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2023 ReportA.C.N. 006 639 514 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Reedy Lagoon Corporation Limited Contents 30 June 2017 Chairman's letter Review of operations Corporate directory Directors' report Auditor's independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's report to the members of Reedy Lagoon Corporation Limited Shareholder information Tenement schedule 2 3 8 9 17 18 19 20 21 22 41 42 46 48 Corporate Governance Statement is available from the MANAGEMENT page at : http://www.reedylagoon.com.au 1 Reedy Lagoon Corporation Limited Chairman's letter 30 June 2017 28th September 2017 Dear Shareholders, In 2016 Reedy Lagoon identified lithium brines as presenting an opportunity not often available to resource companies. The extraordinary growth in demand for lithium created by an increasing number of very large lithium ion battery factories and the likelihood that growth in demand was likely to continue for at least 5 years meant that there was an opportunity for Reedy Lagoon to establish a lithium operation with sales contracts on favourable terms. The Company acted to seize this opportunity by securing rights to acquire 3 lithium brine projects in Nevada, USA. Lithium production from brines is potentially cheaper than production from hard rock and the technology for direct extraction of lithium products from brines is developing rapidly. Nevada is also home to the Tesla gigafactory. Reedy Lagoon’s acquisition of the company which owns the 3 lithium brine projects (Nevada Lithium Pty Ltd) was approved by shareholders in April 2017. That acquisition needs to be completed this calendar year by the issue of $2 million worth of RLC Shares to the vendors of Nevada Lithium at the time when RLC raises at least $2 million for drilling at the projects. A meeting is to be called for RLC shareholders to provide the consents required by the ASX Listing Rules and the Corporations Act for the issue of shares to the vendors to complete the acquisition. Geophysical surveys undertaken at the projects have identified strong brine targets at each project. Funding is now required for drilling. Your Directors have been pursuing a number of strategies to obtain funding including seeking to engage with companies active in or holding expertise in lithium brine processing. Directors expect that a significant amount of funding will be required to be raised from external sources, but any capital raising will include an entitlement offer to shareholders. The Directors expect to be able to announce details of its capital raising before the annual general meeting. Yours sincerely Jonathan Hamer Chairman Reedy Lagoon Corporation Limited 2 Reedy Lagoon Corporation Limited Review of operations 30 June 2017 Mineralisation styles targeted during the period included lithium brines (Nevada, USA) and minor work conducted on: Iron-ore (Burracoppin Magnetite project) • • Uranium (Edward Creek project) • Gold (Cassilis project) Overview Reedy Lagoon has projects prospective for lithium brines in Nevada, USA. The identification of increasing demand for lithium, and the prospect of emerging new processing technologies for extracting lithium from brines, led to Reedy Lagoon developing an interest in three project areas in Nevada. The project areas are in closed geological basins which share similar geology with, but are separate from, Clayton Valley in which North America's only lithium producing brine operation is located. The lithium brine projects are: Big Smoky South Columbus Salt Marsh Alkali Lake North. Reedy Lagoon intends drilling in the December Quarter 2017 to establish whether brine targets lithium) (hyper-saline water potentially containing identified by geophysical surveys at each of the projects contain lithium in sufficient concentrations for economic extraction. Samples of brine fluids pumped from the drill holes will be analysed to establish their lithium content and if containing lithium in sufficient quantities, testing will follow to assess potential process pathways for the commercial extraction of lithium. Should potential for commercial extraction be proven by this work, then it is possible that production could be achievable in 2020 (extensive environmental studies which would underpin any feasibility study generally take at least 2 years and process plant construction could take about a year). Acquisition of the Nevada Brine projects will be completed by the issue of $2m worth of RLC shares to the vendors following a capital raise of at least $2m to fund drilling. The number of RLC shares that will be issued to the vendors to meet the $2m payment amount will be determined using the offer price of RLC shares issued for the capital raise. Reedy Lagoon also has projects targeting iron-ore in Western Australia and uranium in South Australia. These projects are secondary to the prime focus which is lithium. The Company cancelled its option to acquire the Cassilis gold project. 3 Reedy Lagoon Corporation Limited Review of operations 30 June 2017 Exploration Lithium Exploration Nevada Lithium Brine Projects LITHIUM BRINES Nevada, USA Alkali Lake North: Big Smokey South: Columbus Salt Marsh: 128 claims – 2,554 acres (1,033 ha) 239 claims – 4,753 acres (1,924 ha) 167 claims – 3,291 acres (1,332 ha) RLC 100% The Nevada lithium brine projects comprise Placer Mining Claims over three prospects in large basins (ground water catchment areas) located in Nevada, USA (refer to ASX release 30 January 2017). The projects are within 10 to 50 kilometres of the Silver Peak lithium production operation of Albemarle Corp, in Clayton Valley. Silver Peak is the only lithium brine operation, and one of only a handful of lithium producers, in North America. The Tesla Gigafactory 1, a lithium-ion battery factory, is only 250 kilometres northwest of RLC's lithium projects. The three projects cover a combined area of 4,289 hectares (10,598 acres) under 534 placer claims. All the placer claims are 100% owned and there are no royalty arrangements. Geophysical surveys carried out by RLC during the period successfully demonstrate the presence of brine targets (hyper-saline water potentially containing lithium) located within sub-basins in all three of the Company's projects (refer to ASX releases 5 May 2017, 26 May 2017, 29 May 2017, 30 May 2017). Brine targets comprising multiple aquifers with hyper-saline water potentially containing lithium have been identified in each of the projects. The brine targets are very strong, with RLC planning to drill only targets showing resistivities of one ohm-metre or less. Drilling is planned once funding has been arranged, with permits to drill being secured following the end of the report period. 4 Reedy Lagoon Corporation Limited Review of operations 30 June 2017 Iron Ore Exploration Burracoppin Project IRON ORE - MAGNETITE Western Australia RLC 100% In January 2017, Bullamine Magnetite Pty Ltd, a wholly owned subsidiary of Reedy Lagoon, lodged an application for an exploration licence covering its previous Burracoppin Magnetite Prospect located near Merredin in Western Australia. Reedy Lagoon held the Burracoppin Magnetite deposit when it was discovered in 2012 with its then joint venture farm-in partners: Cliffs Magnetite Holdings Pty Ltd (manager), NS Iron Ore Development Pty Ltd and Sojitz Mineral Development Pty Ltd. The farm-in parties withdrew in 2014 and Reedy Lagoon relinquished the ground in April 2016. Magnetite mineralisation in multiple bands with variable continuity was intersected by drilling in 2012 by our previous joint venture. Additional drilling is required to better understand the extent of the mineralisation. However, the limited drilling completed indicates the mineralised bands have combined horizontal widths of between 150 metres and 200 metres. Detailed magnetic data indicate a strike length of 3,000 metres and a potential tonnage of magnetite bearing rock of between 140 and 220 million tonnes (refer to ASX release 31 January 2013). Note that the potential quantity and grade of the Burracoppin deposit is conceptual in nature. