Vmoto Limited
Annual Report 2020

Plain-text annual report

ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 VMOTO LIMITED ABN 36 098 455 460 1 AUDITOR Bentleys Audit & Corporate (WA) Pty Ltd Level 3, 216 St Georges Terrace Perth, Western Australia 6000, Australia BANKER National Australia Bank 1238 Hay Street West Perth, Western Australia 6005, Australia SOLICITORS Squire Patton Boggs Level 21, 300 Murray Street Perth, Western Australia 6000, Australia Accuro Maxwell Level 26, 56 Pitt Street Sydney, New South Wales 2000, Australia SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth, Western Australia 6000, Australia Telephone: +61 8 9323 2000 Facsimile: +61 8 9323 2033 CORPORATE DIRECTORY DIRECTORS Mr Charles Chen – Managing Director Mr Ivan Teo – Finance Director Mr Blair Sergeant – Non-Executive Director Mr Kaijian Chen – Non-Executive Director Ms Shannon Coates – Non-Executive Director COMPANY SECRETARY Ms Shannon Coates PRINCIPAL AND REGISTERED OFFICE Suite 5, 62 Ord Street West Perth, Western Australia 6005, Australia Telephone: +61 8 9226 3865 Facsimile: +61 8 9322 5230 SECURITIES EXCHANGE Australian Securities Exchange Level 40, Central Park 152-158 St Georges Terrace Perth, Western Australia 6000, Australia WEBSITE AND EMAIL Website: www.vmoto.com Email: info@vmoto.com ASX Code: VMT Vmoto Limited is a public company incorporated in Western Australia and listed on the Australian Securities Exchange. 1 CONTENTS 1 3 4 7 15 25 67 69 70 75 Corporate Directory Managing Director’s Letter Operations Review Directors’ Report Remuneration Report Financial Statements Directors’ Declaration Auditor’s Independence Declaration Independent Auditor’s Report Additional Shareholder Information 2 MANAGING DIRECTOR’S LETTER Dear Shareholders, I would firstly like to thank you for your unwavering support during what became a landmark year, filled with numerous challenges but ultimately resulting in the achievement of a number of significant commercial and operational milestones for Vmoto. It goes without saying that 2020 offered a unique set of challenges for economies and businesses globally and I am delighted to be able to say that the experience and agility of the Vmoto Board and management team ensured we were able to react quickly in revising our global growth strategies to ensure as little disruption as possible. Ultimately we achieved total unit sales of 23,547, record revenues of $61 million (an increase of 34% on the FY2019) and a net profit after tax of $3.7 million, an increase of 174% on FY2019. These exceptional results were driven heavily by our focus on capitalising on growth in the B2B markets, as well as the benefits realised via Vmoto Soco Manufacturing, our jointly owned manufacturing company with Super Soco that was established in Q1 2020. Vmoto’s B2B operations with its ride sharing, parcel and food delivery and distribution partners performed above expectations as the Company secured an additional 23 international distributors, a record 4,300-unit order from Go Sharing and commenced supplying to a number of new ride-sharing operators. During the year, we undertook equity placements, including a share purchase plan to reward our valued shareholders for their ongoing support, raising a total of $13.6 million and providing the Company with resources to ramp-up our growth strategies, ensuring continued commercial success and shareholder wealth creation. Vmoto is also strategically focussed on a B2C growth strategy, and subsequent to the year end, launched three new B2C models, namely the new TS model, the new TC model and a CUmini model, into international markets. These models were unveiled at the recent 2021 Vmoto Soco World Première. The Company is in an incredibly strong position going into the new financial year and we are confident we will continue on our current growth trajectory, especially with the increasing global focus on electric vehicles, net zero carbon targets and sustainability. On behalf of the Vmoto Board and Management, I would like to thank all of our shareholders for their ongoing support and look forward to updating you on our upcoming achievements. Yours faithfully Charles Chen Managing Director 3 3 VMOTO LIMITED OPERATIONS REVIEW OVERVIEW - Highlights Financial Overview for FY2020 • Statutory results » » » » Total revenue of $61 million, up 34% on FY2019 Net profit after tax (NPAT) of $3.7 million, up 174% on FY2019 Earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.8 million, up 102% on FY2019 Strong positive cash flows from operating activities of $4 million, up 139% on FY2019 • • • Strong cash position of $15 million as at 31 December 2020, up 126% from $6.6 million as at 31 December 2019 No bank debt as at 31 December 2020, having paid out the operating facility in full Net tangible assets of $32.7 million at 31 December 2020, up 103% on FY2019 Operational Overview for FY2020 • • Total sales of 23,547 units of electric two-wheel vehicles, up 18% on FY2019 and up 117% on FY2018. Total international sales of 21,416 units, up 24% on FY2019 and up 112% on FY2018. • Order of 4,300 units secured from Vmoto’s strategic ride-sharing customer, Go Sharing, part of Greenmo Group, all of which have been delivered. Additional order of 5,904 units secured from Greenmo Group post period end. 23 international distributorships established via ongoing expansion of Vmoto’s international distribution network, together with continuing discussions and samples shared with a significant number of potential customers in new markets. Vmoto now has a total of 46 international distributors. Vmoto and its long-term partner, Super Soco, established a new 50%/50% joint venture manufacturing company to capitalise on more efficient production and cost synergies • • FY2020 – A landmark year of operational and commercial growth for Vmoto During the 2020 financial year, Vmoto delivered exceptionally strong sales and revenue growth to deliver a NPAT of circa $3.7 million. This is testament to the Company’s dedication to its well-honed international growth strategy, which still delivered amidst the COVID-19 outbreak, despite lockdowns, travel restrictions and other market challenges. In spite of the aforementioned global economic challenges, the Company sold a total of 23,547 units of electric two-wheel vehicles representing an increase of 18% on the previous financial year, translating to total revenue of $61 million. International markets Vmoto’s B2C products have continued to generate increased interest and recognition among motorcycle enthusiasts and other consumers alike, whilst Vmoto’s B2B products have received significant increased interest from food delivery, parcel delivery, rental companies and ride-sharing operators. During the 2020 financial year, the Company signed and renewed distribution agreements with 23 international partners across Paraguay, United Arab Emirates, Peru, Russia, Serbia, Kosovo, Montenegro, Bosnia, Herzegovina, Macedonia and Albania, Armenia, Japan, Costa Rica, Panama and Thailand, Kazakhstan, Malaysia, Nepal, Philippines and New Caledonia, Argentina, Dominican Republic, Indonesia, Japan, Lithuania, Romania and Ukraine, for the warehousing, distribution and marketing of its B2C range of electric two-wheel vehicles. 4 VMOTO LIMITED • To allow the establishment of solid credit and trading terms with suppliers through economies of scale, providing increased purchasing power and freeing up working capital to enable Vmoto to aggressively pursue its expansion plans; and • Ongoing expansion of Vmoto Soco Manufacturing’s research and development capabilities, including Vmoto’s immediate access to Super Soco’s research and development capability. Corporate In August 2020, Vmoto successfully raised $9.6 million (before costs) in an equity capital raising which was supported by a broad range of strategic investors, institutions and sophisticated and professional investors. The raise was cornerstoned by Perennial Value Management. Earlier in 2020, the Company also completed a heavily oversubscribed share purchase plan, raising a total of $3.95 million from existing shareholders. The funds raised have enabled the Company to accelerate its growth and further capitalise on the opportunities in the growing international market, in particular the B2B markets, where the Company has been able to offer flexible payment terms, facilitating and supporting that growth. A portion of the funds has also been applied towards working capital as the Company fast tracks its expansion into other international electric two-wheel vehicle markets. The Company has actively increased the promotion and marketing of the Company’s products worldwide, including the recent online World Premiere event, in addition to supporting influencers on various social media platforms. The Company maintains close relationships with its existing network of distributors to deliver exceptional products and customer service. This, in addition to its sales strategy, has proven successful. The Company has seen a further increase in interest from business customers, including food delivery, parcel delivery and ride-sharing companies for the Company’s B2B products and Vmoto is now supplying products to seven ride-sharing operators globally and is in advanced discussions with an additional fourteen ride-sharing operators. Further, the Company is supplying delivery products to twelve delivery customers globally and is in discussions with an additional thirteen potential new customers operating in this market segment. Vmoto has also supplied samples to and/or is in discussions with a number of potential B2C and B2B distributors and customers in Bahrain, Bangladesh, Bolivia, Brazil, Bulgaria, Columbia, Croatia, Cuba, Czech Republic, Denmark, Dubai, Ecuador, Egypt, Georgia, Greece, India, Israel, Mexico, Pakistan, Portugal, Romania, Russia, Salvador, Saudi