Magnis Energy Technologies
Annual Report 2023

Plain-text annual report

ANNUAL REPORT 2023 I T R O P E R L A U N N A – S E G O L O N H C E T Y G R E N E S I N G A M 3 2 0 2 Website www.magnis.com.au Emailinfo@magnis.com.auContents1 Review of Operations 32 Corporate Governance 103 Directors’ Report 244 Auditors’ Independence Declaration 44 5 Statement of Profit and Loss & Comprehensive Income 466 Statement of Financial Position 477 Statement of Changes in Equity 488 Statement of Cash Flows 49 9 Notes to the Financial Statements 50 10 Directors’ Declaration 8511 Independent Auditor’s Report 8612 Supplementary Information 91BoardF Poullas [Executive Chairman]H Daruwalla [Managing Director US]M Dajani [Non-Executive Director]C Bibby [Non-Executive Director]G Gunesekera [Non-Executive Director]P Tsegas [Non-Executive Director] Fabrizio Perilli [Non-Executive Director]Chief Financial OfficerJ Behrens General Counsel & Company Secretary D Glasgow & J Reynolds Registered OfficeSuite 11.01,1 Castlereagh Street, Sydney NSW 2000 AustraliaTel +61 2 8397 9888 Tanzania OfficeHouse No 19, Plot No. 890 Yacht Club RoadMasaki, Dar es Salaam, Tanzania Tel +255 739 500 023 Share RegisterLink Market Services Limited Tower 4, 727 Collins Street Melbourne VIC 3000 Australia Tel 1300 554 474Fax +61 3 9287 0303 AuditorsHall Chadwick Melbourne Audit Level 14, 44 Collins Street Melbourne VIC 3000Tel +61 3 9820 6400 BankersNational Australia Bank Ltd Level 15, 680 George Street Sydney NSW 2000 Australia Tel +61 2 9237 9290STOCK EXCHANGE LISTING/ASXMagnis Energy Technologies Ltd shares (code MNS) are listed on the Australian Securities Exchange.Website www.magnis.com.au Emailinfo@magnis.com.auContents1 Review of Operations 32 Corporate Governance 103 Directors’ Report 244 Auditors’ Independence Declaration 44 5 Statement of Profit and Loss & Comprehensive Income 466 Statement of Financial Position 477 Statement of Changes in Equity 488 Statement of Cash Flows 49 9 Notes to the Financial Statements 50 10 Directors’ Declaration 8511 Independent Auditor’s Report 8612 Supplementary Information 91BoardF Poullas [Executive Chairman]H Daruwalla [Managing Director US]M Dajani [Non-Executive Director]C Bibby [Non-Executive Director]G Gunesekera [Non-Executive Director]P Tsegas [Non-Executive Director] Fabrizio Perilli [Non-Executive Director]Chief Financial OfficerJ Behrens General Counsel & Company Secretary D Glasgow & J Reynolds Registered OfficeSuite 11.01,1 Castlereagh Street, Sydney NSW 2000 AustraliaTel +61 2 8397 9888 Tanzania OfficeHouse No 19, Plot No. 890 Yacht Club RoadMasaki, Dar es Salaam, Tanzania Tel +255 739 500 023 Share RegisterLink Market Services Limited Tower 4, 727 Collins Street Melbourne VIC 3000 Australia Tel 1300 554 474Fax +61 3 9287 0303 AuditorsHall Chadwick Melbourne Audit Level 14, 44 Collins Street Melbourne VIC 3000Tel +61 3 9820 6400 BankersNational Australia Bank Ltd Level 15, 680 George Street Sydney NSW 2000 Australia Tel +61 2 9237 9290STOCK EXCHANGE LISTING/ASXMagnis Energy Technologies Ltd shares (code MNS) are listed on the Australian Securities Exchange.2 ANNUAL REPORT | 2023 1 2 REVIEW OF OPERATIONS iM3NY Production Commences In August 2022, the iM3NY Lithium-ion Battery plant, a vast facility spanning 22,000 square meters (equivalent to over three professional football/soccer fields), finished the majority of the plant to enable commercial production, which commenced at this time. It then sought certification of its cells to UN38.3 which enables more than 8 cells to be shipped to customers. This milestone was achieved in June of 2023. Joint Venture with Omega Seiki Magnis majority owned subsidiary Imperium 3 New York Inc, entered into a joint venture (JV) agreement with Omega Seiki Mobility (OSM). OSM is part of the Anglo Omega Group. The entity is set to engage in the production and distribution of lithium-ion battery packs manufactured within India. These batteries will find their purpose in OSM’s electric vehicles, spanning the realm of two, three, and four-wheelers. Their geographical reach will extend to encompass India, UAE, Bahrain, Kuwait, Qatar, and Saudi Arabia. Functioning as an independent profit centre, the JV company will assume full financial responsibility for its operations. OSM will oversee local operations, as well as take charge of financing, sales, marketing, compliance, and administrative duties. iM3NY will contribute the essential technology and expertise needed for the development and production of lithium-ion battery packs. In terms of ownership, OSM will hold a 74% stake in the JV company, while iM3NY will possess the remaining 26%. This collaboration is poised to usher in a new era of sustainable and innovative mobility solutions across the specified regions. ANNUAL REPORT | 2023 3 AAM PROJECT In February 2023, Magnis announced its downstream Advanced Anode Material (AAM) production facility, a key development in the company’s strategic initiatives. This facility is poised to provide a reliable source of Coated Spherical Purified Graphite (CSPG) anode products which due to the quality of the graphite feedstock from the Nachu Graphite Project has been recognised as being sustainably produced with top-tier quality, and performance. These products are specifically tailored to cater to the burgeoning lithium-ion battery markets in the United States and Europe. The proposed AAM processing facility aligns seamlessly with Magnis’ vision of comprehensive vertical integration across the Lithium-ion battery value chain. Magnis will implement a phased approach to AAM production, commencing with the fitting out of a site in South West USA of a demonstration plant.. The demonstration plant will play a pivotal role in providing AAM for the qualification process involving Original Equipment Manufacturers (OEMs) and Lithium battery cell manufacturers. This endeavor underscores Magnis’ commitment to advancing sustainable energy solutions. Off-take agreement with Tier-1 Manufacturer Magnis signed a Firm Off-take Agreement with a Tier 1 EV manufacturer, ensuring the supply of Advanced Anode Material (AAM) commencing in February 2025 at a fixed price. As part of this agreement, this manufacturer commits to procuring a minimum of 17,500 tons per annum (tpa) of AAM, starting from February 2025, with the flexibility to acquire up to 35,000 tpa. This contractual commitment spans a minimum duration of three years, all while maintaining a fixed pricing structure. The fulfillment of this agreement is contingent upon several key milestones. These include Magnis securing a final location for its commercial AAM facility before June 30, 2023 (which Magnis has met, see below), successful AAM production from the demonstration plant by March 31, 2024, the initiation of production from the commercial AAM facility by February 1, 2025, and satisfying the necessary customer qualification requirements, these dates are capable of being varied by up to 12 months by agreement. Letter of Intent for Site Selection Magnis appointed Jones Lang Lasalle, Americas, Inc as commercial real estate adviser to identify and secure a real estate solution that best meets the Company’s long-term operational plans for a full scale AAM plant. 4 ANNUAL REPORT | 2023 Magnis entered into a Letter of Intent (LOI) for a site in the Southwestern United States which satisfied the selection criteria such as size, power supply, infrastructure prerequisites, and prospects for expansion, and its closeness to crucial logistical hubs and key partners. Simultaneously, the company is actively engaged in negotiations with governmental bodies at the local, state, and federal levels to secure incentives and support packages for the site. Completed Funding Funding was completed from L1 Capital Global Opportunities Master Fund (“L1 Capital”) and Regal Funds Management as trustee for one or more funds (“Regal”). The funding is structured as an equity-linked pre- paid share subscription facility agreement for a total of up to A$50 million subscription credit. A$25 million was issued in the first tranche, the second tranche was not pursued. Equipment Deposit was paid for the first key piece of equipment with leading supplier Hosokawa Alpine Aktiengesellschaft for the AAM Demonstration Plant. This same equipment will be utilized in the full scale AAM Plant. Worley Contracted After several discussions with a selected short-list of global engineering firms, the appointment of Worley Group Inc. (“Worley”) was announced and they were contracted to provide pre-Front-End Engineering & Design (“FEED”), and project permitting services for its planned commercial scale AAM project in the US. Anode Active Material Performance Recently Magnis produced Anode Active Material derived from its high-purity Nachu flake graphite for customer qualification. The materials produced by Magnis’ technology partner, C4V utilising a downstream processing technology at its pilot facility in New York has been undergoing regular product development, optimisation and quality and performance testing exercises. The quality control (QC) and performance testing have been performed as per industry standard protocols including third party analytical tests for purity verifications. Magnis’ AAM has demonstrated FCE results that meet and outperform the industry standard requirements for both EV’s and energy stationary storage. These performance results have been achieved without any chemical/ acid purification or high-temperature thermal purification. Particle engineering equipment held at C4V Labs in New York to upgrade Natural Graphite into Battery Anode Material ANNUAL REPORT | 2023 5 NACHU Magnis Energy Technologies Ltd. has two subsidiaries in Tanzania: ● ● UTL (Uranex Tanzania Ltd) Magnis Technologies (Tanzania) Ltd (MTT) UTL is the company under which the discovery of the extensive graphite mineralization on the tenement (PL9076/2013) was made and which holds the Special Mining Lease (SML550/2015). UTL will operate the mining operations, tailings dam and water supply facilities. UTL will carry out the initial processing as well. UTL falls under the jurisdiction of the Ministry of Minerals. MTT will finish off the product and achieve the higher levels of purity required by the markets. MTT is the company that holds the SEZ (Special Economic Zone) license for production of the advanced graphite products through the production process developed by Magnis. The original application for the SEZ was made in November 2016 which resulted in the granting of the SEZ license. Following discussions with the EPZA (Export Processing Zone Authority), a revised application with an amendment proposal was made April 2018. MTT falls under the jurisdiction of the Ministry of Industry and Trade and the relevant authority is the EPZA. Mineral Resource and Reserve Estimate The Nachu Graphite Project Mineral Resource Estimate as of 1st February 2016 included a 174 Million Tonnes at 5.4% graphitic carbon (Cg) at a 3% Cg cut-off grade, classified as either Measured, Indicated or Inferred resources and reported in accordance with the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012). The Mineral Resource Estimate is summarised below. Classification Measured Indicated Inferred Total mineral resources JORC Compliant Mineral Resource Estimates Nachu Mineral Resource Estimate Tonnes (mt) Grade (% TGC) Graphite (mt) 63 61 50 174 4.7 5.7 5.8 5.4 3.0 3.5 2.9 9.3 Classification Proved Probable Total ore reserves JORC Compliant Ore Reserve Estimates 6 Nachu Ore Reserve Estimate Tonnes (mt) Grade (% TGC) Graphite (mt) 50.5 25.7 76.3 4.6 5.1 4.8 2.3 1.3 3.7 ANNUAL REPORT | 2023 BFS Update Completed The update to the 2016 BFS (Bank Feasibility Study) confirmed the Nachu Project as a world class graphite project with strong technical and financial viability combined with impactful sustainability outcomes. Key highlights from the BFS are found in the table below. Key Financial Highlights of the Nachu Graphite Project Project Metrics Project NPV10 LOM (Post Tax) Project IRR LOM (Post Tax) Payback Period1 Operating Expenditure2 Initial Project Capital Cost3 Special Economic Zone Period4 Concentrate Total Graphitic Carbon (TGC)5 Concentrate Basket FOB Mtwara Process Plant Capacity Steady State Graphite Production6 Recovery Rate Ore Reserve Mineral Resources Mine Life Units US$ % Months US$/t US$ Years % US$/t t/year t/year % t t Years Value $1.2bn 51% 19 $639 $324mn 10 98.5% - 99% $1847 5,000,000 ~236,000 89.6% 76M 174M 15.5 1 Payback period is at the Project level (unlevered) and thus does not consider financing costs 2 Average Annual Operating Costs during steady state production from Year 2 to Year 12. Operating costs include all mining, processing, product logistics costs (FOB) and miscellaneous and general admin costs. Excludes sustaining capital and industrial mineral royalties of 3%. 3 Additionally, there are contingency costs of US$39.6m and pre-production mining costs of US$33.7m. 4 Exemption from corporate tax and royalties for 10-years. This was recently renewed in May 2021. International arbitration available if dispute resolution required and revenues from product sales will be paid into foreign accounts. Applies to Magnis Technologies Tanzania Limited (MTT) only, a subsidiary of Magnis Energy Technologies Ltd. MTT will operate the processing plant and produce and export advanced graphite products. 5 Jumbo and Super Jumbo Flakes at 98.5% and 99% for large flakes and below. Average TGC 98.8% 6 Steady state production from Year 2 to Year 12 ANNUAL REPORT | 2023 7 Advisers Appointed Key financial and legal advisers were appointed to assist with project financing required to fund construction of the Nachu Graphite Project. Independent corporate finance advisory firm HCF International advisers based in London, UK was selected based on their experience and expertise in the mining and metals sector, and a long history of securing funding for projects in Africa. Additionally, International law firm Milbank LLP was appointed as legal adviser given their experience advising a range of clients on some of Africa’s most significant project finance transactions. Eco-Village The company had identified 75 Project Affected People (PAP) who were assessed and compensated, of those only 59 families were living on the special mining licence area. 70 houses have been constructed, 59 for the identified PAPs and 11 for some PAPs that were identified as disadvantaged during the valuation process. The Eco-village being built to house those families, was completed including solar powered street lights, water storage tanks and tower, solar water pump and roadwork. CSR Work The Uranex CSR Team has completed the Namikulo Maternity Ward. It features a paved corridor for wheelchair and hospital bed access. It is now ready to be handed over to the community. The Chunyu Mtumbuni Primary School has also been completed and has since been handed over to the community. District Executive director, Mr. Mbesigwe, conveyed his gratitude to UTL and their contractors for their commendable support to the community, even during non-production phases. Namikulo Maternity Ward (below) Chunyu Mtumbuni Primary School Staff & Children 8 ANNUAL REPORT | 2023 MAGNIS Managing Director (USA) Appointed Hoshi Daruwalla was appointed Managing Director (USA). Hoshi is based in the United States, and oversees Magnis’ U.S. expansion plans. Hoshi brings over 30 years of experience in global tier-1 advanced manufacturing companies where he has held board, C-Level, and Senior Management roles. Funding Provided to iM3NY Magnis has increased its economic interest in iM3NY LLC (“iM3NY”) to 73% following the issue of Class A Preference Units in return for the provision of funding to iM3NY in March 2023 and further funding in late June 2023. With the iM3NY Battery Plant likely entering the stage of commercial field trial sales from production batches in the current quarter, the Company’s board believed it was an opportune time to increase its overall stake in the project, rather than seeking repayment of this funding. Magnis has also carried out a fully subscribed placement of approximately 80M shares @$0.12 per share which occurred in July and then a Standby Equity Deed under which a further 80,000,000 shares were committed to enable it to provide additional support to iM3NY (thereby allowing iM3NY to meet its operating and financing obligations) and to provide additional working capital to Magnis itself. ANNUAL REPORT | 2023 9  2 2 Corporate Governance Statement Magnis Energy Technologies Ltd (Company or Magnis) approach to corporate governance is more than merely one of compliance and more focused on striving for best industry practice and building excellent corporate governance which it believes is essential for long-term sustainability of its business and general performance and will assist in the protection of the interests of all stakeholders of the Company. This Corporate Governance Statement (CGS) outlines the main corporate governance practices currently in place for Magnis and addresses the 4th Edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Recommendations). The Company accords with most of the ASX Recommendations and where it does not an explanation is provided as to why not. All references to the Company’s website are to: www.magnis.com.au PRINCIPLE 1 LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT Role of the Board and Governance Framework The Board has a clear understanding that it is responsible for the Company’s corporate governance and recognises the importance of this in establishing accountabilities, monitoring, and managing risks, guiding, and regulating activities and optimising the Company’s overall performance. The Board also recognises the need for continuous improvement and to regularly review its system of corporate governance1. The Directors must act in the best interests of the Company and, in general, are responsible for, and have the authority to determine, all matters relating to the policies, management and operations of the Company. The role and responsibilities of the board is detailed in the board charter available at: https://magnis.com.au/ files/Board-Charter.pdf This is the newly approved board charter which was as part of the governance review during the year which saw most of the policies and charters reviewed and updated. The Board’s responsibilities, in summary, include 2: ● ● ● ● ● ● ● Defining the company’s purpose and promoting a culture of acting lawfully, ethically and respectfully. Providing strategic direction and reviewing, approving then monitoring corporate strategic goals and objectives. Lead by example applying the Company’s values and Code of Conduct. Oversee the Group’s accounting and corporate reporting, compliance and regulatory reporting. Institute ands regularly review and update a broad-based risk management framework and crisis management plan. Set the sustainability, diversity, climate and ethical standards and goals for the group. Appointing, monitoring the performance of, and, if necessary, removing the Chief Executive Officer and/ or Managing Director. 1 There has been turnover at the board & senior management during the financial year. As a consequence, the opportunity was taken to change the composition and expertise on the board and the committees and the frequency of meetings of both the board and its committees. 2 These have changed as a consequence of a review and update of the Board Charter. 10 ANNUAL REPORT | 2023  ● ● ● ● ● ● ● ● ● ● ● Ratifying the appointment or removal and contributing to the performance assessment of the members of the senior management team. Appoint the chairs and composition of each of the standing and ad hoc committees of the board. Planning for Board and executive succession. Ensuring there are effective management processes in place and approving major corporate initiatives. Adopting an annual budget and monitoring management and financial performance and plans. Monitoring the adequacy, appropriateness and operation of internal controls. Identifying significant business risks and reviewing how they are managed. Considering and approving the Company’s Annual Financial Report and the quarterly Cash flow and Activities reports. Enhancing and protecting the reputation of the Company. Reporting to, and communicating with, shareholders; and Maintain best industry corporate governance standards, approve this statement, set delegated authority levels and monitor the effectiveness of the company’s policies in particular the Security Trading Policy, Modern Slavery Statement and the Anti-Money Laundering, Bribery and Corruption policy. Day to day management of the Company and implementation of Board policies and strategies has been formally delegated to senior executives and management. It is the responsibility of the Board to oversee the activities of management in executing delegated tasks. In particular, the Board has delegated management responsibility for: ● ● ● ● ● Delivering key objectives and milestones in accordance with market expectations as are set by the Company. Developing project budgets for capital and operating expenditure for Board review and, if appropriate, approval. Developing and maintaining an effective risk management framework and keeping the Board and the market fully informed about risk. The prudent management of the Company’s cash reserves in accordance with the approved annual operating budget. Regulatory compliance across all jurisdictions in which the Company undertakes business covering amongst other things health and safety, tax, accounting, and company reporting. In making decisions regarding the appointment of Directors, the Board assesses the appropriate mix of skills, experience and expertise required by the Board and assesses the extent to which the required skills and experience are represented on the Board. When a vacancy exists, the Board receives suggestions for candidates and based on the skills determines whether those were what is required at that time and doesn’t automatically select based on those of the outgoing board member as the groups business is evolving. Directors, senior executives and employees work under employment contracts that provide accountability with respect to expected duties, rights, responsibilities, remuneration and entitlements such as superannuation, leave, annual reviews, performance KPIs and termination events. ANNUAL REPORT | 2023 11 Board Committees During the reporting period the Board had three (3) standing Board Committees and 2 ad hoc committees, of the latter the Continuous Disclosure Committee was formalised prior to the start of the reporting period and the other the M&A Committee was appointed midway through the year. Details regarding the number of Board meetings and committee meetings held during the year and the attendance of each member is set out in the 2023 Director’s Report which forms part of the Annual Report. The Board and its Committees held 27 meetings during the year ended 30 June 2023. The Company Secretary is accountable to the Board through the Chairman with respect to corporate governance matters including the functioning of the Board, and in communications to the ASX, as required under the Listing Rules. For the majority of the year the board comprised 7 Directors, of which 6 were non-executive and 1 executive director, the Chair. This changed in April when Mugunthan Siva resigned to 5 non-executive and 1 executive director and then changed again in June when Hoshi Daruwalla became MD (USA) such that there were for a period of 2 months 2 executive directors and 4 non-executive directors until Fabrizio Perilli was appointed which reinstated the non-executive directors to 5. The composition of the standing committees is set out below and the Continuous Disclosure Committee comprises a mixture of executives and 2 non-executive directors, currently Giles Gunesekera OAM and Claire Bibby. The M&A Committee which met 4 times during the year comprises Giles Gunesekera, Claire Bibby and Hoshi Daruwalla, with the latter acting as chair. Nominations & Remuneration Committee The Nominations & Remuneration Committee is comprised of the non-executive directors, Ms. Mona Dajani, Ms. Claire Bibby and Mr. Hoshi Daruwalla and Mr. Mugunthan Siva who remained as Chair until he resigned in April 2023 when he was replaced as Chair by Giles Gunesekera OAM,. A copy of the Nominations & Remuneration Committee Charter is accessible from the Company’s website: https://www.magnis.com.au/files/MNS-Nominations-And-Renumeration-Committee-Charter.pdf The Committee advises the Board on remuneration and incentive policies and practices. It makes specific recommendations on remuneration packages and other terms of employment for senior executives and Non- Executive and Executive Directors. A new remuneration structure was approved by the Committee for adoption by the Group which was approved by the Board towards the end of the reporting period. This is yet to be implemented. Any increase in the maximum remuneration of Non-Executive Directors is the subject of shareholder resolution in accordance with the Company’s Constitution, the Corporations Act and the ASX Listing Rules, as applicable. Currently this is $650,000 set in 2017. The Board may award additional remuneration to Non-Executive and Executive Directors called upon to perform extra services or undertake special duties on behalf of the Company. The Nominations & Remuneration Committee also identifies potential candidates often with the use of external consultants for both the Board and management level requirements. Suitable candidates are usually based on recommendations from this Committee. 12 ANNUAL REPORT | 2023 The Nominations & Remuneration Committee promotes screening checks and other tools prior to nominating a candidate to the Board as a director or senior management position. Appointments to fill a casual vacancy are appointed until the subsequent Annual General Meeting. The Committee, Board and the candidate themselves provide, in the explanatory memorandum that accompanies the notice of meeting, all material information for shareholders to make an informed decision to elect or re-elect directors. Audit & Risk Committee This Committee was constituted with only non-executive directors, with Ms. Claire Bibby as the Chair, Ms. Mona Dajani, and Giles Gunesekera OAM. During the year as part of the governance review Hoshi Daruwalla replaced Mona Dajani given his wealth of operational experience in the battery industry. When Hoshi Daruwalla became MD (USA) and returned to a majority of non-executive directors, H Daruwalla was replaced as soon as Fabrizio Perilli was appointed in early August.2023. The Executive Chairman Frank Poullas and the CEO or Managing Director may attend as ex-officio members of the committee. A copy of the Audit & Risk Committee Charter is accessible from the Company’s website: https://magnis.com. au/files/Audit-Risk-Committee-Charter.pdf The main responsibilities of the Committee were, inter alia, to: ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Review and report to the Board on the Independence of the external auditor. Periodic reports and financial statements. Rotation of the external audit partner. Integrity of the half year and full year financial statements, the audit plan for these. Provide assurance to the Board that it is receiving adequate, timely and reliable information. Review the accounting policies and changes to those and where changes are necessary advise the board; Review the adequacy of Magnis policies relating to financial reporting and controls, including compliance with laws, regulations and ethical guidelines. Monitor the ability of the Company to fund its activities, having regard to current funding arrangements and its cash-flow outlook. Monitor the prudence of gearing levels, interest cover and compliance with banking covenants, (where applicable). Review policies relating to financial risk management, including hedging of interest rate risk and foreign currency exchange risk. Monitor compliance with such policies and report to the Board on any relevant issues. Create a Risk Register of all business risks, having regard to risk appetite rate and quantify those risks and regularly review the risk register. Monitoring developments in corporate governance practices. Review compliance with applicable laws such as the Corporations Act, the ASX Listing Rules and other legislation and reporting requirements; and Ensuring management has processes to manage and report on significant financial risks facing the business. The Audit & Risk Committee reviews the performance of the external auditors on an annual basis. ANNUAL REPORT | 2023 13 Health, Safety and Sustainability Committee Giles Gunesekera was appointed the Chair in January 2022 and Mr. Frank Poullas, Mr. Peter Tsegas, Mr. Mugunthan Siva and Hoshi Daruwalla were initially the members. When Hoshi Daruwalla transferred to the Audit & Risk Committee, Mona Dajani transferred from that committee to this committee to replace him. Frank Poullas as a director of iM3NY LLC and iM3NY Inc. and Peter Tsegas who assists the Tanzanian operations provide updates from a Health Safety & Sustainability viewpoint on the activities of those business units and the board of the Company receives details about safety incidents. The Committee is cognizant of the increasing risk of injury that comes with the iM3NY factory moving into production. iM3NY has a safety officer who reports to its board and via the CEO reports to the Board of the Company. A copy of the Health, Safety and Sustainability Committee is accessible from the Company’s website: https://www.magnis.com.au/files/MNS-Health-Safety-And-Sustainability-Charter.pdf The responsibilities of the Committee include: ● ● ● ● ● ● ● ● ● Reviewing Reports from Executives of each entity in the group in the areas of health safety & the environment in which the entity operates. Ensure that the Company and all the staff in all the entities in the group are protected and safe so as to ensure the company attracts and retains high quality staff in all areas. Monitor the Company’s performance on health, safety, sustainability and corporate responsibility matters and report to the Board where that doesn’t meet comparative industry requirements. Monitoring the Company’s compliance with Health, Safety and Environment legislation. Review and oversee the development and implementation of policies and procedures that will allow the Company to operate its business in a safe, sustainable and ethical manner. Review initiatives and practices in respect of the Company’s community engagement and social responsibility. Review the effectiveness of the risk framework that relates to the health safety and environment in which the group entities operate. Reviewing and making recommendations to the Board in relation to significant public statements as they relate to the areas that are considered as ESG (sustainability) including assisting with the production and review of the sustainability report; and Reviewing and recommending to the Board any changes to be made to the Company’s Code of Conduct and reviewing the effectiveness of the systems for monitoring compliance. Performance Evaluation and Remuneration In prior reporting periods, the Board had not undertaken any level of formal performance evaluation of Directors. However, on an informal basis the Chairman has previously consulted with the Directors seeking guidance on ways in which the Board as a whole, as well as each individual Director, can improve its and their contribution, performance and execution of its and their responsibilities. Whilst the board’s composition remained largely unchanged, the majority of the current board is relatively new. Reviews of its composition were formalized by the circulation of a skills matrix questionnaire the response to which are currently under review, being paused toward the end of the reporting period because Hoshi Daruwalla changed status when he became Managing Director (USA) and Mugunthan Siva resigned and only recently has been replaced. As such the review has been re-commenced. Once finalised the results of the review will be compiled by the Chair of the Nomination & Remuneration Committee and discussed with Board members at an appropriate Board meeting. It was the intention for the board skills matrix to be compiled and released in FY23, this will now occur in the current reporting period. 14 ANNUAL REPORT | 2023 The performance of the Chief Executive Officer (CEO) and Managing Director (MD) roles (when applicable) will be reviewed periodically by the Board. However, as the CEO has resigned and hasn’t been replaced and the Managing Director (USA) role is new his has not occurred. Similarly, the CEO was to discuss with all Senior executives on a regular basis their performance and report to the Chair of the Nomination & Remuneration Committee before that committee brings forward its recommendations to the board for consideration, including extension of the role or movement within the function in order to address the changing business demands. As noted above, due to the turnover of senior officers and Directors, a performance review did not occur. It is intended to re-implement this process as the Board and Senior Management shows stability. Diversity The Company places great importance on its people and remains committed to promoting an inclusive workplace by applying policies and practices designed to improve both gender equality and diversity within the organisation. Having a diverse workplace, with varying skills, cultural backgrounds, ethnicity, and experience brings a range of benefits to the business, such as improved business decision making, wider range of skills, fosters innovation and ultimately better solutions for the customers. The Diversity Policy was previously reviewed and has been updated on the Website at the address below. https://magnis.com.au/files/MNS-Diversity-Policy.pdf Company’s progress towards improving diversity Diversity is driven by the leadership and commitment of the board and senior management. The Company has made a commitment to gender diversity at the board level and is very pleased to have retained two female Board directors that provide the Company with additional skills, depth, and diversity of thought to help grow the business and enhance its strong leadership and governance. Female Participation-MNS Board Level 30 June 2023 30 June 2023 29% 29% The Company is committed to creating an inclusive workplace where discrimination, harassment and inequity is not tolerated, and demeaning behaviour toward colleagues or management by anyone in the company or the board is not tolerated. As such the board has adopted in addition to the Diversity Policy a Safe & Respectful Workplace Policy and a Procedure for resolving workplace issues. The Safe & Respectful Workplace Policy adopted by the Board can be viewed on the Company’s website: https://magnis.com.au/files/Safe-and-Respectful-Workplace-Policy.pdf ANNUAL REPORT | 2023 15 PRINCIPLE 2 STRUCTURE THE BOARD TO BE EFFECTIVE AND ADD VALUE The composition of the board at the date of the Corporate Compliance Statement is shown as below: Name of Director Frank Poullas Peter Tsegas Claire Bibby Giles Gunesekera Hoshi Daruwalla Mugunthan Siva Mona Dajani Fabrizio Perilli 1 2 3 4 5 6 7 8 Board Composition Category Executive Chairman Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director; changed to Executive Director, by being appointed as MD(USA) Independent Non-Executive Director Resigned Independent Non- Executive Director Independent Non-Executive Director Date of Appointment 9 Sep 2010 16 June 2015 28 January 2022 28 January 2022 31 Dec 2021 31 May 2023 29 Mar 2021 7 April 2023 29 Mar 2021 31 July 2023 The Board currently comprises seven Directors, 5 Non-Executive and 2 Executive Directors with a broad range of skills, expertise, and experience, and all of whom add value to the operation of the Board. The Board comprises 4 Independent Directors, 1 non-Executive Director, 2 exectuvie directors and 1 Chairman who has a shareholder stake of 1.45% in the Company. The independence of Directors is important to the Board. Independence is determined by objective criteria acknowledged as being desirable to protect investor interests and optimise value to investors. The Board regularly assesses the independence of its Directors. In determining the status of a Director, the Company considers that a Director is independent when he or she is independent of management and free of any business or other relationship (for example a significant shareholding) that could materially interfere with or could reasonably be perceived to interfere with the exercise of unfettered and independent judgement. The Company’s criteria for assessing independence are in line with standards set by the Principles. The appointment and removal of Directors is governed by the Company’s Constitution. Under the Constitution, the Board must comprise of a minimum of three Directors. Given the Board is considered majority Non- Executive, the Board does maintain a Nominations & Remuneration Committee (Committee). The Committee is responsible for selecting and recommending to the Board candidates to fill any casual vacancies that may arise on the Board from time to time. Directors who have been appointed to fill casual vacancies must offer themselves up for election at the next Annual General Meeting of the Company (AGM). In addition, at each AGM, at least one Director must be a candidate for re-election and no Director shall serve more than three years without being a candidate for re-election (consistent with the requirements of the Company’s Constitution). ● ● ● New Directors may participate in an induction program to assist them to understand the Company’s business and the issues and are provided access to historical minutes and other items. The Board collectively has the right to seek independent professional advice as it sees fit. Each Director additionally enjoys the right to seek independent professional advice, subject to the approval of the Chairman. All Directors have direct access to the Group General Counsel & Company Secretary. 