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. Metallurgical studies on core samples have produced concentrate with high iron levels (67% to 70% Fe) and low levels of impurities at a relatively coarse grind size (P80 -150 microns) (refer to ASX release 23 November 2012). The project area is under application (E70/4941, lodged 9/01/2107, area 5,854 ha) and no field work was conducted during the report period. Uranium Exploration Edward Creek Project RLC 100% All diamond interest farmed out to DiamondCo Limited which conducts diamond exploration independently from RLC. RLC retains nil interest in diamond. South Australia URANIUM Exploration for uranium remains postponed because of the low uranium price. Exploration expenditure on the project area by DiamondCo enables RLC to postpone its planned exploration for uranium without penalty. RLC’s past exploration at Edward Creek has identified uranium on the north eastern margin of the Gawler Craton in South Australia. The project area comprises EL 5580 (343 square kilometres). Victory prospect Part of the Edward Creek Project The Victory prospect was identified by greenfields exploration conducted in 2010. Ground spectrometer survey investigating an airborne radiometric anomaly identified anomalous uranium in an area measuring about 6.5 hectares. Within this area a strongly anomalous linear zone measuring approximately 20 metres by 100 metres has been identified. 5 Reedy Lagoon Corporation Limited Review of operations 30 June 2017 Surface cover and deep weathering obscure most of the area. In the limited exposed areas elevated radiometric responses and assay results are wide spread, as is evidence of hydrothermal veining. An unconformity with younger rocks including conglomerates and volcanics, lies a few hundred metres east of the anomalous area shown in the adjacent figure, but is obscured by transported cover. The surface mineralisation identified at Victory may be marginal to prospective zones under cover at or near the unconformity. No field work was conducted by RLC on the Victory prospect during the report period. Work planned, in the event the uranium market improves, includes drilling to investigate the surface uranium anomalism and along strike where the concealed unconformity is interpreted. Victory prospect showing planned future drill sites at 1-A, 1-B, 1-C, 1-D and 1-E. (For sample details release 12/10/2010 and September 201 Quarterly Report). refer ASX Gold Exploration Cassilis Project GOLD Victoria option Evaluation work was hampered during the year by continued uncertainty resulting from protracted delays by the Victorian Department of Economic Development, Jobs, Transport and Resources (“DEDJTR”) associated with the processing of tenement applications and with the application for transfer of MIN 5335 to Cassilis Mining Pty Ltd from the registered holder, Rocky Mining Pty Ltd. During the report period the liquidator of Rocky Mining Pty Ltd (in liquidation) brought actions which led to the expiry of MIN 5335. As a result of this action the parties to the Cassilis Agreement dated 4 June 2015 agreed to terminate the agreement on 7 June 2017 thus cancelling the Company’s option to acquire the Cassilis gold project. No field work was conducted during the report period. Geoffrey Fethers Managing Director 6 Reedy Lagoon Corporation Limited Review of operations 30 June 2017 Competent Person’s Statement: The information in the section headed “Lithium Exploration” of this report as it relates to exploration results and geology was compiled by Mr Geoff Balfe who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Balfe is a consultant to Reedy Lagoon Corporation Limited and Mr Balfe is a vendor to Reedy Lagoon Corporation Limited of shares in Nevada Lithium Pty Ltd. (which owns the lithium brine projects). Mr Balfe has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Balfe consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. The information in the sections headed: “Iron ore Exploration”, “Uranium Exploration” and “Gold Exploration” in this report that relates to Exploration Results is based on information compiled by Geoffrey Fethers, who is a member of the Australian Institute of Mining and Metallurgy (AusIMM). Mr Fethers is a director of the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr Fethers consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Where Exploration Results have been reported in earlier RLC ASX Releases referenced in this report, those releases are available to view on the NEWS page of reedylagoon.com.au. The Company confirms that it is not aware of any new information or data that materially affects the information included in those earlier releases. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. 7 Reedy Lagoon Corporation Limited Corporate directory 30 June 2017 Directors Contact details Jonathan M. Hamer Chairman, Non Executive Director Geoffrey H. Fethers Managing Director and Company Secretary Adrian C. Griffin Non Executive Director Phone : 03 8420 6280 Fax : 03 8420 6299 Email : info@reedylagoon.com.au Company secretary Geoffrey H. Fethers Share register Auditor Solicitors Link Market Services Limited (ABN 54 063 214 537) Level 1, 333 Collins Street Melbourne, Victoria 3000 Telephone : 1300 554 474 www.linkmarketservices.com.au Moore Stephens Level 18, 530 Collins Street Melbourne Victoria 3000 www.moorestephens.com.au King & Wood Mallesons Level 50, 600 Bourke Street Melbourne Victoria 3000 Stock exchange listing Reedy Lagoon Corporation Limited shares are listed on the Australian Securities Exchange (ASX code: RLC) Website www.reedylagoon.com.au 8 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Reedy Lagoon Corporation Limited (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 2017. Directors The following persons were directors of Reedy Lagoon Corporation Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Jonathan M. Hamer Geoffrey H. Fethers Adrian C. Griffin Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of: ● exploration for minerals in Australia and the United States of America. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the consolidated entity after providing for income tax amounted to $808,688 (30 June 2016: $386,255). Refer to the separate review of operations that comes directly before this directors' report. Significant changes in the state of affairs During the year, the Company issued 64,648,222 fully paid shares raising $835,947 before costs as well settling liabilities totalling $69,376. On 22 December 2016 Reedy Lagoon entered into an agreement (Share Purchase Agreement) under which Reedy Lagoon acquired Nevada Lithium Pty Ltd. Nevada Lithium Pty Ltd owns 3 lithium brine projects in Nevada, USA through its wholly-owned subsidiary, Sierra Lithium LLC. There were no other significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year On 30 August 2017, the Company announced that it had obtained permits to drill two holes at its lithium brine project in Nevada USA. It has negotiated a contract with Boart Longyear to undertake the drilling which will be entered into once the Company has raised funding for the drilling. Since 30 June 2017, the Company has paid amounts totalling $131,153 as payment or reimbursement of exploration costs incurred in relation the Nevada Lithium Pty Ltd brine projects in Nevada, USA. No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. At the date of this report, there are no future developments of the Company which warrant disclosure. Environmental regulation The Company's operations are subject to environmental regulations in relation to its exploration activities. The directors are not aware of any breaches of environmental regulations during the period covered by this report. 9 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 Information on directors Name: Title: Age: Qualifications: Experience and expertise: Jonathan M. Hamer Chairman – Non Executive 62 BA, LLB. A former partner of King & Wood Mallesons where he practised in the areas of corporate and finance law. Jonathan has been advising RLC since 1988 on a range of legal and commercial issues, including in its various joint venture agreements and capital raisings. Jonathan has served on the RLC board for 10 years. Other current directorships: Nil Former directorships (last 3 years): Nil Interests in shares: Interests in options: 12,207,245 fully paid ordinary shares 900,000 options Name: Title: Age: Qualifications: Experience and expertise: Geoffrey H. Fethers M AusIMM 60 B.Sc.(Hons), M AusIMM Manages the operations of RLC. He is a geologist with over 25 years exploration experience. He was employed by De Beers Australia Exploration Limited (formerly Stockdale Prospecting Limited) from 1980 to 1985. He founded RLC in 1986. He is a Member of the Geological Society of Australia and the Australian Institute of Mining and Metallurgy. Geoffrey is a founding director. Other current directorships: Nil Former directorships (last 3 years): Nil Special responsibilities: Interests in shares: Interests in options: Manages the operations of RLC. 26,869,492 fully paid ordinary shares 1,500,000 options Name: Title: Age: Qualifications: Experience and expertise: Other current directorships: Adrian C. Griffin Director 64 B.Sc.