a le n t o f a n M B A ). C u r r e n t a n d f o r m e r d ir e c t o r s h ip s o f o t h e r lis t e d c o m p a n ie s in la s t t h r e e y e a r s : K in g Is la n d S c h e e lit e L im it e d (A S X : K IS ) S p e c ia l r e s p o n s ib ilit ie s : F o r m e r C h a ir m a n o f t h e A u d it C o m m it t e e a n d a fo r m e r m e m b e r o f t h e R e m u n e r a t io n C o m m it t e e . 2 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S C O M P A N Y S E C R E T A R Y F r a n k G i o r d a n o A p p o in t e d C o m p a n y S e c r e t a r y a n d L e g a l C o u n s e l 1 7 J u ly 2 0 2 0 . B . E c . L L .B . L L .M . M . T a x a t io n (U n iv e r s it y o f S y d n e y ), C PA , F e llo w o f t h e G o v e r n a n c e In s t it u t e o f A u s t r a lia , h o ld e r o f a n A u s t r a lia n L e g a l P r a c t is in g C e r t ifi c a t e (L a w S o c ie t y o f N S W ), m e m b e r o f t h e A u s t r a lia n In s t it u t e o f C o m p a n y D ire c t o r s a n d m e m b e r o f t h e A s s o c ia t io n o f C o r p o r a t e C o u n s e l, A u s t r a lia . F r a n k h a s o v e r 3 0 y e a r s ’ e x p e r ie n c e in s e n io r c o r p o r a t e le g a l, g o v e r n a n c e a n d c o m p lia n c e m a n a g e m e n t ro le s in c lu d in g w it h A u s t r a lia n In d u s t r y D e v e lo p m e n t C o r p o r a t io n /A ID C L t d , In s u r a n c e A u s t r a lia G ro u p L t d , B a b c o c k & B ro w n , A m b e r In fr a s t r u c t u re G ro u p , A u s t r a lia , a n d re c e n t ly h e ld a c o n t r a c t ro le a s A s s is t a n t C o m p a n y S e c re t a r y a n d L e g a l C o u n s e l w it h M o r t g a g e C h o ic e L im it e d , a n A S X lis t e d p u b lic c o m p a n y . D o u g R i c h a r d s o n B . C o m (E c o n o m ic s a n d F in a n c e ), G r a d D ip . A p p lie d F in a n c e a n d In v e s t m e n t A p p o in t e d C o m p a n y S e c r e t a r y 1 4 J a n u a r y 2 0 1 5 . R e s ig n e d 1 7 J u ly 2 0 2 0 . D o u g R ic h a rd s o n h a s o v e r 2 5 y e a r s ’ e x p e r ie n c e in t h e fi n a n c ia l s e r v ic e s a n d re s o u rc e s s e c t o r s . H is e x p e r ie n c e h a s in c lu d e d in v e s t m e n t re s e a rc h , a n a ly t ic s a n d c lie n t a d v is in g fo r v a r io u s o r g a n is a t io n s in c lu d in g G IO A s s e t M a n a g e m e n t , A u s t r a lia n P r u d e n t ia l R e g u la t io n A u t h o r it y , S u n c o r p , a n d P h ilo C a p it a l A d v is e r s . D I R E C T O R S ’ I N T E R E S T S A s a t t h e d a t e o f t h is re p o r t , t h e in t e re s t s (d ire c t ly o r in d ire c t ly h e ld ) o f t h e D ire c t o r s in t h e s h a re s a n d o p t io n s o f t h e C o m p a n y w e re : D ir e c t o r F r a n k P o u lla s P ro f. M . S t a n le y W h it t in g h a m P e t e r T s e g a s J a m e s D a c k H o n . T ro y G r a n t L is t e d O r d in a r y S h a r e s U n lis t e d O p t io n s o v e r O r d in a r y S h a r e s 1 5 ,9 8 3 ,9 2 6 - 7 7 0 ,0 0 0 - - 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 - - M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 2 3 D ire c t o r s ’ R e p o r t N A T U R E O F O P E R A T I O N S A N D P R I N C I P A L A C T I V I T I E S T h e G ro u p h a s a m u lt i-s t r a t e g y b u s in e s s o f lit h iu m -io n b a t t e r y t e c h n o lo g y m a n u fa c t u r in g in t h e U S A a n d A u s t r a lia c o m b in e d w it h p re -m in e d e v e lo p m e n t o f it s N a c h u G r a p h it e P ro je c t (N G P ) in T a n z a n ia . T h e G ro u p is c o m m it t e d t o m in im u m e x p e n d it u re re q u ire m e n t s in re la t io n t o it s N a c h u t e n e m e n t s . M a g n is c o n t in u e s t o a d v a n c e it s m u lt i-s t r a t e g y b u s in e s s p la n o f d e v e lo p in g : > A s a s t r a t e g ic p a r t n e r, t h e r a p id a d v a n c e m e n t o f t w o (2 ) p ro p o s e d lit h iu m -io n b a t t e r y (‘L IB ’) g ig a -fa c t o r ie s in t h e U S A a n d A u s t r a lia . > T h e m in in g a n d p ro c e s s in g o f h ig h p u r it y n a t u r a l fl a k e g r a p h it e fro m t h e G ro u p ’s 1 0 0 % o w n e d N G P. D I V I D E N D S N o d iv id e n d s h a v e b e e n p a id d u r in g t h e y e a r (2 0 1 9 : $ N IL ). T h e D ire c t o r s d o n o t re c o m m e n d t h e p a y m e n t o f a d iv id e n d fo r t h is fi n a n c ia l y e a r. L I K E LY D E V E L O P M E N T S A N D E X P E C T E D R E S U LT S O F O P E R A T I O N S T h e D ire c t o r s a re n o t a w a re o f a n y d e v e lo p m e n t s , o t h e r t h a n t h e o n -g o in g c h a lle n g e s p o s e d b y t h e C O V ID -1 9 g lo b a l p a n d e m ic , t h a t m ig h t h a v e a s ig n ifi c a n t e ff e c t o n t h e o p e r a t io n s o f t h e G ro u p in s u b s e q u e n t fi n a n c ia l y e a r s t h a t a re n o t a lre a d y d is c lo s e d in t h is re p o r t . C O R P O R A T E I N F O R M A T I O N M a g n is E n e rg y Te c h n o lo g ie s L im it e d is a C o m p a n y lim it e d b y s h a re s t h a t is in c o r p o r a t e d a n d d o m ic ile d in A u s t r a lia . T h e s h a re s a re lis t e d o n t h e A u s t r a lia n S e c u r it ie s E x c h a n g e (“A S X ”) u n d e r t h e A S X c o d e M N S . U n lis t e d o p t io n s is s u e d t o D ire c t o r s b e n e fi c ia lly v ia t h e C o m p a n y ’s e m p lo y e e o p t io n t r u s t s c h e m e a re in c lu d e d in t h e o p t io n a g g re g a t e . D e t a ils o f s h a re s o r in t e re s t s is s u e d d u r in g a n d a f t e r t h e e n d o f t h e fi n a n c ia l y e a r a s a re s u lt o f e x e rc is e o f a n o p t io n a re : Is s u in g e n t it y M a g n is E n e rg y Te c h n o lo g ie s L im it e d E M P L O Y E E S N u m b e r o f s h a r e s is s u e d C la s s o f s h a r e s T o t a l a m o u n t p a id f o r s h a r e s A m o u n t u n p a id o n s h a r e s 0 O rd in a r y 0 $ n il M a g n is E n e rg y Te c h n o lo g ie s L im it e d h a d 6 e m p lo y e e s a s a t 3 0 J u n e 2 0 2 0 (2 0 1 9 : 6 e m p lo y e e s ). C a t e g o r y o f e m p lo y e e A ll E m p lo y e e s a n d B o a rd S e n io r E x e c u t iv e s B o a rd T o t a l 9 5 5 G e n d e r M a le 8 5 5 U r a n e x T a n z a n ia L im it e d h a d 1 0 fu ll t im e e m p lo y e e s a s a t 3 0 J u n e 2 0 2 0 . (2 0 1 9 : 1 1 e m p lo y e e s ) C a t e g o r y o f e m p lo y e e A ll E m p lo y e e s T o t a l 1 0 M a le 7 G e n d e r F e m a le 1 0 0 F e m a le 3 2 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S C O R P O R A T E D ir e c t o r M o v e m e n t s d u r in g t h e y e a r T h e H o n . W a r w ic k S m it h re s ig n e d fro m h is p o s it io n o f N o n -E x e c u t iv e D ire c t o r o n 1 J a n u a r y 2 0 2 0 . M r M a rc V o g t s re t ire d fro m h is p o s it io n o f M a n a g in g D ire c t o r o n 3 1 J a n u a r y 2 0 2 0 . M r L e s lie H o s k in g re s ig n e d fro m h is p o s it io n o f In t e r im M a n a g in g D ire c t o r o n 2 1 F e b r u a r y 2 0 2 0 . M r S u b h a s D e G a m ia re s ig n e d fro m h is p o s it io n o f N o n -E x e c u t iv e D ire c t o r o n 2 5 F e b r u a r y 2 0 2 0 . M r J o h a n n J o o s t e -J a c o b s re t ire d fro m h is p o s it io n o f N o n -E x e c u t iv e D ire c t o r o n 3 1 M a y 2 0 2 0 . M r J a m e s D a c k w a s a p p o in t e d a s E x e c u t iv e D ire c t o r o n 1 5 J u n e 2 0 2 0 . T h e H o n . T ro y G r a n t w a s a p p o in t e d a s N o n -E x e c u t iv e D ire c t o r o n 2 3 J u n e 2 0 2 0 . P la c e m e n t s O n 2 7 S e p t e m b e r 2 0 1 9 , M a g n is a n n o u n c e d it h a d s e c u re d $ 8 m illio n in fu n d in g fro m M id d le E a s t b a s e d N e g m a G ro u p L t d (“N e g m a ”), w h ic h h a d a g re e d t o s u b s c r ib e fo r s h a re s o v e r t h e c o u r s e o f 1 2 m o n t h s w it h a m a x im u m m o n t h ly s u b s c r ip t io n o f $ 7 0 0 ,0 0 0 . T h e p r ic e o f t h e s h a re s is s u e d w o u ld b e a t a n 8 % d is c o u n t t o t h e p re v io u s t e n d a y V o lu m e W e ig h t e d A v e r a g e P r ic e (“V W A P ”). T h e C o m p a n y h a d t h e fl e x ib ilit y t o c a ll t h e m o n t h ly a m o u n t s a n d c o u ld t e r m in a t e t h e S u b s c r ip t io n A g re e m e n t (“A g re e m e n t ”) a t a n y t im e , w it h o u t a p e n a lt y . A n o p t io n fo r a n a d d it io n a l $ 4 m illio n s u b s c r ip t io n w a s o n o ff e r a t t h e s a m e t e r m s . T h e fu n d s r a is e d w o u ld b e u s e d fo r w o r k in g c a p it a l a n d a d v a n c in g a ll p ro je c t s . F o u r c a lls w e re re q u e s t e d d u r in g t h e 2 0 2 0 fi n a n c ia l y e a r, w it h t h e d e t a ils s u m m a r is e d b e lo w : Is s u e D a t e 1 5 /1 0 /2 0 1 9 2 1 /1 1 /2 0 1 9 2 4 /0 1 /2 0 2 0 2 2 /0 4 /2 0 2 0 S h a r e s Is s u e d V W A P p e r s h a r e le s s 8 % A m o u n t R a is e d 4 ,7 0 8 ,5 5 0 7 ,2 1 9 ,5 3 2 8 ,4 8 0 ,6 0 5 1 3 ,4 6 1 ,5 3 8 3 3 ,8 7 0 ,2 2 5 $ 0 .1 6 9 9 $ 0 .1 1 0 8 $ 0 .1 4 1 5 $ 0 .0 5 2 0 $ 0 .1 0 3 3 $ 8 0 0 ,0 0 0 $ 8 0 0 ,0 0 0 $ 1 ,2 0 0 ,0 0 0 $ 7 0 0 ,0 0 0 $ 5 ,0 0 0 ,0 0 0 O n 2 7 N o v e m b e r 2 0 1 9 , M a g n is a n n o u n c e d it h a d is s u e d a fu r t h e r 4 ,0 0 0 ,0 0 0 U n lis t e d S h a re O p t io n s t o N e g m a a s p a r t o f t h e A g re e m e n t a n n o u n c e d o n 2 7 S e p t e m b e r 2 0 1 9 , a t a n e x e rc is e p r ic e o f $ 0 .4 0 p e r s h a re o p t io n w it h a n e x p ir y d a t e o f 3 0 A p r il 2 0 2 1 . O n 2 J u n e 2 0 2 0 , M a g n is a n n o u n c e d it h a d re c e iv e d fi r m c o m m it m e n t s fo r t h e p la c e m e n t o f 2 0 ,0 0 0 ,0 0 0 fu lly p a id o rd in a r y s h a re s a t $ 0 .0 7 5 p e r s h a re t o p ro fe s s io n a l, s o p h is t ic a t e d , a n d in s t it u t io n a l in v e s t o r s t o r a is e A $ 1 .5 m illio n . T h e fu n d s r a is e d w e re u s e d t o s t re n g t h e n t h e b a la n c e s h e e t t o a llo w M a g n is t o c a p it a lis e o n c u r re n t a n d fu t u re g ro w t h o p p o r t u n it ie s in t h e b a t t e r y t e c h n o lo g y s e c t o r a n d t o fu n d t h e o n g o in g in v e s t m e n t in t h e fu t u re d e v e lo p m e n t o f t h e C o m p a n y ’s 1 0 0 % o w n e d N a c h u G r a p h it e P ro je c t . E x e r c is e o f L is t e d O p t io n s T h e re w e re n o lis t e d o p t io n s t h a t w e re e x e rc is e d . N o o p t io n s a re c u r re n t ly lis t e d o n t h e m a r k e t . E x e r c is e o f U n lis t e d O p t io n s T h e re w e re N il u n lis t e d o p t io n s e x e rc is e d d u r in g t h e p e r io d . T h e re w e re N il p ro c e e d s re c e iv e d fro m t h e e x e rc is in g o f u n lis t e d o p t io n s . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 2 5 D ire c t o r s ’ R e p o r t O P E R A T I N G R E S U LT S F O R T H E Y E A R T h e G ro u p in c u r re d a n o p e r a t in g lo s s a f t e r t a x o f $ 7 ,3 7 8 ,6 0 1 (2 0 1 9 : $ 5 ,5 4 9 ,5 5 3 ). R e fe r t o N o t e 1 o f t h e fi n a n c ia l s t a t e m e n t s fo r a c c o u n t in g p o lic ie s u s e d . S u m m a r is e d s e g m e n t o p e r a t in g re s u lt s a re a s fo llo w s : 2 0 2 0 L it h iu m -io n B a t t e r y in v e s t m e n t s G r a p h it e e x p lo r a t io n a n d d e v e lo p m e n t In t e r s e g m e n t e lim in a t io n In c o m e a n d lo s s e s b e fo re t a x 2 0 2 0 I n c o m e $ 1 6 7 ,7 2 0 6 8 4 ,1 6 0 - 8 5 1 ,8 8 0 R e s u lt s $ - (7 ,3 7 8 ,6 0 1 ) - (7 ,3 7 8 ,6 0 1 ) E x p lo r a t io n c o s t s fo r t h e y e a r a m o u n t e d t o $ 1 ,0 1 3 ,0 3 4 (2 0 1 9 : $ 1 ,4 7 9 ,1 9 0 ), w it h t h e G ro u p h a v in g c o m m e n c e d a n u m b e r o f p re -d e v e lo p m e n t in it ia t iv e s s u c h a s s t a r t in g in it ia l la n d c le a r in g a n d ro a d w o r k s a lo n g w it h re lo c a t io n s . T h e G ro u p h a s a ls o c o n t in u e d t o in c re a s e it s s t r a t e g ic in v e s t m e n t s in t h e b u s in e s s e s o f lit h iu m -io n b a t t e r y t e c h n o lo g y m a n u fa c t u r in g in t h e U S A a n d A u s t r a lia , v ia a g lo b a l c o n s o r t iu m Im p e r iu m 3 N e w Yo r k In c (‘iM 3 N Y ’). R E V I E W O F F I N A N C I A L P O S I T I O N L iq u id it y a n d C a p it a l R e s o u r c e s T h e s t a t e m e n t o f c a s h fl o w s s h o w s a d e c re a s e in c a s h a n d c a s h e q u iv a le n t s fo r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 o f $ 1 ,1 1 0 ,8 9 6 (2 0 1 9 in c re a s e : $ 3 0 5 ,0 7 7 ). D u r in g t h e y e a r, t h e G ro u p r a is e d $ 5 ,0 0 0 ,0 0 0 (2 0 1 9 : % 1 1 ,1 0 0 ,0 0 0 ) b e fo re c o s t s v ia s h a re p la c e m e n t s a n d $ N il p ro c e e d s fro m o p t io n s e x e rc is e d , (2 0 1 9 : $ 3 0 0 ,0 0 0 ). A t y e a r e n d t h e G ro u p h a d liq u id fu n d s o f $ 7 1 9 ,6 1 5 (2 0 1 9 : $ 1 ,8 2 9 ,8 1 7 ) a v a ila b le fo r fu t u re o p e r a t io n a l u s e a n d h a s n o b o r ro w in g s (2 0 1 9 : $ N il). S u b s e q u e n t e v e n t - C a p it a l r a is in g O n 4 S e p t e m b e r 2 0 2 0 , M a g n is a n n o u n c e d it h a d re c e iv e d fi r m c o m m it m e n t s fo r a p la c e m e n t o f 4 5 ,0 0 0 ,0 0 0 fu lly p a id o rd in a r y s h a re s a t $ 0 .1 7 p e r s h a re t o p ro fe s s io n a l, s o p h is t ic a t e d , a n d in s t it u t io n a l in v e s t o r s t o r a is e A $ 7 .6 5 m illio n . T h e fu n d s r a is e d w e re u s e d t o s t re n g t h e n t h e b a la n c e s h e e t t o a llo w M a g n is t o c a p it a lis e o n c u r re n t a n d fu t u re g ro w t h o p p o r t u n it ie s in t h e b a t t e r y t e c h n o lo g y s e c t o r a n d t o fu n d t h e o n g o in g in v e s t m e n t in t h e fu t u re d e v e lo p m e n t o f t h e C o m p a n y ’s 1 0 0 % o w n e d N a c h u G r a p h it e P ro je c t . O n 8 S e p t e m b e r 2 0 2 0 , M a g n is a n n o u n c e d it h a d t e r m in a t e d t h e N e g m a S u b s c r ip t io n A g re e m e n t fo llo w in g t h e C o m p a n y ’s s u c c e s s fu l c a p it a l r a is in g a n n o u n c e d o n 4 S e p t e m b e r 2 0 2 0 . S h a r e s a n d O p t io n s is s u e d d u r in g t h e y e a r D u r in g t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 , t h e C o m p a n y r a is e d e q u it y fu n d s fro m a s fo llo w s : > > > > > 2 6 $ 3 ,5 0 0 ,0 0 0 (2 0 1 9 : $ N il) fro m t h e N e g m a S u b s c r ip t io n A g re e m e n t fo r 3 3 ,8 7 0 ,2 2 5 (2 0 1 9 : N IL ) o rd in a r y fu lly p a id s h a re s . $ 1 ,5 0 0 ,0 0 0 (2 0 1 9 : $ 1 1 ,1 0 0 ,0 0 0 ) fro m a s h a re p la c e m e n t o f 2 0 ,0 0 0 ,0 0 0 (2 0 1 9 : 3 0 ,0 0 0 ,1 0 0 ) o rd in a r y fu lly p a id s h a re s . T h e re w e re N il lis t e d o p t io n s e x e rc is e d d u r in g t h e p e r io d . T h e re n o o p t io n s a re c u r re n t ly lis t e d o n t h e m a r k e t . T h e re w e re N il u n lis t e d o p t io n s e x e rc is e d d u r in g t h e p e r io d 1 2 ,1 0 0 ,0 0 0 u n lis t e d o p t io n s (2 0 1 9 : 1 ,0 0 0 ,0 0 0 ) o n v a r y in g t e r m s a n d c o n d it io n s w e re is s u e d d u r in g t h e y e a r. A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S C a p it a l E x p e n d it u r e C a p it a l e x p e n d it u re o n p la n t a n d e q u ip m e n t d u r in g t h e y e a r w a s $ 2 ,1 7 6 (2 0 1 9 : $ 1 2 ,4 6 1 ). G R O U P P E R F O R M A N C E A n n u a l N e t I n c o m e C o n s o lid a t e d lo s s a f t e r t a x ($ ) S h a r e h o ld e r R e t u r n s S h a re p r ic e a t fi n a n c ia l y e a r e n d ($ ) B a s ic lo s s p e r s h a re (c e n t s ) D ilu t e d lo s s p e r s h a re (c e n t s ) R I S K M A N A G E M E N T 2 0 2 0 7 ,3 7 8 ,6 0 1 2 0 1 9 5 ,5 4 9 ,5 5 3 2 0 1 8 5 ,4 1 7 ,8 8 5 2 0 1 7 9 ,7 5 6 ,4 3 4 2 0 1 6 1 2 ,0 2 6 ,7 8 1 2 0 2 0 0 .0 8 1 .1 1 1 .1 1 2 0 1 9 0 .1 9 0 .9 2 0 .9 2 2 0 1 8 0 .3 8 0 .9 7 0 .9 7 2 0 1 7 0 .5 1 5 2 .0 9 2 .0 9 2 0 1 6 0 .9 7 5 3 .4 2 3 .4 2 T h e B o a rd is re s p o n s ib le fo r e n s u r in g t h a t r is k s a re id e n t ifi e d o n a t im e ly b a s is a n d t h a t t h e G ro u p ’s a c t iv it ie s m a n a g e t h e r is k s id e n t ifi e d b y t h e B o a rd . T h e G ro u p b e lie v e s t h a t it is c r u c ia l fo r a ll B o a rd m e m b e r s t o b e a p a r t o f t h is p ro c e s s . T h e B o a rd h a s n o t e s t a b lis h e d a s e p a r a t e r is k m a n a g e m e n t c o m m it t e e b u t re v ie w e d t h e m a jo r r is k s t o t h e b u s in e s s w it h m a n a g e m e n t a n d h a s t h e fo llo w in g p ro c e s s e s in p la c e t o m o n it o r it : > T h e B o a rd h a s u n d e r t a k e n s t r a t e g ic re v ie w s o f it s a c t iv it ie s a n d c o n v e y e d t o m a n a g e m e n t a n d s h a re h o ld e r s it s o b je c t iv e s . > T h e B o a rd a p p ro v e d o p e r a t in g b u d g e t s a n d a t it s m e e t in g s , m o n it o r s a c t u a l e x p e n d it u re t o b u d g e t . > > T h e B o a rd re v ie w s s o v e re ig n , o p e r a t in g a n d e n v iro n m e n t a l r is k s w it h m a n a g e m e n t a n d fro m t im e t o t im e e x t e r n a l c o n s u lt a n t s p ro v id e re p o r t s o n it s p r a c t ic e s . T h e B o a rd a s s e s s e s p o lit ic a l a n d s o v e re ig n r is k s re la t in g t o it s in t e r n a t io n a l a s s e t s b y m o n it o r in g lo c a l m e d ia a n d p o lit ic s . G ro u p re p re s e n t a t iv e s lia is e w it h a ll le v e ls o f G o v e r n m e n t t o m a in t a in a w a re n e s s a s t o m a t t e r s t h a t m a y a ff e c t t h e C o m p a n y . T h e C o m p a n y h a s a re s id e n t B o a rd m e m b e r in A fr ic a t o a s s is t w it h t h e m o n it o r in g o f s o v e re ig n r is k fo r it s T a n z a n ia n a s s e t s . T h e D ire c t o r s h a v e id e n t ifi e d r is k s a s s o c ia t e d w it h o u r b u s in e s s . In h e re n t ly , e v a lu a t io n , p re -d e v e lo p m e n t , t e c h n o lo g ic a l a d v a n c e m e n t s , a n d c o m p e t it io n is a r is k y u n d e r t a k in g t h a t o f t e n p ro v id e s s u b s t a n t ia l re w a rd s t o in v e s t o r s w h e n e v e r s u c c e s s is a c h ie v e d . T h is is t h e fo re m o s t r is k t h a t t h e B o a rd e n d e a v o u r s t o m it ig a t e t h ro u g h it s s t r a t e g ic id e n t ifi c a t io n o f p o t e n t ia l m in e r a lis a t io n t a rg e t s a n d o v e r s ig h t o f m a n a g e m e n t s u b s e q u e n t ly c o n d u c t in g t h e re s p e c t iv e e x p lo r a t io n p ro g r a m m e s . T h e B o a rd is v e r y a w a re o f t h e fi n a n c ia l r is k s a s s o c ia t e d w it h t h e e x p lo r a t io n a n d m in in g in d u s t r y a n d t h e t e c h n o lo g y r is k s a s s o c ia t e d w it h t h e b a t t e r y a n d e n e r g y s t o r a g e in d u s t r y . T h e G ro u p p re s e n t ly a c c e s s e s fu n d s t h ro u g h t h e c a p it a l m a r k e t s in o rd e r t o fu n d it s fu t u re b u s in e s s n e e d s . T h e c a p it a l m a r k e t s a re s u b je c t t o p re v a ilin g e c o n o m ic c o n d it io n s , s o t h e D ire c t o r s a re a t t u n e d t o r a is in g fu n d s t o m e e t fu t u re n e e d s w h e n c irc u m s t a n c e s p e r m it . T h e B o a rd a n n o u n c e d o n 1 5 M a y 2 0 2 0 t h a t , in t e r a lia , it s A u d it C o m m it t e e w a s re -c o n s t it u t e d a s t h e A u d it a n d R is k C o m m it t e e . S I G N I F I C A N T C H A N G E S I N T H E S T A T E O F A F F A I R S T h e C o m p a n y is s t r a t e g ic a lly m a n a g in g t h e c h a lle n g e s p o s e d b y t h e o n -g o in g C O V ID -1 9 g lo b a l p a n d e m ic . E N V I R O N M E N T A L R E G U L A T I O N A N D P E R F O R M A N C E T h e G ro u p ’s e x p lo r a t io n a c t iv it ie s in T a n z a n ia a re s u b je c t t o e n v iro n m e n t a l re g u la t io n s a n d g u id e lin e s o p e r a t in g in t h e lic e n c e d a re a s . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 2 7 D ire c t o r s ’ R e p o r t F a ilu re t o m e e t e n v iro n m e n t a l c o n d it io n s a t t a c h in g t o t h e g ro u p ’s m in e r a l t e n e m e n t s c o u ld le a d t o fo r fe it u re o f t h e t e n e m e n t s . N o e n v iro n m e n t a l b re a c h e s h a v e o c c u r re d o r h a v e b e e n n o t ifi e d b y a n y g o v e r n m e n t a g e n c ie s d u r in g t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 . T h e N e w Yo r k lit h iu m -io n b a t t e r y p la n t s c h e d u le d fo r o p e r a t io n in e a r ly 2 0 2 1 c a le n d a r y e a r w ill b e s u b je c t t o E n v iro n m e n t a l a n d P la n n in g R e g u la t io n s fro m v a r io u s g o v e r n m e n t a u t h o r it ie s , t h a t w ill b e s t r ic t ly m a n a g e d a n d a d h e re d t o b y t h e c o n s o r t iu m m e m b e r s o f iM 3 N Y. D I R E C T O R S M E E T I N G S T h e n u m b e r o f D ire c t o r s m e e t in g s h e ld (in c lu d in g m e e t in g s o f c o m m it t e e s o f D ire c t o r s ) a n d t h e n u m b e r o f m e e t in g s a t t e n d e d b y e a c h o f t h e D ire c t o r s o f t h e C o m p a n y d u r in g t h e fi n a n c ia l y e a r a re : D ir e c t o r s M e e t in g A u d it C o m m it t e e N o m in a t io n s & R e m u n e r a t io n C o m m it t e e S u s t a in a b ilit y C o m m it t e e N u m b e r o f m e e t in g s a t t e n d e d : J C J o o s t e -J a c o b s F P o u lla s P T s e g a s L H o s k in g M V o g t s W S m it h M S W h it t in g h a m S D e G a m ia J D a c k T G r a n t A 9 9 4 7 7 6 9 1 - - B 9 9 9 7 7 6 9 1 - - A 2 2 1 * * * * * * * B 2 2 2 * * * * * * * A 1 1 * * - - * * * * B 1 1 * * - - * * * * A * - - - * - * * * * B * - - - * - * * * * N o te s A B * N u m b e r o f m e e tin g s a tte n d e d . N u m b e r o f m e e tin g s h e ld d u rin g th e y e a r w h ils t th e d ire c to r h e ld o ffi c e . N o t a m e m b e r o f th e re le v a n t c o m m itte e . T h e A u d it C o m m it te e c o m p ris e d J C J o o s te -J a c o b s (C h a irm a n ), F P o u lla s a n d P Ts e g a s . T h e N o m in a tio n s & R e m u n e ra tio n C o m m itte e c o m p ris e d F P o u lla s (C h a irm a n ), J C J o o s te -J a c o b s a n d M V o g ts . T h e S u s ta in a b ilit y C o m m itte e c o m p ris e d o f P. Ts e g a s (C h a irm a n ), F. P o u lla s a n d L .H o s k in g . O n 1 5 M a y 2 0 2 0 , th e C o m p a n y a n n o u n c e d th a t, a s p a r t o f its C o rp o ra te G o v e rn a n c e R e v ie w , th e A u d it C o m m itte e w a s re n a m e d a s th e A u d it a n d R is k C o m m itte e , th e R e m u n e ra tio n C o m m itte e w a s re n a m e d th e N o m in a tio n s a n d R e m u n e ra tio n C o m m itte e a n d th e S u s ta in a b ilit y C o m m itte e w a s re n a m e d th e H e a lth , S a fe t y a n d S u s ta in a b ilit y C o m m itte e . N e w C o m m itte e C h a r te rs w e re s im ila rly im p le m e n te d . R E M U N E R A T I O N R E P O R T (A U D I T E D ) T h is re p o r t o u t lin e s t h e re m u n e r a t io n a r r a n g e m e n t s in p la c e fo r D ire c t o r s a n d e x e c u t iv e s . R E M U N E R A T I O N P O L I C Y T h e B o a rd re c o g n is e s t h a t t h e p e r fo r m a n c e o f t h e G ro u p d e p e n d s u p o n t h e q u a lit y o f it s D ire c t o r s a n d e x e c u t iv e s . To a c h ie v e it s o p e r a t in g a n d fi n a n c ia l a c t iv it ie s t h e G ro u p m u s t a t t r a c t , m o t iv a t e , a n d re t a in h ig h ly s k ille d D ire c t o r s a n d e x e c u t iv e s . T h e G ro u p ’s p o lic y fo r d e t e r m in in g t h e n a t u re a n d n u m b e r o f e m o lu m e n t s o f B o a rd m e m b e r s a n d e x e c u t iv e s o f t h e C o m p a n y is a s s e s s e d a n n u a lly a t t h e e n d o f e a c h c a le n d a r y e a r a n d a re s e t b y re fe re n c e t o t h e m in e r a l e x p lo r a t io n in d u s t r y m a r k e t p la c e . T h e R e m u n e r a t io n C o m m it t e e s u b m it s it s re c o m m e n d a t io n t o t h e B o a rd fo r it s c o n s id e r a t io n . A ll re m u n e r a t io n p a id t o D ire c t o r s a n d e x e c u t iv e s is v a lu e d a t t h e c o s t t o t h e G ro u p a n d e x p e n s e d . T h e B o a rd p o lic y is t o re m u n e r a t e N o n -E x e c u t iv e D ire c t o r s a t m a r k e t r a t e s fo r c o m p a r a b le c o m p a n ie s fo r t im e , 2 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S c o m m it m e n t a n d re s p o n s ib ilit ie s b a s e d o n re c o m m e n d a t io n s fro m t h e R e m u n e r a t io n C o m m it t e e . T h e B o a rd d e t e r m in e s p a y m e n t s t o t h e N o n -E x e c u t iv e D ire c t o r s a n d re v ie w s t h e ir re m u n e r a t io n a n n u a lly , b a s e d o n m a r k e t p r a c t ic e , d u t ie s , a n d a c c o u n t a b ilit y . T h e c u r re n t m a x im u m a g g re g a t e o f N o n -E x e c u t iv e D ire c t o r s fe e s p a y a b le is $ 6 5 0 ,0 0 0 ; h a v in g b e e n a p p ro v e d b y s h a re h o ld e r s a t t h e C o m p a n y ’s A n n u a l G e n e r a l M e e t in g h e ld o n 1 7 N o v e m b e r 2 0 1 7 a n d t h is re p re s e n t e d t h e fi r s t in c re a s e t o t h e m a x im u m a g g re g a t e a m o u n t in 9 y e a r s . P re s e n t ly , N o n -E x e c u t iv e D ire c t o r s re c e iv e a n n u a l fe e s o f b e t w e e n $ 6 5 ,0 0 0 t o $ 7 0 ,0 0 0 a n d t h e N o n -E x e c u t iv e C h a ir m a n $ 1 2 0 ,0 0 0 . A n a d d it io n a l $ 5 ,0 0 0 p e r a n n u m is p a id t o D ire c t o r s w h o a c t a s C h a ir m a n o f C o m m it t e e s . S u p e r a n n u a t io n is b a s e d o n e a c h in d iv id u a l D ire c t o r ’s s e r v ic e a g re e m e n t . D I R E C T O R A N D O T H E R E X E C U T I V E S D E T A I L S L is t e d o n p a g e s 1 8 -2 2 o f t h e D ire c t o r s ’ R e p o r t a re p e r s o n s w h o a c t e d a s a d ire c t o r o f t h e C o m p a n y d u r in g o r s in c e t h e e n d o f t h e fi n a n c ia l y e a r. F o r t h e p u r p o s e s o f t h is re p o r t , K e y M a n a g e m e n t P e r s o n n e l (K M P ) o f t h e G ro u p a re t h o s e p e r s o n s h a v in g a u t h o r it y a n d re s p o n s ib ilit y fo r p la n n in g d ire c t in g a n d c o n t ro llin g t h e m a jo r a c t iv it ie s o f t h e C o m p a n y a n d t h e G ro u p , d ire c t ly o r in d ire c t ly , in c lu d in g a n y D ire c t o r (w h e t h e r e x e c u t iv e o r o t h e r w is e ) o f t h e C o m p a n y , a n d s e n io r o r k e y m a n a g e m e n t . In a d d it io n t o t h e D ire c t o r s , t h e fo llo w in g w e re K M P d u r in g t h e fi n a n c ia l y e a r : D r. F r a n k H o u llis - C h ie f E x e c u t iv e O ffi c e r (t o 2 1 A u g u s t 2 0 2 0 ) P E R F O R M A N C E B A S E D R E M U N E R A T I O N T h e G ro u p c u r re n t ly h a s n o p e r fo r m a n c e -b a s e d re m u n e r a t io n c o m p o n e n t b u ilt in t o K M P re m u n e r a t io n p a c k a g e s . B o n u s e s m a y b e p a y a b le a t t h e B o a rd ’s d is c re t io n fo llo w in g t h e a n n u a l p e r fo r m a n c e re v ie w . T h e C o m p a n y d o e s n o t h a v e p o lic ie s re g a rd in g r is k m a n a g e m e n t o f fl e x ib le c o m p o n e n t s o f re m u n e r a t io n p a c k a g e s . C O M P A N Y P E R F O R M A N C E , S H A R E H O L D E R W E A LT H A N D D I R E C T O R S A N D E X E C U T I V E S R E M U N E R A T I O N In a c c o rd a n c e w it h t h e re m u n e r a t io n p o lic y n o t e d a b o v e , t h e G ro u p in c lu d e s t h e fo llo w in g p r in c ip le s in it s re m u n e r a t io n fr a m e w o r k : > C o m p e t it iv e re w a rd s a re s e t t o a t t r a c t h ig h c a lib re e x e c u t iv e s > E x e c u t iv e re w a rd s a re lin k e d t o s h a re h o ld e r v a lu e . F o r e x e c u t iv e s , t h e G ro u p ’s p o lic y is t o p o s it io n t o t a l e m p lo y m e n t c o s t s w it h in a p e e r g ro u p . T h e m ix o f fi x e d a n d v a r ia b le c o m p o n e n t s o f e m p lo y m e n t c o s t s is d e r iv e d fro m d a t a a s s e s s in g m a r k e t r a t e la b o u r c o s t s b y p o s it io n . T h e re a re n o fi n a n c ia l m e a s u re s t h a t a re in c lu d e d in t h e a s s e s s m e n t , b u t t h e R e m u n e r a t io n C o m m it t e e c o n s id e r s t h e g ro w t h in m a r k e t c a p it a lis a t io n a n im p o r t a n t p a r a m e t e r. F o r n o n -fi n a n c ia l m e a s u re s , a r a n g e o f fa c t o r s a re c o n s id e re d in c lu d in g : m a r k e t p o s it io n , re la t io n s h ip w it h a r a n g e o f s t a k e h o ld e r s , r is k m a n a g e m e n t , le a d e r s h ip , a n d t e a m c o n t r ib u t io n . S H A R E O P T I O N P L A N M a g n is E n e rg y Te c h n o lo g ie s L im it e d o p e r a t e s a n o w n e r s h ip -b a s e d s c h e m e fo r D ire c t o r s a n d E m p lo y e e s o f t h e c o n s o lid a t e d e n t it y . In a c c o rd a n c e w it h t h e p ro v is io n s o f t h e P la n , s h a re s a n d o p t io n s a re h e ld o n b e h a lf o f P la n P a r t ic ip a n t s b y t h e T r u s t e e o f t h e M a g n is O p t io n S h a re T r u s t (“M O S T ”). D u r in g t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 , 8 ,1 0 0 ,0 0 0 o p t io n s (2 0 1 9 : 1 ,0 0 0 ,0 0 0 ) o n v a r y in g t e r m s a n d c o n d it io n s w e re a llo t t e d t o t h e T r u s t u n d e r t h e s h a re s c h e m e . S E R V I C E A G R E E M E N T S R e m u n e r a t io n a n d o t h e r t e r m s o f e m p lo y m e n t fo r k e y m a n a g e m e n t p e r s o n n e l a re fo r m a lis e d in s e r v ic e a g re e m e n t s . R e m u n e r a t io n a g re e m e n t s a re s e t o u t b e lo w : M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 2 9 D ire c t o r s ’ R e p o r t J a m e s D a c k - E x e c u t iv e D ir e c t o r > N o a g re e m e n t e x p ir y d a t e ; > > R e m u n e r a t io n is $ 3 0 0 ,0 0 0 (2 0 1 9 : n il) p e r a n n u m in c lu d in g s t a t u t o r y s u p e r a n n u a t io n g u a r a n t e e p lu s a o n c e -o ff S ig n - O n F e e o f $ 3 8 0 ,0 0 0 . T h e S ig n -O n F e e w ill b e re p a id t o t h e C o m p a n y b y t h e E m p lo y e e , if t h e E m p lo y e e t e r m in a t e s t h is A g re e m e n t w it h in t h e fi r s t t w e lv e m o n t h s S u b je c t t o s h a re h o ld e r a p p ro v a l t o b e o b t a in e d a t t h e n e x t A n n u a l G e n e r a l M e e t in g o r E x t r a o rd in a r y G e n e r a l M e e t in g (w h ic h e v e r c o m e s fi r s t ) t h e E m p lo y e e w ill b e g r a n t e d 2 0 ,0 0 0 ,0 0 0 fu lly p a id o rd in a r y s h a re s in t h e C o m p a n y . T h e s h a re s w ill h a v e a t h re e y e a r e s c ro w p e r io d fro m t h e d a t e t h e y a re is s u e d . T h e s h a re s w ill b e c o n d it io n a l u p o n M r D a c k s e r v in g a fu ll t w o c o n s e c u t iv e y e a r p e r io d o f e m p lo y m e n t w it h t h e C o m p a n y ; > T h e a g re e m e n t a n d t h e e m p lo y m e n t c re a t e d b y it m a y b e t e r m in a t e d b y e it h e r M a g n is E n e rg y Te c h n o lo g ie s L t d o r M r D a c k b y g iv in g t h e o t h e r p a r t y 3 m o n t h s ’ n o t ic e ; a n d > T h e a g re e m e n t is s u b je c t t o a n n u a l re v ie w . F r a n k P o u lla s - E x e c u t iv e C h a ir m a n > N o a g re e m e n t e x p ir y d a t e ; > R e m u n e r a t io n is $ 1 2 0 ,0 0 0 (2 0 1 9 : n il) p e r a n n u m in c lu d in g s t a t u t o r y s u p e r a n n u a t io n g u a r a n t e e > > C o n s u lt in g fe e s o f $ 1 ,0 0 0 p e r b u s in e s s d a y t h a t is a p p lic a b le if in v o ic e d fro m S t ro n g S o lu t io n s P t y L t d , a re la t e d p a r t y t o M r P o u lla s T h e a g re e m e n t a n d t h e e m p lo y m e n t c re a t e d b y it m a y b e t e r m in a t e d b y e it h e r M a g n is E n e rg y Te c h n o lo g ie s L t d o r M r P o u lla s b y g iv in g t h e o t h e r p a r t y 3 m o n t h s ’ n o t ic e ; a n d > T h e a g re e m e n t is s u b je c t t o a n n u a l re v ie w . D r F r a n k H o u llis - C h ie f E x e c u t iv e O ffi c e r > N o a g re e m e n t e x p ir y d a t e ; > R e m u n e r a t io n o f $ 2 0 0 ,0 0 0 fro m 1 A p r il 2 0 2 0 (2 0 1 9 : $ 3 0 0 ,0 0 0 ) p e r a n n u m p lu s s t a t u t o r y s u p e r a n n u a t io n g u a r a n t e e ; > T h e a g re e m e n t a n d t h e e m p lo y m e n t c re a t e d b y it m a y b e t e r m in a t e d b y e it h e r M a g n is E n e rg y Te c h n o lo g ie s L t d o r D r H o u llis g iv in g t h e o t h e r p a r t y 1 2 m o n t h s ’ n o t ic e . T h e a g re e m e n t a ls o in c lu d e s a 6 m o n t h ‘n o n -c o m p e t e ’ c la u s e fo r D r H o u llis ; a n d > T h e a g re e m e n t is s u b je c t t o a n n u a l re v ie w . O t h e r t r a n s a c t io n s w it h k e y m a n a g e m e n t p e r s o n n e l A t o t a l o f $ 2 3 1 ,5 3 7 w a s p a id in c o n s u lt a n c y fe e s t o re la t e d p a r t ie s o f t h e N o n -e x e c u t iv e d ire c t o r s d u r in g t h e fi n a n c ia l y e a r (2 0 1 9 : $ 7 4 4 ,4 6 8 ). T h e c o n s u lt a n c y s e r v ic e s a re p ro v id e d u n d e r n o r m a l c o m m e rc ia l t e r m s a n d a re d is c lo s e d in d e t a il u n d e r N o t e 2 4 a n d N o t e 2 5 . 3 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S T a b l e 1 : R e m u n e r a t i o n f o r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 N o n E x e c u t iv e D ir e c t o r s S a la r y & F e e s $ C a s h B o n u s e s $ T e r m in a t io n B e n e fi t s $ P o s t E m p lo y m e n t B e n e fi t s $ S h a r e B a s e d P a y m e n t s O p t io n s # $ T o t a l $ H o n W L S m it h (re s ig n e d 0 1 -J a n -2 0 2 0 ) J C J o o s t e -J a c o b s (re t ire d 3 1 -M a y -2 0 2 0 ) * L H o s k in g (re s ig n e d 2 1 -F e b -2 0 2 0 ) P T s e g a s H o n . T ro y G r a n t (a p p o in t e d 2 3 -J u n -2 0 2 0 ) 3 1 ,9 6 3 7 0 ,0 0 0 5 6 ,4 9 4 3 5 ,0 0 0 - P ro fe s s o r M . S . W h it t in g h a m 7 0 ,0 0 0 S D e G a m ia (a p p o in t e d 0 1 -J a n -2 0 2 0 , re s ig n e d 2 5 -F e b -2 0 2 0 ) 1 0 ,0 0 0 K e y m a n a g e m e n t p e r s o n n e l M V o g t s (re s ig n e d 3 1 -J a n -2 0 2 0 ) F H o u llis (t e r m in a t e d 2 1 -A u g -2 0 2 0 ) F P o u lla s * 1 5 6 ,3 3 5 2 7 5 ,0 0 0 9 0 ,0 0 0 J D a c k (a p p o in t e d 1 5 -J u n -2 0 2 0 ) - 7 9 4 ,7 9 2 - - - - - - - - - - 3 8 0 ,0 0 0 3 8 0 ,0 0 0 * F e e s p a id to re la te d e n titie s . ^ In c lu d e s s u p e ra n n u a tio n a n d m o v e m e n ts in e m p lo y e e e n title m e n ts . # S h a re b a s e d p a y m e n ts c o n s is t o f u n lis te d s h a re o p tio n s is s u e d . T a b l e 2 : R e m u n e r a t i o n f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 9 - - - - - - - - - - - - 3 ,0 3 7 6 ,6 5 0 - - - - - 1 0 0 1 0 0 1 0 0 - 1 0 0 3 5 ,0 0 0 7 6 ,7 5 0 5 6 ,5 9 4 3 5 ,1 0 0 - 7 0 ,1 0 0 9 5 0 - 1 0 ,9 5 0 1 4 ,6 1 5 2 6 ,1 2 5 8 ,5 5 0 - 5 9 ,9 2 7 2 4 7 - 1 0 0 - 7 4 7 1 7 1 ,1 9 7 3 0 1 ,1 2 5 9 8 ,6 5 0 3 8 0 ,0 0 0 1 ,2 3 5 ,4 6 6 N o n E x e c u t iv e D ir e c t o r s S a la r y & F e e s $ C a s h B o n u s e s $ T e r m in a t io n B e n e fi t s $ P o s t E m p lo y m e n t B e n e fi t s 1 $ S h a r e B a s e d P a y m e n t s O p t io n s 2 $ T o t a l $ F P o u lla s 3 P T s e g a s 3 M S W h it t in g h a m W L S m it h (a p p o in t e d 7 -S e p -2 0 1 8 ) J C J o o s t e -J a c o b s 3 L H o s k in g (a p p o in t e d 5 -M a r -2 0 1 9 ) 1 2 0 ,0 0 0 7 0 ,0 0 0 7 0 ,0 0 0 5 1 ,8 7 9 7 0 ,0 0 0 2 1 ,0 7 4 U B e z (re s ig n e d 2 8 -F e b -2 0 1 9 ) 4 3 ,3 2 8 K e y m a n a g e m e n t p e r s o n n e l M V o g t s F H o u llis T P e lu s o (re s ig n e d 2 0 -J u n -2 0 1 9 ) 1 9 5 ,6 0 8 3 0 0 ,0 0 0 2 5 3 ,3 3 7 1,195,226 - - - - - - - - - - - 1 In c lu d e s s u p e ra n n u a tio n a n d m o v e m e n ts in c o m p e n s a te d a b s e n c e s . 2 S h a re b a s e d p a y m e n ts c o n s is t o f u n lis te d s h a re o p tio n s is s u e d . 3 F e e s p a id to re la te d e n titie s . - - - - - - - - - 1 9 ,2 3 1 19,231 1 1 ,4 0 0 - - 4 ,9 2 9 6 ,6 5 0 - - 1 9 ,2 5 7 4 4 ,5 3 4 2 3 ,1 5 6 109,926 - - - 1 1 ,4 0 0 - - - - - - 11,400 1 3 1 ,4 0 0 7 0 ,0 0 0 7 0 ,0 0 0 6 8 ,2 0 8 7 6 ,6 5 0 2 1 ,0 7 4 4 3 ,3 2 8 2 1 4 ,8 6 5 3 4 4 ,5 3 4 2 9 5 ,7 2 4 1,335,783 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 3 1 D ire c t o r s ’ R e p o r t C o m p e n s a t i o n o p t i o n s g r a n t e d a n d v e s t e d D u r in g t h e fi n a n c ia l y e a r, t h e fo llo w in g s h a re -b a s e d p a y m e n t s w e re a w a rd e d , v e s t e d , e x e rc is e d , o r la p s e d : T a b l e 1 : O p t i o n s A w a r d e d G r a n t D a t e a n d V e s t in g D a t e E x p ir y D a t e 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 3 1 -O c t -2 0 2 2 1 5 -N o v -2 0 2 1 1 5 -N o v -2 0 2 1 1 5 -N o v -2 0 2 1 G r a n t D a t e F a ir V a lu e $ 0 .0 0 0 1 0 .0 0 0 2 0 .0 0 0 0 0 9 5 0 .0 0 0 0 0 0 8 N u m b e r 6 ,0 0 0 ,0 0 0 7 0 0 ,0 0 0 7 0 0 ,0 0 0 7 0 0 ,0 0 0 O r ig in a l E x e r c is e P r ic e o f O p t io n $ F a ir V a lu e E x p e n s e u n d e r A A S B 2 $ 0 .7 0 0 .5 0 0 .7 5 1 .0 0 6 0 0 1 4 0 7 1 W E IG H T E D A V E R A G E FA IR VA L U E O F O P T IO N S G R A N T E D 0 .0 0 0 0 9 T a b l e 2 : O p t i o n s E x e r c i s e d G r a n t D a t e a n d V e s t in g D a t e E x p ir y D a t e G r a n t D a t e F a ir V a lu e $ N u m b e r O r ig in a l E x e r c is e P r ic e o f O p t io n $ F a ir V a lu e E x p e n s e u n d e r A A S B 2 $ T a b l e 3 : O p t i o n s L a p s e d G r a n t D a t e a n d V e s t in g D a t e E x p ir y D a t e G r a n t D a t e F a ir V a lu e $ 2 1 -O c t -2 0 1 6 1 4 -D e c -2 0 1 7 2 6 -O c t -2 0 1 8 7 -A p r -2 0 1 7 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 2 6 -N o v -2 0 1 9 2 1 -O c t -2 0 1 9 1 7 -N o v -2 0 1 9 1 -A p r -2 0 2 0 7 -A p r -2 0 2 0 3 0 -A p r -2 0 2 0 3 0 -A p r -2 0 2 0 3 0 -A p r -2 0 2 0 3 0 -A p r -2 0 2 0 2 5 -M a y -2 0 2 0 0 .2 1 7 6 0 0 0 .0 4 8 7 0 0 0 .0 1 1 4 0 0 0 .0 9 1 1 0 0 0 .0 0 0 2 0 0 0 .0 0 0 0 0 9 0 .0 0 0 0 0 1 0 .0 0 0 1 0 0 0 .0 0 0 1 0 0 N u m b e r 3 ,0 0 0 ,0 0 0 2 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 7 5 0 ,0 0 0 7 0 0 ,0 0 0 7 0 0 ,0 0 0 7 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 0 ,8 5 0 ,0 0 0 O r ig in a l E x e r c is e P r ic e o f O p t io n $ F a ir V a lu e E x p e n s e u n d e r A A S B 2 $ 0 .7 0 0 .7 0 0 .7 0 1 .0 0 0 .5 0 0 .7 5 1 .0 0 0 .7 0 0 .7 0 6 5 2 ,8 0 0 9 7 ,4 0 0 1 1 ,4 0 0 6 8 ,3 2 5 1 4 0 6 1 1 0 0 1 0 0 8 3 0 ,2 7 2 3 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S A D D I T I O N A L D I S C L O S U R E S R E L A T I N G T O K E Y M A N A G E M E N T P E R S O N N E L S h a r e h o ld in g T h e n u m b e r o f s h a re s in t h e C o m p a n y h e ld d u r in g t h e fi n a n c ia l y e a r b y e a c h d ire c t o r a n d o t h e r m e m b e r s o f k e y m a n a g e m e n t p e r s o n n e l o f t h e c o n s o lid a t e d e n t it y , in c lu d in g t h e ir p e r s o n a lly re la t e d p a r t ie s , is s e t o u t b e lo w : B a la n c e a t t h e s t a r t o f t h e y e a r 1 5 ,1 1 2 ,4 6 6 6 5 0 ,2 0 0 5 ,3 3 0 ,7 1 4 1 0 0 ,0 0 0 7 7 0 ,0 0 0 3 ,1 1 4 ,7 5 9 - - 6 3 7 ,9 4 5 2 5 ,7 1 6 ,0 8 4 G r a n t e d A d d it io n s D is p o s a ls / o t h e r - - - - - - - - - - 8 7 1 ,4 6 0 - - - - - - - - 8 7 1 ,4 6 0 - - - - - - - - - - B a la n c e a t t h e e n d o f t h e y e a r 1 5 ,9 8 3 ,9 2 6 6 5 0 ,2 0 0 5 ,3 3 0 ,7 1 4 1 0 0 ,0 0 0 7 7 0 ,0 0 0 3 ,1 1 4 ,7 5 9 - - 6 3 7 ,9 4 5 2 6 ,5 8 7 ,5 4 4 O r d in a r y s h a r e s F P o u lla s H o n . W L S m it h (a p p o in t e d 7 -S e p -2 0 1 8 )! J C J o o s t e -J a c o b s L H o s k in g (a p p o in t e d 5 -M a r -2 0 1 9 )! P T s e g a s M V o g t s M S W h it t in g h a m J D a c k (a p p o in t e d 1 5 -J u n -2 0 2 0 )! F H o u llis ! O p e n in g b a la n c e a s a t a p p o in tm e n t d a te O p t i o n h o l d i n g T h e n u m b e r o p t io n s o v e r o rd in a r y s h a re s in t h e C o m p a n y h e ld d u r in g t h e fi n a n c ia l y e a r b y e a c h d ire c t o r a n d o t h e r m e m b e r s o f k e y m a n a g e m e n t p e r s o n n e l o f t h e c o n s o lid a t e d e n t it y , in c lu d in g t h e ir p e r s o n a lly re la t e d p a r t ie s , is s e t o u t b e lo w : G r a n t e d A d d it io n s O r d in a r y s h a r e s F P o u lla s J C J o o s t e -J a c o b s (re s ig n e d 3 1 -0 5 -2 0 2 0 ) 4 P T s e g a s M V o g t s (re s ig n e d 3 1 -0 1 -2 0 2 0 ) 4 M S W h it t in g h a m H o n W L S m it h (re s ig n e d 1 -0 1 -2 0 2 0 ) 4 L H o s k in g (re s ig n e d 2 1 -0 2 -2 0 2 0 ) 4 H o n T ro y G r a n t (a p p o in t e d 2 3 -0 6 -2 0 2 0 ) 3 J D a c k (a p p o in t e d 1 5 -0 6 -2 0 2 0 ) 2 F H o u llis T P e lu s o (re s ig n e d 2 0 -0 6 -2 0 1 9 ) 4 B a la n c e a t t h e s t a r t o f t h e y e a r 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 - - - 1 ,5 0 0 ,0 0 0 7 5 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 3 ,1 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 - - - - - 8 ,2 5 0 ,0 0 0 8 ,1 0 0 ,0 0 0 1 a ll o p t io n s v e s t im m e d ia te ly a n d a re e x e rc is a b le a t a n y tim e 2 o p e n in g b a la n c e a s a t 1 5 -0 6 -2 0 2 0 3 o p e n in g b a la n c e a s a t 2 3 -0 6 -2 0 2 0 4 a t tim e o f re s ig n a tio n a s D ire c to r/ k e y m a n a g e m e n t p e rs o n n e l D is p o s a ls / o t h e r (1 ,0 0 0 ,0 0 0 ) (1 ,0 0 0 ,0 0 0 ) (1 ,0 0 0 ,0 0 0 ) (4 ,1 0 0 ,0 0 0 ) (1 ,0 0 0 ,0 0 0 ) (1 ,0 0 0 ,0 0 0 ) (1 ,0 0 0 ,0 0 0 ) - - - (7 5 0 ,0 0 0 ) B a la n c e a t t h e e n d o f t h e y e a r 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 1 ,0 0 0 ,0 0 0 - 1 ,0 0 0 ,0 0 0 - - - - 1 ,5 0 0 ,0 0 0 - (1 0 ,8 5 0 ,0 0 0 ) 5 ,5 0 0 ,0 0 0 - - - - - - - - - - - - M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 3 3 D ire c t o r s ’ R e p o r t O T H E R T R A N S A C T I O N S W I T H K E Y M A N A G E M E N T P E R S O N N E L A N D T H E I R R E L A T E D P A R T I E S D u r in g o r s in c e t h e fi n a n c ia l y e a r, n o D ire c t o r o f t h e C o m p a n y h a s re c e iv e d o r b e c o m e e n t it le d t o re c e iv e a b e n e fi t , o t h e r t h a n a b e n e fi t in c lu d e d in t h e a g g re g a t e a m o u n t o f e m o lu m e n t s re c e iv e d o r d u e a n d re c e iv a b le b y t h e D ire c t o r s s h o w n in t h e c o n s o lid a t e d a c c o u n t s , b y re a s o n o f a c o n t r a c t e n t e re d in t o b y t h e C o m p a n y o r a n e n t it y t h a t t h e C o m p a n y c o n t ro lle d o r a b o d y c o r p o r a t e t h a t w a s re la t e d t o t h e C o m p a n y w h e n t h e c o n t r a c t w a s m a d e o r w h e n t h e D ire c t o r re c e iv e d , o r b e c a m e e n t it le d t o re c e iv e , t h e b e n e fi t w it h : > a D ire c t o r, o r > a fi r m o f w h ic h a D ire c t o r is a m e m b e r, o r > a n e n t it y in w h ic h a D ire c t o r h a s s u b s t a n t ia l fi n a n c ia l in t e re s t e x c e p t t h e u s u a l p ro fe s s io n a l fe e s fo r t h e ir s e r v ic e s p a id b y t h e C o m p a n y t o : Id e n t it y o f R e la t e d P a r t y N a t u r e o f R e la t io n s h ip T y p e o f T r a n s a c t io n T e r m s & C o n d it io n s o f T r a n s a c t io n A g g r e g a t e A m o u n t 2 0 2 0 $ 2 0 1 9 $ S t ro n g S o lu t io n s P t y L im it e d F r a n k P o u lla s is a re la t e d p a r t y o f S t ro n g S o lu t io n s P t y L im it e d a n d a d ire c t o r o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d C o n s u lt in g fe e s a n d P & E p u rc h a s e s P e t e r T s e g a s P e t e r T s e g a s is a D ire c t o r o f M a g n is E n e rg y Te c h n o lo g ie s L t d C o n s u lt in g F e e s M S t a n le y W h it t in g h a m M S t a n le y W h it t in g h a m is a D ire c t o r o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d D r U lr ic h B e z H o n D Te c h D r U lr ic h B e z is a D ire c t o r o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d C o n s u lt in g F e e s C o n s u lt in g F e e s N o r m a l c o m m e rc ia l t e r m s N o r m a l c o m m e rc ia l t e r m s N o r m a l c o m m e rc ia l t e r m s N o r m a l c o m m e rc ia l t e r m s 1 8 1 ,7 7 0 3 1 4 ,5 6 8 3 5 ,0 1 8 4 2 0 ,0 0 0 1 4 ,7 4 9 - - 9 ,9 0 0 2 0 1 9 R E M U N E R A T I O N R E P O R T T h e R e m u n e r a t io n R e p o r t re c e iv e d p o s it iv e s h a re h o ld e r s u p p o r t fro m m e m b e r s [8 8 % ] a t t h e 2 0 1 9 A n n u a l G e n e r a l M e e t in g . T h i s c o n c l u d e s t h e r e m u n e r a t i o n r e p o r t , w h i c h h a s b e e n a u d i t e d . S H A R E S U N D E R O P T I O N D e t a ils o f u n is s u e d s h a re s u n d e r o p t io n a s a t 3 0 J u n e 2 0 2 0 in M a g n is E n e r g y Te c h n o lo g ie s L im it e d a re : N u m b e r o f o r d in a r y s h a r e s C la s s o f s h a r e s E x e r c is e p r ic e o f o p t io n E x p ir y d a t e o f o p t io n 4 ,0 0 0 ,0 0 0 2 ,0 0 0 ,0 0 0 4 ,0 0 0 ,0 0 0 O rd in a r y O rd in a r y O rd in a r y 0 .4 0 .7 0 .7 A p r -2 1 J u n -2 1 O c t -2 2 T h e h o ld e r s o f t h e s e o p t io n s d o n o t h a v e t h e r ig h t , b y v ir t u e o f t h e o p t io n , t o p a r t ic ip a t e in a n y s h a re is s u e o r in t e re s t is s u e o f t h e C o m p a n y o r o f a n y o t h e r b o d y c o r p o r a t e o r re g is t e re d s c h e m e . N o v o t in g r ig h t s a t t a c h e d t o t h e o p t io n s . T h e re w e re N il (2 0 1 9 : 7 5 0 ,0 0 0 ) s h a re s is s u e d d u r in g t h e 2 0 2 0 fi n a n c ia l y e a r a s a re s u lt o f e x e rc is in g o f o p t io n s . 3 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S I N D E M N I F I C A T I O N A N D I N S U R A N C E O F D I R E C T O R S A N D O F F I C E R S T h e C o m p a n y h a s a g re e d t o in d e m n ify a ll t h e d ire c t o r s a n d e x e c u t iv e o ffi c e r s fo r a n y b re a c h o f la w s b y t h e C o m p a n y fo r w h ic h t h e y m a y b e h e ld p e r s o n a lly lia b le . T h e a g re e m e n t p ro v id e s fo r t h e C o m p a n y t o p a y lia b ilit ie s o r le g a l e x p e n s e s t o t h e e x t e n t p e r m it t e d b y la w . D u r in g o r s in c e t h e fi n a n c ia l y e a r, t h e C o m p a n y h a s p a id p re m iu m s in s u r in g a ll t h e D ire c t o r s o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d a g a in s t c o s t s in c u r re d in d e fe n d in g p ro c e e d in g s fo r c o n d u c t o t h e r t h a n : > > (a ) a w ilfu l b re a c h o f d u t y (b ) a c o n t r a v e n t io n o f s e c t io n s 1 8 2 o r 1 8 3 o f t h e C o r p o r a t io n s A c t , 2 0 0 1 a s p e r m it t e d b y s e c t io n 1 9 9 B o f t h e C o r p o r a t io n s A c t , 2 0 0 1 . T h e t o t a l a m o u n t o f in s u r a n c e c o n t r a c t p re m iu m s p a id is c o n fi d e n t ia l u n d e r t h e t e r m s o f t h e in s u r a n c e p o lic y . I N D E M N I F I C A T I O N A N D I N S U R A N C E O F A U D I T O R To t h e e x t e n t p e r m it t e d b y la w , t h e C o m p a n y h a s n o t a g re e d t o in d e m n ify it s a u d it o r s , H a ll C h a d w ic k M e lb o u r n e A u d it , a s p a r t o f t h e t e r m s o f it s a u d it e n g a g e m e n t a g re e m e n t a g a in s t c la im s b y t h ird p a r t ie s a r is in g fro m t h e a u d it (fo r a n u n s p e c ifi e d a m o u n t ). N o p a y m e n t h a s b e e n m a d e t o in d e m n ify H a ll C h a d w ic k M e lb o u r n e A u d it d u r in g o r s in c e t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 . P R O C E E D I N G S O N B E H A L F O F T H E C O M P A N Y N o p e r s o n h a s a p p lie d t o t h e C o u r t u n d e r S e c t io n 2 3 7 o f t h e C o r p o r a t io n s A c t 2 0 0 1 fo r le a v e t o b r in g p ro c e e d in g s o n b e h a lf o f t h e C o m p a n y , o r t o in t e r v e n e in a n y p ro c e e d in g s t o w h ic h t h e C o m p a n y is p a r t y fo r t h e p u r p o s e o f t a k in g re s p o n s ib ilit y o n b e h a lf o f t h e C o m p a n y fo r a ll o r p a r t o f t h o s e p ro c e e d in g s . S U B S E Q U E N T E V E N T S S u b s e q u e n t e v e n t s s in c e t h e e n d o f t h e y e a r a re o u t lin e d in N o t e 2 1 ‘S u b s e q u e n t e v e n t s ’ t o t h e F in a n c ia l S t a t e m e n t s . R O U N D I N G O F A M O U N T S T h e C o m p a n y is a c o m p a n y o f t h e k in d re fe r re d t o in A S IC C o r p o r a t io n s (R o u n d in g in F in a n c ia l / D ire c t o r s ’ R e p o r t s ) In s t r u m e n t 2 0 1 6 /1 9 1 , d a t e d 2 4 M a rc h 2 0 1 6 , a n d in a c c o rd a n c e w it h t h a t C o r p o r a t io n s In s t r u m e n t a m o u n t s in t h e D ire c t o r s ’ R e p o r t a n d t h e F in a n c ia l S t a t e m e n t s a re ro u n d e d o ff t o t h e n e a re s t d o lla r, u n le s s o t h e r w is e in d ic a t e d . N O N -A U D I T S E R V I C E S D e t a ils o f t h e a m o u n t s p a id o r p a y a b le t o t h e a u d it o r fo r n o n -a u d it s e r v ic e s p ro v id e d d u r in g t h e fi n a n c ia l y e a r b y t h e a u d it o r a re o u t lin e d b e lo w : H a ll C h a d w ic k M e lb o u r n e A u d it > > T a x a t io n s e r v ic e s –A u s t r a lia & T a n z a n ia $ N il C o r p o r a t e s e r v ic e s - A u s t r a lia $ N il B D O E a s t C o a s t P a r t n e r s > > T a x a t io n s e r v ic e s –A u s t r a lia & T a n z a n ia $ 3 6 ,4 0 0 C o r p o r a t e s e r v ic e s - A u s t r a lia $ N il T h e d ire c t o r s a re s a t is fi e d t h a t t h e p ro v is io n o f n o n -a u d it s e r v ic e s d u r in g t h e fi n a n c ia l y e a r, b y t h e a u d it o r (o r b y a n o t h e r p e r s o n o r fi r m o n t h e a u d it o r ’s b e h a lf ), is c o m p a t ib le w it h t h e g e n e r a l s t a n d a rd o f in d e p e n d e n c e fo r a u d it o r s im p o s e d b y t h e C o r p o r a t io n s A c t 2 0 0 1 . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 3 5 D ire c t o r s ’ R e p o r t T h e d ire c t o r s a re o f t h e o p in io n t h a t t h e s e r v ic e s a s d is c lo s e d in N o t e 2 2 t o t h e fi n a n c ia l s t a t e m e n t s d o n o t c o m p ro m is e t h e e x t e r n a l a u d it o r ’s in d e p e n d e n c e re q u ire m e n t s o f t h e C o r p o r a t io n s A c t 2 0 0 1 fo r t h e fo llo w in g re a s o n s : > > a ll n o n -a u d it s e r v ic e s h a v e b e e n re v ie w e d a n d a p p ro v e d t o e n s u re t h a t t h e y d o n o t im p a c t t h e in t e g r it y a n d o b je c t iv it y o f t h e a u d it o r ; a n d n o n e o f t h e s e r v ic e s u n d e r m in e t h e g e n e r a l p r in c ip le s re la t in g t o a u d it o r in d e p e n d e n c e a s s e t o u t in A P E S 1 1 0 C o d e o f E t h ic s fo r P ro fe s s io n a l A c c o u n t a n t s is s u e d b y t h e A c c o u n t in g P ro fe s s io n a l a n d E t h ic a l S t a n d a rd s B o a rd , in c lu d in g re v ie w in g o r a u d it in g t h e a u d it o r ’s o w n w o r k , a c t in g in a m a n a g e m e n t o r d e c is io n -m a k in g c a p a c it y fo r t h e c o m p a n y , a c t in g a s a d v o c a t e fo r t h e c o m p a n y o r jo in t ly s h a r in g e c o n o m ic r is k s a n d re w a rd s . A U D I T O R I N D E P E N D E N C E A c o p y o f t h e a u d it o r ’s in d e p e n d e n c e d e c la r a t io n a s re q u ire d u n d e r s e c t io n 3 0 7 C o f t h e C o r p o r a t io n s A c t , 2 0 0 1 is s e t o u t o n p a g e 1 9 . S ig n e d in a c c o rd a n c e w it h a re s o lu t io n o f t h e D ire c t o r s , p u r s u a n t t o s e c t io n 2 9 8 (2 )(a ) o f t h e C o r p o r a t io n s A c t , 2 0 0 1 . O n b e h a lf o f t h e d ire c t o r s F r a n k P o u l l a s E X E C U T IV E C H A IR M A N S y d n e y , 3 0 S e p t e m b e r 2 0 2 0 3 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 06A u d it o r ’s In d e p e n d e n c e D e c la r a t io n MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES ABN 26 115 111 763 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Magnis Energy Technologies Limited and controlled entities. As the lead audit partner for the audit of the financial report of Magnis Energy Technologies Limited and controlled entities for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Hall Chadwick Melbourne VIC 3000 DREW TOWNSEND Partner Date: 30 September 2020 MAGNIS ENERGY TECHNOLOGIES LIMITED: ANNUAL FINANCIAL REPORT 2020 19 SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 3 7 07S t a t e m e n t o f P ro fi t o r L o s s & O t h e r C o m p re h e n s iv e In c o m e Y E A R E N D E D 3 0 J U N E 2 0 2 0 C o n s o l i d a t e d 2 0 2 0 $ N o t e s I n c o m e In t e re s t re c e iv e d R & D G r a n t F o re ig n e x c h a n g e g a in P ro fi t o n s a le o f fi x e d a s s e t s O t h e r re v e n u e G o v e r n m e n t G r a n t s a n d A s s is t a n c e 3 1 1 3 0 ,3 6 3 1 1 6 ,3 8 5 2 0 ,9 7 8 4 9 3 ,3 1 1 1 9 ,8 4 3 7 1 ,0 0 0 2 0 1 9 $ 1 0 5 ,7 4 7 2 1 0 ,6 8 4 2 2 ,1 2 3 - - - T o t a l i n c o m e E x p e n d i t u r e A d m in is t r a t io n e x p e n s e s D e p re c ia t io n e x p e n s e D ire c t o r s ’ fe e s E m p lo y e e b e n e fi t s e x p e n s e L e g a l a n d c o n s u lt in g e x p e n s e s S h a re b a s e d p a y m e n t t o e m p lo y e e s S h a re b a s e d p a y m e n t t o n o n -e m p lo y e e s S h a re o f n e t lo s s o f a s s o c ia t e a c c o u n t e d fo r u s in g t h e e q u it y m e t h o d 2 8 (a ) 2 8 (a ) 8 5 1 ,8 8 0 3 3 8 ,5 5 4 3 ,7 3 2 ,9 8 3 1 ,3 1 4 ,1 0 4 1 7 9 ,6 1 5 4 9 0 ,6 3 9 1 ,5 1 7 ,8 7 5 1 ,2 9 4 ,7 8 8 7 4 7 8 0 0 - 1 2 0 ,9 0 1 5 5 2 ,8 5 9 1 ,3 0 3 ,2 7 1 7 9 4 ,7 3 8 1 1 ,4 0 0 1 0 ,5 0 0 3 0 1 ,1 4 4 1 ,0 1 3 ,0 3 4 1 ,4 7 9 ,1 9 0 8 ,2 3 0 ,4 8 1 5 ,8 8 8 ,1 0 7 (7 ,3 7 8 ,6 0 1 ) (5 ,5 4 9 ,5 5 3 ) 5 - - (7 ,3 7 8 ,6 0 1 ) (5 ,5 4 9 ,5 5 3 ) (6 ,9 8 3 ,5 1 3 ) (5 ,5 4 9 ,5 5 3 ) (3 9 5 ,0 8 8 ) - (7 ,3 7 8 ,6 0 1 ) (5 ,5 4 9 ,5 5 3 ) (2 ,5 2 4 ,5 2 3 ) 8 7 6 ,5 2 2 (1 ,6 4 8 ,0 0 1 ) - 2 4 0 ,8 3 1 2 4 0 ,8 3 1 E x p lo r a t io n a n d e v a lu a t io n e x p e n s e s T o t a l e x p e n d i t u r e (L o s s ) b e f o r e i n c o m e t a x e x p e n s e In c o m e t a x e x p e n s e N e t (l o s s ) f o r t h e y e a r N e t p r o fi t / (l o s s ) f o r t h e y e a r a t t r i b u t a b l e t o : O w n e r s o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d N o n -c o n t ro llin g In t e re s t N e t (l o s s ) f o r t h e y e a r O t h e r c o m p r e h e n s i v e i n c o m e /(l o s s ) It e m s t h a t m a y b e s u b s e q u e n t ly re c la s s ifi e d t o p ro fi t o r lo s s C h a n g e in fa ir v a lu e o f fi n a n c ia l a s s e t s a t F V O C I G a in / (lo s s ) o n fo re ig n c u r re n c y t r a n s la t io n O t h e r c o m p r e h e n s i v e i n c o m e / (l o s s ) f o r t h e y e a r, n e t o f t a x T o t a l c o m p r e h e n s i v e i n c o m e / (l o s s ) f o r t h e y e a r, n e t o f t a x (9 ,0 2 6 ,6 0 2 ) (5 ,3 0 8 ,7 2 2 ) T o t a l c o m p r e h e n s i v e e a r n i n g s / (l o s s ) f o r t h e y e a r a t t r i b u t a b l e t o : O w n e r s o f p a re n t e n t it y N o n -c o n t ro llin g In t e re s t T o t a l c o m p r e h e n s i v e i n c o m e / (l o s s ) f o r t h e y e a r, n e t o f t a x B a s ic lo s s p e r s h a re (c e n t s p e r s h a re ) D ilu t e d lo s s p e r s h a re (c e n t s p e r s h a re ) (9 ,0 2 4 ,7 8 3 ) (5 ,3 0 8 ,7 2 2 ) (1 ,8 1 9 ) - (9 ,0 2 6 ,6 0 2 ) (5 ,3 0 8 ,7 2 2 ) 2 3 2 3 1 .1 1 1 .1 1 0 .9 2 0 .9 2 T h e a b o v e S ta te m e n t o f P ro fi t o r L o s s a n d O th e r C o m p re h e n s iv e In c o m e s h o u ld b e re a d in c o n ju n c tio n w ith th e a c c o m p a n y in g N o te s . 3 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 08S t a t e m e n t o f F in a n c ia l P o s it io n Y E A R E N D E D 3 0 J U N E 2 0 2 0 C u r r e n t a s s e t s C a s h a n d c a s h e q u iv a le n t s T r a d e a n d o t h e r re c e iv a b le s L o a n re c e iv a b le s T o t a l c u r r e n t a s s e t s N o n c u r r e n t a s s e t s F in a n c ia l a s s e t s a t F V O C I In v e s t m e n t a c c o u n t e d fo r u s in g t h e e q u it y m e t h o d R ig h t -o f-u s e -a s s e t s D e v e lo p m e n t a s s e t s iM 3 N Y P & E P la n t & e q u ip m e n t T o t a l n o n c u r r e n t a s s e t s T o t a l a s s e t s C u r r e n t l i a b i l i t i e s T r a d e a n d o t h e r p a y a b le s L e a s e L ia b ilit y P ro v is io n s T o t a l c u r r e n t l i a b i l i t i e s N o n c u r r e n t l i a b i l i t i e s L e a s e L ia b ilit y P ro v is io n s T o t a l n o n c u r r e n t l i a b i l i t i e s T o t a l l i a b i l i t i e s N e t a s s e t s E q u i t y C o n t r ib u t e d e q u it y R e s e r v e s A c c u m u la t e d P ro fi t s /(L o s s e s ) P a r e n t I n t e r e s t - C a p i t a l a n d R e s e r v e s Is s u e d C a p it a l - N o n -c o n t ro llin g In t e re s t A c c u m u la t e d P ro fi t s /(L o s s e s ) - N o n -c o n t ro llin g In t e re s t N o n c o n t r o l l i n g i n t e r e s t s T o t a l e q u i t y C o n s o l i d a t e d 2 0 2 0 $ 7 1 9 ,6 1 5 5 2 7 ,1 4 3 2 8 0 ,9 4 1 2 0 1 9 $ 1 ,8 2 9 ,8 1 7 3 0 7 ,6 2 3 1 ,8 2 2 ,6 4 7 1 ,5 2 7 ,6 9 9 3 ,9 6 0 ,0 8 7 7 ,4 9 5 ,5 6 2 1 0 ,0 2 0 ,0 8 4 - 5 ,2 9 1 ,1 0 5 4 7 6 ,3 6 3 - 5 ,5 7 7 ,1 3 1 5 ,4 6 6 ,4 9 2 N o t e s 6 , 1 8 (b ) 7 8 1 0 1 1 1 1 2 (a ) 1 2 (b ) 1 1 ,9 7 1 ,6 5 0 1 6 ,0 9 1 - 5 3 ,2 9 8 2 5 ,5 3 6 ,7 9 7 2 0 ,8 3 0 ,9 7 9 2 7 ,0 6 4 ,4 9 6 2 4 ,7 9 1 ,0 6 6 1 3 1 1 4 1 1 4 1 ,7 9 4 ,6 0 8 5 9 0 ,8 0 0 1 9 7 ,9 5 0 1 1 2 ,2 9 0 2 ,1 0 4 ,8 4 8 2 9 2 ,7 0 0 4 3 ,3 2 3 3 3 6 ,0 2 3 - 1 3 7 ,7 4 0 7 2 8 ,5 4 0 - 4 0 ,8 2 1 4 0 ,8 2 1 2 ,4 4 0 ,8 7 1 7 6 9 ,3 6 1 2 4 ,6 2 3 ,6 2 5 2 4 ,0 2 1 ,7 0 5 1 5 (a ) 1 7 1 2 8 ,6 2 5 ,9 0 5 1 2 4 ,1 7 7 ,4 1 9 3 ,5 2 1 ,4 7 6 6 ,3 9 6 ,9 2 1 (1 1 2 ,9 3 8 ,2 3 1 ) (1 0 6 ,5 5 2 ,6 3 5 ) 1 9 ,2 0 9 ,1 5 0 2 4 ,0 2 1 ,7 0 5 5 ,8 0 9 ,5 6 3 (3 9 5 ,0 8 8 ) 5 ,4 1 4 ,4 7 5 - - - 2 4 ,6 2 3 ,6 2 5 2 4 ,0 2 1 ,7 0 5 T h e a b o v e S ta te m e n t o f P ro fi t o r L o s s a n d O th e r C o m p re h e n s iv e In c o m e s h o u ld b e re a d in c o n ju n c tio n w ith th e a c c o m p a n y in g N o te s . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 3 9 09S t a t e m e n t o f C h a n g e s in E q u it y Y E A R E N D E D 3 0 J U N E 2 0 2 0 N o t e s Is s u e d C a p it a l $ F V )C I R e s e r v e $ A t 1 J u ly 2 0 1 9 1 2 4 ,1 7 7 ,4 1 9 L o s s fo r t h e p re v io u s p e r io d L o s s fo r t h e p e r io d O t h e r c o m p re h e n s iv e in c o m e /(lo s s ) T o t a l c o m p r e h e n s i v e i n c o m e /(l o s s ) f o r t h e y e a r T r a n s a c t i o n s w i t h o w n e r s : C o n t r ib u t io n s o f e q u it y , n e t o f t ra n s a c t io n c o s t s S h a re b a s e d p a y m e n t s 2 8 (a ) F o r fe it u re o f s h a re -b a s e d p a y m e n t s N o n -C o n t ro lle d in t e re s t R e c la s s ifi c a t io n fro m re s e r v e - - - - 4 ,4 4 8 ,4 8 6 - - - - - - (2 ,5 2 4 ,5 2 3 ) (2 ,5 2 4 ,5 2 3 ) - - - - - S h a r e B a s e d P a y m e n t R e s e r v e s $ F o r e ig n C u r r e n c y T r a n s la t io n R e s e r v e $ A c c u m u la t e d (lo s s e s ) $ N o n c o n t r o llin g In t e r e s t s $ T o t a l E q u it y $ 1 ,2 9 0 ,6 4 4 5 ,1 0 6 ,2 7 7 (1 0 6 ,5 5 2 ,6 3 5 ) - 2 4 ,0 2 1 ,7 0 5 - - - - - 1 ,5 4 8 (1 ,2 2 8 ,9 9 2 ) - - - - - (6 3 1 ,0 7 5 ) (6 3 1 ,0 7 5 ) (6 ,9 8 3 ,5 1 3 ) (3 9 5 ,0 8 8 ) (7 ,3 7 8 ,6 0 1 ) 8 7 6 ,5 2 2 - - (1 ,6 4 8 ,0 0 1 ) 8 7 6 ,5 2 2 (6 ,9 8 3 ,5 1 3 ) (1 ,0 2 6 ,1 6 3 ) (9 ,6 5 7 ,6 7 7 ) 5 ,8 0 9 ,5 6 3 1 0 ,2 5 8 ,0 4 9 - - - - - - - 1 ,2 2 8 ,9 9 2 - - (1 ,0 2 6 ,1 6 3 ) 1 ,0 2 6 ,1 6 3 - - 1 ,5 4 8 - - - A t 3 0 J u n e 2 0 2 0 1 2 8 ,6 2 5 ,9 0 5 (2 ,5 2 4 ,5 2 3 ) 6 3 ,2 0 0 5 ,9 8 2 ,7 9 9 (1 1 3 ,3 3 3 ,3 1 9 ) 5 ,8 0 9 ,5 6 3 2 4 ,6 2 3 ,6 2 5 N o t e s Is s u e d C a p it a l $ F V )C I R e s e r v e $ S h a r e B a s e d P a y m e n t R e s e r v e s $ F o r e ig n C u r r e n c y T r a n s la t io n R e s e r v e $ A c c u m u la t e d (lo s s e s ) $ N o n c o n t r o llin g In t e r e s t s $ T o t a l E q u it y $ A t 1 J u l y 2 0 1 8 1 1 0 ,6 3 7 ,5 2 3 - 2 ,1 7 1 ,5 0 7 4 ,8 6 5 ,4 4 6 (1 0 1 ,8 4 0 ,9 3 2 ) - 1 5 ,8 3 3 ,5 4 4 L o s s fo r t h e p e r io d O t h e r c o m p re h e n s iv e in c o m e /(lo s s ) T o t a l c o m p r e h e n s i v e i n c o m e /(l o s s ) f o r t h e y e a r T r a n s a c t i o n s w i t h o w n e r s : C o n t r ib u t io n s o f e q u it y , n e t o f t ra n s a c t io n c o s t s S h a re b a s e d p a y m e n t s 2 8 (a ) F o r fe it u re o f s h a re -b a s e d p a y m e n t s R e c la s s ifi c a t io n fro m re s e r v e - - - 1 3 ,4 7 4 ,9 8 3 6 4 ,9 1 3 A t 3 0 J u n e 2 0 1 9 1 2 4 ,1 7 7 ,4 1 9 R e c la s s ifi c a t io n fro m re s e r v e - - - - - - - - - - - - 2 1 ,9 0 0 (8 3 7 ,8 5 0 ) (6 4 ,9 1 3 ) - (5 ,5 4 9 ,5 5 3 ) (5 ,5 4 9 ,5 5 3 ) 2 4 0 ,8 3 1 - 2 4 0 ,8 3 1 2 4 0 ,8 3 1 (5 ,5 4 9 ,5 5 3 ) - (5 ,3 0 8 ,7 2 2 ) - - - - - - 8 3 7 ,8 5 0 - 1 ,2 9 0 ,6 4 4 5 ,1 0 6 ,2 7 7 (1 0 6 ,5 5 2 ,6 3 5 ) - - - - - - - - - 1 3 ,4 7 4 ,9 8 3 2 1 ,9 0 0 - - 2 4 ,0 2 1 ,7 0 5 - A t 3 0 J u n e 2 0 2 0 1 2 8 ,6 2 5 ,9 0 5 (2 ,5 2 4 ,5 2 3 ) 6 3 ,2 0 0 5 ,9 8 2 ,7 9 9 (1 1 3 ,3 3 3 ,3 1 9 ) 5 ,8 0 9 ,5 6 3 2 4 ,6 2 3 ,6 2 5 T h e a b o v e S ta te m e n t o f C h a n g e s in E q u it y s h o u ld b e re a d in c o n ju n c tio n w ith th e a c c o m p a n y in g N o te s . 4 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 10S t a t e m e n t o f C a s h F lo w s Y E A R E N D E D 3 0 J U N E 2 0 2 0 C a s h fl o w s f r o m o p e r a t i n g a c t i v i t i e s P a y m e n ts to s u p p lie rs a n d e m p lo y e e s P a y m e n t o f e x p lo ra tio n e x p e n d itu re P a y m e n t fo r d e v e lo p m e n t a s s e ts In te re s t re c e iv e d G o v e rn m e n t G ra n ts a n d A s s is ta n c e R &D g ra n t C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ N o t e s (4 ,4 0 2 ,3 5 8 ) (3 ,8 7 4 ,2 1 9 ) (1 ,0 0 9 ,5 8 2 ) (1 ,5 5 9 ,0 1 5 ) (8 ,9 9 8 ) (4 2 5 ,0 7 7 ) 6 ,6 9 8 6 2 ,2 2 7 7 1 ,0 0 0 1 1 6 ,3 8 5 2 1 0 ,6 8 4 N e t c a s h u s e d i n o p e r a t i n g a c t i v i t i e s 1 8 (a ) (5 ,2 2 6 ,8 5 5 ) (5 ,5 8 5 ,4 0 0 ) C a s h fl o w s f r o m i n v e s t i n g a c t i v i t i e s A c q u is itio n o f p la n t & e q u ip m e n t A c q u is itio n o f in te re s t in a s s o c ia te A c q u is itio n o f in te re s t in fi n a n c ia l a s s e t P ro c e e d s fro m s a le o f p ro p e r ty, p la n t a n d e q u ip m e n t P a y m e n t o f lo a n to re la te d p a r tie s N e t c a s h fl o w s u s e d i n i n v e s t i n g a c t i v i t i e s C a s h fl o w s f r o m fi n a n c i n g a c t i v i t i e s P ro c e e d s fro m is s u e s /s a le o f o rd in a r y s h a re s a n d o p tio n s R e p a y m e n t o f le a s e lia b ilitie s C a p ita l ra is in g e x p e n s e s N e t c a s h fl o w s f r o m fi n a n c i n g a c t i v i t i e s (2 ,1 7 6 ) (1 2 ,4 6 1 ) (8 5 6 ,2 2 2 ) (1 ,5 7 1 ,6 0 2 ) (2 7 ,2 2 2 ) (1 ,3 9 3 ,5 9 2 ) 4 9 3 ,3 1 1 - 1 5 6 ,3 5 1 (1 ,8 2 9 ,0 7 3 ) (2 3 5 ,9 5 8 ) (4 ,8 0 6 ,7 2 8 ) 4 ,3 7 6 ,8 3 3 1 1 ,4 0 0 ,0 0 0 (4 4 ,5 0 4 ) 1 1 ,4 0 0 ,0 0 0 1 9 ,5 8 8 (7 0 2 ,7 9 5 ) 4 ,3 5 1 ,9 1 7 1 0 ,6 9 7 ,2 0 5 N e t i n c r e a s e /(d e c r e a s e ) i n c a s h a n d c a s h e q u i v a l e n t s (1 ,1 1 0 ,8 9 6 ) 3 0 5 ,0 7 7 N e t fo re ig n e x c h a n g e d iff e re n c e s A d d o p e n in g c a s h a n d c a s h e q u iv a le n ts – iM 3 N Y A d d o p e n in g c a s h a n d c a s h e q u iv a le n ts C l o s i n g c a s h a n d c a s h e q u i v a l e n t s (5 ,3 3 6 ) 6 ,0 3 0 8 5 4 - 1 ,8 2 9 ,8 1 7 1 ,5 2 3 ,8 8 6 1 8 (b ) 7 1 9 ,6 1 5 1 ,8 2 9 ,8 1 7 T h e a b o v e S ta te m e n t o f C a s h F lo w s s h o u ld b e re a d in c o n ju n c tio n w ith th e a c c o m p a n y in g N o te s . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 4 1 11N o t e s t o t h e F in a n c ia l S t a t e m e n t s Y E A R E N D E D 3 0 J U N E 2 0 2 0 1 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S T h e p r in c ip a l a c c o u n t in g p o lic ie s a d o p t e d in t h e p re p a r a t io n o f t h e fi n a n c ia l re p o r t a re s e t o u t b e lo w . T h e fi n a n c ia l re p o r t c o v e r s t h e c o n s o lid a t e d g ro u p o f M a g n is E n e r g y Te c h n o lo g ie s L im it e d a n d c o n t ro lle d e n t it ie s (“t h e G ro u p ”). M a g n is E n e rg y Te c h n o lo g ie s L im it e d is a c o m p a n y , lim it e d b y s h a re s , in c o r p o r a t e d in A u s t r a lia w h o s e s h a re s a re p u b lic ly t r a d e d o n A u s t r a lia n S e c u r it ie s E x c h a n g e (“A S X ”). T h e fo llo w in g is a s u m m a r y o f t h e m a t e r ia l a c c o u n t in g p o lic ie s a d o p t e d b y t h e c o n s o lid a t e d G ro u p in t h e p re p a r a t io n o f t h e fi n a n c ia l re p o r t . T h e a c c o u n t in g p o lic ie s h a v e b e e n c o n s is t e n t ly a p p lie d t o a ll y e a r s p re s e n t e d , u n le s s o t h e r w is e s t a t e d . B A S I S O F P R E P A R A T I O N T h e s e g e n e r a l p u r p o s e fi n a n c ia l s t a t e m e n t h a v e b e e n p re p a re d in a c c o rd a n c e w it h A u s t r a lia n A c c o u n t in g S t a n d a rd s a n d In t e r p re t a t io n s is s u e d b y t h e A u s t r a lia n A c c o u n t in g S t a n d a rd s B o a rd [“A A S B ’] a n d t h e C o r p o r a t io n s A c t 2 0 0 1 , a s a p p ro p r ia t e fo r -p ro fi t o r ie n t a t e d e n t it ie s . [i ] S t a t e m e n t o f C o m p l i a n c e T h e s e fi n a n c ia l s t a t e m e n t s a ls o c o m p ly w it h In t e r n a t io n a l F in a n c ia l R e p o r t in g S t a n d a rd s [“IF R S ”] a s is s u e d b y t h e In t e r n a t io n a l A c c o u n t in g S t a n d a rd s B o a rd [“IA S B ”] [i i ] H i s t o r i c a l c o s t c o n v e n t i o n T h e fi n a n c ia l re p o r t h a s b e e n p re p a re d o n a n a c c r u a l b a s is u n d e r t h e h is t o r ic a l c o s t c o n v e n t io n , a s m o d ifi e d b y t h e re v a lu a t io n o f s e le c t e d n o n -c u r re n t a s s e t s , fi n a n c ia l a s s e t s a n d fi n a n c ia l lia b ilit ie s fo r w h ic h t h e fa ir v a lu e b a s is o f a c c o u n t in g h a s b e e n a p p lie d . [i i i ] C r i t i c a l a c c o u n t i n g e s t i m a t e s T h e p re p a r a t io n o f fi n a n c ia l s t a t e m e n t s re q u ire s t h e u s e o f c e r t a in c r it ic a l a c c o u n t in g e s t im a t e s . It a ls o re q u ire s m a n a g e m e n t t o e x e rc is e it s ju d g e m e n t in t h e p ro c e s s o f a p p ly in g t h e G ro u p ’s a c c o u n t in g p o lic ie s . T h e a re a s in v o lv in g a h ig h e r d e g re e o f ju d g e m e n t o r c o m p le x it y , o r a re a s w h e re a s s u m p t io n s a n d e s t im a t e s a re s ig n ifi c a n t t o t h e fi n a n c ia l s t a t e m e n t s a re d is c lo s e d in N o t e 2 . T h e fi n a n c ia l re p o r t is p re p a re d in A u s t r a lia n d o lla r s . G O I N G C O N C E R N T h e G ro u p h a s a m u lt i s t r a t e g y b u s in e s s o f lit h iu m -io n b a t t e r y t e c h n o lo g y m a n u fa c t u r in g in t h e U S A a n d A u s t r a lia c o m b in e d w it h p re -m in e d e v e lo p m e n t o f it s N a c h u G r a p h it e p ro je c t in T a n z a n ia . T h e G ro u p is c o m m it t e d t o m in im u m e x p e n d it u re re q u ire m e n t s in re la t io n t o it s N a c h u t e n e m e n t s . F o r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 , t h e G ro u p re p o r t e d a n e t lo s s o f $ 7 ,3 7 8 ,6 0 1 (2 0 1 9 : $ 5 ,5 4 9 ,5 5 3 ) a n d n e t o p e r a t in g c a s h o u t fl o w s o f $ 5 ,2 2 6 ,8 5 3 (2 0 1 9 : $ 5 ,5 8 5 ,4 0 0 ). T h e o p e r a t in g c a s h o u t fl o w s h a v e b e e n fu n d e d b y c a s h in fl o w s fro m e q u it y r a is in g s o f $ 4 ,3 7 6 ,8 3 3 (2 0 1 9 : $ 1 1 ,4 0 0 ,0 0 0 ) d u r in g t h e y e a r. A s a t 3 0 J u n e 2 0 2 0 t h e G ro u p h a d n e t c u r re n t a s s e t s o f ($ 7 2 8 ,1 2 6 ) (2 0 1 9 : $ 3 ,2 3 1 ,5 4 7 ) in c lu d in g c a s h re s e r v e s o f $ 7 1 9 ,6 1 5 (2 0 1 9 : $ 1 ,8 2 9 ,8 1 7 ). S u b s e q u e n t t o y e a r e n d , M a g n is a n n o u n c e d it h a d re c e iv e d c o m m it m e n t s fo r a p la c e m e n t o f 4 5 m illio n fu lly p a id o rd in a r y s h a re s a t $ 0 .1 7 p e r s h a re t o p ro fe s s io n a l, s o p h is t ic a t e d , a n d in s t it u t io n a l in v e s t o r s t o r a is e A $ 7 .6 5 m illio n v ia a p la c e m e n t . O f t h e 4 5 m illio n s h a re s o r ig in a lly c o m m it t e d , 4 2 ,0 5 8 ,5 7 7 w e re is s u e d . A fu r t h e r 2 ,9 4 1 ,1 7 6 s h a re s w e re s u b s c r ib e d fo r b y M r J a m e s D a c k w h ic h w ill re q u ire s h a re h o ld e r a p p ro v a l a t t h e C o m p a n y ’s 2 0 2 0 A G M b e fo re t h e y c a n b e is s u e d . T h e re s id u a l 2 4 7 le s s s h a re s in t e n d e d fo r is s u e w e re n o t is s u e d d u e t o u n fo re s e e n b a n k in g t r a n s a c t io n c h a rg e s in c u r re d b y s h a re a p p lic a n t s . To t a l fu n d s r a is e d w ill b e u s e d t o s t re n g t h e n t h e b a la n c e s h e e t t o a llo w M a g n is t o c a p it a lis e o n c u r re n t a n d fu t u re g ro w t h o p p o r t u n it ie s in t h e b a t t e r y t e c h n o lo g y s e c t o r a n d t o fu n d t h e o n g o in g in v e s t m e n t in t h e fu t u re d e v e lo p m e n t o f t h e C o m p a n y ’s 1 0 0 % o w n e d N a c h u G r a p h it e P ro je c t . M a g n is fu r t h e r a n n o u n c e d o n 8 S e p t e m b e r 2 0 2 0 it h a d t e r m in a t e d t h e N e g m a S u b s c r ip t io n A g re e m e n t fo llo w in g t h e a n n o u n c e m e n t o n 4 S e p t e m b e r 2 0 2 0 o f t h e C o m p a n y ’s s u c c e s s fu l c a p it a l r a is in g . 4 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S A s s u c h , t h e fi n a n c ia l s t a t e m e n t s h a v e b e e n p re p a re d o n a g o in g c o n c e r n b a s is w h ic h c o n t e m p la t e s t h e c o n t in u it y o f n o r m a l b u s in e s s a c t iv it ie s , fu r t h e r s h a re p la c e m e n t s a n d t h e re a lis a t io n o f a s s e t s a n d s e t t le m e n t o f lia b ilit ie s in t h e o rd in a r y c o u r s e o f b u s in e s s . In t h e e v e n t t h a t t h e a s s u m p t io n s u n d e r p in n in g t h e b a s is o f p re p a r a t io n d o n o t o c c u r a s a n t ic ip a t e d , t h e re is m a t e r ia l u n c e r t a in t y t h a t m a y c a s t s ig n ifi c a n t d o u b t w h e t h e r t h e G ro u p w ill c o n t in u e t o o p e r a t e a s a g o in g c o n c e r n . If t h e G ro u p is u n a b le t o c o n t in u e a s a g o in g c o n c e r n it m a y b e re q u ire d t o re a lis e it s a s s e t s a n d e x t in g u is h it s lia b ilit ie s o t h e r t h a n in t h e n o r m a l c o u r s e o f b u s in e s s a n d a t a m o u n t s d iff e re n t t o t h o s e s t a t e d in t h e fi n a n c ia l s t a t e m e n t s . N o a d ju s t m e n t s h a v e b e e n m a d e t o t h e fi n a n c ia l re p o r t re la t in g t o t h e re c o v e r a b ilit y a n d c la s s ifi c a t io n o f t h e a s s e t c a r r y in g a m o u n t s o r t h e c la s s ifi c a t io n o f lia b ilit ie s t h a t m ig h t b e n e c e s s a r y s h o u ld t h e G ro u p n o t c o n t in u e a s a g o in g c o n c e r n . T h e fi n a n c ia l s t a t e m e n t s w e re a u t h o r is e d fo r is s u e b y t h e d ire c t o r s o n 3 0 S e p t e m b e r 2 0 2 0 . N E W A C C O U N T I N G S T A N D A R D S A N D I N T E R P R E T A T I O N S (i ) N e w a n d a m e n d e d s t a n d a r d s a d o p t e d b y t h e G r o u p T h e a c c o u n t in g p o lic ie s a d o p t e d a re c o n s is t e n t w it h t h o s e o f t h e p re v io u s fi n a n c ia l y e a r e x c e p t a s fo llo w s : A A S B 1 6 ‘L E A S E S ’ (a ) N a t u r e o f t h e e ff e c t o f a d o p t i o n o f A A S B 1 6 T h e G ro u p a p p lie d t h e m o d ifi e d re t ro s p e c t iv e t r a n s it io n m e t h o d t o a d o p t A A S B 1 6 a n d t h u s p r io r c o m p a r a t iv e s w e re n o t re s t a t e d . U n d e r t h is m e t h o d , t h e c u m u la t iv e e ff e c t o f in it ia lly a p p ly in g t h e s t a n d a rd is re c o g n is e d d ire c t ly a s a n a d ju s t m e n t t o e q u it y a t t h e d a t e o f in it ia l a p p lic a t io n , 1 J u ly 2 0 1 9 . T h e G ro u p e le c t e d t o u s e t h e re c o g n it io n e x e m p t io n s fo r le a s e c o n t r a c t s t h a t h a v e a le a s e t e r m o f 1 2 m o n t h s o r le s s a n d d o n o t c o n t a in a p u rc h a s e o p t io n (‘s h o r t -t e r m le a s e s ’), a n d le a s e c o n t r a c t s fo r w h ic h t h e u n d e r ly in g a s s e t is o f lo w v a lu e (‘lo w -v a lu e a s s e t s ’). T h e G ro u p h a s le a s e c o n t r a c t s fo r it s h e a d o ffi c e s in A u s t r a lia a n d T a n z a n ia . P r io r t o t h e a d o p t io n o f A A S B 1 6 , t h e G ro u p c la s s ifi e d e a c h o f it s le a s e s a t t h e in c e p t io n d a t e a s o p e r a t in g le a s e s . O p e r a t in g le a s e s w e re n o t c a p it a lis e d , a n d t h e le a s e p a y m e n t s w e re re c o g n is e d a s re n t e x p e n s e in t h e p ro fi t o r lo s s o n a s t r a ig h t -lin e b a s is o v e r t h e le a s e t e r m . O n a d o p t io n o f A A S B 1 6 , t h e G ro u p a p p lie d a s in g le re c o g n it io n a n d m e a s u re m e n t a p p ro a c h fo r a ll le a s e s , e x c e p t s h o r t - t e r m le a s e s a n d le a s e s o f lo w -v a lu e a s s e t s . T h e G ro u p h a s e le c t e d t o p re s e n t r ig h t -o f-u s e a s s e t s a n d le a s e lia b ilit ie s s e p a r a t e ly in t h e s t a t e m e n t o f fi n a n c ia l p o s it io n . O n t r a n s it io n , n o r ig h t -o f-u s e a s s e t o r le a s e lia b ilit y w a s re c o g n is e d d u e t o t h e re c o g n it io n e x e m p t io n s o f e x c lu d in g s h o r t -t e r m le a s e s . S u b s e q u e n t t o t r a n s it io n , le a s e lia b ilit ie s w e re re c o g n is e d b a s e d o n t h e p re s e n t v a lu e o f t h e re m a in in g le a s e p a y m e n t s , d is c o u n t e d u s in g t h e in c re m e n t a l b o r ro w in g r a t e a t t h e d a t e o f in it ia l a p p lic a t io n . T h e w e ig h t e d -a v e r a g e d is c o u n t r a t e a p p lie d w a s 5 .5 % . A A S B 1 6 w a s a d o p t e d u s in g t h e m o d ifi e d re t ro s p e c t iv e a p p ro a c h a n d a s s u c h t h e c o m p a r a t iv e s h a v e n o t re s t a t e d . T h e im p a c t o f t h e a d o p t io n is s u m m a r is e d a s fo llo w s : M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 4 3 N o t e s t o t h e F in a n c ia l S t a t e m e n t s L e a s e l i a b i l i t i e s O p e ra tin g le a s e c o m m itm e n ts d is c lo s e d a s a t 3 0 J u n e 2 0 2 0 S h o r t te rm a n d lo w v a lu e le a s e c o m m itm e n ts a s a t 3 0 J u n e 2 0 2 0 D is c o u n te d u s in g th e c o m p a n y ’s in c re m e n ta l b o rro w in g ra te o f 5 .5 % L e a s e lia b ility re c o g n is e d a s a t 1 J u ly 2 0 1 9 R e c o n c i l i a t i o n o f m o v e m e n t i n l e a s e l i a b i l i t i e s : L e a s e lia b ility re c o g n is e d a s a t 1 J u ly 2 0 1 9 A d d itio n s In te re s t e x p e n s e R e p a y m e n t o f le a s e lia b ilitie s To ta l L e a s e lia b ilitie s a s a t 3 0 J u n e 2 0 2 0 R i g h t -o f -u s e a s s e t s L e a s e lia b ility re c o g n is e d a s a t 1 J u ly 2 0 1 9 L e a s e in c e n tiv e s re c e iv e d R ig h t-o f-u s e a s s e ts a s a t 1 J u ly 2 0 1 9 R e c o n c i l i a t i o n o f m o v e m e n t i n r i g h t -o f -u s e a s s e t s R ig h t-o f-u s e a s s e ts a s a t 1 J u ly 2 0 1 9 A d d itio n s D e p re c ia tio n e x p e n s e R ig h t-o f-u s e a s s e ts a s a t 3 0 J u n e 2 0 2 0 3 0 -J u n e -2 0 2 0 $ 3 0 -J u n e -2 0 1 9 $ - - - - - 6 1 4 ,6 6 5 2 4 ,0 3 9 (1 4 8 ,0 5 4 ) (4 9 0 ,6 5 0 ) - - - - 6 1 4 ,8 0 8 (1 3 8 ,4 4 5 ) 4 7 6 ,3 6 3 - - - - - - - - - - - - - - - T h e im p a c t o f IF R S 1 6 a d o p t io n o n c lo s in g 3 0 J u n e 2 0 2 0 re p o r t e d b a la n c e s is s u m m a r is e d a s fo llo w s : A c c o u n t i n g u n d e r n e w a c c o u n t i n g p o l i c y (A A S B 1 6 ) A c c o u n t i n g u n d e r p r e v i o u s a c c o u n t i n g p o l i c y (A A S B 1 6 ) E ff e c t o f c h a n g e t o a c c o u n t i n g p o l i c y S t a t e m e n t o f P r o fi t o r L o s s a n d O t h e r C o m p r e h e n s i v e I n c o m e O c c u p a n c y e x p e n s e s D e p re c ia tio n a n d a m o r tis a tio n F in a n c e e x p e n s e s S t a t e m e n t o f F i n a n c i a l P o s i t i o n R ig h t-o f-u s e a s s e ts L e a s e lia b ilitie s – c u rre n t L e a s e lia b ilitie s – n o n c u rre n t 1 3 0 ,7 0 4 1 3 4 ,6 3 2 2 4 ,0 3 9 2 8 9 ,3 7 5 4 7 6 ,3 6 3 (1 9 7 ,9 5 0 ) (2 9 2 ,7 0 0 ) (1 4 ,2 8 7 ) 3 0 3 ,6 6 2 (1 7 2 ,9 5 8 ) - - 1 3 4 ,6 3 2 2 4 ,0 3 9 3 0 3 ,6 6 2 (1 4 ,2 8 7 ) - - - 4 7 6 ,3 6 3 (1 9 7 ,9 5 0 ) (2 9 2 ,7 0 0 ) (1 4 ,2 8 7 ) (1 4 ,2 8 7 ) A c c u m u la te d lo s s e s (1 1 4 ,1 6 7 ,2 2 3 ) (1 1 4 ,1 5 2 ,9 3 6 ) (b ) S u m m a r y o f n e w a c c o u n tin g p o lic ie s fo r le a s e s (a p p lie d 1 J u ly 2 0 1 9 ) 4 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S B e lo w a re t h e n e w a c c o u n t in g p o lic ie s o f t h e G ro u p u p o n t h e a d o p t io n o f A A S B 1 6 w h ic h h a v e b e e n a p p lie d fro m t h e d a t e o f in it ia l a p p lic a t io n : L E A S E S T h e G ro u p a s s e s s e s a t c o n t r a c t in c e p t io n w h e t h e r a c o n t r a c t is , o r c o n t a in s , a le a s e . T h a t is , if t h e c o n t r a c t c o n t a in s t h e r ig h t t o c o n t ro l t h e u s e o f a n id e n t ifi a b le a s s e t fo r a p e r io d o f t im e in e x c h a n g e fo r c o n s id e r a t io n . R ig h t -o f-u s e -a s s e t s T h e G ro u p re c o g n is e s r ig h t -o f-u s e a s s e t s a t t h e c o m m e n c e m e n t d a t e o f t h e le a s e (i.e . t h e d a t e t h e u n d e r ly in g a s s e t is a v a ila b le fo r u s e ). R ig h t -o f-u s e a s s e t s a re m e a s u re d a t c o s t , le s s a n y a c c u m u la t e d d e p re c ia t io n a n d im p a ir m e n t lo s s e s , a n d a d ju s t e d fo r a n y re m e a s u re m e n t o f le a s e lia b ilit ie s . T h e c o s t o f r ig h t -o f-u s e a s s e t s in c lu d e s t h e a m o u n t o f le a s e lia b ilit ie s re c o g n is e d , in it ia l d ire c t c o s t s in c u r re d , a n d le a s e p a y m e n t s m a d e a t o r b e fo re t h e c o m m e n c e m e n t d a t e le s s a n y le a s e in c e n t iv e s re c e iv e d . U n le s s t h e G ro u p is re a s o n a b ly c e r t a in t o o b t a in o w n e r s h ip o f t h e le a s e d a s s e t a t t h e e n d o f t h e le a s e t e r m , t h e re c o g n is e d r ig h t -o f-u s e a s s e t s a re d e p re c ia t e d o n a s t r a ig h t -lin e b a s is o v e r t h e s h o r t e r o f it s e s t im a t e d u s e fu l lie a n d t h e le a s e t e r m . R ig h t -o f-u s e a s s e t s a re s u b je c t t o im p a ir m e n t . L E A S E L I A B I L I T I E S A t t h e c o m m e n c e m e n t d a t e o f t h e le a s e , t h e G ro u p re c o g n is e s le a s e lia b ilit ie s m e a s u re d a t t h e p re s e n t v a lu e o f le a s e p a y m e n t s t o b e m a d e o v e r t h e le a s e t e r m . T h e le a s e p a y m e n t in c lu d e s fi x e d p a y m e n t s (in c lu d in g in -s u b s t a n c e fi x e d p a y m e n t s ) le s s a n y le a s e in c e n t iv e s re c e iv a b le , v a r ia b le le a s e p a y m e n t s t h a t d e p e n d o n a n in d e x o r a r a t e , a n d a m o u n t s e x p e c t e d t o b e p a id u n d e r re s id u a l v a lu e g u a r a n t e e s . T h e le a s e p a y m e n t s a ls o in c lu d e t h e e x e rc is e p r ic e o f a p u rc h a s e o p t io n re a s o n a b ly c e r t a in t o b e e x e rc is e d b y t h e G ro u p a n d p a y m e n t s o f p e n a lt ie s fo r t e r m in a t in g a le a s e , if t h e le a s e t e r m s re fl e c t t h e G ro u p e x e rc is in g t h e o p t io n t o t e r m in a t e . T h e v a r ia b le le a s e p a y m e n t s t h a t d o n o t d e p e n d o n a n in d e x o r a r a t e a re re c o g n is e d a s e x p e n s e in t h e p e r io d o n w h ic h t h e e v e n t o r c o n d it io n t h a t t r ig g e re d t h e p a y m e n t o c c u r s . In c a lc u la t in g t h e p re s e n t v a lu e o f t h e le a s e p a y m e n t s , t h e G ro u p u s e s t h e in c re m e n t a l b o r ro w in g r a t e a t t h e le a s e c o m m e n c e m e n t d a t e o f t h e in t e re s t r a t e im p lic it in t h e le a s e is n o t re a d ily d e t e r m in a b le . A f t e r t h e c o m m e n c e m e n t d a t e , t h e a m o u n t o f le a s e lia b ilit ie s is in c re a s e d t o re fl e c t t h e a c c re t io n o f in t e re s t a n d re d u c e d fo r t h e le a s e p a y m e n t s m a d e . In a d d it io n , t h e c a r r y in g a m o u n t o f le a s e lia b ilit ie s is re m e a s u re d if t h e re is a m o d ifi c a t io n , a c h a n g e in t h e le a s e t e r m , a c h a n g e in t h e in -s u b s t a n c e fi x e d le a s e p a y m e n t s o r a c h a n g e in t h e a s s e s s m e n t t o p u rc h a s e t h e u n d e r ly in g a s s e t . S H O R T -T E R M L E A S E S A N D L E A S E S O F L O W -V A L U E A S S E T S T h e G ro u p a p p lie s t h e s h o r t -t e r m le a s e re c o g n it io n e x e m p t io n t o it s s h o r t -t e r m le a s e s . It a ls o a p p lie s t h e le a s e o f lo w -v a lu e a s s e t s re c o g n it io n e x e m p t io n t o le a s e s t h a t a re c o n s id e re d o f lo w v a lu e . L e a s e p a y m e n t s o n s h o r t -t e r m le a s e a n d le a s e o f lo w -v a lu e a s s e t s a re re c o g n is e d a s a n e x p e n s e o n a s t r a ig h t -lin e b a s is o v e r t h e le a s e t e r m . T h e G ro u p h a s n o t e le c t e d t o e a r ly a d o p t a n y o t h e r n e w s t a n d a rd . (ii) E a r ly A d o p t io n o f S t a n d a r d s T h e G ro u p d id n o t a p p ly t h e e a r ly a d o p t io n o f S t a n d a rd s fro m t h e fi n a n c ia l y e a r b e g in n in g o n 1 J u ly 2 0 1 9 . (iii) A c c o u n t in g S t a n d a r d s a n d I n t e r p r e t a t io n s is s u e d b u t n o t y e t e ff e c t iv e C O N C E P T U A L F R A M E W O R K F O R F I N A N C I A L R E P O R T I N G (C O N C E P T U A L F R A M E W O R K ) T h e re v is e d C o n c e p t u a l F r a m e w o r k is a p p lic a b le t o a n n u a l re p o r t p e r io d s b e g in n in g o n o r a f t e r 1 J a n u a r y 2 0 2 0 a n d e a r ly a d o p t io n is p e r m it t e d . T h e C o n c e p t u a l F r a m e w o r k c o n t a in s n e w d e fi n it io n a n d re c o g n it io n c r it e r ia a s w e ll a s n e w g u id a n c e o n m e a s u re m e n t t h a t a ff e c t s s e v e r a l A c c o u n t in g S t a n d a rd s . W h e re t h e c o n s o lid a t e d e n t it y h a s re lie d o n t h e e x is t in g fr a m e w o r k in d e t e r m in in g it s a c c o u n t in g p o lic ie s fo r t r a n s a c t io n s , e v e n t s o r c o n d it io n s t h a t a re n o t o t h e r w is e d e a lt w it h u n d e r t h e A u s t r a lia n A c c o u n t in g S t a n d a rd s , t h e c o n s o lid a t e d e n t it y m y n e e d t o re v ie w s u c h p o lic ie s u n d e r t h e re v is e d fr a m e w o r k . A t t h is t im e , t h e a p p lic a t io n o f t h e C o n c e p t u a l F r a m e w o r k is n o t e x p e c t e d t o h a v e m a t e r ia l im p a c t o n t h e c o n s o lid a t e d e n t it y ’s fi n a n c ia l s t a t e m e n t s . E X P L O R A T I O N A N D E V A L U A T I O N C O S T S E x p lo r a t io n a n d e v a lu a t io n e x p e n d it u re is e x p e n s e d d ire c t ly t o p ro fi t a n d lo s s w h e n in c u r re d . A c c o u n t in g p o lic ie s fo r t h e G ro u p ’s d e v e lo p m e n t a s s e t s a re o u t lin e d in N o t e 1 1 ‘D e v e lo p m e n t A s s e t s ’. M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 4 5 N o t e s t o t h e F in a n c ia l S t a t e m e n t s F A I R V A L U E M E A S U R E M E N T W h e n a n a s s e t o r lia b ilit y , fi n a n c ia l o r n o n -fi n a n c ia l, is m e a s u re d a t fa ir v a lu e fo r re c o g n it io n o r d is c lo s u re p u r p o s e s , t h e fa ir v a lu e is b a s e d o n t h e p r ic e t h a t w o u ld b e re c e iv e d t o s e ll a n a s s e t o r p a id t o t r a n s fe r a lia b ilit y in a n o rd e r ly t r a n s a c t io n b e t w e e n m a r k e t p a r t ic ip a n t s a t t h e m e a s u re m e n t d a t e ; a n d a s s u m e s t h a t t h e t r a n s a c t io n w ill t a k e p la c e e it h e r : in t h e p r in c ip a l m a r k e t ; o r in t h e a b s e n c e o f a p r in c ip a l m a r k e t , in t h e m o s t a d v a n t a g e o u s m a r k e t . F a ir v a lu e is m e a s u re d u s in g t h e a s s u m p t io n s t h a t m a r k e t p a r t ic ip a n t s w o u ld u s e w h e n p r ic in g t h e a s s e t o r lia b ilit y , a s s u m in g t h e y a c t in t h e ir e c o n o m ic b e s t in t e re s t s . F o r n o n -fi n a n c ia l a s s e t s , t h e fa ir v a lu e m e a s u re m e n t is b a s e d o n it s h ig h e s t a n d b e s t u s e . V a lu a t io n t e c h n iq u e s t h a t a re a p p ro p r ia t e in t h e c irc u m s t a n c e s a n d fo r w h ic h s u ffi c ie n t d a t a a re a v a ila b le t o m e a s u re fa ir v a lu e , a re u s e d , m a x im is in g t h e u s e o f re le v a n t