Arabia, Singapore, Slovenia, South Africa, Spain, Switzerland, Turkey and United States. Vmoto and Super Soco established new manufacturing company In FY2020, Vmoto entered into a joint investment agreement with its longstanding strategic partner, Super Soco Intelligent Technology (Shanghai) Co, Ltd, to establish a new jointly owned Chinese registered manufacturing company, Nanjing Vmoto Soco Intelligent Technology Co Ltd (Vmoto Soco Manufacturing). The issued capital of Vmoto Soco Manufacturing is owned 50% by Vmoto and 50% Super Soco, and it is the sole and exclusive manufacturer for both Vmoto’s and Super Soco’s electric scooter and motorcycle products. Under the terms of the agreement, Vmoto was required to contribute RMB 30 million (~A$5.9 million) in cash and/or assets by end of June 2020, which served as the initial working capital for Vmoto Soco Manufacturing. Vmoto has fulfilled this commitment. Super Soco will also contribute RMB 30 million (~A$5.9 million) in cash and/or assets progressively by no later than June 2025, based on the commercial requirements of the joint venture company. This may include contributions of Super Soco’s intangible assets, including patents and molds. The key strategic objectives and rationale behind establishing Vmoto Soco Manufacturing are: • • To strengthen Vmoto’s commercial relationship with Super Soco; Streamlining of supply chain processes, with Vmoto Soco Manufacturing the sole and exclusive manufacturer for both companies, and Vmoto retaining exclusive sales and marketing rights for Super Soco products globally, excluding China; 5 VMOTO LIMITEDOUTLOOK As the COVID-19 situation continues to evolve around the world, the Board and Management remain in continuous discussion and preparedness, should the implementation of a revised strategy be required. However, having ended the 2020 financial year in such a strong operational and financial position post numerous commercial achievements, the Company is confident in the strength of its global growth strategy and therefore, in the absence of unforseen events, expects similar levels of growth to be delivered for the 2021 financial year. Vmoto continues to execute on its strategy of selling high performance and high value electric two-wheel vehicles into international markets and continues to build both its B2B and B2C distribution network worldwide. Subsequent to year end, Vmoto secured a major order valued at ~$13 million with its strategic B2B customer, Greenmo Group. In addition, the Company is looking to penetrate various new markets including the world’s largest two-wheel vehicle market; India, where subsequent to year end, it signed an MOU with one of India’s largest travel technology companies, Bird Group. Vmoto is also focused on expanding its product range to supply broader markets of electric vehicle users, with 3 new B2C models launched in February 2021 and plans to launch a new B2B electric delivery two-wheel vehicle in the coming months. In addition, Vmoto is evaluating and developing a new electric delivery three-wheel vehicle in consultation with its existing and new B2B customers and the Company is also in discussions with a top European industrial design company to develop new electric two-wheel vehicle models, further enhancing the Company’s product range. The global focus on mitigating the impacts of climate change and the transition towards electric vehicles provide Vmoto a strong platform from which to accelerate its growth. As a result, the Company has broadened its commercialisation strategy and is confident it will be able to deliver strong sales and revenue growth in the coming year and beyond. 6 VMOTO LIMITEDDIRECTORS’ REPORT The Directors present their report together with the consolidated financial statements of Vmoto Limited (“Vmoto” or the “Company”) and its controlled entities (the “Group”) for the financial period 1 January 2020 to 31 December 2020. The Directors of the Company at any time during or since the end of the financial year are set out below. Directors were in office for the entire year unless otherwise stated: Executive Directors Charles Chen Managing Director Ivan Teo Finance Director Experience and responsibilities: Mr Teo joined the Company as Chief Financial Officer in 17 June 2009 and has been a Finance Director of the Company since 29 January 2013. Mr Teo is an experienced finance executive with significant experience in international business. Mr Teo is a qualified Chartered Accountant and has over 18 years of finance and accounting experience with private and public companies in a diverse range of industries including automobile, manufacturing, mining and retail. Mr Teo graduated from University of Adelaide, South Australia with a Bachelor of Commerce and currently resides in China. Non-Executive Directors Experience and responsibilities: Mr Chen has been an Executive Director of the Company since 5 January 2007 and Managing Director since 1 September 2011. Kaijian Chen Independent Non-Executive Director Mr Chen is an entrepreneur in motorcycle industry and has previously founded Freedomotor Corporation Limited in 2004, which were subsequently acquired by Vmoto through a management buyout of key assets. Mr Chen holds a Bachelor of Automobile Engineering from Wuhan University of Automobile Technology (China) and a postgraduate Diploma of Business Administration from South Wales University (UK). Mr Chens began his career with Hainan Sundiro Motorcycle Co, Ltd, the largest publicly listed industrial company in Hainan Province, which was acquired by Honda Japan in 2001. Mr Chen has held senior executive roles with Hainan Sundiro from 1993 to 2002, and professionally trained in broad aspect of the motorcycle manufacturing and distribution operations including international sales and marketing, research and development, procurement and production. Mr Chen resides in China, and oversees all of the Company’s operations and activities Experience and responsibilities: Mr Chen has been a Non-Executive Director of the Company since 1 September 2011. Mr Chen has extensive experience in the motorcycle manufacturing industry in China. He was formerly vice president of Hainan Sundiro Motorcycle Co, Ltd, which was the second largest motorcycle manufacturer in China at the time, and which was subsequently acquired by Honda in 2001. Mr Chen also served as vice president for Xinri E-Vehicle Co. Ltd, which is one of the largest electric two-wheel vehicle manufacturers in China at present and the first electric two-wheel vehicle enterprise in China that listed on securities exchange. Currently, Mr Chen is vice president of Changzhou Supaiqi E-Vehicle Co, Ltd, which is one of the most renowned electric vehicle manufacturers in China at present. Mr Chen holds a degree from the Beijing Institute of Technology and resides in China. 7 VMOTO LIMITEDShannon Coates Independent Non-Executive Director Ms Coates has been a Non-Executive Director of the Company since 23 May 2014. Experience and responsibilities: Ms Coates has been a Non-Executive Director of the Company since 23 May 2014. Ms Coates completed a Bachelor of Laws through Murdoch University and has since gained over 20 years’ in-house experience in corporate law and compliance for public companies. She is a Chartered Secretary and an Associate Member of both the Institute of Chartered Secretaries & Administrators and Governance Institute Australia. She is also a graduate of the Australian Institute of Company Directors. Ms Coates is a director of Evolution Corporate Services Pty Ltd, a company providing corporate advisory services and is also company secretary to a number of listed companies. Blair Sergeant Independent Non-Executive Director Experience and responsibilities: Mr Sergeant has been a Non-Executive Director of the Company since 4 November 2020. Mr Sergeant is an experienced public company executive, having been the former Founding Managing Director of Lemur Resources Limited, as well as the former Finance Director of Coal of Africa Limited, which the company grew from a sub-$2m market capitalisation to over $1.5b at its peak. Mr Sergeant was also responsible for the acquisition of Vmoto in mid-2006, resulting in reverse takeover of Optima Corporation Limited. Furthermore, Mr Sergeant was responsible for the acquisition of Freedomotor Ltd by Vmoto Limited in early 2007. During his career, Mr Sergeant has held the position of Managing Director, Non- Executive Director and/ or Company Secretary for numerous listed entities across a broad spectrum of industry. Mr Sergeant graduated from Curtin University, Western Australia with a Bachelor of Business and subsequently, a Post Graduate Diploma in Corporate Administration. He is a Chartered Secretary, member of the Governance Institute of Australia, member of the Australian Institute of Company Directors and an Associate of the Australian Certified Practising Accountants. Phillip Campbell Independent Non-Executive Chairman Resigned 4 November 2020 Experience and responsibilities: Mr Campbell was appointed as Non-Executive Chairman on 31 May 2017. Mr Campbell’s career spans 35 years and includes national and international postings across a range of industries including resources, construction, manufacturing, food, and engineering services. Phillip has previously been a chairman of ASX listed Fleetwood Corporation Limited, FMCG business, Farm Pride Foods Limited and has previously been a director of mining services company Pearl-Street Limited; energy and technical services business, HRL Limited; agricultural company, Fodder King Limited. He is currently also a director and advisor to a number of unlisted public and private organisations across Australia. 