UUV Aquabotix Limited
Annual Report 2020

Plain-text annual report

UUV Aquabotix Limited ABN 52 616 062 072 ANNUAL REPORT for the year ending 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 1 Contents Contents ......................................................................................................................................................................................................... 1 Corporate Information ................................................................................................................................................................................... 2 Directors’ Report ............................................................................................................................................................................................ 3 Auditor’s independence declaration ............................................................................................................................................................ 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income ............................................................................................. 17 Consolidated Statement of Financial Position .............................................................................................................................................. 18 Consolidated Statement of Changes in Equity ............................................................................................................................................. 19 Consolidated Statement of Cash Flows ........................................................................................................................................................ 20 Notes to the Financial Statements ............................................................................................................................................................... 21 Directors’ Declaration .................................................................................................................................................................................. 43 Independent Auditor’s Report ..................................................................................................................................................................... 44 UUV Aquabotix Limited | 2020 Annual Report 2 Corporate Information Directors & Management Winton Willesee (Non-Executive Chairman) James Bahen (Non-Executive Director) Erlyn Dale (Non-Executive Director) Company Secretary Winton Willesee & Erlyn Dale Registered Office Suite 5 CPC 145 Stirling Highway Nedlands, 6009 WA Australia Telephone: +61 8 9389 3160 Email: investors@aquabotix.com Website: www.aquabotix.com Auditors RSM Australia Partners Level 13, 60 Castlereagh Street Sydney, NSW 2000 Australia Share Registry Link Market Services Limited Level 4, 152 St Georges Terrace Perth, WA 6000 Australia Enquiries (within Australia): 1300 288 664 Enquiries (outside Australia): +61 8 9324 2099 Stock Exchange Listing UUV Aquabotix Limited shares (ASX code: UUV) and Options (ASX code: UUVOA) are listed on the Australian Securities Exchange. Website: www.aquabotix.com Corporate Governance Statement: https://www.aquabotix.com/investor-relations.html Directors’ Report UUV Aquabotix Limited | 2020 Annual Report 3 Your Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Company’ or ‘Aquabotix’) consisting of UUV Aquabotix Limited and its controlled entities for the year ended 31 December 2020. Directors The following persons were directors of UUV Aquabotix Limited during the financial year and up until the date of this report, unless otherwise stated. Winton Willesee - Non-Executive Chairman (appointed 3 October 2020) James Bahen - Non-Executive Director (appointed 23 October 2020) Erlyn Dale - Non-Executive Director (appointed 23 October 2020) Peter James (resigned 2 October 2020) Admiral Jay M. Cohen (resigned 23 October 2020) Robert Clisdell (resigned 23 October 2020) Winton Willesee: Non-Executive Chairman and Joint Company Secretary Mr. Willesee is an experienced corporate professional with a broad range of skills and experience in strategy, company development, corporate governance, company public listings, merger and acquisition transactions and corporate finance. Mr Willesee has considerable experience with ASX listed and other companies over a broad range of industries, having held directorships, chairmanships and company secretarial positions with a number of ASX-listed companies over many years. Mr. Willesee holds a Master of Commerce, a Post-Graduate Diploma in Business (Economics and Finance), a Graduate Diploma in Applied Finance and Investment, a Graduate Diploma in Applied Corporate Governance, a Graduate Diploma in Education and a Bachelor of Business. He is a Fellow of the Financial Services Institute of Australasia, a Graduate of the Australian Institute of Company Directors, a Member of CPA Australia and a Fellow of the Governance Institute of Australia and the Institute of Chartered Secretaries and Administrators/Chartered Secretary. Other ASX Directorships held within the last 3 years: Nanollose Limited (ASX: NC6) Non-Executive Director (Current) MMJ Group Holdings Limited (ASX: MMJ) Non-Executive Director (Current) New Zealand Coastal Seafoods Limited (ASX: NZS) Chairman (Current) Neurotech International Limited (ASX: NTI) Non-Executive Director (Current) eSense-Lab Ltd (ASX: ESE) Non-Executive Director (Current) Ding Sheng Xin Finance Co Limited (ASX: DXF) Non-Executive Director James Bahen: Non-Executive Director Mr Bahen is a Corporate Advisory Executive and Chartered Secretary who commenced his career in audit and assurance with a chartered accounting firm. He is currently a Company Secretary to a number of ASX listed companies. Mr Bahen is a member of the Governance Institute of Australia (GIA) and holds a Graduate Diploma of Applied Finance and a Bachelor of Commerce degree majoring in Accounting and Finance. Other ASX Directorships held within the last 3 years: MinRex Resources Limited (ASX: MRR) Non-Executive Director (Current) Directors’ Report (Continued) Erlyn Dale: Non-Executive Director and Joint Company Secretary UUV Aquabotix Limited | 2020 Annual Report 4 Miss Dale is an experienced corporate professional with a broad range of corporate governance, accounting and capital markets experience. Miss Dale holds positions as company secretary for a number of ASX listed public companies across a range of industries, with particular expertise in the facilitation of company listings, merger and acquisition transactions and capital raisings. Miss Dale holds a Bachelor of Commerce (Accounting and Finance) and a Graduate Diploma in Applied Corporate Governance. She is a member of the Governance Institute of Australia/Chartered Secretary. Other ASX Directorships held within the last 3 years: New Zealand Coastal Seafoods Limited (ASX: NZS) Non-Executive Director (Current) Meetings of Directors The Company’s full Board of Directors met 5 times during the year ended 31 December 2020. In addition, there were 5 sub-committee meetings held during the year ended 31 December 2020. The number of meetings eligible to be attended and the number of meetings attended by each director were as follows: Full Board Meetings Sub Committee Meetings Name Eligible to attend Attended Winton Willesee James Bahen Erlyn Dale Peter James Jay M. Cohen Robert Clisdell 2 2 2 3 3 3 2 2 2 3 3 3 Eligible to attend - Attended - - - 5 - 5 - - 5 - 5 Eligible to attend represents the number of board meetings held during the time the director held office. Review of Operations and Financial Results The loss for the Group after providing for income tax and non-controlling interest for the year ended 31 December 2020 amounted to $1,347,290 (31 December 2019 loss of $2,409,264). The Aquabotix Group started the 2020 calendar year with a significant order backlog, comprised of US government and other foreign defense contracts. During this reporting period, the Company successfully delivered against those order backlogs as well as newly established contracts, providing test support and training services and hardware for test and evaluation purposes to the extent practicable given impacts associated with COVID-19 on travel and customer prioritisation of these types of activities throughout the phases of this pandemic. The delivery of these contract milestones over the period represented a solid upward trajectory in revenues recognised and increased net cash from operating activities, with even half-year 2020 figures exceeding those for the total of 2019 calendar year. In addition to the securing and delivering of contracts to key customers as detailed above, the Company announced in February 2020 that it had entered into a Non-Standard Navy Cooperative Research and Development Agreement with the United States Naval Undersea Warfare Center Division Newport with the intention of working together collaboratively on a project related to experimental coordination with swarms. To complement its increasing revenues, in April 2020, the Company’s United States-based subsidiary, Aquabotix Technology Corporation (“ATC”), received approval for a non-dilutive loan under the United States Government’s Paycheck Protection program of approximately US$76,000. In addition to this support, the Company received a cashflow boost from the Australian Tax Office of $10,000 upon filing its first quarter activity statement. This temporary cashflow boost is non-assessable, non-exempt income intended to support businesses during the economic downturn associated with COVID-19. In addition to these nondilutive funding sources, the Company undertook several investment activities to generate needed funds over the fiscal year. The Company raised $1,769,156 in equity capital through the year including the rights issue funding referred to below. Notwithstanding the increasing revenues and active financing program, the Company could not reach a point whereby it was operationally cashflow neutral. Directors’ Report (Continued) UUV Aquabotix Limited | 2020 Annual Report 5 The advent of COVID-19 pandemic created delays and disruptions that impacted the Company’s ability to deliver products and services in accordance with its previous plans over the period. These operational impacts ultimately translated to decreased revenues and lagging cashflows, among other challenges for the Company. On 23 January 2020, the Group learned that the licensor of one part of its licenced technology, Apium Inc., had filed a lawsuit against ATC in the U.S. District Court, Central District of California in Los Angeles. The lawsuit included claims for actual and anticipatory breach of the license agreement, a declaratory judgment that the license was terminated and that Apium itself has not breached the license, as well as a violation of the U.S. Defend Trade Secrets Act. As disclosed at the time, the Company and ATC believe the lawsuit was without merit and that Apium’s actions were themselves a breach of the terms of the license agreement. In November, acknowledging the pressures on the global economy and the business of ATC, both generally and as a result of the legal dispute with Apium, had made further capital investment into these operations unlikely at that time. The Company advised that ATC ceased the active conduct of its business operations. Following shortly after that announcement, in December 2020, ATC filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Massachusetts. With regard to the legal dispute between Apium and ATC, the Company notes that the filing of bankruptcy automatically stays the action, and a formal Notice of Stay of Proceedings due to the filing of bankruptcy was filed in December in the United States District Court, Central District of California in Los Angeles. In the latter part of the reporting period the Board of directors of the Company changed with the retirement of Peter James, Robert Clisdell and Jay Cohen, and the appointments