(Hons), M AusIMM Adrian Griffin, aged 64, has accumulated extensive experience in the resource sector over the past 35 years. During that time he has held directorships in a number of private and listed resource companies and overseen the operation of large, integrated mining and processing facilities, including the Bulong nickel- cobalt operation in the late 1990s to his current position as Managing Director of Lithium Australia NL, a company developing lithium extraction and recovery technologies. Mr Griffin was a director of Reedy Lagoon from 9 May 2007 until resigning on 27 November 2009 to act as technical director of Ferrum Crescent, an iron-ore developer in South Africa. He re-joined RLC as a director on 30 June 2014. Mr Griffin was also a founding director of Northern Uranium and Parkway Minerals (developer of the KMax process to recover potassium and other metals from glauconite). Recently, he was instrumental in identifying the global opportunity to establish lithium micas as a source feed for the lithium chemical industry. Managing Director – Lithium Australia NL; Non-executive Director – Northern Minerals Ltd; Chairman – Parkway Minerals NL Former directorships (last 3 years): Nil Nil Special responsibilities: 7,100,671 fully paid ordinary shares Interests in shares: 300,000 options Interests in options: 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 10 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Interests in shares and options’ quoted above are as at the date of this report. Company secretary Geoffrey H. Fethers is the Company's secretary. Details of his qualifications and experience are disclosed in the information on directors section above. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2017, and the number of meetings attended by each director were: Jonathan M. Hamer Geoffrey H. Fethers Adrian C. Griffin Full Board Attended Held 11 11 11 11 11 11 Held: represents the number of meetings held during the time the director held office. Remuneration report (audited) This remuneration report outlines the Director and Executive remuneration arrangements of the Company in accordance with the Corporations Act 2001 and its Regulations. It also provides the remuneration disclosures required by paragraphs AUS25.4 and AUS 25.7.2 of AASB 124 Related Party Disclosures which have been transferred to the Remuneration Report in accordance with the Corporations Regulation 2M 6.04 This report outlines the remuneration arrangements in place for the Directors (both Executive and Non Executive) and Executives of the Company. This report is audited as the entity has transferred the disclosures from the financial statements. For the purposes of this report the term ‘Senior Executive‘ encompasses the Managing Director, Executive Directors and Secretary of the Company. The remuneration report is set out under the following main headings: ● ● ● ● ● Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Share-based compensation Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration Currently, the Company does not have a separate remuneration committee. Because of the size of the Board and the operations of the Company, the Directors are of the view that there is no need for a separate remuneration committee. The Board as a whole reviews the remuneration packages and policies applicable to the Chairman, Senior Executives and Non-Executive Directors on an annual basis. Remuneration levels are set to attract or retain, as appropriate, qualified and experienced Directors and Senior Executives. From time to time and as required, the Board will seek independent professional advice on the appropriateness of remuneration packages. The current nature and amount of remuneration payable to Chairman, Executives and Non-Executive Directors is not dependent upon the satisfaction of a performance condition. Instead part of the remuneration takes the form of options which will have value if the Company’s share price increases. Use of remuneration consultants The Company did not make use of remuneration consultants during the 2017 financial year. 11 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 Voting and comments made at the Company's 23 November 2016 Annual General Meeting ('AGM') At the 23 November 2016 AGM, 98.54% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2016. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Reedy Lagoon Corporation Limited: J Hamer ● G Fethers ● A Griffin ● Short-term benefits Post- employmen t benefits Long-term benefits Share- based payments Cash salary and fees1 Bonus Non- Super- monetary annuation $ $ $ $ Long service leave $ Equity- settled $ Total $ 40,000 40,000 132,000 212,000 - - - - - - - - - - - - 1,013 338 41,013 40,338 12,540 12,540 2,546 2,546 1,689 3,040 148,775 230,126 2017 Non-Executive Directors: J Hamer A Griffin Executive Directors: G Fethers * * Mr Fethers was the sole executive employee of the Company for the year ended 30 June 2017. 1 At the election of the individual directors the sum of $45,000 of entitlements to cash, salary and fees was settled in the form of 5,189,114 shares in the Company. As at 30 June 2017, $208,945 (2016: $159,000) of short term employee benefits remain unpaid, and prior period fees totalling $94,624 were forgiven and $24,376 was taken in the form of 2,810,886 shares in the Company. Short-term benefits Post- employmen t benefits Long-term benefits Share- based payments Cash salary and fees * Bonus Non- Super- monetary annuation * $ $ $ $ Long service leave * $ Equity- settled $ Total $ 35,832 35,000 126,000 196,832 - - - - - - - - - - - - 4,798 5,201 40,630 40,201 12,540 12,540 9,475 9,475 7,050 17,049 155,065 235,896 2016 Non-Executive Directors: J Hamer A Griffin Executive Directors: G Fethers * * Mr Fethers was the sole executive employee of the Company for the years ended 30 June 2016. 12 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Non-Executive Directors: J Hamer A Griffin Executive Directors: G Fethers Fixed remuneration 2016 2017 At risk - STI At risk - LTI 2017 2016 2017 2016 98% 99% 87% 87% 99% 95% - - - - - - 2% 1% 13% 13% 1% 5% Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Agreement commenced: Details: Name: Title: Agreement commenced: Details: Name: Title: Agreement commenced: Term of agreement: Mr Geoffrey Fethers Managing Director 1 May 2007 Mr G Fethers is the Company’s Executive Managing Director under a contract of employment which commenced on 1 May 2007. Under the contract Mr Fethers is entitled to $132,000 per annum plus statutory superannuation. The contract does not have any fixed term and may be terminated by the Company or Mr Fethers on reasonable notice. No payments or retirement benefits are payable on termination. Mr Jonathan Hamer Chairman - Non Executive 1 May 2007 Mr J Hamer is employed as the Company’s Non-executive Chairman. His appointment as a Director commenced on 9 May 2007 with agreed director fees payable at an annual rate of $40,000 plus options under the terms of the Directors Options Scheme. There is no fixed term and no set retirement benefits are payable on termination. Mr Adrian Griffin Director 30 June 2014 Mr A Griffin is employed as a Non-executive Director. His appointment as a Director commenced on 30 June 2014 with agreed director fees payable at an annual rate of $40,000 plus options under the terms of the Directors Options Scheme. There is no fixed term and no set retirement benefits are payable on termination. Key management personnel have no entitlement to termination payments, other than accrued leave balances, in the event of removal for misconduct. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2017. Shares were issued to each director in lieu of cash payable for fees/salary/super. 13 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per option at grant date 25 November 2016 31 December 2019 31 December 2019 $0.0133 $0.0033 Options granted carry no dividend or voting rights. The number of options over ordinary shares granted to and vested by directors and other key management personnel as part of compensation during the year ended 30 June 2017 are set out below: Name J Hamer G Fethers A Griffin Number of Number of Number of Number of options granted options granted options vested options vested during the during the during the during the year 2017 year 2016 year 2017 year 2016 300,000 500,000 100,000 300,000 500,000 100,000 300,000 500,000 100,000 300,000 500,000 100,000 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: Balance at Received in lieu of the start of the year remuneration Additions Held on appointment Balance at the end of the year Ordinary shares G Fethers J Hamer A Griffin 14,335,058 6,871,819 2,769,388 23,976,265 5,693,727 6,840,707 - 5,335,426 2,025,010 2,306,273 8,000,000 14,201,143 - 26,869,492 - 12,207,245 7,100,671 - - 46,177,408 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 G Fethers J Hamer A Griffin Balance at the start of the year Granted Exercised Expired / Forfeited Balance at the end of the year 1,500,000 900,000 200,000 2,600,000 500,000 300,000 100,000 900,000 - - - - (500,000) (300,000) - (800,000) 1,500,000 900,000 300,000 2,700,000 This concludes the remuneration report, which has been audited. 