8 VMOTO LIMITED Directorships in other listed entities Directorships in other listed entities held by Directors of the Company during the last 3 years immediately before 31 December 2020 are as follows: Director Mr Charles Chen Mr Ivan Teo Mr Kaijian Chen 2019 - - - Ms Shannon Coates Bellevue Gold Ltd Flinders Mines Limited Kopore Metals Limited Mr Blair Sergeant Bowen Coking Coal Limited Rincon Resources Limited Ikwezi Mining Limited Celsius Resources Limited Period of directorship From - - - Current 2019 2020 Current Current Current Current To - - - 2020 2018 2015 2018 2020 2020 2021 Directors’ Meetings The number of Directors’ meetings and the number of meetings attended by each of the Directors of the Company during the year ended 31 December 2020 are: Director Held while Director Attended Board Meetings Mr Phillip Campbell1 6 Mr Charles Chen Mr Ivan Teo Mr Kaijian Chen 7 7 7 Ms Shannon Coates 7 Mr Blair Sergeant2 1 6 7 7 5 7 1 1. Mr Campbell resigned on 4 November 2020 2. Mr Sergeant was appointed on 4 November 2020 There is presently no separate Audit, Nomination or Remuneration Committee, with all committee functions being addressed by the full Board. Principal Activity The principal activity of the Group during the year ended 31 December 2020 was the development and manufacture, marketing and distribution of electric two-wheel vehicle (electric mopeds and electric motorcycles). Operating and Financial Review Review of Operations Vmoto Limited is a global electric two-wheel vehicle (EV) manufacturing and distribution group. The Company specialises in high quality electric two-wheel vehicles manufactured from its own manufacturing facilities in Nanjing, China. Vmoto combines comprehensive and well-established Chinese manufacturing capabilities and supply chain with international design. The Group operates through two primary brands: • • E-Max, its own proprietary brand, targeting international B2B markets, with high performance products; and Super Soco, a B2C brand for which Vmoto holds international marketing rights outside of China. 9 VMOTO LIMITED Total consolidated sales of $61 million were recorded for the Group for the year ended 31 December 2020 (FY2019: $45.7 million). The revenue of the Group has increased 34% compared to the year ended 31 December 2019, largely due to increased international sales into the electric two-wheel vehicle market as the Company capitalised on new government policies and regulation in Europe supporting sustainable personal electric mobility and the growth of businesses using electric vehicles in their delivery and ride-sharing operations. During the year ended 31 December 2020, the Group recorded a net profit of $3,655,860 after income tax (FY2019: $1,300,836). The earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ended 31 December 2020 was $5,806,014 (FY2019: $2,889,707). The following table provides a reconciliation between the EBITDA and statutory net profit after tax for the year ended 31 December 2020 and 31 December 2019: Earnings before interest, tax, depreciation and amortisation $5,806,014 $2,889,707 FY2020 FY2019 Depreciation and amortisation Profit before interest and tax Interest income Interest expense Income tax expense Net profit after tax ($1,594,082) ($1,629,293) $4,211,932 $124,510 ($116,070) ($564,512) $1,260,414 $109,157 ($68,735) - $3,655,860 $1,300,836 The Directors believe this information is useful to provide investors with transparency on the underlying performance of the Company. sales activities. The Group’s long term strategic customers have paid all their trade receivables due in full on time post 31 December 2020. Inventories stayed at $4.5 million, which is in consistent with the year ended 31 December 2019. This represents general inventories level to ensure products ordered by customers are delivered on time in full in the most efficient manner. Prepayments decreased by approximately $3.6 million largely due to the improved efficiency in productions and delivery of finished products through the Group’s jointly owned manufacturing company, Vmoto Soco Manufacturing. Intangible assets decreased by approximately $298k due to amortisation of the PowerEagle trademark. A more detailed review of operations for the year ended 31 December 2020 is set out in the Operations Review preceding the Directors’ Report. Review of Financial Position The Group’s net assets increased by approximately $16.1 million during the year ended 31 December 2020. Cash balances increased by approximately $8.3 million during the year ended 31 December 2020 due to increased sales and orders from customers, and additional funding secured through a share purchase plan and a placement to strategic investors and existing shareholders in order to ramp up the Group’s growth strategies. During the year, the Group has continued to receive significant deposits and funds from customers for growing orders and to invest further into working capital for the Group’s expanding international distribution operations especially in Europe, with an aim to continue to penetrate further into international markets and further consolidate the Group’s position as a world leading electric two-wheel vehicle company. Trade and other receivables increased by $6.6 million, largely due to growing orders from the customers, flexible payment terms to the Group’s long term strategic customers with high credibility and increased in credits from governments as a result of increased 10 VMOTO LIMITEDTrade and other payables increased by approximately $2 million during the period primarily due to increased deposits from customers for more orders, which are unearned until the products are delivered to customers. Issued capital increased by $14.5 million during the year ended 31 December 2020, primarily due to completion of a share purchase plan and placement to strategic investors and existing shareholders. The proceeds from the share purchase plan and placement have strengthen the Group’s financial position and enabled the Group to pursue a number of business deals and fast track its growth in the growing B2C and B2B electric two-wheel vehicle markets internationally. No dividend has been declared or paid by the Company to the date of this Annual Report in respect of the year ended 31 December 2020. Business Strategies and Prospects for Future Financial Years The Company’s business strategies for future financial years include: • Continue to focus on high value and high margin international markets and to become worldwide leading electric vehicle manufacturer and provider to B2C and B2B customers and markets internationally; • Continue to improve the Company’s electric • • • • two-wheel vehicle products to attract high quality international business group customers; Expand the Company’s product range including electric three-wheel vehicle to supply to broad spectrum of consumers and customers; Expand its European distribution network and warehouse in Europe to accelerate sales into European B2C and B2C markets; Expand its international distribution network and work with strategic distributors/customers to target large projects in local markets; and Expand its international B2B business and target large B2B customers in ride-sharing and delivery sectors. The potential material business risks faced by the Company that are likely to have an effect on the financial prospects of the Company and how the Company manages these risks include: • Competition in the electric two-wheel vehicles industry – Vmoto operates in the electric two-wheel vehicle industry and the Company expects additional competitors to enter this market that may have greater financial, research and development, marketing, distribution and other resources. We believe that we can compete in this market very competitively as Vmoto has the first mover advantage having operated in the electric two-wheel vehicle markets since 2009, Vmoto manufactures its products in China that has comprehensive and long history of supply chain for electric two-wheel vehicles and Vmoto has established a distribution network over 50 countries in the world. • • Technological obsolescence – given the Company operates in an industry involving electric vehicle technology, any technological obsolescence could have an impact on our financial results. We address this risk through continued investment in research and development, patent appropriate and necessary research and development results, recruitment of competent technicians and constantly monitoring the market. We see this risk as minimal as the Company is constantly developing new technology and functions in its electric two-wheel vehicle products and has the protection of trademarks and patents. Business relationship with Super Soco – During the financial year, Vmoto signed a joint investment agreement with Super Soco, to establish a new jointly owned Chinese registered manufacturing company, Nanjing Vmoto Soco Intelligent Technology Co, Ltd (Vmoto Soco Manufacturing). Vmoto and Super Soco each own 50% of the issued capital of Vmoto Soco Manufacturing. The joint investment agreement reduced the risk however changes in business cooperation and circumstances of Super Soco could have an impact on our financial results. Impact of legislation and other external requirements The Group’s operations are not subject to any significant environmental regulations. The Board believes that the Group has adequate systems in place for the management of its environmental regulations and is not aware of any breach of those environmental requirements as they apply to the Group. Clean Energy Legislative Package The Clean Energy Legislative Package, which included the Clean Energy Act 2011, was passed by the Australian Government in November 2011. It sets out the way that the government will introduce a carbon price to reduce Australia’s carbon pollution and move to a clean energy future. The Group’s manufacturing activities are primarily carried out in China and the Directors believe that the Group will not be significantly affected by this legislation passed. The Group has not incorporated the effect of any carbon price implementation in its impairment testing at 31 December 2020. The Directors’ view is that there were no changes in environmental or other legislative requirements during the year that have significantly affected the results or operations of the Group. Events Subsequent to Balance Date On 14 January 2021, the Company announced it had secured a significant B2B order of 5,904 units from its strategic B2B customer, Greenmo Group, representing a total sales value of approximately A$13 million. 