of Winton Willesee, Erlyn Dale and James Bahen. The Company wishes to again thank the outgoing directors for their efforts during their time in office. In July 2020 the Company completed a rights issue to shareholders and in October 2020 completed the placement of the shortfall to that rights issue to raise a total of $1,583,823 before costs. The Company is now in a solid financial situation with a new Board in place consisting of directors experienced in the recapitalisation and reforming of ASX listed companies. Principal Activities During the financial year up until the cessation of the operations of ATC on 30 November 2020, the principal activities of the Group consisted of designing, developing, manufacturing, and selling underwater drone systems, related technologies, and man-machine teaming solutions. Significant Changes in the State of Affairs Other than discussed in the Review of Operations above, there have been no other significant changes in the state of affairs of the Company during the year ended 31 December 2020. Contingent Liabilities During January 2020, the Group learned that a licensor of technology incorporated into the SwarmDiverTM product, Apium Inc. (“Apium”), a small, privately held U.S. Company, filed a lawsuit against the Company’s subsidiary, Aquabotix Technology Corporation (“ATC”) in the U.S. District Court, Central District of California in Los Angeles. The lawsuit includes claims for actual and anticipatory breach of the license agreement, a declaratory judgement that the license is terminated and that Apium itself has not breached the license, as well as violation of the Defend Trade Secrets Act, a U.S. law often invoked in licensing disputes. The Company believes that the lawsuit is completely without merit and that Apium’s actions are themselves a breach of the terms of the license agreement. The Company notes that the filing of the bankruptcy automatically stays the action, and a formal Notice of Stay of Proceedings due to filing of bankruptcy was filed in December in the U.S. District Court, Central District of California in Los Angeles. Other than detailed above, as at 31 December 2020 the Company had no contingent liabilities. Significant Events after the Balance Date The impact of the COVID-19 pandemic is on-going, and it is not practicable to estimate the potential impact, positive or negative, after the reporting date. Given the company is largely dormant the pandemic is not expected to have any significant impact at all. The situation is rapidly developing and could change depending on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. No other matter or circumstance has arisen since 31 December 2020 that has significantly affected or may significantly affect the results of the Company’s operations, the results of those operations, or the Company’s state of affairs in future financial years. Directors’ Report (Continued) Environmental regulation UUV Aquabotix Limited | 2020 Annual Report 6 The Group’s operations are not subject to any significant environmental regulation under either Australian Commonwealth or State legislation. The Board considers that adequate systems are in place to manage the Group’s obligations and is not aware of any breach of environmental requirements as they relate to the Group. Dividends No dividends were declared or paid to shareholders during the financial year (2019: $nil). Corporate Governance Statement The Board of the Company recognises the importance of establishing a comprehensive system of control and accountability as the basis for the administration of corporate governance. In establishing its corporate governance framework for the financial year ended 31 December 2020 (Reporting Period), the Board has referred to the Corporate Governance Principles and Recommendations (4th Edition) published by the ASX Corporate Governance Council. The Company sets out its compliance with, and departures from the Recommendations for the financial year ended 31 December 2020. The Company’s Corporate Governance Statement for the financial year ending 31 December 2020 was approved by the Board of Directors on 31 March 2021. The Company’s Corporate Governance Statement is available at the Company’s website at https://www.aquabotix.com/investor-relations.html. In the context of the Company’s nature, scale and operations, the Board considers that the current corporate governance regime is efficient, practical, and cost-effective method of directing and managing the Company. AGM The Company anticipates that it will hold its next Annual General Meeting (‘AGM’) on or after 21 May 2021. In accordance with ASX Listing Rule 3.13.1, the closing date for the receipt of nominations from persons wishing to be considered for election as a director of the Company is 9 April 2021. Any nominations must be received in writing no later than 5.00pm (WST) on 9 April 2021 at the Company’s registered office. Remuneration Report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings:       Principles used to determine the nature and amount of remuneration Details of remuneration Employment agreements Share-based compensation Additional information Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ensures that executive reward satisfies the following key criteria for good reward governance practices:     competitiveness and reasonableness acceptability to shareholders performance linkage/alignment of executive compensation transparency The Board as a whole carry out the function of the Nomination and Remuneration Committee, which is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel. UUV Aquabotix Limited | 2020 Annual Report 7 Directors’ Report - Remuneration Report (audited) (Continued) The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by:    having economic profit as a core component of plan design focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value attracting and retaining high calibre executives. Additionally, the reward framework should seek to enhance executives' interests by:    rewarding capability and experience reflecting competitive reward for contribution to growth in shareholder wealth providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive director’s remuneration Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. No director is present during any discussions relating to the determination of his or her own remuneration. ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components:     base pay and non-monetary benefits short-term performance incentives share-based payments other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations. The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. The long-term incentives ('LTI') include long service leave and share-based payments. Shares are awarded to executives over a period of three years based on long-term incentive measures. These include increase in shareholders’ value relative to the entire market and the increase compared to the Group's direct competitors. Details of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. The key management personnel of the Group consisted of the following directors of UUV Aquabotix Limited during the financial year and up to the date of this report, unless otherwise stated:  Winton Willesee - Non-Executive Chairman (appointed 3 October 2020)  James Bahen - Non-Executive Director (appointed 23 October 2020)  Erlyn Dale - Non-Executive Director (appointed 23 October 2020)  Whitney Million – Chief Executive Officer    Peter James – former Non-Executive Chairman (resigned 2 October 2020) Admiral Jay Cohen – former Non-Executive Director (resigned 23 October 2020) Robert Clisdell – former Non-Executive Director (resigned 23 October 2020) There have been no changes to the key management personnel since the end of the reporting period. Directors’ Report - Remuneration Report (audited) (Continued) UUV Aquabotix Limited | 2020 Annual Report 8 Executive remuneration governance The Board reviews and approves the remuneration policy to enable the Company to attract and retain executives and Directors who will create value for shareholders having consideration to the amount deemed to be commensurate for a company of its size and level of activity as well as the relevant Directors’ time, commitment and responsibility. The Board is also responsible for reviewing any employee incentive and equity- based plans including the appropriateness of performance hurdles and total payments proposed. Remuneration committee Due to the size and nature of the existing Board and the magnitude of the Company’s operations, the Company does not currently have a Remuneration Committee. Pursuant Schedule 1 point 7 of the Company’s Corporate Governance Plan www.aquabotix.com/investor- relations.html, the full Board currently carries out the duties that would ordinarily be assigned to the Remuneration Committee under the written terms of reference for that committee. The Board will devote time on an annual basis to fulfil the roles and responsibilities associated with setting the level and composition of remuneration for Directors and senior executives and ensuring that such remuneration is appropriate and not excessive. The Board of Directors is responsible for overseeing performance evaluations of senior executives on an annual basis. This evaluation is based on specific criteria, including the business performance of the Company, whether strategic objectives are being achieved and the development of management and personnel. Directors’ remuneration The remuneration of an Executive Director is decided by the Board, without the affected Executive Director participating in that decision-making process. In accordance with the Constitution, the total maximum remuneration of Non-Executive Directors is initially set by the Board and subsequent variation is by ordinary resolution of shareholders in general meeting in accordance with the Constitution, the Corporations Act 2001 and the ASX Listing Rules, as applicable. The determination of Non-Executive Directors’ remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each Non-Executive Director. The current amount has been set at an amount not to exceed $300,000 per annum. In addition, a Director may be paid fees or other amounts, subject to any necessary shareholder approval, including non-cash performance incentives such as options, as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. Directors are also entitled to be paid reasonable travelling, hotel and other expenses incurred by them respectively in or about the performance of their duties as Directors. The Group’s remuneration policy for Executive Directors (including the Managing Director) and senior management is designed to promote superior performance and long-term commitment to the Group. Executives receive a base remuneration which is market related and may also be entitled to performance-based remuneration at the ultimate discretion of the Board. Overall remuneration policies are subject to the discretion of the Board and can be changed to reflect competitive market and business conditions where it is in the interests of the Group and the Company’s shareholders to do so. Executive remuneration and other terms of employment are reviewed annually by the Board having regard to performance, relevant comparative information and, where necessary, expert advice. Executive remuneration framework The Group’s reward policy reflects the benefits of aligning executive remuneration with shareholders’ interests and to retain appropriately qualified executive talent for the benefit of the Group. The main principles of the policy are: (a) (b) (c) remuneration is reasonable and fair, taking into account the Group’s obligations at law, the competitive market in which the Group operates and the relative size and scale of the Group’s business; individual reward should be linked to clearly specified performance targets which should be aligned to the Group’s short term and long- term performance objectives; and executives should be rewarded for both financial