o b s e r v a b le in p u t s a n d m in im is in g t h e u s e o f u n o b s e r v a b le in p u t s A s s e t s a n d lia b ilit ie s m e a s u re d a t fa ir v a lu e a re c la s s ifi e d in t o t h re e le v e ls , u s in g a fa ir v a lu e h ie r a rc h y t h a t re fl e c t s t h e s ig n ifi c a n c e o f t h e in p u t s u s e d in m a k in g t h e m e a s u re m e n t s . C la s s ifi c a t io n s a re re v ie w e d a t e a c h re p o r t in g d a t e a n d t r a n s fe r s b e t w e e n le v e ls a re d e t e r m in e d b a s e d o n a re a s s e s s m e n t o f t h e lo w e s t le v e l o f in p u t t h a t is s ig n ifi c a n t t o t h e fa ir v a lu e m e a s u re m e n t . F o r re c u r r in g a n d n o n -re c u r r in g fa ir v a lu e m e a s u re m e n t s , e x t e r n a l v a lu e r s m a y b e u s e d w h e n in t e r n a l e x p e r t is e is e it h e r n o t a v a ila b le o r w h e n t h e v a lu a t io n is d e e m e d t o b e s ig n ifi c a n t . E x t e r n a l v a lu e r s a re s e le c t e d b a s e d o n m a r k e t k n o w le d g e a n d re p u t a t io n . W h e re t h e re is a s ig n ifi c a n t c h a n g e in fa ir v a lu e o f a n a s s e t o r lia b ilit y fro m o n e p e r io d t o a n o t h e r, a n a n a ly s is is u n d e r t a k e n , w h ic h in c lu d e s a v e r ifi c a t io n o f t h e m a jo r in p u t s a p p lie d in t h e la t e s t v a lu a t io n a n d a c o m p a r is o n , w h e re a p p lic a b le , w it h e x t e r n a l s o u rc e s o f d a t a . G O O D S A N D S E R V I C E S T A X (G S T A N D /O R V A T ) R e v e n u e s , e x p e n s e s , a n d a s s e t s a re re c o g n is e d n e t o f t h e a m o u n t o f G S T /VA T e x c e p t : > w h e re t h e G S T /VA T in c u r re d o n a p u rc h a s e o f g o o d s a n d s e r v ic e s is n o t re c o v e r a b le fro m t h e t a x a t io n a u t h o r it y , in w h ic h c a s e t h e G S T /VA T is re c o g n is e d a s p a r t o f t h e c o s t o f a c q u is it io n o f t h e a s s e t o r a s p a r t o f t h e e x p e n s e it e m a s a p p lic a b le ; a n d > re c e iv a b le s a n d p a y a b le s a re s t a t e d w it h t h e a m o u n t o f G S T /VA T in c lu d e d . T h e n e t a m o u n t o f G S T /VA T re c o v e r a b le fro m , o r p a y a b le t o , t h e t a x a t io n a u t h o r it y is in c lu d e d a s p a r t o f re c e iv a b le s o r p a y a b le s in t h e s t a t e m e n t o f fi n a n c ia l p o s it io n . C a s h fl o w s a re in c lu d e d in t h e S t a t e m e n t o f C a s h F lo w s o n a g ro s s b a s is a n d t h e G S T /VA T c o m p o n e n t o f c a s h fl o w s a r is in g fro m in v e s t in g a n d fi n a n c in g a c t iv it ie s , w h ic h is re c o v e r a b le fro m , o r p a y a b le t o , t h e t a x a t io n a u t h o r it y , a re c la s s ifi e d a s o p e r a t in g c a s h fl o w s . C o m m it m e n t s a n d c o n t in g e n c ie s a re d is c lo s e d n e t o f t h e a m o u n t o f G S T /VA T re c o v e r a b le fro m , o r p a y a b le t o , t h e t a x a t io n a u t h o r it y . W it h h o ld in g t a x a n d o t h e r in d ire c t t a x e s a re in c u r re d o n a m o u n t s o f VA T re c o v e r a b le fro m , o r p a y a b le t o , t h e t a x a t io n a u t h o r it y . F O R E I G N C U R R E N C Y T R A N S L A T I O N F u n c t io n a l a n d p r e s e n t a t io n c u r r e n c y T h e fu n c t io n a l c u r re n c y o f e a c h o f t h e G ro u p ’s e n t it ie s is m e a s u re d u s in g t h e c u r re n c y o f t h e p r im a r y e c o n o m ic e n v iro n m e n t in w h ic h t h a t e n t it y o p e r a t e s . T h e c o n s o lid a t e d fi n a n c ia l s t a t e m e n t s a re p re s e n t e d in A u s t r a lia n d o lla r s w h ic h is t h e p a re n t e n t it y ’s fu n c t io n a l a n d p re s e n t a t io n c u r re n c y . T r a n s a c t io n s a n d b a la n c e s F o re ig n c u r re n c y t r a n s a c t io n s a re t r a n s la t e d in t o fu n c t io n a l c u r re n c y u s in g t h e e x c h a n g e r a t e s p re v a ilin g a t t h e d a t e o f t h e t r a n s a c t io n . F o re ig n c u r re n c y m o n e t a r y it e m s a re re -t r a n s la t e d a t t h e y e a r -e n d e x c h a n g e r a t e . N o n -m o n e t a r y it e m s 4 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S m e a s u re d a t h is t o r ic a l c o s t c o n t in u e t o b e c a r r ie d a t t h e e x c h a n g e r a t e a t t h e d a t e o f t h e t r a n s a c t io n . N o n -m o n e t a r y it e m s m e a s u re d a t fa ir v a lu e a re re p o r t e d a t t h e e x c h a n g e r a t e a t t h e d a t e w h e n fa ir v a lu e s w e re d e t e r m in e d . E x c h a n g e d iff e re n c e s a r is in g o n t h e t r a n s la t io n o f m o n e t a r y it e m s a re re c o g n is e d in p ro fi t o r lo s s . F in a n c ia l s t a t e m e n t s o f f o r e ig n o p e r a t io n s T h e fi n a n c ia l re s u lt s a n d p o s it io n o f fo re ig n o p e r a t io n s w h o s e fu n c t io n a l c u r re n c y is n o t A u s t r a lia n d o lla r s , t h e G ro u p ’s p re s e n t a t io n c u r re n c y , a re t r a n s la t e d a s fo llo w s : > > a s s e t s a n d lia b ilit ie s a re t r a n s la t e d a t y e a r -e n d e x c h a n g e r a t e s p re v a ilin g a t t h a t re p o r t in g d a t e in c o m e a n d e x p e n s e s a re t r a n s la t e d a t a v e r a g e e x c h a n g e r a t e s fo r e a c h m o n t h d u r in g t h e p e r io d . E x c h a n g e d iff e re n c e s a r is in g o n t r a n s la t io n o f fo re ig n o p e r a t io n s a re t r a n s fe r re d d ire c t ly t o t h e G ro u p ’s fo re ig n c u r re n c y t r a n s la t io n re s e r v e in o t h e r c o m p re h e n s iv e in c o m e . T h e s e d iff e re n c e s a re re c o g n is e d in t h e s t a t e m e n t o f c o m p re h e n s iv e in c o m e in t h e p e r io d in w h ic h t h e o p e r a t io n is d is p o s e d . E M P L O Y E E B E N E F I T S P ro v is io n is m a d e fo r e m p lo y e e b e n e fi t s a c c u m u la t e d a s a re s u lt o f e m p lo y e e s re n d e r in g s e r v ic e s u p t o t h e re p o r t in g d a t e . T h e s e b e n e fi t s in c lu d e w a g e s a n d s a la r ie s , a n n u a l le a v e , a n d lo n g s e r v ic e le a v e w h e n it is p ro b a b le t h a t s e t t le m e n t w ill b e re q u ire d . L ia b ilit ie s a r is in g in re s p e c t o f w a g e s a n d s a la r ie s , a n n u a l le a v e a n d a n y o t h e r e m p lo y e e b e n e fi t s e x p e c t e d t o b e s e t t le d w it h in t w e lv e m o n t h s o f t h e re p o r t in g d a t e a re m e a s u re d a t t h e ir n o m in a l a m o u n t s b a s e d o n re m u n e r a t io n r a t e s w h ic h a re e x p e c t e d t o b e p a id w h e n t h e lia b ilit y is s e t t le d in c lu d in g re la t e d o n -c o s t s , s u c h a s w o r k e r s c o m p e n s a t io n a n d p a y ro ll t a x . R E V E N U E R E C O G N I T I O N In t e re s t re v e n u e is re c o g n is e d a s in t e re s t a c c r u e s u s in g t h e e ff e c t iv e in t e re s t m e t h o d . C O N T R I B U T E D E Q U I T Y O rd in a r y s h a re s a re c la s s ifi e d a s e q u it y . A n y t r a n s a c t io n c o s t s a r is in g o n t h e is s u e o f o rd in a r y s h a re s a re re c o g n is e d d ire c t ly in e q u it y a s a re d u c t io n o f t h e s h a re p ro c e e d s re c e iv e d . R E S T A T E M E N T O F C O M P A R A T I V E S W h e n re q u ire d b y a c c o u n t in g s t a n d a rd s , c o m p a r a t iv e fi g u re s h a v e b e e n a d ju s t e d t o c o n fo r m t o c h a n g e s in p re s e n t a t io n fo r t h e c u r re n t fi n a n c ia l y e a r. 2 . C R I T I C A L A C C O U N T I N G J U D G E M E N T S , E S T I M A T E S A N D A S S U M P T I O N S T h e p re p a r a t io n o f t h e fi n a n c ia l s t a t e m e n t s re q u ire s m a n a g e m e n t t o m a k e ju d g e m e n t s , e s t im a t e s a n d a s s u m p t io n s t h a t a ff e c t t h e re p o r t e d a m o u n t s in t h e fi n a n c ia l s t a t e m e n t s . M a n a g e m e n t c o n t in u a lly e v a lu a t e s it s ju d g e m e n t s a n d e s t im a t e s in re la t io n t o a s s e t s , lia b ilit ie s , c o n t in g e n t lia b ilit ie s , re v e n u e , a n d e x p e n s e s . M a n a g e m e n t b a s e s it s ju d g e m e n t s , e s t im a t e s a n d a s s u m p t io n s o n h is t o r ic a l e x p e r ie n c e a n d o n o t h e r v a r io u s fa c t o r s , in c lu d in g e x p e c t a t io n s o f fu t u re e v e n t s , m a n a g e m e n t b e lie v e s t o b e re a s o n a b le u n d e r t h e c irc u m s t a n c e s . T h e re s u lt in g a c c o u n t in g ju d g e m e n t s a n d e s t im a t e s w ill s e ld o m e q u a l t h e re la t e d a c t u a l re s u lt s . T h e e s t im a t e , ju d g e m e n t s a n d a s s u m p t io n s t h a t h a v e a s ig n ifi c a n t r is k o f c a u s in g a m a t e r ia l a d ju s t m e n t t o t h e c a r r y in g a m o u n t s o f a s s e t s a n d lia b ilit ie s (re fe r t o t h e re s p e c t iv e N o t e s ) w it h in t h e n e x t fi n a n c ia l y e a r a re d is c u s s e d b e lo w . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 4 7 N o t e s t o t h e F in a n c ia l S t a t e m e n t s C o r o n a v ir u s (C O V ID -1 9 ) p a n d e m ic J u d g e m e n t h a s b e e n e x e rc is e d in c o n s id e r in g t h e im p a c t s t h a t t h e C o ro n a v ir u s (C O V ID -1 9 ) p a n d e m ic h a s h a d , o r m a y h a v e , o n t h e c o n s o lid a t e d e n t it y b a s e d o n k n o w n in fo r m a t io n . T h is c o n s id e r a t io n e x t e n d s t o t h e n a t u re o f t h e p ro d u c t s a n d s e r v ic e s o ff e re d , c u s t o m e r s , s u p p ly c h a in , s t a ffi n g a n d g e o g r a p h ic re g io n s in w h ic h t h e c o n s o lid a t e d e n t it y o p e r a t e s . O t h e r t h a n a s a d d re s s e d in s p e c ifi c N o t e s , t h e re d o e s n o t c u r re n t ly a p p e a r t o b e e it h e r a n y s ig n ifi c a n t im p a c t u p o n t h e fi n a n c ia l s t a t e m e n t s o r a n y s ig n ifi c a n t u n c e r t a in t ie s w it h re s p e c t t o e v e n t s o r c o n d it io n s w h ic h m a y im p a c t t h e c o n s o lid a t e d e n t it y u n fa v o u r a b ly a s a t t h e re p o r t in g d a t e o r s u b s e q u e n t ly a s a re s u lt o f t h e C o ro n a v ir u s (C O V ID -1 9 ) p a n d e m ic . S h a r e -b a s e d p a y m e n t t r a n s a c t io n s T h e G ro u p m e a s u re s t h e c o s t o f e q u it y -s e t t le d t r a n s a c t io n s w it h e m p lo y e e s a n d d ire c t o r s b y re fe re n c e t o t h e fa ir v a lu e o f t h e e q u it y in s t r u m e n t s a t t h e d a t e a t w h ic h t h e y a re g r a n t e d . T h e fa ir v a lu e o f s h a re o p t io n s is d e t e r m in e d b y a n e x t e r n a l v a lu e r u s in g a b in o m ia l o p t io n p r ic in g m o d e l t h a t u s e s t h e a s s u m p t io n s d e t a ile d in N o t e 2 8 (g ). I n d ir e c t t a x r e c e iv a b le s a n d lia b ilit ie s T h e G ro u p is s u b je c t t o in d ire c t t a x e s in A u s t r a lia a n d t h e ju r is d ic t io n w h e re it h a s fo re ig n o p e r a t io n s . S ig n ifi c a n t ju d g e m e n t is re q u ire d in d e t e r m in in g t h e a m o u n t s re c o rd e d a s re c e iv a b le s fo r re c o v e r y o f s u c h t a x e s a n d p a y a b le s fo r p a y m e n t o f s u c h t a x e s . T h e G ro u p is s u b je c t t o a n a u d it b y a t a x a u t h o r it y in a ju r is d ic t io n in w h ic h it o p e r a t e s . T h e t a x a u t h o r it y is d is p u t in g t h e q u a n t u m o f g o o d s a n d s e r v ic e s t a x re c e iv a b le a n d w it h h o ld in g t a x e s p a y a b le . D is c u s s io n s w it h t h e re le v a n t t a x a u t h o r it y a re o n g o in g . T h e G ro u p re c o g n is e s lia b ilit ie s fo r a n t ic ip a t e d t a x a u d it is s u e s b a s e d o n e s t im a t e s o f w h e t h e r a d d it io n a l t a x e s w ill b e d u e . T h e G ro u p h a s a d e q u a t e ly re c o rd e d re c e iv a b le s a n d p a y a b le s fo r t h e a m o u n t s it b e lie v e s w ill u lt im a t e ly b e p a y a b le . W h e re t h e fi n a l o u t c o m e o f a n y m a t t e r s is d iff e re n t fro m a m o u n t s re c o rd e d , s u c h d iff e re n c e s w ill im p a c t t h e in d ire c t t a x re c e iv a b le s o r p ro v is io n in t h e p e r io d in w h ic h s u c h d e t e r m in a t io n is m a d e . F a ir v a lu e e s t im a t e s o f fi n a n c ia l in s t r u m e n t s T h e G ro u p is re q u ire d t o c la s s ify a ll a s s e t s a n d lia b ilit ie s , m e a s u re d a t fa ir v a lu e , u s in g a t h re e le v e l h ie r a rc h y , b a s e d o n t h e lo w e s t le v e l o f in p u t t h a t is s ig n ifi c a n t t o t h e e n t ire fa ir v a lu e m e a s u re m e n t , b e in g : L e v e l 1 : Q u o t e d p r ic e s (u n a d ju s t e d ) in a c t iv e m a r k e t s fo r id e n t ic a l a s s e t s o r lia b ilit ie s t h a t t h e e n t it y c a n a c c e s s a t t h e m e a s u re m e n t d a t e ; L e v e l 2 : In p u t s o t h e r t h a n q u o t e d p r ic e s in c lu d e d w it h in L e v e l 1 t h a t a re o b s e r v a b le fo r t h e a s s e t o r lia b ilit y , e it h e r d ire c t ly o r in d ire c t ly ; a n d L e v e l 3 : U n o b s e r v a b le in p u t s fo r t h e a s s e t o r lia b ilit y . C o n s id e r a b le ju d g e m e n t is re q u ire d t o d e t e r m in e w h a t is s ig n ifi c a n t t o fa ir v a lu e a n d t h e re fo re w h ic h c a t e g o r y t h e a s s e t o r lia b ilit y is p la c e d in c a n b e s u b je c t iv e T h e fa ir v a lu e o f a s s e t s a n d lia b ilit ie s c la s s ifi e d a s le v e l 3 is d e t e r m in e d b y t h e u s e o f v a lu a t io n m o d e ls . T h e s e in c lu d e d is c o u n t e d c a s h fl o w a n a ly s is o r t h e u s e o f o b s e r v a b le in p u t s t h a t re q u ire s ig n ifi c a n t a d ju s t m e n t s b a s e d o n u n o b s e r v a b le in p u t s . 3 . S E G M E N T I N F O R M A T I O N a ) Id e n t ifi c a t io n o f r e p o r t a b le s e g m e n t s T h e G ro u p h a s id e n t ifi e d it s o p e r a t in g s e g m e n t s b a s e d o n t h e in t e r n a l re p o r t s t h a t a re re v ie w e d a n d u s e d b y t h e e x e c u t iv e m a n a g e m e n t t e a m (c h ie f o p e r a t in g d e c is io n m a k e r ) in a s s e s s in g p e r fo r m a n c e a n d in d e t e r m in in g t h e a llo c a t io n o f re s o u rc e s . D u r in g t h e fi n a n c ia l y e a r, t h e G ro u p c o n t in u e d it s p a r t ic ip a t io n in g lo b a l c o n s o r t iu m , in c lu d in g o w n e r s h ip , t o o p e r a t e lit h iu m -io n b a t t e r y g ig a fa c t o r ie s in A u s t r a lia a n d t h e U S A . A s a m e m b e r o f t h e s e c o n s o r t iu m s , M a g n is ’ ro le w ill b e t o p ro v id e a n o d e m a t e r ia ls a n d a s s o c ia t e d t e c h n o lo g ie s t o a s s is t in t h e p ro d u c t io n p ro c e s s . T h is a c t iv it y is s u p p le m e n t e d b y t h e in v o lv e m e n t in t h e d e v e lo p m e n t a n d u lt im a t e m in in g o f n a t u r a l fl a k e g r a p h it e fo r u s e in v a r io u s in d u s t r ie s , in c lu d in g in p a r t ic u la r b a t t e r ie s fo r s t o r in g e le c t r ic a l e n e rg y . 4 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S D u e t o t h e in fa n c y o f it s in t e re s t s in t h e lit h iu m -io n b a t t e r y s e c t o r, t h e G ro u p h a s d e t e r m in e d it s re p o r t a b le s e g m e n t s fo r t h e fi n a n c ia l y e a r e n d e d 3 0 J u n e 2 0 2 0 a s fo llo w s : > L it h iu m -io n B a t t e r y in v e s t m e n t s > G r a p h it e e x p lo r a t io n a n d d e v e lo p m e n t b ) Id e n t ifi c a t io n o f r e p o r t a b le s e g m e n t s 2 0 2 0 S e g m e n t fi n a n c i a l i n f o r m a t i o n L i t h i u m -i o n B a t t e r y I n v e s t m e n t U S A $ L i t h i u m -i o n B a t t e r y I n v e s t m e n t A u s t r a l i a $ G r a p h i t e E x p l o r a t i o n & D e v e l o p m e n t T a n z a n i a $ C o n s o l i d a t e d $ S e g m e n t re v e n u e S e g m e n t lo s s b e fo re t a x S e g m e n t c u r re n t a s s e t s S e g m e n t n o n -c u r re n t a s s e t s S e g m e n t lia b ilit ie s A c c o u n t in g p o lic ie s 1 4 9 ,4 6 8 - 1 9 1 ,2 1 7 7 ,4 9 5 ,5 6 1 - 1 8 ,2 5 2 - 1 3 1 ,4 7 3 - - 6 8 4 ,1 6 0 (7 ,3 7 8 ,6 0 1 ) 1 ,2 0 5 ,0 0 9 1 8 ,0 4 1 ,2 3 6 (2 ,4 4 0 ,8 7 1 ) 8 5 1 ,8 8 0 (7 ,3 7 8 ,6 0 1 ) 1 ,5 2 7 ,6 9 9 2 5 ,6 8 7 ,7 9 7 (2 ,4 4 0 ,8 7 1 ) T h e G ro u p a p p lie s A A S B 8 O p e r a t in g S e g m e n t s a n d d e t e r m in e s it s o p e r a t in g s e g m e n t s t o b e b a s e d o n it s g e o g r a p h ic a l lo c a t io n a n d a ls o b y o p e r a t io n a l t y p e . L it h iu m -Io n B a t t e r y In v e s t m e n t re fe r s t o t h e G ro u p s o w n e r s h ip in p la n n e d g ig a fa c t o r ie s v ia t h e G lo b a l C o n s o r t iu m Im p e r iu m 3 P t y L t d . G r a p h it e e x p lo r a t io n a n d d e v e lo p m e n t c u r re n t ly re fe r s t o t h e p re -d e v e lo p m e n t o p e r a t io n o f t h e N a c h u G r a p h it e P ro je c t in T a n z a n ia . T h e fi n a n c ia l p e r fo r m a n c e o f t h e s e s e g m e n t s a re re p o r t e d t o t h e B o a rd o n a m o n t h ly b a s is . T h e a c c o u n t in g s t a n d a rd s a d o p t e d in p re p a r in g in t e r n a l re p o r t s t o t h e B o a rd a re c o n s is t e n t w it h t h o s e a d o p t e d in p re p a r in g t h is a n n u a l re p o r t . O p e r a t in g s e g m e n t s a re s u b je c t t o r is k s a n d re t u r n s t h a t a re d iff e re n t t o t h o s e o f s e g m e n t s o p e r a t in g in o t h e r e c o n o m ic e n v iro n m e n t s . I n t e r -s e g m e n t t r a n s a c t io n s To a v o id a s y m m e t r ic a l a llo c a t io n w it h in s e g m e n t s w h ic h m a n a g e m e n t b e lie v e w o u ld b e in c o n s is t e n t p o lic y is t h a t if it e m s o f re v e n u e a n d e x p e n s e a re n o t a llo c a t e d t o o p e r a t in g s e g m e n t s t h e n a n y a s s o c ia t e d a s s e t s a n d lia b ilit ie s a re a ls o n o t a llo c a t e d t o s e g m e n t s . S e g m e n t a s s e t s a n d lia b ilit ie s S e g m e n t a s s e t s in c lu d e a ll a s s e t s u s e d b y a s e g m e n t a n d c o n s is t p r im a r ily o f c a s h a n d c a s h e q u iv a le n t s . D e v e lo p m e n t a s s e t s , p la n t a n d e q u ip m e n t a n d t r a d e a n d o t h e r re c e iv a b le s . W h ile m o s t o f t h e s e a s s e t s c a n b e d ire c t ly a t t r ib u t a b le t o in d iv id u a l s e g m e n t s , t h e c a r r y in g a m o u n t s o f c e r t a in a s s e t s u s e d jo in t ly b y s e g m e n t s a re n o t a llo c a t e d . S e g m e n t lia b ilit ie s c o n s is t p r im a r ily o f t r a d e a n d o t h e r c re d it o r s a n d e m p lo y e e b e n e fi t s . S e g m e n t a s s e t s a n d lia b ilit ie s d o n o t in c lu d e d e fe r re d in c o m e t a x e s . 4 . D I V I D E N D S P A I D O R P R O V I D E D F O R O N O R D I N A R Y S H A R E S N o d iv id e n d s w e re p a id o r d e c la re d s in c e t h e s t a r t o f t h e fi n a n c ia l y e a r. N o re c o m m e n d a t io n fo r p a y m e n t o f d iv id e n d s h a s b e e n m a d e . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 4 9 N o t e s t o t h e F in a n c ia l S t a t e m e n t s 5 . I N C O M E T A X C u r r e n t i n c o m e t a x C u rre n t in c o m e ta x c re d it/(e x p e n s e ) Ta x lo s s e s n o t re c o g n is e d a s n o t p ro b a b le (U n d e r)/o v e r p ro v is io n in p rio r y e a r D e f e r r e d i n c o m e t a x C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 2 ,2 3 4 ,2 2 0 1 ,5 1 0 ,5 6 7 (1 ,7 4 7 ,0 7 8 ) (1 ,4 5 5 ,3 3 1 ) 4 8 7 ,1 4 2 5 5 ,2 3 6 R e la tin g to o rig in a tio n a n d re v e rs a l o f te m p o ra r y d iff e re n c e s (4 8 7 ,1 4 2 ) (5 5 ,2 3 6 ) Ta x lo s s e s b ro u g h t to a c c o u n t to o ff s e t n e t d e fe rre d ta x lia b ility In c o m e ta x c re d it/(e x p e n s e ) re p o r te d in th e S ta te m e n t o f C o m p re h e n s iv e In c o m e a ) S t a t e m e n t o f C h a n g e s i n E q u i t y D e f e r r e d i n c o m e t a x r e l a t e d t o i t e m s c h a r g e d o r c r e d i t e d d i r e c t l y t o e q u i t y S h a re is s u e c o s ts D e fe rre d ta x o ff s e t In c o m e ta x b e n e fi t re p o r te d in E q u ity b ) T a x R e c o n c i l i a t i o n - - - - - - 5 0 ,3 1 8 1 0 2 ,7 0 8 (5 0 ,3 1 8 ) (1 0 2 ,7 0 8 ) - - A r e c o n c i l i a t i o n b e t w e e n t a x e x p e n s e a n d t h e p r o d u c t o f a c c o u n t i n g p r o fi t b e f o r e i n c o m e t a x m u l t i p l i e d b y t h e G r o u p ’s a p p l i c a b l e i n c o m e t a x r a t e i s a s f o l l o w s : A c c o u n tin g (lo s s ) b e fo re ta x (7 ,3 7 8 ,6 0 1 ) (5 ,5 4 9 ,5 5 3 ) A t th e G ro u p ’s s ta tu to r y 3 0 % ta x ra te (2 0 1 9 : 3 0 %) 2 ,2 1 3 ,5 8 0 1 ,6 6 4 ,8 6 6 S h a re b a s e d p a y m e n t e x p e n s e M o v e m e n t in te m p o ra r y d iff e re n c e s S h a re o f n e t P &L o f a s s o c ia te a c c o u n te d fo r u s in g e q u ity m e th o d (1 2 0 ,2 4 0 ) (3 8 0 ,5 6 5 ) - (3 ,1 5 0 ) (5 9 ,5 4 7 ) (9 0 ,3 4 3 ) E x p lo ra tio n a n d e v a lu a tio n e x p e n s e w rite o ff (1 1 8 ,3 7 6 ) (2 2 9 ,1 1 3 ) N o n -a s s e s s a b le R &D o ff s e t in c o m e D e d u c tib le o p tio n is s u e c o s ts O th e r a d ju s tm e n ts Ta x lo s s e s n o t b ro u g h t to a c c o u n t L o s s re c o u p m e n t In c o m e ta x (e x p e n s e ) re p o r te d in th e S ta te m e n t o f C o m p re h e n s iv e In c o m e 3 4 ,9 1 5 1 1 5 ,1 3 6 2 ,6 2 7 6 3 ,2 0 5 1 1 3 ,7 3 4 (4 ,3 2 1 ) (1 ,7 4 7 ,0 7 7 ) (1 ,4 5 5 ,3 3 1 ) - - - - 5 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S A t t h e re p o r t in g d a t e , t h e G ro u p h a s e s t im a t e d t a x lo s s e s o f $ 1 0 2 ,3 5 8 ,3 1 9 [2 0 1 9 : $ 9 5 ,7 0 9 ,9 6 5 ] a v a ila b le t o o ff s e t a g a in s t fu t u re t a x a b le in c o m e s u b je c t t o c o n t in u in g t o m e e t re le v a n t s t a t u t o r y t e s t s . To t h e e x t e n t t h a t is d o e s n o t o ff s e t a d e fe r re d t a x lia b ilit y , a d e fe r re d t a x a s s e t h a s n o t b e e n re c o g n is e d fo r t h e s e lo s s e s b e c a u s e it is n o t p ro b a b le t h a t fu t u re t a x a b le in c o m e w ill b e a v a ila b le t o u s e a g a in s t s u c h lo s s e s .” A C C O U N T I N G P O L I C I E S T h e in c o m e t a x e x p e n s e o r re v e n u e fo r t h e p e r io d is t h e t a x p a y a b le o n t h e c u r re n t p e r io d ’s t a x a b le in c o m e b a s e d o n t h e n a t io n a l in c o m e t a x r a t e fo r e a c h ju r is d ic t io n a d ju s t e d b y t h e c h a n g e s in d e fe r re d t a x a s s e t s a n d lia b ilit ie s a t t r ib u t a b le t o t e m p o r a r y d iff e re n c e s b e t w e e n t h e t a x b a s e s o f a s s e t s a n d lia b ilit ie s a n d t h e ir c a r r y in g a m o u n t s in t h e fi n a n c ia l s t a t e m e n t s , a n d t o u n u s e d t a x lo s s e s . D e fe r re d in c o m e t a x is p ro v id e d o n a ll t e m p o r a r y d iff e re n c e s a t t h e re p o r t in g d a t e b e t w e e n t h e t a x b a s e s o f a s s e t s a n d lia b ilit ie s a n d t h e ir c a r r y in g a m o u n t s fo r fi n a n c ia l re p o r t in g p u r p o s e s . D e fe r re d in c o m e t a x lia b ilit ie s a re re c o g n is e d fo r a ll t e m p o r a r y d iff e re n c e s , e x c e p t : > > w h e re t h e d e fe r re d in c o m e t a x lia b ilit y a r is e s fro m t h e in it ia l re c o g n it io n o f a n a s s e t o r lia b ilit y in a t r a n s a c t io n t h a t is n o t a b u s in e s s c o m b in a t io n a n d , a t t h e t im e o f t h e t r a n s a c t io n , a ff e c t s n e it h e r t h e a c c o u n t in g p ro fi t n o r t a x a b le p ro fi t o r lo s s ; o r w h e n t h e t a x a b le t e m p o r a r y d iff e re n c e is a s s o c ia t e d w it h in v e s t m e n t s in s u b s id ia r ie s , a s s o c ia t e s o r in t e re s t s in jo in t v e n t u re s , a n d t h e t im in g o f t h e re v e r s a l o f t h e t e m p o r a r y d iff e re n c e c a n b e c o n t ro lle d a n d it is p ro b a b le t h a t t h e t e m p o r a r y d iff e re n c e s w ill n o t re v e r s e in t h e fo re s e e a b le fu t u re . D e fe r re d in c o m e t a x a s s e t s a re re c o g n is e d fo r a ll d e d u c t ib le t e m p o r a r y d iff e re n c e s , c a r r y -fo r w a rd o f u n u s e d t a x a s s e t s a n d u n u s e d t a x lo s s e s , t o t h e e x t e n t t h a t it is p ro b a b le t h a t t a x a b le p ro fi t w ill b e a v a ila b le a g a in s t w h ic h t h e d e d u c t ib le t e m p o r a r y d iff e re n c e , a n d t h e c a r r y -fo r w a rd o f u n u s e d t a x a s s e t s a n d u n u s e d t a x lo s s e s c a n b e u s e d , e x c e p t : > > w h e re t h e d e fe r re d in c o m e t a x a s s e t re la t in g t o t h e d e d u c t ib le t e m p o r a r y d iff e re n c e a r is e s fro m t h e in it ia l re c o g n it io n o f a n a s s e t o r lia b ilit y in a t r a n s a c t io n t h a t is n o t a b u s in e s s c o m b in a t io n a n d , a t t h e t im e o f t h e t r a n s a c t io n , a ff e c t s n e it h e r t h e a c c o u n t in g p ro fi t n o r t a x a b le p ro fi t o r lo s s ; a n d w h e n t h e d e d u c t ib le t e m p o r a r y d iff e re n c e s is a s s o c ia t e d w it h in v e s t m e n t s in s u b s id ia r ie s , a s s o c ia t e s o r in t e re s t s in jo in t v e n t u re s , in w h ic h c a s e a d e fe r re d t a x a s s e t is o n ly re c o g n is e d t o t h e e x t e n t t h a t it is p ro b a b le t h a t t h e t e m p o r a r y d iff e re n c e w ill re v e r s e in t h e fo re s e e a b le fu t u re a n d t a x a b le p ro fi t w ill b e a v a ila b le a g a in s t w h ic h t h e t e m p o r a r y d iff e re n c e s c a n b e a p p lie d . T h e c a r r y in g a m o u n t o f d e fe r re d in c o m e t a x a s s e t s is re v ie w e d a t e a c h re p o r t in g d a t e a n d re d u c e d t o t h e e x t e n t t h a t it is n o lo n g e r p ro b a b le t h a t s u ffi c ie n t t a x a b le p ro fi t w ill b e a v a ila b le t o a llo w a ll o r p a r t o f t h e d e fe r re d in c o m e t a x a s s e t t o b e u t ilis e d . D e fe r re d in c o m e t a x a s s e t s a n d lia b ilit ie s a re m e a s u re d a t t h e t a x r a t e s t h a t a re e x p e c t e d t o a p p ly t o t h e y e a r w h e n t h e a s s e t is re a lis e d o r t h e lia b ilit y is s e t t le d , b a s e d o n t a x r a t e s [a n d t a x la w s ] t h a t h a v e b e e n e n a c t e d o r s u b s t a n t iv e ly e n a c t e d a t t h e re p o r t in g d a t e . In c o m e t a x e s re la t in g t o it e m s re c o g n is e d d ire c t ly in e q u it y a re re c o g n is e d in e q u it y a n d n o t in t h e s t a t e m e n t o f fi n a n c ia l p o s it io n . T a x c o n s o lid a t e d g r o u p T h e C o m p a n y a n d it s w h o lly o w n e d A u s t r a lia n s u b s id ia r ie s h a v e e le c t e d t o fo r m a t a x c o n s o lid a t e d g ro u p fro m 1 J u ly 2 0 1 5 , w it h M a g n is R e s o u rc e s L im it e d b e in g t h e h e a d e n t it y w it h in t h a t g ro u p . T h e s e e n t it ie s a re t a x e d a s a s in g le e n t it y . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 5 1 N o t e s t o t h e F in a n c ia l S t a t e m e n t s 6 . C U R R E N T A S S E T S - C A S H A N D C A S H E Q U I V A L E N T S C a s h o n h a n d C a s h a t b a n k A C C O U N T I N G P O L I C I E S C o n s o l i d a t e d 2 0 2 0 $ 5 ,0 9 4 7 1 4 ,5 2 1 7 1 9 ,6 1 5 2 0 1 9 $ 6 ,4 4 8 1 ,8 2 3 ,3 6 9 1 ,8 2 9 ,8 1 7 F o r s t a t e m e n t o f c a s h fl o w s p re s e n t a t io n p u r p o s e s , c a s h a n d c a s h e q u iv a le n t s in c lu d e s c a s h o n h a n d , d e p o s it s h e ld a t c a ll w it h fi n a n c ia l in s t it u t io n s , o t h e r s h o r t -t e r m h ig h ly liq u id in v e s t m e n t s t h a t a re re a d ily c o n v e r t ib le t o k n o w n a m o u n t s o f c a s h a n d w h ic h a re s u b je c t t o in s ig n ifi c a n t r is k o f c h a n g e in v a lu e , a n d b a n k o v e rd r a f t s . 