14 Reedy Lagoon Corporation Limited Directors' report 30 June 2017 Shares under option Unissued ordinary shares of Reedy Lagoon Corporation Limited under option at the date of this report are as follows: Grant date Expiry date 13 November 2014 30 December 2015 25 November 2016 31 December 2017 31 December 2018 31 December 2019 Exercise price Number under option $0.2000 $0.0110 $0.0133 900,000 900,000 900,000 2,700,000 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of Reedy Lagoon Corporation Limited issued on the exercise of options during the year ended 30 June 2017 and up to the date of this report. Indemnity and insurance of officers During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above) and all executive officers of the Company and of any related body corporate against a liability incurred in such capacity of director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer. Indemnity and insurance of auditor During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above) and all executive officers of the Company and of any related body corporate against a liability incurred in such capacity of director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Proceedings on behalf of the company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 20 to the financial statements. 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 20 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 110 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. ● 15 Reedy Lagoon Corporation Limited Directols'report 30 JLrne 2017 Officers of the company who are former partners of Moore Stephens Audit (Vic) There are no officers of the Company who are formef padners of I\loore Stephens Audit (Vic). Auditof's independence declaration A copy of the auditofs independence declarction as fequifed under section 307C of the Corpofations Act 2001 is out immediately aftef ihis directors report. sei Auditor [,4oofe Stephens Audit (Vic) contin!es in office in accodance with section 327 of the Corpofations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2Xa) of the CofporaUons 2001. On behalf of the difectors G.H. Fethers [4anaging Director 28 Septembef 2017 lvlelbourne AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF REEDY LAGOON CORPORATION LIMITED AND CONTROLLED ENTITIES I declare that, to the best of my knowledge and belief, during the year ended 30 June 2017, there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. MOORE STEPHENS AUDIT (VIC) ABN 16 847 721 257 RYAN LEEMON Partner Audit & Assurance Services Melbourne, Victoria 29 September 2017 17 Reedy Lagoon Corporation Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2017 Revenue Expenses Corporate and administration expenses Employee and director benefits expense Exploration expenditure Depreciation and amortisation expense Share based payments expense Restructure costs Other expenses Loss before income tax expense Income tax expense Loss after income tax expense for the year attributable to the owners of Reedy Lagoon Corporation Limited Other comprehensive income for the year, net of tax Total comprehensive loss for the year attributable to the owners of Reedy Lagoon Corporation Limited Note Consolidated 2017 $ 2016 $ 6 7 7 8 26,675 27,903 (75,848) (154,826) (484,583) (394) (3,040) (56,585) (60,087) (93,148) (191,591) (72,418) (1,217) (1,865) - (53,919) (808,688) (386,255) - - (808,688) (386,255) - - (808,688) (386,255) Cents Cents Basic earnings per share Diluted earnings per share 29 29 (0.565) (0.565) (0.358) (0.358) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 18 Reedy Lagoon Corporation Limited Statement of financial position As at 30 June 2017 Assets Current assets Cash and cash equivalents Trade and other receivables Other Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Employee benefits Total current liabilities Non-current liabilities Employee benefits Total non-current liabilities Total liabilities Net liabilities Equity Issued capital Reserves Accumulated losses Total deficiency in equity Note Consolidated 2017 $ 2016 $ 9 10 11 183,299 22,958 11,986 218,243 48,223 4,596 11,851 64,670 - - 394 394 218,243 65,064 12 13 14 14,239 282,755 296,994 8,090 220,105 228,195 26,335 26,335 23,789 23,789 323,329 251,984 (105,086) (186,920) 15 16 15,666,091 14,778,609 15,470 (15,777,052) (14,980,999) 5,875 (105,086) (186,920) The above statement of financial position should be read in conjunction with the accompanying notes 19 Reedy Lagoon Corporation Limited Statement of changes in equity For the year ended 30 June 2017 Consolidated Issued Accumulated Reserves capital $ Losses $ $ Total deficiency in equity $ Balance at 1 July 2015 14,489,839 (14,621,744) 40,605 (91,300) Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 15) Share-based payments (note 30) Lapse of options - - - (386,255) - (386,255) - - - (386,255) - (386,255) 288,770 - - - - 27,000 - 1,865 (27,000) 288,770 1,865 - Balance at 30 June 2016 14,778,609 (14,980,999) 15,470 (186,920) Consolidated Issued Accumulated Reserves capital $ losses $ $ Total deficiency in equity $ Balance at 1 July 2016 14,778,609 (14,980,999) 15,470 (186,920) Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 15) Share-based payments (note 30) Lapse of options - - - (808,688) - (808,688) - - - (808,688) - (808,688) 887,482 - - - - 12,635 - 3,040 (12,635) 887,482 3,040 - Balance at 30 June 2017 15,666,091 (15,777,052) 5,875 (105,086) The above statement of changes in equity should be read in conjunction with the accompanying notes 20 Reedy Lagoon Corporation Limited Statement of cash flows For the year ended 30 June 2017 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Payments for exploration activities Note Consolidated 2017 $ 2016 $ 20,234 (223,117) 936 (484,583) 24,398 (213,234) 1,298 (37,336) Net cash used in operating activities 28 (686,530) (224,874) Cash flows from investing activities Net cash from investing activities Cash flows from financing activities Proceeds from issue of shares Capital raising costs Proceeds from borrowings Repayment of borrowings Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year 15 - - 835,947 (17,841) 30,000 (26,500) 275,361 (9,116) - - 821,606 266,245 135,076 48,223 41,371 6,852 Cash and cash equivalents at the end of the financial year 9 183,299 48,223 The above statement of cash flows should be read in conjunction with the accompanying notes 21 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 1. General information The financial statements cover Reedy Lagoon Corporation Limited as a consolidated entity consisting of Reedy Lagoon Corporation Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Reedy Lagoon Corporation Limited's functional and presentation currency. Reedy Lagoon Corporation Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 18 530 Collins Street Melbourne VIC 3121 A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 28 September 2017. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Going concern For the year ended 30 June 2017 the Group made a loss of $808,688 (2016: loss of $386,255), has a net asset deficiency of $75,011 (2016: $163,525), and had operating cash outflows $686,530 (2016: $224,874). Notwithstanding this the financial report has been prepared on a going concern basis. Subsequent to year end, the directors have provided an undertaking to financially support the Company up to $150,000 for non-discretionary expenditure for a period of not less than 12 months from the date of this report if capital cannot be raised. This support Includes deferral or waiving of fees and entitlements if to the detriment of external creditors. The directors believe that such support and potential deferral is sufficient to meet expenditure commitments and for a period of not less than twelve months from the date of signing these financial statements. If the group is to continue to explore and develop its prospects it will require further funds and will need to raise further capital. In the event that the group is not able to raise additional funding it may not be able to continue its operations as a going concern and therefore may not be able to realise its assets and extinguish its liabilities in the ordinary course of operations and at the amounts stated in the financial report. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments. 