11 VMOTO LIMITEDOn 8 February 2021, the Company granted 970,000 shares to employees as an incentive and to recognise their efforts in the year ended 31 December 2020. On 15 March 2021, the Company announced it had signed a memorandum of understanding (MOU) with Bird Group of India regarding potential exclusive distribution of the Company’s CUX and CUmini range of electric two-wheel vehicles across India, which is the world’s largest two-wheel vehicle market in the world. Apart from noted above, there has not arisen in the interval between the end of the financial period and the date of this Annual Report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Likely Developments Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years are discussed in the Operations Review. Directors’ Interests The relevant interests of each Director in the shares, options and rights issued by the Company at the date of this Annual Report are as follows: Director Mr Charles Chen1 Mr Ivan Teo2 Mr Kaijian Chen3 Ms Shannon Coates4 Mr Blair Sergeant Ordinary shares Options Service & performance rights 22,487,784 1,371,207 2,912,539 437,929 - - - - - - 4,050,995 1,686,122 - - - 1. 22,487,784 shares and 4,050,995 service and performance rights are held directly by Mr Charles Chen. 2. 1,371,207 shares and 1,686,122 service and performance rights are held directly by Mr Ivan Teo. 3. 2,912,539 shares are held directly by Mr Kaijian Chen. 4. 437,929 shares are held indirectly by Ms Coates’ spouse, Mr Simon Kimberley Coates as trustee for the Kooyong Trust. Ms Coates is a beneficiary of the Kooyong Trust. 12 VMOTO LIMITEDService & Performance Rights Insurance Premiums On 18 December 2020, the Company issued 2,400,000 service rights to Mr Charles Chen and 1,000,000 service rights to Mr Ivan Teo as approved by shareholders on 16 December 2020. On 22 December 2020, the Company issued 1,200,000 shares to Mr Charles Chen and 500,000 shares to Mr Ivan Teo as a result of vesting of 1,700,000 service rights. On 18 December 2020, the Company issued 2,850,995 performance rights to Mr Charles Chen and 1,186,122 performance rights to Mr Ivan Teo as approved by shareholders on 16 December 2020. All Performance Rights convert to fully paid ordinary shares for nil cash consideration, subject to performance based vesting conditions. At the date of this report, rights over unissued ordinary shares of the Company are: As at the date of this Annual Report, a Directors and Officers insurance policy has been secured. The insurance premium for this policy paid during the year ended 31 December 2020 was $55,000. Contingent Liabilities The Company is currently a defendant in a proceeding brought against the Company by a former employee in relation to the employee’s past employment. Having considered legal advice, the Directors believe that the claim can be successfully defended, without any losses (including for costs) being incurred by the Company. Non-audit services During the year, Bentleys Audit & Corporate (WA) Pty Ltd, the Company’s auditor, did not perform any non- audit services in addition to their statutory duties. Class Number Auditor’s Independence Declaration 2020 Service Rights 1,700,000 2020 Performance rights 4,037,117 The Auditor’s Independence Declaration is set out on page 69 and forms part of the Directors’ Report for the year ended 31 December 2020. Options At the date of this Annual Report, there are no options over unissued ordinary shares of the Company. Indemnification and Insurance of Officers and Auditors Indemnification The Company has agreed to indemnify the current Directors and Officers of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors and Officers of the Company, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet, to the maximum extent permitted by law, the full amount of any such liabilities, including costs and expenses. The Company has not agreed to indemnify their current auditors, Bentleys Audit & Corporate (WA) Pty Ltd. 13 14 REMUNERATION REPORT This remuneration report outlines the Director and executive remuneration arrangements of the Company and the Group. Group given trends in comparative companies both locally and internationally, and the objectives of the Company’s remuneration strategy. The Board as a whole is responsible for considering remuneration policies and packages applicable both to Directors and executives of the Company and the Group. Key Management Personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the Group, including Directors of the Company and other executives. Key Management Personnel comprise the Directors of the Company, key management and executives for the Company and the Group. Director and Key Management Personnel details Remuneration packages consist of fixed remuneration including base salary, employer contributions to superannuation funds and non-cash benefits. The Company has established a long-term incentive plan, which is known as the Vmoto Limited Employee Long Term Incentive Plan. This plan allows Directors to offer equity securities to attract, motivate and retain key directors, employees and consultants and provide them with the opportunity to participate in the future growth of the Company. Under the plan, the Board may offer to eligible persons the opportunity to subscribe for equity securities in the Company as the Board may decide and on the terms set out in the rules of the plan. The following persons acted as Directors of the Company during or since the end of the financial year: Fixed remuneration • Mr Charles Chen • Mr Ivan Teo • Mr Phillip Campbell (resigned 4 November 2020) • Mr Kaijian Chen • Ms Shannon Coates • Mr Blair Sergeant (appointed 4 November 2020) • The term ‘Key Management Personnel’ is used in this remuneration report to refer to the Directors and the following persons. Except as noted, the named persons held their position during or since the end of the financial year: Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicle), as well as employer contributions to superannuation funds. Remuneration levels are reviewed annually by the Board through a process that considers individual, segment and overall performance of the Group. The Board has regard to remuneration levels external to the Group to ensure the Directors’ and executives’ remuneration is competitive in the market place. • Mr Jeffrey Wu (International Sales Manager) • Ms Susan Xie (International Sales Manager) • Mr Xiaoliang Wan (Production & Purchasing Manager) • Mr Maik Spaan (Europe After Sales & Service Manager, appointed 1 June 2020) • Mr Gaetan Orselli (International Sales Manager, appointed 1 July 2020) • Mr Marcel Koper (Europe After Sales & Service Director, resigned 31 May 2020) Executive Directors are employed full time and receive fixed remuneration in the form of salary and statutory superannuation or consultancy fees, commensurate with their required level of services. Non-Executive Directors receive a fixed monthly fee for their services. Where Non-Executive Directors provide services materially outside their usual Board duties, they are remunerated on an agreed retainer or daily rate basis. Overview of remuneration policies Service agreements Broadly, remuneration levels for Key Management Personnel of the Company and Key Management Personnel of the Group are competitively set to attract and retain appropriately qualified and experienced Directors and executives and reward the achievement of strategic objectives. The Board may seek independent advice on the appropriateness of remuneration packages of both the Company and the It is the Group’s policy that service agreements for Key Management Personnel are unlimited in term but capable of termination on 3 months’ notice and that the Group retains the right to terminate the service agreements immediately, by making payment equal to 3 months’ pay in lieu of notice. 15 VMOTO LIMITEDThe service agreement outlines the components of compensation paid to Key Management Personnel but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed annually on a date as close as possible to 31 December of each year to take into account Key Management Personnel’s performance. Certain Key Management Personnel will be entitled to bonuses as the Board may decide in its absolute discretion from time to time. Non-Executive Directors Total remuneration for all Non-Executive Directors, last voted upon by shareholders at the 2012 Annual General Meeting, is not to exceed A$300,000 per annum and has been set at a level to enable the Company to attract and retain suitably qualified Directors. The Company does not have any scheme relating to retirement benefits for Non-Executive Directors. 