7 . T R A D E A N D O T H E R R E C E I V A B L E S A c c r u e d in t e re s t G o o d s a n d s e r v ic e s t a x re c o v e r a b le P re p a y m e n t s a n d o t h e r re c e iv a b le s L e s s : a llo w a n c e fo r e x p e c t e d c re d it lo s s S e c u r it y d e p o s it A C C O U N T I N G P O L I C I E S C o n s o l i d a t e d 2 0 2 0 $ 9 1 0 2 6 ,1 5 8 3 9 9 ,0 6 1 (4 9 ,9 6 3 ) 1 5 0 ,9 7 7 5 2 7 ,1 4 3 2 0 1 9 $ 1 ,5 6 2 3 0 ,6 6 1 2 3 1 ,6 3 7 (1 0 7 ,2 1 4 ) 1 5 0 ,9 7 7 3 0 7 ,6 2 3 O t h e r re c e iv a b le s a re re c o g n is e d a n d m e a s u re d a t a m o r t is e d c o s t , le s s a n y a llo w a n c e fo r e x p e c t e d c re d it lo s s e s . A llo w a n c e f o r e x p e c t e d c r e d it lo s s e s T h e c o n s o lid a t e d e n t it y h a s re c o g n is e d a lo s s o f $ 4 9 ,9 6 3 (2 0 1 9 : 1 0 7 ,2 1 4 ) in t h e p ro fi t o r lo s s , in re s p e c t o f t h e e x p e c t e d c re d it lo s s e s re la t e d t o t r a d e a n d o t h e r re c e iv a b le s fo r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 . M o v e m e n t s in t h e a llo w a n c e fo r e x p e c t e d c re d it lo s s e s a re a s fo llo w s : O p e n in g b a la n c e A d d it io n a l p ro v is io n s re c o g n is e d R e c e iv a b le s w r it t e n o ff d u r in g t h e y e a r a s u n c o lle c t a b le U n u s e d a m o u n t s re v e r s e d C lo s in g b a la n c e C o n s o l i d a t e d 2 0 2 0 $ 1 0 7 ,2 1 4 4 9 ,9 6 3 (1 0 7 ,2 1 4 ) - 4 9 ,9 6 3 2 0 1 9 $ - 1 0 7 ,2 1 4 - - 1 0 7 ,2 1 4 5 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 8 . L O A N R E C E I V A B L E S A c c r u e d in t e re s t S h o r t -t e r m lo a n - C h a rg e C C C V L L C L e s s : a llo w a n c e fo r e x p e c t e d c re d it lo s s S h o r t -t e r m lo a n - Im p e r iu m 3 To w n s v ille A C C O U N T I N G P O L I C I E S C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 1 6 7 ,7 2 0 4 3 ,4 0 4 1 ,5 1 7 ,7 5 4 1 ,3 5 4 ,0 7 3 (1 ,5 1 7 ,7 5 4 ) 1 1 3 ,2 2 1 2 8 0 ,9 4 1 (4 9 ,8 3 0 ) 4 7 5 ,0 0 0 1 ,8 2 2 ,6 4 7 L o a n re c e iv a b le s a re re c o g n is e d a n d m e a s u re d a t a m o r t is e d c o s t , le s s a n y a llo w a n c e fo r e x p e c t e d c re d it lo s s e s . A llo w a n c e f o r e x p e c t e d c r e d it lo s s e s T h e c o n s o lid a t e d e n t it y h a s re c o g n is e d a lo s s o f $ 1 ,5 1 7 ,7 5 4 (2 0 1 9 : $ 1 4 9 ,8 3 0 ) in p ro fi t o r lo s s in re s p e c t o f t h e e x p e c t e d c re d it lo s s e s re la t e d t o t r a d e a n d o t h e r re c e iv a b le s fo r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 . M o v e m e n t s in t h e a llo w a n c e fo r e x p e c t e d c re d it lo s s e s a re a s fo llo w s : O p e n in g b a la n c e A d d it io n a l p ro v is io n s re c o g n is e d R e c e iv a b le s w r it t e n o ff d u r in g t h e y e a r a s u n c o lle c t a b le U n u s e d a m o u n t s re v e r s e d C lo s in g b a la n c e C o n s o l i d a t e d 2 0 2 0 $ 4 9 ,8 3 0 1 ,5 1 7 ,7 5 4 (4 9 ,8 3 0 ) - 2 0 1 9 $ - 4 9 ,8 3 0 - - 1 ,5 1 7 ,7 5 4 4 9 ,8 3 0 O n 6 A u g u s t 2 0 2 0 , t h e C o m p a n y e n t e re d in t o a n A m e n d m e n t A g re e m e n t w it h C h a r g e C C C V , L L C (C 4 V ) (A g re e m e n t ). In s u m m a r y , t h e A g re e m e n t a m e n d e d t h e S e r v ic e S u p p ly A g re e m e n t d a t e d 1 M a rc h 2 0 1 7 b e t w e e n t h e C o m p a n y a s P r in c ip a l a n d C 4 V a s A g e n t t o p ro v id e v a r io u s s e r v ic e s t o t h e P r in c ip a l (S e r v ic e s A g re e m e n t ), s u c h t h a t g o in g fo r w a rd , t h e C o m p a n y w a s re q u ire d t o p a y , w it h e ff e c t fro m 1 J u ly 2 0 2 0 C 4 V , a s e r v ic e fe e o f U S $ 5 0 ,0 0 0 m o n t h ly in lie u o f t h e U S $ 3 7 5 ,0 0 0 s e r v ic e fe e p re v io u s ly p a y a b le o n a q u a r t e r ly b a s is , w it h n o c h a n g e t o t h e n e w t e r m s p e r m it t e d fo r t h re e y e a r s . T h e A g re e m e n t a ls o a m e n d e d t h e L o a n A g re e m e n t d a t e d 2 1 D e c e m b e r 2 0 1 8 b e t w e e n t h e C o m p a n y a s L e n d e r a n d C 4 V a s B o r ro w e r, s u c h t h a t g o in g fo r w a rd , t h e lo a n b a la n c e o f U S $ 1 ,1 8 0 ,0 0 0 o w in g t o t h e C o m p a n y a s a t 3 0 J u n e 2 0 2 0 w a s a g re e d t o b e re d u c e d b y t h e a m o u n t o f e x p e n s e s in c u r re d b y C 4 V in p ro v id in g s e r v ic e s t o t h e C o m p a n y u n d e r t h e S e r v ic e s A g re e m e n t o f U S $ 5 8 2 ,8 6 6 , le a v in g a n e t b a la n c e o f U S $ 5 9 6 ,1 3 4 t o b e c o m e t h e re v is e d L o a n A m o u n t u n d e r t h e L o a n A g re e m e n t w h ic h L o a n A m o u n t w o u ld a c c r u e d a ily in t e re s t a t t h e r a t e o f 7 .3 5 % p a fro m 1 J u ly 2 0 2 0 . T h e t e r m o f t h e L o a n A g re e m e n t w a s e x t e n d e d t o e x p ire o n 2 0 D e c e m b e r 2 0 2 0 (fro m t h e p re v io u s e x p ir y d a t e o f 2 0 D e c e m b e r 2 0 1 9 ). 9 . N O N C U R R E N T A S S E T S - R E C E I V A B L E S S e c u r it y d e p o s it M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ - - - - 5 3 N o t e s t o t h e F in a n c ia l S t a t e m e n t s 1 0 . F I N A N C I A L A S S E T a t F V O C I E q u it y in v e s t m e n t in C h a rg e C C C V L L C C o n s o l i d a t e d 2 0 2 0 $ 7 ,4 9 5 ,5 6 2 7 ,4 9 5 ,5 6 2 2 0 1 9 $ 1 0 ,0 2 0 ,0 8 4 1 0 ,0 2 0 ,0 8 4 O n 2 9 M a rc h 2 0 1 8 , M a g n is a n n o u n c e d a s t r a t e g ic in v e s t m e n t t o a c q u ire a 1 0 % in t e re s t in le a d in g U S b a s e d , lit h iu m -io n b a t t e r y t e c h n o lo g y g ro u p , C h a rg e C C C V L L C (‘C 4 V ’) a n d s e c u re d a n e x c lu s iv e a g re e m e n t o v e r s e le c t iv e p a t e n t s , w h ic h w ill a s s is t in d r iv in g t h e C o m p a n y ’s g ro w t h in t h e lit h iu m -io n b a t t e r y s e c t o r. U n d e r t h e t e r m s o f t h e A g re e m e n t , M a g n is a c q u ire d a 1 0 % s t a k e in C 4 V fo r t o t a l c o n s id e r a t io n o f U S $ 7 .5 m illio n , c o m p r is in g a n u p fro n t c a s h p a y m e n t o f U S $ 2 m t o g e t h e r w it h t h e is s u e o f 6 ,9 4 0 ,5 4 4 o rd in a r y s h a re s in M a g n is (re p re s e n t in g U S $ 2 .5 m in v a lu e ). A fu r t h e r c a s h p a y m e n t o f U S $ 1 m illio n w a s m a d e o n 1 2 S e p t e m b e r 2 0 1 8 t o g e t h e r w it h t h e is s u e o f 7 ,5 0 7 ,5 0 8 o rd in a r y s h a re s in M a g n is . A s a t 3 0 J u n e 2 0 2 0 , M a g n is h e ld a 1 0 % s t a k e in C 4 V (2 0 1 9 : 1 0 % ). M a g n is h a s a p p o in t e d o n e re p re s e n t a t iv e t o t h e B o a rd o f D ire c t o r s o f C 4 V a n d h a s a ls o s e c u re d a fi r s t r ig h t o f re fu s a l fo r a n y fu t u re c a p it a l r a is in g in it ia t iv e s t h a t C 4 V u n d e r t a k e . F u r t h e r t o t h e a g re e m e n t , M a g n is a ls o h a s a n e x c lu s iv e a g re e m e n t fo r 5 y e a r s o v e r s e le c t e d C 4 V p a t e n t s , w h ic h w ill e x p a n d t h e C o m p a n y ’s m a t e r ia l t e c h n o lo g ie s in t h e r a p id ly g ro w in g lit h iu m -io n B a t t e r y s e c t o r. A C C O U N T I N G P O L I C I E S (i) C la s s ifi c a t io n o f fi n a n c ia l a s s e t s a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e F in a n c ia l a s s e t s a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e c o m p r is e : > > e q u it y s e c u r it ie s w h ic h a re n o t h e ld fo r t r a d in g , a n d fo r w h ic h t h e g ro u p h a s m a d e a n ir re v o c a b le e le c t io n a t in it ia l re c o g n it io n t o re c o g n is e c h a n g e s in fa ir v a lu e t h ro u g h O C I r a t h e r t h a n p ro fi t o r lo s s a s t h e s e a re s t r a t e g ic in v e s t m e n t s a n d t h e g ro u p c o n s id e re d t h is t o b e m o re re le v a n t , a n d d e b t s e c u r it ie s w h e re t h e c o n t r a c t u a l c a s h fl o w s a re s o le ly p r in c ip le a n d in t e re s t a n d t h e o b je c t iv e o f t h e g ro u p ’s b u s in e s s m o d e l is a c h ie v e d b o t h b y c o lle c t in g c o n t r a c t u a l c a s h fl o w s a n d s e llin g fi n a n c ia l a s s e t s . (ii) E q u it y in v e s t m e n t s a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e E q u it y in v e s t m e n t s a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e (F V O C I) c o m p r is e t h e fo llo w in g in v e s t m e n t : U n lis t e d s e c u r it ie s - C h a rg e C C C V L L C C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 7 ,4 9 5 ,5 6 2 7 ,4 9 5 ,5 6 2 1 0 ,0 2 0 ,0 8 4 1 0 ,0 2 0 ,0 8 4 U p o n d is p o s a l o f t h e s e e q u it y in v e s t m e n t s , a n y b a la n c e w it h in t h e O C I re s e r v e fo r t h e s e e q u it y in v e s t m e n t s is re c la s s ifi e d t o re t a in e d e a r n in g s a n d is n o t re c la s s ifi e d t o p ro fi t o r lo s s . (iii) D e b t in v e s t m e n t s a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e T h e re a re n o d e b t in v e s t m e n t s a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e (F V O C I) fo r b o t h y e a r s . In fo r m a t io n a b o u t t h e m e t h o d s a n d a s s u m p t io n s u s e d in d e t e r m in in g fa ir v a lu e is p ro v id e d in N o t e 1 6 . 5 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 1 1 . D E V E L O P M E N T A S S E T S D e v e lo p m e n t a s s e t s A C C O U N T I N G P O L I C I E S C o n s o l i d a t e d 2 0 2 0 $ 5 ,5 7 7 ,1 3 1 5 ,5 7 7 ,1 3 1 2 0 1 9 $ 5 ,4 6 6 ,4 9 2 5 ,4 6 6 ,4 9 2 D e v e lo p m e n t a s s e t s a re s t a t e d a t c o s t le s s a c c u m u la t e d d e p re c ia t io n a n d im p a ir m e n t lo s s e s . C o s t re p re s e n t t h e a c c u m u la t io n o f a ll t h e c o m p e n s a t io n a n d re s e t t le m e n t e x p e n d it u re in c u r re d b y , o r o n b e h a lf o f, t h e e n t it y in re la t io n t o a re a s o f in t e re s t in w h ic h c o n s t r u c t io n o r d e v e lo p m e n t h a s c o m m e n c e d . C o m p e n s a t io n a n d re s e t t le m e n t e x p e n d it u re s a re c a p it a lis e d a s d e v e lo p m e n t a s s e t s . D e v e lo p m e n t c o s t s in w h ic h t h e G ro u p h a s a n in t e re s t a re a m o r t is e d o t h e r t h e life o f t h e a re a o f in t e re s t t o w h ic h t h e c o s t s re la t e o n a u n it s o f p ro d u c t io n b a s is o v e r t h e e s t im a t e d p ro v e n a n d p ro b a b le o re re s e r v e s a n d p ro p o r t io n o f o t h e r m e a s u re d a n d in d ic a t e d m in e r a l re s o u rc e s w h e re t h e re is a h ig h d e g re e o f c o n fi d e n c e t h a t t h e y c a n b e e x t r a c t e d e c o n o m ic a lly . C h a n g e s in t h e life o f t h e a re a o f in t e re s t a n d /o r o re re s e r v e s , a n d o t h e r m in e r a l re s o u rc e s a re a c c o u n t e d fo r p ro s p e c t iv e ly . I m p a ir m e n t A t e a c h re p o r t in g d a t e , t h e G ro u p re v ie w s t h e c a r r y in g v a lu e s o f it s d e v e lo p m e n t a s s e t s t o d e t e r m in e w h e t h e r t h e re is a n y in d ic a t io n t h a t t h o s e a s s e t s h a v e b e e n im p a ire d . If s u c h a n in d ic a t io n e x is t s , t h e re c o v e r a b le a m o u n t o f t h e a s s e t , b e in g t h e h ig h e r o f t h e a s s e t ’s fa ir v a lu e le s s c o s t s t o s e ll a n d v a lu e in u s e , is c o m p a re d t o t h e a s s e t ’s c a r r y in g v a lu e . A n y e x c e s s o f t h e a s s e t ’s c a r r y in g v a lu e o v e r it s re c o v e r a b le a m o u n t is e x p e n s e d t o p ro fi t o r lo s s . W h e re it is n o t p o s s ib le t o e s t im a t e t h e re c o v e r a b le a m o u n t o f a n in d iv id u a l a s s e t , t h e G ro u p e s t im a t e s t h e re c o v e r a b le a m o u n t o f t h e c a s h -g e n e r a t in g u n it t o w h ic h t h e a s s e t b e lo n g s . A s a t 3 0 J u n e 2 0 2 0 , n o im p a ir m e n t t o t h e c a r r y in g v a lu e o f t h e d e v e lo p m e n t a s s e t s h a s b e e n d e e m e d n e c e s s a r y . M o v e m e n t s in d e v e lo p m e n t a s s e t s M o v e m e n t s in d e v e lo p m e n t a s s e t s d u r in g t h e fi n a n c ia l y e a r, a re s e t o u t a s fo llo w s : A t 1 J u ly 2 0 1 9 D e v e lo p m e n t c o s t s c a p it a lis e d d u r in g t h e y e a r C u r re n c y t r a n s la t io n d iff e re n c e A t 3 0 J u n e 2 0 2 0 D e v e l o p m e n t A s s e t $ 5 ,4 6 6 ,4 9 2 - 1 1 0 ,6 3 9 5 ,5 7 7 ,1 3 1 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 5 5 N o t e s t o t h e F in a n c ia l S t a t e m e n t s 1 2 . (a ) P L A N T A N D E Q U I P M E N T i M 3 N Y R e c o n c ilia t io n o f c a r r y in g a m o u n t s a t t h e b e g in n in g a n d e n d o f t h e y e a r. A le v o A c q u is it io n E q u ip m e n t C o n s u lt in g - D ir o f L o g is t ic s E q u ip m e n t R e lo c a t io n S e r v ic e s In s u r a n c e - N C S t o r a g e a n d u t ilit ie s - N C T r a v e l - N C L e g a l S e r v ic e s - A le v o A PA A C C O U N T I N G P O L I C I E S C o n s o l i d a t e d 2 0 2 0 $ 7 ,2 7 1 ,5 5 3 2 4 6 ,3 5 2 2 ,5 0 4 ,2 4 3 1 3 ,5 2 9 1 ,8 9 7 ,4 3 0 1 1 ,9 2 6 2 6 ,6 1 7 1 1 ,9 7 1 ,6 5 0 2 0 1 9 $ - - - - - - - - iM 3 N Y P & E a s s e t s a re s t a t e d a t c o s t le s s a c c u m u la t e d d e p re c ia t io n a n d im p a ir m e n t lo s s e s . C o s t s re p re s e n t t h e a c c u m u la t io n o f a ll t h e p la n t a n d e q u ip m e n t a n d e x p e n d it u re in c u r re d b y , o r o n b e h a lf o f, t h e e n t it y in re la t io n t o t h e e s t a b lis h m e n t a n d p re p a r a t io n o f p ro d u c t io n p la n t . iM 3 N Y P & E c o s t s in w h ic h t h e G ro u p h a s a n in t e re s t a re a m o r t is e d o v e r t h e p ro je c t e d life o f t h e p ro d u c t io n p la n t . I m p a ir m e n t In O c t o b e r 2 0 1 9 , t h e G ro u p h a d a n in d e p e n d e n t v a lu a t io n u n d e r t a k e n b y R a m b o ll E n e rg y w h ic h c o n fi r m e d t h a t t h e iM 3 N Y p la n t a n d e q u ip m e n t w a s v a lu e d a t U S D 7 1 ,3 4 0 ,6 2 0 . A s a t 3 0 J u n e 2 0 2 0 , n o im p a ir m e n t t o t h e c a r r y in g v a lu e o f t h e iM 3 N Y P & E a s s e t s h a s b e e n d e e m e d n e c e s s a r y . M o v e m e n t s in d e v e lo p m e n t a s s e t s M o v e m e n t s in d e v e lo p m e n t a s s e t s d u r in g t h e fi n a n c ia l y e a r, a re s e t o u t a s fo llo w s : A t 1 J u ly 2 0 1 9 iM 3 N Y P & E c o s t s c a p it a lis e d d u r in g t h e y e a r C u r re n c y t r a n s la t io n d iff e re n c e A t 3 0 J u n e 2 0 2 0 i M 3 N Y P & E A s s e t $ - 1 1 ,9 7 1 ,6 5 0 - 1 1 ,9 7 1 ,6 5 0 5 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 1 2 . (b ) P L A N T A N D E Q U I P M E N T R e c o n c ilia t io n o f c a r r y in g a m o u n t s a t t h e b e g in n in g a n d e n d o f t h e y e a r. P la n t a n d e q u ip m e n t O ffi c e E q u ip m e n t S o f t w a re O ffi c e fu r n it u re a n d fi t t in g s O ffi c e im p ro v e m e n t s M o t o r v e h ic le s C o n s o l i d a t e d 2 0 2 0 $ 1 ,8 5 6 9 ,7 5 6 - 9 3 - 4 ,3 8 6 1 6 ,0 9 1 2 0 1 9 $ 1 0 7 1 9 ,2 1 4 - 6 3 7 2 2 ,1 9 9 1 1 ,1 4 1 5 3 ,2 9 8 P la n t a n d e q u i p m e n t $ O ffi c e e q u i p m e n t $ S o f t w a r e $ C o n s o l i d a t e d O ffi c e f u r n i t u r e a n d fi t t i n g s $ O ffi c e I m p r o v e - m e n t s $ M o t o r v e h i c l e s $ T o t a l $ Y e a r e n d e d 3 0 J u n e 2 0 2 0 B a la n c e a t 1 J u ly 2 0 1 9 n e t o f a c c u m u la t e d d e p re c ia t io n A d d it io n s D is p o s a ls C u r re n c y t r a n s la t io n d iff e re n c e s D e p re c ia t io n c h a rg e fo r t h e y e a r B a la n c e a t 3 0 J u n e 2 0 2 0 n e t o f a c c u m u la t e d d e p re c ia t io n A t 3 0 J u n e 2 0 2 0 C o s t A c c u m u la t e d d e p re c ia t io n a n d im p a ir m e n t N e t c a r r y in g a m o u n t Y e a r e n d e d 3 0 J u n e 2 0 1 9 B a la n c e a t 1 J u ly 2 0 1 8 n e t o f a c c u m u la t e d d e p re c ia t io n A d d it io n s D is p o s a ls C u r re n c y t r a n s la t io n d iff e re n c e s 1 0 7 2 ,1 7 6 - (4 9 ) (3 7 7 ) 1 9 ,2 1 4 - - 5 6 (9 ,5 1 4 ) 1 ,8 5 6 9 ,7 5 6 4 3 5 ,0 0 8 9 7 ,1 4 4 (4 3 3 ,1 5 2 ) (8 7 ,3 8 8 ) 1 ,8 5 6 9 ,7 5 6 5 8 ,2 2 4 - - 5 1 2 7 ,0 1 5 1 1 ,3 6 0 - 4 5 1 D e p re c ia t io n c h a rg e fo r t h e y e a r (5 8 ,1 6 8 ) (1 9 ,6 1 2 ) B a la n c e a t 3 0 J u n e 2 0 1 9 n e t o f a c c u m u la t e d d e p re c ia t io n 1 0 7 1 9 ,2 1 4 A t 3 0 J u n e 2 0 1 9 C o s t A c c u m u la t e d d e p re c ia t io n a n d im p a ir m e n t N e t c a r r y in g a m o u n t 4 2 7 ,3 0 3 9 6 ,6 8 9 (4 2 7 ,1 9 6 ) (7 7 ,4 7 5 ) 1 0 7 1 9 ,2 1 4 - - - - - - - - - - - - - - - - - 6 3 7 2 2 ,1 9 9 1 1 ,1 4 1 - - 4 - - - - 4 4 9 2 2 6 5 3 ,2 9 8 2 ,1 7 6 - 6 8 6 (5 4 8 ) (2 2 ,6 4 8 ) (6 ,9 8 1 ) (4 0 ,0 6 8 ) 9 3 - 4 ,3 8 6 1 6 ,0 9 1 1 6 ,3 0 5 6 6 ,6 4 9 3 6 ,5 8 6 6 5 1 ,6 9 1 (1 6 ,2 1 2 ) (6 6 ,6 4 9 ) (3 2 ,2 0 0 ) (6 3 5 ,6 0 0 ) 9 3 - 4 ,3 8 6 1 6 ,0 9 1 5 ,0 2 0 5 0 ,8 4 0 1 7 ,1 0 5 1 5 8 ,2 0 5 - - - 1 1 ,3 6 0 - 2 2 6 3 ,9 3 3 9 4 5 5 ,6 0 5 (4 ,6 0 9 ) (3 2 ,5 7 4 ) (6 ,9 0 9 ) (1 2 1 ,8 7 2 ) 6 3 7 2 2 ,1 9 9 1 1 ,1 4 1 5 3 ,2 9 8 1 6 ,0 2 5 6 5 ,3 2 7 3 5 ,8 6 0 6 4 1 ,2 0 4 (1 5 ,3 8 8 ) (4 3 ,1 2 8 ) (2 4 ,7 1 9 ) (5 8 7 ,9 0 6 ) 6 3 7 2 2 ,1 9 9 1 1 ,1 4 1 5 3 ,2 9 8 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 5 7 N o t e s t o t h e F in a n c ia l S t a t e m e n t s A C C O U N T I N G P O L I C I E S E a c h c la s s o f p la n t a n d e q u ip m e n t is c a r r ie d a t c o s t , le s s , w h e re a p p lic a b le , a n y a c c u m u la t e d d e p re c ia t io n a n d im p a ir m e n t lo s s e s . T h e c o s t o f fi x e d a s s e t s c o n s t r u c t e d w it h in t h e G ro u p in c lu d e s t h e c o s t o f m a t e r ia ls , d ire c t la b o u r, b o r ro w in g c o s t s a n d a n a p p ro p r ia t e p ro p o r t io n o f fi x e d a n d v a r ia b le o v e r h e a d s . S u b s e q u e n t c o s t s a re in c lu d e d in t h e a s s e t ’s c a r r y in g a m o u n t o r re c o g n is e d a s a s e p a r a t e a s s e t , a s a p p ro p r ia t e , o n ly w h e n it is p ro b a b le t h a t fu t u re e c o n o m ic b e n e fi t s a s s o c ia t e w it h t h e it e m w ill fl o w t o t h e G ro u p a n d t h e c o s t o f t h e it e m c a n b e m e a s u re d re lia b ly . A ll o t h e r re p a ir s a n d m a in t e n a n c e a re c h a rg e d t o p ro fi t a n d lo s s d u r in g t h e fi n a n c ia l p e r io d in w h ic h t h e y a re in c u r re d . D e p r e c ia t io n D e p re c ia t io n is p ro v id e d o n p la n t a n d e q u ip m e n t , m o t o r v e h ic le s , o ffi c e e q u ip m e n t , fu r n it u re a n d fi t t in g s , a n d is c a lc u la t e d o n a s t r a ig h t lin e b a s is , c o m m e n c in g fo r m t h e t im e t h e a s s e t is fi r s t u s e d , s o a s t o w r it e o ff t h e n e t c o s t s o f e a c h a s s e t o v e r t h e e x p e c t e d u s e fu l life . T h e fo llo w in g u s e fu l liv e s a re u s e d in t h e c a lc u la t io n o f d e p re c ia t io n : > > > P la n t & E q u ip m e n t 2 t o 5 y e a r s V e h ic le s 2 t o 5 y e a r s O ffi c e e q u ip m e n t , fu r n it u re & fi t t in g s 2 t o 2 0 y e a r s B o t h a s s e t s re s id u a l v a lu e a n d u s e fu l life a re re v ie w e d , a n d a d ju s t e d if a p p ro p r ia t e , a t e a c h re p o r t in g d a t e . G a in s a n d lo s s e s o n d is p o s a ls a re d e t e r m in e d b y c o m p a r in g p ro c e e d s w it h c a r r y in g a m o u n t . T h e s e a re in c lu d e d in p ro fi t o r lo s s . I m p a ir m e n t A t e a c h re p o r t in g d a t e , t h e G ro u p re v ie w s t h e c a r r y in g v a lu e s o f it s p la n t & e q u ip m e n t a s s e t s t o d e t e r m in e w h e t h e r t h e re is a n y in d ic a t io n t h a t t h o s e a s s e t s h a v e b e e n im p a ire d . If s u c h a n in d ic a t io n e x is t s , t h e re c o v e r a b le a m o u n t o f t h e a s s e t , b e in g t h e h ig h e r o f t h e a s s e t ’s fa ir v a lu e le s s c o s t s t o s e ll a n d v a lu e in u s e , is c o m p a re d t o t h e a s s e t ’s c a r r y in g v a lu e . A n y e x c e s s o f t h e a s s e t ’s c a r r y in g v a lu e o v e r it s re c o v e r a b le a m o u n t is e x p e n s e d t o p ro fi t o r lo s s . W h e re it is n o t p o s s ib le t o e s t im a t e t h e re c o v e r a b le a m o u n t o f a n in d iv id u a l a s s e t , t h e G ro u p e s t im a t e s t h e re c o v e r a b le a m o u n t o f t h e c a s h -g e n e r a t in g u n it t o w h ic h t h e a s s e t b e lo n g s . 1 3 . T R A D E A N D O T H E R P A Y A B L E S T r a d e p a y a b le s O t h e r p a y a b le s a n d a c c r u a ls A C C O U N T I N G P O L I C I E S C o n s o l i d a t e d 2 0 2 0 $ 1 ,1 2 7 ,1 2 0 6 6 7 ,4 8 8 1 ,7 9 4 ,6 0 8 2 0 1 9 $ 9 4 ,7 3 4 4 9 6 ,0 6 6 5 9 0 ,8 0 0 T r a d e a n d o t h e r p a y a b le s a re re c o g n is e d w h e n t h e G ro u p b e c o m e s o b lig e d t o m a k e fu r t h e r p a y m e n t s fro m t h e p u rc h a s e o f g o o d s a n d s e r v ic e s a n d a re m e a s u re d a t a m o r t is e d c o s t u s in g t h e e ff e c t iv e in t e re s t m e t h o d , le s s a n y im p a ir m e n t lo s s e s . 5 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 1 4 . P R O V I S I O N S C u r r e n t P ro v is io n fo r a n n u a l le a v e (a ) N o n C u r r e n t P ro v is io n fo r lo n g s e r v ic e le a v e (a ) C o n s o l i d a t e d 2 0 2 0 $ 1 2 9 ,2 9 0 1 2 9 ,2 9 0 2 0 1 9 $ 1 3 7 ,7 4 0 1 3 7 ,7 4 0 C o n s o l i d a t e d 2 0 2 0 $ 4 3 ,3 2 3 4 3 ,3 2 4 2 0 1 9 $ 4 0 ,8 2 1 4 0 ,8 2 1 (a ) A n n u a l L e a v e a n d L o n g S e r v ic e L e a v e A n e s t im a t e o f a n n u a l le a v e is p ro v id e d a f t e r re v ie w in g re le v a n t w o r k p la c e a g re e m e n t s a n d in d u s t r ia l a w a rd s fo r re s p e c t iv e e m p lo y e e s a n d d e t e r m in in g e n t it le m e n t a t t h e re p o r t in g d a t e . T h e c o s t in c lu d e s a n a c c o u n t o f d ire c t e m p lo y m e n t c o s t s . T h e s ig n ifi c a n t a s s u m p t io n s a p p lie d in t h e m e a s u re m e n t o f t h is p ro v is io n in c lu d e d e v is in g p ro b a b ilit ie s fo r e m p lo y e e s c o m p ly in g w it h t h e le g is la t iv e re q u ire m e n t s [y e a r s o f s e r v ic e ] a n d t h e c o m p u t e d e m p lo y m e n t c o s t s d is c o u n t e d b y u s in g R B A b o n d r a t e s a p p lie d fo r t h e re s p e c t iv e y e a r s o f s e r v ic e . A C C O U N T I N G P O L I C I E S P ro v is io n s a re re c o g n is e d w h e n t h e G ro u p h a s a p re s e n t o b lig a t io n [le g a l o r c o n s t r u c t iv e ] a s a re s u lt o f a p a s t e v e n t , a n d it is p ro b a b le t h a t a n o u t fl o w o f re s o u rc e s e m b o d y in g e c o n o m ic b e n e fi t s w ill b e re q u ire d t o s e t t le t h e o b lig a t io n a n d a re lia b le e s t im a t e c a n b e m a d e o f t h e a m o u n t o f t h e o b lig a t io n . P ro v is io n s a re m e a s u re d a t t h e p re s e n t v a lu e o f m a n a g e m e n t ’s b e s t e s t im a t e o f t h e e x p e n d it u re re q u ire d t o s e t t le t h e p re s e n t o b lig a t io n a t t h e re p o r t in g d a t e . If t h e e ff e c t o f t h e t im e v a lu e o f m o n e y is m a t e r ia l, p ro v is io n s a re d e t e r m in e d b y d is c o u n t in g t h e e x p e c t e d fu t u re c a s h fl o w s a t a p re -t a x r a t e t h a t re fl e c t s c u r re n t m a r k e t a s s e s s m e n t s o f t h e t im e v a lu e o f m o n e y a n d , w h e re a p p ro p r ia t e , t h e r is k s s p e c ifi c t o t h e lia b ilit y . T h e in c re a s e in t h e p ro v is io n re s u lt in g fro m t h e p a s s a g e o f t im e is re c o g n is e d in fi n a n c e c o s t s . a ) I s s u e d c a p i t a l a n d o p t i o n s O rd in a r y s h a re s fu lly p a id F u lly p a id o rd in a r y s h a re s c a r r y o n v o t e p e r s h a re a n d c a r r y a r ig h t t o d iv id e n d s . O p t io n h o ld e r s a re n o t e n t it le d t o v o t e a n d d iv id e n d . b ) M o v e m e n t s i n f u l l y p a i d s h a r e s A t 1 J u ly 2 0 1 9 S h a re s is s u e d E x e rc is e o f u n lis t e d r ig h t s a n d o p t io n s T r a n s a c t io n c o s t s R e a llo c a t io n A t 3 0 J u n e 2 0 2 0 N u m b e r o f s h a r e s a n d o p t i o n s 2 0 2 0 $ 6 6 5 ,0 0 6 ,2 2 1 1 2 8 ,6 2 5 ,9 0 5 6 1 1 ,1 3 5 ,9 9 6 1 2 4 ,1 7 7 ,4 1 9 5 3 ,8 7 0 ,2 2 5 5 ,0 0 0 ,0 0 0 - - (5 5 1 ,5 1 4 ) - 6 6 5 ,0 0 6 ,2 2 1 1 2 8 ,6 2 5 ,9 0 5 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 5 9 N o t e s t o t h e F in a n c ia l S t a t e m e n t s 1 5 . C O N T R I B U T E D E Q U I T Y D u r in g t h e y e a r t h e C o m p a n y r a is e d fu n d s fro m e q u it y a s fo llo w s : > > $ 1 ,5 0 0 ,0 0 0 (2 0 1 9 : $ 1 1 ,1 0 0 ,0 0 0 ) fro m s h a re p la c e m e n t s o f 2 0 ,0 0 0 ,0 0 0 fu lly p a id o rd in a r y s h a re s . T r a n s a c t io n c o s t s a m o u n t e d t o $ 4 0 ,5 7 7 (2 0 1 9 : $ 7 0 2 ,7 9 5 ). $ 3 ,5 0 0 ,0 0 0 (2 0 1 9 : $ N il) fro m t h e N e g m a S u b s c r ip t io n A g re e m e n t o f 3 3 ,8 7 0 ,2 2 5 fu lly p a id o rd in a r y s h a re s . T r a n s a c t io n c o s t s a m o u n t e d t o $ 5 1 0 ,9 3 8 (2 0 1 9 : $ N il). c ) C a p it a l m a n a g e m e n t M a n a g e m e n t ’s p r im e o b je c t iv e w h e n m a n a g in g t h e G ro u p ’s c a p it a l is t o e n s u re t h e e n t it y c o n t in u e s a s a g o in g c o n c e r n a s w e ll a s e n s u r in g t h a t fu n d s e x p e n d e d p ro v id e s h a re h o ld e r s w it h o p t im a l re t u r n s . T h e c a p it a l s t r u c t u re is in t e n d e d t o p ro v id e t h e lo w e s t c o s t o f c a p it a l a v a ila b le t o t h e G ro u p c o n s id e r in g it s p re s e n t p h a s e o f o p e r a t io n s . C a p it a l r is k m a n a g e m e n t O v e r t h e c o m in g y e a r t h e g ro u p is p ro p o s in g t o u n d e r t a k e a n e x p lo r a t io n p ro g r a m t h a t re q u ire s a s ig n ifi c a n t o u t la y o f fu n d s . M a n a g e m e n t m o n it o r s t h is e x p e n d it u re a g a in s t t h e b u d g e t a p p ro v e d b y t h e B o a rd . A n e a r t e r m c a p it a l r a is in g o r a s s e t s a le s h o u ld e n s u re t h e g ro u p h a s a s a fe t y m a r g in o f fu n d s a v a ila b le t o c o n t in u e w it h it s d e s ire d le v e l o f o p e r a t io n s – re fe r N o t e 1 . In o rd e r t o m a in t a in o r a d ju s t t h e c a p it a l s t r u c t u re , t h e c o n s o lid a t e d e n t it y m a y a d ju s t t h e a m o u n t o f d iv id e n d s p a id t o s h a re h o ld e r s , re t u r n c a p it a l t o s h a re h o ld e r s , is s u e n e w s h a re s o r s e ll a s s e t s t o re d u c e d e b t . T h e c a p it a l r is k m a n a g e m e n t p o lic y re m a in s u n c h a n g e d fro m t h e 3 0 J u n e 2 0 2 0 A n n u a l R e p o r t . 