22 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 2. Significant accounting policies (continued) Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 24. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Reedy Lagoon Corporation Limited ('Company' or 'parent entity') as at 30 June 2017 and the results of all subsidiaries for the year then ended. Reedy Lagoon Corporation Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Exploration, Evaluation and Development Expenditure Expenditure incurred on the acquisition of exploration properties and exploration, evaluation and development costs, including acquisition of Nevada Lithium Pty Ltd (refer to Notes 3-& 4) are written off as incurred where the activities in the areas of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Once it is determined that the costs can be recouped through sale or successful development and exploitation of the area of interest then the on-going costs are accumulated and carried forward for each area of interest. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward exploration, evaluation and development costs are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. Each area of interest is also reviewed annually and accumulated costs written off to the extent that they will not be recoverable in the future. 23 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 2. Significant accounting policies (continued) Restoration costs are provided for at the time of the activities that give rise to the need for restoration. If this occurs prior to commencement of production, the costs are included in deferred exploration and development expenditure. If it occurs after commencement of production, restoration costs are provided for and charged to the statement of financial performance as an expense. Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Rendering of services Revenue from the rendering of a service is recognised upon the delivery of the service to the customers or in accordance with contractual rights. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where the contract outcome cannot be reliably estimated, revenue is only recognised to the extent of the recoverable costs incurred to date. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established, less allowance for doubtful receivables. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. ● Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. 24 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 2. Significant accounting policies (continued) An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Other receivables are recognised at amortised cost, less any provision for impairment. Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment 5-10 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. 25 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 2. Significant accounting policies (continued) Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The costs of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The costs of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: ● During the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. From the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. ● All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Issued capital Ordinary shares are classified as equity. 26 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 2. Significant accounting policies (continued) Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Reedy Lagoon Corporation Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax ('GST') Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. AASB 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1 January 2018 but the impact of its adoption is not expected to be material. 27 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 2. Significant accounting policies (continued) AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 January 2018 but the impact of its adoption is not expected to be material. AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed. Note 3. 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, which management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates 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 Equity-settled share-based payments are measured at fair value of the equity instrument at the grant date. Fair value is measured by the use of either a Binomial or Black-Scholes model as described at Note 29 taking into account the terms and conditions upon which the instruments were granted. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. 28 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 3. Critical accounting judgements, estimates and assumptions (continued) Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Management has determined not to recognise the deferred tax asset, given that the group has experienced losses, on a historical basis. Employee benefits provision As discussed in note 2, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Acquisition of Nevada Lithium Pty Ltd Under the agreement to purchase Nevada Lithium Pty Ltd, the Company has made an initial payment of $209,000 to reimburse exploration costs. As at 30 June 2017, costs totalling $434,354 (including the initial payment reimbursing $209,000) had been reimbursed. Under the contract, there is no obligation for these amounts to be repaid in the event of the deal not proceeding, and for this reason all expenses incurred as at 30 June 2017 have been recognised in the statement of comprehensive income. Refer to Note 7. Exploration expenditures The consolidated entity expenses expenditures relating to exploration as they are incurred as they are not considered likely to be recoverable. The consolidated entity has not extracted any reserves and therefore all of the exploration expenses should be expensed. Management assessed such judgement in light of no mineral reserves being founded as of yet. Note 4. Acquisition of Lithium Brine Projects in Nevada. On 22 December 2016 Reedy Lagoon entered into an agreement (Share Purchase Agreement) under which Reedy Lagoon acquired Nevada Lithium Pty Ltd. Nevada Lithium Pty Ltd owns 3 lithium brine projects in Nevada, USA through its wholly-owned subsidiary, Sierra Lithium LLC. The Share Purchase Agreement requires Reedy Lagoon to fund exploration costs on the projects to advance them to a stage where drilling is warranted. During the report period $434,354 was spent by Reedy Lagoon on exploration costs on the projects. In the period post balance date to the date of this report, Reedy Lagoon has spent $131,153 on exploration costs on the projects. To complete the acquisition Reedy Lagoon needs to issue $2m "worth" of RLC shares to the vendors of Nevada Lithium on or before the end of calendar year 2017. The number of RLC Shares to be issued to the vendors is to be calculated by reference to the offer price of RLC Shares under a capital raising of at least $2m to fund drilling on the projects. The Listing Rules require Reedy Lagoon to obtain the consent of its shareholders to the issue of the $2M "worth" of RLC Shares to the vendors. Note 5. Operating segments Identification of reportable operating segments The Company is organised into one operating segments: mineral exploration in Australia. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. 29 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 6. Revenue Interest Labour and office cost recoveries Revenue Note 7. Expenses Loss before income tax includes the following specific expenses: Depreciation Plant and equipment Scientific equipment Total depreciation Exploration Tenement applications fees and rents Other exploration expenditure Payments made in relation to Nevada Lithium Pty Ltd (refer to Notes 3 & 4) Total exploration Note 8. Income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Capital allowances share issue costs Non-deductible equity settled benefits expense Other non-deductible (deductible) expenses Non-deductible overseas exploration expenditure Deferred tax asset (on account of losses) not brought to account Income tax expense Consolidated 2017 $ 2016 $ 936 25,739 1,298 26,605 26,675 27,903 Consolidated 2017 $ 2016 $ 394 - 1,137 80 394 1,217 2,590 47,639 434,354 11,232 61,186 - 484,583 72,418 Consolidated 2017 $ 2016 $ (808,688) (386,255) (242,606) (115,877) (67) 912 (378) 88,402 (1,257) 560 (1,110) - (153,737) 153,737 (117,684) 117,684 - - The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised in the statement of financial position as the recovery of this benefit is uncertain. 