16 VMOTO LIMITED Relationship between the remuneration policy and Company performance The remuneration policy has been tailored to increase goal congruence between shareholders, Directors and executives. Two methods have been applied to achieve this aim, the first being a performance-based rights subject to performance-based vesting conditions, and the second being the issue of options or shares to Key Management Personnel to encourage the alignment of personal and shareholder interests. The tables below set out summary information about the Group’s earnings and movements in shareholder wealth for the last five reporting years: In AUD Revenue Net profit / (loss) before tax Net profit / (loss) after tax 31 Dec 2020 12 months $’000 31 Dec 2019 12 months $’000 31 Dec 2018 12 months $’000 31 Dec 2017 12 months $’000 31 Dec 2016 12 months $’000 61,013 4,220 3,656 45,672 1,301 1,301 19,578 (918) (918) 15,079 (8,097) (8,097) 17,271 (14,081) (14,093) In AUD Share price at start of period Share price at end of period Dividend Basic earnings/(loss) per share Diluted earnings/(loss) per share 31 Dec 2020 12 months 31 Dec 2019 12 months 31 Dec 2018 12 months 31 Dec 2017 12 months 31 Dec 2016 12 months $0.245 $0.44 - $0.056 $0.245 - $0.058 $0.056 - $0.099 $0.058 - $0.33 $0.099 - 1.45 cents 0.58 cents (0.43 cents) (4.68 cents) (8.61 cents) 1.45 cents 0.57 cents (0.43 cents) (4.68 cents) (8.61 cents) 17 VMOTO LIMITED Directors’ and executive officers’ remuneration Details of the nature and amount of each major element of the remuneration of each Director of the Company and the named officers of the Company and the Group for the years ended 31 December 2020 and 31 December 2019 are: SHORT-TERM POST- EMPLOYMENT SHARE BASED PAYMENTS In AUD Executive Directors Salary & fees $ STI cash bonus $ Superan- nuation benefits $ Proportion of remuneration shares related Proportion of remuneration performance related - - - - - - - - Mr Charles Chen 12 months to Dec 2020 12 months to Dec 2019 350,0001 350,000 Mr Ivan Teo 12 months to Dec 2020 12 months to Dec 2019 152,5002 152,480 Non-Executive Directors Mr Phillip Campbell3 (resigned 4 Nov 2020) 12 months to Dec 2020 12 months to Dec 2019 55,000 55,000 Mr Kaijian Chen4 12 months to Dec 2020 12 months to Dec 2019 - - Ms Shannon Coates5 12 months to Dec 2020 12 months to Dec 2019 45,662 50,000 Mr Blair Sergeant6 (appointed 4 Nov 2020) 12 months to Dec 2020 12 months to Dec 2019 10,000 - - - - - - - - - - - - - Shares $ Total $ 465,102 - 815,102 350,000 193,780 - 346,280 152,480 57% - 56% - 128,795 106,367 183,795 161,367 70% 66% 82,424 69,566 82,424 69,566 100% 100% 4,338 - - - - - - - 50,000 50,000 10,000 - - - - - 2% - 2% - - - - - - - - - Total, all Directors 12 months to Dec 2020 12 months to Dec 2019 613,162 607,480 - - 4,338 - 870,101 175,933 1,487,601 783,413 58% 22% 2% - 1. Mr Chen’s Director fees for the year ended 31 December 2020 was USD280,000. 2. Mr Teo’s Director fees for the year ended 31 December 2020 was USD122,000. 3. Mr Campbell resigned as Non-Executive Chairman on 4 November 2020. For the year ended 31 December 2020, Mr Campbell is entitled to $41,667 of his Director fees in shares. 4. Mr Kaijian Chen was appointed as Non-Executive Director on 1 September 2011. Mr Chen has agreed to receive his Director fees in shares and the Company will seek shareholders’ approval for this issue at the 2021 Annual General Meeting. Mr Chen’s FY2019 Director fees were also paid in shares. 5. Ms Coates was appointed as Non-Executive Director on 23 May 2014. Ms Coates was appointed Company Secretary to the Company in 2007 and, via an associated company Evolution Corporate Services Pty Ltd, provides company secretarial, corporate advisory and Australian registered office services to Vmoto for a monthly retainer. For the 2020 financial year, the Company paid Evolution Corporate Services Pty Ltd $66,000 for these services, which is not included in the amount above. 6. Mr Sergeant was appointed as Non-executive Director on 4 November 2020. 18 VMOTO LIMITED SHORT-TERM Salary & fees $ STI cash bonus $ POST- EMPLOYMENT Superan- nuation benefits $ SHARE BASED PAYMENTS Shares $ Total $ Proportion of remuneration shares related Proportion of remuneration performance related - - - - - - - - - - - - - - - - 116,668 171,690 - - - - 23,488 14,558 150,142 119,856 14,289 7,886 81,201 93,501 16% 12% 18% 8% 12,456 8,025 63,267 81,522 20% 10% - - - - 63,805 - 49,552 - - - - - 42% 17% 37% 31% 37% 28% - - - - 50,233 30,469 524,635 466,569 10% 7% 22% 16% In AUD Executives Mr Marcel Koper (Europe After Sales & Service Director, resigned 31 May 2020) 12 months to Dec 2020 12 months to Dec 2019 116,668 171,690 - - Mr Jeffrey Wu (Sales Manager) 12 months to Dec 2020 12 months to Dec 2019 63,519 84,477 63,135 20,821 Ms Susan Xie (Sales Manager) 12 months to Dec 2020 12 months to Dec 2019 36,802 56,466 30,110 29,149 Mr Xiaoliang Wan (Production & Purchasing Manager) Mr Maik Spaan (Europe After Sales & Service Manager, appointed 1 Jun 2020) Mr Gaetan Orselli (Sales Manager, appointed 1 July 2020) 12 months to Dec 2020 12 months to Dec 2019 27,601 50,490 23,210 23,007 12 months to Dec 2020 12 months to Dec 2019 63,805 - 12 months to Dec 2020 12 months to Dec 2019 49,552 - - - - - Total, all Executives 12 months to Dec 2020 12 months to Dec 2019 357,947 363,123 116,455 72,977 19 VMOTO LIMITED 20 Share-based payment arrangements Shares On 8 February 2021, 970,000 shares were granted to Key Management Personnel as an incentive and to recognise their efforts in the year ended 31 December 2020. The shares granted to Key Management Personnel are subject to a three-year voluntary escrow period. Options The Company operates an Employee Long Term Incentive Plan (Plan) for eligible persons of the Group. In accordance with the provisions of the Plan, eligible persons may be granted options to purchase ordinary shares at an exercise price to be determined by the Board with regard to the market value of the shares when it resolves to offer the options. The options may only be granted to eligible persons after the Board considers the person’s seniority, position, length of service, record of employment, potential contribution and any other matters which the Board considers relevant. Each employee share option converts into one ordinary share of Vmoto Limited on exercise. No amounts are paid or payable to the Company by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is determined by the Board. There is no further service or performance criteria that need to be met in relation to options granted before the beneficial interest vests in the recipient. During the year ended 31 December 2020, no options were granted to Key Management Personnel under the Plan. Service & Performance Rights As above, the Company operates an Employee Long Term Incentive Plan for eligible persons of the Group. In accordance with the provisions of the Plan, eligible persons may be granted rights to attract, motivate and retain key directors, employees and consultants to participate in the future growth of the Company to be determined by the Board and on the terms set out in the rules of the plan. The rights may only be granted to eligible persons after the Board considers the person’s seniority, position, length of service, record of employment, potential contribution and any other matters which the Board considers relevant. Each right converts into one ordinary share of Vmoto Limited at nil consideration when service and performance-based conditions as determined by the Board are met within designated period. No amounts are paid or payable to the Company by the recipient on receipt of the rights or on conversion of the rights to shares. Rights carry neither rights to dividends nor voting rights. The number of rights granted is determined by the Board. Rights under the Plan expire when the applicable service and/or performance conditions are not met within designated period, or immediately on the resignation of the eligible persons, whichever is the earlier. Unless specified by the Board at the time of offer of rights, there are no further service or performance criteria that need to be met in relation to rights granted before the beneficial interest vests in the recipient. 21 Performance rights granted in FY2020 During the year ended 31 December 2020, 2,850,995 performance rights were granted to Mr Charles Chen and 1,186,122 performance rights were granted to Mr Ivan Teo pursuant to the shareholder approval on 16 December 2020. The performance rights vest subject to: • Continuing employment • Minimum performance hurdle of a minimum share price compound annual growth rate (CAGR) increases • • of 5% over the performance period No performance rights will vest if CAGR is less than 5% over the respective period 50% of the performance rights will vest if CAGR of 10% is achieved, up to maximum of 100% of the performance rights will vest if CAGR of 15% is achieved and pro rata of the performance rights will vest if CAGR is >5%&<10% and >10%&<15%, as follows: Performance right grants Performance period Share price hurdle Performance hurdles 25% vest 50% vest 100% vest 2020 performance rights 2 years to 5% 5% 10% 15% 31 December 2022 Service rights granted in FY2020 During the year ended 31 December 2020, 2,400,000 service rights were granted to Mr Charles Chen and 1,000,000 service rights were granted to Mr Ivan Teo pursuant to the shareholder approval on 16 December 2020. Vesting of the service rights issued in the period is subject to continuing employment, with no other performance conditions, vesting as follows: Number of service rights granted Grant dates Vesting dates 1,700,000 850,000 850,000 3,400,000 16 December 2020 18 December 2020 16 December 2020 18 December 2021 16 December 2020 18 December 2022 Fair value of performance rights and service rights granted during the period The fair value of services received in return for performance and service rights granted to executive directors is measured by reference to the fair value of the rights granted. The estimate of the fair value of the services received is measured by reference to the vesting conditions specific to the grant based on Black-Scholes valuation methodology for service rights and Monte Carlo valuation methodology for performance rights. Assumptions to determine fair value of rights 2020 performance rights 2020 service rights Grant