and non-financial performance. The total remuneration of Executive Directors (including the Managing Director) and other senior managers consist of the following: (a) (b) (c) Salary - Executive Directors and senior managers may receive a fixed sum payable monthly in cash; Short term incentive - Executive Directors and nominated senior managers are eligible to participate in a profit participation plan if deemed appropriate. The Board may at its discretion award bonuses for exceptional performance in relation to each person’s pre- agreed Key Performance Indicators; Post-employment benefits – this refers to superannuation schemes; and Directors’ Report - Remuneration Report (audited) (Continued) (d) Long term incentives - Executive Directors may participate in share option schemes with the prior approval of shareholders. Executives may also participate in employee share option schemes, with any option issues generally being made in accordance with thresholds set in plans approved by shareholders. The Board however, considers it appropriate to retain the flexibility to issue options to executives outside of approved Employee Option Plans in exceptional circumstances. UUV Aquabotix Limited | 2020 Annual Report 9 KMP remuneration disclosures in detail Details of the remuneration of the Directors of UUV Aquabotix Limited and other KMP are set out in tables below: 2020 Short-term benefits Cash Salary and fees^^ Cash bonus Other Benefits Post- employment benefits Super- annuation $ $ $ $ Share-based payments Equity-settled shares Equity-settled options# $ $ Total $ Non-Executive Directors: Winton Willesee James Bahen Erlyn Dale Peter James Jay M. Cohen Robert Clisdell Other Key Management Personnel: Whitney Million 16,145 6,888 6,871 58,666 19,795 21,250 129,615 170,700 300,315 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 25,000 - 12,500 37,500 - - - - - - - 16,145 6,888 6,871 83,666 19,795 33,750 167,115 18,128 31,545 220,373 55,628 31,545 387,488 NB: The Company intends to seek shareholder approval for the grant of 40 million and 20 million UUVOA options to Peter James and Rob Clisdell respectively in lieu of cash fees owed at the time of their resignations. 2019 Short-term benefits Cash Salary and fees^^ Cash bonus Other Benefits Post- employment benefits Super- annuation $ $ $ $ Share-based payments Equity-settled shares $ Equity-settled options# $ Total $ Non-Executive Directors: Peter James Jay M. Cohen Robert Clisdell Other Key Management Personnel: Whitney Million 41,977 57,680 20,834 120,491 326,087 446,578 - - - - - - - - 10,901 10,901 - - - - - 58,333 - 29,166 87,499 36,865 14,746 25,805 77,416 - 36,414 87,499 113,830 136,865 72,426 75,805 285,096 373,402 658,498 Directors’ Report - Remuneration Report (audited) (Continued) The proportion of remuneration linked to performance and the fixed proportion are as follows: UUV Aquabotix Limited | 2020 Annual Report 10 Name 2020 2019 2020 2019 2020 2019 Fixed remuneration At risk – STI At risk – LTI Non-Executive Directors: Winton Willesee James Bahen Erlyn Dale Peter James Jay M. Cohen Robert Clisdell 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Other Key Management Personnel: Whitney Million 100% 100% - - - - - - - - - - - - - - - - - - - - - - - - - - - - Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined having regard to the satisfaction of performance measures and weightings as described above in the section 'Group performance and link to remuneration'. The maximum bonus values are established at the start of each financial year and amounts payable are determined in the final month of the financial year by the Nomination and Remuneration Committee. No cash bonuses were paid or are payable for the financial year ended 31 December 2020 (2019: nil). There has been no forfeit of cash bonuses. Employment agreements with Key Management Personnel Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Whitney Million Chief Executive Officer Agreement commenced: 21 March 2018 Agreement terminated: 2 November 2020 Details: Base salary of USD$200,000 per annum for the period to 19 March 2020, the reduced to US$100,000 by the board of Directors. A payment of US$24,000 plus 35,000,000 UUVOA options valued at $18,128 were paid to Ms Million on termination of employment as full and final settlement. Agreement commenced: 2 November 2020 Agreement terminated: Remains Details: Monthly fee of $4,750. Termination notice period of three months. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Directors’ Report - Remuneration Report (audited) (Continued) Key Management Personnel shareholdings The number of shares in the Company held during the financial year by each Director of UUV Aquabotix Limited and other key management personnel, including their personally related entities, are set out in the table below: UUV Aquabotix Limited | 2020 Annual Report 11 Name Winton Willesee James Bahen Erlyn Dale Peter James Robert Clisdell Jay Cohen Whitney Million Balance at 1 January 2020 Shares acquired Shares issued in lieu of salary or fees Other changes during the year ^ Balance at 31 December 2020 - - - 84,723,000 - 5,000,000 - - - - - - 84,723,000 - 5,000,000 25,107,126 8,665,197 - - - - - - 10,924,867 (36,031,993) 5,462,433 (14,127,630) - - 28,164,771 (28,164,771) - - - - Total 33,772,323 89,723,000 44,552,071 (78,324,394) 89,723,000 ^ Balance at the date of resignation as a Director or termination of employment Options issued 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: Name Number of options granted Grant date Vesting date and exercisable dated Expiry date Exercise price Fair value per option at grant dated Whitney Million 35,000,000 26 October 2020 26 October 2020 28 July 2023 $0.001 $18,128 Options granted carry no dividend or voting rights. All options were granted over unissued fully paid ordinary shares in the Company. The number of options granted was determined having regard to the satisfaction of performance measures and weightings as described above in the section 'Group performance and link to remuneration'. Options vest based on the provision of service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder as from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise. Directors’ Report - Remuneration Report (audited) (Continued) Option holdings The number of options over ordinary shares in the Company held during the financial year ended 31 December 2020 by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: UUV Aquabotix Limited | 2020 Annual Report 12 Balance at the start of the year Issued or Granted Exercised Expired forfeited other (a) Balance at the end of the year Options Vested at the end of the year Options exercisable at the end of the year Options unexerciseab le at the end of the year Winton Willesee James Bahen Erlyn Dale - - - 74,595,166 - 3,333,334 Peter James (a) 26,000,000 39,046,633 Robert Clisdell (a) 15,000,000 18,357,934 Jay Cohen (a) 8,000,000 - Whitney Million 31,000,000 35,000,000 80,000,000 135,333,067 - - - - - - - - - - - 74,595,166 74,595,166 74,595,166 - - - 3,333,334 3,333,334 3,333,334 (65,046,633) (33,357,934) (8,000,000) - - - - - - - - - - 66,000,000 66,000,000 66,000,000 (106,404,567) 143,928,500 143,928,500 143,928,500 (a) Balance of options held as at the date of resignation - - - - - - - - Performance of the Company and shareholder returns The performance of the Company is summarised below. Sales revenue EBITDA Loss after income tax Basic loss per share (cents) Share price as at 31 December (cents) Dividends proposed or paid in the year 2017 $ 2018 $ 2019 $ 2020 $ 747,131 154,494 322,166 457,767 (4,565,627) (4,803,011) (2,329,871) (1,333,812) (4,559,109) (4,833,146) (2,409,264) (1,347,290) (4.23) 9.90 Nil (3.35) 5.00 Nil (0.75) 0.004 Nil (0.001) 0.001 Nil Directors’ Report - Remuneration Report (audited) (Continued) UUV Aquabotix Limited | 2020 Annual Report 13 Remuneration consultants. No remuneration consultants were used during the year. Other transactions with key management personnel and their related parties. Fees of $44,400 were paid and $2,000 was paid to Azalea Consulting Pty Ltd which is an entity associated with Mr Winton Willesee and Ms Erlyn Dale for company secretarial services and for the provision of the registered office. Fees of $708 are payable to Valle Corporate which is an entity associated with Mr Winton Willesee and Ms Erlyn Dale for accounting services. All amounts were charged at standard commercial rates or less. There were no transactions with key management personnel and their related parties other than as disclosed above. This concludes the remuneration report, which has been audited. Directors’ Report (Continued) Shares under option Unissued ordinary shares of UUV Aquabotix Limited under option at the date of this report are as follows: UUV Aquabotix Limited | 2020 Annual Report 14 Unlisted Option Class Class D Class E Class F Class R Class S Class T Class U Class V Class W Class X Class Y Class Z Class AA Class AB Class AC Class AD Class AE Class AF Class AG Class AH Listed Option Class UUVOA Grant date 20 April 2017 20 April 2017 20 April 2017 21 March 2018 21 March 2018 21 March 2018 21 March 2018 1 June 2018 Expiry date 20 April 2021 20 April 2021 20 April 2022 18 April 2021 18 April 2022 18 April 2023 18 April 2024 30 May 2021 11 December 2018 21 December 2021 18 July 2018 18 July 2018 18 July 2018 18 July 2021 18 July 2021 18 July 2021 2 November 2018 2 November 2021 2 November 2018 2 November 2021 2 November 2018 2 November 2021 12 and 18 December 2019 24 December 2023 12 and 18 December 2019 24 December 2023 12 and 18 December 2019 24 December 2023 12 and 18 December 2019 24 December 2023 23 June 2020 30 June 2022 Exercise price Number under option $0.30 $0.30 $0.30 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.11 $0.005 $0.010 $0.015 $0.020 $0.008 700,000 5,000,000 3,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,000,000 300,000 400,000 400,000 400,000 200,000 200,000 200,000 32,750,000 6,000,000 6,500,000 6,500,000 29,687,500 99,237,500 Grant date 28 July 2020 Expiry date 28 July 2023 Exercise price $0.001 Number under option 1,104,592,677 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 333,334 ordinary shares of UUV Aquabotix Limited were issued during the year ended 31 December 2020 (31 December 2019: none) upon on the exercise of options granted. Indemnity and Insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executive of the Company against a liability to the extent permitted by the Corporation Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.  UUV Aquabotix Limited | 2020 Annual Report 15 Directors’ Report (Continued) Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or 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 17 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 17 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. Officers of the Company who are former partners of RSM Australia Partners There are no officers of the Company who are former partners of RSM Australia Partners. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest dollar. Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under the Section 307C of the Corporations Act 2001 is set out on page 16. Auditor RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Winton Willesee Chairman 31 March 2021 RSM Australia Partners Level 13, 60 Castlereagh Street Sydney NSW 2000 GPO Box 5138 Sydney NSW 2001 T +61 (0) 2 8226 4500 F +61 (0) 2 8226 4501 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of UUV Aquabotix Limited for the year ended 31 December 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS G N Sherwood Partner Sydney, NSW Dated: 31 March 2021 THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING 16 RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 17 Revenue Cost of goods sold Gross profit Other income Gain on deconsolidation of subsidiary Expenses General and administrative expense Selling and marketing expense Research and development expense Depreciation expense Loss on disposal of assets Impairment of right-of-use asset Lease liabilities released Share option expense Foreign exchange losses Interest expense US subsidiary bankruptcy expenses Loss before income tax Income tax expense Loss after income tax Other comprehensive income/(loss): Items that may be reclassified to profit or loss Translation of foreign controlled entity Note 4 4 5 31 December 2020 $ 31 December 2019 $ 457,767 (286,707) 171,060 71,951 228,071 (1,586,553) (6,072) (54,335) (9,163) (2,668) - - (77,294) - (4,532) (77,755) 322,166 (119,298) 202,868 8,652 - (2,163,670) (53,457) (96,431) (44,625) (71,096) (380,072) 390,313 (160,256) (6,722) (34,768) - (1,347,290) (2,409,264) 6 - - (1,347,290) (2,409,264) 23,063 (14,174) Total comprehensive loss for the year (1,324,227) (2,423,438) Basic loss per share Diluted loss per share 25 25 Cents (0.001) (0.001) Cents (0.75) (0.75) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 17 Consolidated Statement of Financial Position As at 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 18 31 December 2020 $ 31 December 2019 $ Note ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories 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 Customer deposits Total current liabilities Total liabilities Net assets EQUITY Issued capital Reserves Accumulated losses Total equity 7 8 9 10 12 13 20 21 14 911,323 37,265 - 948,588 - - 260,254 91,204 109,834 461,292 32,752 32,752 948,588 494,044 226,192 - - 226,192 226,192 722,396 169,245 34,001 12,228 215,474 215,474 278,570 13,779,012 1,216,443 (14,273,059) 12,065,190 1,162,212 (12,948,832) 722,396 278,570 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 18 Consolidated Statement of Changes in Equity For the year ended 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 19 Issued Capital $ Options reserve $ Foreign exchange reserve $ Accumulated losses $ Total equity $ Balance at 1 January 2020 12,065,190 1,139,149 23,063 (12,948,832) 278,570 Loss for the year Exchange difference on translation of foreign operations Total comprehensive loss for the year - - - - - - - (1,347,290) (1,347,290) (23,063) (23,063) 23,063 (1,324,227) - (1,347,290) Transactions with owners in their capacity as owners: Shares issued during the year Share issue costs Share options lapsed in the year Share options issued in the year Share option expense recognised 1,884,009 (170,187) - - - - (49,703) 25,402 - 101,595 Balance at 31 December 2020 13,779,012 1,216,443 - - - - - - - - - - - 1,884,009 (170,187) (49,703) 25,402 101,595 (14,273,059) 722,396 Balance at 1 January 2019 Loss for the year Exchange difference on translation of foreign operations Total comprehensive loss for the year Transactions with owners in their capacity as owners: 10,191,710 978,893 37,237 (10,539,568) 668,272 - - - - - - - (2,409,264) (2,409,264) (14,174) (14,174) - (2,409,264) (14,174) (2,423,438) Shares issued in the year Share options issued in the year 1,873,480 - - 160,256 - - - - 1,873,480 160,256 Balance at 31 December 2019 12,065,190 1,139,149 23,063 (12,948,832) 278,570 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 19 Consolidated Statement of Cash Flows For the year ended 31 December 2020 Operating activities Receipts from customers Payments to suppliers and employees UUV Aquabotix Limited | 2020 Annual Report 20 31 December 2020 $ 31 December 2019 $ 511,706 (1,440,131) 320,245 (2,327,444) Net cash flows used in operating activities 27 (928,425) (2,007,199) Investing activities Purchase of plant and equipment Net cash flows used in investing activities Financing activities Net proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Share issue costs Payments in respect of finance lease Net cash flows provided by financing activities Cash and cash equivalents at beginning of period - - 1,769,156 - - (170,187) - - - 1,772,877 200,000 (200,000) (133,146) (90,006) 1,598,969 1,549,725 260,254 704,377 Net increase / (decrease) in cash and cash equivalents 670,544 (457,474) De-recognition of subsidiary cash balance Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 7 (19,475) - 911,323 - 13,351 260,254 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 20 Notes to the Financial Statements For the year ended 31 December 2020 Corporate Information UUV Aquabotix Limited | 2020 Annual Report 21 The consolidated financial report of UUV Aquabotix Limited (“the Company”) and its controlled entities (together “the Group”) for the year ended 31 December 2020 was authorised for issue in accordance with a resolution of the Directors on 31 March 2021. UUV Aquabotix Limited is a company incorporated in Australia, limited by shares which are publicly traded on the Australian Stock Exchange. The principal activity of the Company during the period was to design, develop, manufacture and sell unmanned underwater vehicles (“UUVs”). 1. Summary of 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 years presented, unless otherwise stated. New accounting standards and interpretations The Company has adopted all of the new, revised or amended Accounting Standards and interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. 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”). These financial statements have been prepared on the basis of historical cost as explained in the accounting policies below. The accounting policies are consistent with prior periods and have been consistently applied unless otherwise stated. The principal accounting policies are set out below. Going Concern During the year ended 31 December 2020, the Group incurred a loss after income tax of $1,347,290 and had net cash outflows used in operating activities of $928,425. This consolidated financial report has been prepared on the basis that the Group will continue to meet its commitments and can therefore continue normal business activities and realise assets and settle liabilities in the ordinary course of business. The Directors believe that there are reasonable grounds to believe that the Group will continue as a going concern for a period of at least 12 months following the date of this Report, after consideration of the following factors:     the cessation of US-based operations and the filing for bankruptcy of the Group’s former subsidiary Aquabotix Technology Corporation the Group had net current assets and net assets of $722,396 including cash and cash equivalents of $911,323 as at 31 December 2020; the Group has the ability to issue additional shares to raise further working capital and has been successful in doing this previously, as evidenced by the successful capital raising completed during financial year ended 31 December 2020; and the Company has scaled down its operations in order to minimise expenditure to ensure that sufficient cash is available to meet forecast requirements. Accordingly, the Directors believe that the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report. The report does not include any adjustments relating to the amounts or classification or recorded assets or liabilities that might be necessary if the Group does not continue as a going concern. 21 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Critical accounting estimates UUV Aquabotix Limited | 2020 Annual Report 22 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 Group'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 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in Note 19. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of UUV Aquabotix Limited ('Company' or 'parent entity') for the period 1 January 2020 to 23 December 2020. On this date, the Company’s wholly owned US based subsidiary Aquabotix Technology Corporation (“ATC”) filed for Chapter 7 bankruptcy in the United States Bankruptcy Court in the District of Massachusetts, and which time ATC was de-consolidated. Subsidiaries are all those entities over which the Company has control, which occurs if the Company 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 acquired and they are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group 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 Group. Accordingly, the Company’s sole subsidiary ATC was deconsolidated as of 23 December 2020 – refer to Note 5 for further details on the effect of the deconsolidation on the financial statements. 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. The CODM, who is responsible for allocating resources and assessing performance of the operating segments is the CEO. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group'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 Group'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. 22 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Foreign currency translation UUV Aquabotix Limited | 2020 Annual Report 23 The financial statements are presented in Australian dollars, which is UUV Aquabotix Limited's functional and presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year end exchange rates are recognised in profit or loss. The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. The table below shows the average exchange rates and the exchange rates as at the reporting date for the period. As at 31 December Average rate for the period ending 31 December Revenue recognition USD 2020 0.77 0.72 2019 0.70 0.69 Revenue is measured at the fair value of the consideration received or receivable after taking into consideration any trade rebates or discounts. Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. The Group enters into sales transactions involving either a sale to the client or the sale of services. The Group applies the revenue recognition criteria set out below to each separately identifiable component of the sales transaction in order to reflect the substance of the transaction. Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability. Sale of goods Revenue from sales of goods is recognised when the entity has delivered a product to the customer, which is defined as upon shipment. The recorded revenue is the gross amount of sale, including any fees payable for the transaction. Such fees are included in cost of goods sold. Sale of services Revenue from sales of services is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Interest income Interest income 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. 23 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Government grants UUV Aquabotix Limited | 2020 Annual Report 24 Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. 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 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. The Group currently does not recognise any deferred tax assets or liabilities. Goods and services and other value-added taxes (“GST”) Revenue, expenses and assets are recognised net of the amount of associated GST, except where the amount of GST incurred is not recoverable from the taxation authority, in which case it is recognised as part of the acquisition cost of an 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 taxation authority is included as part of other receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term, highly liquid investments with original maturities of three months or less, and bank overdrafts. For the statement of cash flows presentation purposes, cash and cash equivalents comprise the above. 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 allowances for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. 24 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Trade and other payables UUV Aquabotix Limited | 2020 Annual Report 25 These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. They are initially recognised at fair value. Due to their short-term nature, they are subsequently measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of direct materials and delivery costs, import duties and other taxes. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right- of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 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. Defined contribution superannuation expense The group makes mandatory fixed percentage contributions for all Australian resident employees to complying third party superannuation funds. Contributions to these superannuation funds are expensed in the period they are incurred. 25 UUV Aquabotix Limited | 2020 Annual Report 26 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Share-based payments Equity-settled share-based compensation benefits are provided to certain key employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The costs of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using 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 and the risk-free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group 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. Long service leave The liability for long service leave is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. Research and development Research costs are expensed as incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources; and intent to complete the development and its costs can be measured reliably. Otherwise, development costs are expensed as incurred. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit. Property, plant and equipment Plant and equipment is recorded 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: Furniture and equipment Demonstration equipment Manufacturing tools Moulds 3 - 5 years 2 years 5 - 7 years 7 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. 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. Issued capital Ordinary shares are classified as equity. 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. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. 26 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Earnings per share UUV Aquabotix Limited | 2020 Annual Report 27 Basic earnings per share is calculated by dividing the profit attributable to the owners of UUV Aquabotix 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 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. Financial instruments – recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs. The Group’s financial assets include loans, trade and other receivables. After initial recognition, financial assets are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s financial liabilities include borrowings, trade and other payables. After initial recognition, financial liabilities are measured at amortised cost using the effective interest method. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Impairment of assets Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely dependent of the cash inflows from other assets or other groups of assets (cash generating units). Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest dollar. Reclassifications During the period, certain amounts have been reclassified in order to comply with new accounting standards. 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 mandatory for 31 December 2020 reporting periods have not been early adopted by the Group. The Group has not yet assessed the impact of these new or amended standards and interpretations. 27 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 2. Critical accounting judgements, estimates and assumptions UUV Aquabotix Limited | 2020 Annual Report 28 In the application of the Group’s accounting policies, which are described in Note 1, Management is required to make judgements, estimates and assumptions in the preparation of the financial statements about matters that are not readily available from other sources. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. 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 payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. 3. Segment information Operating segment information Until the cessation of operations of the Company’s wholly owned US based subsidiary Aquabotix Technology Corporation (“ATC”) and its subsequent filing for Chapter 7 bankruptcy in the United States Bankruptcy Court in the District of Massachusetts, there was one operating segment, being the development and sale of unmanned underwater vehicles. Geographical segment information The following tables present certain information regarding geographical segments for the years ended 31 December 2020 and 31 December 2019. Segment performance 31 December 2020 Segment revenue Other income Interest income Depreciation Finance costs Income tax credit/(expense) Loss after income tax expense Assets and liabilities Segment assets Segment liabilities USA $ 457,767 - 206 (9,163) - - Australia $ - 71,734 11 - - - (896,342) (450,948) - - 948,588 (226,192) Elimination $ - - - - - - - - Total $ 457,767 71,734 217 (9,163) - - (1,347,290) 948,588 (226,192) 28 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 29 Segment performance 31 December 2019 Total segment revenue Other income Interest income Depreciation Finance costs Income tax credit/(expense) Loss after income tax expense Assets and liabilities Segment assets Segment liabilities 4. Revenue Revenue from contracts with customers Sale of goods Rendering of services Other revenue Interest revenue Government grant revenue Other revenue Total revenue 5. Deconsolidation of subsidiary Australia $ Elimination $ USA $ 322,166 - 1,656 (43,290) (26,118) - - 6,500 496 (1,335) (8,650) - (1,323,787) (1,085,477) Total $ 322,166 6,500 2,152 (44,625) (34,768) - (2,409,264) - - - - - - - 203,675 (6,322,312) 6,546,799 (149,592) (6,256,430) 6,256,430 494,044 (215,474) 31 December 2020 $ 31 December 2019 $ 457,767 - 457,767 217 53,634 18,100 71,951 285,013 37,153 322,166 2,152 6,500 8,652 529,718 330,818 On 30 November 2020 the Company’s wholly owned US based subsidiary Aquabotix Technology Corporation (“ATC”) ceased active conduct of its business operations. Subsequently, on 23 December 2020 ATC filed for Chapter 7 bankruptcy in the United States Bankruptcy Court in the District of Massachusetts. Accordingly, ATC has been de-consolidated as at that date as the Company no longer has control over ATC. The effect of the de-consolidation of ATC on the loss before income tax for the period is as follows: Derecognition of assets Cash at bank Trade and other receivables Plant and equipment Derecognition of liabilities Trade and other payables Unearned income Borrowings Net assets de-consolidated 29 31 December 2020 $ (19,475) (33,055) (20,921) (73,451) 156,727 69,312 98,546 324,585 251,134 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 Gain or de-consolidation recognised in net profit before income tax Foreign currency translation reserve Net assets de-consolidated 6. Income taxes The components of tax recognised in profit or loss include: Current tax Deferred tax Aggregate income tax expense UUV Aquabotix Limited | 2020 Annual Report 30 31 December 2020 $ 228,071 23,063 251,134 31 December 2020 $ 31 December 2019 $ - - - - - - The income tax for the year can be reconciled to the accounting profit as follows: Loss before income tax expense Income tax credit calculated at the Australian statutory rate of 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income tax: Other non-allowable items Carried forward tax benefits not recognised in the current year (1,347,290) (404,187) (2,409,264) (722,779) 404,187 722,779 Income tax expense/(credit) recognised in profit or loss (relating to continuing operations) - - As at December 2020, the Group had US domiciled tax losses of approximately $12,972,467 relating to international operations, which will expire at various dates over the next seven years. Such losses may also be subject to changes in ownership provisions. The operations of the US subsidiary ATC were discontinued on 30 November 2020 and ATC was placed into bankruptcy on 23 December 2020 and de-consolidated as a result. Accordingly, some or all of these US domiciled tax losses may be limited in future periods or may expire before being able to be applied to reduce future foreign income tax liabilities. The benefit of these losses has not been recognised and will only be recognised in the future when it is probable that future taxable profits will be available against which the benefits of the deferred tax assets can be utilised. In the opinion of the Directors, it is considered likely that these tax losses will not be available in the future. 30 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 7. Cash and cash equivalents Cash at bank and in hand Short-term deposits Total cash and cash equivalents 8. Trade and other receivables Trade receivables Less: allowance for expected credit losses Total trade and other receivables Prepayments and other receivables Security deposits Total trade and other receivables UUV Aquabotix Limited | 2020 Annual Report 31 31 December 2020 $ 31 December 2019 $ 905,823 5,500 911,323 - - - 37,265 - 37,265 37,265 255,254 5,000 260,254 7,130 - 7,130 74,883 9,191 84,074 91,204 Allowance for expected credit losses The Group has not recognised any loss in profit or loss in respect of allowances for expected credit losses for the year ended 31 December 2020 (2019: $nil). Past due but not impaired Customers with balances past due but without allowance for expected credit losses amount to $nil as at 31 December 2020 ($nil as at 31 December 2019). The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on recent collection practices. The ageing of receivables past due but not impaired are as follows: 0 to 3 months overdue 3 to 6 months overdue Total 9. Inventories Raw materials and finished goods 31 December 2020 $ 31 December 2019 $ - - - - 7,130 - 7,130 109,834 31 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 10. Property, plant and equipment Plant and equipment – at cost Less: accumulated depreciation UUV Aquabotix Limited | 2020 Annual Report 32 31 December 2020 $ 31 December 2019 $ - - - 218,286 (185,534) 32,752 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 1 January Additions Disposals Depreciation Exchange differences Deconsolidation Balance as at 31 December 11. Right-of-use asset 2020 $ 32,752 - (2,668) (9,163) - (20,921) - 2019 $ 130,741 - (71,259) (27,098) 368 32,752 On 1 January 2019, the Company adopted AASB 16, Leases. In doing so, a right of use asset of $387,640 and a corresponding lease liability of the same amount were recognised on the balance sheet on 1 January 2019. Since then, the Company vacated the property and negotiated a settlement to prematurely terminate this lease with the landlord. This resulted in an impairment loss the first half of 2019, with a corresponding adjustment to the outstanding lease liability was recognised in August 2019 to reflect the updated negotiated position between the parties. The agreed settlement terms effectively reduced the total expected cash outflow related to this lease by approximately $400,000 over the next four years. Balance at 1 January Additions – AASB 16 Exchange differences Less: accumulated depreciation Less: Impairment Balance as at 31 December 2020 $ - - - - - - 2019 $ - 387,640 9,959 (17,527) (380,072) - As at 31 December 2020, the Company did not have any property, plant and equipment secured under leases. 