30 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 8. Income tax expense (continued) The potential future income tax benefit will only be obtained if: a) The Company derives future assessable income of a nature and amount sufficient to enable the benefit to be realised; b) The Company continues to comply with the conditions for deductibility imposed by the law; and c) No changes in tax legislation adversely affect the Company in realising the benefit. Note 9. Current assets - cash and cash equivalents Consolidated 2017 $ 2016 $ 183,299 48,223 Consolidated 2017 $ 2016 $ 8,024 423 14,511 2,518 - 2,078 22,958 4,596 Consolidated 2017 $ 2016 $ 11,986 11,851 Consolidated 2017 $ 2016 $ 3,500 10,739 - 8,090 14,239 8,090 Cash at bank Note 10. Current assets - trade and other receivables Trade receivables Other receivables GST receivable Note 11. Current assets - other Prepayments Note 12. Current liabilities - trade and other payables Amounts payable to directors Other payables and accruals Refer to note 18 for further information on financial instruments. 31 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 13. Current liabilities - employee benefits Annual leave (a) Accrued directors wages / fees (a) Consolidated 2017 $ 2016 $ 73,810 208,945 61,105 159,000 282,755 220,105 (a) each of the directors have provided the Company an undertaking that they do not intend to call on payment of accrued salaries or fees until the Company has adequate liquidity to be able to pay these amounts and remain solvent. Note 14. Non-current liabilities - employee benefits Long service leave Note 15. Equity - issued capital Consolidated 2017 $ 2016 $ 26,335 23,789 Consolidated 2017 Shares 2016 Shares 2017 $ 2016 $ Ordinary shares - fully paid 175,675,168 111,026,946 15,666,091 14,778,609 Movements in ordinary share capital Details Date Shares Issue price $ Balance Issue of shares Shares issued as directors' fees Issue of shares Shares issued as directors' fees Cost of capital raising Balance Shares issued as directors’ fees Issue of shares Issue of shares Less share issue costs 1 July 2015 9 July 2015 13 July 2015 17 July 2015 5 October 2015 30 June 2016 27 October 2016 25 November 2016 20 April 2017 73,379,298 27,706,111 625,000 7,133,657 2,182,880 - 111,026,946 8,000,000 39,250,000 17,398,222 - $0.0080 $0.0060 $0.0080 $0.0070 $0.0000 14,489,839 221,649 4,000 57,069 15,168 (9,116) $0.0087 $0.0080 $0.0300 $0.0000 14,778,609 69,376 314,000 521,947 (17,841) Balance 30 June 2017 175,675,168 15,666,091 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. 32 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 15. Equity - issued capital (continued) Capital risk management RLC’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and exploit the mineral assets under its control in order to provide future returns for shareholders and benefits for other stakeholders. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. The Company continuously reviews the capital structure to ensure:- • Sufficient funds are available to implement its exploration expenditure programs in accordance with forecasted needs; and • Sufficient funds for the other operational needs of the Company are maintained. The capital risk management policy remains unchanged from the 30 June 2016 annual report. Note 16. Equity - reserves Share-based payments reserve Consolidated 2017 $ 2016 $ 5,875 15,470 Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2015 Share based payments (refer to note 30) Expiry of options Balance at 30 June 2016 Share based payments (refer to note 30) Expiry of options Balance at 30 June 2017 Note 17. Equity - dividends Share based payments $ Total $ 40,605 1,865 (27,000) 15,470 3,040 (12,635) 40,605 1,865 (27,000) 15,470 3,040 (12,635) 5,875 5,875 There were no dividends paid, recommended or declared during the current or previous financial year. 33 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 18. Financial instruments Financial risk management objectives The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity's operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The consolidated entity 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 functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity is not exposed to significant interest rate risk. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. 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 consolidated entity does not hold any collateral. The consolidated entity trade and other receivables consist of GST receivable and interest receivable. For this reason the consolidated entity is not exposed to significant credit risk. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. 34 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 18. Financial instruments (continued) Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2017 Non-derivatives Non-interest bearing Trade other payables Amounts payable to directors Total non-derivatives Consolidated - 2016 Non-derivatives Non-interest bearing Trade payables Total non-derivatives Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Remaining contractual maturities $ Over 5 years $ - - 10,739 3,500 14,239 - - - - - - - - - 10,739 3,500 14,239 Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Remaining contractual maturities $ Over 5 years $ - 8,090 8,090 - - - - - - 8,090 8,090 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Note 19. Key management personnel disclosures 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 Post-employment benefits Long-term benefits Share-based payments Consolidated 2017 $ 2016 $ 212,000 12,540 2,546 3,040 196,832 12,540 9,475 17,049 230,126 235,896 As at 30 June 2017, $208,945 (2016: $159,000) of short term employee benefits remain unpaid, and fees totalling $94,624 relating to prior periods were forgiven. 35 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 20. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Moore Stephens Audit (Vic), the auditor of the Company: Audit services - Moore Stephens Audit (Vic) Audit or review of the financial statements Other services - Moore Stephens Audit (Vic) Tax and compliance services Consolidated 2017 $ 2016 $ 15,900 15,423 8,225 12,839 24,125 28,262 It is the Company’s policy to engage the external auditor to provide services additional to their audit duties where the external auditor’s experience and expertise with the Company’s are important and it is logical and efficient for them to provide those services. The provision of non-audit services during the year by the external auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001. Note 21. Contingent liabilities The Company intends to purchase Nevada Lithium Pty Ltd as noted in Note 3. In order to complete the acquisition the Company must issue $2,000,000 worth of fully paid ordinary shares in the Company to the vendors of Nevada Lithium Pty Ltd. This issue of the Company’s shares is required to be made by no later than 31 December 2017. Under the Share Purchase Agreement the “$2,000,000 worth” of shares in the Company is to be calculated using the offer price per share at which shares are offered under a contemporaneous capital raising for not less than $2,000,000. A contingent liability exists at 30 June 2017 for the issue of $2,000,000 worth of fully paid ordinary shares, the value of which liability is contingent upon the offer price under the contemporaneous capital raising. The Company is not obliged to complete the acquisition of Nevada Lithium, but if it does not issue $2,000,000 worth of shares in the Company to the vendors of Nevada Lithium by 31 December 2017 the acquisition will terminate and the Company will have no right to recover any amount paid as exploration costs on the lithium brine projects. Note 22. Exploration expenditure commitments The Company held one tenement, EL5580. Ongoing annual exploration expenditure is required to maintain title to the consolidated entity’s mineral exploration tenements. No provision has been made in the accounts for these amounts as the amounts are expected to be fulfilled in the normal course of the operations of the consolidated entity. Tenement expenditure is dependent upon exploration results and available cash resources. Expenditure commitments are also impacted upon and may be reduced where access to areas has been restricted by the existence of Aboriginal freehold, Native Title and Native Title claims. The minimum expenditure requirement is $170,000 for the 12 months ending 11 Nov 2017. Unless the Minister determines otherwise, if the minimum expenditure ($170,000) is not satisfied then 50% of the licence area must be reduced by the end of 1 Nov 2017. All diamond interests have been farmed out to DiamondCo Limited under the terms of the Diamond Farm-out Agreement. Expenditure by DiamondCo Limited on EL5580 under the terms of the Diamond Farm-out Agreement exceeded $100,000 at the date of this report. The statutory expenditure requirement is subject to negotiation with the relevant state department, and expenditure commitments may be varied between tenements, or reduced subject to reduction of exploration area and/or relinquishment of non-prospective tenements. Note 23. Related party transactions Parent entity Reedy Lagoon Corporation Limited is the parent entity. 