1 6 . F A I R V A L U E M E A S U R E M E N T T h e fa ir v a lu e o f fi n a n c ia l a s s e t s a n d fi n a n c ia l lia b ilit ie s a re t h e e q u iv a le n t t o t h e n e t c a r r y in g a m o u n t . F a ir v a lu e s a re t h o s e a m o u n t s a t w h ic h a n a s s e t c o u ld b e e x c h a n g e d , o r a lia b ilit y s e t t le d , b e t w e e n k n o w le d g e a b le , w illin g p a r t ie s in a n a r m ’s le n g t h t r a n s a c t io n . T h e c a r r y in g a m o u n t s o f c a s h , t r a d e a n d o t h e r re c e iv a b le s a n d t r a d e a n d o t h e r p a y a b le s a re a s s u m e d t o a p p ro x im a t e t h e ir fa ir v a lu e s d u e t o t h e ir s h o r t -t e r m n a t u re . T h e G ro u p c la s s ifi e d t h e fa ir v a lu e o f it s o t h e r fi n a n c ia l in s t r u m e n t s a c c o rd in g t o t h e fo llo w in g fa ir v a lu e h ie r a rc h y b a s e d o n t h e a m o u n t o f o b s e r v a b le in p u t s u s e d t o v a lu e t h e in s t r u m e n t s : T h e t h re e le v e ls o f t h e fa ir v a lu e h ie r a rc h y a re : > L e v e l 1 - V a lu e s b a s e d o n u n a d ju s t e d q u o t e d p r ic e s a v a ila b le in a c t iv e m a r k e t s fo r id e n t ic a l a s s e t s o r lia b ilit ie s a s o f t h e re p o r t in g d a t e . > L e v e l 2 - V a lu e s b a s e d o n in p u t s , in c lu d in g q u o t e d p r ic e s , t im e v a lu e a n d v o la t ilit y fa c t o r s , w h ic h c a n b e s u b s t a n t ia lly o b s e r v e d o r c o r ro b o r a t e d in t h e m a r k e t p la c e . P r ic e s in L e v e l 2 a re e it h e r d ire c t ly o r in d ire c t ly o b s e r v a b le a s o f t h e re p o r t in g d a t e . > L e v e l 3 - V a lu e s b a s e d o n p r ic e s o r v a lu a t io n t e c h n iq u e s t h a t a re n o t b a s e d o n o b s e r v a b le m a r k e t d a t a . F i n a n c i a l a s s e t s m e a s u r e d a t f a i r v a l u e F in a n c ia l a s s e t s a t F V O C I In v e s t m e n t a c c o u n t e d fo r u s in g t h e e q u it y m e t h o d L e v e l i n F a i r V a l u e h i e r a r c h y C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 3 3 7 ,4 9 5 ,5 6 2 1 0 ,0 2 0 ,0 8 4 - 5 ,2 9 1 ,1 0 5 7 ,4 9 5 ,5 6 2 1 5 ,3 1 1 ,1 8 9 6 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S F in a n c ia l a s s e ts a t F V O C I F in a n c ia l a s s e t s a t F V O C I c o m p r is e t h e G ro u p ’s in v e s t m e n t in p r iv a t e U S b a s e d , lit h iu m -io n b a t t e r y t e c h n o lo g y g ro u p , C h a rg e C C C V L L C (‘C 4 V ’) w h ic h is a c c o u n t e d fo r a s a fi n a n c ia l a s s e t m e a s u re d a t fa ir v a lu e t h ro u g h o t h e r c o m p re h e n s iv e in c o m e . T h e in v e s t m e n t is n o t q u o t e d in a n a c t iv e m a r k e t a n d a c c o rd in g ly t h e fa ir v a lu e o f t h is in v e s t m e n t is in c lu d e d w it h in L e v e l 3 o f t h e h ie r a rc h y . C 4 V h a s e x p e r t is e a n d p a t e n t e d t e c h n o lo g y in lit h iu m -io n b a t t e r y c o m p o s it io n a n d m a n u fa c t u re . C 4 V h a s e x e c u t e d b in d in g a g re e m e n t s t o re c e iv e ro y a lt y in c o m e fro m t h e e x c lu s iv e u s e o f b o t h it s p a t e n t e d a n o d e c h e m is t r y a n d it s c o b a lt a n d n ic k e l fre e c a t h o d e c h e m is t r y . C 4 V a ls o re t a in s t h e r ig h t t o re c e iv e a o n c e o ff re s e r v a t io n fe e u p o n t h e g r a n t in g o f e x c lu s iv e u s e o f it s p a t e n t e d IP a t e a c h o f t h e a p p ro v e d iM 3 b a t t e r y p la n t s . T h e ro y a lt y in c o m e is d e p e n d e n t u p o n t h e s u c c e s s fu l d e v e lo p m e n t o f t h re e k e y p ro je c t s w h ic h in v o lv e s e it h e r t h e m in in g a n d p ro c e s s in g o f n a t u r a l fl a k e g r a p h it e o r t h e p ro d u c t io n o f lit h iu m -io n b a t t e r ie s . C 4 V a ls o h a s a 4 5 .1 8 % s t r a t e g ic in v e s t m e n t in a N e w Yo r k lit h iu m -io n b a t t e r y p ro d u c t io n p la n t , Im p e r iu m 3 N e w Yo r k In c (‘iM 3 N Y ’). iM 3 N Y o w n s b a t t e r y p la n t a s s e t s lo c a t e d in a p la n n e d lit h iu m -io n b a t t e r y m a n u fa c t u r in g fa c ilit y b a s e d a t t h e H u ro n C a m p u s in E n d ic o t t , N e w Yo r k . V a lu a t io n T e c h n iq u e s - L e v e l 3 T h e G ro u p h a s u t ilis e d a c o m b in a t io n o f t h e d is c o u n t e d c a s h fl o w (D C F ) m e t h o d t o g e t h e r w it h t h e fa ir v a lu e o f C 4 V ’s s t r a t e g ic in v e s t m e n t in iM 3 N Y t o c a lc u la t e t h e e n t e r p r is e v a lu e o f C 4 V . T h e D C F in v o lv e s t h e p ro je c t io n o f a s e r ie s o f c a s h fl o w s a n d t o t h is a n a p p ro p r ia t e m a r k e t d e r iv e d d is c o u n t r a t e is a p p lie d t o e s t a b lis h t h e p re s e n t v a lu e o f t h e in c o m e s t re a m . T h e fa ir v a lu e o f C 4 V ’s in v e s t m e n t in iM 3 N Y h a s b e e n d e t e r m in e d b y in d e p e n d e n t v a lu a t io n o f t h e p la n t e q u ip m e n t p u rc h a s e d in 2 0 1 8 . T h e v a lu a t io n o f p la n t e q u ip m e n t w a s u n d e r t a k e n in A u g u s t 2 0 1 9 b y le a d in g e n g in e e r in g fi r m O ’B r ie n & G e re w h o a s s e s s e d a ll t h e it e m s p u rc h a s e d . In it s c u r re n t s t a t u s a n d c o n d it io n , t h e e x t e r n a l v a lu e r h a s a t t r ib u t e d a v a lu a t io n o f U S $ 7 1 .3 4 m illio n o f w h ic h C 4 V h a s a d ire c t in t e re s t e q u iv a le n t t o U S $ 3 2 .2 3 m illio n . T h e G ro u p d e c id e s it s v a lu a t io n p o lic ie s a n d p ro c e d u re s in lin e w it h it s b u s in e s s o b je c t iv e s a n d w it h re fe re n c e t o t h e G ro u p ’s a s s e s s m e n t o f it s in v e s t m e n t in in d iv id u a l p ro je c t s . P o s it io n p a p e r s a re p re p a re d t o a p p r is e t h e a u d it c o m m it t e e o f t h e v a lu a t io n t e c h n iq u e s a d o p t e d . T h e G ro u p re v ie w s t h e v a lu a t io n o f it s fi n a n c ia l a s s e t s a t F V O C I a t le a s t o n c e e v e r y s ix m o n t h s , in lin e w it h t h e g ro u p ’s h a lf-y e a r ly re p o r t in g re q u ire m e n t s . C h a n g e s in le v e l 3 fa ir v a lu e s a re a n a ly s e d a t t h e e n d o f e a c h re p o r t in g p e r io d d u r in g t h is re v ie w . Q u a n t it a t iv e in f o r m a t io n o n s ig n ifi c a n t u n o b s e r v a b le in p u t s - L e v e l 3 T h e fo llo w in g t a b le s u m m a r is e s t h e q u a n t it a t iv e in fo r m a t io n a b o u t t h e s ig n ifi c a n t u n o b s e r v a b le in p u t s u s e d in t h e fa ir v a lu e m e a s u re m e n t o f t h e G ro u p ’s in v e s t m e n t in C 4 V . U n o b s e r v a b l e i n p u t s V a l u a t i o n M e t h o d N a c h u G r a p h i t e P r o j e c t I m p e r i u m 3 T o w n s v i l l e I m p e r i u m 3 N e w Y o r k R e l a t i o n s h i p o f U n o b s e r v a b l e i n p u t t o f a i r v a l u e P ro je c t S ta tu s D C F P re lim in a r y P re lim in a r y (B a n k a b le F e a s ib ility S tu d y ) (F e a s ib ility S tu d y ) n /a T h e m o re a d v a n c e d th e p ro je c t th e h ig h e r th e fa ir v a lu e T im e lin e to p ro d u c tio n D C F 2 y e a rs p o s t fi n a n c e 2 y e a rs p o s t fi n a n c e n /a P ro je c t life D C F R is k a d ju s te d d is c o u n t ra te D C F 2 0 y rs 2 0 % 2 0 y rs 4 5 % C a p ita l re q u ire d D C F A U $ 4 0 0 M (U S $ 2 7 0 M ) A U $ 3 B illio n E x p e c te d a n n u a l v o lu m e s D C F 2 4 0 ,0 0 0 to n n e p a 1 8 G W h Va lu a tio n o f b a tte r y m a n u fa c tu rin g e q u ip m e n t F V n /a n /a T h e lo n g e r th e tim e to p ro d u c tio n th e lo w e r th e fa ir v a lu e T h e lo n g e r th e life s p a n th e h ig h e r th e fa ir v a lu e T h e h ig h e r th e d is c o u n t ra te th e lo w e r th e fa ir v a lu e T h e h ig h e r th e c a p ita l re q u ire d th e lo w e r th e fa ir v a lu e T h e h ig h e r th e a n n u a l v o lu m e s th e h ig h e r th e fa ir v a lu e n /a n /a n /a n /a A U $ 1 0 2 M (U S $ 7 1 .3 4 ) T h e lo w e r th e re c o v e ra b le a m o u n t o f th e e q u ip m e n t th e lo w e r th e fa ir v a lu e M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 6 1 N o t e s t o t h e F in a n c ia l S t a t e m e n t s P r o j e c t a n d I n v e s t m e n t R is k T h e fa ir v a lu e o f t h e G ro u p ’s in v e s t m e n t in C 4 V is m e a s u re d a g a in s t t h e e n t e r p r is e v a lu e o f C 4 V w h ic h is c a lc u la t e d u s in g fa ir v a lu e in c o r p o r a t in g p re s e n t v a lu e t e c h n iq u e s . T h e p re s e n t v a lu e c a lc u la t io n s u s e c a s h fl o w s t h a t a re e s t im a t e s r a t h e r t h a n k n o w n a m o u n t s . T h e re is in h e re n t u n c e r t a in t y in t h is v a lu a t io n t e c h n iq u e . A s a re s u lt , t h e fa ir v a lu e is e x p o s e d t o v a r io u s fo r m s o f r is k . T h e fa ir v a lu e o f a s a t 3 0 J u n e 2 0 2 0 is m e a s u re d u s in g a n u m b e r o f s ig n ifi c a n t u n o b s e r v a b le in p u t s . R is k s s p e c ifi c t o t h e s e u n o b s e r v a b le in p u t s a re d e t a ile d b e lo w a n d h a v e b e e n fa c t o re d in t o t h e in d iv id u a l p ro je c t s t h ro u g h t h e r is k a d ju s t e d d is c o u n t r a t e a p p lie d . T h e G ro u p h a s p e r fo r m e d d e t a ile d r is k a n a ly s is u s in g in t e r n a t io n a l fr a m e w o r k s o n e a c h o f t h e in d iv id u a l p ro je c t s d u r in g fe a s ib ilit y s t u d y . In p e r fo r m in g t h is a n a ly s is , t h e G ro u p h a s id e n t ifi e d a re a s o f k e y r is k a n d h a s d e v e lo p e d r is k m a n a g e m e n t a n d m it ig a t io n s t r a t e g ie s t o im p le m e n t in o rd e r t o re d u c e t h e lik e ly e x p o s u re t o t h e s e r is k s . P r o je c t s t a t u s T h e c u r re n t s t a t u s o f t h e p ro je c t s h a s b e e n d e t e r m in e d a s b e in g p re lim in a r y . T h e p ro je c t s a re a ls o c h a r a c t e r is e d a s b e in g g re e n fi e ld p ro je c t s w h ic h re la t e s t o t h e la c k o f e x is t in g fa c ilit y t o v e r ify o u t c o m e s . T h e re is a r is k t h a t t h e p ro je c t s w ill n o t b e a d v a n c e d d u e t o t h e s ig n ifi c a n t c a p it a l re q u ire d t o c o m m e n c e c o n s t r u c t io n . T h e re is a ls o a r is k t h a t le g is la t iv e a p p ro v a ls re q u ire d t o c o m m e n c e c o n s t r u c t io n m a y b e d e la y e d o r n o t g r a n t e d . P ro je c t s t a t u s is a lig n e d t o t h e t im e lin e t o p ro d u c t io n . A n y s lip p a g e in t im e lin e m ile s t o n e w ill re d u c e t h e fa ir v a lu e . D e t a ile d im p le m e n t a t io n p la n s h a v e b e e n e s t a b lis h e d fo r e a c h o f t h e in d iv id u a l p ro je c t s . T h e im p le m e n t a t io n p la n id e n t ifi e s a re a s t h a t a re c r it ic a l t o t h e s u c c e s s fu l a d v a n c e m e n t o f t h e p ro je c t s . S t r a t e g ie s t o m it ig a t e a n d m a n a g e r is k a s s o c ia t e d w it h p ro je c t s u c c e s s h a v e b e e n d o c u m e n t e d in d e t a il fo r im p le m e n t a t io n . T h is in c lu d e s p re -fi n a n c e t e s t in g a n d m a r k e t d e v e lo p m e n t w o r k . E s t a b lis h m e n t o f s t r a t e g ic p a r t n e r s h ip s w it h c re d it a b le in d u s t r y p ro fe s s io n a ls s u c h a s e n g in e e r in g , p ro c u re m e n t a n d c o n s t r u c t io n c o n t r a c t o r s , o r ig in a l e q u ip m e n t m a n u fa c t u re r s , a n d fi n a n c in g p ro fe s s io n a ls s u c h a s N a t io n a l A u s t r a lia B a n k is a ls o c o n s id e re d c r it ic a l in re d u c in g t h e r is k o f g re e n fi e ld o p e r a t io n s . T im e lin e t o p r o d u c t io n S c h e d u lin g fo r t h e p ro je c t s h a s n o t fa c t o re d s ig n ifi c a n t d e la y s o r c o s t o v e r r u n s . F a c t o r s w h ic h c o u ld c re a t e s ig n ifi c a n t d e la y s in c lu d e a d v e r s e w e a t h e r c o n d it io n s , c o n s t r u c t io n r is k s p a r t ic u la r ly in -g ro u n d r is k s , t h e s e c u r in g o f w a t e r s u p p ly fo r c o n s t r u c t io n a n d re q u is it e a p p ro v a ls fo r in fr a s t r u c t u re u p g r a d e s . T h e re is a r is k t h a t s u c h d e la y s o r c o s t o v e r r u n s w ill im p a c t t h e p a y b a c k c a p a b ilit y o f t h e p ro je c t a n d re d u c e t h e o v e r a ll c a s h fl o w s . A n in c re a s e t o t h e t im e lin e t o p ro d u c t io n w ill re s u lt in a lo w e r fa ir v a lu e . C a p it a l r e q u ir e d T h e e s t im a t e d t o t a l c o n s t r u c t io n c o s t s o f t h e 1 8 G w h fa c t o r y in To w n s v ille is A U $ 3 B n . P ro je c t d e v e lo p m e n t h a s b e e n p h a s e d in t o 3 s t a g e s o f 6 G W h t o re d u c e t h e u p fro n t c a p it a l re q u ire m e n t . S t a g e O n e c o n s t r u c t io n c o s t s a re e s t im a t e d t o b e A U $ 1 .1 2 B n . W it h o u t a d e m o n s t r a t e d a b ilit y in c a p it a l r a is in g o f t h is q u a n t u m , t h e re is a r is k t h a t t h e c a p it a l re q u ire d w o n ’t b e s e c u re d o r w ill b e s ig n ifi c a n t ly d e la y e d . A s t h e re is n o p r io r h is t o r y o f m a n u fa c t u re a t s c a le , t h e re is a ls o a r is k t h a t fi n a n c e m a y b e o n le s s fa v o u r a b le t e r m s . T h e re is a ls o r is k t h a t b a t t e r y c e ll o ff t a k e a g re e m e n t s w ill n o t b e s e c u re d fo r e a c h o f t h e t h re e s t a g e s o r t h a t t h e p r ic e w ill b e le s s t h a n e s t im a t e d . T h is c o u ld im p a c t t h e p ro je c t s a b ilit y t o re p a y p ro je c t fi n a n c e a n d re s u lt in a lo w e r fa ir v a lu e . To m it ig a t e t h e s e r is k s , iM 3 T S V h a s a p p o in t e d N a t io n a l A u s t r a lia B a n k (‘N A B ’) in t h e c a p a c it y o f fi n a n c ia l a d v is o r t o jo in t ly d e v e lo p t h e P ro je c t fu n d in g s t r a t e g y a s p a r t o f t h is fe a s ib ilit y s t u d y . In t h e ro le o f fi n a n c ia l a d v is o r, N A B b r in g s e x t e n s iv e e x p e r ie n c e o n s e e k in g fu n d in g fo r la rg e p ro je c t s in t h e re n e w a b le s s e c t o r in c lu d in g w o r k in g a lo n g s id e g o v e r n m e n t b o d ie s , t o a d v is e p ro je c t s in N o r t h Q u e e n s la n d . iM 3 T S V w ill a ls o im p le m e n t a t e s t in g a n d m a r k e t d e v e lo p m e n t p ro g r a m in v o lv in g b a t t e r y p ro d u c t io n t e s t in g in a c o m m e rc ia l s e t t in g a t e q u ip m e n t v e n d o r fa c ilit ie s . G e n e r a t e d p ro d u c t w ill b e p ro v id e d fo r c u s t o m e r e v a lu a t io n a n d q u a lifi c a t io n t o w a rd s p ro c u r in g o ff t a k e c o n t r a c t s . T h is p ro g r a m w ill t a k e p la c e p r io r t o s e c u r in g t h e c o n s t r u c t io n c o s t s fo r S t a g e O n e . S e c u r in g o ff t a k e fo llo w in g c o n fi r m a t io n o f p ro d u c t s p e c ifi c a t io n w ill a s s is t is s e c u r in g p ro je c t fu n d in g . T h e t o t a l c o n s t r u c t io n o f t h e N a c h u G r a p h it e P ro je c t is e s t im a t e d t o c o s t A U D $ 4 0 0 M (U S $ 2 7 0 M ). T h is is a ls o c o n s id e re d a s ig n ifi c a n t a m o u n t o f c a p it a l. T h is is c o m p o u n d e d b y t h e s o v e re ig n r is k o f d e v e lo p in g a g r a p h it e m in e in T a n z a n ia . T h e re is a r is k t h a t t h e c a p it a l re q u ire d is n o t s e c u re d o r t h a t t h e fu n d in g w ill b e o n le s s fa v o u r a b le t e r m s . T h e G ro u p h a s id e n t ifi e d t a r g e t fu n d in g p a r t n e r s w it h e x p e r ie n c e in T a n z a n ia , w h o h a v e in -d e p t h a p p re c ia t io n a n d u n d e r s t a n d in g o f d e v e lo p in g a la rg e -s c a le re s o u rc e p ro je c t s in a ju r is d ic t io n w it h h ig h s o v e re ig n r is k . 6 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S E x p e c t e d a n n u a l p r o d u c t io n P ro je c t d e v e lo p m e n t o f iM 3 T S V h a s b e e n p h a s e d in t o t h re e s t a g e s o f 6 G W h e a c h . T h e b e n e fi t o f a s t a g e a p p ro a c h is t o re d u c e t h e u p fro n t c a p it a l re q u ire m e n t b u t a ls o t o a llo w fo r t h e p ro je c t e x p a n s io n t o o c c u r in lin e w it h m a r k e t d e v e lo p m e n t . H o w e v e r, t h e re is a r is k t h a t c a p it a l fo r t h e s e c o n d o r t h ird s t a g e m a y n o t b e s e c u re d o r t h a t c h a n g e s in g lo b a l c o m p e t it io n a n d t e c h n o lo g ic a l a d v a n c e m e n t o v e r c o n s t r u c t io n a n d t h e fi r s t s t a g e m a y im p a c t t h e v ia b ilit y o f e x p a n s io n . T h e re is a ls o a r is k t h a t t h e p ro je c t w ill a c h ie v e lo w e r b a t t e r y c e ll p ro d u c t io n y ie ld s t h a n fo re c a s t . To m it ig a t e t h e s e r is k s a n e x t e n s iv e p ro d u c t d e v e lo p m e n t a n d t e s t in g p ro g r a m w ill b e u n d e r t a k e n b y iM 3 T S V p r io r t o s e c u r in g S t a g e O n e fu n d in g . S u c h t e s t in g p ro g r a m s o n c e fu lly im p le m e n t e d c a n b e u t ilis e d t o t r a in e m p lo y e e s p r io r t o c o n s t r u c t io n a n d c o m m is s io n in g t o e n s u re a n in e x p e r ie n c e d w o r k fo rc e d o e s n o t d e la y r a m p u p . T h e N a c h u G r a p h it e P ro je c t h a s b e e n re p o r t e d a s t h e la r g e s t m in e r a l re s o u rc e s o f la r g e fl a k e g r a p h it e in t h e w o r ld . T h e re is a r is k , a t a p ro d u c t io n r a t e o f 2 4 0 ,0 0 0 t p a , t h a t s u p p ly w ill o u t s t r ip d e m a n d re s u lt in g in a n u n s u s t a in a b le p ro d u c t io n r a t e . T h e p ro je c t is a ls o s u b je c t t o s ig n ifi c a n t s o v e re ig n r is k a r is in g fro m c h a n g e s in le g is la t io n , g o v e r n m e n t , e n v iro n m e n t a l p e r m it s , e m p lo y m e n t , d is e a s e , c o m m u n it y re la t io n s a ll o f w h ic h c o u ld im p a c t t h e a n n u a l p ro d u c t io n . A re d u c t io n in t h e e x p e c t e d a n n u a l p ro d u c t io n w o u ld re d u c e t h e fa ir v a lu e . T h e N a c h u G r a p h it e P ro je c t is h o w e v e r c a p a b le o f b e in g p h a s e d in t o t w o s t a g e s o f p ro d u c t io n . T h e s t a g e d a p p ro a c h a llo w s t h e p ro je c t r is k s a n d t h e G ro u p ’s re s p o n s e t o b e t e s t e d a t a s m a lle r s c a le w it h re d u c e d c a p it a l o u t la y . R o y a lt ie s & R e s e r v a t io n F e e C 4 V h a s e x e c u t e d b in d in g a g re e m e n t s t o re c e iv e ro y a lt y in c o m e fro m t h e e x c lu s iv e u s e o f b o t h it s p a t e n t e d a n o d e c h e m is t r y a n d it s c o b a lt a n d n ic k e l fre e c a t h o d e c h e m is t r y . C 4 V a ls o re t a in s t h e r ig h t t o re c e iv e a o n c e o ff re s e r v a t io n fe e u p o n t h e g r a n t in g o f e x c lu s iv e u s e o f it s p a t e n t e d IP a t e a c h o f t h e a p p ro v e d iM 3 b a t t e r y p la n t s . T h e ro y a lt y in c o m e is d e p e n d e n t u p o n t h e s u c c e s s fu l d e v e lo p m e n t o f t h re e k e y p ro je c t s w h ic h in v o lv e s e it h e r m in in g a n d p ro c e s s in g o f n a t u r a l fl a k e g r a p h it e o r t h e p ro d u c t io n o f lit h iu m -io n b a t t e r ie s . T h e re is a r is k t h a t C 4 V w ill n o t re c e iv e t h e e s t im a t e d re s e r v a t io n fe e o r ro y a lt y in c o m e if t h e G ro u p is u n s u c c e s s fu l in s e c u r in g t h e re q u ire d c a p it a l t o c o m m e n c e c o n s t r u c t io n o f t h e in d iv id u a l p ro je c t s . T h e re is a ls o a r is k t h a t t h e a n n u a l ro y a lt y in c o m e d e r iv e d fro m t h e in d iv id u a l p ro je c t s w ill b e le s s t h a n e s t im a t e d d u e t o d e la y s in p ro d u c t io n t im e lin e s o r re d u c t io n in t h e e x p e c t e d a n n u a l p ro d u c t io n . A n y re d u c t io n in a n n u a l ro y a lt y in c o m e o r re s e r v a t io n fe e in c o m e w ill lo w e r t h e fa ir v a lu e . T h e c o n t r a c t s b e t w e e n C 4 V a n d M a g n is a n d iM 3 c o n t a in c o m m e rc ia lly s e n s it iv e in fo r m a t io n a n d a s s u c h c a n n o t b e d is c lo s e d in t h e fi n a n c ia l re p o r t a s it w o u ld lik e ly b e p re ju d ic ia l t o M a g n is . T h e c o n t r a c t e d ro y a lt y a n d re s e r v a t io n fe e s h a v e b e e n u s e d b y t h e G ro u p in d e t e r m in in g t h e fa ir v a lu e o f C 4 V R e c o v e r a b le a m o u n t - C 4 V ’s in v e s t m e n t in iM 3 N Y R e a lis in g t h e re c o v e r a b le a m o u n t o f C 4 V ’s in v e s t m e n t in iM 3 N Y is d e p e n d e n t o n p ro c e e d o f s a le e q u a llin g t h e e s t im a t e d U S $ 7 1 .3 4 m illio n . T h e re is a r is k t h a t t h e re m a y b e s ig n ifi c a n t a d v a n c e m e n t s in s t a t e o f t h e a r t e q u ip m e n t a n d t h a t b u y e r s w ill b e c o m e in c re a s in g ly d iffi c u lt t o id e n t ify . T h e v a lu a t io n o f t h e b a t t e r y m a n u fa c t u r in g e q u ip m e n t d o e s n o t fa c t o r in t h e c o s t o f re lo c a t in g t h e e q u ip m e n t fro m iM 3 N Y t o t h e b u y e r (s ). In t h e e v e n t t h a t iM 3 N Y w a s u n s u c c e s s fu l in a s s ig n in g t h e s e c o s t s t o t h e b u y e r, t h e fa ir v a lu e w o u ld b e re d u c e d . In t e r e s t r a t e r is k T h e m a in in t e re s t r a t e r is k a r is e s fro m e x p e c t e d lo n g -t e r m b o r ro w in g s t o fu n d t h e c o n s t r u c t io n c o s t s . B o r ro w in g s o b t a in e d a t v a r ia b le r a t e s e x p o s e in t e re s t r a t e r is k . B o r ro w in g s o b t a in e d a t fi x e d r a t e s e x p o s e t h e c o n s o lid a t e d e n t it y t o fa ir v a lu e r is k . T h e re is a ls o a r is k t h a t t h e g re e n fi e ld s t a t u s o f t h e p ro je c t c o u ld a t t r a c t in t e re s t r a t e s w it h e m b e d d e d r is k p re m iu m s . iM 3 T S V h a s m it ig a t e d t h is r is k b y a p p o in t in g N A B t o a d v is e o f t h e m o s t a d v a n t a g e o u s m ix o f a c h ie v a b le fu n d in g s o u rc e s a n d t a rg e t fu n d in g p a r t n e r s t o re d u c e t h e a m o u n t o f fu n d in g e x p o s e d t o in t e re s t r a t e r is k . T h is in c lu d e s s o u rc in g e q u it y p a r t n e r s a n d g o v e r n m e n t g r a n t s t o re d u c e t h e q u a n t u m o f p ro je c t fi n a n c in g re q u ire d . T h e G ro u p is t a rg e t in g p o t e n t ia l fu n d in g p a r t n e r s fo r t h e N a c h u G r a p h it e P ro je c t w h o h a v e a n in -d e p t h k n o w le d g e a n d e x p e r ie n c e in T a n z a n ia t o re d u c e t h e p ro b a b ilit y o f s ig n ifi c a n t r is k p re m iu m s b e in g a d d e d t o in t e re s t r a t e s . T a rg e t in g fu n d in g v ia e n g in e e r in g , c o n s t r u c t io n a n d p ro c u re m e n t c o n t r a c t o r s w h o h a v e a v e s t e d in t e re s t in t h e s u c c e s s o f t h e p ro je c t is o n e s t r a t e g y t h e G ro u p b e lie v e s w ill m it ig a t e t h e r is k o f a t t r a c t in g fi n a n c e w it h s u b s t a n t ia l r is k p re m iu m e m b e d d e d in t h e in t e re s t r a t e . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 6 3 N o t e s t o t h e F in a n c ia l S t a t e m e n t s C u r r e n c y r a t e r is k T h e in d iv id u a l p ro je c t s u n d e r t a k e c e r t a in t r a n s a c t io n s d e n o m in a t e d in fo re ig n c u r re n c y a n d is e x p o s e d t o fo re ig n c u r re n c y r is k t h ro u g h fo re ig n e x c h a n g e r a t e fl u c t u a t io n s . A s ig n ifi c a n t p o r t io n o f t h e S t a g e O n e c o n s t r u c t io n c o s t s fo r iM 3 T S V re la t e t o e q u ip m e n t p u rc h a s e s p a y a b le in U n it e d S t a t e s D o lla r s . F o re ig n e x c h a n g e r is k a r is e s fro m fu t u re c o m m e rc ia l t r a n s a c t io n s a n d re c o g n is e d fi n a n c ia l a s s e t s a n d fi n a n c ia l lia b ilit ie s d e n o m in a t e d in a c u r re n c y t h a t is n o t t h e e n t it y ’s fu n c t io n a l c u r re n c y . A d v e r s e fo re ig n c u r re n c y fl u c t u a t io n c a n a d d s ig n ifi c a n t a d d it io n a l c o s t s t o t h e e s t im a t e d c o n s t r u c t io n c o s t s o f t h e p ro je c t . T h e N a c h u p ro je c t is e x p o s e d t o c u r re n c y fl u c t u a t io n s b e t w e e n t h e U n it e d S t a t e s D o lla r (U S D ) a n d t h e T a n z a n ia n S c h illin g s (T z s ). W h e re p o s s ib le , t h e G ro u p m it ig a t e s t h is r is k b y e x e c u t in g s u p p ly a g re e m e n t s in U S D , h o w e v e r lo c a l c o n t e n t re q u ire m e n t s lim it s t h e e x t e n t t h a t t h is s t r a t e g y c a n b e im p le m e n t e d . In o rd e r t o p ro t e c t a g a in s t e x c h a n g e r a t e m o v e m e n t s , t h e G ro u p w ill c o n s id e r e n t e r in g in t o s im p le fo r w a rd fo re ig n e x c h a n g e c o n t r a c t s . R is k a d ju s t e d d is c o u n t r a t e T h e a b o v e r is k s h a v e b e e n fa c t o re d in t o t h e r is k a d ju s t e d d is c o u n t r a t e . A n y fa v o u r a b le m it ig a t io n o f t h e r is k s o u t lin e d a b o v e w o u ld re s u lt in a d e c re a s e in t h e d is c o u n t r a t e a n d a n in c re a s e in t h e fa ir v a lu e . S e n s it iv it y a n a ly s is In a c c o rd a n c e w it h t h e G ro u p p o lic y o f re v ie w in g t h is r is k , t h e fo llo w in g s e n s it iv it y a n a ly s is b a s e d o n a n in c re a s e o r d e c re a s e o f t h e r is k a d ju s t e d d is c o u n t r a t e v a r ie s a n d o t h e r v a r ia b le s re m a in c o n s t a n t , t h e fa ir v a lu e o f t h e in v e s t m e n t w o u ld h a v e b e e n a ff e c t e d a s s h o w n . D e s c r ip t io n U n o b s e r v a b le in p u t s S e n s it iv it y F in a n c ia l a s s e t a t F V O C I P ro je c t life A o n e y e a r c h a n g e w o u ld in c re a s e / (d e c re a s e ) fa ir v a lu e b y A U $ 0 .0 3 4 M / (A U $ 0 .0 4 2 M ) R is k a d ju s te d d is c o u n t ra te 5 % c h a n g e w o u ld in c re a s e / (d e c re a s e ) fa ir v a lu e b y A U $ 2 .1 4 7 M / (A U $ 1 .4 0 8 M ) E x p e c te d a n n u a l v o lu m e s 5 % c h a n g e w o u ld in c re a s e / (d e c re a s e ) fa ir v a lu e b y A U $ 0 .4 2 3 M / (A U $ 0 .4 2 3 M ) Va lu a tio n o f b a tte r y m a n u fa c tu rin g e q u ip m e n t 5 % c h a n g e w o u ld in c re a s e / (d e c re a s e ) fa ir v a lu e b y A U $ 2 .4 5 9 M / (A U $ 2 .4 5 9 M ) In v e s t m e n t a c c o u n te d fo r u s in g th e e q u it y m e th o d – M a g n is d ire c t in v e s tm e n t in IM 3 N Y In v e s t m e n t a c c o u n t e d fo r u s in g t h e e q u it y m e t h o d c o m p r is e s t h e G ro u p ’s in v e s t m e n t in a p r iv a t e N e w Yo r k lit h iu m -io n b a t t e r y p ro d u c t io n p la n t , Im p e r iu m 3 N e w Yo r k In c (‘iM 3 N Y ’). T h e in v e s t m e n t w h ic h is a c c o u n t e d fo r u s in g t h e e q u it y m e t h o d is m e a s u re d a t c o s t a n d t h e c a r r y in g v a lu e o f t h e in v e s t m e n t is s u b s e q u e n t ly a d ju s t e d fo r t h e G ro u p ’s in t e re s t in t h e a s s o c ia t e s p ro fi t o r lo s s . T h e in v e s t m e n t is n o t q u o t e d in a n a c t iv e m a r k e t a n d a c c o rd in g ly t h e fa ir v a lu e o f t h is in v e s t m e n t is in c lu d e d w it h in L e v e l 3 o f t h e h ie r a rc h y . V a lu a t io n T e c h n iq u e s - L e v e l 3 T h e G ro u p h a s d e t e r m in e d t h e fa ir v a lu e o f it s s t r a t e g ic in v e s t m e n t in iM 3 N Y b y o b t a in in g a t h ird - p a r t y v a lu a t io n o f t h e re c o v e r a b le a m o u n t o f t h e b a t t e r y p la n t e q u ip m e n t p u rc h a s e d in 2 0 1 8 . T h e v a lu a t io n o f t h e b a t t e r y p la n t e q u ip m e n t w a s u n d e r t a k e n in A u g u s t 2 0 1 9 b y le a d in g e n g in e e r in g fi r m O ’B r ie n & G e re w h o a s s e s s e d o f a ll t h e it e m s p u rc h a s e d . In it s c u r re n t s t a t u s a n d c o n d it io n t h e e x t e r n a l v a lu e r h a s a t t r ib u t e d a v a lu a t io n o f A U $ 1 0 1 .4 m illio n (U S $ 7 1 .3 4 m illio n ) o f w h ic h M N S h a s a d ire c t in t e re s t e q u iv a le n t t o A U $ 5 4 .3 5 m illio n (U S $ 3 7 .3 7 m illio n ). 6 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S Q u a n t it a t iv e in f o r m a t io n o n s ig n ifi c a n t u n o b s e r v a b le in p u t s - L e v e l 3 D e s c r ip t io n V a lu a t io n t e c h n iq u e U n o b s e r v a b le in p u t s I m p e r iu m 3 N e w Yo r k S e n s it iv it y In v e s tm e n t a c c o u n te d fo r F V Va lu a tio n o f b a tte r y A U $ 1 0 2 M 5 % c h a n g e w o u ld in c re a s e / (d e c re a s e ) u s in g th e e q u ity m e th o d m a n u fa c tu rin g e q u ip m e n t (U S $ 7 1 .3 4 M ) fa ir v a lu e b y A U $ 2 .7 0 m /(A U $ 2 .7 0 )m ) 1 7 . R E S E R V E S a ) R e s e r v e s F o re ig n c u r re n c y t r a n s la t io n S h a re b a s e d p a y m e n t F V O C I R e s e r v e b ) N a t u r e a n d p u r p o s e o f r e s e r v e s i. F o r e ig n c u r r e n c y t r a n s la t io n r e s e r v e C o n s o l i d a t e d 2 0 2 0 $ 5 ,9 8 2 ,7 9 9 6 3 ,2 0 0 (2 ,5 2 4 ,5 2 3 ) 2 0 1 9 $ 5 ,1 0 6 ,2 7 7 1 ,2 9 0 ,6 4 4 - 3 ,5 2 1 ,4 7 6 6 ,3 9 6 ,9 2 1 E x c h a n g e d iff e re n c e s a r is in g o n t r a n s la t io n o f t h e fo re ig n c o n t ro lle d e n t it y a re t a k e n t o t h e fo re ig n c u r re n c y t r a n s la t io n re s e r v e , a s d e s c r ib e d in N o t e 1 .T h e re s e r v e is re c o g n is e d in p ro fi t o r lo s s w h e n t h e n e t in v e s t m e n t is d is p o s e d o f. ii. S h a r e b a s e d p a y m e n t r e s e r v e T h e s h a re b a s e d p a y m e n t re s e r v e is u s e d t o re c o g n is e t h e fa ir v a lu e o f p a id o p t io n s is s u e d t o D ire c t o r s , e m p lo y e e s , a n d c o n t r a c t o r s . iii. F V O C I r e s e r v e T h e F V O C I R e s e r v e is u s e d t o re c o g n is e a n y im p a ir m e n t o n a s s e t s a n d lia b ilit ie s u s in g t h e fa ir v a lu e o f m e a s u re m e n t , t h e re b y e n s u r in g fa ir v a lu e s a re e q u iv a le n t t o t h e ir re s p e c t iv e n e t c a r r y in g v a lu e . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 6 5 N o t e s t o t h e F in a n c ia l S t a t e m e n t 1 8 . S T A T E M E N T O F C A S H F L O W S a ) R e c o n c ilia t io n o f t h e n e t lo s s a f t e r in c o m e t a x t o t h e n e t c a s h fl o w s f r o m o p e r a t in g a c t iv it ie s O p e r a t i n g a c t i v i t i e s N e t lo s s N o n c a s h a n d n o n o p e r a t i n g i t e m s D e p re c ia t io n o f n o n c u r re n t a s s e t s S h a re b a s e d p a y m e n t s S h a re o f a s s o c ia t e s n e t lo s s a c c o u n t e d fo r u s in g t h e e q u it y m e t h o d (P ro fi t )/ L o s s o n s a le o f a s s e t s N e t fo re ig n c u r re n c y t r a n s la t io n g a in (lo s s ) A c c r u e d in t e re s t C h a n g e s i n a s s e t s a n d l i a b i l i t i e s (In c re a s e )/d e c re a s e in t r a d e a n d o t h e r re c e iv a b le s (In c re a s e )/d e c re a s e in p re p a y m e n t s (In c re a s e )/d e c re a s e in s e c u r it y b o n d s (In c re a s e )/d e c re a s e in e x p lo r a t io n a s s e t s (In c re a s e ) in d e v e lo p m e n t a s s e t s In c re a s e /(d e c re a s e ) in t r a d e a n d o t h e r p a y a b le s In c re a s e /(d e c re a s e ) in p ro v is io n s N e t c a s h o u t fl o w f r o m o p e r a t i n g a c t i v i t i e s a ) R e c o n c ilia t io n o f c a s h a n d c a s h e q u iv a le n t s C a s h a t b a n k C a s h a t b a n k a n d in h a n d 1 9 . C O M M I T M E N T S a ) E x p lo r a t io n c o m m it m e n t s C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ (7 ,8 6 7 ,0 8 8 ) (5 ,5 4 9 ,5 5 3 ) 4 0 ,8 6 9 4 0 1 ,5 4 7 - (5 4 ,2 5 6 ) 1 6 5 ,4 1 6 - 1 ,3 3 8 ,2 2 2 (2 2 1 ,7 1 9 ) - - - 4 5 1 ,5 1 9 5 1 8 ,6 3 5 1 2 0 ,9 0 1 2 1 ,9 0 0 3 0 1 ,1 4 4 - (2 3 ,0 3 0 ) (4 3 ,5 2 1 ) 3 4 ,7 2 4 3 ,8 5 1 - - (3 ,6 3 5 ) (4 6 1 ,3 3 8 ) 1 3 ,1 5 7 (5 ,2 2 6 ,8 5 5 ) (5 ,5 8 5 ,4 0 0 ) 7 1 9 ,6 1 5 7 1 9 ,6 1 5 1 ,8 2 9 ,8 1 7 1 ,8 2 9 ,8 1 7 T h e G ro u p h a s c e r t a in c o m m it m e n t s t o m e e t m in im u m e x p e n d it u re re q u ire m e n t s o n t h e m in e r a l e x p lo r a t io n a s s e t s in w h ic h it h a s a n in t e re s t . N o t e 1 o u t lin e s t h e G ro u p ’s fu t u re fu n d in g o p t io n s t o m e e t it s c o m m it m e n t s . O u t s t a n d in g e x p lo r a t io n c o m m it m e n t s a re a s fo llo w s : N o t la t e r t h a n o n e y e a r C o n s o l i d a t e d 2 0 2 0 $ 9 0 ,0 1 5 9 0 ,0 1 5 2 0 1 9 $ 8 8 ,2 2 9 8 8 ,2 2 9 E x p lo r a t io n e x p e n d it u re c o m m it m e n t s b e y o n d t w e lv e m o n t h s c o u ld n o t b e re lia b le d e t e r m in e d b e c a u s e t h e a n n u a l c o m m it m e n t w a s s e t a t t h e a n n iv e r s a r y d a t e fo r e a c h t e n e m e n t . 6 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 2 0 . C O N T I N G E N T L I A B I L I T I E S A N D C O N T I N G E N T A S S E T S T h e re a re n o c o n t in g e n t lia b ilit ie s o r a s s e t s a t 3 0 J u n e 2 0 2 0 .T h e G ro u p h a s g u a r a n t e e s fo r p ro p e r t y le a s e s a n d b a n k in g fi n a n c e fa c ilit ie s o f $ 1 5 0 ,9 7 7 (2 0 1 9 : $ 1 5 0 ,9 7 7 ). 2 1 . E V E N T S A F T E R R E P O R T I N G P E R I O D > O n 2 1 A u g u s t 2 0 2 0 , t h e C o m p a n y t e r m in a t e d t h e e m p lo y m e n t o f it s C h ie f E x e c u t iv e O ffi c e r, D r F r a n k H o u llis . > > > > O n 4 S e p t e m b e r 2 0 2 0 , t h e C o m p a n y a n n o u n c e d t h a t it re c e iv e d fi r m c o m m it m e n t s fro m in s t it u t io n a l, p ro fe s s io n a l, a n d s o p h is t ic a t e d in v e s t o r s t o r a is e $ 7 .6 5 m illio n v ia a p la c e m e n t o f 4 5 m o rd in a r y s h a re s a t 1 7 c e n t s p e r s h a re . T h is in c lu d e d a n a m o u n t o f a p p ro x im a t e ly $ 5 0 0 ,0 0 0 s u b s c r ib e d b y M r J a m e s D a c k , E x e c u t iv e D ire c t o r, s u b je c t t o s h a re h o ld e r a p p ro v a l t o b e o b t a in e d a t t h e C o m p a n y ’s 2 0 2 0 A n n u a l G e n e r a l M e e t in g . F u n d s r a is e d w ill b e u s e d fo r w o r k in g c a p it a l a n d a d v a n c in g a ll p ro je c t s O n 8 S e p t e m b e r 2 0 2 0 , t h e C o m p a n y t e r m in a t e d t h e S u b s c r ip t io n A g re e m e n t d a t e d 2 7 S e p t e m b e r 2 0 2 0 b e t w e e n t h e C o m p a n y a n d N e g m a G ro u p L im it e d , s u c h t e r m in a t io n b e in g e ff e c t iv e im m e d ia t e ly . O n 2 1 S e p t e m b e r 2 0 2 0 , t h e C o m p a n y a n n o u n c e d t h a t it a p p o in t e d M r R o d C h it t e n d e n t o t h e ro le o f P ro je c t D ire c t o r, N a c h u G r a p h it e P ro je c t , a n d M r J a c k R o b e r t s o n t o t h e ro le o f S t r a t e g ic M a n a g e r, B a t t e r ie s (P a r t -t im e ). T h e im p a c t o f t h e C o ro n a v ir u s (C O V ID -1 9 ) p a n d e m ic is o n g o in g a n d w h ile it h a s b e e n fi n a n c ia lly p o s it iv e fo r t h e c o n s o lid a t e d e n t it y u p t o 3 0 J u n e 2 0 2 0 , it is n o t p r a c t ic a b le t o e s t im a t e t h e p o t e n t ia l im p a c t , p o s it iv e o r n e g a t iv e , a f t e r t h e re p o r t in g d a t e . T h e s it u a t io n is r a p id ly d e v e lo p in g a n d is d e p e n d e n t o n m e a s u re s im p o s e d b y t h e A u s t r a lia n G o v e r n m e n t a n d o t h e r c o u n t r ie s , s u c h a s m a in t a in in g s o c ia l d is t a n c in g re q u ire m e n t s , t r a v e l re s t r ic t io n s a n d a n y e c o n o m ic s t im u lu s t h a t m a y b e p ro v id e d . 2 2 . A U D I T O R S ’ R E M U N E R A T I O N T h e a u d it o r o f M a g n is E n e rg y Te c h n o lo g ie s L im it e d in t h e c u r re n t y e a r is H a ll C h a d w ic k M e lb o u r n e A u d it . C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ (a ) A m o u n t s r e c e i v e d o r d u e a n d r e c e i v a b l e b y M a g n i s G r o u p A u d i t o r ’s (A u s t r a l i a ) f o r : A n a u d it o r re v ie w o f t h e fi n a n c ia l re p o r t o f t h e e n t it y a n d a n y o t h e r e n t it y in t h e c o n s o lid a t e d G ro u p 1 0 6 ,3 9 2 6 2 ,9 7 8 O t h e r s e r v ic e s in re la t io n o f t h e e n t it y a n d a n y o t h e r e n t it y in t h e c o n s o lid a t e d G ro u p – T a x a t io n s e r v ic e s – C o r p o r a t e s e r v ic e s 9 7 ,7 1 9 - 6 7 ,4 8 9 2 ,5 9 5 2 0 4 ,1 1 1 1 3 3 ,0 6 2 (b ) A m o u n t s r e c e i v e d o r d u e a n d r e c e i v a b l e b y r e l a t e d p r a c t i c e s o f M a g n i s G r o u p A u d i t o r ’s (A u s t r a l i a ) f o r : A n a u d it o r re v ie w o f t h e fi n a n c ia l re p o r t o f t h e e n t it y a n d a n y o t h e r e n t it y in t h e c o n s o lid a t e d G ro u p O t h e r s e r v ic e s in re la t io n o f t h e e n t it y a n d a n y o t h e r e n t it y in t h e c o n s o lid a t e d G ro u p – T a x a t io n s e r v ic e s - - - 1 3 ,2 0 1 6 ,3 0 8 1 9 ,5 0 9 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 6 7 N o t e s t o t h e F in a n c ia l S t a t e m e n t s 2 3 . L O S S P E R S H A R E (a ) R e c o n c i l i a t i o n o f e a r n i n g s t o p r o fi t o r l o s s : N e t lo s s - L o s s u s e d in c a lc u la tin g b a s ic lo s s p e r s h a re C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 7 ,3 7 8 ,6 0 1 5 ,5 4 9 ,5 5 3 N u m b e r o f s h a r e s 2 0 2 0 N u m b e r o f s h a r e s 2 0 1 9 (b ) W e i g h t e d a v e r a g e n u m b e r o f o r d i n a r y s h a r e s o u t s t a n d i n g d u r i n g t h e y e a r u s e d i n c a l c u l a t i n g b a s i c l o s s p e r s h a r e : W e ig h te d a v e ra g e n u m b e r o f o rd in a r y s h a re s u s e d in c a lc u la tin g b a s ic lo s s p e r s h a re 6 6 5 ,0 0 6 ,2 2 1 6 0 4 ,6 3 4 ,7 4 5 B a s ic lo s s p e r s h a re (c e n t s p e r s h a re ): 1 .1 1 (2 0 1 9 : 0 .9 2 ) (c ) E ff e c t o f d i l u t i v e s e c u r i t i e s F o r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 a n d fo r t h e c o m p a r a t iv e p e r io d t h e re a re n o d ilu t iv e o rd in a r y s h a re s b e c a u s e c o n v e r s io n o f s h a re o p t io n s a n d p e r fo r m a n c e r ig h t s w o u ld d e c re a s e t h e lo s s p e r s h a re a n d h e n c e b e n o n -d ilu t iv e . D ilu t e d lo s s p e r s h a re (c e n t s p e r s h a re ): 1 .1 1 (2 0 1 9 : 0 .9 2 ) A C C O U N T I N G P O L I C I E S B a s ic E P S is c a lc u la t e d a s t h e p ro fi t / [lo s s ] a t t r ib u t a b le t o e q u it y h o ld e r s o f t h e C o m p a n y , e x c lu d in g a n y c o s t s o f s e r v ic in g e q u it y o t h e r t h a n o rd in a r y s h a re s , d iv id e n d b y t h e w e ig h t e d a v e r a g e n u m b e r o f o rd in a r y s h a re s o u t s t a n d in g d u r in g t h e fi n a n c ia l y e a r, a d ju s t e d fo r a n y b o n u s e le m e n t s in o rd in a r y s h a re s d u r in g t h e y e a r. D ilu t e d E P S a d ju s t s t h e fi g u re s u s e d in t h e d e t e r m in a t io n o f b a s ic E P S t o t a k e in t o a c c o u n t t h e a f t e r in c o m e t a x e ff e c t o f in t e re s t a n d o t h e r fi n a n c in g c o s t s a s s o c ia t e d w it h d ilu t iv e o rd in a r y s h a re s a n d t h e w e ig h t e d a v e r a g e n u m b e r o f s h a re s a s s u m e d t o h a v e b e e n is s u e d fo r n o c o n s id e r a t io n in re la t io n t o d ilu t iv e p o t e n t ia l o rd in a r y s h a re s . 2 4 . K E Y M A N A G E M E N T P E R S O N N E L (a ) C o m p e n s a t i o n T h e a g g re g a t e c o m p e n s a t io n m a d e t o d ire c t o r s a n d o t h e r m e m b e r s o f k e y m a n a g e m e n t p e r s o n n e l o f t h e c o n s o lid a t e d e n t it y is s e t o u t b e lo w : S h o r t-te rm e m p lo y e e b e n e fi ts Te rm in a tio n b e n e fi ts P o s t-e m p lo y m e n t b e n e fi ts S h a re -b a s e d p a y m e n ts C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 1 ,1 7 4 ,7 9 2 1 ,2 1 4 ,4 5 7 - 5 9 ,9 2 7 7 4 7 - 1 0 9 ,9 2 6 1 1 ,4 0 0 1 ,2 3 5 ,4 6 6 1 ,3 3 5 ,7 8 3 6 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S (b ) O t h e r t r a n s a c t i o n s a n d b a l a n c e s w i t h k e y m a n a g e m e n t p e r s o n n e l a n d t h e i r r e l a t e d p a r t i e s T r a n s a c t io n s w it h D ire c t o r s ’ re la t e d e n t it ie s . I d e n t i t y o f r e l a t e d p a r t y N a t u r e o f r e l a t i o n s h i p T y p e o f t r a n s a c t i o n T e r m s & C o n d i t i o n s o f T r a n s a c t i o n S tro n g S o lu tio n s P ty L im ite d F ra n k P o u lla s is a re la te d p a r ty o f S tro n g S o lu tio n s P ty L im ite d a n d a D ire c to r o f M a g n is E n e rg y Te c h n o lo g ie s L im ite d C o n s u ltin g fe e s a n d P &E p u rc h a s e s N o rm a l C o m m e rc ia l Te rm s A g r e g a t e d A m o u n t 2 0 2 0 $ 2 0 1 9 $ 1 8 1 ,7 7 0 3 1 4 ,5 6 8 P e te r Ts e g a s P e te r Ts e g a s is a D ire c to r o f M a g n is C o n s u ltin g F e e s N o rm a l 3 5 ,0 1 8 4 2 0 ,0 0 0 E n e rg y Te c h n o lo g ie s L td D r U lric h B e z H o n D Te c h D r U lric h B e x is a D ire c to r o f M a g n is E n e rg y Te c h n o lo g ie s L im ite d C o n s u ltin g F e e s M S ta n le y W h ittin g h a m M S ta n le y W h ittin g h a m is a D ire c to r o f C o n s u ltin g F e e s C o m m e rc ia l Te rm s N o rm a l C o m m e rc ia l Te rm s N o rm a l C o m m e rc ia l Te rm s - 9 ,9 0 0 1 4 ,7 4 9 - (c ) O u t s t a n d i n g b a l a n c e s a r i s e s f r o m p u r c h a s e s o f g o o d s a n d s e r v i c e s a t t h e r e p o r t i n g d a t e i n r e l a t i o n t o o t h e r t r a n s a c t i o n s w i t h k e y m a n a g e m e n t p e r s o n n e l. A s s e t s a n d l i a b i l i t i e s C u r r e n t l i a b i l i t i e s Tra d e a n d o th e r p a y a b le s To ta l lia b ilitie s 2 0 2 0 $ 2 0 1 9 $ - - 2 2 ,0 0 9 2 2 ,0 0 9 2 5 . R E L A T E D P A R T Y D I S C L O S U R E S P A R E N T E N T I T Y M a g n is E n e rg y Te c h n o lo g ie s L im it e d is t h e u lt im a t e A u s t r a lia n p a re n t e n t it y o f t h e c o n s o lid a t e d e n t it y . It s in t e re s t s in c o n t ro lle d e n t it ie s a re s e t o u t in N o t e 2 7 . W H O L LY O W N E D G R O U P T R A N S A C T I O N S C o n t ro lle d e n t it ie s m a d e p a y m e n t s a n d re c e iv e d fu n d s o n b e h a lf o f M a g n is E n e r g y Te c h n o lo g ie s L im it e d a n d o t h e r c o n t ro lle d e n t it ie s b y w a y o f in t e r -c o m p a n y lo a n a c c o u n t s w it h e a c h c o n t ro lle d e n t it y . T h e s e lo a n s a re u n s e c u re d , b e a r n o in t e re s t a n d a re re p a y a b le o n d e m a n d . H o w e v e r, d e m a n d fo r re p a y m e n t is n o t e x p e c t e d in t h e n e x t t w e lv e m o n t h s . T r a n s a c t io n s a n d b a la n c e s b e t w e e n t h e C o m p a n y a n d it s c o n t ro lle d e n t it ie s w e re e lim in a t e d in t h e p re p a r a t io n a n d c o n s o lid a t io n o f t h e fi n a n c ia l s t a t e m e n t s o f t h e g ro u p . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 6 9 N o t e s t o t h e F in a n c ia l S t a t e m e n t s K E Y M A N A G E M E N T P E R S O N N E L D e t a ils re la t in g t o k e y m a n a g e m e n t p e r s o n n e l, in c lu d in g re m u n e r a t io n p a id , a re in c lu d e d in N o t e 2 4 a n d t h e R e m u n e r a t io n R e p o r t in t h e D ire c t o r s R e p o r t . T R A N S A C T I O N S W I T H R E L A T E D P A R T I E S A ll a m o u n t s p a y a b le t o re la t e d p a r t ie s a re u n s e c u re d a n d a t n o in t e re s t c o s t . T h e a m o u n t o u t s t a n d in g w ill b e s e t t le d in c a s h . N o g u a r a n t e e s h a v e b e e n g iv e n o r re c e iv e d . N o e x p e n s e h a s b e e n re c o g n is e d in t h e p e r io d fo r b a d o r d o u b t fu l d e b t s in re s p e c t o f t h e a m o u n t s o w e d b y re la t e d p a r t ie s . E N T I T Y W I T H S I G N I F I C A N T I N F L U E N C E O V E R T H E G R O U P M A Z Z D E L P T Y LT D c o n t ro ls 8 .5 3 % o f t h e o rd in a r y s h a re s (fu lly d ilu t e d ) in M a g n is E n e r g y Te c h n o lo g ie s L im it e d (2 0 1 9 : 8 .3 5 % ). A L C A P ITA L H O L D IN G P T Y LT D c o n t ro ls 5 .5 8 % o f t h e o rd in a r y s h a re s (fu lly d ilu t e d ) in M a g n is E n e r g y Te c h n o lo g ie s L im it e d (2 0 1 9 : 5 .7 6 % ). 2 6 . P A R E N T E N T I T Y I N F O R M A T I O N S e t o u t b e lo w is t h e s u p p le m e n t a r y in fo r m a t io n a b o u t t h e p a re n t e n t it y . S t a t e m e n t o f p r o fi t o r l o s s a n d o t h e r c o m p r e h e n s i v e i n c o m e P ro fi t a f t e r in c o m e t a x To t a l c o m p re h e n s iv e in c o m e S t a t e m e n t o f fi n a n c i a l p o s i t i o n To t a l c u r re n t a s s e t s To t a l a s s e t s To t a l c u r re n t lia b ilit ie s To t a l lia b ilit ie s E q u it y Is s u e d c a p it a l E q u it y s e t t le d e m p lo y e e b e n e fi t s re s e r v e R e t a in e d p ro fi t s To t a l e q u it y C o n t in g e n t lia b ilit ie s P a r e n t 2 0 2 0 $ 2 0 1 9 $ (6 ,9 7 2 ,8 7 3 ) (6 ,0 1 8 ,1 4 6 ) (6 ,9 7 2 ,8 7 3 ) (6 ,0 1 8 ,1 4 6 ) 1 ,0 4 7 ,0 2 4 3 ,8 4 3 ,2 9 2 1 4 ,7 8 9 ,8 5 6 1 9 ,1 7 1 ,4 0 7 7 0 7 ,5 2 1 1 ,1 4 2 ,7 8 2 4 3 6 ,1 5 0 4 7 6 ,9 7 1 1 2 8 ,6 2 5 ,9 0 5 1 2 4 ,1 7 7 ,4 1 8 6 3 ,2 0 0 1 ,2 9 0 ,6 4 5 (1 1 2 ,5 1 7 ,5 0 8 ) (1 0 6 ,7 7 3 ,6 2 7 ) 1 6 ,1 7 1 ,5 9 7 1 8 ,6 9 4 ,4 3 6 T h e p a re n t e n t it y h a d n o c o n t in g e n t lia b ilit ie s a s a t 3 0 J u n e 2 0 2 0 a n d 3 0 J u n e 2 0 1 9 . C a p it a l c o m m it m e n t s - P la n t a n d e q u ip m e n t T h e p a re n t e n t it y h a d n o c a p it a l c o m m it m e n t s fo r p la n t a n d e q u ip m e n t a t a s 3 0 J u n e 2 0 2 0 a n d 3 0 J u n e 2 0 1 9 . R e m u n e r a t io n c o m m it m e n t s T h e p a re n t e n t it y h a s a re m u n e r a t io n c o m m it m e n t o f $ 8 9 ,2 4 7 a s a t 3 0 J u n e 2 0 2 0 (2 0 1 9 : $ 5 4 9 ,8 9 6 ). 7 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 2 7 . I N T E R E S T S I N C O N T R O L L E D E N T I T I E S T h e c o n s o lid a t e d fi n a n c ia l s t a t e m e n t s in c o r p o r a t e t h e a s s e t s , lia b ilit ie s , a n d re s u lt s o f t h e fo llo w in g s u b s id ia r ie s in a c c o rd a n c e w it h t h e a c c o u n t in g p o lic y d e s c r ib e d in N o t e 1 : N a m e C o u n t r y o f i n c o r p o r a t i o n C l a s s o f s h a r e s U ra n e x Ta n z a n ia L im ite d M a g n is Te c h n o lo g ie s [Ta n z a n ia ] L im ite d Ta n z a n ia Ta n z a n ia U ra n e x M o z a m b iq u e L im ita d a M o z a m b iq u e U ra n e x E S IP P ty L td A u s tra lia Fa ru R e s o u rc e s L im ite d J u h u d i M in e ra ls L im ite d Im p e riu m 3 N e w Yo rk In c . 1 ,2 O rd in a r y Ta n z a n ia Ta n z a n ia U S A O rd in a r y O rd in a r y O rd in a r y 1 0 0 O rd in a r y O rd in a r y O rd in a r y E q u i t y H o l d i n g s 1 2 0 2 0 % 2 0 1 9 % 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 6 2 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 3 1 1 p e rc e n ta g e o f v o tin g p o w e r is in p ro p o r tio n to o w n e rs h ip . 2 Im p e riu m 3 N e w Yo rk In c . w a s in c o rp o ra te d fo r c o n s o lid a tio n p u rp o s e s o n 2 9 J u n e 2 0 2 0 . T h e re m a in in g 3 8 % h a s b e e n a ttrib u te d to n o n - c o n tro llin g in te re s ts . A C C O U N T I N G P O L I C I E S P r in c ip le s o f c o n s o lid a t io n T h e c o n s o lid a t io n fi n a n c ia l s t a t e m e n t s a re t h o s e o f t h e c o n s o lid a t e d e n t it y , c o m p r is in g M a g n is E n e r g y Te c h n o lo g ie s L im it e d [t h e p a re n t e n t it y ], s p e c ia l p u r p o s e e n t it ie s a n d a ll e n t it ie s w h ic h M a g n is E n e r g y Te c h n o lo g ie s L im it e d c o n t ro lle d fro m t im e t o t im e d u r in g t h e y e a r a n d a t re p o r t in g d a t e . C o n t ro l is a c h ie v e d w h e n t h e G ro u p is e x p o s e d , o r h a s r ig h t s , t o v a r ia b le re t u r n s fro m it s in v o lv e m e n t w it h t h e in v e s t e e a n d h a s t h e a b ilit y t o a ff e c t t h o s e re t u r n s t h ro u g h t ie s p o w e r o v e r t h e in v e s t e e . S p e c ifi c a lly , t h e G ro u p c o n t ro ls a n d in v e s t e e if a n d o n ly if t h e G ro u p h a s : > > > P o w e r o v e r t h e in v e s t e e [i.e . e x is t in g r ig h t s t h a t g iv e it t h e c u r re n t a b ilit y t o d ire c t t h e re le v a n t a c t iv it ie s o f t h e in v e s t e e ] E x p o s u re , o r r ig h t s , t o v a r ia b le re t u r n s fro m it s in v o lv e m e n t w it h t h e in v e s t e e , a n d T h e a b ilit y t o u s e it s p o w e r o v e r t h e in v e s t e e t o a ff e c t it s re t u r n s W h e n t h e G ro u p h a s le s s t h a n a m a jo r it y o f t h e v o t in g o r s im ila r r ig h t s o f a n in v e s t e e , t h e G ro u p c o n s id e r s a ll re le v a n t fa c t s a n d c irc u m s t a n c e s in a s s e s s in g w h e t h e r it h a s p o w e r o v e r a n in v e s t e e , in c lu d in g : > > > T h e c o n t r a c t u a l a r r a n g e m e n t w it h t h e o t h e r v o t e h o ld e r s o f t h e in v e s t e e R ig h t s a r is in g fro m o t h e r c o n t r a c t u a l a r r a n g e m e n t s T h e G ro u p ’s v o t in g r ig h t s a n d p o t e n t ia l v o t in g r ig h t s T h e G ro u p re -a s s e s s w h e t h e r o r n o t it c o n t ro ls a n in v e s t e e if fa c t s a n d c irc u m s t a n c e s in d ic a t e t h a t t h e re a re c h a n g e s t o o n e o r m o re o f t h e t h re e e le m e n t s o f c o n t ro l. C o n s o lid a t io n o f a s u b s id ia r y b e g in s w h e n t h e G ro u p o b t a in s c o n t ro l o v e r t h e s u b s id ia r y a n d c e a s e s w h e n t h e G ro u p lo s s e s c o n t ro l o f t h e s u b s id ia r y . A s s e t s , lia b ilit ie s , in c o m e , a n d e x p e n s e s o f a s u b s id ia r y a c q u ire d o r d is p o s e d o f d u r in g t h e y e a r a re in c lu d e d in t h e s t a t e m e n t o f c o m p re h e n s iv e in c o m e fro m t h e d a t e t h e G ro u p g a in s c o n t ro l u n t il t h e d a t e t h e G ro u p c e a s e s t o c o n t ro l t h e s u b s id ia r y . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 7 1 N o t e s t o t h e F in a n c ia l S t a t e m e n t s P ro fi t o r lo s s a n d e a c h c o m p o n e n t o f o t h e r c o m p re h e n s iv e in c o m e [O C I] a re a t t r ib u t e d t o t h e e q u it y h o ld e r s o f t h e p a re n t o f t h e G ro u p a n d t o t h e n o n -c o n t ro llin g in t e re s t s , e v e n if t h is re s u lt s in t h e n o n -c o n t ro llin g in t e re s t s h a v in g a d e fi c it b a la n c e . W h e n n e c e s s a r y , a d ju s t m e n t s a re m a d e t o t h e fi n a n c ia l s t a t e m e n t s o f s u b s id ia r ie s t o b r in g t h e ir a c c o u n t in g p o lic ie s in t o lin e w it h t h e G ro u p ’s a c c o u n t in g p o lic ie s . A ll in t r a -g ro u p a s s e t s a n d lia b ilit ie s , e q u it y , in c o m e , e x p e n s e s , a n d c a s h fl o w s re la t in g t o t r a n s a c t io n s b e t w e e n m e m b e r s o f t h e G ro u p a re e lim in a t e d in fu ll o n c o n s o lid a t io n . A c h a n g e in t h e o w n e r s h ip in t e re s t o f a s u b s id ia r y , w it h o u t a lo s s o f c o n t ro l, is a c c o u n t e d fo r a s a n e q u it y t r a n s a c t io n . If t h e G ro u p lo s e s c o n t ro l o v e r a s u b s id ia r y , it : > > > > > > > D e -re c o g n is e s t h e a s s e t s [in c lu d in g g o o d w ill] a n d lia b ilit ie s o f t h e s u b s id ia r y D e -re c o g n is e s t h e c a r r y in g a m o u n t o f a n y n o n -c o n t ro llin g in t e re s t s D e -re c o g n is e s t h e c u m u la t iv e t r a n s la t io n d iff e re n c e s re c o rd e d in e q u it y R e c o g n is e s t h e fa ir v a lu e o f t h e c o n s id e r a t io n re c e iv e d R e c o g n is e s t h e fa ir v a lu e o f a n y in v e s t m e n t re t a in e d R e c o g n is e s a n y s u r p lu s o r d e fi c it in p ro fi t o r lo s s R e c la s s ifi e s t h e p a re n t ’s s h a re o f c o m p o n e n t s p re v io u s ly re c o g n is e d in O C I t o p ro fi t o r lo s s o r re t a in e d e a r n in g s , a s a p p ro p r ia t e , a s w o u ld b e re q u ire d if t h e G ro u p h a d d ire c t ly d is p o s e d o f t h e re la t e d a s s e t s o r lia b ilit ie s S u b s id ia r ie s a re re c o rd e d a s a c o m p o n e n t o f o t h e r re v e n u e s in t h e s e p a r a t e in c o m e s t a t e m e n t o f t h e p a re n t e n t it y , a n d d o n o t im p a c t t h e re c o rd e d c o s t o f t h e in v e s t m e n t . U p o n re c e ip t o f d iv id e n d p a y m e n t s fro m s u b s id ia r ie s , t h e p a re n t w ill a s s e s s w h e t h e r a n y in d ic a t o r s o r im p a ir m e n t o f t h e c a r r y in g v a lu e o f t h e in v e s t m e n t in t h e s u b s id ia r y e x is t . W h e re s u c h in d ic a t o r s e x is t , t o t h e e x t e n t t h a t t h e c a r r y in g v a lu e o f t h e in v e s t m e n t e x c e e d s it s re c o v e r a b le a m o u n t , a n im p a ir m e n t lo s s is re c o g n is e d . 2 8 . S H A R E -B A S E D P A Y M E N T P L A N S a ) R e c o g n is e d s h a r e -b a s e d p a y m e n t e x p e n s e s T h e e x p e n s e re c o g n is e d fo r e m p lo y e e s a n d c o n t r a c t o r s re c e iv e d d u r in g t h e y e a r is s h o w n b e lo w : E x p e n s e a ris in g fro m th e is s u e o f o p tio n s (e m p lo y e e s ) E x p e n s e a ris in g fro m th e is s u e o f o p tio n s (n o n -e m p lo y e e s ) To ta l e x p e n s e a ris in g fro m s h a re -b a s e d p a y m e n t tra n s a c tio n s T h e s h a re -b a s e d p a y m e n t p la n s a re d e s c r ib e d b e lo w . b ) T y p e s o f s h a r e -b a s e d p a y m e n t p la n s f o r e m p lo y e e E m p l o y e e s h a r e o p t i o n p l a n (E S O P ) C o n s o l i d a t e d 2 0 2 0 $ 7 4 8 8 0 0 1 ,5 4 8 2 0 1 9 $ 1 1 ,4 0 0 1 0 ,5 0 0 2 1 ,9 0 0 S h a re o p t io n s a re g r a n t e d t o D ire c t o r s , o t h e r K e y M a n a g e m e n t P e r s o n n e l (K M P ) a n d o t h e r e m p lo y e e s . T h e E S O P is d e s ig n e d t o a lig n p a r t ic ip a n t s ’ in t e re s t s w it h t h o s e o f s h a re h o ld e r s b y in c re a s in g t h e v a lu e o f t h e C o m p a n y ’s s h a re s . U n d e r t h e E S O P, t h e e x e rc is e p r ic e o f t h e o p t io n s is s e t b y t h e B o a rd o n t h e d a t e o f g r a n t . T h e life o f o p t io n s t o K M P a n d o t h e r e m p lo y e e s g r a n t e d a re fo r 3 y e a r s , b u t t h e s e m u s t b e e x e rc is e d w it h in 3 m o n t h s o f t h e o p t io n h o ld e r c e a s in g e m p lo y m e n t w it h M a g n is E n e r g y Te c h n o lo g ie s L im it e d . T h e re a re n o c a s h s e t t le m e n t a lt e r n a t iv e s . 7 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S c ) S h a r e -b a s e d p a y m e n t p la n s f o r n o n -e m p lo y e e (C o n s u lt a n t o p t io n s ) S h a re o p t io n s a re g r a n t e d t o s e le c t e d n o n -e m p lo y e e s fro m t im e t o t im e in c o n s id e r a t io n fo r t h e s e r v ic e s o f t h e c o n s u lt a n t a s a s h a re -b a s e d in c e n t iv e (C o n s u lt a n t o p t io n s ). P r io r S h a re h o ld e r a p p ro v a l o f t h e is s u e o f C o n s u lt a n t o p t io n s is re q u ire d . E a c h C o n s u lt a n t O p t io n is g r a n t e d fo r n il c o n s id e r a t io n fo r s e r v ic e s p ro v id e d b y u n re la t e d p a r t ie s t o t h e C o m p a n y , t h e t e r m s a re s u b je c t t o t h e s a m e t e r m s o f t h e C o m p a n y ’s e x is t in g u n lis t e d o p t io n s . N o fu n d s a re r a is e d fro m t h e is s u e o f t h e C o n s u lt a n t O p t io n s , a s t h e y a re is s u e d t o t h e c o n s u lt a n t in c o n s id e r a t io n fo r a s s is t a n c e w it h t h e C o m p a n y ’s p ro g re s s a n d s u c c e s s . T h e re a re n o c a s h s e t t le m e n t a lt e r n a t iv e s . d ) S u m m a r ie s o f o p t io n s a n d r ig h t s g r a n t e d u n d e r s h a r e -b a s e d p a y m e n t T h e fo llo w in g t a b le illu s t r a t e s t h e n u m b e r (N o .) a n d w e ig h t e d a v e r a g e e x e rc is e p r ic e s (W A E P ) o f, a n d m o v e m e n t s in , s h a re o p t io n s is s u e d d u r in g t h e y e a r. O u ts ta n d in g a t th e b e g in n in g o f th e y e a r G ra n te d d u rin g th e y e a r E x e rc is e d d u rin g th e y e a r E x p ire d d u rin g th e y e a r O u ts ta n d in g a t th e e n d o f th e y e a r E x e rc is a b le a t th e e n d o f th e y e a r 2 0 2 0 N o . 1 5 ,8 0 0 ,0 0 0 1 2 ,1 0 0 ,0 0 0 - (1 7 ,9 0 0 ,0 0 0 ) 1 0 ,0 0 0 ,0 0 0 1 0 ,0 0 0 ,0 0 0 2 0 2 0 W A E P 0 .7 1 0 .6 9 - - 0 .5 8 0 .5 8 2 0 1 9 N o . 