32 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 12. Current liabilities – trade and other payables UUV Aquabotix Limited | 2020 Annual Report 33 Trade payables Accrued expenses Other payables and accrued expenses Trade and other current liabilities 13. Employee benefits Employee benefits – less than 1 year Total employee benefits 14. Accumulated losses Accumulated losses at the beginning of the financial year Loss after income tax expense for the financial year Foreign exchange translation 31 December 2020 $ 31 December 2019 $ - 11,976 226,192 226,192 - - 157,269 169,245 34,001 34,001 (12,948,832) (1,347,290) 23,063 (10,539,568) (2,409,264) - Accumulated losses at the end of the financial year (14,273,059) (12,948,832) 15. Loan facility and related parties On 24 March 2019, UUV Aquabotix Limited entered into a non-convertible unsecured credit facility agreement with Long Hill Capital II, LLC, one of the Group’s shareholders. Under the agreement, Long Hill Capital II, LLC made available up to AUD$200,000 provided that the Group draw down on the facility within 60 days of entering into the agreement. No fees were incurred in the set-up of this facility, and interest is charged at a rate of 12% per annum, payable in arrears each quarter. The facility has a maturity date of 20 March 2020. The Group drew down on the full facility within 60 days of entering into the agreement and subsequently repaid the full amount plus interest of $4,035 in June 2019. On January 28, 2020, UUV Aquabotix Limited entered into a non-convertible unsecured credit facility agreement, replacing the above facility, with Bergen Global Opportunity Fund LP (“the Lender”), a related party to the Company. Under the agreement, the Lender made available US$248,000 by way of an unsecured credit facility, to be drawn down at its discretion by the Company over the following 12 months subject to it meeting various administrative conditions precedent. A further US$352,000 may be drawn down by mutual agreement between the Company and the Lender. Initial fees of US$48,000 will be payable if the Company elects to draw down on the facility. Interest is payable on any drawn down amount at a rate of 14.99%, payable in arrears on a quarterly basis. The facility is available for a period of 12 months from the date of execution of the agreement. In the event that facility is drawn down, the maturity date for repayment of the loans is 21 January 2021. As at the date of this report, the facility had not been drawn down on. The facility with Bergen Global Opportunity Fund LP was never drawn down and was terminated by mutual consent on 23 October 2020. 33 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 16. Financial risk management UUV Aquabotix Limited | 2020 Annual Report 34 The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable and inter-company funding. Due to the geographical position of the Group and its activities, it is exposed to a variety of financial risks: market risk (including foreign currency risk), interest rate risk, credit risk and liquidity risk. The Directors’ overall risk management program focuses on enabling the Group to meet its financial targets and obligations whilst minimising the potential adverse effects on financial performance. Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors. These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and mitigates financial risks within the Group's operating units. Finance reports to the Board on a monthly basis. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Market Risk Foreign currency risk The Group operates in both Australia and the United States of America. Transactions occur in both AUD and USD and cash and cash equivalents used to fund working capital requirements are held in both AUD and USD denominated bank accounts. Transactional currency exposure arises from sales or purchases other than the group entities’ functional currency. Foreign exchange risk arises from commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the reporting Group’s functional currency. The Group uses cashflow forecasting to manage its working capital. The Group is also exposed to foreign currency exchange risk when capital is raised in AUD and transferred to the US entity. The Group closely monitors foreign currency movements but does not use hedging instruments to manage such risk. In order to protect against exchange rate movements, throughout the year, the Group held amounts denominated in foreign currencies as cash and cash equivalents. The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Cash Trade and other receivables Total Financial assets Trade and other payables Total Financial liabilities Price risk The Group is not exposed to any significant price risk. 31 December 2020 $ 31 December 2019 $ - - - - - 45,279 16,320 61,599 (30,167) (30,167) Interest rate risk The Group is not exposed to any significant interest rate risk. The Group does not have any interest-bearing borrowings. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group 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 Group does not hold any collateral. Credit risk is limited to major banks. 34 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 16. Financial risk management (continued) UUV Aquabotix Limited | 2020 Annual Report 35 Liquidity risk The Group manages liquidity risk by maintaining sufficient liquid assets (mainly cash and cash equivalents) in both Australia and the USA to be able to pay debts as and when they become due. The Group achieves this through the continual monitoring of cashflows and the maturity profile of term deposits. The Group can potentially also raise additional capital as required to manage its liquidity risk. Financial instrument composition and maturity analysis The table below reflects the undiscounted contractual settlement terms for financial liabilities. Less than 6 months $ 6-12 Months $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contractual cash flows $ Carrying amount (assets)/ liabilities $ Contractual maturities of financial liabilities As at 31 December 2020 Trade and other payables Other financial liabilities Total As at 31 December 2019 Trade and other payables Other financial liabilities 226,192 - 226,192 - - - 168,863 12,228 382 - Total 181,091 382 - - - - - - - - - - - - - - - - - - 226,192 - 226,192 - 226,192 226,192 169,245 12,228 169,245 12,228 181,473 181,473 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. 17. Remuneration of auditor During the year, the following fees were paid or payable for services provided by the auditor, RSM Australia Partners and its related practices: Audit services Review services 31 December 2020 $ 38,500 - 31 December 2019 $ 30,000 12,000 Total auditor’s remuneration 38,500 42,000 35 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 18. Key Management Personnel disclosure and related party transactions Compensation UUV Aquabotix Limited | 2020 Annual Report 36 The aggregate compensation made to directors and other members of key management personnel of the Group is set out below: Short-term employee benefits Share-based payments Total Key Management Personnel compensation 31 December 2020 $ 300,314 87,173 387,487 31 December 2019 $ 457,168 201,330 658,498 Details of performance shares granted to directors and other members of key management personnel of the Group are included in Note 22. Details of the share options granted to directors and other members of key management personnel of the Group are included in Note 24. Additional detail in respect of remuneration disclosures for key management personnel are provided in the Remuneration Report on pages 6- 13. Fees of $44,400 were paid and $2,000 was paid to Azalea Consulting Pty Ltd which is an entity associated with Mr Winton Willesee and Ms Erlyn Dale for company secretarial services and for the provision of the registered office. Fees of $708 are payable to Valle Corporate is an entity associated with Mr Winton Willesee and Ms Erlyn Dale for accounting services. All amounts were charged at standard commercial rates or less. 19. Parent entity financial information The individual financial statements for the accounting parent entity, UUV Aquabotix Limited, show the following aggregate amounts: Statement of profit or loss and other comprehensive income Loss for the year Total comprehensive loss Statement of financial position Current assets Total assets Current liabilities Total liabilities Net assets Share Capital Share option reserve Accumulated losses Total Equity 36 31 December 2020 $ 31 December 2019 $ (450,948) (1,085,477) (450,948) (1,085,477) 948,588 948,588 (226,192) (226,192) 6,546,799 6,546,799 (149,593) (149,593) 722,396 6,397,206 13,779,012 1,216,443 (14,273,059) 9,480,516 1,139,149 (4,222,458) 722,396 6,397,206 UUV Aquabotix Limited | 2020 Annual Report 37 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 19. Parent entity financial information Guarantees entered into by the parent entity in relation to the debts of its subsidiaries No guarantees have been entered into by the parent entity as at 31 December 2020 or 31 December 2019. Contingent liabilities The parent entity had no contingent liabilities as at 31 December 2020 and 31 December 2019. Capital commitments The parent entity had no capital commitments as at 31 December 2020 and 31 December 2019. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for the following: ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent enty. Issued equity Note No. of shares $ Balance at 31 December 2018 Shares issued during the period with regard to capital raising Shares issued during the period in lieu of Director fees Shares issued in exchange for services rendered Balance at 31 December 2019 Placement – January 2020 Placement – March 2020 Placement – April 2020 Rights issue – July 2020 Shares issued in lieu of payment for services Shares issued in lieu of Director’s fees Shares issued on conversion of options Shares issued to CEO in lieu of salary Shares issued to employees in lieu of salaries Capital raising costs 37 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 160,000,001 10,191,711 307,937,592 1,609,729 30,296,611 18,750,000 178,750 85,000 516,984,204 12,065,190 77,500,000 87,500,000 59,375,000 77,500 87,500 47,500 1,583,822,997 1,583,823 6,000,000 16,387,300 333,334 28,164,771 12,307,205 6,000 37,500 333 31,546 12,307 - (170,187) 2,388,374,811 13,779,012 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 38 Note (a) Note (b) Note (c) During the period ended 31 December 2019, the Company undertook capital raisings and issued 307,937,592 ordinary shares, raising AUD$1,609,729, net of capital raising costs of $163,146. Of these costs, $30,000 was settled in shares as per Note (c) below. During the period ended 31 December 2019, the Company issued 30,296,611 shares in lieu of cash payment for Director fees, totalling $178,750. During the period ended 31 December 2019, the Company issued 18,750,000 in exchange for services rendered by professional advisers, with an aggregate deemed value of $85,000. Note (d) Issue of 77,500,000 shares at $0.001 to Azalea Investments Pty Ltd (an entity associated with Winton Willesee) Note (e) Issue of 87,500,000 shares at $0.001 Note (f) Issue of 59,375,000 shares at $0.0008 to Azalea Investments Pty Ltd (an entity associated with Winton Willesee) Note (g) Issue of 1,583,822,997 shares at $0.001 pursuant to the Prospectus dated 28 July 2020. Shares were issued as follows: - - - Share subscriptions - 505,552,088 shares to raise $505,552 Shares issued pursuant to Underwriting - 494,447,909 shares to raise $494,448 Share issued pursuant to Rights Issue shortfall - 583,823,000 shares to raise $583,823 Note (h) Issue of 6,000,000 shares at $0.001 in lieu of services provided by Azalea Consulting Pty Ltd (an entity associated with Winton Willesee and Erlyn Dale) for $6,000 Note (i) Issue of 16,387,300 shares at $0.00228 in lieu of Director’s fees to Peter James (former Director) for $25,000 and Rondy Investments Pty Ltd (an entity associated with Robert Clisdell a former Director) for $12,500 Note (j) 333,334 options exercised at $0.001 Note (k) Issue of 28,164,771 shares to Whitney Million (Chief Executive Officer) at $0.00112 in lieu of salary of $31,546 Note (l) Issue of 12,307,205 shares to employees in lieu of salaries and entitlements of $12,307 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. Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. 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. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. The Group is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. 