36 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 23. Related party transactions (continued) Subsidiaries Interests in subsidiaries are set out in note 25. Joint ventures Interests in joint ventures are set out in note 26. Key management personnel Disclosures relating to key management personnel are set out in note 19 and the remuneration report included in the directors' report. Transactions with related parties DiamondCo Limited, a company of which Mr Fethers and Mr Hamer are directors and shareholders, holds the rights to diamonds located on EL 5580 through a joint venture agreement dated 26 March 2007. Opportunities to reduce mobilisation costs and expand small scale programmes by combining field activities are exploited where possible. Where services for combined RLC and DiamondCo programmes are contracted RLC normally acts as principal and invoices DiamondCo on a cost recovery basis. RLC provides the services of Mr Fethers and office services to DiamondCo at normal commercial rates. Total fees invoiced by RLC during the financial year to DiamondCo amounting to $25,739 (201–6: $13,171). Receivable from and payable to related parties The amount of $8,024 (2016: $2,208) was payable by DiamondCo Limited at 30 June 2017 and no trade payables to related parties at the current and previous reporting date. An additional amount of $3,500 was payable to directors at 30 June 2017 (2016: $ nil). Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Note 24. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive loss Parent 2017 $ 2016 $ (808,688) (386,255) (808,688) (386,255) 37 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 24. Parent entity information (continued) Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Share-based payments reserve Accumulated losses Total deficiency in equity Parent 2017 $ 2016 $ 218,243 64,670 218,243 65,064 296,994 228,195 323,329 251,984 15,666,091 14,778,609 15,470 (15,777,052) (14,980,999) 5,875 (105,086) (186,920) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2017 and 30 June 2016. Contingent liabilities The Company intends to purchase Nevada Lithium Pty Ltd as noted in Note 4. In order to complete the acquisition the Company must issue $2,000,000 worth of fully paid ordinary shares in the Company to the vendors of Nevada Lithium Pty Ltd. This issue of the Company’s shares is required to be made by no later than 31 December 2017. Under the Share Purchase Agreement the “$2,000,000 worth” of shares in the Company is to be calculated using the offer price per share at which shares are offered under a contemporaneous capital raising for not less than $2,000,000. A contingent liability exists at 30 June 2017 for the issue of $2,000,000 worth of fully paid ordinary shares, the value of which liability is contingent upon the offer price under the contemporaneous capital raising. The Company is not obliged to complete the acquisition of Nevada Lithium, but if it does not issue $2,000,000 worth of shares in the Company to the vendors of Nevada Lithium by 31 December 2017 the acquisition will terminate and the Company will have no right to recover any amount paid as exploration costs on the lithium brine projects. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment at as 30 June 2017 and 30 June 2016. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for the following: ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Note 25. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 2: Name Principal place of business / Country of incorporation Ownership interest 2016 2017 % % Bullamine Magnetite Pty Ltd Australia 100.00% 100.00% 38 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 26. Interests in joint ventures EL 5580 is subject to a joint venture agreement, the Diamond Farm Out Agreement, which transfers all RLC’s interest in diamonds in this tenement to DiamondCo Limited. Tenements which pre-date and carry through to EL 5580 were subject to a joint venture agreement, the Edward Creek Base Metals Joint Venture (“ECBMJV”) which was terminated and all interests in the ECBMJV were forfeited to RLC on 9 June 2009. The termination of the joint venture was disputed by the other parties, but RLC considers the dispute to be baseless. Prior to the termination of the joint venture RLC held a 62% interest in the tenements. Note 27. Events after the reporting period On 30 August 2017, the Company announced that it had obtained permits to drill two holes at its lithium brine project in Nevada USA. It has negotiated a contract with Boart Longyear to undertake the drilling which will be entered into once the company has raised funding for the drilling. Since 30 June 2017, the Company has paid amounts totalling $131,153 as payment or reimbursement of exploration costs incurred in relation the Nevada Lithium Pty Ltd brine projects in Nevada, USA. No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Note 28. Reconciliation of loss after income tax to net cash used in operating activities Loss after income tax expense for the year Adjustments for: Depreciation and amortisation Share-based payments Shares issued in lieu of fees Change in operating assets and liabilities: Increase in trade and other receivables Decrease/(increase) in prepayments Increase/(decrease) in trade and other payables Increase in employee benefits Increase in accrued salaries and director's fees Net cash used in operating activities Note 29. Earnings per share Consolidated 2017 $ 2016 $ (808,688) (386,255) 394 3,040 69,376 1,217 1,865 22,526 (17,938) (136) 2,226 15,251 49,945 (2,881) 1,373 (7,442) 26,112 118,611 (686,530) (224,874) Consolidated 2017 $ 2016 $ Loss after income tax attributable to the owners of Reedy Lagoon Corporation Limited (808,688) (386,255) Weighted average number of ordinary shares used in calculating basic earnings per share 143,115,772 108,005,941 Weighted average number of ordinary shares used in calculating diluted earnings per share 143,115,772 108,005,941 Number Number 39 Reedy Lagoon Corporation Limited Notes to the financial statements 30 June 2017 Note 29. Earnings per share (continued) Basic earnings per share Diluted earnings per share Cents Cents (0.565) (0.565) (0.358) (0.358) The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 ‘Earnings per Share’. The rights to options are non-dilutive as the Company has generated a loss for the financial year. Note 30. Share-based payments A share option plan has been established by the Company and approved by shareholders at a general meeting, whereby the Company may, at the discretion of the board, grant options over ordinary shares in the company to certain key management personnel. Remuneration arrangements of key management personnel are disclosed in the annual financial report. In addition, on 25 November 2016, after approval at the Company's annual general meeting, a total of 900,000 were issued to directors as part of their remuneration packages. Each director received the below options:- • Geoffrey H. Fethers – 500,000 options, exercise price 1.3 cents, expiring on 31 December 2019 with a value $1,689; • Adrian C. Griffin – 100,000 options, exercise price 1.3 cents, expiring on 31 December 2019 with a value $338; and • Jonathan M. Hamer – 300,000 options, exercise price 1.3 cents, expiring on 31 December 2019 with a value $1,013. Set out below are summaries of options granted under the plan: 2017 Grant date Expiry date price Exercise Balance at the start of the year Granted Exercised Lapsed Balance at the end of the year 29/11/2013 13/11/2014 30/12/2015 25/11/2016 31/12/2016 31/12/2017 31/12/2018 31/12/2019 $0.0200 $0.0200 $0.0110 $0.0133 900,000 900,000 900,000 - 2,700,000 - - - 900,000 900,000 - - - - - (900,000) - - - (900,000) - 900,000 900,000 900,000 2,700,000 2016 Grant date Expiry date price Exercise Balance at the start of the year Granted Exercised Lapsed Balance at the end of the year 15/11/2012 29/11/2013 13/11/2014 30/12/2015 31/12/2015 31/12/2016 31/12/2017 31/12/2018 $0.0200 $0.0200 $0.0200 $0.0110 900,000 900,000 900,000 - 2,700,000 - - - 900,000 900,000 - - - - - (900,000) - - - (900,000) - 900,000 900,000 900,000 2,700,000 For the options granted during the current financial half-year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date Share price Exercise at grant date price Expected volatility Dividend yield Risk-free interest rate at grant date Fair value 25/11/2016 31/12/2019 $0.0008 $0.0133 88.50% - 2.21% $0.0130 An expense of $3,040 (2016: $1,865) has been recognised in the statement of comprehensive income for the current period in relation to the above options. 