2 0 1 9 W A E P 1 7 ,5 5 0 ,0 0 0 6 ,0 0 0 ,0 0 0 (7 5 0 ,0 0 0 ) (7 ,0 0 0 ,0 0 0 ) 1 5 ,8 0 0 ,0 0 0 1 5 ,8 0 0 ,0 0 0 0 .6 8 0 .7 0 0 .4 0 0 .7 1 0 .7 1 T h e r a n g e o f e x e rc is e p r ic e s fo r r ig h t s a n d o p t io n s o u t s t a n d in g a t t h e e n d o f t h e y e a r w a s b e t w e e n $ 0 .4 0 a n d $ 0 .7 0 (2 0 1 9 : $ 0 .7 0 a n d $ 1 .0 0 ). e ) W e ig h t e d a v e r a g e r e m a in in g e s t im a t e d lif e T h e w e ig h t e d a v e r a g e re m a in in g e s t im a t e d life fo r t h e s h a re o p t io n s o u t s t a n d in g a s a t 3 0 J u n e 2 0 2 0 is 1 .5 y e a r s (2 0 1 9 : 0 .8 3 y e a r s ). f ) W e ig h t e d a v e r a g e f a ir v a lu e T h e w e ig h t e d a v e r a g e fa ir v a lu e o f o p t io n s g r a n t e d d u r in g t h e y e a r w a s $ 0 .0 0 2 2 (2 0 1 9 : $ 0 .0 0 3 6 5 ). g ) O p t io n p r ic in g m o d e l E q u i t y -s e t t l e d t r a n s a c t i o n s T h e fa ir v a lu e o f t h e e q u it y -s e t t le d s h a re o p t io n s g r a n t e d u n d e r t h e s h a re b a s e d p a y m e n t is e s t im a t e d a s a t t h e d a t e o f g r a n t u s in g a B in o m ia l M o d e l t a k in g in t o a c c o u n t t h e t e r m s a n d c o n d it io n s u p o n w h ic h t h e o p t io n s w e re g r a n t e d . T h e fo llo w in g t a b le lis t s t h e in p u t s t o t h e m o d e ls u s e d fo r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 : D iv id e n d y ie ld (%) E x p e c te d v o la tility (%) R is k-fre e in te re s t ra te (%) E x p e c te d life o f o p tio n (y e a rs ) O p tio n e x e rc is e p ric e (c e n ts ) W e ig h te d a v e ra g e s h a re p ric e a t m e a s u re m e n t d a te s (c e n ts ) E x e rc is e p ric e m u ltip le M o d e l u s e d 2 0 2 0 N il 3 6 1 .8 7 – 1 .9 8 1 .5 – 3 .0 0 7 0 2 9 .5 2 B in o m ia l M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 7 3 N o t e s t o t h e F in a n c ia l S t a t e m e n t s T h e e ff e c t s o f e a r ly e x e rc is e h a v e b e e n in c o r p o r a t e d in t o c a lc u la t io n s b y u s in g a n e x p e c t e d life fo r t h e o p t io n t h a t is s h o r t e r t h a n t h e e s t im a t e d life b a s e d o n h is t o r ic a l e x e rc is e b e h a v io u r, w h ic h is n o t n e c e s s a r ily in d ic a t iv e o f e x e rc is e p a t t e r n s t h a t m a y o c c u r in t h e fu t u re . T h e e x p e c t e d v o la t ilit y w a s d e t e r m in e d u s in g a h is t o r ic a l s a m p le o f C o m p a n y s h a re - p r ic e s . T h e re s u lt in g e x p e c t e d v o la t ilit y t h e re fo re re fl e c t s t h e a s s u m p t io n t h a t t h e h is t o r ic a l v o la t ilit y is in d ic a t iv e o f fu t u re t re n d s w h ic h m a y a ls o n o t n e c e s s a r ily b e t h e a c t u a l o u t c o m e . T h e o p t io n h o ld e r s w e re a s s u m e d t o e x e rc is e p r io r t o e x p ir y d a t e w h e n t h e p r ic e is t w ic e t h a t o f t h e e x e rc is e p r ic e . T h is re fl e c t s t h e re s t r ic t io n s t o t r a d in g o f d ire c t o r s a n d e m p lo y e e s o u t lin e d in t h e C o m p a n y ’s s h a re t r a d in g p o lic y . D u r in g t h e fi n a n c ia l y e a r, t h e M a g n is O p t io n S h a re T r u s t (M O S T ) s c h e m e a c q u ire d a n d w a s is s u e d w it h 8 ,1 0 0 ,0 0 0 (2 0 1 9 : 1 ,0 0 0 ,0 0 0 ) o p t io n s o n v a r y in g t e r m s a n d c o n d it io n s fo r a llo t m e n t t o D ire c t o r s a n d e m p lo y e e s . A C C O U N T I N G P O L I C I E S T h e G ro u p p ro v id e s b e n e fi t s t o e m p lo y e e s [in c lu d in g d ire c t o r s ] o f, a n d c o n s u lt a n t s t o , t h e G ro u p in t h e fo r m o f s h a re - b a s e d p a y m e n t t r a n s a c t io n s , w h e re b y s e r v ic e s a re re n d e re d in e x c h a n g e fo r s h a re s o r r ig h t s o v e r s h a re s [‘e q u it y -s e t t le d t r a n s a c t io n s ’]. T h e c o s t o f e q u it y -s e t t le d t r a n s a c t io n s is m e a s u re d b y re fe re n c e t o t h e fa ir v a lu e a t t h e d a t e a t w h ic h t h e y a re g r a n t e d . T h e fa ir v a lu e o f o p t io n s a n d p e r fo r m a n c e r ig h t s w it h m a r k e t b a s e d p e r fo r m a n c e c r it e r ia is d e t e r m in e d b y a n e x t e r n a l v a lu e r u s in g a b in o m ia l o p t io n p r ic in g m o d e l. T h e fa ir v a lu e o f p e r fo r m a n c e p la n r ig h t s w it h n o n -m a r k e t p e r fo r m a n c e c r it e r ia is d e t e r m in e d b y re fe re n c e t o t h e C o m p a n y ’s s h a re p r ic e a t d a t e o f g r a n t . T h e c o s t o f e q u it y -s e t t le d t r a n s a c t io n s is re c o g n is e d , t o g e t h e r w it h a c o r re s p o n d in g in c re a s e in e q u it y , o v e r t h e p e r io d in w h ic h t h e p e r fo r m a n c e c o n d it io n s a re fu lfi lle d , e n d in g in t h e d a t e o n w h ic h t h e re c ip ie n t b e c o m e s fu lly e n t it le d t o t h e a w a rd [‘v e s t in g d a t e ’]. T h e c u m u la t iv e e x p e n s e re c o g n is e d fo r e q u it y -s e t t le d t r a n s a c t io n s a t e a c h re p o r t in g d a t e u n t il v e s t in g d a t e re fl e c t s : [i] t h e e x t e n t t o w h ic h t h e v e s t in g p e r io d h a s e x p ire d a n d [ii] t h e n u m b e r o f a w a rd s t h a t , in t h e o p in io n o f t h e d ire c t o r s , b a s e d o n t h e b e s t a v a ila b le in fo r m a t io n a t re p o r t in g d a t e w ill u lt im a t e ly v e s t . N o a d ju s t m e n t is m a d e fo r t h e lik e lih o o d o f m a r k e t c o n d it io n s b e in g m e t a s t h e e ff e c t o f t h e s e c o n d it io n s is in c lu d e d in d e t e r m in a t io n o f fa ir v a lu e a t g r a n t d a t e . T h e c h a r g e o r c re d it fo r t h e p e r io d re p re s e n t s t h e m o v e m e n t in c u m u la t iv e e x p e n s e re c o g n is e d a s a t t h e b e g in n in g a n d e n d o f t h e p e r io d . W h e re a w a rd s v e s t im m e d ia t e ly , t h e e x p e n s e is a ls o re c o g n is e d in p ro fi t o r lo s s . N o e x p e n s e is re c o g n is e d fo r a w a rd s t h a t d o n o t u lt im a t e ly v e s t , e x c e p t fo r a w a rd s w h e re v e s t in g is c o n d it io n a l u p o n a m a r k e t c o n d it io n . W h e re t h e t e r m s o f a n e q u it y -s e t t le d a w a rd a re m o d ifi e d , a s a m in im u m , a n e x p e n s e is re c o g n is e d a s if t h e t e r m s h a d n o t b e e n m o d ifi e d . In a d d it io n , a n e x p e n s e is re c o g n is e d fo r a n y in c re a s e in t h e v a lu e o f t h e t r a n s a c t io n a s a re s u lt o f t h e m o d ifi c a t io n , a s m e a s u re d a t t h e d a t e o f m o d ifi c a t io n . W h e re t h e t e r m s o f a n e q u it y -s e t t le d a w a rd is c a n c e lle d , it is t re a t e d a s if it h a d v e s t e d o n t h e d a t e o f c a n c e lla t io n a n d a n y e x p e n s e n o t y e t re c o g n is e d fo r t h e a w a rd is re c o g n is e d im m e d ia t e ly . H o w e v e r, if a n e w a w a rd is s u b s t it u t e d fo r t h e c a n c e lle d a w a rd a n d d e s ig n a t e d a s a re p la c e m e n t a w a rd o n t h e d a t e t h a t it is g r a n t e d , t h e c a n c e lle d a n d t h e n e w a w a rd a re t re a t e d a s if t h e y w e re a m o d ifi c a t io n o f t h e o r ig in a l a w a rd a s d e s c r ib e d in t h e p re v io u s p a r a g r a p h . T h e d ilu t iv e e ff e c t , if a n y , o f o u t s t a n d in g o p t io n s is re fl e c t e d a s a d d it io n a l s h a re d ilu t io n in t h e c o m p u t a t io n o f e a r n in g s p e r s h a re . 2 9 . F I N A N C I A L I N S T R U M E N T S (a ) F in a n c ia l r is k m a n a g e m e n t o b j e c t iv e s a n d p o lic ie s T h e G ro u p ’s p r in c ip a l fi n a n c ia l in s t r u m e n t s c o n s is t o f s h o r t t e r m d e p o s it s , re c e iv a b le s , a n d p a y a b le s . T h e s e a c t iv it ie s e x p o s e t h e G ro u p t o a v a r ie t y o f fi n a n c ia l r is k s : m a r k e t r is k , i.e . (in t e re s t r a t e r is k a n d fo re ig n e x c h a n g e r is k s ), c re d it r is k a n d liq u id it y r is k . 7 4 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S T h e o v e r a ll o b je c t iv e o f t h e G ro u p ’s fi n a n c ia l r is k m a n a g e m e n t p o lic ie s is t o m e e t it s fi n a n c ia l t a r g e t s w h ils t p ro t e c t in g fu t u re fi n a n c ia l s e c u r it y . T h e B o a rd fu lfi ls it s c o r p o r a t e g o v e r n a n c e a n d o v e r s ig h t re s p o n s ib ilit ie s b y m o n it o r in g a n d re v ie w in g t h e in t e g r it y o f fi n a n c ia l s t a t e m e n t s , t h e e ff e c t iv e n e s s o f in t e r n a l fi n a n c ia l c o n t ro l a n d t h e p o lic ie s o n r is k o v e r s ig h t a n d m a n a g e m e n t . M a n a g e m e n t is c h a rg e d w it h im p le m e n t in g t h e p o lic ie s . T h e m a n a g e m e n t m a n a g e s t h e d iff e re n t t y p e s o f r is k s t o w h ic h t h e G ro u p is e x p o s e d b y c o n s id e r in g r is k a n d m o n it o r in g le v e ls o f e x p o s u re t o in t e re s t r is k a n d b y b e in g a w a re o f m a r k e t fo re c a s t s fo r in t e re s t r a t e s . L iq u id it y r is k is m o n it o re d t h ro u g h g e n e r a l b u s in e s s b u d g e t s a n d fo re c a s t s . T h e B o a rd re v ie w s a n d a g re e s o n p o lic ie s fo r m a n a g in g t h e s e r is k s . (b ) M a r k e t R is k F o r e i g n c u r r e n c y r i s k T h e G ro u p u n d e r t a k e s c e r t a in t r a n s a c t io n s d e n o m in a t e d in fo re ig n c u r re n c y a n d is e x p o s e d t o fo re ig n c u r re n c y r is k t h ro u g h fo re ig n e x c h a n g e r a t e fl u c t u a t io n s . F o re ig n e x c h a n g e r is k a r is e s fro m fu t u re c o m m e rc ia l t r a n s a c t io n s a n d re c o g n is e d fi n a n c ia l a s s e t s a n d fi n a n c ia l lia b ilit ie s d e n o m in a t e d in a c u r re n c y t h a t is n o t t h e e n t it y ’s fu n c t io n a l c u r re n c y . T h e r is k is m e a s u re d u s in g s e n s it iv it y a n a ly s is a n d c a s h fl o w fo re c a s t in g . T h e c a r r y in g a m o u n t o f t h e G ro u p ’s fo re ig n c u r re n c y d e n o m in a t e d fi n a n c ia l a s s e t s a n d fi n a n c ia l lia b ilit ie s a t t h e re p o r t in g d a t e w e re a s fo llo w s : C o n s o l i d a t e d U S d o lla rs A s s e t s L i a b i i i t i e s 2 0 2 0 $ ’0 0 0 3 ,9 8 6 ,1 6 9 3 ,9 8 6 ,1 6 9 2 0 1 9 $ ’0 0 0 3 ,9 4 1 ,5 5 9 3 ,9 4 1 ,5 5 9 2 0 2 0 $ ’0 0 0 2 4 9 ,2 4 4 2 4 9 ,2 4 4 2 0 1 9 $ ’0 0 0 1 8 3 ,2 3 0 1 8 3 ,2 3 0 T h e G ro u p h a d n e t a s s e t s d e n o m in a t e d in fo re ig n c u r re n c ie s o f $ 3 ,7 5 8 ,3 2 9 (a s s e t s o f $ 3 ,9 4 1 ,5 5 9 le s s lia b ilit ie s o f $ 2 4 9 ,2 4 4 ) a s a t 3 0 J u n e 2 0 2 0 (2 0 1 9 : $ 3 ,7 5 8 ,3 2 9 (a s s e t s o f $ 3 ,9 4 1 ,5 5 9 le s s lia b ilit ie s o f $ 1 8 3 ,2 3 0 )). B a s e d o n t h is e x p o s u re , h a d t h e A u s t r a lia n d o lla r w e a k e n e d o r s t re n g t h e n e d b y 5 % (2 0 1 9 : w e a k e n e d b y 1 0 % /s t re n g t h e n e d b y 5 % ) a g a in s t t h e s e fo re ig n c u r re n c ie s w it h a ll o t h e r v a r ia b le s h e ld c o n s t a n t , t h e c o n s o lid a t e d e n t it y ’s p ro fi t b e fo re t a x fo r t h e y e a r w o u ld h a v e b e e n $ 2 7 6 ,5 3 5 lo w e r /$ 2 7 6 ,5 3 5 h ig h e r (2 0 1 9 : $ 3 7 5 ,8 3 3 lo w e r /$ 1 8 7 ,9 1 6 h ig h e r ) a n d e q u it y w o u ld h a v e b e e n $ 2 7 6 ,5 3 5 /lo w e r $ 2 7 6 ,5 3 5 h ig h e r (2 0 1 9 : $ 3 7 5 ,8 3 3 lo w e r /$ 1 8 7 ,9 1 6 h ig h e r ). T h e p e rc e n t a g e c h a n g e is t h e e x p e c t e d o v e r a ll v o la t ilit y o f t h e s ig n ifi c a n t c u r re n c ie s , w h ic h is b a s e d o n m a n a g e m e n t ’s a s s e s s m e n t o f re a s o n a b le p o s s ib le fl u c t u a t io n s t a k in g in t o c o n s id e r a t io n m o v e m e n t s o v e r t h e la s t 6 m o n t h s e a c h y e a r a n d t h e s p o t r a t e a t e a c h re p o r t in g d a t e . T h e a c t u a l fo re ig n e x c h a n g e lo s s fo r t h e y e a r e n d e d 3 0 J u n e 2 0 2 0 w a s $ 2 0 ,9 7 8 (2 0 1 9 : g a in o f $ 9 6 ,1 1 4 ) I n t e r e s t r a t e r is k T h e G ro u p is e x p o s e d t o m o v e m e n t s in m a r k e t in t e re s t r a t e s o n s h o r t -t e r m d e p o s it s . M a n a g e m e n t e n s u re s a b a la n c e is m a in t a in e d b e t w e e n t h e liq u id it y o f c a s h a s s e t s a n d t h e in t e re s t r a t e re t u r n . P re s e n t ly , t h e G ro u p h a s n o in t e re s t b e a r in g lia b ilit ie s . A t re p o r t in g d a t e , t h e G ro u p h a d t h e fo llo w in g fi n a n c ia l a s s e t s a n d lia b ilit ie s e x p o s e d m o s t ly t o A u s t r a lia n v a r ia b le in t e re s t r a t e s a n d a re u n h e d g e d . C a s h a n d c a s h e q u iv a le n ts C o n s o l i d a t e d 2 0 2 0 $ 2 0 1 9 $ 7 1 9 ,6 1 5 1 ,8 2 9 ,8 1 7 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 7 5 N o t e s t o t h e F in a n c ia l S t a t e m e n t s T h e w e ig h t e d a v e r a g e in t e re s t r a t e fo r t h e G ro u p a t re p o r t in g d a t e w a s 1 .7 8 % (2 0 1 9 : 2 .5 0 % ). In a c c o rd a n c e w it h t h e G ro u p p o lic y o f re v ie w in g t h is r is k , t h e fo llo w in g s e n s it iv it y a n a ly s is b a s e d o n in t e re s t r a t e e x p o s u re a t re p o r t in g d a t e w h e re t h e in t e re s t r a t e m o v e m e n t v a r ie s a n d o t h e r v a r ia b le s re m a in c o n s t a n t , p o s t t a x lo s s a n d e q u it y w o u ld h a v e b e e n a ff e c t e d a s s h o w n . T h e a n a ly s is h a s b e e n p e r fo r m e d o n t h e s a m e b a s is fo r b o t h 2 0 2 0 a n d 2 0 1 9 . 3 0 J u n e 2 0 2 0 C o n s o l i d a t e d E n t i t y F i n a n c i a l a s s e t I n t e r e s t R a t e R i s k -1 % I n t e r e s t R a t e R i s k +1 % C a r r y i n g A m o u n t N e t L o s s $ E q u i t y $ N e t L o s s $ E q u i t y $ C a s h a n d c a s h e q u iv a le n ts 7 1 9 ,6 1 5 (7 ,1 9 6 ) (7 ,1 9 6 ) 7 ,1 9 6 7 ,1 9 6 3 0 J u n e 2 0 1 9 C o n s o l i d a t e d E n t i t y F i n a n c i a l a s s e t I n t e r e s t R a t e R i s k -1 % I n t e r e s t R a t e R i s k +1 % C a r r y i n g A m o u n t N e t L o s s $ E q u i t y $ N e t L o s s $ E q u i t y $ C a s h a n d c a s h e q u iv a le n ts 1 ,8 2 9 ,8 1 7 (1 8 ,2 9 8 ) (1 8 ,2 9 8 ) 1 8 ,2 9 8 1 8 ,2 9 8 T h e s e n s it iv it y w a s lo w e r d u r in g 2 0 2 0 t h a n 2 0 1 9 b e c a u s e o f lo w e r c a s h b a la n c e s . T h e a n a ly s is a s s u m e s t h e c a r r y in g a m o u n t s n o t e d w ill b e m a in t a in e d o v e r t h e n e x t fi n a n c ia l y e a r. (c ) C r e d it r is k C re d it r is k re fe r s t o t h e r is k t h a t a c o u n t e r p a r t y w ill d e fa u lt o n it s c o n t r a c t u a l o b lig a t io n s re s u lt in g in fi n a n c ia l lo s s t o t h e G ro u p . T h e m a x im u m e x p o s u re t o c re d it r is k a t t h e re p o r t in g d a t e t o re c o g n is e d fi n a n c ia l a s s e t s is t h e c a r r y in g a m o u n t , n e t o f a n y p ro v is io n s fo r im p a ir m e n t o f t h o s e a s s e t s , a s d is c lo s e d in t h e s t a t e m e n t o f fi n a n c ia l p o s it io n a n d N o t e s t o t h e fi n a n c ia l s t a t e m e n t s . T h e G ro u p d o e s n o t h o ld a n y c o lla t e r a l. T h e G ro u p h a s a d o p t e d a s im p lifi e d life t im e e x p e c t e d lo s s a llo w a n c e in e s t im a t in g e x p e c t e d c re d it lo s s e s t o t r a d e a n d o t h e r re c e iv a b le s . T h e G ro u p h a s n o s ig n ifi c a n t c o n c e n t r a t io n s o f c re d it r is k . T h e m a x im u m e x p o s u re t o c re d it r is k a t re p o r t in g d a t e is t h e c a r r y in g a m o u n t (n e t o f e x p e c t e d c re d it lo s s ) o f t h o s e a s s e t s a s d is c lo s e d in t h e s t a t e m e n t o f fi n a n c ia l p o s it io n a n d N o t e s t o t h e fi n a n c ia l s t a t e m e n t s . (d ) L iq u id it y r is k L iq u id it y r is k a r is e s fro m t h e fi n a n c ia l lia b ilit ie s o f t h e G ro u p a n d t h e G ro u p ’s s u b s e q u e n t a b ilit y t o m e e t t h e ir o b lig a t io n s t o re p a y t h e ir fi n a n c ia l lia b ilit ie s a s a n d w h e n t h e y fa ll d u e . T h e G ro u p ’s o b je c t iv e is t o m a in t a in a b a la n c e b e t w e e n c o n t in u it y o f fu n d in g a n d fl e x ib ilit y a s t o it s s o u rc e . T h e D ire c t o r s m o n it o r c a s h fl o w m o n t h ly a n d in c re a s e t h e fre q u e n c y o f re v ie w w h e n t h e s a fe t y m a rg in is o r is n e a r ly b re a c h e d . T h e B o a rd fo r m u la t e s p la n s t o re p le n is h it s c a s h re s o u rc e s w h e n re q u ire d a n d im p le m e n t s c o s t re d u c t io n p ro g r a m m e s t o re d u c e c a s h e x p e n d it u re . T h e t a b le b e lo w re fl e c t s a ll c o n t r a c t u a lly fi x e d p a y -o ff s , re p a y m e n t s , a n d in t e re s t fro m re c o g n is e d fi n a n c ia l lia b ilit ie s .F o r t h e s e o b lig a t io n s t h e u n d is c o u n t e d c a s h fl o w s fo r t h e re s p e c t iv e u p c o m in g fi n a n c ia l y e a r s a re p re s e n t e d . C a s h fl o w s fo r fi n a n c ia l a s s e t s a n d lia b ilit ie s w it h o u t fi x e d t im in g o r a m o u n t a re b a s e d o n t h e c o n d it io n s e x is t in g a t 3 0 J u n e 2 0 2 0 . 7 6 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S T h e re m a in in g c o n t r a c t u a l m a t u r it ie s o f t h e G ro u p e n t it y ’s fi n a n c ia l lia b ilit ie s c o n s is t in g o f t r a d e a n d o t h e r p a y a b le s a re : O n d e m a n d L e s s t h a n 1 y e a r 1 -5 y e a r s > 5 y e a r s (e ) N e t F a ir V a lu e s C o n s o l i d a t e d 2 0 2 0 $ - 2 0 1 9 $ - 1 ,7 9 4 ,6 0 7 5 9 0 ,8 0 0 - - - - 1 ,7 9 4 ,6 0 7 5 9 0 ,8 0 0 T h e c a r r y in g a m o u n t s o f fi n a n c ia l a s s e t s a n d lia b ilit ie s a s s h o w n in t h e s t a t e m e n t o f fi n a n c ia l p o s it io n a p p ro x im a t e t h e ir fa ir v a lu e . 3 0 . G O V E R N M E N T G R A N T S A N D A S S I S T A N C E J o b K e e p e r P a y m e n t T h is p a y m e n t is in t e n d e d t o h e lp k e e p m o re A u s t r a lia n s in jo b s a n d s u p p o r t b u s in e s s e s a ff e c t e d b y t h e s ig n ifi c a n t e c o n o m ic im p a c t o f C O V ID -1 9 . T h e e x is t in g J o b K e e p e r P a y m e n t w ill re m a in in p la c e u n t il 2 7 S e p t e m b e r 2 0 2 0 . O n 2 1 J u ly 2 0 2 0 , t h e g o v e r n m e n t a n n o u n c e d t h e e x t e n s io n o f t h e J o b K e e p e r p a y m e n t t o 2 8 M a rc h 2 0 2 1 a t m o d ifi e d r a t e s a n d e lig ib ilit y . T h e J o b K e e p e r p a y m e n t is re c o rd e d n e t o f m a n p o w e r re la t e d e x p e n s e s . T h e C o m p a n y c o lle c t e d $ 2 1 ,0 0 0 in J o b K e e p e r p a y m e n t s o n b e h a lf o f e lig ib le s t a ff , a ll o f w h ic h w a s u s e d t o s u b s id is e w a g e s o f w o r k in g e m p lo y e e s . C a s h fl o w b o o s t Te m p o r a r y c a s h fl o w b o o s t p a y m e n t s w e re m a d e b y t h e A T O t o s u p p o r t e lig ib le s m a ll a n d m e d iu m b u s in e s s e s d u r in g t h e e c o n o m ic d o w n t u r n a s s o c ia t e d w it h C O V ID -1 9 . T h e c o m p a n y q u a lifi e d fo r t h e s c h e m e a n d c o lle c t e d $ 5 0 ,0 0 0 in c a s h fl o w b o o s t p a y m e n t s . M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 7 7 12D ire c t o r s ’ D e c la r a t io n In a c c o rd a n c e w it h a re s o lu t io n o f t h e D ire c t o r s o f M a g n is E n e r g y Te c h n o lo g ie s L im it e d , I s t a t e t h a t : 1 . In t h e o p in io n o f t h e D ire c t o r s : a ) t h e fi n a n c ia l s t a t e m e n t s a n d N o t e s o f t h e c o n s o lid a t e d e n t it y a re in a c c o rd a n c e w it h t h e C o r p o r a t io n s A c t 2 0 0 1 , in c lu d in g : (i) G iv in g a t r u e a n d fa ir v ie w o f it s fi n a n c ia l p o s it io n a s a t 3 0 J u n e 2 0 2 0 a n d p e r fo r m a n c e fo r t h e fi n a n c ia l y e a r e n d e d o n t h a t d a t e . (ii) C o m p ly in g w it h A c c o u n t in g S t a n d a rd s (in c lu d in g t h e A u s t r a lia n A c c o u n t in g In t e r p re t a t io n s ) a n d t h e C o r p o r a t io n s R e g u la t io n s 2 0 0 1 . b ) T h e fi n a n c ia l s t a t e m e n t s a n d N o t e s a ls o c o m p ly w it h In t e r n a t io n a l F in a n c ia l R e p o r t in g S t a n d a rd s a s d is c lo s e d in N o t e 1 . c ) T h e re a re re a s o n a b le g ro u n d s t o b e lie v e t h a t t h e C o m p a n y , a s n o t e d b y D ire c t o r s in N o t e 1 – G o in g c o n c e r n , w ill b e a b le t o p a y it s d e b t s a s a n d w h e n t h e y b e c o m e d u e a n d p a y a b le . 2 . T h is d e c la r a t io n h a s b e e n m a d e a f t e r re c e iv in g t h e d e c la r a t io n s re q u ire d t o b e m a d e t o t h e D ire c t o r s in a c c o rd a n c e w it h s e c t io n 2 9 5 A o f t h e C o r p o r a t io n s A c t 2 0 0 1 fo r t h e fi n a n c ia l y e a r e n d e d 3 0 J u n e 2 0 2 0 . O n b e h a lf o f t h e b o a rd F P o u l l a s E X E C U T I V E C H A I R M A N S y d n e y , 3 0 S e p t e m b e r 2 0 2 0 7 8 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S 13In d e p e n d e n t A u d it o r ’s R e p o r t MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES ABN 26 115 111 763 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGNIS ENERGY TECHNOLOGIES LIMITED REPORT ON THE AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS Report on the Financial Report Opinion We have audited the financial report of Magnis Energy Technologies Limited and Controlled Entities (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit and 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 consolidated financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion the accompanying financial report of Magnis Energy Technologies Limited and Controlled Entities is in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and Regulations 2001; and the Corporations Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. 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 auditor independence requirements of 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates that the company incurred a net loss of $7,378,601 during the year ended 30 June 2020 and, as of that date; the company's total current liabilities exceeded its total current assets by $577,149. As stated in Note 1 these conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report. Our opinion is not modified in respect of this matter. MAGNIS ENERGY TECHNOLOGIES LIMITED: ANNUAL FINANCIAL REPORT 2020 58 SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 7 9 In d e p e n d e n t A u d it o r ’s R e p o r t MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES ABN 26 115 111 763 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGNIS ENERGY TECHNOLOGIES LIMITED 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 for the year ended 30 June 2020. 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. Key Audit Matter How Our Audit Addressed the Key Audit Matter Investment in Charge CCV LLC Refer to Note 10 ‘Financial Assets at FVOCI At 30 June 2020, the Consolidated Entity had an investment in Charge CCCV LLC “C4V” an entity external to the Group and recorded at a value of $7,495,561. The Group’s accounting policy in respect of this investment is outlined in Note 10. This is a key audit matter because of the judgements and estimates along with the disclosure considerations that are required in relation to management’s assessment of the fair value to ensure that these are in accordance with AASB 13 Fair Value, AASB 9 Financial Instruments and AASB 7 Financial Instruments: Disclosures. Our procedures included, amongst others: Obtaining and evaluating management’s assessment and assumptions made in relation to the investment in C4V to ensure the classification of the asset continues to be appropriate. Evaluating management’s financial model to support the fair value of C4V, including the challenging of key assumptions as reported in Note 10 as well as checking the mathematical accuracy of the model and underlying calculations Gaining an understanding of quantum of funds required to ensure Nachu, iM3NY and iM3TSV progress to development and into production to produce the royalty cash flows to C4V. Reviewing the mandate with HSBC to act as financial advisor in seeking funding. Evaluating the accuracy and completeness of the disclosures in accordance with AASB 9, AASB 13 and AASB 7. Key Audit Matter How Our Audit Addressed the Key Audit Matter Property, Plant and Equipment Refer to Note 12 ‘Property, Plant and Equipment’ The group has $11,987,741 of property, plant and equipment at 30 June 2020. Included in the carrying value is equipment held by a subsidiary amounting to $11,971,650. We focused on this matter as a key audit matter as equipment is the most significant asset of the group. Our procedures included amongst others: Assessed the Group’s analysis for indicators of impairment, including the views of managements valuation specialists. This included consideration of whether any movements in the valuation drivers indicated potential impairment by comparing them to historical results in addition to economic and industry forecasts. We assessed the adequacy of group's disclosures in relation to the carrying value of property, plant & equipment. MAGNIS ENERGY TECHNOLOGIES LIMITED: ANNUAL FINANCIAL REPORT 2020 59 8 0 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES ABN 26 115 111 763 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGNIS ENERGY TECHNOLOGIES LIMITED Key Audit Matter How Our Audit Addressed the Key Audit Matter Development Asset Refer to Note 11 ‘Development Asset The Group has $5,577,131 recorded as development asset as at 30 June 2020. The Group’s accounting policy in respect of exploration and evaluation assets is outlined in Note 11. judgements are applied This is a key audit matter because the carrying value of the assets are material to the financial statements and significant in determining whether an indicator of impairment exists in relation to capitalised exploration and expenditure assets in accordance with Australian Accounting Standard AASB 6 Exploration for and Evaluation of Mineral Resources. Our Procedures included, amongst others: In assessing whether an indicator of impairment exists in relation to the Group’s exploration assets in accordance with AASB 6 – Exploration for and Evaluation of Mineral Resources, we: o examined the minutes of the Group’s board meetings and updates from the Group’s exploration partners; o discussed with management of the Group’s ability and intention to undertake further exploration activities; and reviewed the tenements profile and ensured any that have been surrendered were expensed as required. o We tested a sample of additions of capitalised exploration expenditure to supporting documentation. Information Other Than The Financial Report And Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly 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 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, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of 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 have no realistic alternative but to do so. MAGNIS ENERGY TECHNOLOGIES LIMITED: ANNUAL FINANCIAL REPORT 2020 60 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 8 1 In d e p e n d e n t A u d it o r ’s R e p o r t MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES ABN 26 115 111 763 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGNIS ENERGY TECHNOLOGIES LIMITED 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: – – – – – – Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. MAGNIS ENERGY TECHNOLOGIES LIMITED: ANNUAL FINANCIAL REPORT 2020 61 8 2 A N N U A L R E P O R T 2 0 2 0 - M A G N IS E N E R G Y T E C H N O L O G IE S MAGNIS ENERGY TECHNOLOGIES LIMITED AND CONTROLLED ENTITIES ABN 49 089 206 986 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MAGNIS ENERGY TECHNOLOGIES LIMITED From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the remuneration report included in pages 11 to 17 of the directors’ report for the year ended 30 June 2020. In our opinion, the remuneration report of Magnis Energy Technologies Limited, for the year ended 30 June 2020, complies with 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. Hall Chadwick Melbourne VIC 3000 DREW TOWNSEND Partner Date: 30 September 2020 MAGNIS ENERGY TECHNOLOGIES LIMITED: ANNUAL FINANCIAL REPORT 2020 62 M A G N IS E N E R G Y T E C H N O L O G IE S - A N N U A L R E P O R T 2 0 2 0 8 3 14A d d it io n a l S h a re h o ld e r In fo r m a t io n A d d it io n a l in fo r m a t io n re q u ire d b y t h e A u s t r a lia n S e c u r it ie s E x c h a n g e L t d a n d n o t s h o w n e ls e w h e re in t h is re p o r t is a s fo llo w s . T h e in fo r m a t io n is c u r re n t a s a t 7 O c t o b e r 2 0 2 0 . 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