38 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 20. Reserves Opening balance at 31 December 2018 Share options issued during the year UUV Aquabotix Limited | 2020 Annual Report 39 Options reserve $ Foreign exchange reserve $ 978,893 160,256 37,237 - Exchange difference on translation of foreign operations - (14,174) Opening balance at 31 December 2019 1,139,149 23,063 Options issued to employees in lieu of salaries Share option expense recognised during the financial year Employee share options lapsed and cancelled 25,402 101,595 (49,703) - - - Deconsolidation of foreign subsidiary (Note 4) - (23,063) Balance at 31 December 2020 1,216,443 - Nature and purpose of reserves Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payment reserve The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. 39 UUV Aquabotix Limited | 2020 Annual Report 40 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 21. Changes in composition of entity Opening balances at 1 January 2020 Shares lapsed during the period Options lapsed during the period Options issued to Directors and Management Closing balances at 31 December 2019 Expiry of Class B options Expiry of Class C options Options issued pursuant to the Rights Issue Underwriter options Class AH options issued Options Issued to US Employees in lieu of cash salaries and wages Options exercised (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Number of Unlisted Options Number of Listed UUV options 28,500,000 - - 78,500,000 107,000,000 (10,000,000) (700,000) 29,687,500 - - - - - - - 696,458,395 359,423,637 - 49,043,979 (333,334) Number of Performance Shares 45,000,000 (15,000,000) - - 30,000,000 - - Performance shares lapsed during the period Note 23 (30,000,000) Closing balances at 31 December 2020 125,987,500 1,104,592,677 - (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) These performance shares lapsed unexercised on 26 April 2019. These Class A options were issued to all shareholders who subscribed for shares under the Initial Public Offering. The options had a strike price of $0.22 and an expiry date of 20 April 2019. 78,500,000 Unlisted Options were issued to Directors and Management during the year to 31 December 2019. These Options were subject to various escrow and vesting conditions relating to length of employment with the Company. In 2018, 13,200,000 of these unlisted options lapsed unexercised as a result of staff leaving the Company. These options expired during the financial period. These options were issued pursuant to the prospectus dated 28 July 2020. These options were issued as free attaching options to shares subscribed for under a placement to an entity associated with Winton Willesee prior to him becoming a Director. These options were issued to US based employees in lieu of unpaid cash salaries and wages of $25,402 during the period. These options were exercised at a strike price of $0.001 for consideration of $333. 22. Performance shares: The original shareholders of Aquabotix Technology Corporation were historically granted 45,000,000 Performance Shares, each convertible into one Ordinary Share in UUV Aquabotix Limited upon achievement of various performance milestones, as detailed in the table below. During the period ended 31 December 2019, the Class A Performance Shares lapsed unexercised as the conditions required to convert them into Ordinary Shares were not met. The Class B and Class C Performance shares lapsed on 30 November 2020 as the Company’s wholly owned US based subsidiary Aquabotix Technology Corporation (“ATC”) ceased active conduct of its business operations. Subsequently, on 23 December 2020 ATC filed for Chapter 7 bankruptcy in the United States Bankruptcy Court in the District of Massachusetts. 40 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 UUV Aquabotix Limited | 2020 Annual Report 41 Class 15,000,000 Class A Performance Shares 15,000,000 Class B Performance Shares 15,000,000 Class C Performance Shares Performance Shares each share is convertible into one fully paid ordinary share upon the Shares achieving a 30-day volume weighted average price exceeding $0.30 and the Company securing no less than 20 paying customers of remotely operated underwater vehicles within 24 months of the date the Company is admitted to the Official List. each share will convert into one fully paid ordinary share upon the Company achieving, in relation to the Company’s technology, $7,000,000 of cumulative revenue or $2,500,000 of annual revenue in any given twelve-month period, within 36 months of the date the Company is admitted to the Official List. each share is convertible into one fully paid ordinary share upon the Company achieving, in relation to the Company’s technology, $3,000,000 of cumulative earnings before interest and taxes (EBIT) or $1,000,000 of annual EBIT in any given financial year, within 36 months of the date the Company is admitted to the Official List. Number on issue at 31 December 2020 nil nil nil 23. Options issued A share option plan has been established by the Group and approved by shareholders at a general meeting, whereby the Group may, at the discretion of the Nomination and Remuneration Committee, grant options over ordinary shares in the company to certain key management personnel of the Group. The options are issued for nil consideration and are granted in accordance with performance guidelines established by the Nomination and Remuneration Committee. During the year ended 31 December 2020 there were no options issued under the share option plan. During the financial year 26,750,000 Class AE options that were issued to directors and management in 2019 lapsed with the balance of 6,000,000 Class AE options remaining vested. The movement of options during the period is set out in Note 22. The total options on issue as at 31 December 2020 was 1,203,830,177, comprising 99,237,500 unlisted options and 1,104,592,677 listed UUVOA options and details are set out on page 15 of the Directors Report. 24. Earnings (loss) per share (a) Loss attributable to the owners of UUV Aquabotix Limited Loss after income tax attributable to the owners of UUV Aquabotix Limited (1,347,290) (2,409,264) 31 December 2020 $ 31 December 2019 $ (b) Loss per share Basic loss per share Diluted loss per share Cents Cents (0.001) (0.001) (0.75) (0.75) Number Number (c) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share 1,267,712,828 321,327,466 All performance shares and share options were considered anti-dilutive in the period ended 31 December 2020 and 31 December 2019. 41 Notes to the Financial Statements (Continued) For the year ended 31 December 2020 25. Contingent liabilities UUV Aquabotix Limited | 2020 Annual Report 42 During January 2020, the Group learned that a licensor of technology incorporated into the SwarmDiverTM product, Apium Inc. (“Apium”), a small, privately held U.S. Company, filed a lawsuit against the Company’s subsidiary, Aquabotix Technology Corporation (“ATC”) in the U.S. District Court, Central District of California in Los Angeles. The lawsuit includes claims for actual and anticipatory breach of the license agreement, a declaratory judgement that the license is terminated and that Apium itself has not breached the license, as well as violation of the Defend Trade Secrets Act, a U.S. law often invoked in licensing disputes. The Company believes that the lawsuit is completely without merit and that Apium’s actions are themselves a breach of the terms of the license agreement. The Company notes that the filing of the bankruptcy automatically stays the action, and a formal Notice of Stay of Proceedings due to filing of bankruptcy was filed in December in the U.S. District Court, Central District of California in Los Angeles. The Company intends to seek shareholder approval for the grant of 40 million and 20 million UUVOA options to Peter James and Rob Clisdell respectively in lieu of cash fees owed at the time of their resignations. Other than detailed above, as at 31 December 2020 the Company had no contingent liabilities. 26. Reconciliation from loss after income tax to net cash outflow from operating activities Operating loss for the year after tax Add/ (deduct) non-cash items- income and expenses Depreciation Share option expense Effects of foreign currency translation Impairment of Right-Of-Use asset Lease liabilities release Loss on disposal of assets Operating expenses paid in shares Effect of deconsolidation of subsidiary working capital Change in operating assets and liabilities Increase/(decrease) in trade and other receivables Decrease/(increase) in inventory (Decrease)/increase in trade and other payables (Decrease)/increase in other operating liabilities 31 December 2020 $ (1,347,290) 31 December 2019 $ (2,409,264) 9,163 77,294 - - - - 91,789 66,128 53,939 109,834 56,947 (46,229) 44,625 160,256 6,722 380,072 (390,313) 71,096 145,000 - (1,247) 21,784 (89,955) 54,025 Net cash flows from (used in) operating activities (928,425) (2,007,199) 27. Events after the reporting date The impact of the COVID-19 pandemic is on-going, and it is not practicable to estimate the potential impact, positive or negative, after the reporting date. Given the company is largely dormant the pandemic is not expected to have any significant impact at all. The situation is rapidly evolving and could change depending on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. No other matter or circumstance has arisen since 31 December 2020 that has significantly affected or may significantly affect the results of the Company’s operations, the results of those operations, or the Company’s state of affairs in future financial years. 42  UUV Aquabotix Limited | 2020 Annual Report 43 43 Directors’ Declaration In the opinion of the Directors:  the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;  the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 1 to the financial statements;  the attached financial statements and notes give a true and fair view of the Group's financial position as at 31 December 2020 and of its performance for the financial year ended on that date;  there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer for the year ended 31 December 2020 required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. On behalf of the Directors Winton Willesee Chairman 31 March 2021 INDEPENDENT AUDITOR’S REPORT To the Members of UUV Aquabotix Limited RSM Australia Partners Level 13, 60 Castlereagh Street Sydney NSW 2000 GPO Box 5138 Sydney NSW 2001 T +61 (0) 2 8226 4500 F +61 (0) 2 8226 4501 www.rsm.com.au Opinion We have audited the financial report of UUV Aquabotix Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2020, 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 the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's financial position as at 31 December 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING 44 RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Key Audit Matter How our audit addressed this matter Deconsolidation of Subsidiary Refer to Note 5 in the financial statements On 30 November 2020, the Company’s wholly owned US based subsidiary, Aquabotix Technology Corporation (“ATC”) ceased active conduct of its business operations. Subsequently, on 23 December 2020, ATC filed for Chapter 7 bankruptcy in the United States Bankruptcy Court in the District of Massachusetts. Accordingly, ATC has been de- consolidated as at that date as the Company no longer has control over ATC. proceeds were No deconsolidation and forgiven during the year. received inter-company from this loan was We identified the deconsolidation of ATC as a key audit matter as it is a significant transaction that has resulted in the deconsolidation of the Group’s only subsidiary. In addition, the accounting in relation to this transaction is non-routine and complex. Share-based payments Refer to Note 24 in the financial statements The Group issued share options to directors and employees during the year. These were equity- settled options, which management valued using a Black Scholes model. Share-based payments are technically complex to account for and are subject to significant judgement by management in determining the inputs used to determine the fair value. This was considered a key audit matter due to the technical complexity and judgments required in determining if the transactions were appropriately accounted for in accordance with AASB 2 Share Based Payments. Our audit procedures in relation to deconsolidation of subsidiary included:  Obtaining a detailed understanding of the transaction and related accounting entries in that relation occurred in December 2020; the deconsolidation of ATC to  Reviewed the ASX announcements and other documentation in relation to ATC’s filing for bankruptcy the ensure that control was effectively lost prior to the financial year end;  Reviewed the Company’s consolidation workings including the underlying accounting records of ATC at the time control was lost, and assessed related that adjustments were the requirements of AASB 10, Consolidated Financial Statements; and treatment and in accordance with the accounting  Assessed the presentation and disclosures of deconsolidation in the financial statements to evaluate compliance with the requirements of Australian Accounting Standards. Our audit procedures in relation to share-based payments included:  Making inquiries of management and reviewing relevant agreements to understand the share- based payment schemes established in the year.  