16 ANNUAL REPORT | 2023  ● Directors also have access to the senior management team. In addition to regular reports by senior management through the CEO (until his resignation) to the Board meetings, Directors may seek briefings from senior management on specific matters and Directors are entitled to request additional information. PRINCIPLE 3 INSTIL A CULTURE OF ACTING LAWFULLY, ETHICALLY AND RESPONSIBLY Code of Business Conduct and Ethics The Company is committed to being a good corporate citizen within all jurisdictions that it undertakes its business activities, and the Board has undertaken to ensure that the Company implements: ● ● ● Practices necessary to maintain confidence in the Company’s integrity. Practices necessary to consider their legal obligations and the reasonable expectations of their stakeholders; and, Responsibility and accountability of individuals for reporting and investigating reports of unethical practices. The Company has adopted a Code of Business Conduct and Ethics which applies to each of its Directors and employees and it can be viewed at https://magnis.com.au/files/Code-of-Business-Conduct-and-Ethics.pdf ● The Board is responsible for maintaining corporate integrity and ethical behaviour and seeks to set the standards for dealing ethically with employees, investors, customers, regulatory bodies and the financial and wider community, and the responsibility and accountability of individuals for reporting and investigating reports of unethical behaviour. Whistleblower Policy Magnis seeks to identify and assess wrongdoing as early as possible. The Company’s values support a culture that encourages staff to speak up on matters or conduct that concerns them. This policy provides information to assist staff to make disclosures and sets out how the Company will protect them from retaliation for whistleblowing. It can be viewed at: https://magnis.com.au/files/WhistleblowerPolicy.pdf Anti-Bribery and Corruption Policy Magnis has a zero tolerance to bribery and corruption and operates its businesses with integrity. In line with its Whistleblower Policy, it encourages the reporting of material breaches of the Anti-Bribery and Corruption Policy, or material incidents to the Chair of the Audit and Risk Committee, the General Counsel & Company Secretary or Board subject to safeguards afforded to whistleblowers. It can be viewed at https://magnis.com.au/files/Anti-Bribery-and-Corruption-Policy.pdf Dealing in Securities The Company has in place a formal Securities Dealing Policy that regulates the way Directors, senior ANNUAL REPORT | 2023 17 management and others that are involved in the management of the Company deal with securities. The Share Trading Policy prohibits share trading in specific trading blackouts. Trading by directors is governed by the Corporations Act and timely disclosures are required under the Listing Rules. Persons in possession of non-public price sensitive information are required to be conscious of the legal consequence of insider trading. The Securities Dealing Policy is also available on the Company’s website. It can be viewed at: https://magnis.com.au/files/Code-For-Dealing-In-Securities.pdf PRINCIPLE 4 SAFEGUARD THE INTEGRITY OF CORPORATE REPORTS The Audit and Risk Committee is responsible to assist the Board in discharging its responsibilities to safeguard the integrity of the Company’s financial reporting. The Company reports frequently as it is considered a Mining Exploration Company. The Committee provides advice and recommendations to the Board to enable it to fulfil its responsibilities with respect to financial reporting. The Audit and Risk Committee Charter is available on the Company website, it can be viewed at: https://magnis.com.au/files/Audit-Risk-Committee-Charter.pdf The Audit and Risk Committee Charter also details processes around the appointment and oversight of external auditors. The external auditor is required to be available to shareholders at each Annual General Meeting to answer questions about their findings during the Company’s external audit. In accordance with the Company’s legal obligations and Recommendation 4.2 of the ASX Recommendations, the Executive Chairman (in the absence of a CEO or Managing Director of the Company) and the CFO are required to provide declarations to the Board in relation to the Financial Statements. Non-Audited Financials are released on a quarterly basis. These are prepared internally, and the board on the advice of the CFO must agree to the release of the Appendix 5B, following its review by the Audit & Risk Committee. The Quarterly Activities Report is reviewed by the board and approved for release by the Continuous Disclosure Committee. In doing so, the relevant officers represent to the Board that the financial records have: ● ● ● ● been properly maintained. the financial statements comply with the appropriate accounting standards, give a true and fair view of the financial position and performance of the entity. based on a sound system of risk management and internal controls, which to their best belief and knowledge operate effectively. The Audit & Risk Committee communicates with the Auditors at the end of each half year, receiving their recommendations to address any areas for improvement. The Audit & Risk Committee then in turn reports to the Board. Please see above the details around the functions of the Audit & Risk Committee in this area. 18 ANNUAL REPORT | 2023 PRINCIPLE 5 MAKE TIMELY AND BALANCED DISCLOSURE The Company is committed to complying with the ASX Listing Rules and Corporations Act in particular the continuous disclosure obligations and in so doing ensuring that its shareholders are kept well-informed of all significant developments affecting the Company’s circumstances to promote transparency and investor confidence. Magnis has adopted a Continuous Disclosure Policy. It can be viewed at: https://magnis.com.au/files/Continuous-Disclosure-Policy.pdf which incorporates a continuous disclosure framework that is based on ASX Listing Rules Chapter 3, and ASX Listing Rules Guidance Note 8, this was reviewed prior to the end of the reporting period and some minor changes incorporated. The Continuous Disclosure Policy provides a framework for compliance with relevant disclosure obligations and establishes the accountability of the Board for achieving compliance. Specifically, the policy: ● ● ● ● ● describes the Company’s obligations under ASX Listing Rule 3.1 and the Corporations Act. establishes internal processes for reporting information considered to be potentially price- sensitive and for consideration as requiring disclosure by the Board’s delegated group (namely the Continuous Disclosure Committee). establishes processes for the disclosure of price sensitive information, considering the clarification provided by ASX Guidance Note 8. establishes internal processes for briefing of analysts, investor, and media groups, responding to market speculation, leaks and rumours and calling trading halts where appropriate to avoid trading occurring in an uninformed market; and outlines authorisation procedures for ASX announcements, including their categories, summarized these a predominantly determined by the Continuous Disclosure Committee and where relevant the full board. As recommended, Magnis ensures its Board receives market announcements promptly when made, especially where these contain market sensitive information. Before corporate presentations to substantive investors or analyst presentations, the Company releases the presentation on the ASX, unless entirely composed of abstracts of historical releases. PRINCIPLE 6 RESPECT THE RIGHTS OF SECURITY HOLDERS The Board strives to ensure that shareholders are informed of all major developments and business events likely to materially impact the Company’s operations and financial standing, including the market price of securities, with Information communicated to shareholders via: ● ● ● ● ● The ASX platform. The Company’s website. Annual audited financial report, half year unaudited financials and report and Appendix 5B and accompanying reports released quarterly. Market-sensitive releases, including information that relates to strategy and milestone accomplishment. Chairman or MD’s addresses to the AGM which are also made available through the ASX website. ANNUAL REPORT | 2023 19  ● ● The release of results of General and Annual General Meeting; and. Any presentation made to investor groups or platforms such as ShareCafe. Historical information retained on the Magnis website includes: ● ● ● ● ● ● ASX Announcements -https://magnis.com.au/asx-announcements/ Company Presentations - https://magnis.com.au/presentations/; Company Reports Annual - https://magnis.com.au/annual-reports Quarterly - https://magnis.com.au/quarterly-reports/ Director - https://magnis.com.au/board-of-directors/ Management Details - https://magnis.com.au/management/; and Governance, namely Charters and Policies - https://magnis.com.au/corporate-governance/ General Meetings Shareholders have the right, and are encouraged, to attend the Company’s General Meetings in particular the Annual General Meeting, held in October/November each year, and are provided with explanatory notes on the resolutions proposed through the notice of meeting. A copy of the notice of meeting is also posted on the Company website and lodged with the ASX. In addition, shareholders are invited to submit questions of the board, auditors, or management, which are addressed at the Annual General Meeting. Shareholders are encouraged to vote on all resolutions and unless specifically stated otherwise in the notice of the meeting, all shareholders are eligible to vote on all resolutions. Shareholders who cannot attend the Annual General Meeting may lodge a proxy in accordance with the Corporations Act. Proxy forms may be lodged with the share registry by mail, hand delivery, facsimile or electronically. Transcripts of the Chair and MD’s presentations or speeches are released to the ASX prior to the Meeting. These transcripts, and the results of the meeting are posted on the ASX and the Company’s website. All shareholders are provided the option to receive communications (in particular the Annual Report and the Notice of Meeting (including the proxy form) from the Company and the share registry electronically and are encouraged to do so, with election documentation included in regular mail outs to shareholders. This use of technology is in line with the Company’s focus on sustainability. PRINCIPLE 7 RECOGNISE AND MANAGE RISK The Company, through management and lead by the CEO in FY23 progressed the building of a new risk management framework and Risk Register. This is overseen by the Audit & Risk Committee and reviewed frequently by the Board. It encompasses all material risks, quantifying them and setting appropriate actions, policies and other actions to mitigate and manage them. The identification and effective management of risk, including calculated commercial risks are viewed as an essential part of the Company’s approach for creating long-term shareholder value. The Company does not have an independent internal audit function due to the size of the Company, accordingly, as mentioned above its risk management policies and the Risk Register is reviewed and 20 ANNUAL REPORT | 2023 monitored by the Audit and Risk Committee. The Committee is obligated to work within the mandate established by the Audit and Risk Committee’s Charter, which is itself reviewed on an bi-annual basis. The Company’s risk management framework integrates macro strategic goals with day-to-day business procedures and functional responsibilities. The Risk Register was finalised in its current form in March 2023 and the Audit & Risk Committee will continue the risk review throughout the FY24 year. Corporate Responsibility The Company acknowledges the importance of sustainability as a core foundation and part of its corporate responsibility to all stakeholders. The Company believes that sustainable conduct is a delivery driver of value for its shareholders and the broader community and external stakeholders in the long term. Magnis’ entities and investee companies are committed towards ensuring support to sustainable business practices. The impact of the Company’s decision-making and operations all have an impact on the economy, society and the environment, which forms part of its corporate responsibility. This is no more evident than in respect to its subsidiary’s operations in New York and Tanzania Environment The Company’s high quality green credentialed Lithium-ion batteries to be and being produced by iM3NY, using C4V’s patented BM-LMP Technology leads to longer battery life, faster charging, and greater safety without the use of the more environmentally impactful Nickel and Cobalt. The Graphite to be produced from the Nachu Graphite Project in Tanzania and to be utilized in anode active material in batteries and the larger flake sizes which are used in heat resistant applications can be produced without reliance on harsh chemicals. Social A key part of the Company’s sustainability approach is based on proactively maintaining its social license to operate through greater interaction and positive impacts on the communities it operates in, in particular Tanzania. Its capital investments into the iM3NY operations in New York has created numerous new jobs and supported livelihoods and assists in re-invigorating the local community in which it operates. The iM3NY operation has created approximately 90 ongoing roles in Endicott, New York at the battery manufacturing plant. As the plant expands from its initial 1 GWh to the planned 15GWh over time so will the workforce increase. There are also Future job creation opportunities being planned for the Tanzania projects, once production is underway. This is on top of the employment generated through the building of the eco-village and the various enhancements made to local schools and hospitals completed during FY23. The Magnis group of companies is committed to complying with the laws, regulations and guidelines that govern the group’s operations in the multiple jurisdictions in which it operates across Australia, United States and Tanzania. Engagement with Local communities In Tanzania, the Company has continued to partner with several organisations in line with its commitment to operate in a sustainable manner. There have been four key areas where the Company has contributed and engaged with the local communities in Tanzania in relation to its Nachu Graphite Project: ANNUAL REPORT | 2023 21 1. 2. 3. 4. Community Consultation: Engagement with the local communities and neighbors surrounding its site. Financial literacy and Education: The Company has ensured that financial literacy education has been rolled out to various communities, by enabling building work on the local schools and provision of textbooks. Community support through supply of materials: the Company has donated building materials and supplies for the construction of various community clinics and schools. Community Donation and Support Programs: The Company has provided various donations to support numerous charity and program campaigns during the year. People, Health and Safety The Company has a focus on safety, health and providing an equal work environment to all its employees, regardless of their background and position. The focus is on maintaining safe working environments through strong, safety-first leadership and culture. The Health, Safety and Sustainability Committee’s charter includes the development, monitoring, and refining of safety performance indicators to better understand the processes and behaviours that are most effective in minimising safety incidents and serious harm. The Committee monitored and tracked any serious consequence-based injury, and will monitor and track other major incidents capable of causing or have caused serious or fatal harm. All incidents, injuries and near misses will be reported in accordance with incident management procedures to ensure measures can be taken to prevent reoccurrence. There were a small number of safety incidents for the financial year ending 30 June 2023 at the iM3NY factory, the most serious of which resulted in 10 days lost time.. The Health Safety & Sustainability Committee will be evaluating the Company’s material exposure to economic, environmental, and social sustainability risks. The results of these findings will shape strategy and resource allocation. PRINCIPLE 8 REMUNERATE FAIRLY AND RESPONSIBLY The Nominations and Remuneration Committee, which in accordance with its Charter https://www.magnis.com.au/files/MNS-Nominations-And-Renumeration-Committee-Charter.pdf is responsible for reviewing and making recommendations to the Board in respect of: ● ● ● ● ● ● Executive remuneration. Executive incentive plans. Remuneration of the Company’s key management personnel. Equity based incentive plans. Recruitment, retention, performance measurement and termination policies and procedures for non- executive directors, the CEO or MD(USA) and any other executive director and all senior executives reporting directly to the CEO or MD(USA)`; and The disclosure of remuneration in the Company’s Annual Report. Details of Remuneration and Nomination Committee are outlined earlier in this Corporate Governance Statement and in the Directors’ Report contained in the Annual Report as is the Remuneration Report. 22 ANNUAL REPORT | 2023 Remuneration levels are set to attract and retain appropriately qualified and experienced personnel. Performance, duties and responsibilities, market comparison and independent advice are all considered as part of the remuneration process. To this end during the reporting period the Committee engaged external consultants to review and benchmark the remuneration strategies and remuneration of all the Board and KMP, This has resulted in a new framework being proposed which the board has approved and which will be rolled out in FY24. The total remuneration paid to Directors and key management personnel for the reporting period are set out in the Remuneration Report. Directors’ fees were reviewed and benchmarked against fees paid to Directors of similar organisations with similar growth and were considered to be at the median. Directors are not provided with retirement benefits other than statutory superannuation and have been awarded out of the money options which were approved at the last AGM. Alternative structures will likely be considered going forward. To ensure that the Company’s senior executives properly perform their duties, the following procedures are in place: ● ● ● Full year achievement reviews through the re-constituted Nomination & Remuneration Committee. Senior management assessed in terms of their achievements against expectations. A link between the outcomes, market rates, and the performance review process which is outlined in the Remuneration Report. CONTINUOUS REVIEW OF CORPORATE GOVERNANCE Directors consider, on an ongoing basis, how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as Directors of the Company. Such information must be sufficient from time to time considering changing circumstances and economic conditions. The Directors recognise that: ● ● mineral exploration and pre-development of off takes of graphite, and the manufacture of lithium cells each of those areas carry numerous risks, financial, production, environmental and others set out in the risk register. Directors are committed and conscious of the role they play with respect to the oversight of these businesses and operational strategy. The adoption of skilled employees and contractors and adopting sound risk mitigation frameworks designed to manage and address particular and general risks relating to each of these businesses and the overall business generally, noting the multi- jurisdictional nature of the Company’s interests in particular. This Corporate Governance Statement was approved by a resolution of the Board on 24 October 2023 ANNUAL REPORT | 2023 23 2 3 Director’s Report DIRECTORS’ REPORT The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Magnis Energy Technologies Ltd (referred to hereafter as the 'Company' or 'Parent Entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. DIRECTORS The following persons were Directors of Magnis Energy Technologies Ltd during either the whole of the financial year or were appointed during the year and remained directors at the date of this report, unless otherwise stated: MR. FRANK POULLAS – EXECUTIVE CHAIRMAN Appointed Non-Executive - 10 September 2010. Elected Executive Chairman - 29 August 2014. Mr Poullas has spent over two decades working in the technology, investment banking and engineering industries. During the last 17 years, Mr Poullas has been involved with assisting several ASX-Listed entities with funding and strategic direction in the Lithium-ion Battery Materials and Energy sectors. Current and former directorships of other listed companies in last 3 years None Special responsibilities Mr Poullas is a member of the Health, Safety and Sustainability Committee. As executive Chairman he is an ex-officio member of each of the committees and a member of the Continuous Disclosure Committee, MR. HOSHI DARUWALLA - NON-EXECUTIVE DIRECTOR Appointed Non-Executive - 31 December 2021. Appointed Executive - MD USA26 May 2023 Mr Daruwalla is based in the United States and has a career spanning over three decades where he has started, operated, and grew businesses across a variety of industries globally from start-ups to significant multinationals. He has held global senior management roles at corporations such as Daikin Industries, American Air Filter – McQuay, Hong Leong Group and Purafil. He has operated, seeded, and scaled up businesses in 93+ countries, with successful outcomes including receiving the prestigious U.S. Presidential E- and E-Star awards for Excellence in U.S. Exports awarded by the U.S. Secretary of Commerce. Recently, Mr Daruwalla held the role of Executive VP – Strategic Global Expansions; Chairman of the Board, President, and CEO of the North American entity of EcoPro Battery. He is a Board Member and CEO Mentor at the State of Georgia District Export Council (U.S. Department of Commerce appointee), and holds a bachelor’s degree in manufacturing engineering, Masters in Business Administration, and is an alumnus of the Wharton Business School. Current and former directorships of other listed companies in last three years None Special responsibilities Initially a Member of the Health, Safety and Sustainability Committee and the Nomination & Remuneration Committee, He transferred to the Audit & Risk Committee and vacated his position on the Health Safety & Sustainability Committee midway through the H1FY23. He is the Chair of the M&A Committee, which meets as and when required. MS. MONA E. DAJANI - NON-EXECUTIVE DIRECTOR Appointed - 29 March 2021 Ms. Dajani has over 20 years of legal practice experience as a dual qualified lawyer in the U.S. and England and as a licensed professional engineer. She serves as a lead lawyer in complex acquisitions, dispositions, financing, and project development transactions involving energy and infrastructure facilities in the United States and around the world. She moved to the firm of Sherman Stirling where she co-leads their Energy and Infrastructure Project Teams. Current and former directorships of other listed companies in last three years None Special responsibilities Member of the Nominations and Remuneration Committee and a member of the Audit and Risk Committee until as noted above she transferred to the Health Safety & Sustainability Committee when Hoshi Daruwalla moved to take her place on the Audit & Risk Committee.in early FY23. For the full year she was a Director and Manager/Director of Imperium3 New York Inc and iM3NY LLC respectively. 24 ANNUAL REPORT | 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 2 DIRECTORS’ REPORT DIRECTORS The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Magnis Energy Technologies Ltd (referred to hereafter as the 'Company' or 'Parent Entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. The following persons were Directors of Magnis Energy Technologies Ltd during either the whole of the financial year or were appointed during the year and remained directors at the date of this report, unless otherwise stated: MR. FRANK POULLAS – EXECUTIVE CHAIRMAN Appointed Non-Executive - 10 September 2010. Elected Executive Chairman - 29 August 2014. Mr Poullas has spent over two decades working in the technology, investment banking and engineering industries. During the last 17 years, Mr Poullas has been involved with assisting several ASX-Listed entities with funding and strategic direction in the Lithium-ion Battery Materials and Energy sectors. Current and former directorships of other listed companies in last 3 years None Special responsibilities Mr Poullas is a member of the Health, Safety and Sustainability Committee. As executive Chairman he is an ex-officio member of each of the committees and a member of the Continuous Disclosure Committee, MR. HOSHI DARUWALLA - NON-EXECUTIVE DIRECTOR Appointed Non-Executive - 31 December 2021. Appointed Executive - MD USA26 May 2023 Mr Daruwalla is based in the United States and has a career spanning over three decades where he has started, operated, and grew businesses across a variety of industries globally from start-ups to significant multinationals. He has held global senior management roles at corporations such as Daikin Industries, American Air Filter – McQuay, Hong Leong Group and Purafil. He has operated, seeded, and scaled up businesses in 93+ countries, with successful outcomes including receiving the prestigious U.S. Presidential E- and E-Star awards for Excellence in U.S. Exports awarded by the U.S. Secretary of Commerce. Recently, Mr Daruwalla held the role of Executive VP – Strategic Global Expansions; Chairman of the Board, President, and CEO of the North American entity of EcoPro Battery. He is a Board Member and CEO Mentor at the State of Georgia District Export Council (U.S. Department of Commerce appointee), and holds a bachelor’s degree in manufacturing engineering, Masters in Business Administration, and is an alumnus of the Wharton Business School. Current and former directorships of other listed companies in last three years None Special responsibilities Initially a Member of the Health, Safety and Sustainability Committee and the Nomination & Remuneration Committee, He transferred to the Audit & Risk Committee and vacated his position on the Health Safety & Sustainability Committee midway through the H1FY23. He is the Chair of the M&A Committee, which meets as and when required. MS. MONA E. DAJANI - NON-EXECUTIVE DIRECTOR Appointed - 29 March 2021 Ms. Dajani has over 20 years of legal practice experience as a dual qualified lawyer in the U.S. and England and as a licensed professional engineer. She serves as a lead lawyer in complex acquisitions, dispositions, financing, and project development transactions involving energy and infrastructure facilities in the United States and around the world. She moved to the firm of Sherman Stirling where she co-leads their Energy and Infrastructure Project Teams. Current and former directorships of other listed companies in last three years None Special responsibilities Member of the Nominations and Remuneration Committee and a member of the Audit and Risk Committee until as noted above she transferred to the Health Safety & Sustainability Committee when Hoshi Daruwalla moved to take her place on the Audit & Risk Committee.in early FY23. For the full year she was a Director and Manager/Director of Imperium3 New York Inc and iM3NY LLC respectively. DIRECTORS’ REPORT MS. CLAIRE BIBBY - NON-EXECUTIVE DIRECTOR Appointed - 28 January 2022. Ms. Bibby has over 30 years of professional experience as a senior lawyer and executive coach. Claire has founded and co- founded several businesses covering the legal, executive coaching, property-tech and legal-tech spaces and has held senior management appointments with some of world’s largest companies and top-tier law firms. Claire is a Non-Executive Director of two other ASX listed companies noted below and sits on a number of unlisted companies and charities including Arowana International Limited. Claire has been recognised by several professional organisations during her career including recently being named by Australasian Lawyer as one of the Elite Women of 2021. Claire is also an Industry/Professional Fellow with the University of Technology Sydney, School of Law. Current and former directorships of other listed companies in last three years Comms Group Limited (ASX: CCG), Clime Asset Management (ASX: CIW); Arowana International Limited, (which has since delisted) Special responsibilities Chair of the Audit and Risk Committee, and member of the Nominations and Renumeration Committee and the M&A Committee and the Continuous Disclosure Committee. MR. GILES GUNESEKERA - NON-EXECUTIVE DIRECTOR Appointed - 28 January 2022. Giles is the Founder and CEO of Global Impact Initiative and has over 25 years’ experience of building and developing businesses for global organisations. GII is the only Impact Investing business in the world that is acknowledged by the United Nations as a Global LEAD company and recognised for their high levels of engagement in the United Nations Sustainable Development Goals (UNSDGs) Giles holds numerous Volunteer Not-for-Profit Directorships ranging from International Aid, Human Rights, Climate Action, Disabilities, Education, Arts and Sports. Giles is on Advisory Boards for the United Nations for Climate & Health and Sustainable Finance. Giles has formal academic qualifications from Oxford University, Melbourne University, Monash University, and the Financial Services Institute of Australia. Current and former directorships of other listed companies in last three years None. Special responsibilities Chair of the Health, Safety and Sustainability Committee, member of the Audit and Risk Committee and M&A Committee and Chair of the Nomination & Remuneration Committee and member of the Continuous Disclosure Committee which roles he took up when Mugunthan Siva resigned in April 2023. MR. PETER TSEGAS - NON-EXECUTIVE DIRECTOR Appointed - 16 June 2015. Mr Tsegas has over 20 years of experience in Tanzania where he’s been a resident for over 15 years. He has worked to engage both the private and government sectors on several projects and was Managing Director of Tancoal Energy Ltd which he successfully took from an exploration company to a JV with the Tanzanian government, and then into production. Current and former directorships of other listed companies in last three years: Adavale Resources Limited, (ASX: ADD, Appointed 29 November 2019, Resigned 17 June 2020). Gladiator Resources Limited, (ASX: GLA), which he joined in August 2023. Special responsibilities Member of the Health, Safety and Sustainability Committee. FORMER DIRECTORS + KMP DURING 2023 REPORTING PERIOD Mr. Mugunthan Siva, Non-Executive Director, 29 March 2021 to 7 April 2023. Mr. Julian Rockett, Joint Company Secretary and Corporate Counsel, 15 April 2021 to 31 March 2023. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 2 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 3 25 DIRECTORS’ REPORT DIRECTORS APPOINTED FOLLOWING THE END OF THE 2023 REPORTING PERIIOD MR. FABRIZIO PERILLI – INDEPENBDENT NON-EXECUTIVE DIRECTOR Appointed 31 July 2023 Mr Perilli has over 25 years of experience in director level roles and has overseen projects valued at over $6 Billion. Currently he is co-founder and Managing Director at PERIFA, a vertically integrated international property group. Prior to PERIFA, Mr Perilli spent 15 years at TOGA Group as its CEO, Development and Construction where he significantly grew the business and successfully led the company’s focus on achieving value and quality outcomes for all stakeholders. Mr Perilli was also a Director at Clifton Coney Group (Coffey Projects), and over the 10 years was responsible for establishing and leading new operations in Sydney, New Zealand, and Vietnam. Mr Perilli is the president of the Property Council of Australia's NSW division. Current and former directorships of other listed companies in last three years: Okapi Resources Limited (ASX: OKR) KMP DURING 2023 REPORTING PERIOD MR. DUNCAN GLASGOW - COMPANY SECRETARY AND GROUP GENERAL COUNSEL Appointed - 10 February 2022. Mr. Glasgow has over three decades of extensive experience as a corporate and commercial lawyer and company secretary who has worked across several ASX listed companies as well as private companies in the energy, mining, retailing and industrial sectors. He has a Bachelor of Arts and a Bachelor of Laws from Macquarie University, is a Fellow of the Institute of Chartered Secretaries and a Fellow of the Governance Institute and holds an Unqualified Practicing Certificate from the Law Society of NSW. DIRECTORS’ INTERESTS As at the date of this report, the interests (directly or indirectly held) of the Directors in the shares and options of the Company were: Director Mr. F. Poullas Mr. P. Tsegas Ms. M. E. Dajani Mr. M. Siva (Resigned 7 April 2023) Ms. C. Bibby Mr. G. Gunesekera Mr. H. Daruwalla (Appointed Executive 26 May 2023) Ordinary Fully Paid (OFP) Shares 17,387,506 1,270,000 - 700,000 - - - Unlisted Options over OFP Shares Performance Rights - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - - - - PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN STATE OF AFFAIRS The Group has business interests across the Lithium-ion battery supply chain in the USA and Tanzania. Magnis’ vision is to advance their multi-strategy business through: • Operating as a strategic partner, to support through its parent (in which it holds a majority interest) Imperium3 New York, Inc’s (‘iM3NY’) lithium-ion battery manufacturing facility to build towards double-digit gigawatt production. • Developing the Group’s wholly owned Nachu Graphite mining project in Tanzania to produce high purity natural flake graphite. Upon execution of a Framework Agreement with the Tanzanian Government the percentage ownership will reduce to 84%. • Working closely with C4V (of which the Company holds a 9.65% interest) which plans to commercialize their lithium- ion battery technology and has provided some assistance in producing high performance anode active material from the Company’s Nachu Graphite feedstock, which will be located in the USA. • Develop the active anode material business by progressing the agreement reached during the reporting period with the leading international EV automotive manufacturer. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 26 ANNUAL REPORT | 2023 4 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS APPOINTED FOLLOWING THE END OF THE 2023 REPORTING PERIIOD MR. FABRIZIO PERILLI – INDEPENBDENT NON-EXECUTIVE DIRECTOR Appointed 31 July 2023 Mr Perilli has over 25 years of experience in director level roles and has overseen projects valued at over $6 Billion. Currently he is co-founder and Managing Director at PERIFA, a vertically integrated international property group. Prior to PERIFA, Mr Perilli spent 15 years at TOGA Group as its CEO, Development and Construction where he significantly grew the business and successfully led the company’s focus on achieving value and quality outcomes for all stakeholders. Mr Perilli was also a Director at Clifton Coney Group (Coffey Projects), and over the 10 years was responsible for establishing and leading new operations in Sydney, New Zealand, and Vietnam. Mr Perilli is the president of the Property Council of Australia's NSW division. Current and former directorships of other listed companies in last three years: Okapi Resources Limited (ASX: OKR) KMP DURING 2023 REPORTING PERIOD MR. DUNCAN GLASGOW - COMPANY SECRETARY AND GROUP GENERAL COUNSEL Appointed - 10 February 2022. Mr. Glasgow has over three decades of extensive experience as a corporate and commercial lawyer and company secretary who has worked across several ASX listed companies as well as private companies in the energy, mining, retailing and industrial sectors. He has a Bachelor of Arts and a Bachelor of Laws from Macquarie University, is a Fellow of the Institute of Chartered Secretaries and a Fellow of the Governance Institute and holds an Unqualified Practicing As at the date of this report, the interests (directly or indirectly held) of the Directors in the shares and options of Certificate from the Law Society of NSW. DIRECTORS’ INTERESTS the Company were: Director Mr. F. Poullas Mr. P. Tsegas Ms. M. E. Dajani Ms. C. Bibby Mr. G. Gunesekera Ordinary Fully Paid (OFP) Shares 17,387,506 1,270,000 Unlisted Performance Options over OFP Shares Rights - - 2,000,000 2,000,000 - - - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - - - - As at reporting period end, the primary activities, and changes in state-of-affairs of the Company were as follows: • Mr. David Taylor appointed 1 August 2022 as Chief Executive Officer, resigned in June 2023 with an effective date of 30 Nov 2023. • iM3NY Completed the work fitting out its lithium-Ion battery/cell factory in Endacott, upstate New York USA and commenced production of cells, which received certification at the end of the reporting period, with little or no sales possible until certification was achieved. • The Company entered into a binding offtake agreement with a leading international EV automotive manufacturer to provided anode active material produced from its Anode Active Material manufacturing facility the LOI for which was signed at the end of the FY23. • Global engineering group Ausenco completed a Definitive Feasibility Study for the Nachu Graphite Project, and the Framework Agreement had largely been agreed, with signing to occur once the Financial Model that is annexed to it is completed. • Magnis secured a total of A$25 million when it entered into a Pre-Payment Subscription Agreement with L1 Capital and Regal Funds Management in March of 2023. • The Resettlement Program for the projects affected persons from the development of the Nachu Graphite project is a key precursor before construction of the plant and processing facility can commence. The Group’s wholly owned subsidiary Uranex Tanzania Limited had completed the works and by the date of the Directors’ report will have commenced the resettlement of those persons into the newly completed Eco-Village. Post the reporting period end, the primary activities, and changes in state-of-affairs of the Company were as follows: • A placement for AUD10million was made through Evolution Capital Pty Ltd, utilizing the Board discretionary limit of 15%. • A Standby Equity Deed was signed with Evolution Capital Pty Ltd, to provide some additional working capital with a cap of 80,000,000 shares (also within the Board’s discretionary limit) was signed and announced on September 8, 2023. REVIEW OF OPERATIONS LITHIUM-ION BATTERY MANUFACTURING The Group along with its technology partner Charge CCCV LLC (“C4V”) are the major shareholders in the New York Lithium- ion battery manufacturing facility, iM3NY. iM3NY is commercialising C4V’s patented technology to produce green credentialed lithium-ion battery cells for use in energy storage and electric vehicle applications. Mr. M. Siva (Resigned 7 April 2023) 700,000 Over the year, iM3NY: Mr. H. Daruwalla (Appointed Executive 26 May 2023) PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN STATE OF AFFAIRS The Group has business interests across the Lithium-ion battery supply chain in the USA and Tanzania. Magnis’ vision is to advance their multi-strategy business through: • Operating as a strategic partner, to support through its parent (in which it holds a majority interest) Imperium3 New York, Inc’s (‘iM3NY’) lithium-ion battery manufacturing facility to build towards double-digit gigawatt production. • Developing the Group’s wholly owned Nachu Graphite mining project in Tanzania to produce high purity natural flake graphite. Upon execution of a Framework Agreement with the Tanzanian Government the percentage ownership will reduce to 84%. • Working closely with C4V (of which the Company holds a 9.65% interest) which plans to commercialize their lithium- ion battery technology and has provided some assistance in producing high performance anode active material from the Company’s Nachu Graphite feedstock, which will be located in the USA. • Develop the active anode material business by progressing the agreement reached during the reporting period with the leading international EV automotive manufacturer. • Finalised the installation and commissioning of key equipment such as Mixing, Coating, Drying, Calendaring, Slitting, Stamping, Stacking, Electrolyte Filling, etc. and commenced production of cells. Then proceeded to carry out internal qualification of the cells, this was to ensure compliance with safety and environmental requirements. • Over the period iM3NY increased its head count from 57 to ~90 at the end of the accounting period. • Organised the certification of the cells to UN38.3, which took longer than anticipated, so much so that certification was only achieved late in the reporting period. Whilst this was progressing the company sold small quantities of cells to existing customers for their internal approval processes. • HSBC was appointed in late November of Q2, to assist with funding to achieve the expansion aspirations of the entity which is aiming to achieve a 38GWh output. • A Joint venture was announced, also late in the reporting period with OSM (which makes three and four-wheeler electric vehicles), where IM3NY will provide the technology and expertise in exchange for a 26% interest in the JV. Also, in anticipation of certification one customer, Sukh Energy has agreed a delivery schedule which will commence in the second half of calendar 2023. The sales team has continued to focus on obtaining deposits and locking in initial delivery dates once other customers have completed their internal testing. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 4 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 5 27 DIRECTORS’ REPORT NACHU GRAPHITE PROJECT UPDATE DIRECTORS’ REPORT CAPITAL RAISINGS Ausenco Services Pty Ltd completed its work on the Definitive Feasibility Study for the Nachu Graphite Project in Tanzania. The study is based on an annual graphite production of 239,000 tonnes of high-grade graphite concentrate. This was filed with the ASX in October 2022. This paved the way for progressing the negotiation of the Framework Agreement which when completed will see 16% of the project being ceded to the Government of Tanzania in accordance with the Mining Act of Tanzania. The negotiations remain on-going although the only matter outstanding to the execution and the commencement of production is the approval of the financial model for the project. Magnis, through its wholly owned subsidiary Magnis Technology Tanzania has retained its Special Exconiomic Zone (SEZ) registration where part of the purification of the natural graphite will occur. There are benefits from a tax and other imposts from having this registration and to some extent that has caused Magnis to take longer to finalise the Framework Agreement negotiations. Uranex Tanzania Limited, a wholly owned subsidiary of the Group has progressed a number of infrastructure projects such as ponds and dams within the Special Mining Licence boundary. Also the company’s resettlement program utilising Italframe Limited, a Tanzanian Registered building contractor overseen by project consultants, Norplan Tanzania Ltd has seen the completion of the construction of the Eco-village to house the 59 families that were living on the special mining licence area. It is expected that the relocation of the families will be completed during this financial year, which will ensure there is no impediment to commencement of mining. To facilitate the commencement of mining on the special mining license financial advisors HCF were engaged to assist with the funding required to acquire the machinery and fund the infrastructure necessary to process the natural flake graphite once it is mined. This is ongoing. ANODE ACTIVE MATERIALS BUSINESS The Company set up a wholly owned subsidiary in the US – Magnis AAM LLC in anticipation of securing the offtake agreement with the leading International EV manufacturer, details of which were released in February 2023. This required the location of the site for the plant to be progressed by the end of the reporting period, which was achieved with the announcement of the LOI for a site in Southwest USA. This will house initially the demonstration plant and then be expanded with further equipment to manufacture the anode material to satisfy the offtake. Worley have bene engaged to produce the engineering design for the plant and Hosokawa has been contracted to produce the key piece of equipment for the administration plant. NO SIGNIFICANT ANTICIPATED DEVELOPMENTS EXCEPT AS DISCLOSED The Directors are not aware of any developments other than the on-going challenges posed by developing 3 projects at the one time, all of which require significant capital and are to differing extents interrelated. The Company is not involved in or aware of any pending litigation, although as announced ASIC has commenced a further investigation and had issued a s33 Notice for production of documents following period end and which had been satisfied by the date of this report. Other than as disclosed above and elsewhere in this report, there have been no further subsequent events. DIVIDENDS No dividends have been paid or declared during the year (2022: $NIL). The Directors do not anticipate the declaration or payment of a dividend in the next financial year. FUTURE OUTLOOK AND STRATEGY Magnis’ vision is to be a key global player in the lithium-ion battery value chain with a key focus on the electric vehicles and clean energy storage markets. The Company envisions the following corporate developments to take place in the new financial year: • New York lithium-ion battery plant, Imperium3 New York Inc. (‘iM3NY’) to gradually increase commercial production to meet customer orders. • IM3NY seeks to raise further capital to increase capacity towards double digit gigawatt scale. • Secure further graphite offtakes, complete and sign the Framework Agreement with Government of Tanzania, which with the completion of the resettlement of the local inhabitants from the mine site to the Eco-Village will enable the Nachu Graphite Project in Tanzania to be funded and to commence production of natural flake graphite. • Progress the Anode Active Materials plant design and build on the site for which an LOI has been signed on 30 June in order to satisfy the initial milestones for the offtake agreement with the Leading International EV automotive manufacturer. On 17 March 2023, the Company announced that it had received a binding equity-linked pre-paid share subscription facility agreement from US-based SBC under which the Company expects to be able to raise up to A$50 million before fees via two lots of $25m tranches (Funding Proposal). The first tranche of $25m was received on 24 March 2023 from two New York based investors, L1 Capital $14,189,189 (affiliate entity of SBC Global Investment Fund) and Regal $10,810,811. Deal fees and legal expenses amounting to $1,415,000 were incurred and deducted upfront from the proceeds received under the first tranche of funding. On 24 March 2023, Magnis issued 145,000,000 Ordinary Fully Paid shares as part of receiving its first $25M tranche before fees, that included: • 40,000,000 (22,702,703 to L1 Capital, 17,297,297 to Regal) issued as collateral shares that are required to be paid for or surrendered within 18 months from date of issue. • 59,594,594 shares were subsequently issued to L1 Capital (L1: 62,594,594 - 3,000,000 from SBC), • 45,405,406 shares were subsequently issued to Regal. As at 30 June 2023, the first tranche of the pre-paid share subscription facility had been completed in full with NIL outstanding balances for Regal and L1 Capital. The company did not take up the offer of the second tranche, instead relying on a separate placement to Sophisticated Investors in order to raise $10 million. Magnis Energy Technologies Ltd had 10 employees (including 1 executive director) on 30 June 2023 (2022: 7 employees). Uranex Tanzania Limited had 12 full-time employees on 30 June 2023. (2022:13 employees) Imperium 3 New York LLC had 80 employees on 30 June 2023 (2022: 52 employees). Total 14 7 6 Total 12 Total 80 Gender Gender Gender Male 11 7 4 Male 8 Male 60 Female 3 - 2 Female 4 Female 20 EMPLOYEES Employees All Employees and Board Key Management Personnel Board Employees All Employees and Board Employees All Employees and Executives CORPORATE CORPORATE INFORMATION Magnis Energy Technologies Ltd is limited by shares and incorporated and domiciled in Australia. The shares are listed on the Australian Securities Exchange (“ASX”) under the ASX code MNS. Unlisted options issued to Director’s total 8,000,000 and were either approved by Shareholders at the AGM in 2022 or in 2021 and have not been forfeited prior to or following the end of the financial year. There are a total of 2,625,000 unlisted options issued to employees either approved at the AGM in 2022 or earlier and have not been forfeited prior to or following the end of the financial year. The table below lists total shares that have been issued during the financial year from capital raisings and exercise of options. Entity Magnis Energy Technologies Ltd 148,846,154 Ordinary $26,128,108 $nil Number of shares issued Class of shares Amount paid for shares before fees Amount unpaid on shares MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 28 ANNUAL REPORT | 2023 6 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 7 DIRECTORS’ REPORT NACHU GRAPHITE PROJECT UPDATE DIRECTORS’ REPORT CAPITAL RAISINGS Ausenco Services Pty Ltd completed its work on the Definitive Feasibility Study for the Nachu Graphite Project in Tanzania. The study is based on an annual graphite production of 239,000 tonnes of high-grade graphite concentrate. This was filed with the ASX in October 2022. This paved the way for progressing the negotiation of the Framework Agreement which when completed will see 16% of the project being ceded to the Government of Tanzania in accordance with the Mining Act of Tanzania. The negotiations remain on-going although the only matter outstanding to the execution and the commencement of production is the approval of the financial model for the project. Magnis, through its wholly owned subsidiary Magnis Technology Tanzania has retained its Special Exconiomic Zone (SEZ) registration where part of the purification of the natural graphite will occur. There are benefits from a tax and other imposts from having this registration and to some extent that has caused Magnis to take longer to finalise the Framework Agreement negotiations. Uranex Tanzania Limited, a wholly owned subsidiary of the Group has progressed a number of infrastructure projects such as ponds and dams within the Special Mining Licence boundary. Also the company’s resettlement program utilising Italframe Limited, a Tanzanian Registered building contractor overseen by project consultants, Norplan Tanzania Ltd has seen the completion of the construction of the Eco-village to house the 59 families that were living on the special mining licence area. It is expected that the relocation of the families will be completed during this financial year, which will ensure there is no impediment to commencement of mining. To facilitate the commencement of mining on the special mining license financial advisors HCF were engaged to assist with the funding required to acquire the machinery and fund the infrastructure necessary to process the natural flake graphite once it is mined. This is ongoing. ANODE ACTIVE MATERIALS BUSINESS The Company set up a wholly owned subsidiary in the US – Magnis AAM LLC in anticipation of securing the offtake agreement with the leading International EV manufacturer, details of which were released in February 2023. This required the location of the site for the plant to be progressed by the end of the reporting period, which was achieved with the announcement of the LOI for a site in Southwest USA. This will house initially the demonstration plant and then be expanded with further equipment to manufacture the anode material to satisfy the offtake. Worley have bene engaged to produce the engineering design for the plant and Hosokawa has been contracted to produce the key piece of equipment for the administration plant. NO SIGNIFICANT ANTICIPATED DEVELOPMENTS EXCEPT AS DISCLOSED The Directors are not aware of any developments other than the on-going challenges posed by developing 3 projects at the one time, all of which require significant capital and are to differing extents interrelated. The Company is not involved in or aware of any pending litigation, although as announced ASIC has commenced a further investigation and had issued a s33 Notice for production of documents following period end and which had been satisfied by the date of this report. Other than as disclosed above and elsewhere in this report, there have been no further subsequent events. No dividends have been paid or declared during the year (2022: $NIL). The Directors do not anticipate the declaration DIVIDENDS or payment of a dividend in the next financial year. FUTURE OUTLOOK AND STRATEGY Magnis’ vision is to be a key global player in the lithium-ion battery value chain with a key focus on the electric vehicles and clean energy storage markets. The Company envisions the following corporate developments to take place in the new financial year: to meet customer orders. • New York lithium-ion battery plant, Imperium3 New York Inc. (‘iM3NY’) to gradually increase commercial production • IM3NY seeks to raise further capital to increase capacity towards double digit gigawatt scale. • Secure further graphite offtakes, complete and sign the Framework Agreement with Government of Tanzania, which with the completion of the resettlement of the local inhabitants from the mine site to the Eco-Village will enable the Nachu Graphite Project in Tanzania to be funded and to commence production of natural flake graphite. • Progress the Anode Active Materials plant design and build on the site for which an LOI has been signed on 30 June in order to satisfy the initial milestones for the offtake agreement with the Leading International EV automotive manufacturer. On 17 March 2023, the Company announced that it had received a binding equity-linked pre-paid share subscription facility agreement from US-based SBC under which the Company expects to be able to raise up to A$50 million before fees via two lots of $25m tranches (Funding Proposal). The first tranche of $25m was received on 24 March 2023 from two New York based investors, L1 Capital $14,189,189 (affiliate entity of SBC Global Investment Fund) and Regal $10,810,811. Deal fees and legal expenses amounting to $1,415,000 were incurred and deducted upfront from the proceeds received under the first tranche of funding. On 24 March 2023, Magnis issued 145,000,000 Ordinary Fully Paid shares as part of receiving its first $25M tranche before fees, that included: • 40,000,000 (22,702,703 to L1 Capital, 17,297,297 to Regal) issued as collateral shares that are required to be paid for or surrendered within 18 months from date of issue. • 59,594,594 shares were subsequently issued to L1 Capital (L1: 62,594,594 - 3,000,000 from SBC), • 45,405,406 shares were subsequently issued to Regal. As at 30 June 2023, the first tranche of the pre-paid share subscription facility had been completed in full with NIL outstanding balances for Regal and L1 Capital. The company did not take up the offer of the second tranche, instead relying on a separate placement to Sophisticated Investors in order to raise $10 million. EMPLOYEES Magnis Energy Technologies Ltd had 10 employees (including 1 executive director) on 30 June 2023 (2022: 7 employees). Employees All Employees and Board Key Management Personnel Board Total 14 7 6 Gender Male 11 7 4 Female 3 - 2 Uranex Tanzania Limited had 12 full-time employees on 30 June 2023. (2022:13 employees) Employees All Employees and Board Total 12 Gender Male 8 Female 4 Imperium 3 New York LLC had 80 employees on 30 June 2023 (2022: 52 employees). Employees All Employees and Executives Total 80 Gender Male 60 Female 20 CORPORATE CORPORATE INFORMATION Magnis Energy Technologies Ltd is limited by shares and incorporated and domiciled in Australia. The shares are listed on the Australian Securities Exchange (“ASX”) under the ASX code MNS. Unlisted options issued to Director’s total 8,000,000 and were either approved by Shareholders at the AGM in 2022 or in 2021 and have not been forfeited prior to or following the end of the financial year. There are a total of 2,625,000 unlisted options issued to employees either approved at the AGM in 2022 or earlier and have not been forfeited prior to or following the end of the financial year. The table below lists total shares that have been issued during the financial year from capital raisings and exercise of options. Entity Number of shares issued Class of shares Amount paid for shares before fees Amount unpaid on shares Magnis Energy Technologies Ltd 148,846,154 Ordinary $26,128,108 $nil MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 6 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 7 29 DIRECTORS’ REPORT CORPORATE DEVELOPMENT Following the departure of Mugunthan Siva, the board appointed Fabrizio Perilli as an independent non-executive director after the end of the fiscal year and that ensured that non-executive directors comprised the majority on the board. Name Mr. Hoshi Daruwalla Ms. Claire Bibby Mr. Giles Gunesekera Role Executive Managing Director USA Independent Non-Executive Director Independent Non-Executive Director Date Joined 31st December 2021 28th January 2022 28th January 2022 DIRECTOR MOVEMENTS DURING THE YEAR Directors Role Appointment Date Departure Date Mr. M. Siva Mr. H. Daruwalla Mr. H. Daruwalla Non-Executive Director Non-Executive Director Executive Managing Director USA 29 March 2021 31 December 2021 26 May 2023 7 April 2023 26 May 2023 CAPITAL FUNDS On 25 July 2022, SBC Global Investment Fund (‘SBC’) requested to convert a further $1,000,000 of their $10.5M convertible note at $0.26 to receive 3,846,154 fully paid ordinary shares, leaving a remaining balance of $750,000 outstanding. On 24 March 2023 this remaining balance was repaid in full from the new equity-linked pre-paid share subscription facility agreement provided by L1 Capital Global Opportunities Master Fund (affiliate entity of SBC Global Investment Fund) ("L1 Capital") and Regal Funds Management ("Regal"). During August 2022, the Company received $840,000 and $300,000 from SBC for converting 4,000,000 of their 7,000,000 collateral options issued in August 2021, into fully paid ordinary shares at $0.28 and $0.30 respectively, leaving a remaining balance of 3,000,000 outstanding. On 13 April 2023 this remaining balance was closed out in full at $0.21, valuing the outstanding balance at $630,000. The Board elected not to receive these proceeds but instead use these 3,000,000 collateral shares to reduce the respective issue of shares called by L1 Capital on 13 April 2023 under the new equity-linked pre-paid share subscription facility agreement. On 1 August 2022, Magnis Option Share Trust (MOST) was granted with 1,000,000 unlisted options for the CEO at $0.63 exercise price, and a 3-year expiry period, from its 31 July 2022 issue date. On 23 September 2022, the Company cancelled 2,000,000 unlisted options at $0.70 exercise price that were issued directly to Non-Executive Director who had resigned. The Company also lapsed 1,000,000 unlisted options relating to a retiring director, at $0.70. On 17 November 2022, 2,000,000 unlisted options at $0.70 exercise price and 30 Oct 2022 expiry date, lapsed within the Magnis Option Share Trust (MOST). At the 2022 AGM on 24 November, shareholders approved the previous issue to MOST of 1,375,000 options to staff with an $0.80 exercise price and a 3-year term as well as approved the issue of 1,300,000 options with an exercise price of $0.60 to Traxys. The 4,000,000 outstanding directly held unlisted options at $0.70 exercise price, expiring on 25 November 2024, were transferred into the Magnis Option Share Trust (‘MOST’) for two Non-Executive Directors in 2022. On 16 December 2022, Magnis Option Share Trust (‘MOST’) was granted 6,000,000 unlisted options for 3 newly elected non- executive directors at $0.80 exercise price, with a 3-year expiry period, from their 7 December 2022 issue date. On 17 March 2023, the Company announced that it had received a binding equity-linked pre-paid share subscription facility agreement from US-based L1 Capital (previously referred to as SBC) and or its nominee under which the Company expected to be able to raise up to A$50 million before fees via two lots of $25m tranches (Funding Proposal). The first tranche of $25m was received on 24 March 2023 from two New York based investors, L1 Capital $14,189,189 (affiliate entity of SBC Global Investment Fund) and Regal Funds Management Pty Ltd $10,810,811. Deal fees and legal expenses amounting to $1,415,000 were incurred and deducted upfront from the proceeds received under the first tranche of funding. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 30 ANNUAL REPORT | 2023 8 DIRECTORS’ REPORT On 24 March 2023, Magnis issued 145,000,000 Ordinary Fully Paid shares as part of receiving its first $25M tranche before fees, that included: • 40,000,000 (22,702,703 to L1 Capital, 17,297,297 to Regal) as collateral shares that are required to be paid for or surrendered within 18 months. • 59,594,594 shares were subsequently issued to L1 Capital (L1: 62,594,594 - 3,000,000 from SBC), and • 45,405,406 shares were issued to Regal. As at 30 June 2023, the first tranche of the pre-paid share subscription facility had been completed in full with NIL outstanding balances for Regal and L1 Capital. On 19 May 2023, Magnis announced that it had issued 35,000,000 unlisted options (L1 Capital: 14,189,189, Regal: 10,810,811, Evolution: 10,000,000) at $0.50 exercise price, and a 3-year expiry period, from its 18 May 2023 issue date. On 26 May 2023, Magnis announced that 77,869,167 unlisted options at $0.50 exercise price, and a 3-year expiry period, from its 26 May 2020 issue date had expired. SECURITIES AS AT 30 JUNE 2023 The Company had the following securities on issue as at 30 June 2023: • 1,115,331,483 Ordinary Fully Paid shares on issue. • 35,000,000 unlisted options remain issued with a strike price at $0.50 and expiring on 18 May 2026. • 20,000,000 unlisted options remain issued to funding providers (‘LIND & SBC’) with a strike price at $0.40 and expiring on 25 November 2024. • 10,000,000 unlisted options remain issued to capital advisors (including Evolution) with a strike price at $0.50 and expiring on 25 November 2024. • 13,125,000 unlisted options outstanding in the Magnis Option Share Trust (‘MOST’, formally called Uranex Option Share Trust), with varying expiry dates ranging from 28 October 2023 to 7 December 2025 and varying exercise prices ranging from $0.50 to $0.80. • 4,000,000 performance rights outstanding in the Magnis Executive Rights Trust (‘MERT’) • 1,250,000 Ordinary Fully Paid shares held in the Magnis Option Share Trust (‘MOST’). A consolidated cash balance of $22,137,605 (2022: $100,238,244). CONVERSION OF UNLISTED PERFORMANCE RIGHTS There were NIL performance rights converted during the period as a result of meeting performance eligibility. (2022: NIL). EXERCISE OF UNLISTED OPTIONS There were NIL unlisted options exercised during the period. (2022: 43,559,405) EXERCISE OF LISTED OPTIONS No listed options exist, and none were exercised. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 9 31 DIRECTORS’ REPORT OPERATING RESULTS FOR THE YEAR 2023 Income $ Results $ Lithium-ion battery investments 123,837 (57,927,224) Graphite exploration and development 266,936 (14,790,382) Intersegment elimination - - Income and losses before tax 390,773 (72,717,606) SUBSEQUENT EQUITY EVENT: CAPITAL RAISING On 17 July 2023, Magnis announced it had that it has received firm commitments raising $10 Million via the placement of 83,333,334 shares at $0.12 per share, which will be issued within the capacity under Listing Rule 7.1. The placement was made to local and overseas institutional fund managers along with professional and sophisticated investors. Net funds received will be used to provide working capital as well as advance all projects including the AAM Demonstration Plant and the Nachu Graphite Project. Directors participating in the placement will require shareholder approval under Listing Rule 10.11 at the next Company AGM. On 8 September 2023, Magnis announced it had that it has entered into a standby equity facility agreement (“Equity Facility”) with Evolution Capital Pty Ltd (“Evolution Capital”) along with its terms for the purpose of providing the Company another option to raise funds while it continues to advance IM3NY production and corporate endeavours. On 11 September 2023 Magnis issued a placement of 20 million shares with Evolution Capital as security for the obligations Magnis owes Evolution Capital under the Equity Facility, with 60 million remaining to be issued. A maximum of 80 million shares (in 4 individual placements of up to 20 million shares each) may be issued to Evolution Capital under the Equity Facility. REVIEW OF FINANCIAL POSITION LIQUIDITY AND CAPITAL RESOURCES The Group statement of cash flows shows a decrease in cash and cash equivalents for the year ended 30 June 2023 of $80,280,443 (2022: increase $20,889,367). During the year, the Group raised $26,128,108 (2022: $23,561,500) before costs via capital raisings and $NIL proceeds from options exercised (2022: 21,779,703). At year end the Group had liquid funds of $22,137,605 (2022: $100,238,244) available for future operational and investment use and borrowings of $150,631,220 (2022: $145,111,133). For a breakup of liquidity, refer to Notes 6 and Note 14(c)f for borrowing. SHARES ISSUED DURING PERIOD During the year ended 30 June 2023, the Company issued 148,846,154 Ordinary Fully Paid shares (2022: 115,050,783) raising $26,128,108 in equity before fees (2022: $45,341,203). CAPITAL EXPENDITURE Capital expenditure by the Group on plant and equipment during the year was $43,153,600 (2022: $34,105,551). GROUP PERFORMANCE Annual Net Income Consolidated loss after tax ($) 2023 72,717,606 2022 61,697,819 2021 12,032,230 2020 7,378,601 2019 5,549,553 Shareholder Returns Share price at financial year end ($) Basic loss per share (cents) Diluted loss per share (cents) 2023 0.14 6.52 6.52 2022 0.30 6.38 6.38 2021 0.26 1.41 1.41 2020 0.08 1.11 1.11 2019 0.19 0.92 0.92 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 32 ANNUAL REPORT | 2023 10 DIRECTORS’ REPORT OPERATING RESULTS FOR THE YEAR DIRECTORS’ REPORT RISK MANAGEMENT 2023 Income $ Results $ Lithium-ion battery investments 123,837 (57,927,224) Graphite exploration and development 266,936 (14,790,382) Intersegment elimination - - Income and losses before tax 390,773 (72,717,606) SUBSEQUENT EQUITY EVENT: CAPITAL RAISING On 17 July 2023, Magnis announced it had that it has received firm commitments raising $10 Million via the placement of 83,333,334 shares at $0.12 per share, which will be issued within the capacity under Listing Rule 7.1. The placement was made to local and overseas institutional fund managers along with professional and sophisticated investors. Net funds received will be used to provide working capital as well as advance all projects including the AAM Demonstration Plant and the Nachu Graphite Project. Directors participating in the placement will require shareholder approval under Listing Rule 10.11 at the next Company AGM. On 8 September 2023, Magnis announced it had that it has entered into a standby equity facility agreement (“Equity Facility”) with Evolution Capital Pty Ltd (“Evolution Capital”) along with its terms for the purpose of providing the Company another option to raise funds while it continues to advance IM3NY production and corporate endeavours. On 11 September 2023 Magnis issued a placement of 20 million shares with Evolution Capital as security for the obligations Magnis owes Evolution Capital under the Equity Facility, with 60 million remaining to be issued. A maximum of 80 million shares (in 4 individual placements of up to 20 million shares each) may be issued to Evolution Capital under the Equity Facility. REVIEW OF FINANCIAL POSITION LIQUIDITY AND CAPITAL RESOURCES The Group statement of cash flows shows a decrease in cash and cash equivalents for the year ended 30 June 2023 of $80,280,443 (2022: increase $20,889,367). During the year, the Group raised $26,128,108 (2022: $23,561,500) before costs via capital raisings and $NIL proceeds from options exercised (2022: 21,779,703). At year end the Group had liquid funds of $22,137,605 (2022: $100,238,244) available for future operational and investment use and borrowings of $150,631,220 (2022: $145,111,133). For a breakup of liquidity, refer to Notes 6 and Note 14(c)f for borrowing. SHARES ISSUED DURING PERIOD CAPITAL EXPENDITURE GROUP PERFORMANCE Annual Net Income During the year ended 30 June 2023, the Company issued 148,846,154 Ordinary Fully Paid shares (2022: 115,050,783) raising $26,128,108 in equity before fees (2022: $45,341,203). Capital expenditure by the Group on plant and equipment during the year was $43,153,600 (2022: $34,105,551). Consolidated loss after tax ($) 72,717,606 61,697,819 12,032,230 7,378,601 5,549,553 2023 2022 2021 2020 2019 Shareholder Returns Share price at financial year end ($) Basic loss per share (cents) Diluted loss per share (cents) 2023 0.14 6.52 6.52 2022 0.30 6.38 6.38 2021 0.26 1.41 1.41 2020 0.08 1.11 1.11 2019 0.19 0.92 0.92 The Board is responsible for ensuring that risks are identified, which has been delegated to the Audit & Risk Committee to be reviewed on a timely basis and that the Group’s management addresses the risks identified. Risks identified have been captured in the risk register and appropriately categorised as to likelihood and consequence and relevant mitigants noted. This register was created in consultations between the Audit & Risk Committee and management. the Risk Register, which is constantly reviewed and updated, Management and staff operate under numerous policies in their day-to-day operations which are designed to assist in reducing the identified risks. The Board strategically reviews operational activities and conveys to management as well as shareholders its objectives and reports on progress against those objectives. The Board approves operating and capital budgets and at its meetings monitors actual expenditure against those budgets. The Board reviews sovereign, operating and environmental risks with management and from time-to-time external consultants provide reports on its practices. The prior year saw a number of initiatives begun that straddled this, in particular the engagement of IBIS to perform a Vendor ESG Audit, then towards the end of the year a proposal was approved by the Health Safety & Sustainability Committee to appoint. The Board assesses political and sovereign risks relating to its international assets by monitoring local media and politics. Group representatives liaise with all relevant levels of Government to maintain awareness as to matters that may affect the Company. Mr. Tsegas, the Company’s resident director assists by monitoring and with the assistance of local management helps reduce sovereign risks for its Tanzanian assets and the management of those. Also, our US based directors Ms Dajani and Hoshi Daruwalla keep the Board informed of developments and assisted the Board to address any emerging risks. It was felt with the increased focus on the US that Hoshi Daruwalla should become more involved, so he was towards the end of the reporting period appointed as MD(USA) and in so doing take a more hands on approach and better able to address risks more directly. One key matter was the sourcing of the LOI for the AAM plant site which would utilize some of the beneficial incentives offered by the state and local communities where it is to be located. The other Committees have specific responsibilities for making recommendations for adoption, in the areas appropriate to their Charters. Numerous risks are associated with the Company’s businesses, failing to keep pace with technological advancements, capital requirements, and growing competition makes the Company’s activities risky concerning its battery manufacturing investments. Likewise, the realisation of the project including processing, from its Nachu Graphite Project will be very capital intensive. The degree of success depends on numerous factors, including negotiating suitable commercial off-take agreements, funding, sovereign risks, relevant commodity prices, the quality and scale of the resource, and commercial partnerships to manage these operations. In balancing and managing these diverse risks, will provide substantial rewards for investors that compensate for the level of risk inherent to projects of this nature. Magnis from a resource and technological perspective is positioned in the lithium-ion battery space, as such it benefits from tailwinds of political, technical, and economic changes that are focusing on that. These forces, in particular the economic, are increasingly embracing electrical power together with other renewable energy strategies. There is an international consensus to reduce global carbon emissions. Not surprisingly, this has coincided with an increased level of ‘green’ investment interest and technological achievements that support a paradigm shift from the dominant reliance on fossil fuels last century. The Board considers Magnis well-positioned to capitalise on the broader macro-economic changes. Furthermore, the Group continues to access funds through the capital markets to fund its business needs and strategic goals and intends to do so until it is self-sustaining through revenue. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 10 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 11 33 DIRECTORS’ REPORT SIGNIFICANT CHANGES IN STATE OF AFFAIRS iM3NY has been delayed in achieving any material sales due to the demand in the US fostered by the Biden Administrations IRA initiatives causing over demand on the resources of certifies such that its batteries only received certification towards the end of the financial year thus preventing any meaningful sales even though the fit out of the plant was substantially completed early in the financial year. As the construction of the resettlement village has largely been completed the next step is to actually resettle the people that are currently located on the proposed mine site and before the mining can commence the Framework Agreement which is almost complete needs to be signed off and executed by the Tanzanian Government. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s exploration activities in Tanzania are subject to environmental regulations and guidelines in the licenced areas. Failure to meet environmental conditions attaching to the group’s mineral tenements could lead to forfeiture of the tenements. No environmental breaches have occurred or have been notified by any government agencies during the year ended 30 June 2023. The Vendor ESG audit conducted at the end of the prior reporting period did not reveal any concerning gaps in respect to this or any other areas covered by the audit, specifically noting the positives arising from the Group’s community engagement. The New York lithium-ion battery plant is also subject to Environmental and Planning Regulations from various government authorities, which are being strictly adhered to by iM3NY. DIRECTORS MEETINGS The number of Directors meetings held (including meetings of committees of Directors) and the number of meetings attended by each of the Directors of the Company during the financial year are illustrated in the table below: Directors Meeting Audit & Risk Committee A B A B Nominations & Remuneration Committee B A Health, Safety & Sustainability Committee A B Number of meetings attended: F. Poullas P. Tsegas M. Siva M.E. Dajani* C. Bibby H. Daruwalla* G. Gunesekera ^ 13 13 11 13 13 13 13 13 9 9 7 13 13 13 - - - 1 5 4 5 - - - 0 5 3 5 - - 4 5 5 5 1 - - 4 1 4 3 1 4 4 3 3 - 1 4 1 3 2 3 - 0 4 Notes: A. Number of meetings held during the year whilst the director held office. B. Number of meetings attended. * Hoshi Daruwalla and Mona Dajani swapped Committees early in FY23 with Mona Dajani moving to the Health Safety & Sustainability Committee from the Audit & Risk Committee. ^ as noted below Giles Gunesekera took over as Chair of the Nomination and Remuneration Committee when Mugunthan Siva resigned in April 2023. The Audit & Risk Committee initially comprised C Bibby (Chair), M.E. Dajani and G. Gunasekera, this changed early in the financial year and is now composed of C. Bibby (Chair) G. Gunesekera and H Daruwalla. The Nominations & Remuneration Committee initially comprised M. Siva (Chair), M.E. Dajani, H Daruwalla, C. Bibby this has changed from April 2023 to G. Gunesekera (Chair), M.E. Dajani, C. Bibby, and H. Daruwalla The Health, Safety & Sustainability Committee initially comprised of G. Gunesekera (Chair), F. Poullas, P. Tsegas, M. Siva and H. Daruwalla. This then changed early in the financial year to G. Gunesekera (Chair), F. Poullas, P. Tsegas, M. Siva (who resigned in April 2023 and wasn’t replaced) and M.E. Dajani. DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for Directors and executives. REMUNERATION POLICY The Board recognises that the performance of the Group depends upon the quality of its Directors and executives. To achieve its operating and financial activities the Group must attract, motivate, and retain highly skilled Directors and The Charter of the Remuneration and Nominations Committee, recently updated ensures that the Committee sets appropriate remuneration, goals and STI and LTI structures and following that submits its recommendation for any changes to the Board for its consideration, which it did prior to the end of the financial year, and which was approved by the board. As yet that has not been implemented. All remuneration paid to Directors and executives is valued at the cost to the Group and executives. expensed. The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities and where additional work is required a rate has been set and approved by the board. The Board determines payments to the Executive Directors (namely Peter Tsegas and Frank Poullas) and reviews their remuneration annually, based on market practice and their duties and accountability. The current maximum aggregate of Non-Executive Directors fees payable is $650,000; having been approved by shareholders at the Company’s Annual General Meeting held on 17 November 2017. Presently, Non-executive Directors receive annual fees of between $65,000 to $70,000, The Managing Director (USA) US$290,000 net of taxes and superannuation (referred to in the USA as a 401 entitlement), and the Executive Chairman $120,000 plus consulting fees which are described below. An additional $5,000 per annum is paid to Directors who Chair Committees, except for the Audit and Risk Committee, where the Chair receives $15,000 per annum. Superannuation is payable under each Director’s service agreement and in accordance with the Superannuation Guarantee Charge Act (Cth). A fee per meeting has been set for participation by directors in the M&A Committee as that committee meets sporadically. DIRECTOR AND OTHER EXECUTIVE DETAILS Listed on pages 2-4 of the Directors’ Report are persons who acted as a director of the Company during the whole of the financial year or resigned during the year or were appointed since the end of the financial year. For the purposes of this report, Key Management Personnel (KMP) of the Company are those persons having authority and responsibility for planning directing and controlling the major activities of the Company, directly or indirectly, or were senior or key management employees. In addition to the Directors, the following were KMP during the financial year: • Mr. Rodney Chittenden - Project Director (from 1 September 2020) • Mr. Duncan Glasgow - Company Secretary and Group General Counsel (from 10 February 2022) • Dr. Jawahar Nerkar - Director of Battery Technologies (from 19 July 2021) • Mr. Jürgen Behrens - Chief Financial Officer (from 1 April 2020) PERFORMANCE BASED REMUNERATION The Group currently has no performance-based remuneration component built into KMP remuneration packages. As noted in the Corporate Governance Statement the Nomination & Remuneration Committee can recommend bonuses and had recommended a new Remuneration Structure to the board which had been approved, however, too late in the year to be utilised for that purpose. No bonuses were agreed to be paid, even though the CEO had a bonus potential he resigned during the year which removed any entitlement. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL (KMP) A total of $1,048,606 was paid in consultancy fees to related parties of the KMP, and Non-Executive Directors during the financial year (2022: $397,440). The consultancy and personal exertion activities and services in addition to those which are required to satisfy their roles as directors of the board and relevant committees are provided under commercial terms on arm’s length basis and on terms better than would be obtained by the company from independent third parties with the same or similar skill sets to those of the directors providing those activities and services. For example, Hoshi Daruwalla, before he became an executive director invoiced the company at a rate that was in excess of 10% lower than he would be charged out by his consulting company to other non-associated entities. Claire Bibby applied her extensive experience as a senior lawyer and coach to assist the company address matters that were outside her usual director’s duties, in particular attending meetings held at times to accommodate the group’s diverse business locations. The same applies for Giles Gunekesera as he provided invaluable ESG input to assist with securing the Offtake agreement with the Leading International EV automotive manufacturer. The M&A Committee which was constituted in January 2023 and comprised Hoshi Daruwalla (as Chair), Claire Bibby and Giles Gunekesera met on 4 occasions formally and on numerous other occasions over the first few months of calendar 2023. The Committee members received an amount per formal meeting, otherwise they recorded the additional times that they worked on matters relevant to the charter of the M&A Committee and charged again at a discounted arm’s length basis. The details of these additional activities and service costs are disclosed in detail under Notes 24 and 25. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 34 12 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 13 ANNUAL REPORT | 2023 DIRECTORS’ REPORT SIGNIFICANT CHANGES IN STATE OF AFFAIRS iM3NY has been delayed in achieving any material sales due to the demand in the US fostered by the Biden Administrations IRA initiatives causing over demand on the resources of certifies such that its batteries only received certification towards the end of the financial year thus preventing any meaningful sales even though the fit out of the plant was substantially completed early in the financial year. As the construction of the resettlement village has largely been completed the next step is to actually resettle the people that are currently located on the proposed mine site and before the mining can commence the Framework Agreement which is almost complete needs to be signed off and executed by the Tanzanian Government. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s exploration activities in Tanzania are subject to environmental regulations and guidelines in the licenced areas. Failure to meet environmental conditions attaching to the group’s mineral tenements could lead to forfeiture of the tenements. No environmental breaches have occurred or have been notified by any government agencies during the year ended 30 June 2023. The Vendor ESG audit conducted at the end of the prior reporting period did not reveal any concerning gaps in respect to this or any other areas covered by the audit, specifically noting the positives arising from the Group’s community engagement. The New York lithium-ion battery plant is also subject to Environmental and Planning Regulations from various government authorities, which are being strictly adhered to by iM3NY. DIRECTORS MEETINGS The number of Directors meetings held (including meetings of committees of Directors) and the number of meetings attended by each of the Directors of the Company during the financial year are illustrated in the table below: Directors Meeting Audit & Risk Committee Nominations Health, Safety & & Remuneration Committee Sustainability Committee A B A B A B A B Number of meetings attended: F. Poullas P. Tsegas M. Siva M.E. Dajani* C. Bibby H. Daruwalla* G. Gunesekera ^ 13 13 11 13 13 13 13 13 9 9 7 13 13 13 - - - 1 5 4 5 - - - 0 5 3 5 - - 4 5 5 5 1 - - 4 1 4 3 1 4 4 3 3 - 1 4 1 3 2 3 - 0 4 Notes: A. Number of meetings held during the year whilst the director held office. B. Number of meetings attended. * Hoshi Daruwalla and Mona Dajani swapped Committees early in FY23 with Mona Dajani moving to the Health Safety & Sustainability Committee ^ as noted below Giles Gunesekera took over as Chair of the Nomination and Remuneration Committee when Mugunthan Siva resigned in April from the Audit & Risk Committee. 2023. The Audit & Risk Committee initially comprised C Bibby (Chair), M.E. Dajani and G. Gunasekera, this changed early in the financial year and is now composed of C. Bibby (Chair) G. Gunesekera and H Daruwalla. The Nominations & Remuneration Committee initially comprised M. Siva (Chair), M.E. Dajani, H Daruwalla, C. Bibby this has changed from April 2023 to G. Gunesekera (Chair), M.E. Dajani, C. Bibby, and H. Daruwalla The Health, Safety & Sustainability Committee initially comprised of G. Gunesekera (Chair), F. Poullas, P. Tsegas, M. Siva and H. Daruwalla. This then changed early in the financial year to G. Gunesekera (Chair), F. Poullas, P. Tsegas, M. Siva (who resigned in April 2023 and wasn’t replaced) and M.E. Dajani. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 12 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for Directors and executives. REMUNERATION POLICY The Board recognises that the performance of the Group depends upon the quality of its Directors and executives. To achieve its operating and financial activities the Group must attract, motivate, and retain highly skilled Directors and executives. The Charter of the Remuneration and Nominations Committee, recently updated ensures that the Committee sets appropriate remuneration, goals and STI and LTI structures and following that submits its recommendation for any changes to the Board for its consideration, which it did prior to the end of the financial year, and which was approved by the board. As yet that has not been implemented. All remuneration paid to Directors and executives is valued at the cost to the Group and expensed. The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities and where additional work is required a rate has been set and approved by the board. The Board determines payments to the Executive Directors (namely Peter Tsegas and Frank Poullas) and reviews their remuneration annually, based on market practice and their duties and accountability. The current maximum aggregate of Non-Executive Directors fees payable is $650,000; having been approved by shareholders at the Company’s Annual General Meeting held on 17 November 2017. Presently, Non-executive Directors receive annual fees of between $65,000 to $70,000, The Managing Director (USA) US$290,000 net of taxes and superannuation (referred to in the USA as a 401 entitlement), and the Executive Chairman $120,000 plus consulting fees which are described below. An additional $5,000 per annum is paid to Directors who Chair Committees, except for the Audit and Risk Committee, where the Chair receives $15,000 per annum. Superannuation is payable under each Director’s service agreement and in accordance with the Superannuation Guarantee Charge Act (Cth). A fee per meeting has been set for participation by directors in the M&A Committee as that committee meets sporadically. DIRECTOR AND OTHER EXECUTIVE DETAILS Listed on pages 2-4 of the Directors’ Report are persons who acted as a director of the Company during the whole of the financial year or resigned during the year or were appointed since the end of the financial year. For the purposes of this report, Key Management Personnel (KMP) of the Company are those persons having authority and responsibility for planning directing and controlling the major activities of the Company, directly or indirectly, or were senior or key management employees. In addition to the Directors, the following were KMP during the financial year: • Mr. Rodney Chittenden - Project Director (from 1 September 2020) • Mr. Duncan Glasgow - Company Secretary and Group General Counsel (from 10 February 2022) • Dr. Jawahar Nerkar - Director of Battery Technologies (from 19 July 2021) • Mr. Jürgen Behrens - Chief Financial Officer (from 1 April 2020) PERFORMANCE BASED REMUNERATION The Group currently has no performance-based remuneration component built into KMP remuneration packages. As noted in the Corporate Governance Statement the Nomination & Remuneration Committee can recommend bonuses and had recommended a new Remuneration Structure to the board which had been approved, however, too late in the year to be utilised for that purpose. No bonuses were agreed to be paid, even though the CEO had a bonus potential he resigned during the year which removed any entitlement. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL (KMP) A total of $1,048,606 was paid in consultancy fees to related parties of the KMP, and Non-Executive Directors during the financial year (2022: $397,440). The consultancy and personal exertion activities and services in addition to those which are required to satisfy their roles as directors of the board and relevant committees are provided under commercial terms on arm’s length basis and on terms better than would be obtained by the company from independent third parties with the same or similar skill sets to those of the directors providing those activities and services. For example, Hoshi Daruwalla, before he became an executive director invoiced the company at a rate that was in excess of 10% lower than he would be charged out by his consulting company to other non-associated entities. Claire Bibby applied her extensive experience as a senior lawyer and coach to assist the company address matters that were outside her usual director’s duties, in particular attending meetings held at times to accommodate the group’s diverse business locations. The same applies for Giles Gunekesera as he provided invaluable ESG input to assist with securing the Offtake agreement with the Leading International EV automotive manufacturer. The M&A Committee which was constituted in January 2023 and comprised Hoshi Daruwalla (as Chair), Claire Bibby and Giles Gunekesera met on 4 occasions formally and on numerous other occasions over the first few months of calendar 2023. The Committee members received an amount per formal meeting, otherwise they recorded the additional times that they worked on matters relevant to the charter of the M&A Committee and charged again at a discounted arm’s length basis. The details of these additional activities and service costs are disclosed in detail under Notes 24 and 25. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 13 35 ANNUAL REPORT | 2023 DIRECTORS’ REPORT TABLE 1: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2023 DIRECTORS’ REPORT Non-Executive Directors P. Tsegas M. E. Dajani M. Siva (Resigned 7 April 2023) C. Bibby G. Gunesekera Z. Pavri (Resigned 24 Dec 2021) ** Key Management Personnel F. Poullas * H. Daruwalla (Appointed 26 May 2023) D. Taylor (Appointed 1 August 2022) R. Chittenden J. Behrens D. Glasgow Dr. J Nerkar Salary & Fees Cash Bonus Termination Benefits $ $ $ Post Employment Benefits ^ $ SBP Options # Total $ $ 65,000 65,000 52,500 85,349 56,511 - 120,000 76,005 366,667 250,000 165,000 275,000 160,000 1,740,032 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,512 8,982 6,249 - 12,000 - 23,185 25,851 17,325 25,292 16,800 (100) - - 64,900 65,000 58,012 168,000 168,000 (282,200) 262,311 233,760 (282,200) (100) 168,000 153,600 - - - - 132,500 244,005 543,452 275,851 182,325 300,292 176,800 141,776 375,200 2,257,008 TABLE 3: OPTIONS EXPIRED \ LAPSED * Fees were paid to related entities. ^ Includes superannuation and movements in employee entitlements. ** the options associated were forfeited as required under the terms of MOST. # Share Based Payments (SBP) consist of unlisted options issued in MOST. TABLE 2: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2022 Non-Executive Directors P. Tsegas M. E. Dajani M. Siva C. Bibby (Appointed 28 Jan 2022) G. Gunesekera (Appointed 28 Jan 2022) H. Daruwalla (Appointed 31 Dec 2021) Prof. M.S. Whittingham (Resigned 31 Dec 2021) Z. Pavri ** (Resigned 24 Dec 2021) Dr. R. Petty (Resigned 17 Nov. 2021) Key Management Personnel F. Poullas * I. Nagendra R. Chittenden J. Behrens J. Rockett * D. Glasgow (Appointed 10 Feb 2022) Dr. J Nerkar (Appointed 19 July 2021) Salary & Fees Cash Bonus Termination Benefits $ $ $ Post Employment Benefits ^ $ SBP Options # Total $ $ 65,000 65,000 70,206 33,420 46,258 35,192 35,000 33,741 31,358 120,000 145,165 145,833 151,667 127,600 105,982 144,920 1,356,342 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,020 3,342 4,711 - 3,520 - (4,225) 282,200 282,200 - - - (2,770) 282,200 60,775 347,200 359,426 36,762 50,969 35,192 32,230 319,461 31,358 12,000 (4,225) 127,775 - - 15,167 - 10,002 14,492 47,200 23,600 23,600 - - 11,800 192,365 169,433 190,434 127,600 115,984 171,212 70,254 941,580 2,368,176 * Fees were paid to related entities. ^ Includes superannuation and movements in employee entitlements. ** the options associated were forfeited as required under the terms of MOST. # Share Based Payments (SBP) consist of unlisted options issued in MOST. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 36 ANNUAL REPORT | 2023 14 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 15 COMPENSATION SHARES AND OPTIONS GRANTED AND VESTED During the financial year, the following share-based payments were awarded, vested, exercised, or lapsed: TABLE 1: OPTIONS AWARDED Grant Date and Vesting Date Expiry Date 31-Jul-2022 31-Jul-2025 7-Dec-2022 7-Dec-2025 19-May-2023 18-May-2026 Grant Date Fair Value $ 0.153600 0.084000 0.055600 Number 1,000,000 6,000,000 10,000,000 17,000,000 Original Exercise Price of Option Fair Value Expense under AASB 2 $ 0.63 0.80 0.50 $ 153,600 504,000 556,000 1,213,600 0.07139 WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED: TABLE 2: OPTIONS EXERCISED Grant Date and Vesting Date Expiry Date N\A Grant Date Fair Value $ Number Original Exercise Price of Option $ Fair Value Expense under AASB 2 $ Grant Date and Vesting Date Expiry Date Grant Date Fair Value $ 26-Nov-2019 25-Nov-2021 31-Oct-22 23-Nov-24 0.000100 0.141100 Number 2,000,000 2,000,000 4,000,000 Original Exercise Price of Option Fair Value Expense under AASB 2 $ 0.70 0.70 $ 200 282,200 282,400 COMPENSATION SHARES AND RIGHTS GRANTED AND VESTED During the financial year, the following rights-based payments were awarded, vested, converted, or lapsed: TABLE 4: PERFORMANCE RIGHTS AWARDED Grant Date and Vesting Date Expiry Date Grant Date Fair Value Number Original Exercise Price of Right Fair Value Expense under AASB 2 n\a n\a WEIGHTED AVERAGE FAIR VALUE OF RIGHTS GRANTED: 0.00000 TABLE 5: PERFORMANCE RIGHTS CONVERTED Grant Date and Vesting Date Expiry Date Grant Date Fair Value Number Original Exercise Price of Right Fair Value Expense under AASB 2 $ - $ - $ - n\a n\a TABLE 6: PERFORMANCE RIGHTS LAPSED n\a n\a $ 0.00 $ 0.00 $ 0.00 - - - - - $ - $ $ - - - - Grant Date and Vesting Date Expiry Date Grant Date Fair Value Number Original Exercise Price of Right Fair Value Expense under AASB 2 $ 0.63 0.80 0.50 $ 153,600 504,000 556,000 1,213,600 0.07139 Original Exercise Price of Option Fair Value Expense under AASB 2 TABLE 2: OPTIONS EXERCISED WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED: DIRECTORS’ REPORT COMPENSATION SHARES AND OPTIONS GRANTED AND VESTED During the financial year, the following share-based payments were awarded, vested, exercised, or lapsed: TABLE 1: OPTIONS AWARDED Grant Date and Vesting Date Expiry Date 31-Jul-2022 31-Jul-2025 7-Dec-2022 7-Dec-2025 19-May-2023 18-May-2026 Grant Date Fair Value $ 0.153600 0.084000 0.055600 Number 1,000,000 6,000,000 10,000,000 17,000,000 DIRECTORS’ REPORT TABLE 1: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2023 Salary & Fees Cash Bonus Termination Benefits Post Employment Benefits ^ SBP Options # Total $ $ $ $ $ $ Z. Pavri (Resigned 24 Dec 2021) ** - (282,200) (282,200) * Fees were paid to related entities. ** the options associated were forfeited as required under the terms of MOST. ^ Includes superannuation and movements in employee entitlements. # Share Based Payments (SBP) consist of unlisted options issued in MOST. TABLE 2: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2022 Salary & Fees Cash Bonus Termination Benefits Post Employment Benefits ^ SBP Options # Total $ $ $ $ $ $ Non-Executive Directors P. Tsegas M. E. Dajani C. Bibby G. Gunesekera M. Siva (Resigned 7 April 2023) Key Management Personnel F. Poullas * H. Daruwalla (Appointed 26 May 2023) D. Taylor (Appointed 1 August 2022) R. Chittenden J. Behrens D. Glasgow Dr. J Nerkar Non-Executive Directors P. Tsegas M. E. Dajani M. Siva C. Bibby (Appointed 28 Jan 2022) G. Gunesekera (Appointed 28 Jan 2022) H. Daruwalla (Appointed 31 Dec 2021) Prof. M.S. Whittingham (Resigned 31 Dec 2021) Z. Pavri ** (Resigned 24 Dec 2021) Dr. R. Petty (Resigned 17 Nov. 2021) Key Management Personnel F. Poullas * I. Nagendra R. Chittenden J. Behrens J. Rockett * D. Glasgow (Appointed 10 Feb 2022) Dr. J Nerkar (Appointed 19 July 2021) 65,000 65,000 52,500 85,349 56,511 - 120,000 76,005 366,667 250,000 165,000 275,000 160,000 1,740,032 65,000 65,000 70,206 33,420 46,258 35,192 35,000 33,741 31,358 120,000 145,165 145,833 151,667 127,600 105,982 144,920 1,356,342 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (100) - - 168,000 168,000 (100) 168,000 153,600 - - 5,512 8,982 6,249 12,000 - 23,185 25,851 17,325 25,292 16,800 - - - - - - - - (4,225) 282,200 282,200 7,020 3,342 4,711 (2,770) 3,520 282,200 47,200 23,600 23,600 11,800 15,167 10,002 14,492 - - - - - - - - - 64,900 65,000 58,012 262,311 233,760 132,500 244,005 543,452 275,851 182,325 300,292 176,800 60,775 347,200 359,426 36,762 50,969 35,192 32,230 319,461 31,358 192,365 169,433 190,434 127,600 115,984 171,212 70,254 941,580 2,368,176 Grant Date and Vesting Date N\A Expiry Date Grant Date Fair Value Number Original Exercise Price of Option $ $ Fair Value Expense under AASB 2 $ 141,776 375,200 2,257,008 TABLE 3: OPTIONS EXPIRED \ LAPSED Grant Date and Vesting Date Expiry Date Grant Date Fair Value 26-Nov-2019 25-Nov-2021 31-Oct-22 23-Nov-24 $ 0.000100 0.141100 Number 2,000,000 2,000,000 4,000,000 Original Exercise Price of Option $ 0.70 0.70 Fair Value Expense under AASB 2 $ 200 282,200 282,400 COMPENSATION SHARES AND RIGHTS GRANTED AND VESTED During the financial year, the following rights-based payments were awarded, vested, converted, or lapsed: TABLE 4: PERFORMANCE RIGHTS AWARDED Grant Date and Vesting Date Expiry Date Grant Date Fair Value n\a n\a $ - Number - Original Exercise Price of Right Fair Value Expense under AASB 2 $ 0.00 $ - WEIGHTED AVERAGE FAIR VALUE OF RIGHTS GRANTED: 0.00000 TABLE 5: PERFORMANCE RIGHTS CONVERTED Grant Date and Vesting Date Expiry Date Grant Date Fair Value Number Original Exercise Price of Right Fair Value Expense under AASB 2 12,000 (4,225) 127,775 n\a n\a $ - $ 0.00 - - $ - - TABLE 6: PERFORMANCE RIGHTS LAPSED Grant Date and Vesting Date Expiry Date Grant Date Fair Value Number Original Exercise Price of Right Fair Value Expense under AASB 2 * Fees were paid to related entities. ** the options associated were forfeited as required under the terms of MOST. ^ Includes superannuation and movements in employee entitlements. # Share Based Payments (SBP) consist of unlisted options issued in MOST. n\a n\a $ - $ 0.00 - - MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 14 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 $ - - 15 37 DIRECTORS’ REPORT COMPANY PERFORMANCE, SHAREHOLDER WEALTH AND DIRECTOR AND EXECUTIVE REMUNERATION In accordance with the remuneration policy noted above, the Group adopted at the end of the financial year a new remuneration framework which is designed to achieve the following principles in its remuneration framework: • competitive rewards - to attract high calibre executives. • those rewards are linked to shareholder value. For executives, the Company’s intention is to position total employment costs within the relevant peer group following the outcome of the review by the external consultants engaged to benchmark the remuneration of each level of executive. There are financial measures that will be included in the assessment of both the STI and LTI components of each executive’s remuneration package once the framework is implemented. However, at this time as there is no STI or LTI component to an executive's remuneration there are no financial measures. The Nomination and Remuneration Committee considers the growth in market capitalisation an important parameter, hence the reason that performance rights were approved, and shares issued to 2 directors, please see the comments below in respect to MERT. It is the intention to include this for executives and the newly appointed executives in the future, once the new framework is implemented and where approval is required by shareholders that is received. For non-financial measures, a range of factors are considered including market position, relationship with a range of stakeholders, risk management, leadership, and team contribution. Previously the issue to MOST of 7,000,000 options as noted above and below was considered appropriate incentivisation. That was not considered appropriate by the external remuneration consultants, so is unlikely to be copied in the future. SHARE OPTION PLAN: MOST Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the Company. In accordance with the provisions of the Plan, listed Ordinary Fully Paid shares and unlisted options are held on behalf of Plan Participants by the Trustee of the Magnis Option Share Trust (‘MOST’). During the year ended 30 June 2023, 7,000,000 unlisted options (2022: 1,375,000) on similar terms and conditions were allotted to the Trust pursuant to the rules of MOST. SHARE PLAN: MEST Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the consolidated entity. In accordance with the provisions of the Plan, listed Ordinary Fully Paid shares are held on behalf of Plan Participants by the Trustee of the Magnis Employee Share Trust (‘MEST’). During the year ended 30 June 2023, NIL Ordinary Fully Paid shares (2022: NIL) were issued to the MEST, held on behalf of one Plan Participant pursuant to their employment agreement. However, during the year those rights were cancelled, pursuant to the respective terms of their grant, triggered by the only Plan Participant resigning. RIGHTS PLAN: MERT Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the consolidated entity. In accordance with the provisions of the Plan, unlisted Performance Rights are held on behalf of Plan Participants by the Trustee of the Magnis Executive Rights Trust (‘MERT’). During the year ended 30 June 2023, NIL unlisted Performance Rights (2022: NIL) were allotted to the Trust under the rights scheme. M. Siva (Resigned 7 April 2023) * ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL SHAREHOLDING The number of shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: H. Daruwalla (Appointed 26 May 2023) ~ ^ all options vest immediately and are convertible at anytime 4,000,000 4,000,000 ~ Opening balance as at appointment date * Closing balance as at resignation\termination date The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out DIRECTORS’ REPORT OPTION HOLDING below: Options over ordinary shares M. Siva (Resigned 7 April 2023) * H. Daruwalla (Appointed 26 May 2023) ~ D. Taylor (Appointed 1 August 2022) ~ F. Poullas P. Tsegas M. E. Dajani C. Bibby G. Gunesekera R. Chittenden J. Behrens D. Glasgow Dr. J Nerkar RIGHTS HOLDING below: Ordinary shares F. Poullas P. Tsegas M. E. Dajani C. Bibby G. Gunesekera ^ all options vest immediately and are convertible at anytime ~ Opening balance as at appointment date * Closing balance as at resignation\termination date 7,000,000 (2,000,000) The number of rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out Year Start Balance Granted Additions / (Disposals) (Exercised) / (Lapsed) Year End Balance 1,000,000 1,000,000 2,000,000 2,000,000 250,000 1,000,000 125,000 7,375,000 2,000,000 2,000,000 2,000,000 1,000,000 (1,000,000) (1,000,000) - - - - - - - - - - ^ - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 1,000,000 250,000 1,000,000 - 125,000 12,375,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Granted Additions / (Disposals) (Lapsed) Year Start Balance 2,000,000 2,000,000 Year End Balance ^ 2,000,000 2,000,000 - - - - - - - - - - - - - Granted Additions - Ordinary shares F. Poullas P. Tsegas M. E. Dajani M. Siva (Resigned 7 April 2023) * C. Bibby G. Gunesekera H. Daruwalla (Appointed 26 May 2023) ~ D. Taylor (Appointed 1 August 2022) ~ R. Chittenden J. Behrens D. Glasgow Dr. J Nerkar Year Start Balance 17,387,506 1,270,000 - 700,000 - - - - 860,334 950,000 - - 21,167,840 - - - - - - - - - - - - - (Disposals) - - - - - - - - - (50,000) - - (50,000) Year End Balance 17,387,506 1,270,000 - 700,000 - - - - 860,334 900,000 - - 21,117,840 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES During or since the financial year, no Director of the Company has received or become entitled to receive a benefit, other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors shown in the consolidated accounts, by reason of a contract entered into by the Company or an entity that the Company controlled or a body corporate that was related to the Company when the contract was made or when the Director received, or became entitled to receive, the benefit with: • a Director, or • a firm of which a Director is a member, or • an entity in which a Director has substantial financial interest except the usual professional fees for their services paid by the Company to: - - - - - - - - - - - - ~ Opening balance as at appointment date * Closing balance as at resignation\termination date MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 38 ANNUAL REPORT | 2023 16 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 17 DIRECTORS’ REPORT COMPANY PERFORMANCE, SHAREHOLDER WEALTH AND DIRECTOR AND EXECUTIVE REMUNERATION In accordance with the remuneration policy noted above, the Group adopted at the end of the financial year a new remuneration framework which is designed to achieve the following principles in its remuneration framework: • competitive rewards - to attract high calibre executives. • those rewards are linked to shareholder value. For executives, the Company’s intention is to position total employment costs within the relevant peer group following the outcome of the review by the external consultants engaged to benchmark the remuneration of each level of executive. There are financial measures that will be included in the assessment of both the STI and LTI components of each executive’s remuneration package once the framework is implemented. However, at this time as there is no STI or LTI component to an executive's remuneration there are no financial measures. The Nomination and Remuneration Committee considers the growth in market capitalisation an important parameter, hence the reason that performance rights were approved, and shares issued to 2 directors, please see the comments below in respect to MERT. It is the intention to include this for executives and the newly appointed executives in the future, once the new framework is implemented and where approval is required by shareholders that is received. For non-financial measures, a range of factors are considered including market position, relationship with a range of stakeholders, risk management, leadership, and team contribution. Previously the issue to MOST of 7,000,000 options as noted above and below was considered appropriate incentivisation. That was not considered appropriate by the external remuneration consultants, so is unlikely to be copied in the future. SHARE OPTION PLAN: MOST Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the Company. In accordance with the provisions of the Plan, listed Ordinary Fully Paid shares and unlisted options are held on behalf of Plan Participants by the Trustee of the Magnis Option Share Trust (‘MOST’). During the year ended 30 June 2023, 7,000,000 unlisted options (2022: 1,375,000) on similar terms and conditions were allotted to the Trust pursuant to the rules of MOST. Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the consolidated entity. In accordance with the provisions of the Plan, listed Ordinary Fully Paid shares are held on behalf of Plan Participants by the Trustee of the Magnis Employee Share Trust (‘MEST’). During the year ended 30 June 2023, NIL Ordinary Fully Paid shares (2022: NIL) were issued to the MEST, held on behalf of one Plan Participant pursuant to their employment agreement. However, during the year those rights were cancelled, pursuant to the respective terms of their grant, triggered by the only Plan Participant SHARE PLAN: MEST resigning. RIGHTS PLAN: MERT Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the consolidated entity. In accordance with the provisions of the Plan, unlisted Performance Rights are held on behalf of Plan Participants by the Trustee of the Magnis Executive Rights Trust (‘MERT’). During the year ended 30 June 2023, NIL unlisted Performance Rights (2022: NIL) were allotted to the Trust under the rights scheme. ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL SHAREHOLDING Ordinary shares F. Poullas P. Tsegas M. E. Dajani C. Bibby G. Gunesekera R. Chittenden J. Behrens D. Glasgow Dr. J Nerkar M. Siva (Resigned 7 April 2023) * H. Daruwalla (Appointed 26 May 2023) ~ D. Taylor (Appointed 1 August 2022) ~ Granted Additions (Disposals) Year Start Balance 17,387,506 1,270,000 700,000 - - - - - - - 860,334 950,000 - - - - - - - - - - - - - Year End Balance 17,387,506 1,270,000 700,000 - - - - - - - - - - - - - - - - - - (50,000) 860,334 900,000 - - - - - - - - - - - - - ~ Opening balance as at appointment date * Closing balance as at resignation\termination date 21,167,840 (50,000) 21,117,840 DIRECTORS’ REPORT OPTION HOLDING The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Options over ordinary shares Year Start Balance F. Poullas P. Tsegas M. E. Dajani M. Siva (Resigned 7 April 2023) * C. Bibby G. Gunesekera H. Daruwalla (Appointed 26 May 2023) ~ D. Taylor (Appointed 1 August 2022) ~ R. Chittenden J. Behrens D. Glasgow Dr. J Nerkar 1,000,000 1,000,000 2,000,000 2,000,000 - - - - 250,000 1,000,000 - 125,000 7,375,000 Granted - - - - 2,000,000 2,000,000 2,000,000 1,000,000 - - - - 7,000,000 Additions / (Disposals) (Exercised) / (Lapsed) - - - - - - - - - - - - - (1,000,000) (1,000,000) - - - - - - - - - - (2,000,000) Year End Balance ^ - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 1,000,000 250,000 1,000,000 - 125,000 12,375,000 ^ all options vest immediately and are convertible at anytime ~ Opening balance as at appointment date * Closing balance as at resignation\termination date RIGHTS HOLDING The number of rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Ordinary shares F. Poullas P. Tsegas M. E. Dajani M. Siva (Resigned 7 April 2023) * C. Bibby G. Gunesekera H. Daruwalla (Appointed 26 May 2023) ~ Year Start Balance 2,000,000 2,000,000 - - - - - 4,000,000 Granted Additions / (Disposals) (Lapsed) - - - - - - - - - - - - - - - - - - - - - - - - Year End Balance ^ 2,000,000 2,000,000 - - - - - 4,000,000 The number of shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: ^ all options vest immediately and are convertible at anytime ~ Opening balance as at appointment date * Closing balance as at resignation\termination date OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES During or since the financial year, no Director of the Company has received or become entitled to receive a benefit, other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors shown in the consolidated accounts, by reason of a contract entered into by the Company or an entity that the Company controlled or a body corporate that was related to the Company when the contract was made or when the Director received, or became entitled to receive, the benefit with: • a Director, or • a firm of which a Director is a member, or • an entity in which a Director has substantial financial interest except the usual professional fees for their services paid by the Company to: MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 16 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 17 39 DIRECTORS’ REPORT Identity of Related Party Nature of Relationship Strong Solutions Pty Ltd Peter Tsegas Claire Bibby Pty Ltd Pillsbury Winthrop Shaw Pittman LLP Mona Dajani, Esq. Global Impact Initiative Pty Ltd The Gunesekera Trust Yatha Enterprises LLC AmeriAnode Inc Mr. Frank Poullas is a related party of Strong Solutions Pty Ltd and a Director of Magnis Energy Technologies Ltd Peter Tsegas is a Non- executive Director of Magnis Energy Technologies Ltd Claire Bibby is a related party of Claire Bibby Pty Ltd and a Non-executive Director of Magnis Energy Technologies Ltd Mona Dajani was a related party of Pillsbury Winthrop Shaw Pittman LLP and a Non- executive Director of Magnis Energy Technologies Ltd Mona Dajani is a related party of Mona Dajani, Esq. and a Non-executive Director of Magnis Energy Technologies Ltd Giles Gunesekera is a related party of Global Impact Initiative Pty Ltd and Non-executive Director of Magnis Energy Technologies Ltd Giles Gunesekera is a related party of the Gunesekera Trust as well as a Non-executive Director of Magnis Energy Technologies Ltd Hoshi Daruwalla is a related party of Yatha Enterprises LLC and an Executive Director of Magnis Energy Technologies Ltd Hoshi Daruwalla is a related party of AmeriAnode Inc and an Executive Director of Magnis Energy Technologies Ltd Terms & Conditions of Transaction Normal commercial terms Normal commercial terms Normal commercial terms Type of Transaction Consulting fees and IT Services Aggregate Amount 2023 $ 223,300 2022 $ 215,600 220,492 133,900 Consulting fees (21,044) 1,914 Consulting fees 72,600 Normal commercial terms Consulting fees 16,799 Normal commercial terms Consulting fees 117,092 - - - Normal commercial terms Consulting Fees 122,600 11,550 Normal commercial terms Consulting Fees 30,800 - Normal commercial terms Consulting Fees 268,068 34,476 Number of ordinary shares under option Class of shares Conversion price of Expiry date of Normal commercial terms Consulting Fees (2,101) - 2023 REMUNERATION REPORT The Remuneration Report received positive shareholder support from members greater than the 75% threshold at the last Annual General Meeting. MERT right. The holders of these MERT rights do not have the right, by virtue of the MERT right, to participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme. No voting rights are attached to the During the 2023 financial year, there were Nil (2022: 1,500,000) shares issued because of converting of rights. 1,048,606 397,440 WEIGHTED AVERAGE REMAINING LIFE OF RIGHTS: 8.8896 years This concludes the remuneration report, which has been audited. During or since the financial year, the Company has paid premiums insuring all the Directors and Officers of Magnis Energy MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 40 ANNUAL REPORT | 2023 18 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 19 DIRECTORS’ REPORT SHARES UNDER OPTION Details of unissued shares under option as at 30 June 2023 in Magnis Energy Technologies Ltd are: Number of ordinary shares under option Class of shares Exercise price of Expiry date of (cid:27)(cid:31)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24) (cid:27)(cid:31)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:18)(cid:27)(cid:31)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24) (cid:28)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:26)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:18)(cid:27)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:30)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:26)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) 79,425,000 (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) option $ (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:31)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:32)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:31)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:28)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:30)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:30)(cid:27)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:32)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) 0.517000 option (cid:26)(cid:32)(cid:20)(cid:25)(cid:24)(cid:20)(cid:26)(cid:24)(cid:26)(cid:27) (cid:26)(cid:32)(cid:20)(cid:25)(cid:24)(cid:20)(cid:26)(cid:24)(cid:26)(cid:27) (cid:24)(cid:33)(cid:20)(cid:25)(cid:26)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:26)(cid:29)(cid:20)(cid:25)(cid:25)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:26)(cid:29)(cid:20)(cid:25)(cid:25)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:26)(cid:29)(cid:20)(cid:25)(cid:25)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:24)(cid:31)(cid:20)(cid:25)(cid:26)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:24)(cid:27)(cid:20)(cid:24)(cid:31)(cid:20)(cid:26)(cid:24)(cid:26)(cid:29) (cid:24)(cid:31)(cid:20)(cid:25)(cid:26)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:25)(cid:32)(cid:20)(cid:24)(cid:29)(cid:20)(cid:26)(cid:24)(cid:26)(cid:30) (cid:25)(cid:32)(cid:20)(cid:24)(cid:29)(cid:20)(cid:26)(cid:24)(cid:26)(cid:30) WEIGHTED AVERAGE REMAINING LIFE OF OPTIONS: 2.1360 years WEIGHTED AVERAGE EXERCISE PRICE The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme. No voting rights are attached to the options. During the 2023 financial year, there were Nil (2022: 43,559,405) shares issued because of exercising of options. PERFORMANCE RIGHTS Details of performance rights as at 30 June 2023 in Magnis Energy Technologies Ltd are: 4,000,000 4,000,000 Ordinary WEIGHTED AVERAGE CONVERSION PRICE right n\a right $ 0.00 0.00 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has agreed to indemnify all the directors and executive officers for any breach of laws by the Company for which they may be held personally liable, except where there is a lack of good faith. The agreement provides for the Company to pay liabilities or legal expenses to the extent permitted by law. Technologies Ltd against costs incurred in defending proceedings for conduct other than: (a) (b) a willful breach of duty a contravention of sections 182 or 183 of the Corporations Act, 2001 as permitted by section 199B of the Corporations Act, 2001. The Company’s insurance contracts prohibit the public disclosure of their terms and conditions, including the cost of the premiums. DIRECTORS’ REPORT Identity of Related Party Nature of Relationship Terms & Conditions of Transaction Type of Transaction Aggregate Amount 2023 $ 2022 $ Strong Solutions Pty Ltd Mr. Frank Poullas is a related Normal Consulting fees 223,300 215,600 party of Strong Solutions Pty Ltd commercial terms and and a Director of Magnis Energy Technologies Ltd IT Services 220,492 133,900 Peter Tsegas Peter Tsegas is a Non- Normal Consulting fees (21,044) 1,914 executive Director of Magnis commercial terms Energy Technologies Ltd Claire Bibby Pty Ltd Normal commercial terms Consulting fees 72,600 Pillsbury Winthrop Shaw Mona Dajani was a related Normal Consulting fees 16,799 Pittman LLP commercial terms Mona Dajani, Esq. Mona Dajani is a related party Normal Consulting fees 117,092 commercial terms DIRECTORS’ REPORT SHARES UNDER OPTION Details of unissued shares under option as at 30 June 2023 in Magnis Energy Technologies Ltd are: Number of ordinary shares under option Class of shares Exercise price of option Expiry date of option (cid:27)(cid:31)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24) (cid:27)(cid:31)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:18)(cid:27)(cid:31)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24) (cid:28)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:26)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:18)(cid:27)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:30)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:25)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) (cid:26)(cid:29)(cid:18)(cid:24)(cid:24)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) 79,425,000 (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) (cid:2)(cid:14)(cid:6)(cid:9)(cid:11)(cid:4)(cid:14)(cid:17) WEIGHTED AVERAGE EXERCISE PRICE $ (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:31)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:32)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:31)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:28)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:30)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:30)(cid:27)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:32)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) (cid:24)(cid:19)(cid:29)(cid:24)(cid:24)(cid:24)(cid:24)(cid:24) 0.517000 (cid:26)(cid:32)(cid:20)(cid:25)(cid:24)(cid:20)(cid:26)(cid:24)(cid:26)(cid:27) (cid:26)(cid:32)(cid:20)(cid:25)(cid:24)(cid:20)(cid:26)(cid:24)(cid:26)(cid:27) (cid:24)(cid:33)(cid:20)(cid:25)(cid:26)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:26)(cid:29)(cid:20)(cid:25)(cid:25)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:26)(cid:29)(cid:20)(cid:25)(cid:25)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:26)(cid:29)(cid:20)(cid:25)(cid:25)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:24)(cid:31)(cid:20)(cid:25)(cid:26)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:24)(cid:27)(cid:20)(cid:24)(cid:31)(cid:20)(cid:26)(cid:24)(cid:26)(cid:29) (cid:24)(cid:31)(cid:20)(cid:25)(cid:26)(cid:20)(cid:26)(cid:24)(cid:26)(cid:28) (cid:25)(cid:32)(cid:20)(cid:24)(cid:29)(cid:20)(cid:26)(cid:24)(cid:26)(cid:30) (cid:25)(cid:32)(cid:20)(cid:24)(cid:29)(cid:20)(cid:26)(cid:24)(cid:26)(cid:30) - - - Global Impact Initiative Pty Giles Gunesekera is a related Normal Consulting Fees 122,600 11,550 Ltd party of Global Impact Initiative commercial terms The Gunesekera Trust Consulting Fees 30,800 - Normal commercial terms WEIGHTED AVERAGE REMAINING LIFE OF OPTIONS: 2.1360 years The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme. No voting rights are attached to the options. During the 2023 financial year, there were Nil (2022: 43,559,405) shares issued because of exercising of options. PERFORMANCE RIGHTS Details of performance rights as at 30 June 2023 in Magnis Energy Technologies Ltd are: Claire Bibby is a related party of Claire Bibby Pty Ltd and a Non-executive Director of Magnis Energy Technologies Ltd party of Pillsbury Winthrop Shaw Pittman LLP and a Non- executive Director of Magnis Energy Technologies Ltd of Mona Dajani, Esq. and a Non-executive Director of Magnis Energy Technologies Ltd Pty Ltd and Non-executive Director of Magnis Energy Technologies Ltd Giles Gunesekera is a related party of the Gunesekera Trust as well as a Non-executive Director of Magnis Energy Technologies Ltd Yatha Enterprises LLC Hoshi Daruwalla is a related Normal Consulting Fees 268,068 34,476 Number of ordinary shares under option Class of shares 4,000,000 4,000,000 Ordinary WEIGHTED AVERAGE CONVERSION PRICE AmeriAnode Inc Hoshi Daruwalla is a related Normal Consulting Fees (2,101) - party of Yatha Enterprises LLC commercial terms and an Executive Director of Magnis Energy Technologies Ltd party of AmeriAnode Inc and an commercial terms Executive Director of Magnis Energy Technologies Ltd Expiry date of right n\a Conversion price of right $ 0.00 0.00 2023 REMUNERATION REPORT the last Annual General Meeting. The Remuneration Report received positive shareholder support from members greater than the 75% threshold at The holders of these MERT rights do not have the right, by virtue of the MERT right, to participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme. No voting rights are attached to the MERT right. During the 2023 financial year, there were Nil (2022: 1,500,000) shares issued because of converting of rights. 1,048,606 397,440 WEIGHTED AVERAGE REMAINING LIFE OF RIGHTS: 8.8896 years This concludes the remuneration report, which has been audited. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has agreed to indemnify all the directors and executive officers for any breach of laws by the Company for which they may be held personally liable, except where there is a lack of good faith. The agreement provides for the Company to pay liabilities or legal expenses to the extent permitted by law. During or since the financial year, the Company has paid premiums insuring all the Directors and Officers of Magnis Energy Technologies Ltd against costs incurred in defending proceedings for conduct other than: (a) (b) a willful breach of duty a contravention of sections 182 or 183 of the Corporations Act, 2001 as permitted by section 199B of the Corporations Act, 2001. The Company’s insurance contracts prohibit the public disclosure of their terms and conditions, including the cost of the premiums. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 18 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 19 41 DIRECTORS’ REPORT INDEMNIFICATION AND INSURANCE OF AUDITOR To the extent permitted by law, the Company has not agreed to indemnify its auditors, Hall Chadwick Melbourne Audit, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit. No payment has been made to indemnify Hall Chadwick Melbourne Audit during or since the year ended 30 June 2023. PROCEEDINGS ON BEHALF OF THE COMPANY No person or entity has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. SUBSEQUENT EVENTS Events after the reporting period or since the end of the year are outlined in Note 21 'Events After Reporting Period' to the Financial Statements. ROUNDING OF AMOUNTS The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors' Report and the Financial Statements are rounded off to the nearest dollar, unless otherwise indicated. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor excluding GST\Taxes for non-audit services provided during the financial year by the auditor are outlined below: Hall Chadwick Melbourne • • Corporate services: $28,963 Taxation services: $77,588 BDO East Africa: Dar es Salaam, Tanzania Taxation services: $1,753 • • Corporate services: $ 0.00 BDO New York, USA Taxation services: $ 0.00 • • Corporate services: $371,399 Sciarabba Walker & Company, LLP: New York, USA • Taxation services: $30,611 • Corporate services: $ 0.00 The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in Note 22 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 11O Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing, or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 42 ANNUAL REPORT | 2023 20 DIRECTORS’ REPORT INDEMNIFICATION AND INSURANCE OF AUDITOR To the extent permitted by law, the Company has not agreed to indemnify its auditors, Hall Chadwick Melbourne Audit, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit. No payment has been made to indemnify Hall Chadwick Melbourne Audit during or since the year ended 30 June 2023. PROCEEDINGS ON BEHALF OF THE COMPANY No person or entity has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Events after the reporting period or since the end of the year are outlined in Note 21 'Events After Reporting Period' to SUBSEQUENT EVENTS the Financial Statements. ROUNDING OF AMOUNTS The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors' Report and the Financial Statements are rounded off to the nearest dollar, unless otherwise indicated. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor excluding GST\Taxes for non-audit services provided during the financial year by the auditor are outlined below: Hall Chadwick Melbourne • Taxation services: $77,588 • Corporate services: $28,963 BDO East Africa: Dar es Salaam, Tanzania • Taxation services: $1,753 • Corporate services: $ 0.00 BDO New York, USA • Taxation services: $ 0.00 • Corporate services: $371,399 Sciarabba Walker & Company, LLP: New York, USA • Taxation services: $30,611 • Corporate services: $ 0.00 The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in Note 22 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: • • of the auditor; and all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity none of the services undermine the general principles relating to auditor independence as set out in APES 11O Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing, or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 20 ANNUAL REPORT | 2023 43 2 4 AUDITOR’S INDEPENDENCE DECLARATION 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 2023, 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. Anh (Steven) Nguyen Director Date: 18 October 2023 Hall Chadwick Melbourne Level 14 440 Collins Street Melbourne VIC 3000 Liability limited by a scheme approved under Professional Services Legislation. Hall Chadwick Melbourne Audit ABN 41 134 806 025 Registered Company Auditors. Level 14 440 Collins Street Melbourne VIC 3000 T: +61 3 9820 6400 Post: Locked Bag 777 Collins Street West VIC 8007 Australia www.hallchadwickmelb.com.au E: hcm@hallchadwickmelb.com.au Hall Chadwick Association - a national group of independent Chartered Accountants and Business Advisory firms. MELBOURNE SYDNEY BRISBANE ADELAIDE PERTH DARWIN 44 ANNUAL REPORT | 2023 ANNUAL REPORT | 2023 45 2 5 STATEMENT OF PROFIT & LOSS & OTHER COMPREHENSIVE INCOME STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME YEAR ENDED 30 JUNE 2023 Notes Consolidated 2023 $ 2022 $ Income Interest received Foreign exchange gain Profit on sale of fixed assets Other revenue R&D Grant Total income Expenditure Administration expenses Depreciation expense Directors’ fees Employee benefits expense Interest expense Borrowing & Loan Costs Legal and consulting expenses Cost of Production expenditure Anode Active Material (AAM) Share based payment to employees Share based payment to non-employees Exploration and evaluation expenses Total expenditure (Loss) before income tax expense Income tax expense Net (loss) for the year Net profit / (loss) for the year attributable to Owners of Magnis Energy Technologies Ltd Non-controlling Interest Net (loss) for the year Other comprehensive income/(loss) Items that will not be reclassified subsequently to profit or (loss) Change in fair value of financial assets at FVOCI Items that may be reclassified subsequently to profit or (loss) Gain / (loss) on foreign currency translation Other comprehensive income / (loss) for the year, net of tax 31 30 33 32 28(a) 28(a) 5 232,960 123,522 4,959 29,332 - 390,773 13,377,205 1,611,935 612,950 6,572,488 15,515,195 14,290,372 4,436,815 13,305,795 202,849 375,200 556,000 2,251,575 73,108,379 25,470 19,405 395,121 2 11,681 451,679 11,973,628 731,768 589,017 5,854,371 10,109,724 24,822,292 4,579,321 1,099,528 - 976,300 300,380 1,113,169 62,149,498 (72,717,606) - (72,717,606) (61,697,819) - (61,697,819) (57,073,989) (15,643,617) (72,717,606) (40,819,903) (20,877,916) (61,697,819) - - (3,753,431) (3,753,431) 2,617,977 2,617,977 Total comprehensive income / (loss) for the year, net of tax (76,471,037) (59,079,842) Total comprehensive earnings / (loss) for the year attributable to Owners of parent entity Non-controlling Interest Total comprehensive earnings / (loss) for the year attributable to (60,853,756) (15,617,281) (76,471,037) (60,076,958) 997,116 (59,079,842) Basic loss per share (cents per share) Diluted loss per share (cents per share) 23 23 (6.52) (6.52) (6.38) (6.38) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying Notes. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 46 22 ANNUAL REPORT | 2023 26 STATEMENT OF FINANCIAL POSITION STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023 As at 30 June 2023 Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Other assets - iM3NY Financial assets at FVOCI Right-of-use-assets Development assets Plant & equipment iM3NY Plant & equipment Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Lease Liability Provisions Borrowings Total current liabilities Non-current liabilities Lease Liability Borrowings Total non-current liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity Reserves Accumulated Profits/(Losses) Parent Interest - Capital and Reserves Issued Capital - Non-controlling Interest Accumulated Profits/(Losses) - Non-controlling Interest Non-controlling interests TOTAL EQUITY Notes Consolidated 2023 $ 2022 $ 6, 18(b) 7 8(a) 22,137,605 9,922,214 22,032,717 54,092,536 100,238,244 10,234,710 3,631,733 114,104,687 8(b) 9 10 11 12(a) 12(b) 13 14(a) 14(b) 14(c) 14(a) 14(c) 15(a) 17 2,495,804 15,096,142 31,049,975 8,029,704 92,984,518 107,148 149,763,291 203,855,827 15,632,853 3,025,815 472,090 4,600,000 23,730,758 30,657,582 150,631,220 181,288,802 205,019,560 (1,163,733) 13,655,704 15,096,142 30,149,281 6,170,865 49,414,529 44,343 114,530,864 228,635,551 3,646,194 386,200 176,430 1,750,000 5,958,824 31,010,410 145,111,133 176,121,543 182,080,367 46,555,184 259,137,517 15,024,976 234,105,997 17,847,208 (287,398,720) (206,510,298) (13,236,227) 45,442,907 27,716,111 (15,643,617) 12,072,494 (1,163,733) 21,990,193 (20,877,916) 1,112,277 46,555,184 The above Statement of Financial Position should be read in conjunction with the accompanying Notes. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 23 47 7 7 STATEMENT OF CHANGES IN EQUITY STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 JUNE 2023 Year ended 30 June 2023 Notes Issued Capital $ FVOCI Reserve $ Share Based Payment Reserves $ Foreign Currency Translation Accumulated (Losses) $ Reserve $ Non controlling interests $ Total Equity $ At 30 June 2022 234,105,997 5,076,057 2,910,493 9,860,658 (206,510,298) 1,112,277 46,555,184 STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2023 Previous year after tax loss Loss for the period Other comprehensive Income / (loss) Total comprehensive income / (loss) for current year Transactions with owners: Contributions of equity, net of transaction costs Contributions of equity, net of transaction costs iM3NY Share based payment (Forfeited) / to controlled entity Equity T\Fer on controlled entity share capital purchase 28(a) Share based payment (Forfeited) \ to Controlled Equity 28(a) Non-Controlled interest Reclassification from reserve - - - - 24,713,108 318,412 - - - - - - - - - - - - - - - - - - - - - - (128,800) - 1,060,000 - (1) - - 5,501,114 (2,711,813) 2,789,301 (57,073,989) (15,643,617) (72,717,606) Cash flows from operating activities (3,753,431) - (3,753,431) (3,753,431) (57,073,989) (15,643,617) (76,471,037) Payment for development assets Notes 2023 $ 2022 $ - - - - - - - - - - - 100 - - - - - (29,315,647) 29,315,647 - - 24,713,108 318,412 (128,800) - 1,060,100 - (1) Net cash used in operating activities 18(a) (58,684,323) (47,106,189) At 30 June 2023 259,137,517 5,076,057 3,841,692 6,107,227 (287,398,720) 12,072,494 (1,163,733) YEAR ENDED 30 JUNE 2022 Issued Capital $ FVOCI Reserve $ Notes Share Based Payment Reserves $ Foreign Currency Translation Accumulated (Losses) $ Reserve $ Non controlling interests $ Total Equity $ At 1 July 2021 (Restated) 169,188,699 5,076,057 46,313 7,242,681 (137,450,231) 15,220,160 59,323,679 Previous year after tax loss Loss for the period Other comprehensive income/(loss) Total comprehensive income / (loss) for current year Transactions with owners: Contributions of equity, net of transaction costs Contributions of equity, net of transaction costs iM3NY Share based payment (Forfeited) / to controlled entity 28(a) Equity T\Fer on controlled entity share capital purchase Share based payment (Forfeited) \ to Controlled Equity 28(a) Non-Controlled interest Reclassification from reserve - - - - 42,237,203 22,680,095 - - - - - - - - - - - - - - - - - - - - - - 965,180 - 1,899,000 - - - - 16,283,919 (28,871,239) (12,587,320) (40,819,903) (20,877,916) (61,697,819) 2,617,977 - - 2,617,977 2,617,977 (40,819,903) (20,877,916) (59,079,842) - - - (12,582,868) 100 3,699,957 45,937,160 Transaction costs related to loans and borrowings Net cash flows from financing activities - - - - 22,680,095 965,180 (12,582,868) Net increase/(decrease) in cash and cash equivalents Net foreign exchange differences Add opening cash and cash equivalents 1,899,100 Closing cash and cash equivalents 18(b) 22,137,605 100,238,244 (31,941,315) 31,941,315 - - - - - - - - - - - At 30 June 2022 234,105,997 5,076,057 2,910,493 9,860,658 (206,510,298) 1,112,277 46,555,184 The above Statement of Cash Flows should be read in conjunction with the accompanying Notes. The above Statement of Changes in Equity should be read in conjunction with the accompanying Notes. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 24 48 ANNUAL REPORT | 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 25 Payments to suppliers and employees Payment of exploration expenditure Payments to production Interest and other costs of finance paid Interest received Other income received R&D grant Cash flows from investing activities Acquisition of plant & equipment Acquisition of interest in associate Acquisition of interest in financial asset Proceeds from sale of property, plant, and equipment Payment of loan to related parties Net cash flows used in investing activities Cash flows from financing activities Proceeds from issues/sale of ordinary shares and options Proceeds from issues/sale of ordinary shares - iM3NY Proceeds from issues/sale of ordinary shares - iM3 PL Proceeds remaining from Conv. Note Facility Proceeds from exercise of options Capital raising expenses Proceeds from borrowings Repayment of borrowings (26,320,561) (34,129,140) (2,233,044) (1,610,732) (13,305,795) (15,468,369) 224,846 29,332 - (1,105,713) (715,088) (1,099,528) (10,091,609) 23,208 - 11,681 (43,153,600) (941,488) (4,999) 4,959 9,778,901 (34,105,551) (17,605,634) (1) 395,121 6,526 (34,316,227) (51,309,539) 26,128,108 470,124 30 2,850,000 (1,415,000) 5,520,087 - - (20,833,242) 12,720,107 (80,280,443) 2,179,804 100,238,244 25,149,000 19,505,143 - 1,750,000 21,779,703 (3,104,000) 145,111,133 (63,983,309) (26,902,575) 119,305,095 20,889,367 6,453,932 72,894,945 28 STATEMENT OF CASH FLOWS STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2023 Cash flows from operating activities Payments to suppliers and employees Payment of exploration expenditure Payment for development assets Payments to production Interest and other costs of finance paid Interest received Other income received R&D grant Notes 2023 $ 2022 $ (26,320,561) (34,129,140) (2,233,044) (1,610,732) (13,305,795) (15,468,369) 224,846 29,332 - (1,105,713) (715,088) (1,099,528) (10,091,609) 23,208 - 11,681 Net cash used in operating activities 18(a) (58,684,323) (47,106,189) Cash flows from investing activities Acquisition of plant & equipment Acquisition of interest in associate Acquisition of interest in financial asset Proceeds from sale of property, plant, and equipment Payment of loan to related parties Net cash flows used in investing activities Cash flows from financing activities Proceeds from issues/sale of ordinary shares and options Proceeds from issues/sale of ordinary shares - iM3NY Proceeds from issues/sale of ordinary shares - iM3 PL Proceeds remaining from Conv. Note Facility Proceeds from exercise of options Capital raising expenses Proceeds from borrowings Repayment of borrowings Transaction costs related to loans and borrowings Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Net foreign exchange differences Add opening cash and cash equivalents Closing cash and cash equivalents (43,153,600) (941,488) (4,999) 4,959 9,778,901 (34,105,551) (17,605,634) (1) 395,121 6,526 (34,316,227) (51,309,539) 26,128,108 470,124 30 2,850,000 - (1,415,000) 5,520,087 - (20,833,242) 12,720,107 (80,280,443) 2,179,804 100,238,244 25,149,000 19,505,143 - 1,750,000 21,779,703 (3,104,000) 145,111,133 (63,983,309) (26,902,575) 119,305,095 20,889,367 6,453,932 72,894,945 18(b) 22,137,605 100,238,244 The above Statement of Cash Flows should be read in conjunction with the accompanying Notes. ANNUAL REPORT | 2023 49 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 25 2 9 NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2023 Notes to the Financial Statements - Continued New accounting standards and interpretations (i) New and amended standards adopted by the Group The accounting policies adopted are consistent with those of the previous financial year and the Group has adopted no new or amended Australian Accounting Standards and AASB Interpretations as of 1 July 2022. Exploration and evaluation costs Exploration and evaluation expenditure is expensed directly to profit or loss when incurred. Accounting policies for the Group’s development assets are outlined in Note 11 ‘Development Assets’. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either in the principal market, or, in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value are used, maximising the use of relevant observable inputs, and minimising the use of unobservable inputs. value measurement. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Goods and services tax (GST) and/or value added tax (VAT) Revenues, expenses, and assets are recognised net of the amount of GST/VAT except: • where the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Goods and services tax (GST) and/or value added tax (VAT) - continued Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the Withholding tax and other indirect taxes are incurred on amounts of VAT recoverable from, or payable to, the taxation taxation authority. authority. 50 ANNUAL REPORT | 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 27 Notes to the Financial Statements - Continued New accounting standards and interpretations (i) New and amended standards adopted by the Group The accounting policies adopted are consistent with those of the previous financial year and the Group has adopted no new or amended Australian Accounting Standards and AASB Interpretations as of 1 July 2022. Exploration and evaluation costs Exploration and evaluation expenditure is expensed directly to profit or loss when incurred. Accounting policies for the Group’s development assets are outlined in Note 11 ‘Development Assets’. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either in the principal market, or, in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value are used, maximising the use of relevant observable inputs, and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Goods and services tax (GST) and/or value added tax (VAT) Revenues, expenses, and assets are recognised net of the amount of GST/VAT except: • where the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Goods and services tax (GST) and/or value added tax (VAT) - continued Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the taxation authority. Withholding tax and other indirect taxes are incurred on amounts of VAT recoverable from, or payable to, the taxation authority. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 27 51 Foreign currency translation Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are re-translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss. Financial statements of foreign operations The financial results and position of foreign operations whose functional currency is not Australian dollars, the Group’s presentation currency, are translated as follows: • assets and liabilities are translated at year-end exchange rates prevailing at that reporting date. • income and expenses are translated at average exchange rates for each month during the period. Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in other comprehensive income. These differences are recognised in the statement of comprehensive income in the period in which the operation is disposed. Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave when it is probable that settlement will be required. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled including related on-costs, such as workers compensation and payroll tax. Revenue recognition Interest revenue is recognised as interest accrues using the effective interest method. Contributed equity Ordinary shares are classified as equity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. Restatement of comparatives When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue, and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, that management believes to be reasonable under the circumstances. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2022 29 52 ANNUAL REPORT | 2023 Notes to the Financial Statements - Continued The resulting accounting judgements and estimates will seldom equal the related actual results. The estimate, judgements and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective Notes) within the next financial year are discussed below. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees and directors by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options is determined by an external valuer using a binomial option pricing model that uses the assumptions detailed in Note 28(g). Indirect tax receivables and liabilities The Group is subject to indirect taxes in Australia and the jurisdiction where it has foreign operations. Significant judgement is required in determining the amounts recorded as receivables for recovery of such taxes and payables for payment of such taxes. The Group is subject to an audit by a tax authority in the jurisdiction in which it operates. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The Group has adequately recorded receivables and payables for the amounts it believes will ultimately be payable. Where the final outcome of any matter is different from amounts recorded, such differences will impact the indirect tax receivables or provision in the period in which such determination is made. Fair value estimates of financial instruments The Group is required to classify all assets and liabilities, measured at fair value, using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as Level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. 3. SEGMENT INFORMATION Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team in assessing performance and in determining the allocation of resources. During the financial year, the Group continued its participation in global consortia, including ownership, to operate a lithium-ion battery Gigafactory in the USA as well as a development project in Australia. This activity is supplemented by the development and planned mining of natural flake graphite for use in various industries, including in particular batteries for storing electrical energy. Due to the infancy of its interests in the lithium-ion battery sector, the Group has determined its reportable segments for the financial year ended 30 June 2023 as follows: • lithium-ion battery investments • graphite exploration and development MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 30 53 Notes to the Financial Statements - Continued 5. INCOME TAX Current income tax Current income tax credit/(expense) Tax losses not recognised as not probable (Under)/over provision in prior year Notes to the Financial Statements - Continued 2023 Segment financial information Segment revenue Segment loss before tax Segment current assets Segment non-current assets Segment liabilities 2022 Segment financial information Segment revenue Segment loss before tax Segment current assets Segment non-current assets Segment liabilities Accounting policies Lithium-ion Battery Investment USA $ Lithium-ion Battery Investment Australia $ Graphite Exploration & Development Tanzania $ Consolidated $ 97,798 (57,927,224) 45,920,697 140,660,631 (198,608,964) 26,039 - 61,986 - - 266,936 (14,790,382) 8,109,853 9,102,660 (6,410,596) 390,773 (72,717,606) 54,092,536 149,763,291 (205,019,560) Lithium-ion Battery Investment USA $ Lithium-ion Battery Investment Australia $ Graphite Exploration & Development Tanzania $ Deferred income tax Relating to origination and reversal of temporary differences Tax losses brought to account to offset net deferred tax liability Consolidated $ Income tax credit/(expense) reported in the Statement of Comprehensive Income 395,121 (49,650,216) 93,214,411 108,249,217 (179,555,851) 22,495 - 58,092 - - 34,063 (12,047,603) 20,832,184 6,281,647 (2,524,516) 451,679 (61,697,819) 114,104,687 114,530,864 (182,080,367) The Group applies AASB 8 Operating Segments and determines its operating segments to be based on its geographical location and also by operational type. Lithium-ion battery investment refers to the Group’s ownership in planned Gigafactories via the Global Consortiums: Imperium3 Pty Ltd and Imperium3 New York Inc. Graphite exploration and development currently refers to the pre-development operation of the Nachu Graphite Project in Tanzania. The financial performance of these segments is reported to the Board on a periodical basis. The accounting standards adopted in preparing internal reports to the Board are consistent with those adopted in preparing this annual report. Operating segments are subject to risks and returns that are different to those of segments operating in other economic environments. Inter-segment transactions To avoid asymmetrical allocation within segments which management believe would be inconsistent policy, if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not allocated to segments. Segment assets and liabilities Segment assets include all assets used by a segment and consist primarily of cash and cash equivalents. Development assets, plant and equipment, and trade and other receivables. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain assets used jointly by segments are not allocated. Segment liabilities consist primarily of trade and other creditors and employee benefits. Segment assets and liabilities do not include deferred income taxes. 4. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES the deductions for the loss to be realised. No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 54 31 ANNUAL REPORT | 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 32 Consolidated 2023 $ 2022 $ 15,720,595 (19,881,329) (4,160,734) 15,541,299 (17,582,312) (2,041,013) 4,160,734 2,041,013 (74,479) 74,479 500,660 (500,660) 2023 $ 2022 $ (72,717,606) (61,697,819) 21,815,282 (223,980) (806,982) (82,755) 456,811 (1,277,047) (19,881,329) 18,509,346 (90,114) (596,151) (48,125) 3,504 430,330 (626,478) (17,582,312) - - - - - - - - - - - - - (a) Statement of Changes in Equity Deferred income tax related to items charged or credited directly to equity Share issue costs Deferred tax offset Income tax benefit reported in Equity (b) Tax Reconciliation A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting (loss) before tax At the Group’s statutory 30% tax rate (2023: 30%) Share based payment expense Movement in temporary differences Share of net P&L of associate accounted for using equity method Exploration and evaluation expense write off Non-assessable R&D offset income Deductible option issue costs Other adjustments Tax losses not brought to account Loss recoupment Income tax (expense) reported in the Statement of Comprehensive Income The benefit of these losses and temporary differences will only be obtained if: • • • the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the Group continues to comply with the condition of deductibility imposed by law; and no changes in tax legislation adversely affect the Group in realising the benefit from the deduction for the loss. At the reporting date, the Group has estimated tax losses of (refer below) available to offset against future taxable income subject to continuing to meet relevant statutory tests. Segment financial information Segment revenue Segment loss before tax Segment current assets Segment non-current assets Segment liabilities 2023 2022 Segment financial information Segment revenue Segment loss before tax Segment current assets Segment non-current assets Segment liabilities Accounting policies environments. Inter-segment transactions allocated to segments. Segment assets and liabilities Lithium-ion Battery Investment USA $ 97,798 (57,927,224) 45,920,697 140,660,631 (198,608,964) Lithium-ion Battery Investment USA $ 395,121 (49,650,216) 93,214,411 108,249,217 (179,555,851) Lithium-ion Battery Investment Australia Graphite Exploration & Development Tanzania Consolidated $ $ 26,039 61,986 266,936 (14,790,382) 8,109,853 9,102,660 (6,410,596) 390,773 (72,717,606) 54,092,536 149,763,291 (205,019,560) Lithium-ion Battery Investment Australia Graphite Exploration & Development 22,495 58,092 34,063 (12,047,603) 20,832,184 6,281,647 (2,524,516) 451,679 (61,697,819) 114,104,687 114,530,864 (182,080,367) $ - - - $ - - - The Group applies AASB 8 Operating Segments and determines its operating segments to be based on its geographical location and also by operational type. Lithium-ion battery investment refers to the Group’s ownership in planned Gigafactories via the Global Consortiums: Imperium3 Pty Ltd and Imperium3 New York Inc. Graphite exploration and development currently refers to the pre-development operation of the Nachu Graphite Project in Tanzania. The financial performance of these segments is reported to the Board on a periodical basis. The accounting standards adopted in preparing internal reports to the Board are consistent with those adopted in preparing this annual report. Operating segments are subject to risks and returns that are different to those of segments operating in other economic To avoid asymmetrical allocation within segments which management believe would be inconsistent policy, if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not Segment assets include all assets used by a segment and consist primarily of cash and cash equivalents. Development assets, plant and equipment, and trade and other receivables. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain assets used jointly by segments are not allocated. Segment liabilities consist primarily of trade and other creditors and employee benefits. Segment assets and liabilities do not include deferred income taxes. 4. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued 5. INCOME TAX Current income tax Current income tax credit/(expense) Tax losses not recognised as not probable (Under)/over provision in prior year Deferred income tax Relating to origination and reversal of temporary differences Tax losses brought to account to offset net deferred tax liability Tanzania Consolidated $ $ Income tax credit/(expense) reported in the Statement of Comprehensive Income (a) Statement of Changes in Equity Deferred income tax related to items charged or credited directly to equity Share issue costs Deferred tax offset Income tax benefit reported in Equity (b) Tax Reconciliation A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting (loss) before tax Consolidated 2023 $ 2022 $ 15,720,595 (19,881,329) (4,160,734) 15,541,299 (17,582,312) (2,041,013) 4,160,734 - 2,041,013 - - - (74,479) 74,479 - 500,660 (500,660) - 2023 $ (72,717,606) 2022 $ (61,697,819) At the Group’s statutory 30% tax rate (2023: 30%) Share based payment expense Movement in temporary differences Share of net P&L of associate accounted for using equity method Exploration and evaluation expense write off Non-assessable R&D offset income Deductible option issue costs Other adjustments Tax losses not brought to account Loss recoupment Income tax (expense) reported in the Statement of Comprehensive Income 21,815,282 (223,980) (806,982) - (82,755) - 456,811 (1,277,047) (19,881,329) - - 18,509,346 (90,114) (596,151) - (48,125) 3,504 430,330 (626,478) (17,582,312) - - The benefit of these losses and temporary differences will only be obtained if: • • • the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the loss to be realised. the Group continues to comply with the condition of deductibility imposed by law; and no changes in tax legislation adversely affect the Group in realising the benefit from the deduction for the loss. At the reporting date, the Group has estimated tax losses of (refer below) available to offset against future taxable income subject to continuing to meet relevant statutory tests. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 31 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 32 55 Notes to the Financial Statements - Continued To the extent that it does not offset a deferred tax liability, a deferred tax asset has not been recognised for these losses because it is not probable that future taxable income will be available to use against such losses. 2023 $ 38,806,164 26,706,090 174,108,098 239,620,351 Group tax losses Transferred tax losses Tax losses in foreign companies Total tax losses Accounting policies The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all temporary differences, except: • where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference, and the carry-forward of unused tax assets and unused tax losses can be used, except: • where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • when the deductible temporary differences is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be applied. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates [and tax laws] that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of financial position. Tax consolidated group The Company and its wholly owned Australian subsidiaries have elected to form a tax consolidated group from 1 July 2015, with Magnis Energy Technologies Ltd being the head entity within that group. These entities are taxed as a single entity. 6. CURRENT ASSETS - CASH AND CASH EQUIVALENTS Cash on hand Cash at bank Cash at bank – iM3NY Accounting policies Consolidated 2023 $ 16,148 3,653,977 18,467,480 22,137,605 2022 $ 814 20,074,650 80,162,780 100,238,244 For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of change in value, and bank overdrafts. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 33 56 ANNUAL REPORT | 2023 Group tax losses Transferred tax losses Tax losses in foreign companies Total tax losses Accounting policies 2023 $ 38,806,164 26,706,090 174,108,098 239,620,351 The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference, and the carry-forward of unused tax assets and unused tax losses can be used, except: • where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • when the deductible temporary differences is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be applied. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates [and tax laws] that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of financial position. Tax consolidated group single entity. 6. CURRENT ASSETS - CASH AND CASH EQUIVALENTS Cash on hand Cash at bank Cash at bank – iM3NY Accounting policies For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of change in value, and bank overdrafts. Consolidated 2023 $ 16,148 3,653,977 18,467,480 22,137,605 2022 $ 814 20,074,650 80,162,780 100,238,244 Notes to the Financial Statements - Continued To the extent that it does not offset a deferred tax liability, a deferred tax asset has not been recognised for these losses because it is not probable that future taxable income will be available to use against such losses. Notes to the Financial Statements - Continued 7. TRADE AND OTHER RECEIVABLES Accrued interest Goods and services tax recoverable Prepayments and other receivables Prepayments and other receivables- iM3NY Security deposit Accounting policies Consolidated 2023 2022 $ (cid:28)(cid:18)(cid:33)(cid:28)(cid:31) (cid:26)(cid:24)(cid:26)(cid:18)(cid:26)(cid:31)(cid:27) (cid:28)(cid:18)(cid:24)(cid:25)(cid:27)(cid:18)(cid:33)(cid:24)(cid:27) (cid:29)(cid:18)(cid:28)(cid:33)(cid:33)(cid:18)(cid:24)(cid:24)(cid:25) (cid:26)(cid:24)(cid:26)(cid:18)(cid:24)(cid:33)(cid:24) 9,922,214 $ 377 421,907 183,836 9,477,613 150,977 10,234,710 Deferred income tax liabilities are recognised for all temporary differences, except: Allowance for expected credit losses • where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or The consolidated entity has recognised a loss of $Nil (2022: Nil) in the profit or loss, in respect of the expected credit losses related to trade and other receivables for the year ended 30 June 2023. Other receivables are recognised and measured at amortised cost, less any allowance for expected credit losses. • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that 8(a) OTHER ASSETS the temporary differences will not reverse in the foreseeable future. Accrued interest Credit Card Clearing Account Short-term loan - Imperium3 Townsville Inventory - iM3NY Capitalised Loan Costs - iM3NY Advances/Deposits-Purchases - iM3NY Accounting policies Allowance for expected credit losses Consolidated 2023 $ 26,039 21,461 31,000 11,939,026 - 10,015,191 22,032,717 2022 $ 22,495 - 35,221 817,561 1,690,631 1,065,825 3,631,733 The Company and its wholly owned Australian subsidiaries have elected to form a tax consolidated group from 1 July 2015, with Magnis Energy Technologies Ltd being the head entity within that group. These entities are taxed as a 8(b) OTHER ASSETS – iM3NY Movements in the allowance for provisions are as follows Capitalised Loan Costs - iM3NY Less: allowance for amortisation - Loan Costs - iM3NY Advances/deposits purchases- iM3NY Consolidated 2023 $ 2022 $ 2,495,804 4,025,873 - - (279,574) 9,909,405 2,495,804 13,655,704 The consolidated entity has recognised a loss of $Nil (2022: $Nil) in profit or loss in respect of the expected credit losses related to other assets for the year ended 30 June 2023. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 33 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 Consolidated 34 57 Accounting policies Capitalised Loan Costs and Allowance for Amortisation of Capitalised Loan Costs - iM3NY These are capitalised expenses incurred in securing and refinancing loaned funds for iM3NY Inc. and includes such items as legal fees, agency fees, borrowing costs and other loan related costs that will be amortised in accordance to their respective nature. The consolidated entity has recognised $2,495,804 (2022: $13,655,704) in respect of capitalised loan costs, net of amortisation, currency translation and loan costs w\off related to refinancing of Riverstone loan for the year ended 30 June 2023. Notes to the Financial Statements - Continued Movements in Capitalised Loan Costs are as follows: Opening balance Additional loans capitalised Less: allowance for amortisation - loan costs Loan costs written off during the year due to refinancing Currency translation Closing balance 9. FINANCIAL ASSET at FVOCI Equity investment in Charge CCCV LLC 2023 $ 2022 $ 13,655,704 12,316,982 2,612,767 9,909,405 - 705,683 (12,522,172) (10,068,369) (1,250,495) 792,003 2,495,804 13,655,704 Consolidated 2023 $ 15,096,142 15,096,142 2022 $ 15,096,142 15,096,142 On 29 March 2018, Magnis announced a strategic investment to acquire a 10% interest in leading US based, lithium-ion battery technology group, Charge CCCV LLC (‘C4V’) and secured an exclusive agreement over selective intellectual property, which will assist in driving the Company’s growth in the lithium-ion battery sector. Magnis has appointed one representative to the Board of Directors of C4V and has also secured a first right of refusal for any future capital raising initiatives that C4V undertakes. Further to the agreement, Magnis also has an exclusive agreement for 5 years over selected C4Vintellectual property, which will expand the Company’s material technologies in the rapidly growing lithium-ion battery sector. On 28 April 2021 and as clarified in announcement on 9 Sept 2021, Riverstone Credit Partners received a 3.50% stake in C4V, which effectively diluted the Company’s C4V ownership to 9.65%. As at 30 June 2023 the Company’s ownership in C4V remains at 9.65% (2022:9.65%). Accounting policies (i) Classification of financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income comprise: • equity securities which are not held for trading, and for which the group has made an irrevocable election at initial recognition to recognise changes in fair value through OCI rather than profit or loss as these are strategic investments and the group considered this to be more relevant, and • debt securities where the contractual cash flows are solely principal and interest, and the objective of the group’s business model is achieved both by collecting contractual cash flows and selling financial assets. (ii) Equity investments at fair value through other comprehensive income Equity investments at fair value through other comprehensive income (FVOCI) comprise the following investment: Non-current assets Unlisted securities - Charge CCCV LLC Consolidated 2023 $ 2022 $ 15,096,142 15,096,142 15,096,142 15,096,142 Upon disposal of these equity investments, any balance within the OCI reserve for these equity investments is reclassified to retained earnings and is not reclassified to profit or loss. (iii) Debt investments at fair value through other comprehensive income There are no debt investments at fair value through other comprehensive income (FVOCI) for both years. Information about the methods and assumptions used in determining fair value is provided in Note 16. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 58 35 ANNUAL REPORT | 2023 Notes to the Financial Statements - Continued Movements in Capitalised Loan Costs are as follows: Opening balance Additional loans capitalised Less: allowance for amortisation - loan costs Loan costs written off during the year due to refinancing Currency translation Closing balance 9. FINANCIAL ASSET at FVOCI Equity investment in Charge CCCV LLC 2023 $ 2022 $ 13,655,704 12,316,982 2,612,767 9,909,405 - 705,683 (12,522,172) (10,068,369) (1,250,495) 792,003 2,495,804 13,655,704 Consolidated 2023 $ 2022 $ 15,096,142 15,096,142 15,096,142 15,096,142 On 29 March 2018, Magnis announced a strategic investment to acquire a 10% interest in leading US based, lithium-ion battery technology group, Charge CCCV LLC (‘C4V’) and secured an exclusive agreement over selective intellectual property, which will assist in driving the Company’s growth in the lithium-ion battery sector. Magnis has appointed one representative to the Board of Directors of C4V and has also secured a first right of refusal for any future capital raising initiatives that C4V undertakes. Further to the agreement, Magnis also has an exclusive agreement for 5 years over selected C4Vintellectual property, which will expand the Company’s material technologies in the rapidly growing lithium-ion battery sector. On 28 April 2021 and as clarified in announcement on 9 Sept 2021, Riverstone Credit Partners received a 3.50% stake in C4V, which effectively diluted the Company’s C4V ownership to 9.65%. As at 30 June 2023 the Company’s ownership in C4V remains at 9.65% (2022:9.65%). Accounting policies (i) Classification of financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income comprise: • equity securities which are not held for trading, and for which the group has made an irrevocable election at initial recognition to recognise changes in fair value through OCI rather than profit or loss as these are strategic investments and the group considered this to be more relevant, and • debt securities where the contractual cash flows are solely principal and interest, and the objective of the group’s business model is achieved both by collecting contractual cash flows and selling financial assets. (ii) Equity investments at fair value through other comprehensive income Equity investments at fair value through other comprehensive income (FVOCI) comprise the following investment: Non-current assets Unlisted securities - Charge CCCV LLC Consolidated 2023 $ 2022 $ 15,096,142 15,096,142 15,096,142 15,096,142 Upon disposal of these equity investments, any balance within the OCI reserve for these equity investments is reclassified to retained earnings and is not reclassified to profit or loss. Notes to the Financial Statements - Continued 10. RIGHT OF USE ASSET Non-current assets Right-of-use assets at start of period Additions Currency Translation Depreciation expense Right-of-use assets – Closing Carrying value Accounting policies Consolidated 2023 $ 2022 $ 30,149,281 1,230,731 1,132,266 (1,462,303) 31,049,975 266,305 29,091,679 1,509,925 (718,628) 30,149,281 The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost, less accumulated depreciation, and impairment losses. 11. DEVELOPMENT ASSETS Development assets Accounting policies Consolidated 2023 $ 8,029,704 8,029,704 2022 $ 6,170,865 6,170,865 Development assets are stated at cost less accumulated amortisation and impairment losses. Cost represents the accumulation of all the compensation and resettlement expenditure incurred by, or on behalf of, the entity in relation to areas of interest in which construction or development has commenced. Compensation and resettlement expenditures are capitalised as development assets. Development costs in which the Group has an interest are amortised over the life of the area of interest to which the costs relate to on a units of production basis over the estimated proven and probable ore reserves and proportion of other measured and indicated mineral resources where there is a high degree of confidence that they can be extracted economically. Changes in the life of the area of interest and/or ore reserves, and other mineral resources are accounted for prospectively. As at 30 June 2023, the depreciation in development asset has not commenced yet because the exploration of mine has not begun. Impairment At each reporting date, the Group reviews the carrying values of its development assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal or value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash- generating unit to which the asset belongs. As at 30 June 2023, no impairment to the carrying value of the development assets has been deemed necessary. Movements in development assets Movements in development assets during the financial year, are set out as follows: (iii) Debt investments at fair value through other comprehensive income There are no debt investments at fair value through other comprehensive income (FVOCI) for both years. Information about the methods and assumptions used in determining fair value is provided in Note 16. Opening balance Development costs capitalised during the year Currency translation difference Closing balance 2022 $ Consolidated 2023 $ 6,170,865 1,610,732 248,107 8,029,704 4,982,338 715,088 473,439 6,170,865 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 35 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 36 59 Notes to the Financial Statements - Continued 12 (a) PLANT AND EQUIPMENT iM3NY Plant and Equipment - iM3NY Accounting policies Consolidated 2023 $ 2022 $ 92,984,518 92,984,518 49,414,529 49,414,529 iM3NY P&E assets are stated at cost less accumulated depreciation and impairment losses. Costs represent the accumulation of all the plant and equipment and expenditure incurred by, or on behalf of, the entity in relation to the establishment and preparation of the production plant. iM3NY P&E costs in which the Group has an interest are amortised over the projected life of the production plant. As at 30 June 2023, as the company’s assets have not been brought into use, they have not been depreciated. Impairment In October 2019, the Group had an independent valuation undertaken by global engineering, architecture and consultancy company Ramboll Energy were consulted to confirm that the iM3NY plant and equipment US$71,340,620 valuation. On 19 April 2021 when the Company announced that its majority owned subsidiary Imperium3 New York Inc. (iM3NY), had received funding to fast-track production at its lithium-ion battery plant in Endicott, NY, Riverstone Credit Partners, L.P. confirmed through its due diligence that iM3NY has US$230Million of manufacturing assets in place. As at 30 June 2023, no impairment to the carrying value of the iM3NY P&E assets has been deemed necessary. Movements in iM3NY P&E assets Movements in iM3NY P&E assets during the financial year, are set out as follows: Opening balance iM3NY P&E costs capitalised during the year Reclassification into other assets Currency translation difference Closing balance - Carrying value Consolidated 2023 $ 2022 $ 49,414,529 43,038,645 - 513,344 92,984,518 21,552,388 34,027,966 (9,909,405) 3,743,580 49,414,529 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 37 60 ANNUAL REPORT | 2023 Notes to the Financial Statements - Continued 12. (b) PLANT AND EQUIPMENT – MNS & UTL Plant and Equipment – Magnis & UTL Accounting policies Consolidated 2023 $ 2022 $ 107,148 107,148 44,343 44,343 Each class of plant and equipment is carried at cost, less, where applicable, any accumulated depreciation and impairment losses. The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Depreciation Depreciation is provided on plant and equipment, motor vehicles, office equipment, furniture, and fittings, and is calculated on a straight-line basis, commencing from the time the asset is first used, so as to write off the net costs of each asset over its expected useful life. The following useful lives are used in the calculation of depreciation: • Plant & equipment 2 to 5 years • Vehicles 2 to 5 years • Office equipment, furniture & fittings 2 to 20 years The residual value and useful life of assets are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposal(s), if any, are determined by comparing the proceeds with the carrying amount. These are included in profit or loss. Impairment At each reporting date, the Group reviews the carrying values of its plant & equipment assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. As at 30 June 2023, no impairment to the carrying value of its plant & equipment assets has been deemed necessary. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 38 61 $ l a t o T - 3 4 3 , 4 4 (cid:29) (cid:29) (cid:33) (cid:28) (cid:25) (cid:25) (cid:18) ) 5 5 7 , 6 1 ( ) 5 9 3 , 5 3 ( $ - (cid:32) (cid:32) (cid:27) (cid:25) (cid:18) - ) 6 4 4 ( ) 2 4 9 ( $ - - (cid:33) (cid:26) (cid:29) (cid:26) (cid:18) ) 3 1 8 ( ) 6 1 7 , 1 ( 8 4 1 , 7 0 1 - - 1 3 3 , 9 1 8 ) 3 8 1 , 2 1 7 ( 8 4 1 , 7 0 1 - 4 9 8 , 7 3 ) 4 9 8 , 7 3 ( - 0 4 8 , 4 1 5 8 5 , 7 7 ) 1 4 9 , 4 3 ( ) 1 4 1 , 3 1 ( - 2 8 1 0 9 9 , 2 ) 4 6 8 ( ) 8 0 3 , 2 ( 1 3 0 , 9 6 ) 1 3 0 , 9 6 ( - - - 7 4 4 , 5 ) 8 5 9 , 3 ( ) 9 8 4 , 1 ( 3 4 3 , 4 4 - - 6 7 3 , 4 0 7 3 4 3 , 4 4 ) 3 3 0 , 0 6 6 ( - 5 0 5 , 6 3 ) 5 0 5 , 6 3 ( - 2 0 5 , 6 6 ) 2 0 5 , 6 6 ( s $ - 8 4 4 (cid:25) (cid:27) (cid:27) (cid:32) (cid:18) ) 2 2 0 , 1 ( ) 8 5 1 , 2 ( 9 9 5 , 5 9 9 5 , 5 7 1 3 , 5 2 ) 8 1 7 , 9 1 ( - 8 2 6 1 1 2 , 1 ) 1 8 3 ( ) 0 1 0 , 1 ( 8 4 4 8 4 4 6 8 9 , 6 1 ) 8 3 5 , 6 1 ( 9 3 r o t o M s e l c i h e v e c i f f O e c i f f O e r u t i n r u f t n e m e v o r p m i s g n i t t i f d n a p u o r G d e t a d i l o s n o C - (cid:21) - - - - - - - - - - - - - - - - $ re a w t f o S $ e c i f f O t n e m p u q e i - 4 3 9 , 4 3 (cid:26) (cid:25) (cid:30) (cid:26) (cid:30) (cid:18) ) 4 8 0 , 8 ( ) 7 7 0 , 7 1 ( $ - 1 6 9 , 8 (cid:29) (cid:33) (cid:24) (cid:24) (cid:28) (cid:18) ) 1 9 3 , 6 ( ) 1 0 5 , 3 1 ( d n a t n a l P t n e m p u q e i 5 8 3 , 2 7 4 6 1 , 9 2 5 8 3 , 2 7 7 6 0 , 3 0 2 ) 2 8 6 , 0 3 1 ( 4 6 1 , 9 2 2 2 0 , 4 8 4 ) 8 5 8 , 4 5 4 ( - 2 7 9 , 2 1 8 2 2 , 5 3 ) 9 3 6 , 9 ( ) 6 2 6 , 3 ( 4 3 9 , 4 3 - 8 5 0 , 1 9 0 7 , 2 3 ) 1 8 7 , 6 ( ) 5 2 0 , 8 1 ( 1 6 9 , 8 5 5 4 , 0 4 1 4 3 9 , 4 3 ) 1 2 5 , 5 0 1 ( 1 6 9 , 8 7 2 9 , 3 4 4 ) 6 6 9 , 4 3 4 ( d e t a l u m u c c a f o t e n 2 2 0 2 y l u J 1 t a e c n a l a B n o i t a i c e r p e d s n o i t i d d A 3 2 0 2 E N U J 0 3 D E D N E R A E Y l s a s o p s D i d e t a l u m u c c a f o t e n 3 2 0 2 e n u J 0 3 t a e c n a l a B s e c n e r e f f i d n o i t a s n a r t y c n e r r u C l r a e y e h t r o f e g r a h c n o i t a c e r p e D i 3 2 0 2 e n u J 0 3 t A t s o C n o i t a i c e r p e d t n e m r i a p m i i d n a n o i t a c e r p e d d e t a u m u c c A l d e t a l u m u c c a f o t e n 1 2 0 2 y l u J 1 t a e c n a l a B 2 2 0 2 E N U J 0 3 D E D N E R A E Y n o i t a i c e r p e d s n o i t i d d A t n u o m a g n i y r r a c t e N l s a s o p s D i d e t a l u m u c c a f o t e n 2 2 0 2 e n u J 0 3 t a e c n a l a B s e c n e r e f f i d n o i t a s n a r t y c n e r r u C l r a e y e h t r o f e g r a h c n o i t a c e r p e D i 2 2 0 2 e n u J 0 3 t A t s o C n o i t a i c e r p e d t n e m r i a p m i i d n a n o i t a c e r p e d d e t a u m u c c A l t n u o m a g n i y r r a c t e N ANNUAL REPORT | 2023 3 2 0 2 T R O P E R L A C N A N F L A U N N A I I : I D T L S E G O L O N H C E T Y G R E N E S N G A M I r a e y l i a c n a n i f e h t f o d n e d n a g n n n g e b e h t i i t a s t n u o m a g n y r r a c i f o n o i t a i l i c n o c e R d e u n i t n o C - s t n e m e t a t S l i i a c n a n F e h t o t s e t o N D E U N T N O C I I - T N E M P U Q E D N A T N A L P ) b ( . 2 1 62 Trade and other payables are recognised when the Group becomes obliged to make further payments from the purchase of goods and services and are measured at amortised cost using the effective interest method, less any Consolidated 2023 $ 15,276,232 356,621 15,632,853 2022 $ 3,260,299 385,895 3,646,194 Consolidated 2023 $ 3,025,815 3,025,815 2022 $ 386,200 386,200 30,657,582 31,010,410 30,657,582 31,010,410 Consolidated 2023 $ 472,090 472,090 2022 $ 176,430 176,430 Notes to the Financial Statements - Continued 13. TRADE AND OTHER PAYABLE Current Trade payables Other payables and accruals Accounting policies impairment losses. 14. (a) LEASE LIABILITIES Current Lease Liabilities Non-current Lease Liabilities Accounting policies 14. (b) PROVISIONS Current Provisional for annual leave The lease liability is measured at the present value of the fixed and variable lease payments, net of cash lease incentives, that are not paid at the balance date. Lease payments are apportioned between finance charges and a reduction of the lease liability using the incremental borrowing rate implicit in the lease where available, or an assumed Group incremental borrowing rate, to achieve a constant rate of interest on the remaining balance of the liability. Annual Leave and Long Service Leave An estimate of annual leave is provided after reviewing relevant workplace agreements and industrial awards for respective employees and determining entitlement at the reporting date. The cost includes an account of direct employment costs. The significant assumptions applied in the measurement of this provision include devising probabilities for employees complying with the legislative requirements [years of service] and the computed employment costs, discounted by using RBA bond rates applied for the respective years of service. Accounting policies Provisions are recognised when the Group has a present obligation [legal or constructive] as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 40 Notes to the Financial Statements - Continued 13. TRADE AND OTHER PAYABLE Current Trade payables Other payables and accruals Accounting policies Consolidated 2023 $ 15,276,232 356,621 15,632,853 2022 $ 3,260,299 385,895 3,646,194 Trade and other payables are recognised when the Group becomes obliged to make further payments from the purchase of goods and services and are measured at amortised cost using the effective interest method, less any impairment losses. 14. (a) LEASE LIABILITIES Current Lease Liabilities Non-current Lease Liabilities Accounting policies Consolidated 2023 $ 3,025,815 3,025,815 2022 $ 386,200 386,200 30,657,582 31,010,410 30,657,582 31,010,410 The lease liability is measured at the present value of the fixed and variable lease payments, net of cash lease incentives, that are not paid at the balance date. Lease payments are apportioned between finance charges and a reduction of the lease liability using the incremental borrowing rate implicit in the lease where available, or an assumed Group incremental borrowing rate, to achieve a constant rate of interest on the remaining balance of the liability. 14. (b) PROVISIONS Current Provisional for annual leave Consolidated 2023 $ 472,090 472,090 2022 $ 176,430 176,430 Annual Leave and Long Service Leave An estimate of annual leave is provided after reviewing relevant workplace agreements and industrial awards for respective employees and determining entitlement at the reporting date. The cost includes an account of direct employment costs. The significant assumptions applied in the measurement of this provision include devising probabilities for employees complying with the legislative requirements [years of service] and the computed employment costs, discounted by using RBA bond rates applied for the respective years of service. Accounting policies Provisions are recognised when the Group has a present obligation [legal or constructive] as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 40 ANNUAL REPORT | 2023 63 Notes to the Financial Statements - Continued flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. 14 (c) BORROWINGS Current Convertible Note \ Share Subscription Facility Short-term iM3NY funding Non-current Senior Secured Loan - iM3NY Consolidated 2023 $ - 4,600,000 4,600,000 2022 $ 1,750,000 - 1,750,000 150,631,220 145,111,133 150,631,220 145,111,133 Convertible Note \ Pre-Paid Share Subscription Facility At period end, SBP effectively extinguished their remaining $10.5M portion of the convertible note and both Regal and L1 Capital completed in full their combined $25m first tranche of the pre-paid share subscription facility, with NIL outstanding balances as at 30 June 2023. Short-term iM3NY funding On 30 June 2023, Magnis obtained a 1-month short-term loan from Evolution Capital Pty Ltd of $4.6M, which was provided to iM3NY LLC to advance the project. The principal and borrowing costs were repaid in full via the capital raising through the $10.0M placement announced to the market on 17 July 2023. Secured loans and borrowings On 19 April 2022, Magnis announced that its majority owned subsidiary Imperium3 New York Inc(iM3NY) entered into a US$100 million loan facility (‘loan facility’), which was utilised to retire its US$50 million senior secured loan facility entered into with Riverstone and provide additional cash and financial flexibility to take advantage of new long-term growth opportunities. The key terms of the loan facility are: Lender: ACP POST OAK CREDIT I LLC through Atlas Credit Partners (‘ACP’) in collaboration with Aon, Amount: US$100 Million, Term: 3 Years, Guarantor: Charge CCCV LLC (C4V), Security: a lien over the assets of iM3NY and the intellectual property of C4V (a minority shareholder in iM3NY) provided to iM3NY, and Interest cost: Secured Overnight Financing Rate (SOFR - that has a floor of 1%) + a 6% margin and Credit Insurance Wrap Premium, which in Year 1 is 8.25%, Year 2 is 4.6% or 2.5% (if milestone achieved) and in Year 3 is 4.35% or 2.25% (if further milestone achieved). Accounting policies Loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Loans and borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Income Statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date. The component of secured notes that exhibits characteristics of debt is recognised as a liability in the Statement of Financial Position, net of transaction costs. On issue of secured notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds is allocated to the equity component and is recognised in shareholders’ equity. The carrying amount of the equity component is not remeasured in subsequent years. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 64 ANNUAL REPORT | 2023 41 Notes to the Financial Statements - Continued flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. 14 (c) BORROWINGS Current Convertible Note \ Share Subscription Facility Short-term iM3NY funding Non-current Senior Secured Loan - iM3NY Consolidated 2023 $ 2022 $ - 1,750,000 4,600,000 4,600,000 - 1,750,000 150,631,220 145,111,133 150,631,220 145,111,133 Convertible Note \ Pre-Paid Share Subscription Facility At period end, SBP effectively extinguished their remaining $10.5M portion of the convertible note and both Regal and L1 Capital completed in full their combined $25m first tranche of the pre-paid share subscription facility, with NIL outstanding balances as at 30 June 2023. Short-term iM3NY funding On 30 June 2023, Magnis obtained a 1-month short-term loan from Evolution Capital Pty Ltd of $4.6M, which was provided to iM3NY LLC to advance the project. The principal and borrowing costs were repaid in full via the capital raising through the $10.0M placement announced to the market on 17 July 2023. Secured loans and borrowings On 19 April 2022, Magnis announced that its majority owned subsidiary Imperium3 New York Inc(iM3NY) entered into a US$100 million loan facility (‘loan facility’), which was utilised to retire its US$50 million senior secured loan facility entered into with Riverstone and provide additional cash and financial flexibility to take advantage of new long-term growth opportunities. The key terms of the loan facility are: Lender: ACP POST OAK CREDIT I LLC through Atlas Credit Partners (‘ACP’) in collaboration with Aon, Amount: US$100 Million, Term: 3 Years, Guarantor: Charge CCCV LLC (C4V), Security: a lien over the assets of iM3NY and the intellectual property of C4V (a minority shareholder in iM3NY) provided to iM3NY, and Interest cost: Secured Overnight Financing Rate (SOFR - that has a floor of 1%) + a 6% margin and Credit Insurance Wrap Premium, which in Year 1 is 8.25%, Year 2 is 4.6% or 2.5% (if milestone achieved) and in Year 3 is 4.35% or 2.25% (if further milestone achieved). Accounting policies Loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Loans and borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Income Statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date. The component of secured notes that exhibits characteristics of debt is recognised as a liability in the Statement of Financial Position, net of transaction costs. On issue of secured notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds is allocated to the equity component and is recognised in shareholders’ equity. The carrying amount of the equity component is not remeasured in subsequent years. Notes to the Financial Statements - Continued 15. CONTRIBUTED EQUITY a) Issued capital Ordinary Fully Paid shares Ordinary Fully Paid shares carry a vote per share and carry a right to dividends. Number of shares 2023 $ 1,115,331,483 259,137,517 b) Movements in fully paid shares At 30 June 2022 Shares restructure - iM3NY Shares issued Exercise of unlisted options Exercise of unlisted rights Transaction costs Transaction costs – iM3NY Share issue to MEST At 30 June 2023 Number of shares 2023 $ 966,485,329 234,105,997 - 148,846,154 - - - - - 318,412 26,128,108 - - (1,415,000) - - 1,115,331,483 259,137,517 During the year the Company raised funds from equity as follows: • $26,128,108 (2022: $23,561,500) from share placements of 148,846,154 (2022: 84,991,378) Ordinary Fully Paid shares. Transaction costs amounted to $1,415,000 (2022: $3,104,000). • $Nil (2022: $21,779,703) from the exercise of unlisted options, issuing Nil (2022: 43,559,405) Ordinary Fully Paid shares. c) Capital management Management’s prime objective when managing the Group’s capital is to ensure the entity continues as a going concern as well as ensuring that funds are appropriately expended. The capital structure is intended to provide the lowest cost of capital available to the Group considering its present phase of operations. Capital risk management. Over the coming year the group is proposing to undertake an exploration program that requires a significant outlay of funds. Management monitors this expenditure against the budget approved by the Board. A near term capital raising or asset sale should ensure the group has a safety margin of funds available to continue with its desired level of operations - refer Note 1. In order to maintain or adjust the capital structure, the consolidated entity may adjust the number of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 16. FAIR VALUE MEASUREMENT The fair value of financial assets and financial liabilities are the equivalent to the net carrying amount. Fair Values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The carrying amounts of cash, trade and other receivables, and trade and other payables are assumed to approximate their fair values due to their short-term nature. The Group classified the fair value of its other financial instruments according to the following fair value hierarchy based on the number of observable inputs used to value the instruments. The three levels of the fair value hierarchy are: • Level 1: Values based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. • Level 2: Values based on inputs, including quoted prices, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date. • Level 3: Values based on prices or valuation techniques that are not based on observable market data. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 41 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 42 65 Notes to the Financial Statements - Continued Financial assets measured at fair value Level in Fair Value hierarchy Financial assets at FVOCI 3 Consolidated 2023 $ 2022 $ 15,096,142 15,096,142 15,096,142 15,096,142 Financial assets at FVOCI Financial assets at FVOCI comprise the Group’s investment in private US based, lithium-ion battery technology group, Charge CCCV LLC (‘C4V’) which is accounted for as a financial asset measured at fair value through other comprehensive income. The investment is not quoted in an active market and accordingly the fair value of this investment is included within Level 3 of the hierarchy. C4V has expertise and patented technology in lithium-ion battery composition and manufacture. C4V has executed binding agreements to receive royalty income from the exclusive use of both its patented anode chemistry and its cobalt and nickel free cathode chemistry. C4V also retains the right to receive a once off reservation fee upon the granting of exclusive use of its patented IP at each of the approved iM3 battery plants. The royalty income is dependent upon the successful development of the Group’s Nachu Graphite Project which involves the mining and processing of natural flake graphite. As at year end, C4V has a common share holding of 31.0% (2022: 31.00%) in Imperium3 New York LLC (‘iM3NY LLC’), being the holding company of Imperium3 New York Inc. (‘iM3NY Inc’), which owns battery plant assets located in a planned lithium-ion battery manufacturing facility based at the Huron Campus in Endicott, New York. As such, C4V has a 20.49% (2022: 31.19%) strategic indirect investment exposure in the New York lithium-ion battery production plant via iM3NY LLC. Valuation Techniques- Level 3 The Group has utilised a combination of the discounted cash flow (DCF) method together with the fair value of C4V’s strategic investment in iM3NY to calculate the enterprise value of C4V. The DCF involves the projection of a series of cash flows and to this an appropriate market derived discount rate is applied to establish the present value of the income stream. The fair value of C4V’s investment in iM3NY has been determined by first obtaining an independent valuation of the plant equipment purchased in 2018. The valuation of plant equipment was undertaken in August 2019 by engineering firm O’Brien & Gere assessed all the items purchased. At that time the external valuer attributed the status and condition at a valuation of US$71.34Million. In October 2019, the Group had an independent valuation undertaken by global engineering, architecture and consultancy company Ramboll Energy which confirmed that the iM3NY plant and equipment was valued at US$71,340,620. On 19 April 2021 Magnis announced that the iM3NY project is fully funded to 1.8GWh of annual production. Riverstone Credit Partners, L.P. confirmed after carrying out its due diligence that iM3NY has US$230Million ($334Million) of manufacturing assets in place, of which C4V has a total indirect strategic interest via iM3NY LLC that is equivalent to US$72Million ($104Million). When the Riverstone Facility was paid out in April 2022, through the financing in collaboration with Atlas and Aon the value of the manufacturing assets in place had increased sufficient for those entities to agree to a funding package valued at US$100M. The Group decides its valuation policies and procedures in line with its business objectives and with reference to the Group’s assessment of its investment in individual projects. Position papers are prepared to apprise the audit and risk committee of the valuation techniques adopted. The Group normally reviews the valuation of its financial assets at FVOCI at least once every six months, in line with the group’s half-yearly and yearly reporting requirements. Changes in level 3 fair values are analysed at the end of each reporting period during this review. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 66 ANNUAL REPORT | 2023 43 Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued Financial assets measured at fair value Level in Fair Value hierarchy Financial assets at FVOCI 3 Consolidated 2023 $ 2022 $ 15,096,142 15,096,142 15,096,142 15,096,142 Financial assets at FVOCI Financial assets at FVOCI comprise the Group’s investment in private US based, lithium-ion battery technology group, Charge CCCV LLC (‘C4V’) which is accounted for as a financial asset measured at fair value through other comprehensive income. The investment is not quoted in an active market and accordingly the fair value of this investment is included within Level 3 of the hierarchy. C4V has expertise and patented technology in lithium-ion battery composition and manufacture. C4V has executed binding agreements to receive royalty income from the exclusive use of both its patented anode chemistry and its cobalt and nickel free cathode chemistry. C4V also retains the right to receive a once off reservation fee upon the granting of exclusive use of its patented IP at each of the approved iM3 battery plants. The royalty income is dependent upon the successful development of the Group’s Nachu Graphite Project which involves the mining and processing of natural flake graphite. As at year end, C4V has a common share holding of 31.0% (2022: 31.00%) in Imperium3 New York LLC (‘iM3NY LLC’), being the holding company of Imperium3 New York Inc. (‘iM3NY Inc’), which owns battery plant assets located in a planned lithium-ion battery manufacturing facility based at the Huron Campus in Endicott, New York. As such, C4V has a 20.49% (2022: 31.19%) strategic indirect investment exposure in the New York lithium-ion battery production plant via iM3NY LLC. Valuation Techniques- Level 3 The Group has utilised a combination of the discounted cash flow (DCF) method together with the fair value of C4V’s strategic investment in iM3NY to calculate the enterprise value of C4V. The DCF involves the projection of a series of cash flows and to this an appropriate market derived discount rate is applied to establish the present value of the income stream. The fair value of C4V’s investment in iM3NY has been determined by first obtaining an independent valuation of the plant equipment purchased in 2018. The valuation of plant equipment was undertaken in August 2019 by engineering firm O’Brien & Gere assessed all the items purchased. At that time the external valuer attributed the status and condition at a valuation of US$71.34Million. In October 2019, the Group had an independent valuation undertaken by global engineering, architecture and consultancy company Ramboll Energy which confirmed that the iM3NY plant and equipment was valued at US$71,340,620. On 19 April 2021 Magnis announced that the iM3NY project is fully funded to 1.8GWh of annual production. Riverstone Credit Partners, L.P. confirmed after carrying out its due diligence that iM3NY has US$230Million ($334Million) of manufacturing assets in place, of which C4V has a total indirect strategic interest via iM3NY LLC that is equivalent to US$72Million ($104Million). When the Riverstone Facility was paid out in April 2022, through the financing in collaboration with Atlas and Aon the value of the manufacturing assets in place had increased sufficient for those entities to agree to a funding package valued at US$100M. The Group decides its valuation policies and procedures in line with its business objectives and with reference to the Group’s assessment of its investment in individual projects. Position papers are prepared to apprise the audit and risk committee of the valuation techniques adopted. The Group normally reviews the valuation of its financial assets at FVOCI at least once every six months, in line with the group’s half-yearly and yearly reporting requirements. Changes in level 3 fair values are analysed at the end of each reporting period during this review. Quantitative information on significant unobservable inputs - Level 3 The following table summarises the quantitative information about the significant unobservable inputs used in the fair value measurement of the Group’s investment in C4V. Unobservable inputs Valuation Method (format) Nachu Graphite Project Imperium 3 New York Relationship of Unobservable input to fair value Project Status Timeline to production DCF DCF Feasibility Study) 2 years post finance n/a The more advanced the project the higher the fair value n/a The longer the time to production the lower the fair value Project life DCF 20yrs n/a The longer the lifespan the higher the fair value Risk adjusted discount rate Capital required Expected annual volumes DCF 20% n/a The higher the discount rate the DCF DCF $406.7M (US$270M) 240,000 tonne p.a. lower the fair value n/a The higher the capital required the lower the fair value n/a The higher the annual volumes the higher the fair value Valuation of battery manufacturing equipment FV n/a $354.9M (US$235.6M) The lower the recoverable amount of the equipment, the lower the fair value Project and Investment Risk The fair value of the Group’s investment in C4V is measured against the enterprise value of C4V which is calculated using fair value incorporating present value techniques. The present value calculations use cash flows that are estimates rather than known amounts. There is inherent uncertainty in this valuation technique. In addition, C4V also holds patents, and their management of those patents, ongoing and active research that results in new patents or their economic success is uncertain. In addition, claims against these patents and the cost of defending claims is likewise uncertain but does represent a real risk. As a result, fair value is exposed to various forms of risk. The fair value as at reporting date is measured using several significant unobservable inputs. Risks specific to these unobservable inputs are detailed below and have been factored into the individual projects through the risk adjusted discount rate applied. The Group has performed detailed risk analysis using international frameworks on each of the individual projects during feasibility study. In performing this analysis, the Group is committed to supporting the Audit and Risk Committee to develop risk management and mitigation strategies for implement so it can reduce its exposure. Production impacts Scheduling for the projects has not factored in significant delays or cost overruns. Factors which could create significant delays include adverse weather conditions, construction risks particularly in-ground risks, the securing of water supply for construction and requisite approvals for infrastructure upgrades. There is a risk that such delays or cost overruns will impact the payback capability of the project and reduce the overall cashflows. A negative incident to production will result in a lower fair value. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 43 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 44 67 Notes to the Financial Statements - Continued Project status The status of the projects has been determined as being preliminary. The projects are also characterised as being greenfield projects which relate to the lack of existing facilities to verify outcomes. There is a risk that the projects will not be advanced due to the significant capital required to commence construction. There is also a risk that legislative approvals required to commence construction may be delayed or not granted. Project status is aligned to the timeline to production. Any slippage in timeline milestone will reduce the fair value. Detailed implementation plans have been established for each of the individual projects. The implementation plan identifies areas that are critical to the successful advancement of the projects. Strategies to mitigate and manage risk associated with project success have been documented in detail for implementation. This includes pre-finance testing and market development work. Establishment of strategic partnerships with credible industry professionals such as engineering, procurement and construction contractors, original equipment manufacturers, and financing professionals is also considered critical in reducing the risk of greenfield operations. Capital required. As the Townsville gigafactory is not proceeding at this time due to the decision of Council through it changing its focus for the Lansdown Precinct there will be no capital requirement in the foreseeable future. Recoverable amount - C4V’s investment in iM3NY Realising the recoverable amount of C4V’s investment in iM3NY is dependent on proceeds of sale equaling the estimated US$235.6Million ($354.9Million) of manufacturing assets in place, of which C4V has a total direct interest in iM3NY LLC and through that an estimated indirect interest equivalent to US$48.3Million ($72.7Million). Sensitivity analysis There is a risk that there may be significant advancements in state-of-the-art equipment render current equipment obsolete, or buyers are then increasingly difficult to identify. The valuation of the battery manufacturing equipment does not factor in the cost of relocating the equipment from iM3NY to the buyer(s). If iM3NY was unsuccessful in assigning these costs to the buyer, the fair value would be reduced. Expected annual production. The Nachu Graphite Project has been reported as the largest mineral resource of large flake graphite in the world. There is a risk, at a production rate of 236,000tpa, that supply may outstrip demand resulting in an unsustainable production rate. The project is also subject to significant sovereign risk arising from changes in legislation, government, environmental permits, employment, disease, and community relations, all of which could impact annual production. A reduction in the expected annual production would reduce the fair value. The Nachu Graphite Project is however capable of being phased into stages of production. The staged approach allows the project risks and the Group’s response to be tested at a reduced scale for a reduction in required capital outlay. Royalties & Reservation Fee C4V has executed binding agreements to receive royalty income from the exclusive use of both its patented anode chemistry and its cobalt and nickel free cathode chemistry. C4V also retains the right to receive a once off reservation fee upon the granting of exclusive use of its patented IP at each of the approved iM3 battery plants. The royalty income is dependent upon the successful development of three key projects which involve either mining and processing of natural flake graphite or the production of lithium-ion batteries. There is a risk that C4V will not receive the estimated reservation fee or royalty income if the Group is unsuccessful in securing the required capital to commence construction of the individual projects. There is also a risk that the annual royalty income derived from the individual projects will be less than estimated due to delays in production timelines or reduction in the expected annual production. Any reduction in annual royalty income or reservation fee income will lower the fair value. The contracts between C4V and Magnis and iM3 contain commercially sensitive information and as such cannot be disclosed in the financial report as it would likely be prejudicial to Magnis. The contracted royalty and reservation fees have been used by the Group in determining the fair value of C4V. Interest rate risk The main interest rate risk arises from expected long-term borrowings to fund the construction costs. Borrowings obtained at variable rates give rise to interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity to fair value risk. There is also a risk that the greenfield status of the project could attract interest rates with embedded risk premiums. The Group has endeavoured to mitigate these risks by targeting an advantageous mix of achievable funding sources and ‘sticky’ partners to reduce the amount of funding exposed to interest rate risk. This includes sourcing equity partners and government grants to reduce the quantum of project financing required. The Group is targeting potential funding partners for the Nachu Graphite Project who have an in-depth knowledge and experience in Tanzania to reduce the probability of significant risk premiums being added to interest rates. Targeting funding via engineering, construction, and procurement contractors who have a vested interest in the success of the project is one strategy that the Group believes will mitigate the risk of attracting finance with substantial risk premium embedded in the interest rate. Notes to the Financial Statements - Continued Currency rate risk daily currency. The individual projects undertake certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's Adverse foreign currency fluctuation can add significant additional costs to the estimated construction costs of the project. The Nachu Graphite Project is exposed to currency fluctuations between the United States Dollar (USD, US$) and the Tanzanian Shillings (TzS). Where possible, the Group mitigates this risk by executing supply agreements in USD, however local content requirements limit the extent to which this strategy can be implemented. To protect against exchange rate movements, the Audit and Risk Committee may consider entering into simple forward foreign exchange contracts. Risk adjusted discount rate. The above risks have been factored into the risk adjusted discount rate. Any favourable mitigation of the risks outlined above would result in a decrease in the discount rate and an increase in the fair value. In accordance with the Group policy of reviewing this risk, the following sensitivity analysis based on an increase or decrease of the risk adjusted discount rate varies and other variables remain constant, the fair value of the investment would have been affected as shown: Description Unobservable inputs Sensitivity Financial asset at Project life FVOCI A one-year change would increase/ (decrease) fair value by AU$0.098M/ (AU$0.122M) Risk adjusted discount rate 5% change would increase/ (decrease) fair value by AU$6.251M/ (AU$4.1M) Expected annual volumes 5% change would increase/ (decrease) fair value by AU$1.232M/ (AU$1.232M) Valuation of battery manufacturing equipment 5% change would increase/ (decrease) fair value by AU$7.161M/ (AU$7.161M) Investment accounted for using the equity method - Magnis investment in iM3NY via iM3NY LLC. Investment accounted for using the equity method comprises the Group’s investment in its majority owned New York lithium-ion battery production plant, Imperium3 New York Inc (‘iM3NY Inc’). The investment which is accounted for using the equity method is measured at cost and the carrying value of the investment is subsequently adjusted for the Group’s interest in the associates profit or loss. The investment is not quoted in an active market and accordingly the fair value of this investment is included within Level 3 of the hierarchy. Valuation Techniques - Level 3 As at year end, the Company has a common share holding of 62.0% (2022:62.00%) in Imperium3 New York LLC (‘iM3NY LLC’), being the holding company of Imperium3 New York Inc. (‘iM3NY Inc’), which owns battery plant assets located in a lithium-ion battery manufacturing facility based at the Huron Campus in Endicott, New York. As such, the Company has a 73.00% (2022: 61.42%) strategic indirect investment exposure in the New York lithium-ion battery production plant via LLC. The table below provides the total direct and indirect strategic interests of all investors in iM3NY LLC and iM3NY Inc, as at 30 June 2023: MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 68 ANNUAL REPORT | 2023 45 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 46 Notes to the Financial Statements - Continued Currency rate risk The individual projects undertake certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's daily currency. Adverse foreign currency fluctuation can add significant additional costs to the estimated construction costs of the project. The Nachu Graphite Project is exposed to currency fluctuations between the United States Dollar (USD, US$) and the Tanzanian Shillings (TzS). Where possible, the Group mitigates this risk by executing supply agreements in USD, however local content requirements limit the extent to which this strategy can be implemented. To protect against exchange rate movements, the Audit and Risk Committee may consider entering into simple forward foreign exchange contracts. Risk adjusted discount rate. The above risks have been factored into the risk adjusted discount rate. Any favourable mitigation of the risks outlined above would result in a decrease in the discount rate and an increase in the fair value. Sensitivity analysis In accordance with the Group policy of reviewing this risk, the following sensitivity analysis based on an increase or decrease of the risk adjusted discount rate varies and other variables remain constant, the fair value of the investment would have been affected as shown: Description Unobservable inputs Sensitivity Financial asset at FVOCI Project life A one-year change would increase/ (decrease) fair value by AU$0.098M/ (AU$0.122M) Risk adjusted discount rate 5% change would increase/ (decrease) fair value by AU$6.251M/ (AU$4.1M) Expected annual volumes 5% change would increase/ (decrease) fair value by AU$1.232M/ (AU$1.232M) Valuation of battery manufacturing equipment 5% change would increase/ (decrease) fair value by AU$7.161M/ (AU$7.161M) Investment accounted for using the equity method - Magnis investment in iM3NY via iM3NY LLC. Investment accounted for using the equity method comprises the Group’s investment in its majority owned New York lithium-ion battery production plant, Imperium3 New York Inc (‘iM3NY Inc’). The investment which is accounted for using the equity method is measured at cost and the carrying value of the investment is subsequently adjusted for the Group’s interest in the associates profit or loss. The investment is not quoted in an active market and accordingly the fair value of this investment is included within Level 3 of the hierarchy. Valuation Techniques - Level 3 As at year end, the Company has a common share holding of 62.0% (2022:62.00%) in Imperium3 New York LLC (‘iM3NY LLC’), being the holding company of Imperium3 New York Inc. (‘iM3NY Inc’), which owns battery plant assets located in a lithium-ion battery manufacturing facility based at the Huron Campus in Endicott, New York. As such, the Company has a 73.00% (2022: 61.42%) strategic indirect investment exposure in the New York lithium-ion battery production plant via LLC. The table below provides the total direct and indirect strategic interests of all investors in iM3NY LLC and iM3NY Inc, as at 30 June 2023: MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 46 69 Notes to the Financial Statements - Continued Direct Common Share Ownership in iM3NY LLC 2023 Direct Indirect Investment Ownership in iM3NY Inc 2023 Investment Ownership in iM3NY Inc 2023 Direct Common Share Ownership in iM3NY LLC 2022 Direct Indirect Investment Ownership in iM3NY Inc 2022 Investment Ownership in iM3NY Inc 2022 Magnis C4V Primet C&D Atlas 62.00% 31.00% 5.00% 2.00% n\a n\a n\a n\a n\a n\a Total iM3NY LLC 100.00% 95.50% Riverstone Group Prisma Pelican Fund HSBC Bank Total Riverstone, HSBC + Prisma n\a n\a n\a n\a 3.86% 0.32% 0.32% 4.50% 73.00% 20.49% 0.37% 0.46% 0.35% 94.67% 4.68% 0.32% 0.32% 5.33% 62.00% 31.00% 5.00% 2.00% n\a n\a n\a n\a n\a n\a 61.42% 31.19% 0.51% 0.64% 0.48% 100.00% 95.50% 94.24% n\a n\a n\a n\a 3.86% 0.32% 0.32% 4.50% 5.12% 0.32% 0.32% 5.76% Total iM3NY Inc. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% The Group has determined the fair value of its strategic investment in iM3NY by first obtaining a third-party valuation of the recoverable amount of the battery plant equipment purchased in 2018. The valuation of plant equipment was undertaken in August 2019 by engineering firm O’Brien & Gere who assessed all the items purchased. At that time the external valuer attributed the current status and condition at a valuation of US$71.34Million. In October 2019, the Group had an independent valuation undertaken by global engineering, architecture and consultancy company Ramboll Energy which confirmed that the iM3NY plant and equipment was valued at US$71,340,620. Recoverable amount (cid:177) (cid:48)(cid:68)(cid:74)(cid:81)(cid:76)s’s investment in iM3NY Realising the recoverable amount of the Company’s investment in iM3NY is dependent on proceeds of sale equaling the estimated US$235.6Million ($354.9Million) of manufacturing assets in place, of which the Company has a total direct interest in iM3NY LLC and through that an estimated indirect interest equivalent to US$172.0Million ($259.1Million). There is a risk that there may be significant advancements in state-of-the-art equipment render current equipment obsolete, or buyers are then increasingly difficult to identify. The valuation of the battery manufacturing equipment does not factor in the cost of relocating the equipment from iM3NY to the buyer(s). If iM3NY was unsuccessful in assigning these costs to the buyer, the fair value would be reduced. 17. RESERVES a) Reserves Foreign currency translation Share based payment FVOCI Reserve b) Nature and purpose of reserves Consolidated 2023 $ 6,107,227 3,841,692 5,076,057 15,024,976 2022 $ 9,860,658 2,910,493 5,076,057 17,847,208 i. Foreign currency translation reserve: Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in Note 1. The reserve is recognised in profit or loss when the net investment is disposed of. ii. Share based payment reserve: The share-based payment reserve is used to recognise the fair value of paid options issued to Directors, employees, and contractors. iii. FVOCI reserve: The FVOCI Reserve is used to recognise any impairment on assets and liabilities using the fair value of measurement, thereby ensuring fair values are equivalent to their respective net carrying value. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 70 47 ANNUAL REPORT | 2023 Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued Direct Common Share Ownership in Direct Indirect Direct Indirect Investment Ownership Investment Ownership in in 2023 Direct Common Share Ownership in Investment Ownership Investment Ownership in in 2022 iM3NY LLC iM3NY Inc iM3NY Inc iM3NY LLC iM3NY Inc iM3NY Inc 2023 2023 2022 2022 62.00% 31.00% 5.00% 2.00% n\a n\a n\a n\a n\a n\a n\a n\a n\a n\a 3.86% 0.32% 0.32% 4.50% 73.00% 20.49% 0.37% 0.46% 0.35% 94.67% 4.68% 0.32% 0.32% 5.33% 62.00% 31.00% 5.00% 2.00% n\a n\a n\a n\a n\a n\a n\a n\a n\a n\a 3.86% 0.32% 0.32% 4.50% 61.42% 31.19% 0.51% 0.64% 0.48% 5.12% 0.32% 0.32% 5.76% Magnis C4V Primet C&D Atlas Riverstone Group Prisma Pelican Fund HSBC Bank Total Riverstone, HSBC + Prisma Total iM3NY LLC 100.00% 95.50% 100.00% 95.50% 94.24% Total iM3NY Inc. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% The Group has determined the fair value of its strategic investment in iM3NY by first obtaining a third-party valuation of the recoverable amount of the battery plant equipment purchased in 2018. The valuation of plant equipment was undertaken in August 2019 by engineering firm O’Brien & Gere who assessed all the items purchased. At that time the external valuer attributed the current status and condition at a valuation of US$71.34Million. In October 2019, the Group had an independent valuation undertaken by global engineering, architecture and consultancy company Ramboll Energy which confirmed that the iM3NY plant and equipment was valued at US$71,340,620. Recoverable amount (cid:177) (cid:48)(cid:68)(cid:74)(cid:81)(cid:76)s’s investment in iM3NY Realising the recoverable amount of the Company’s investment in iM3NY is dependent on proceeds of sale equaling the estimated US$235.6Million ($354.9Million) of manufacturing assets in place, of which the Company has a total direct interest in iM3NY LLC and through that an estimated indirect interest equivalent to US$172.0Million ($259.1Million). There is a risk that there may be significant advancements in state-of-the-art equipment render current equipment obsolete, or buyers are then increasingly difficult to identify. The valuation of the battery manufacturing equipment does not factor in the cost of relocating the equipment from iM3NY to the buyer(s). If iM3NY was unsuccessful in assigning these costs to the buyer, the fair value would be reduced. 18. STATEMENT OF CASH FLOWS a) Reconciliation of the net loss after income tax to the net cash flows from operating activities Operating activities Net loss Non-cash and non-operating items Depreciation of non-current assets Amortisation of borrowing costs Share based payments Share of associates net loss accounted for using the equity method (Profit)/ Loss on sale of assets Net foreign currency translation gain (loss) Accrued interest Changes in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in prepayments (Increase)/decrease in security bonds (Increase)/decrease in exploration assets (Increase) in development assets Increase/(decrease) in trade and other payables Increase/(decrease) in provisions Consolidated 2023 $ 2022 $ (70,703,449) (37,663,313) 35,395 12,500,355 931,200 - (4,959) 3,388,455 - 13,142 3,336,222 1,276,679 - (395,121) (552,497) - (16,097,308) 46,814 (189,362) 0 (1,601,762) 11,980,319 1,029,979 (11,192,154) 16,051 13,099 - (706,765) (1,161,298) (90,234) Net cash outflow from operating activities (58,684,323) (47,106,189) b) Reconciliation of cash and cash equivalents Cash at bank and in hand 19. COMMITMENTS a) Exploration and Equipment commitments 22,137,605 22,137,605 100,238,244 100,238,244 Consolidated 2023 $ 6,107,227 3,841,692 5,076,057 15,024,976 2022 $ 9,860,658 2,910,493 5,076,057 17,847,208 The Group has certain commitments to meet minimum expenditure requirements on the mineral exploration assets in which it has an interest as well as acquiring new equipment. Exploration expenditure commitments beyond twelve months could not be reliably determined because the annual commitment was set at the anniversary date for each tenement. Note 1 outlines the Group’s future funding options to meet its commitments. Outstanding commitments are as follows: Not later than one year - Exploration After one year but no more than five years - AAM Equipment Consolidated 2023 $ 89,817 4,453,189 4,543,006 2022 $ 89,817 - 89,817 17. RESERVES a) Reserves Foreign currency translation Share based payment FVOCI Reserve b) Nature and purpose of reserves i. Foreign currency translation reserve: Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in Note 1. The reserve is recognised in profit or loss when the net investment is disposed of. ii. Share based payment reserve: The share-based payment reserve is used to recognise the fair value of paid options issued to Directors, employees, and contractors. iii. FVOCI reserve: The FVOCI Reserve is used to recognise any impairment on assets and liabilities using the fair value of measurement, thereby ensuring fair values are equivalent to their respective net carrying value. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 47 20. CONTINGENT LIABILITIES AND CONTINGENT ASSETS There are no contingent liabilities or assets at 30 June 2023. The Group has guarantees for property leases and banking finance facilities of $202,090 (2022: $150,977). 21. EVENTS AFTER REPORTING PERIOD On 3 July 2023 Magnis announced that the Company had increased its ownership interest in iM3NY in iM3NY LLC (“iM3NY”) to 73% following the conversion of the Bridging Finance announced on 31 March 2023 (and some other minor financial assistance provided by Magnis more recently) into iM3NY equity. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 48 71 Notes to the Financial Statements - Continued On 17 July 2023, Magnis announced it had that it has received firm commitments raising $10 Million via the placement of 83,333,334 shares at $0.12 per share, which will be issued within the capacity under Listing Rule 7.1. The placement was made to local and overseas institutional fund managers along with professional and sophisticated investors. Net funds received will be used to provide working capital as well as advance all projects including the AAM Demonstration Plant and the Nachu Graphite Project. Directors participating in the placement will require shareholder approval under Listing Rule 10.11 at the next Company AGM. On 31 July 2023, Magnis announced the appointment of Mr. Fabrizio Perilli as Non-Executive Director. On 8 September 2023, Magnis announced it had that it has entered into a standby equity facility agreement (“Equity Facility”) with Evolution Capital Pty Ltd (“Evolution Capital”) along with its terms for the purpose of providing the Company another option to raise funds while it continues to advance IM3NY production and corporate endeavours. On 11 September 2023 Magnis issued a placement of 20 million shares with Evolution Capital as security for the obligations Magnis owes Evolution Capital under the Equity Facility, with 60 million remaining to be issued. A maximum of 80 million shares (in 4 individual placements of up to 20 million shares each) may be issued to Evolution Capital under the Equity Facility. 22. AUDITORS’ REMUNERATION The auditor of Magnis Energy Technologies Ltd in the current year is Hall Chadwick Melbourne Audit. (a) Amounts due and payable to Magnis Group Auditor (Australia) for: An audit or review of the financial report of the entity and consolidated Group Other services in relation of the entity and any other entity in the consolidated Group: • Taxation services • Corporate services (b) Amounts due and payable to related practices of Magnis Group Auditor (Australia) for: An audit or review of the financial report of the entity and consolidated Group Other services in relation of the entity and any other entity in the consolidated Group: • Taxation services 23. LOSS PER SHARE (a) Reconciliation of earnings to profit or loss: Consolidated 2023 2022 $ $ 98,070 64,092 77,588 28,963 144,528 76,550 204,621 285,170 Consolidated 2023 2022 $ - - - $ - - - Consolidated 2023 $ 2022 $ Net loss - Loss used in calculating basic loss per share 72,717,606 61,697,819 Weighted average number of ordinary shares outstanding during the year used in calculating basic loss per share: Shares 2023 Shares 2022 Weighted average number of ordinary shares used in calculating basic loss per share 1,115,331,483 966,485,329 Basic loss per share (cents per share) (6.52) (6.38) Notes to the Financial Statements - Continued Accounting policies Basic EPS is calculated as the profit / (loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, divided by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in ordinary shares during the year. (b) Effect of dilutive securities For the year ended 30 June 2023 and for the comparative period there are no dilutive ordinary shares because conversion of share options and performance rights would decrease the loss per share and hence be non-dilutive. Diluted loss per share (cents per share) Accounting policies Diluted EPS adjusts the figures used in the determination of basic EPS to consider after income tax effect of interest and other financing costs associated with dilutive ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 2023 (6.52) 2022 (6.38) 24. KEY MANAGEMENT PERSONNEL (a) Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Termination benefits Post-employment benefits Share-based payments Assets and liabilities (cid:3)(cid:14)(cid:4)(cid:6)(cid:7) (cid:4)(cid:11)(cid:6) (cid:12)(cid:16)(cid:8)(cid:7)(cid:14) (cid:13)(cid:4)(cid:17)(cid:4)(cid:5)(cid:10)(cid:7)(cid:15) Current Liabilities Consolidated 2023 $ 2022 $ 1,740,032 1,437,175 - 141,776 375,200 - 78,337 965,180 2,257,008 2,480,692 Consolidated 2023 $ (cid:27)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) 30,000 2022 $ (cid:26)(cid:33)(cid:18)(cid:27)(cid:29)(cid:29) 29,355 (b) Outstanding balances arise from purchases of goods and services at the reporting date in relation to other transactions with key management personnel. . 72 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 49 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 50 Notes to the Financial Statements - Continued On 17 July 2023, Magnis announced it had that it has received firm commitments raising $10 Million via the placement of 83,333,334 shares at $0.12 per share, which will be issued within the capacity under Listing Rule 7.1. The placement was made to local and overseas institutional fund managers along with professional and sophisticated investors. Net funds received will be used to provide working capital as well as advance all projects including the AAM Demonstration Plant and the Nachu Graphite Project. Directors participating in the placement will require shareholder approval under Listing Rule 10.11 at the next Company AGM. On 31 July 2023, Magnis announced the appointment of Mr. Fabrizio Perilli as Non-Executive Director. On 8 September 2023, Magnis announced it had that it has entered into a standby equity facility agreement (“Equity Facility”) with Evolution Capital Pty Ltd (“Evolution Capital”) along with its terms for the purpose of providing the Company another option to raise funds while it continues to advance IM3NY production and corporate endeavours. On 11 September 2023 Magnis issued a placement of 20 million shares with Evolution Capital as security for the obligations Magnis owes Evolution Capital under the Equity Facility, with 60 million remaining to be issued. A maximum of 80 million shares (in 4 individual placements of up to 20 million shares each) may be issued to Evolution Capital under the Equity Facility. 22. AUDITORS’ REMUNERATION The auditor of Magnis Energy Technologies Ltd in the current year is Hall Chadwick Melbourne Audit. (a) Amounts due and payable to Magnis Group Auditor (Australia) for: An audit or review of the financial report of the entity and consolidated Group Other services in relation of the entity and any other entity in the consolidated Group: • Taxation services • Corporate services (b) Amounts due and payable to related practices of Magnis Group Auditor (Australia) for: An audit or review of the financial report of the entity and consolidated Group Other services in relation of the entity and any other entity in the consolidated Group: • Taxation services 23. LOSS PER SHARE (a) Reconciliation of earnings to profit or loss: Consolidated 2023 $ 2022 $ 98,070 64,092 77,588 28,963 144,528 76,550 204,621 285,170 Consolidated 2023 2022 $ - - - $ - - - Consolidated 2023 $ 2022 $ Shares 2023 Shares 2022 Net loss - Loss used in calculating basic loss per share 72,717,606 61,697,819 Weighted average number of ordinary shares outstanding during the year used in calculating basic loss per Weighted average number of ordinary shares used in calculating basic loss per share 1,115,331,483 966,485,329 Basic loss per share (cents per share) (6.52) (6.38) share: . Notes to the Financial Statements - Continued Accounting policies Basic EPS is calculated as the profit / (loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, divided by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in ordinary shares during the year. (b) Effect of dilutive securities For the year ended 30 June 2023 and for the comparative period there are no dilutive ordinary shares because conversion of share options and performance rights would decrease the loss per share and hence be non-dilutive. Diluted loss per share (cents per share) Accounting policies 2023 (6.52) 2022 (6.38) Diluted EPS adjusts the figures used in the determination of basic EPS to consider after income tax effect of interest and other financing costs associated with dilutive ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 24. KEY MANAGEMENT PERSONNEL (a) Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Termination benefits Post-employment benefits Share-based payments Consolidated 2023 $ 2022 $ 1,740,032 1,437,175 - 141,776 375,200 - 78,337 965,180 2,257,008 2,480,692 (b) Outstanding balances arise from purchases of goods and services at the reporting date in relation to other transactions with key management personnel. Assets and liabilities (cid:3)(cid:14)(cid:4)(cid:6)(cid:7) (cid:4)(cid:11)(cid:6) (cid:12)(cid:16)(cid:8)(cid:7)(cid:14) (cid:13)(cid:4)(cid:17)(cid:4)(cid:5)(cid:10)(cid:7)(cid:15) Current Liabilities Consolidated 2023 $ (cid:27)(cid:24)(cid:18)(cid:24)(cid:24)(cid:24) 30,000 2022 $ (cid:26)(cid:33)(cid:18)(cid:27)(cid:29)(cid:29) 29,355 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 49 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 50 73 Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued (c) Other transactions and balances with key management personnel and their related parties Transactions with related parties Identity of Related Party Nature of Relationship Terms and Conditions Type of Transaction Aggregate Amount 2023 2022 All amounts payable to related parties are unsecured and at no interest cost. The amount outstanding will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties. Strong Solutions Pty Ltd Frank Poullas is a related party of Strong Solutions Pty Ltd and Executive Chairman of Magnis Energy Technologies Ltd Peter Tsegas is a Non-executive Director of Magnis Energy Technologies Ltd Claire Bibby is a related party of Claire Bibby Pty Ltd and a Non- executive Director of Magnis Energy Technologies Ltd Mona Dajani was a related party of Pillsbury Winthrop Shaw Pittman LLP and a Non-executive Director of Magnis Energy Technologies Ltd Mona Dajani is a related party of Mona Dajani, Esq. and a Non- executive Director of Magnis Energy Technologies Ltd Giles Gunesekera is a related party of Global Impact Initiative Pty Ltd and Non-executive Director of Magnis Energy Technologies Ltd Giles Gunesekera is a related party of the Gunesekera Trust as well as a Non-executive Director of Magnis Energy Technologies Ltd Hoshi Daruwalla is a related party of Yatha Enterprises LLC and an Executive Director of Magnis Energy Technologies Ltd Hoshi Daruwalla is a related party of AmeriAnode Inc and an Executive Director of Magnis Energy Technologies Ltd Peter Tsegas Claire Bibby Pty Ltd Pillsbury Winthrop Shaw Pittman LLP Mona Dajani, Esq. Global Impact Initiative Pty Ltd The Gunesekera Trust Yatha Enterprises LLC AmeriAnode Inc Normal commercial terms Normal commercial terms Normal commercial terms Normal commercial terms Normal commercial terms Normal commercial terms Normal commercial terms Normal commercial terms Normal commercial terms Consulting fees 223,300 215,600 and IT Services 220,492 133,900 Entity with significant influence over the Group CITICORP NOMINEES PTY LIMITED controls 9.00% (2022: 6.22) of the ordinary fully paid shares in the Company. Consulting fees (21,044) 1,914 Set out below is the supplementary information about the parent entity. 26. PARENT ENTITY INFORMATION Consulting fees 72,600 Consulting fees 16,799 Consulting fees 117,092 - - - Statement of profit or (loss) and other comprehensive income Profit or (Loss) after income tax Total comprehensive (loss) \ income Statement of financial position Total current assets Consulting Fees 122,600 11,550 Total assets Consulting Fees 30,800 - Consulting Fees 268,068 34,476 Consulting Fees (2,101) 1,048,606 - 397,440 25. RELATED PARTY DISCLOSURES Parent entity Magnis Energy Technologies Ltd is the ultimate Australian parent entity of the consolidated entity. Its interests in controlled entities are set out in Note 27. Wholly owned group transactions Controlled entities made payments and received funds on behalf of Magnis Energy Technologies Ltd and other controlled entities by way of inter-company loan accounts with each controlled entity. These loans are unsecured, bear no interest and are repayable on demand. However, demand for repayment is not expected in the next twelve months. Transactions and balances between the Company and its controlled entities were eliminated in the preparation and consolidation of the financial statements of the group. Key management personnel Details relating to key management personnel, including remuneration paid, are included in Note 24 and the Remuneration Report in the Directors’ Report. Contingent liabilities Other than funding arising from a letter of support provided by the company to iM3NY, the parent entity had no contingent liabilities as at 30 June 2023. (2022: Nil). Capital commitments – Plant and equipment. The parent entity had no capital commitments for plant and equipment at as 30 June 2023 and 30 June 2022. Remuneration commitments The parent entity has a remuneration commitment of $300,284 as at 30 June 2023 (2022: $166,337). MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 74 ANNUAL REPORT | 2023 51 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 52 Parent 2023 $ 2022 $ (15,490,464) (13,424,544) (15,490,464) (13,424,544) 7,381,342 20,016,515 103,612,665 89,874,398 5,227,159 2,363,544 5,994,587 2,410,163 97,618,078 87,464,235 234,683,169 209,970,061 3,841,692 2,910,492 5,076,057 5,076,057 (145,982,840) (130,492,376) 97,618,078 87,464,235 Total current liabilities Total liabilities Total Net assets Equity Issued capital Equity FVOCI reserve Retained profits Total Equity Equity settled employee benefits reserve Peter Tsegas is a Non-executive Normal Director of Magnis Energy Technologies Ltd Claire Bibby is a related party of Claire Bibby Pty Ltd and a Non- executive Director of Magnis Energy Technologies Ltd commercial terms Normal commercial terms Mona Dajani was a related party of Pillsbury Winthrop Shaw Pittman Normal Mona Dajani is a related party of Mona Dajani, Esq. and a Non- executive Director of Magnis Energy Technologies Ltd Normal commercial terms Giles Gunesekera is a related party of Global Impact Initiative Pty Ltd Normal and Non-executive Director of commercial Giles Gunesekera is a related party of the Gunesekera Trust as well as Normal a Non-executive Director of Magnis commercial Hoshi Daruwalla is a related party of Yatha Enterprises LLC and an Normal Executive Director of Magnis Energy Technologies Ltd Hoshi Daruwalla is a related party of AmeriAnode Inc and an Executive Director of Magnis Energy Technologies Ltd commercial terms Normal commercial terms Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued (c) Other transactions and balances with key management personnel and their related parties Transactions with related parties Identity of Related Party Nature of Relationship Terms and Conditions Type of Transaction Aggregate Amount 2023 2022 All amounts payable to related parties are unsecured and at no interest cost. The amount outstanding will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties. Strong Solutions Pty Ltd Frank Poullas is a related party of Normal Consulting fees 223,300 215,600 Entity with significant influence over the Group CITICORP NOMINEES PTY LIMITED controls 9.00% (2022: 6.22) of the ordinary fully paid shares in the Company. Strong Solutions Pty Ltd and Executive Chairman of Magnis Energy Technologies Ltd commercial terms and IT Services 220,492 133,900 Peter Tsegas Consulting fees (21,044) 1,914 Set out below is the supplementary information about the parent entity. 26. PARENT ENTITY INFORMATION - - - - Claire Bibby Pty Ltd Consulting fees 72,600 Pillsbury Winthrop Shaw LLP and a Non-executive Director commercial Pittman LLP of Magnis Energy Technologies Ltd terms Consulting fees 16,799 Statement of profit or (loss) and other comprehensive income Profit or (Loss) after income tax Total comprehensive (loss) \ income Mona Dajani, Esq. Consulting fees 117,092 Statement of financial position Global Impact Initiative Pty Ltd Magnis Energy Technologies Ltd terms Consulting Fees 122,600 11,550 The Gunesekera Trust Energy Technologies Ltd terms Consulting Fees 30,800 Yatha Enterprises LLC Consulting Fees 268,068 34,476 AmeriAnode Inc Consulting Fees (2,101) 1,048,606 - 397,440 25. RELATED PARTY DISCLOSURES Parent entity Magnis Energy Technologies Ltd is the ultimate Australian parent entity of the consolidated entity. Its interests in controlled entities are set out in Note 27. Total current assets Total assets Total current liabilities Total liabilities Total Net assets Equity Issued capital Equity settled employee benefits reserve Equity FVOCI reserve Retained profits Total Equity Contingent liabilities Parent 2023 $ 2022 $ (15,490,464) (13,424,544) (15,490,464) (13,424,544) 7,381,342 20,016,515 103,612,665 89,874,398 5,227,159 2,363,544 5,994,587 2,410,163 97,618,078 87,464,235 234,683,169 209,970,061 3,841,692 2,910,492 5,076,057 5,076,057 (145,982,840) (130,492,376) 97,618,078 87,464,235 Wholly owned group transactions Controlled entities made payments and received funds on behalf of Magnis Energy Technologies Ltd and other controlled entities by way of inter-company loan accounts with each controlled entity. These loans are unsecured, bear no interest and are repayable on demand. However, demand for repayment is not expected in the next twelve months. Transactions and balances between the Company and its controlled entities were eliminated in the preparation and consolidation of the financial statements of the group. Other than funding arising from a letter of support provided by the company to iM3NY, the parent entity had no contingent liabilities as at 30 June 2023. (2022: Nil). Capital commitments – Plant and equipment. The parent entity had no capital commitments for plant and equipment at as 30 June 2023 and 30 June 2022. Key management personnel Details relating to key management personnel, including remuneration paid, are included in Note 24 and the Remuneration Report in the Directors’ Report. Remuneration commitments The parent entity has a remuneration commitment of $300,284 as at 30 June 2023 (2022: $166,337). MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 51 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 52 75 Notes to the Financial Statements - Continued 27. INTERESTS IN CONTROLLED ENTITIES The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance with the accounting policy described in Note 1: Name of Country incorporation Ownership Uranex (Tanzania) Limited Magnis Technologies (Tanzania) Limited Tanzania Tanzania Uranex Mozambique Limitada Mozambique Uranex ESIP Pty Ltd iM3NY LLC 2 Imperium3 New York Inc. 3 Imperium3 Pty Ltd 5 Magnis AAM LLC. 4 Australia USA USA Australia USA Direct Direct Direct Direct Direct Indirect Direct Direct Class of shares Ordinary Ordinary Ordinary Ordinary Common Common Ordinary Common Equity Holding 1 2023 2022 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 62.00% 73.00% 66.66% 100.00% 62.00% 61.42% 33.33% n\a 1 percentage of voting power is in proportion to ownership (direct and indirect). 2 iM3NY LLC was incorporated for consolidation purposes on 16 April 2021. The remaining 38% has been attributed to non-controlling interests. 3 Imperium3 New York Inc. was incorporated for consolidation purposes on 29 June 2020 of which 95.5% is owned directly by iM3NY LLC (2022:95.5%) while 4.5% has been attributed to non-controlling interests. On the 28 March 2023 and 30 June 2023, Magnis purchased US$18.5M and US$3.5M respectively, of Series A Preference Shares in iM3NY LLC. As at year end the company has a total indirect investment exposure in Imperium3 New York Inc. of approx. 73.0% via iM3NY LLC. 4 Magnis AAM LLC was incorporated in Delaware USA on 3 January 2023. 100.0% is owned directly by Magnis (2022: n\a %). 5 Imperium 3 Pty Ltd was incorporated in NSW, Australia on 27June 2017, which wholly owns iM3 Townsville Pty Ltd. 66.66% is owned directly by Magnis (2022: 33.33 %). Accounting policies Principles of consolidation The consolidation financial statements are those of the consolidated entity, comprising Magnis Energy Technologies Ltd [the parent entity], special purpose entities and all entities which Magnis Energy Technologies Ltd controlled from time to time during the year and at reporting date. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through ties power over the investee. Specifically, the Group controls an investee if and only if the Group has: • power over the investee [i.e., existing rights that give it the ability to direct the relevant activities of the investee]; • exposure, or rights, to variable returns from its involvement with the investee, and • the ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • • • the contractual arrangement with the other vote holders of the investee. rights arising from other contractual arrangements. the Group’s voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group losses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income ‘OCI’ are attributed to the equity holders of the parent of the Group and to the non- controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full, on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • de-recognises the assets [including goodwill] and liabilities of the subsidiary. • de-recognises the carrying amount of any non-controlling interests. • de-recognises the cumulative translation differences recorded in equity. • • • • recognises the fair value of the consideration received. recognises the fair value of any investment retained. recognises any surplus or deficit in profit or loss. reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 76 ANNUAL REPORT | 2023 53 Notes to the Financial Statements - Continued 27. INTERESTS IN CONTROLLED ENTITIES The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance with the accounting policy described in Note 1: Name Ownership shares 2023 2022 Uranex (Tanzania) Limited Magnis Technologies (Tanzania) Limited Uranex Mozambique Limitada Uranex ESIP Pty Ltd iM3NY LLC 2 Imperium3 New York Inc. 3 Imperium3 Pty Ltd 5 Magnis AAM LLC. 4 Country of incorporation Tanzania Tanzania Mozambique Australia USA USA Australia USA Direct Direct Direct Direct Direct Indirect Direct Direct Class of Ordinary Ordinary Ordinary Ordinary Common Common Ordinary Common Equity Holding 1 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 62.00% 62.00% 73.00% 61.42% 66.66% 33.33% 100.00% n\a 1 percentage of voting power is in proportion to ownership (direct and indirect). 2 iM3NY LLC was incorporated for consolidation purposes on 16 April 2021. The remaining 38% has been attributed to non-controlling interests. 3 Imperium3 New York Inc. was incorporated for consolidation purposes on 29 June 2020 of which 95.5% is owned directly by iM3NY LLC (2022:95.5%) while 4.5% has been attributed to non-controlling interests. On the 28 March 2023 and 30 June 2023, Magnis purchased US$18.5M and US$3.5M respectively, of Series A Preference Shares in iM3NY LLC. As at year end the company has a total indirect investment exposure in Imperium3 New York Inc. of approx. 73.0% via iM3NY LLC. 4 Magnis AAM LLC was incorporated in Delaware USA on 3 January 2023. 100.0% is owned directly by Magnis (2022: n\a %). 5 Imperium 3 Pty Ltd was incorporated in NSW, Australia on 27June 2017, which wholly owns iM3 Townsville Pty Ltd. 66.66% is owned directly by Magnis (2022: 33.33 %). Accounting policies Principles of consolidation • • • • • • • • circumstances in assessing whether it has power over an investee, including: the contractual arrangement with the other vote holders of the investee. rights arising from other contractual arrangements. the Group’s voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group losses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income ‘OCI’ are attributed to the equity holders of the parent of the Group and to the non- controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full, on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • de-recognises the assets [including goodwill] and liabilities of the subsidiary. • de-recognises the carrying amount of any non-controlling interests. • de-recognises the cumulative translation differences recorded in equity. recognises the fair value of the consideration received. recognises the fair value of any investment retained. recognises any surplus or deficit in profit or loss. reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. Notes to the Financial Statements - Continued At 29 June 2020 Magnis acquired additional shares in Imperium 3 New York Inc. (iM3NY) to become a majority shareholder. The direct ownership in iM3NY has been accounted for as an asset acquisition and not a business combination, due to factors which include the equipment assets had been relocated from a previous owner’s facility and at the time of the transaction were still in the process of being recommissioned ahead of the commencement of production. From late March 2021 to April 2021, iM3NY undertook a restructuring where iM3NY LLC was created as the new holding company of iM3NY, as a result of the binding Riverstone Credit Partners, L.P. funding agreement. As part of the syndicated funding package, new investors were introduced in iM3NY, while existing iM3NY investors were migrated into the newly created iM3NY LLC. This restructuring effectively placed investors like Magnis and C4V who previously held shares directly in iM3NY, to now become investors with an indirect exposure to iM3NY, through their direct holding in iM3NY LLC. In July 2021 Magnis provided further funding for the iM3NY lithium-ion battery project by increasing its investment in iM3NY LLC’s Series A preference shares while maintaining its holding of common shares. As at year end the company maintains its controlling ownership of 62% in iM3NY LLC, while the holding company maintains its controlling ownership of 95.5% in iM3NY. Business Combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: fair values of the assets transferred. liabilities incurred to the former owners of the acquired business. • • • equity interests issued by the group. • • fair value of any asset or liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the subsidiary. The consolidation financial statements are those of the consolidated entity, comprising Magnis Energy Technologies Ltd [the parent entity], special purpose entities and all entities which Magnis Energy Technologies Ltd controlled from time to time during the year and at reporting date. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through ties power over the investee. Specifically, the Group controls an investee if and only if the Group has: • power over the investee [i.e., existing rights that give it the ability to direct the relevant activities of the investee]; • exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and The excess of the • consideration transferred, • amount of any non-controlling interest in the acquired entity, and • acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where an acquisition does not meet the definition of a business in AASB 3 Business Combinations, the transaction is accounted for as an asset acquisition. Acquired assets are measured at their proportionate share of the transaction consideration, and no goodwill or bargain purchase is recognised. Dividends are recorded as a component of other revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment. Upon receipt of dividend payments from subsidiaries, the parent will assess whether any indicators or impairment of the carrying value of the investment in the subsidiary exist. Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment loss is recognised. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 53 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 54 77 Notes to the Financial Statements - Continued 28. SHARE-BASED PAYMENT PLANS (a) Recognised share-based payment expenses The expense recognised for employees and non-employees received during the year is shown below: Expense arising from the issue of MOST options (employees) Expense arising from the issue of MOST options (non-employee) Expense arising from the issue of DIRECT options (employees) Expense arising from the issue of DIRECT options (non-employee) Expense arising from the issue of MERT rights (employees) Total expense arising from equity-settled payment transactions (b) Types of share-based payment plans: OPTION SHARE PLAN: MOST - (‘EMPLOYEES’) Consolidated 2023 $ 375,200 - - 556,000 - 931,200 2022 $ 129,700 - 846,600 1,899,000 (11,120) 2,864,180 Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors, Key Management Personnel (KMP) employees and other employees of the consolidated entity. The Magnis Option Share Trust (‘MOST’) is designed to align participants’ interests with those of shareholders by increasing the value of the Company’s shares. In accordance with the provisions of the Plan, listed Ordinary Fully Paid shares and unlisted options are held on behalf of Plan Participants by the Trustee of the MOST. Under the MOST, the exercise price of the options is set by the Board on the date of grant. The life of options to participants granted are for 3 years, but these must be exercised within 3 months of the option holder ceasing employment with Magnis Energy Technologies Ltd. There are no cash settlement alternatives. RIGHTS PLAN: MERT - (‘EMPLOYEES’) Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the consolidated entity. In accordance with the provisions of the Plan, unlisted performance share rights are held on behalf of Plan Participants by the Trustee of the Magnis Executive Rights Trust (‘MERT’). Under MERT, the Executive Rights are divided into five tranches and conversion of each tranche is dependent on satisfaction of performance milestones and service conditions applicable to each tranche, including the relevant person being a director at the time the respective performance milestone tranche is satisfied. Although no specific expiry date exists for each tranche, it has been accepted under AASB2 that the life of Executive Rights granted to participants are for 10 years, but they will immediately lapse when the Executive Rights holder ceases employment with Magnis Energy Technologies Ltd. There are no cash settlement alternatives. (c) Share-based payment plans for non-employee (‘Consultant option’): Share options are granted to selected non-employees from time to time in consideration for the services of the consultant as a share-based incentive (‘Consultant options’). Prior Shareholder approval of the issue of Consultant options is required. Each Consultant Option is granted for nil consideration for services provided by unrelated parties to the Company, the terms are subject to the same terms of the Company’s existing unlisted options. No funds are raised from the issue of the Consultant Options, as they are issued to the consultant in consideration for assistance with the Company’s progress and success. There are no cash settlement alternatives. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 78 ANNUAL REPORT | 2023 55 Notes to the Financial Statements - Continued 28. SHARE-BASED PAYMENT PLANS (a) Recognised share-based payment expenses The expense recognised for employees and non-employees received during the year is shown below: Expense arising from the issue of MOST options (employees) 375,200 129,700 Expense arising from the issue of MOST options (non-employee) Expense arising from the issue of DIRECT options (employees) Expense arising from the issue of DIRECT options (non-employee) 556,000 Expense arising from the issue of MERT rights (employees) Total expense arising from equity-settled payment transactions 931,200 2,864,180 Consolidated 2023 $ - - - 2022 $ - 846,600 1,899,000 (11,120) (b) Types of share-based payment plans: OPTION SHARE PLAN: MOST - (‘EMPLOYEES’) Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors, Key Management Personnel (KMP) employees and other employees of the consolidated entity. The Magnis Option Share Trust (‘MOST’) is designed to align participants’ interests with those of shareholders by increasing the value of the Company’s shares. In accordance with the provisions of the Plan, listed Ordinary Fully Paid shares and unlisted options are held on behalf of Plan Participants by the Trustee of the MOST. Under the MOST, the exercise price of the options is set by the Board on the date of grant. The life of options to participants granted are for 3 years, but these must be exercised within 3 months of the option holder ceasing employment with Magnis Energy Technologies Ltd. There are no cash settlement alternatives. RIGHTS PLAN: MERT - (‘EMPLOYEES’) consolidated entity. Notes to the Financial Statements - Continued (d) Summary of options and rights granted under share-based payment Options granted under share-based payment. The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, MOST share options issued during the year. Outstanding at the beginning of the year Granted during the year Exercised during the year (Expired \ Lapsed) during the year Outstanding at the end of the year 2023 No. 10,125,000 7,000,000 - (4,000,000) 13,125,000 2023 WAEP 0.72 1.34 - - 0.75 2022 No. 3,750,000 7,375,000 - (1,000,000) 10,125,000 Exercisable at the end of the year 13,125,000 0.75 10,125,000 2022 WAEP 0.69 0.72 - (0.70) 0.72 0.72 The range of exercise prices for options outstanding at the end of the year was between $0.40 and $0.80 (2022: $0.40 and $0.80). Rights granted under share-based payment. The below table shows the number of, and movements in, MERT performance share rights issued during the year. Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed during the year Outstanding at the end of the year 2023 No. 4,000,000 - - - 4,000,000 2023 WAEP - - - - - 2022 No. 7,500,000 - (1,500,000) (2,000,000) 4,000,000 2022 WAEP - - - - - Exercisable at the end of the year 4,000,000 - 4,000,000 - During 2023, NIL ordinary fully paid shares (2022: 1,500,000) were issued as a result of converting performance rights. Magnis Energy Technologies Ltd operates an ownership-based scheme for Directors and Employees of the (e) Weighted average remaining estimated life. In accordance with the provisions of the Plan, unlisted performance share rights are held on behalf of Plan Participants by the Trustee of the Magnis Executive Rights Trust (‘MERT’). Under MERT, the Executive Rights are divided into five tranches and conversion of each tranche is dependent on satisfaction of performance milestones and service conditions applicable to each tranche, including the relevant person being a director at the time the respective performance milestone tranche is satisfied. Although no specific expiry date exists for each tranche, it has been accepted under AASB2 that the life of Executive Rights granted to participants are for 10 years, but they will immediately lapse when the Executive Rights holder ceases employment with Magnis Energy Technologies Ltd. There are no cash settlement alternatives. (c) Share-based payment plans for non-employee (‘Consultant option’): The weighted average remaining estimated life outstanding as at 30 June 2023 is: • Share options - MOST: • Share options - Direct: • Share rights - MERT: 1.87 years (2022:1.22 years) 0 years (2022: 2.41 years) 9.00 years (2022:9.00 years) (f) Weighted average fair value. The weighted average fair value granted during the year to 30 June 2023 is: • Share options - MOST: • Share options - Direct: • Share rights - MERT: $0.09394 (2022: $0.09440) n\a (2022: 14110) $0.00923 (2022:0.00923) (g) Option pricing model Equity-settled transactions Share options are granted to selected non-employees from time to time in consideration for the services of the consultant as a share-based incentive (‘Consultant options’). Prior Shareholder approval of the issue of Consultant options is required. The fair value of the equity-settled share options granted under the share-based payment is estimated as at the date of grant using a Binomial Model, considering the terms and conditions upon which the options were granted. The following table lists the inputs to the models used for the year ended 30 June 2023: Each Consultant Option is granted for nil consideration for services provided by unrelated parties to the Company, the terms are subject to the same terms of the Company’s existing unlisted options. No funds are raised from the issue of the Consultant Options, as they are issued to the consultant in consideration for assistance with the Company’s progress and success. There are no cash settlement alternatives. Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of option (years) Option exercise price (cents) Weighted average share price at measurement dates (cents) Exercise price multiple Model used Nil 47 - 99 0.062 - 3.878 2.0 - 3.0 40 - 80 18.5 - 53.0 2 Binomial MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 55 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 56 79 Notes to the Financial Statements - Continued The effects of early exercise have been incorporated into calculations by using an expected life for the option that is shorter than the estimated life based on historical exercise behaviour, which is not necessarily indicative of exercise patterns that may occur in the future. The expected volatility was determined using a historical sample of Company share prices. The resulting expected volatility therefore reflects the assumption that the historical volatility is indicative of future trends which may also not necessarily be the actual outcome. The option holders were assumed to exercise prior to expiry date when the price is twice that of the exercise price. This reflects the restrictions to trading of directors and employees outlined in the Company’s share trading policy. During the financial year, the Magnis Option Share Trust (‘MOST’) scheme acquired and was issued with 7,000,000 (2022: 7,375,000) options on varying terms and conditions for allotment to Directors and employees. Accounting policies The Group provides benefits to employees [including directors] of, and consultants to, the Group in the form of share-based payment transactions, whereby services are rendered in exchange for shares or rights over shares [‘equity-settled transactions’]. The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value of options and performance rights with market-based performance criteria is determined by an external valuer using a binomial option pricing model. The fair value of performance plan rights with non- market performance criteria is determined by reference to the Company’s share price at date of grant. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending in the date on which the recipient becomes fully entitled to the award [‘vesting date’]. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the directors, based on the best available information at reporting date will ultimately vest. No adjustment is made for the likelihood of market conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The charge or credit for the period represents the movement in cumulative expense recognised as at the beginning and end of the period. Where awards vest immediately, the expense is also recognised in profit or loss. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Where the terms of an equity-settled award is cancelled, it is treated as if it had been vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and the new award are treated as if they were a modification of the original award as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. 29. FINANCIAL INSTRUMENTS (a) Financial risk management objectives and policies The Group’s principal financial instruments consist of short-term deposits, receivables, and payables. These activities expose the Group to a variety of financial risks: market risk, (i.e., interest rate risk and foreign exchange risks), credit risk and liquidity risk. The overall objective of the Group’s financial risk management policies is to meet its financial targets whilst protecting future financial security. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 80 ANNUAL REPORT | 2023 57 Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued The effects of early exercise have been incorporated into calculations by using an expected life for the option that is shorter than the estimated life based on historical exercise behaviour, which is not necessarily indicative of exercise patterns that may occur in the future. The Board fulfils its corporate governance and oversight responsibilities by monitoring and reviewing the integrity of financial statements, the effectiveness of internal financial control and the policies on risk oversight and management. Management is charged with implementing the policies. The expected volatility was determined using a historical sample of Company share prices. The resulting expected volatility therefore reflects the assumption that the historical volatility is indicative of future trends which may also The management manages the different types of risks to which the Group is exposed by considering risk and monitoring levels of exposure to interest risk and by being aware of market forecasts for interest rates. not necessarily be the actual outcome. The option holders were assumed to exercise prior to expiry date when the price is twice that of the exercise price. This reflects the restrictions to trading of directors and employees outlined in the Company’s share trading policy. During the financial year, the Magnis Option Share Trust (‘MOST’) scheme acquired and was issued with 7,000,000 (2022: 7,375,000) options on varying terms and conditions for allotment to Directors and employees. Accounting policies [‘equity-settled transactions’]. The Group provides benefits to employees [including directors] of, and consultants to, the Group in the form of share-based payment transactions, whereby services are rendered in exchange for shares or rights over shares The cost of equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value of options and performance rights with market-based performance criteria is determined by an external valuer using a binomial option pricing model. The fair value of performance plan rights with non- market performance criteria is determined by reference to the Company’s share price at date of grant. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending in the date on which the recipient becomes fully entitled to the award [‘vesting date’]. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the directors, based on the best available information at reporting date will ultimately vest. No adjustment is made for the likelihood of market conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The charge or credit for the period represents the movement in cumulative expense recognised as at the beginning and end of the period. Where awards vest immediately, the expense is also recognised in profit or loss. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Where the terms of an equity-settled award is cancelled, it is treated as if it had been vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and the new award are treated as if they were a modification of the original award as described in the previous paragraph. earnings per share. 29. FINANCIAL INSTRUMENTS (a) Financial risk management objectives and policies The Group’s principal financial instruments consist of short-term deposits, receivables, and payables. These activities expose the Group to a variety of financial risks: market risk, (i.e., interest rate risk and foreign exchange risks), credit risk and liquidity risk. protecting future financial security. The overall objective of the Group’s financial risk management policies is to meet its financial targets whilst Liquidity risk is monitored through general business budgets and forecasts. The Board reviews and agrees on policies for managing these risks. (b) Market Risk Foreign currency risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's national currency. The risk is measured using sensitivity analysis and cash flow forecasting. The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Consolidated US dollars Assets US$ Liabilities US$ 2023 6,300,913 2022 4,793,355 2023 39,615 2022 69,703 The Group had net assets denominated in foreign currencies of US$6,261,298 (assets less liabilities) as at 30 June 2023 (2022:US$4,723,652). Based on this exposure, had the Australian dollar weakened or strengthened by 5% against these foreign currencies with all other variables held constant, the consolidated entity's loss before tax for the year would have been $135,883 higher / $88,656 lower, while the consolidated entity's net assets \ equity would have been $496,393 higher / $449,118 lower. The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date. The actual foreign exchange loss realised for the year ended 30 June 2023 was $123,522 (2022: $19,405) Interest rate risk The Group is exposed to movements in market interest rates on short-term deposits. Management ensures a balance is maintained between the liquidity of cash assets and the interest rate return. Presently, the Group has no interest-bearing liabilities. At reporting date, the Group had the following financial assets and liabilities exposed mostly to Australian variable interest rates and are unhedged. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of Cash and cash equivalents Consolidated 2023 $ 22,137,605 2022 $ 100,238,244 The weighted average interest rate for the Group at the reporting date was 0.0197% (2022:0.4850%). In accordance with the Group policy of reviewing this risk, the following sensitivity analysis based on interest rate exposure at reporting date where the interest rate movement varies and other variables remain constant, post-tax loss and equity would have been affected as shown. The analysis has been performed on the same basis for both 2023 and 2022. MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 57 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 58 81 Notes to the Financial Statements - Continued 30 June 2023 Consolidated Entity Financial asset Cash and cash equivalents 30 June 2022 Consolidated Entity Financial asset Cash and cash equivalents Carrying Amount Interest Rate Risk -1% Interest Rate Risk +1% Net Loss $ Equity $ Net Loss $ Equity $ 22,137,605 (221,376) (221,376) 221,376 221,376 Carrying Amount Interest Rate Risk -1% Interest Rate Risk +1% Net Loss $ Equity $ Net Loss $ Equity $ 100,238,244 (1,002,382) (1,002,382) 1,002,382 1,002,382 31. ADMINISTRATION EXPENSES The sensitivity was higher during 2023 than 2022 because of higher cash balances. The analysis assumes the carrying amounts noted will be maintained over the next financial year. (c) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and Notes to the financial statements. The Group does not hold any collateral. The Group has adopted a simplified lifetime expected loss allowance in estimating expected credit losses to trade and other receivables. The Group has no significant concentrations of credit risk. The maximum exposure to credit risk at reporting date is the carrying amount (net of expected credit loss) of those assets as disclosed in the statement of financial position and Notes to the financial statements. (d) Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due. The Group’s objective is to maintain a balance between continuity of funding and flexibility as to its source. The Directors receive cash flow reports periodically and increase the frequency of review when the safety margin is or is nearly breached. The Board formulates plans to replenish its cash resources when required and implements cost reduction programmes to reduce cash expenditure. The table below reflects all contractually fixed payoffs, repayments, and interest from recognised financial liabilities. For these obligations the undiscounted cash flows for the respective upcoming financial years are presented. Cash flows for financial assets and liabilities without fixed timing or amount are based on the conditions existing at 30 June 2023. The remaining contractual maturities of the Group entity's financial liabilities consisting of trade and other payables are: On demand Less than 1 year 1-5 years > 5 years (e) Net Fair Values Consolidated 2023 $ - 15,632,853 - - 15,632,853 2022 $ - 3,646,194 - - 3,646,194 The carrying amounts of financial assets and liabilities as shown in the statement of financial position approximate their fair value. Notes to the Financial Statements - Continued 30. INTEREST EXPENSES Interest Expense Interest on Lease Liability Interest Expense Interest Expense - iM3NY Interest expenses - iM3NY Audit Fees Insurance Rental expenses Travel costs C4V Service Supply Fees Other expenses Administration expenses Audit Fees - iM3NY Insurance - iM3NY Rental expenses - iM3NY Travel costs - iM3NY Other expenses - iM3NY Administration expenses - iM3NY 32. LEGAL AND CONSULTANCY EXPENSES Legal and consulting expenses Legal Consultants Marketing Legal - iM3NY Consultants - iM3NY Marketing - iM3NY Legal and consulting expenses - iM3NY Consolidated 2023 $ 2022 $ 363,095 1,000,000 46,826 18,115 409,921 1,018,115 15,105,274 9,091,609 15,105,274 9,091,609 15,515,195 10,109,724 Consolidated 2023 $ 143,319 373,294 131,139 320,623 885,175 2022 $ 90,681 96,024 132,510 152,071 827,259 3,077,231 1,627,789 4,930,781 2,926,334 674,087 488,032 3,056,534 118,298 156,728 3,238,892 2,744,663 162,738 4,109,473 2,744,273 8,446,424 9,047,294 13,377,205 11,973,628 Consolidated 2023 $ 2022 $ 454,829 889,211 3,237,300 2,860,162 156,546 276,880 3,848,675 4,026,253 456,001 337,437 - 132,139 588,140 - 215,631 553,068 4,436,815 4,579,321 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 82 ANNUAL REPORT | 2023 59 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 60 Notes to the Financial Statements - Continued Notes to the Financial Statements - Continued Interest Rate Risk Interest Rate Risk 30. INTEREST EXPENSES 30 June 2023 Net Loss Equity Net Loss 22,137,605 (221,376) (221,376) 221,376 221,376 Interest Rate Risk Interest Rate Risk -1% $ -1% $ +1% $ Equity $ +1% $ Equity $ $ $ Carrying Amount Carrying Amount 30 June 2022 Net Loss Equity Net Loss Consolidated Entity Financial asset Cash and cash equivalents Consolidated Entity Financial asset Cash and cash equivalents 100,238,244 (1,002,382) (1,002,382) 1,002,382 1,002,382 The sensitivity was higher during 2023 than 2022 because of higher cash balances. The analysis assumes the carrying amounts noted will be maintained over the next financial year. (c) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and Notes to the financial statements. The Group does not hold any collateral. The Group has adopted a simplified lifetime expected loss allowance in estimating expected credit losses to trade and other receivables. The Group has no significant concentrations of credit risk. The maximum exposure to credit risk at reporting date is the carrying amount (net of expected credit loss) of those assets as disclosed in the statement of financial position and Notes to the financial statements. (d) Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due. The Group’s objective is to maintain a balance between continuity of funding and flexibility as to its source. The Directors receive cash flow reports periodically and increase the frequency of review when the safety margin is or is nearly breached. The Board formulates plans to replenish its cash resources when required and implements cost reduction programmes to reduce cash expenditure. The table below reflects all contractually fixed payoffs, repayments, and interest from recognised financial liabilities. For these obligations the undiscounted cash flows for the respective upcoming financial years are presented. On demand Less than 1 year 1-5 years > 5 years (e) Net Fair Values their fair value. The carrying amounts of financial assets and liabilities as shown in the statement of financial position approximate Consolidated 2023 $ 2022 $ 15,632,853 3,646,194 - - - - - - 15,632,853 3,646,194 Interest Expense Interest on Lease Liability Interest Expense Interest Expense - iM3NY Interest expenses - iM3NY 31. ADMINISTRATION EXPENSES Audit Fees Insurance Rental expenses Travel costs C4V Service Supply Fees Other expenses Administration expenses Audit Fees - iM3NY Insurance - iM3NY Rental expenses - iM3NY Travel costs - iM3NY Other expenses - iM3NY Administration expenses - iM3NY Cash flows for financial assets and liabilities without fixed timing or amount are based on the conditions existing at 30 June 2023. The remaining contractual maturities of the Group entity's financial liabilities consisting of trade 32. LEGAL AND CONSULTANCY EXPENSES and other payables are: Legal Consultants Marketing Legal and consulting expenses Legal - iM3NY Consultants - iM3NY Marketing - iM3NY Legal and consulting expenses - iM3NY Consolidated 2023 $ 363,095 46,826 2022 $ 1,000,000 18,115 409,921 1,018,115 15,105,274 9,091,609 15,105,274 9,091,609 15,515,195 10,109,724 Consolidated 2023 $ 143,319 373,294 131,139 320,623 885,175 2022 $ 90,681 96,024 132,510 152,071 827,259 3,077,231 1,627,789 4,930,781 2,926,334 674,087 488,032 3,056,534 118,298 156,728 3,238,892 2,744,663 162,738 4,109,473 2,744,273 8,446,424 9,047,294 13,377,205 11,973,628 Consolidated 2023 $ 454,829 2022 $ 889,211 3,237,300 2,860,162 156,546 276,880 3,848,675 4,026,253 456,001 337,437 - 132,139 588,140 - 215,631 553,068 4,436,815 4,579,321 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 59 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 ANNUAL REPORT | 2023 60 83 Notes to the Financial Statements - Continued 33. BORROWING COSTS AND LOAN AMORTIZATION Notes to the Financial Statements - Continued Loan Amortization - iM3NY Borrowing Costs - iM3NY # Borrowing Costs and Loan Amortization – iM3NY # (2022: Includes $20,030,045 of loss on extinguishment of debt.) Consolidated 2023 $ 12,500,355 2022 $ 3,336,221 1,790,017 21,486,071 14,290,372 24,822,292 In accordance with a resolution of the Directors of Magnis Energy Technologies Ltd, I state that: a) the financial statements and Notes of the consolidated entity are in accordance with the Corporations Act DIRECTORS' DECLARATION 1. In the opinion of the Directors: 2001, including: (i) Giving a true and fair view of its financial position as at 30 June 2023 and performance for the financial year ended on that date. the Corporations Regulations 2001. (ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and b) The financial statements and Notes also comply with International Financial Reporting Standards as disclosed in Note 1. c) There are reasonable grounds to believe that the Company, as noted by Directors in Note 1 - Going concern, will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2023. On behalf of the board F Poullas Executive Chairman Sydney, (cid:20)(cid:26) October 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 84 61 ANNUAL REPORT | 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 62 Notes to the Financial Statements - Continued 33. BORROWING COSTS AND LOAN AMORTIZATION Loan Amortization - iM3NY Borrowing Costs - iM3NY # Borrowing Costs and Loan Amortization – iM3NY # (2022: Includes $20,030,045 of loss on extinguishment of debt.) Consolidated 2023 $ 2022 $ 12,500,355 3,336,221 1,790,017 21,486,071 14,290,372 24,822,292 10 2 DIRECTOR’S DECLARATION Notes to the Financial Statements - Continued DIRECTORS' DECLARATION In accordance with a resolution of the Directors of Magnis Energy Technologies Ltd, I state that: 1. In the opinion of the Directors: a) the financial statements and Notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of its financial position as at 30 June 2023 and performance for the financial year ended on that date. (ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. b) c) The financial statements and Notes also comply with International Financial Reporting Standards as disclosed in Note 1. There are reasonable grounds to believe that the Company, as noted by Directors in Note 1 - Going concern, will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2023. On behalf of the board F Poullas Executive Chairman Sydney, (cid:20)(cid:26) October 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 61 ANNUAL REPORT | 2023 MAGNIS ENERGY TECHNOLOGIES LTD: ANNUAL FINANCIAL REPORT 2023 85 62 2 11 INDEPENDENT AUDITOR’S REPORT 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 2023, 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 the Group 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 2023 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001; 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 the independence declaration required by the Corporations Act 2001, 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 $72,717,606 during the year ended 30 June 2023 and net operating cash outflows of $58,684,323; as of that date; As stated in Note 1 these events and 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. Liability limited by a scheme approved under Professional Services Legislation. Hall Chadwick Melbourne Audit ABN 41 134 806 025 Registered Company Auditors. Level 14 440 Collins Street Melbourne VIC 3000 T: +61 3 9820 6400 Post: Locked Bag 777 Collins Street West VIC 8007 Australia www.hallchadwickmelb.com.au E: hcm@hallchadwickmelb.com.au Hall Chadwick Association - a national group of independent Chartered Accountants and Business Advisory firms. MELBOURNE SYDNEY BRISBANE ADELAIDE PERTH DARWIN 86 ANNUAL REPORT | 2023 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 2023. 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 9 ‘Financial Assets at FVOCI Our procedures included, amongst others: At 30 June 2023, the Consolidated Entity had an investment in Charge CCCV LLC “C4V” an entity external to the Group and recorded at a value of $ 15,096,142. The Group’s accounting policy in respect of this investment is outlined in Note 9. 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. Key Audit Matter Development Asset Refer to Note 11 ‘Development Asset’ The Group has $8,029,704 recorded as development asset as at 30 June 2023. The respect of Group’s accounting policy exploration and evaluation assets is outlined in Note 11. in This is a key audit matter because the carrying value of the assets are material to the financial statements and significant judgements are applied in determining whether an indicator of impairment exists in relation to capitalised exploration and expenditure assets in accordance with Australian Accounting for and Standard AASB 6 Exploration Evaluation of Mineral Resources.  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 9 as well as checking the mathematical accuracy of the model and underlying calculations.  Gaining an understanding of quantum of funds required to ensure Nachu and iM3NY progress to development and into production to produce the royalty cash flows to C4V.  Evaluating the accuracy and completeness of the disclosures in accordance with AASB 9, AASB 13 and AASB 7. How Our Audit Addressed the Key Audit Matter 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 obtained management’s position on the assessment of impairment at the end of the year and evaluated it for reasonableness; o reviewed the tenements profile and ensured any that have been surrendered were expensed as required; Liability limited by a scheme approved under Professional Services Legislation. Hall Chadwick Melbourne Audit ABN 41 134 806 025 Registered Company Auditors. Level 14 440 Collins Street Melbourne VIC 3000 T: +61 3 9820 6400 Post: Locked Bag 777 Collins Street West VIC 8007 Australia www.hallchadwickmelb.com.au E: hcm@hallchadwickmelb.com.au Hall Chadwick Association - a national group of independent Chartered Accountants and Business Advisory firms. MELBOURNE SYDNEY BRISBANE ADELAIDE PERTH DARWIN ANNUAL REPORT | 2023 87 Key Audit Matter Property, Plant and Equipment How Our Audit Addressed the Key Audit Matter Our procedures included amongst others: Refer to Note 12 ‘Property, Plant and Equipment’ The Group has $93,091,666 property, plant and equipment at 30 June 2023 of which $92,984,518 relates to iM3NY. We focused on this matter as a key audit matter as equipment is the most significant asset of the group. Key Audit Matter Borrowings Refer to Note 14 (c) ‘Non Current - Borrowings’ The Group has $150,631,220 of non-current borrowings as at 30 June 2023. Magnis’s subsidiary iM3NY entered into an agreement with Atlas Credit Partners through AON for a loan facility of USD 100 million (AUD 145.11 million) which was used to retire the USD 48.475 million ( AUD 63.98 million) senior debt facility entered into with Riverstone and to provide additional cash for the business. This is considered to be a key area of audit focus due to its materiality to the financial report.  Assessed the Group’s analysis for indicators of impairment, including the views of management’s valuation specialists. This included consideration of whether any movements in the valuation drivers impairment by comparing them to historical results in addition to economic and industry forecasts. indicated potential  We assessed the adequacy of group's disclosures in relation to the carrying value of property, plant & equipment. How Our Audit Addressed the Key Audit Matter Our procedures included, amongst others:  Gained an understanding the loan as per the loan agreement.  A review of the loan documentation including the terms of the secured loans and evaluated the accounting treatment adopted by management in accounting for the borrowings.  Confirmed that the management is in compliance with the loan’s covenants  We assessed the adequacy of the Group’s disclosures in respect of borrowings. 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 2023, 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. Other matter The audited financial statements published by the company on 3rd October 2023 includes an audit report with a qualified opinion. The qualification was based on the inability to obtain sufficient and appropriate audit evidence to conclude on material areas relating to equity, intercompany transactions and the implications of income tax arising out of these transactions on the subsidiary iM3NY LLC, as the component auditor had not completed their work on those areas. Since then, the component auditor have completed their work and issued an audit report with unqualified opinion. As we now have obtained sufficient appropriate audit evidence, our audit report has been issued with an unqualified opinion on the reissued consolidated financial statements. Liability limited by a scheme approved under Professional Services Legislation. Hall Chadwick Melbourne Audit ABN 41 134 806 025 Registered Company Auditors. Level 14 440 Collins Street Melbourne VIC 3000 T: +61 3 9820 6400 Post: Locked Bag 777 Collins Street West VIC 8007 Australia www.hallchadwickmelb.com.au E: hcm@hallchadwickmelb.com.au Hall Chadwick Association - a national group of independent Chartered Accountants and Business Advisory firms. MELBOURNE SYDNEY BRISBANE ADELAIDE PERTH DARWIN 88 ANNUAL REPORT | 2023 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. 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. 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 Liability limited by a scheme approved under Professional Services Legislation. Hall Chadwick Melbourne Audit ABN 41 134 806 025 Registered Company Auditors. Level 14 440 Collins Street Melbourne VIC 3000 T: +61 3 9820 6400 Post: Locked Bag 777 Collins Street West VIC 8007 Australia www.hallchadwickmelb.com.au E: hcm@hallchadwickmelb.com.au Hall Chadwick Association - a national group of independent Chartered Accountants and Business Advisory firms. MELBOURNE SYDNEY BRISBANE ADELAIDE PERTH DARWIN ANNUAL REPORT | 2023 89 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 13 to 18 of the directors’ report for the year ended 30 June 2023. In our opinion, the remuneration report of Magnis Energy Technologies Limited, for the year ended 30 June 2023, 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 Audit Chartered Accountants Level 14 440 Collins Street Melbourne VIC 3000 Anh (Steven) Nguyen Director Date: 18 October 2023 Liability limited by a scheme approved under Professional Services Legislation. Hall Chadwick Melbourne Audit ABN 41 134 806 025 Registered Company Auditors. Level 14 440 Collins Street Melbourne VIC 3000 T: +61 3 9820 6400 Post: Locked Bag 777 Collins Street West VIC 8007 Australia www.hallchadwickmelb.com.au E: hcm@hallchadwickmelb.com.au Hall Chadwick Association - a national group of independent Chartered Accountants and Business Advisory firms. MELBOURNE SYDNEY BRISBANE ADELAIDE PERTH DARWIN 90 ANNUAL REPORT | 2023 212 SUPPLEMENTARY INFORMATION Corporate Governance Statement for 2023 can be viewed at: https://magnis.com.au/files/Corporate-Governance-Statement.pdf The Security holder information set out below was current at 24 October 2023 Substantial Shareholders NAME Citicorp Nominees Pty Limited # of Securities % of Securities 61,142,962 7.13 Number of holders in each class of security CLASS OF SECURITY Securities % of Securities No. of Holders % of Holders Ordinary Fully Paid 1,199,498,151 100 19,438 100 Voting Rights attached to each Class of Security Each Ordinary Fully Paid Share is entitled to one vote at any General Meeting of the Company and participates in any distribution equally with all other Ordinary Fully Paid Shares The unlisted Options have no voting rights Distribution Schedule Holding Distribution 30 September 2022 RANGE Securities % of Securities No. of Holders % of Holders 100,001 and over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 922,121,213 226,024,616 27,027,892 18,307,988 701,312 77.22 18.92 2.26 1.53 0.06 1,578 6,697 3,382 6,698 1,083 8.12 34.45 17.40 34.46 5.57 ● 4.10.8 No of holders that have less than a marketable parcel (which is currently sitting at close to 10% of the register). Unmarketable Parcel Details - 30 September 2022 Range Securities % of Securities No. of Holders % of Holders Unmarketable Parcel 25,223,599 2.11 8,841 45.48 91 ANNUAL REPORT | 2023 Rank Name 20 Largest Shareholders 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 CITICORP NOMINEES PTY LIMITED MAZZDEL PTY LIMITED MAZZDEL PTY LIMITED BNP PARIBAS NOMINEES PTY LTD EVOLUTION CAPITAL PTY LTD MR FRANK POULLAS MR MATTHEW JOHN BOYSEN MR MATTHEW JOHN BOYSEN HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 KINGSLAND DEVELOPMENTS AUSTRALIA PTY LTD BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM MR TIAN YONG LIU & MRS WEI YING JIANG MR JOHN PETER SAUNIG FINCLEAR PTY LTD MR MARLON PATHER HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED GREENHILL ROAD INVESTMENTS PTY LTD BNP PARIBAS NOMS PTY LTD MR FRANK POULLAS MISS HAZEL DARCY Details of Unquoted Securities DESCRIPTION Option expiring various dates ex various prices Performance Shares Option Expiring 25 Nov 2024 ex $0.70 Option Expiring 25 Nov 2024 ex $0.50 Option Expiring 25 Nov 2024 ex $0.40 Option Expiring 7 Dec 2024 ex $0.60 Option Expiring 7 December 2025 ex $0.80 Option Expiring 18 May 2026 ex $0.50 Name 85,317,692 30,438,781 21,633,678 20,792,158 20,000,000 13,129,580 11,801,000 11,401,320 9,050,510 7,932,406 6,433,584 6,221,498 5,979,322 5,957,545 5,000,000 4,872,468 4,500,000 4,444,098 4,200,000 4,097,699 %IC 7.13 2.55 1.81 1.74 1.67 1.10 0.99 0.95 0.76 0.66 0.54 0.52 0.50 0.50 0.42 0.41 0.38 0.37 0.35 0.34 # of Securities # of Holders 2,625,000 4,000,000 2,000,000 10,000,000 20,000,000 1,300,000 6,000,000 35,000,000 5 2 1 2 2 1 3 3 Company Secretaries Duncan Glasgow Jonathan Reynolds Phone & registered office address Ph:+61 2 9397 9888 Address of Registered Office Suite 1101, 1 Castlereagh Street, Sydney NSW 2000 Australia Other Stock Exchanges There are no other exchanges although there are 2 OTC markets, namely OTCQX and FSE ANNUAL REPORT | 2023 92 ANNUAL REPORT 2023 I T R O P E R L A U N N A – S E G O L O N H C E T Y G R E N E S I N G A M 3 2 0 2 

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