date 16 December 2020 16 December 2020 Fair value at measurement date Share price at grant date Performance rights life $0.3369 $0.36 2 years $0.36 $0.36 Various 22 VMOTO LIMITEDShare holdings and transactions of Key Management Personnel The movement during the year ended 31 December 2020 in the number of ordinary shares held, directly, indirectly or beneficially by each key management person, including their personally-related entities, is as follows: Directors Held at 1 Jan 2020 Held at date of appointment Net change1 Granted as remuneration Received on vest of service rights Held at date of resignation Held at 31 Dec 2020 Mr P Campbell 1,999,721 Mr C Chen 21,107,383 Mr I Teo Mr K Chen Ms S Coates 720,873 2,670,115 347,728 Mr B Sergeant N/A Executives Mr M Koper Mr J Wu Ms S Xie Mr X Wan Mr M Spaan Mr G Orselli - 750,000 450,000 460,000 N/A N/A N/A N/A N/A N/A N/A - N/A N/A N/A N/A - - 60,134 378,808 - 2,438,663 N/A 180,401 150,334 - - 1,200,000 500,000 - 242,424 90,201 - - - - - - - 300,000 200,000 341,001 200,000 - - - - - - - - - - - - - N/A N/A N/A N/A N/A - N/A N/A N/A N/A N/A 22,487,784 1,371,207 2,912,539 437,929 - N/A 1,050,000 650,000 1,001,001 - - 1. Net change represents the acquisition and disposal of shares on market and exercise of options by the Key Management Personnel. Option holdings of Key Management Personnel The movement during the year ended 31 December 2020 in the number of options over ordinary shares held, directly, indirectly or beneficially by each key management person, including their personally-related entities, is as follows: Held at 1 Jan 2020 Held at date of appointment Additions Granted as remuneration Exercised/ Expired Held at date of resignation Directors Mr P Campbell Mr C Chen Mr I Teo Mr K Chen Ms S Coates - - - - - Mr B Sergeant N/A Executives Mr M Koper Mr J Wu Ms S Xie Mr X Wan Mr M Spaan Mr G Orselli 23 - - - - N/A N/A N/A N/A N/A N/A N/A - N/A N/A N/A N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - N/A N/A N/A N/A N/A - N/A N/A N/A N/A N/A Held at 31 Dec 2020 N/A - - - - - N/A - - - - - VMOTO LIMITED Service and performance rights holdings of Key Management Personnel The movement during the year ended 31 December 2020 in the number of rights over ordinary shares held, directly, indirectly or beneficially by each key management person, including their personally-related entities, is as follows: Held at 1 Jan 2020 Held at date of appointment Additions Granted as remuneration Vested Held at date of resignation Held at 31 Dec 2020 Directors Mr P Campbell Mr C Chen Mr I Teo Mr K Chen Ms S Coates - - - - - Mr B Sergeant N/A Executives Mr M Koper Mr J Wu Ms S Xie Mr X Wan Mr M Spaan Mr G Orselli - - - - N/A N/A N/A N/A N/A N/A N/A - N/A N/A N/A N/A - - - - - - - - - - - - - - - - 5,250,995 (1,200,000) 2,186,122 (500,000) - - - - - - - - - - - - - - - - - - - N/A N/A N/A N/A N/A - N/A N/A N/A N/A N/A N/A 4,050,995 1,686,122 - - - N/A - - - - - Other Key Management Personnel Transactions During the year ended 31 December 2020, Evolution Corporate Services Pty Ltd, an entity associated with Ms Shannon Coates, provided company secretarial, administration and registered office services to the Group pursuant to consultancy agreement and received total fees of A$66,000 for the year ended 31 December 2020. Other than the above, there have been no related party transactions involving any of the Key Management Personnel identified in the table above during the year or the previous year. This report is made with a resolution of the Directors pursuant to s298(2) of the Corporations Act 2001. Charles Chen Managing Director Dated at Western Australia, this 30th day of March 2021. 24 VMOTO LIMITEDCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Revenue from sale of goods Cost of sales Gross Profit Other income Operational expenses Marketing and distribution expenses Corporate and administrative expenses Occupancy expenses Other expenses Share of losses from equity accounted investments Finance costs Impairment of prepayments Profit from continuing operations before tax Income tax expense Profit after tax from continuing opera- tions Notes 2(a) 2(b) 8 4(a) Year ended 31 December 2020 $ 61,013,045 (46,655,366) 14,357,679 1,757,431 (7,517,213) (750,607) (3,330,413) (158,804) - (21,631) (116,070) - 4,220,372 (564,512) 3,655,860 Year ended 31 December 2019 $ 45,672,354 (36,018,789) 9,653,565 1,652,353 (5,116,299) (1,389,552) (2,561,260) (271,949) (28,753) - (68,735) (568,534) 1,300,836 - 1,300,836 25 VMOTO LIMITED Other comprehensive income Notes Foreign currency translation differences Other comprehensive income for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR Profit/(Loss) for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the year attributable to: Owners of the Company Non-controlling interest Year ended 31 December 2020 $ Year ended 31 December 2019 $ (2,037,580) (2,037,580) (111,406) (111,406) 1,618,280 1,189,430 3,736,956 (81,096) 3,655,860 1,699,376 (81,096) 1,618,280 1,366,768 (65,932) 1,300,836 1,255,362 (65,932) 1,189,430 Earnings per share 22 Basic earnings per share Diluted earnings per share 1.45 cents 1.45 cents 0.58 cents 0.57 cents The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 26 VMOTO LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 Notes 31 December 2020 $ 31 December 2019 $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other assets Total Current Assets NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Intangible Assets Investments accounted for using equity method Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Loans and borrowings Current tax liabilities Lease liabilities Total Current Liabilities NON-CURRENT LIABILITIES Lease liabilities Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Non-controlling interests TOTAL EQUITY 5 6 7 8 9 14 10 11 12 13 4(e) 14 14 15 15 18 16 14,997,486 8,724,876 4,487,723 437,710 28,647,795 6,496,557 478,605 - 5,943,885 12,919,047 41,566,842 7,588,206 - 308,254 107,416 8,003,876 402,171 402,171 8,406,047 33,160,795 89,823,509 (2,711,667) (53,925,418) (25,629) 33,160,795 6,648,039 2,129,988 4,367,766 4,032,493 17,178,286 7,244,484 589,949 297,766 - 8,132,199 25,310,485 5,632,650 2,045,994 - 95,312 7,773,956 510,809 510,809 8,284,765 17,025,720 75,353,596 (720,969) (57,662,374) 55,467 17,025,720 The consolidated statement of financial position is to be read in conjunction with the accompanying notes. 27 VMOTO LIMITEDCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Other cash receipts Net cash generated by operating activities Cash flows from investing activities Payments for property, plant & equipment Payments for equity-accounted investments Notes Year ended 31 December 2020 $ Year ended 31 December 2019 $ 56,278,610 (52,917,135) 124,139 (84,373) 628,845 25 4,030,086 46,543,105 (46,023,578) 109,156 (60,881) 1,119,281 1,687,083 (590,946) (195,748) (6,182,635) - Net cash used in investing activities (6,773,581) (195,748) Cash flows from financing activities Proceeds from issue of equity shares Payments for share issue costs Proceeds from borrowings Repayment of borrowings Net cash generated by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the year 13,651,725 (226,079) - (2,026,599) 11,399,047 8,655,552 6,648,039 (306,105) 14,997,486 The consolidated statement of cash flows is to be read in conjunction with the accompanying notes. 188,083 - 3,116,719 (2,290,280) 1,014,522 2,505,857 4,193,790 (51,608) 6,648,039 28 VMOTO LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Issued Capital $ Reserves $ Accumulated Losses $ Non-controlling Interests Total $ Balance as at 1 January 2019 74,814,382 (513,144) (59,125,561) 121,399 15,297,076 Profit/loss for the year Other comprehensive income for the year Total comprehensive income for the year - - - - 1,366,768 (65,932) 1,300,836 (111,406) - - (111,406) (111,406) 1,366,768 (65,932) 1,189,430 Issue of ordinary shares 539,214 - - (96,419) - 96,419 - - 539,214 - 75,353,596 (720,969) (57,662,374) 55,467 17,025,720 Transfer expired options reserve to accumulated losses Balance as at 31 December 2019 Balance as at 1 January 2020 75,353,596 (720,969) (57,662,374) 55,467 17,025,720 Profit/loss for the year Other comprehensive income for the year Total comprehensive income for the year - - - - 3,736,956 (81,096) 3,655,860 (2,037,580) - - (2,037,580) (2,037,580) 3,736,956 (81,096) 1,618,280 Issue of ordinary shares 14,172,868 - Issue of service and performance rights Transfer vested service rights reserve to issued capital - 658,882 612,000 (612,000) Share issue costs (314,955) - - - - - - - - - 14,172,868 658,882 - (314,955) Balance as at 31 December 2020 89,823,509 (2,711,667) (53,925,418) (25,629) 33,160,795 The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. 