Critically evaluate the key assumptions used in determining the fair value of the share options at grant date having consideration of the market, the share price, the expected volatility, the vesting period, and the number of options expected to vest.  Recalculating the Statement of Profit or Loss and the related balance in the Reserves. the estimated charge to  Reviewing the accounting treatment adopted by management and ensuring it is in line with the treatment set out in AASB 2 Share Based Payments.  Considering the Group’s the adequacy of disclosures in respect of the judgements taken in the valuation models. 45 Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 31 December 2020, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 6 to 13 of the directors' report for the year ended 31 December 2020. In our opinion, the Remuneration Report of UUV Aquabotix Limited, for the year ended 31 December 2020, complies with section 300A of the Corporations Act 2001. 46 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. RSM AUSTRALIA PARTNERS G N Sherwood Partner Sydney, NSW Dated: 31 March 2021 47 ASX ADDITIONAL INFORMATION UUV Aquabotix Limited | 2020 Annual Report 48 The shareholder information set out below was applicable as at 26 February 2021. 1. Quotation Listed securities in UUV Aquabotix Ltd are quoted on the Australian Securities Exchange under ASX code UUV (Fully Paid Ordinary Shares) and UUVOA (Listed Options). 2. Voting Rights The voting rights attached to the Fully Paid Ordinary shares of the Company are: (a) (b) at a meeting of members or classes of members each member entitled to vote may vote in person or by proxy or by attorney; and on a show of hands, every person present, who is a member has one vote, and on a poll every person present in person or by proxy or attorney has one vote for each ordinary share held. There are no voting rights attached to any Options on issue. 3. Distribution of Equity Securities: i) Fully paid Ordinary Shares Shares Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total Holders 32 27 52 235 1,391 1,737 Units 3,482 110,340 451,775 11,694,420 2,376,114,794 % - - 0.02 0.49 99.49 2,388,374,811 100.00% On 26 February 2021, there were 472 holders of unmarketable parcels of less than 28,856,645 ordinary shares (based on the closing share price of $0.003). ii) UUVOA Listed Options exercisable at $0.001 on or before 28 July 2023 Shares Range Holders 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total 4 5 1 33 199 242 Units 337 15,129 6,000 1,770,026 1,102,801,185 1,104,592,677 % - - - 0.16 99.84 100.00% iii) Unlisted Options exercisable at $0.11 on or before 18 April 2021 UUV Aquabotix Limited | 2020 Annual Report 49 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Whitney Gayle Million – 1,500,000 options 1,500,0001 1,500,000 100.00 100.00% iv) Unlisted Options exercisable at $0.11 on or before 18 April 2022 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Whitney Gayle Million – 1,500,000 options 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Whitney Gayle Million – 1,500,000 options 1,500,0001 1,500,000 100.00 100.00% 1,500,0001 1,500,000 100.00 100.00% v) Unlisted Options exercisable at $0.11 on or before 18 April 2023 Shares Range Holders Units % - - - - % - - - - % - - - - - - - - - - - - - - - - vi) Unlisted Options exercisable at $0.11 on or before 18 April 2024 UUV Aquabotix Limited | 2020 Annual Report 50 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Whitney Gayle Million – 1,500,000 options 1,500,0001 1,500,000 100.00 100.00% vii) Unlisted Options exercisable at $0.11 on or before 30 May 2021 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1,000,0001 1,000,000 100.00 100.00% 1Holders who hold more than 20% of securities are: Rondy Investments Pty Ltd – 1,000,000 options viii) Unlisted Options exercisable at $0.11 on or before 18 July 2021 Shares Range Holders Units % - - - - % - - - - % - - - - - - - - - - - - - - - - 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 2 2 1Holders who hold more than 20% of securities are: Matthew Moore – 200,000 options Crystal Glenn – 200,000 options 400,0001 400,000 100.00 100.00% ix) Unlisted Options exercisable at $0.11 on or before 18 July 2021 UUV Aquabotix Limited | 2020 Annual Report 51 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 2 2 1Holders who hold more than 20% of securities are: Matthew Moore – 200,000 options Crystal Glenn – 200,000 options 400,0001 400,000 100.00 100.00% x) Unlisted Options exercisable at $0.11 on or before 18 July 2021 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 2 2 1Holders who hold more than 20% of securities are: Matthew Moore – 200,000 options Crystal Glenn – 200,000 options 400,0001 400,000 100.00 100.00% xi) Unlisted Options exercisable at $0.11 on or before 21 December 2021 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Tricity Partners Pty Limited – 300,000 options 300,0001 300,000 100.00 100.00% % - - - - % - - - - % - - - - - - - - - - - - - - - - xii) Unlisted Options exercisable at $0.0008 on or before 30 June 2022 UUV Aquabotix Limited | 2020 Annual Report 52 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Azalea Investments Pty Ltd – 29,687,500 options 29,687,5001 100.00 29,687,500 100.00% xiii) Unlisted Options exercisable at $0.11 on or before 2 November 2021 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Ian Estaphan Owen – 200,000 options 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Ian Estaphan Owen – 200,000 options 200,0001 200,000 100.00 100.00% 200,0001 200,000 100.00 100.00% xiv) Unlisted Options exercisable at $0.11 on or before 2 November 2021 Shares Range Holders Units % - - - - % - - - - % - - - - - - - - - - - - - - - - xv) Unlisted Options exercisable at $0.11 on or before 2 November 2021 UUV Aquabotix Limited | 2020 Annual Report 53 - - - - - - - - - - - - Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Ian Estaphan Owen – 200,000 options 200,0001 200,000 100.00 100.00% xvi) Unlisted Options exercisable at $0.005 on or before 24 December 2023 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 7 7 32,750,0001 100.00 32,750,000 100.00% 1Holders who hold more than 20% of securities are: Peter Richard James – 10,000,000 options Rondy Investments Pty Ltd – 7,000,000 options xvii) Unlisted Options exercisable at $0.010 on or before 24 December 2023 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 7 7 1Holders who hold more than 20% of securities are: Peter Richard James – 10,000,000 options Rondy Investments Pty Ltd – 7,000,000 options 32,750,0001 100.00 32,750,000 100.00% % - - - - % - - - - % - - - - xviii) Unlisted Options exercisable at $0.015 on or before 24 December 2023 UUV Aquabotix Limited | 2020 Annual Report 54 - - - - - - - - - - - - Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Whitney Gayle Million – 6,500,000 options 6,500,0001 6,500,000 100.00 100.00% xix) Unlisted Options exercisable at $0.020 on or before 24 December 2023 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Whitney Gayle Million – 6,500,000 options 6,500,0001 6,500,000 100.00 100.00% xx) Unlisted Options exercisable at $0.30 on or before 28 April 2021 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 3 3 1Holders who hold more than 20% of securities are: Peter Richard James – 3,000,000 options Tricity Partners Pty Limited – 2,000,000 options 5,700,0001 5,700,000 100.00 100.00% % - - - - % - - - - % - - - - xxi) Unlisted Options exercisable at $0.30 on or before 28 April 2022 UUV Aquabotix Limited | 2020 Annual Report 55 Shares Range Holders Units 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and above Total - - - - 1 1 1Holders who hold more than 20% of securities are: Peter Richard James – 3,000,000 options 4. Substantial Shareholders - - - - % - - - - 3,000,0001 3,000,000 100.00 100.00% Notwithstanding the Company has not received a notice of ceasing to be a substantial shareholder from either Deniz Diogo or Durval Tarvares (both of whom lodged notices of becoming substantial shareholders in 2017 with 6,798,457 and 34,839,787 shares respectively), the Company does not believe those holders to be substantial shareholders and will not include them in further disclosures. 5. Restricted Securities There are no restricted securities on the register as at 26 February 2021. 6. On market buy-back There is currently no on market buy-back in place. 7. Twenty Largest Shareholders: The twenty largest shareholders of the Company’s quoted securities as at 26 February 2021 are as follows: UUV Aquabotix Limited | 2020 Annual Report 56 UUV Fully Paid Ordinary Shares: Name No. of Shares SCINTILLA STRATEGIC INVESTMENTS LIMITED 100,000,000 1 2 3 4 SILVERINCH PTY LIMITED COMSEC NOMINEES PTY LIMITED BOND STREET CUSTODIANS LIMITED 5 MR MICHAEL SCHLOMAN 6 6 7 8 HONGMEN PTY LTD 8TIVE TRADING PTY LTD PETER RICHARD JAMES R J & A INVESTMENTS PTY LTD 9 WHITNEY GAYLE MILLION 10 MR PHILLIP JAMES RAE 84,723,000 73,158,253 55,495,612 50,000,000 40,000,000 40,000,000 32,676,281 30,000,000 28,164,771 25,000,000 10 MR DRAGOSLAV JEVTIC & MRS NICOLE JEVTIC 25,000,000 11 AC YOUNG PTY LTD 12 AQUABOTIX TECH. CORP. 401(K) 13 AMAX PACIFIC PTY LIMITED 14 MR DANIEL ROSS BAOHM 15 SCINTILLA CAPITAL PTY LTD 15 RUI LONG INTERNATIONAL PTY LTD 16 CITICORP NOMINEES PTY LIMITED 17 MR MOHAMMAD MANZUR MURSHED 18 MR HIEN QUANG TRINH 19 MR ADRIAN TREVOR BANDUCCI 20 RONDY INVESTMENTS PTY LTD 24,723,000 23,049,813 22,500,000 22,000,000 20,000,000 20,000,000 19,925,263 18,500,000 18,000,000 16,000,000 15,700,407 % 4.19 3.55 3.06 2.32 2.09 1.67 1.67 1.37 1.26 1.18 1.05 1.05 1.04 0.97 0.94 0.92 0.84 0.84 0.83 0.77 0.75 0.67 0.66 Total 804,616,400 33.69 8. Twenty Largest Option holders: The twenty largest option holders of the Company’s quoted securities as at 26 February 2021 are as follows: UUV Aquabotix Limited | 2020 Annual Report 57 UUVOA Listed Options: Name 1 2 3 HAMMERHEAD HOLDINGS PTY LTD GEORDIE BAY HOLDINGS PTY LTD UPSKY EQUITY PTY LTD 4 MR MICHAEL FRANK MANFORD No. of Shares 96,000,000 75,476,806 66,666,666 60,903,636 5 MR DRAGOSLAV JEVTIC & MRS NICOLE JEVTIC 50,000,000 6 LONGREACH 52 PTY LTD 7 WHITNEY GAYLE MILLION 38,666,666 35,000,000 8 9 CHRISTIE JAMES FUNDS MANAGEMENT PTY LTD 32,379,966 SILVERINCH PTY LIMITED 28,241,000 10 SCINTILLA STRATEGIC INVESTMENTS LIMITED 26,666,667 11 LOKTOR HOLDINGS PTY LTD 11 AC YOUNG PTY LTD 12 MR ARJUNAN SUNDARAMOORTHY 13 HALE COURT HOLDINGS PTY LTD 14 MR JASON TANG 14 MR JASON PETER WILLARD 15 RONDY INVESTMENTS PTY LTD 16 AZALEA INVESTMENTS PTY LTD 17 PERSHING AUSTRALIA NOMINEES PT Y LTD 18 MR GREGORY MILTS 19 MR MARK ANTHONY BROGLIO 20 MRS LISA MARLANE ROBERTS 24,907,666 24,907,666 22,500,000 21,403,302 20,000,000 20,000,000 18,277,934 16,666,666 15,189,860 13,000,000 12,500,000 12,484,745 % 8.69 6.83 6.04 5.51 4.53 3.50 3.17 2.93 2.56 2.41 2.25 2.25 2.04 1.94 1.81 1.81 1.65 1.51 1.38 1.18 1.13 1.13 Total 731,839,246 66.25 

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