40 Reedy Lagoon Corporation Limited Directors' declamtion 30 June 2017 In the dlrectors' opinionl . the attached financialstatements and notes cornp y wrth lhe Corporations Act 2001, the Accounting Standards the Corpofations Regulations 2001 and other mandatory pfofessional fepoding requirements; . . . the attached fnancial statements and notes comply wiih Internationa Financial Reporting Standards as issued by the International Accounting Standards Boafd as described in note 2 to ihe flnancial statements; the attached financial statements and notes g ve a true and fair view of the consolidated entity's financial position as ai 30 June 2017 and of its performance for the financial year ended on that date; and there are rcasonable gfounds io believe ihai the Company will be able to pay its debts as and when they become dLe and payable. The difeciorc have been given the decJaratons required by seclion 2954 ofthe Corporations Act 2001. Signed in accordance w th a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Arez--- G H. Feihers IVlanaging Director 28 Septembef 2017 Ivlelboufne INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF REEDY LAGOON CORPORATION LIMITED AND CONTROLLED ENTITIES Report on the Audit of the Financial Report Opinion We have audited the financial report of Reedy Lagoon Corporation Limited and controlled entities (the Company), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion: a) the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: i. ii. giving a true and fair view of the Company’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company 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 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 2 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty 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. Our opinion is not modified in respect of this matter. 42 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no other key audit matters to communicate in our report. Other Information The directors are responsible for the other information. The other information comprises the information included in the Company’s annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Company 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 Company or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 43 As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism 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 Company’s internal control; evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by directors; conclude on the appropriateness of director’s 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 Company’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 Company’s to cease to continue as a going concern; and 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. 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 consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 44 Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 11 to 14 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Reedy Lagoon Corporation Limited, for the year ended 30 June 2017 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. MOORE STEPHENS AUDIT (VIC) ABN 16 847 721 257 RYAN LEEMON Partner Audit & Assurance Services Melbourne, Victoria 29 September 2017 45 Reedy Lagoon Corporation Limited Shareholder information 30 June 2017 The shareholder information set out below was applicable as at 12 September 2017. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Number of holders of ordinary shares 28 21 54 241 151 495 212 Ordinary shares % of total Number held 17,507,500 12,583,333 12,167,893 11,681,922 11,191,368 7,100,671 6,886,740 5,325,000 4,128,000 4,125,000 3,675,000 3,659,000 3,400,454 3,000,000 2,700,000 2,514,404 2,010,000 1,999,999 1,749,998 1,632,374 shares issued 9.97 7.16 6.93 6.65 6.37 4.04 3.92 3.03 2.35 2.35 2.09 2.08 1.94 1.71 1.54 1.43 1.14 1.14 1.00 0.93 119,038,656 67.77 Pyrope Holdings Pty Ltd Jagen Pty Ltd Mr Jonathan Mark Hamer Citycastle Pty Ltd Sked Pty Ltd Mr Adrian Christopher Griffin Pyrope Holdings Pty Ltd (Chromite Staff S/Fund A/C) Wifam Investments Pty Ltd (Wischer Family S/F A/C) Park Road SF Pty Ltd (Park Road Super Fund A/C) Dales Estates No 1 Pty Ltd Tromso Pty Ltd Mr Jaime Lai Tardis Victoria Pty Ltd M&K Korkidas Pty Ltd (M&K Korkidas P/L S/Fund A/C) Toey Pty Ltd (Superannuation Fund A/C) Sked Pty Ltd (Super Fund A/C) Amax Pacific Pty Ltd RFCJ Pty Ltd (RCJ Super Fund A/C) Mr Clarke Barnett Dudley Chromite Pty Ltd Unquoted equity securities There were 2,700,000 unquoted options. 46 Reedy Lagoon Corporation Limited Shareholder information 30 June 2017 Substantial holders Substantial holders in the Company are set out below: Pyrope Holdings Pty Ltd Sked Pty Ltd Jagen PtyLtd Jonathan M. Hamer Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares % of total Number held 26,869,492 26,690,998 12,583,333 12,207,245 shares issued 15.29 15.19 7.16 6.95 Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no other classes of equity securities. 47 Reedy Lagoon Corporation Limited Tenement schedule 30 June 2017 Tenement Schedule Tenements held at 20 September 2017: Located in Australia Tenement EL 5580 Edward Creek project (SA) E70/4941 Burracoppin (WA) Area (km2) Status Company Interest (direct or indirect) 343 Current 100% 1, & 2 58 Application 100% Located in USA Tenements (all Placer Claims located in Nevada) 3 & 4 Claim Name Claim Numbers Corresponding BLM NMC Number Total Claims Total Area Columbus Salt Marsh Project CB Claims CB-1 to CB-12 CB-17 to CB-28 CB-33 to CB-44 CB-47 to CB-60 CB-63 to CB-76 CB-79 to CB-95 CB-101 to CB-186 Big Smoky South Project MB Claims MB-53 to MB-68 MB- 77 to MB-82 MB-89 to MB-96 MB-101 to MB-228 MB-301 to MB-318 MB-320 MB-322 to MB-340 MB-342 MB-344 to MB-368 MB-370 to MB-382 MB-384 to MB-390 MB-392 to MB-398 NMC 1138099 167 1,332 ha 239 1,924 ha to NMC 1138179 NMC 1146279 NMC 1146364 to NMC 1138180 to NMC 1138327 NMC 1146188 to NMC 1146278 Alkali Lake North Project WH Claims WH-1 to WH-128 NMC 1138328 NMC 1138455 to 128 1,033 ha Notes to the tenement schedule: 1. EL 5580 is subject to a joint venture agreement, the Diamond Farm Out Agreement, which transfers all RLC’s interest in diamonds in the tenement to DiamondCo Limited. The minimum expenditure on EL 5580 for the 12 months ending 11 November 2017 is $170,000. At the date of this report more than $100,000 had been expended on exploration on EL 5580 during the current 12 month term. 2. The Statutory expenditure requirement is subject to negotiation with the relevant state department, and expenditure commitments may be varied between tenements, or reduced subject to reduction of exploration area and/or relinquishment of non-prospective tenements. 3. The Placer Claims in each of the 3 lithium brine projects in Nevada Columbus Salt Marsh, Big Smoky South and Alkali Lake North) are 100% owned by and held in the name of Sierra Lithium LLC, a wholly- owned subsidiary of Nevada Lithium Pty Ltd. RLC has acquired Nevada Lithium Pty Ltd under a Share Purchase Agreement. To complete the acquisition RLC must issue $2m "worth" of RLC Shares to the vendors of Nevada Lithium before the end of calendar year 2017: see Note 4 Acquisition of Lithium Brine Projects in Nevada 4. Annual Land Fees comprising US$155 and US$12 per Placer Claim are payable to the BLM and Esmeralda County respectively. All Land Fees are paid up to 31 August 2018. There is no minimum exploration expenditure requirement for Placer Claims located in Nevada, USA. 48 CORPORATE DIRECTORY Reedy Lagoon Corporation Limited ABN 41 006 639 514 ASX Code : RLC Directors Jonathan M. Hamer Chairman, Non-Executive Director Geoffrey H. Fethers Managing Director Adrian C. Griffin Non-Executive Director Company Secretary Geoffrey H. Fethers Registered and Head Office Level 18, 530 Collins Street Melbourne Victoria 3000 www.reedylagoon.com.au Ph: Email: 03 8420 6280 info@reedylagoon.com.au Legal Adviser King & Wood Mallesons Level 50, 600 Bourke Street Melbourne Victoria 3000 Accountants Moore Stephens (Vic) Pty Ltd Level 18, 530 Collins Street Melbourne Victoria 3000 PH: (03) 9608 0100 www.nexia.com.au Auditor Moore Stephens (Vic) Audit Level 18, 530 Collins Street Melbourne Victoria 3000 Share Registry Link Market Services Limited (ABN 54 083 214 537) Tower 4, Collins Square 727 Collins Street Melbourne VIC 3008 Telephone: 1300 554 474 www.linkmarketservices.com.au Shareholders wishing to receive their Annual Reports and/or other information from the Company in electronic form can elect to do so by visiting www.linkmarketservices.com.au 49
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