29 VMOTO LIMITED 30 NOTES TO THE FINANCIAL STATEMENTS 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Accounting Standards that are mandatorily effective for the current reporting year Vmoto Limited (“Vmoto” or “the Company”) is a limited company incorporated in Australia. The consolidated financial report of the Company as at and for the year ended 31 December 2020 comprises the Company and its subsidiaries (together referred to as the “Group”). The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements, and have been applied consistently by all entities in the Group. (a) Basis of preparation (i) Statement of compliance The financial report is a general-purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). The financial statements were approved by the Board of Directors on 30th March 2021. (ii) Basis of measurement The consolidated financial statements of the Group are prepared on an accruals basis and are based on historical costs except where otherwise stated. (iii) Functional and presentation currency The consolidated financial statements of the Group are presented in Australian dollars, which is different from its functional currency, determined to be Renminbi. A different presentation currency has been adopted as the Board of Directors believe that financial statements presented in Australian dollar (which is the functional currency of parent company) are more useful to the users and shareholders of the Company who are predominantly in Australia. (iv) Standards and interpretations affecting amounts reported in current period (and/or prior periods) 31 The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 January 2020. New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group include: • • • • • AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia. The Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and, therefore, no material change is necessary to Group accounting policies Standards and Interpretations in issue not yet adopted. Standards and Interpretations in issue not yet adopted At the date of authorisation of the financial statements, the Group has not applied the new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. Based on a preliminary review of the standards and amendments, the Directors do not anticipate a material change to the Group’s accounting policies, however further analysis will be performed when the relevant standards are effective. (v) Going concern basis The Group has recorded a profit after tax for the year ended 31 December 2020 of $3,655,860 (31 December VMOTO LIMITED2019: $1,300,836). At 31 December 2020, the Group had a working capital surplus of $20,643,919 (31 December 2019: $9,404,330). The Directors have prepared the financial statements on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The Directors believe this to be appropriate for the following reasons: • • • • • • the Group has a significant working capital surplus; the Group has long term supply agreements and demand for its electric two-wheel vehicle products and the demand for products supply by the Group is increasing; the Group has the ability to further reduce corporate and other non-sales resources without materially affecting revenue activities; the Group is currently debt free and the Group’s Stage 1 and 2 of the Nanjing Facility have been completed and can be used as security for debt funding if required; the Group achieved positive operating cash flows of $4 million for the year ended 31 December 2020; the Group’s manufacturing facility in Nanjing, China was fully operational and manufacturing unaffected following a successful inspection by the Nanjing government, in which all health and virus precautionary requirements were met in relation to COVID-19. The Company continues to manage this risk by implementing rigorous health and safety measures at the facility. The Company is also continually monitoring sales performance and has the ability to implement aggressive cost reductions if required; the Group has fully paid for and contributed RMB 30 million (~A$5.9 million) required to provide the initial working capital for the jointly invested manufacturing company, Nanjing Vmoto Soco Intelligent Technology Co, Ltd and the jointly invested manufacturing company is fully operational; and the Directors have prepared cash flow forecasts that indicate the Group will be cash flow positive for the year ending 31 December 2021 and will enable the Group to pay its debts as and when they fall due. Furthermore, the Directors are confident in the Company’s ability to raise capital if required. • • At the date of this Annual Report and having considered the above factors, the Directors are confident that the Group and the Company will be able to continue operations into the foreseeable future. 32 VMOTO LIMITEDAll differences in the consolidated financial report are taken to the profit & loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the profit & loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Vmoto at the rate of exchange ruling at the reporting date and the income statements are translated at the weighted average exchange rates for the period where this rate approximates the rate at the date of the transaction. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the profit & loss. (d) Revenue recognition Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST or equivalent) payable to the taxation authority. (b) Principles of consolidation Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Non-controlling interests in equity and results of the entities that are controlled by the Company are shown as a separate item in the consolidated financial statements. Investments in subsidiaries are carried at cost and recoverable amount. Refer to Note 1(o). Sale of goods Transactions eliminated on consolidation Unrealised gains and losses and inter-entity balances resulting from transactions with or between subsidiaries are eliminated in full on consolidation. (c) Foreign currency translation The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Revenue is measured when or as the control of the goods or services is transferred to a customer. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. If control of the goods and services transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise (and in most instances), revenue is recognised at a point in time when the customer obtains control of the goods and services. Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price which are generally based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected 33 VMOTO LIMITEDcost plus a margin or adjusted market assessment approach, depending on the availability of observable information. If a customer pays consideration before the Company transfers the goods to the customer, the Company presents the contract liability (referred to as advance and deposits from customers) when the payment is made. A contract liability is the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration. Interest income Interest income is recognised using the effective interest method. (e) Trade and other receivables Trade and other receivables include amounts due from customers for goods sold in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. (f) Acquisition of assets All assets acquired including plant and equipment and intangibles other than goodwill are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. When equity instruments are issued as consideration, their market price at the date of acquisition is used as fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity subject to the extent of proceeds received, otherwise expensed. (g) Business Combination Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition- date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquire and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that: • deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with AASB 112 ‘Income Taxes’ and • • AASB 119 ‘Employee Benefits’ respectively; liabilities or equity instruments related to share- based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with AASB 2 ‘Share- based Payment’ at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another Standard. Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 139, or AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being recognised in profit or loss. 34 VMOTO LIMITED35 (i) Property, Plant and Equipment • Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of assets may include the cost of materials and direct labour, and any other costs directly attributable to bringing the assets to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in profit or loss. • Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit & loss as incurred. • Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. Assets will be depreciated once the asset is in the condition necessary for it to be capable of operating in the manner intended by management. The estimated useful lives for the current and comparative periods are as follows: Plant and equipment Motor vehicles Office furniture & equipment Building Leasehold improvements Moulds 3 – 10 years 4 years 5 years 20 years 5 years 5 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquire is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. (h) Investment in Associates and Joint Ventures Associates are those entities over which the Group is able to exert significant influence but which are not subsidiaries. A joint venture is an arrangement that the Group controls jointly with one or more other investors, and over which the Group has rights to a share of the arrangement’s net assets rather than direct rights to underlying assets and obligations for underlying liabilities. A joint arrangement in which the Group has direct rights to underlying assets and obligations for underlying liabilities is classified as a joint operation. Investments in associates and joint ventures are accounted for using the equity method. Interests in joint operations are accounted for by recognising the Group’s assets (including its share of any assets held jointly), its liabilities (including its share of any liabilities incurred jointly), its revenue from the sale of its share of the output arising from the joint operation, its share of the revenue from the sale of the output by the joint operation and its expenses (including its share of any expenses incurred jointly). Any goodwill or fair value adjustment attributable to the Group’s share in the associate or joint venture is not recognised separately and is included in the amount recognised as investment. The carrying amount of the investment in associates and joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment. 36 VMOTO LIMITED • Impairment (m) Inventories The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Inventories are measured at the lower of cost and net realisable value. The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. (n) Leases The recoverable amount of property, plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. (j) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (k) Payables Payables, including goods received and services incurred but not yet invoiced, are recognised at the nominal amount when the Group becomes obliged to make future payments as a result of a purchase of assets or receipt of services. (l) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the tax office is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the tax office are classified as operating cash flows. 37 In the current year, the Group has applied AASB 16 Leases that are effective for an annual period that begins on or after 1 January 2019. The Group as lessee At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (i.e., a lease with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as operating expenses on a straight-line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • • • • • • fixed lease payments less any lease incentives; variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; the amount expected to be payable by the lessee under residual value guarantees; the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; lease payments under extension options, if the lessee is reasonably certain to exercise the options; and payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date and any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. The financial impact from the adoption of this standard is disclosed in note 14. The Group as lessor Upon entering into each contract as a lessor, the Group assesses if the lease is a finance or operating lease. A contract is classified as a finance lease when the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases not within this definition are classified as operating leases. Rental income received from operating leases is recognised on a straight-line basis over the term of the specific lease. Initial direct costs incurred in entering into an operating lease (for example, legal cost, costs to set up equipment) are included in the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term. Rental income due under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases. (p) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in the profit & loss when the liabilities are derecognised as well as through the amortisation process. (q) Share-based payment transactions The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares, options or rights over shares (‘equity-settled transactions’). The Company operates an incentive scheme to provide these benefits, known as the Vmoto Limited Employee Long Term Incentive Plan (the “Plan”). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined using a Black Scholes Option Valuation model or Monte Carlo Valuation model. When a contract is determined to include lease and non-lease components, the Group applies AASB 15 to allocate the consideration under the contract to each component. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Vmoto Limited (“market conditions”). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). (o) Recoverable amount of assets At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 38 The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the Directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. loss per share is the same as the diluted loss per share. (r) Employee benefits Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration, wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. (s) Income tax Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Income tax expense recognised in the statement of profit or loss and other comprehensive income relates to current tax and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. Current tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax The dilutive effect, if any, of outstanding weighted average number of options as at the reporting date is considered not material and accordingly the basic Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for 39 VMOTO LIMITED financial reporting purposes and amounts used for taxation purposes. amortisation and accumulated impairment losses, on the same basis as patents that are acquired separately. Deferred tax is not recognised for the following temporary differences: Customer contracts Customer contracts acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their costs). Subsequent to initial recognition, customer contracts acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as patents that are acquired separately. (u) Development Costs Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably. Capitalised development costs have a finite useful life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project. (v) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. (w) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits available on demand with banks and other short-term highly liquid investments with maturities of 3 months or less. i. the initial recognition of assets or liabilities in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and ii. differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Company and its subsidiaries have unused tax losses as at the reporting date. However, no deferred tax balances have been recognised, as it is considered that asset recognition criteria have not been met at this time. (t) Intangibles Trademarks, licenses and production rights Trademarks, licenses and production rights are recognised at cost of acquisition. Licenses and production rights have an indefinite life and are carried at cost less any accumulated impairment losses. Trademark is estimated to have a useful life of five years and is amortised over a five-year period. The carrying values of trademark are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Patents Patents acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their costs). Subsequent to initial recognition, patents acquired in a business combination are reported at cost less accumulated VMOTO LIMITED 40 (x) Comparative figures This Annual Report relates to the year ended 31 December 2020. Comparatives are for the year ended 31 December 2019. (y) Fair value of assets and liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Valuation techniques Level 3 In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use 41 VMOTO LIMITEDof observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or (ii) if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. Contingent liabilities The Company is currently a defendant in one proceeding brought against it by a former employee in relation to the employee’s past employment. Having considered legal advice, the Directors believe that the claims can be successfully defended, without any losses (including for costs) being incurred by the Company. The carrying amount of goodwill at 31 December 2020 was nil (31 December 2019: nil). Useful lives of property, plant and equipment and trademarks The Group reviews the estimated useful lives of property, plant and equipment and patents at the end of each reporting period. During the current year, the directors determined that the useful lives of property, plant and equipment and trademarks are deemed to be no change. (z) Critical judgements in applying accounting policies and key sources of estimation uncertainty Fair value measurements and valuation processes in relation to business combination acquisition The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. As part of business combination, assets and liabilities are measured at fair value for reporting purposes. The Directors have determined the appropriate valuation techniques and inputs for fair value measurements. In estimating the fair value of plant and equipment, the Group uses Level 3 inputs to perform the valuation. In estimating the fair value of customer base, the Group uses Level 3 inputs to perform the valuation. 42 VMOTO LIMITED2. REVENUES AND EXPENSES (a) Other income Interest income Contributions from customers Government subsidies Net foreign exchange gain Rent income Other income (b) Other expenses Doubtful debts (c) Employee benefits expense Wages and salaries costs (d) Depreciation and amortisation Depreciation of property, plant and equipment Amortisation of intangibles Year ended 31 December 2020 $ Year ended 31 December 2019 $ 124,510 817,559 292,794 44,909 440,378 37,281 109,156 832,026 150,376 110,874 448,987 934 1,757,431 1,652,353 - - 3,436,619 3,436,619 1,296,316 297,766 1,594,082 28,753 28,753 2,192,552 2,192,552 1,480,410 148,884 1,629,294 3. AUDITOR’S REMUNERATION Audit services: Audit of financial reports by Bentleys Audit & Corporate (WA) Pty Ltd 93,592 85,482 43 VMOTO LIMITED Year ended 31 December 2020 $ Year ended 31 December 2019 $ (564,512) - (564,512) 3,655,860 (1,005,362) 276,849 491,109 (327,108) (564,512) - - - 1,300,836 (357,730) (4,003) 162,605 199,128 - 4. INCOME TAX (a) Income tax credit / (expense) Current tax Deferred tax (b) Numerical reconciliation between tax benefit/(expense) and pre-tax net profit Profit before income tax benefit Income tax credit/(expense) calculated at 27.5% Effect on amounts which are not tax deductible: Non-deductible items Effect of different tax rates of subsidiaries operating in other jurisdictions Deferred tax not brought to account Income tax credit / (expense) (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised (as recovery is currently not probable) Potential at 27.5% (31 December 2019: 27.5%) All tax losses relate to Australian based entities. 7,412,549 7,143,516 (d) Unrecognised temporary differences Temporary differences for which deferred tax assets have not been recognised: Accrued expenses Unrecognised deferred tax assets relating to the above temporary differences 16,500 16,500 15,125 15,125 44 VMOTO LIMITED 31 December 2020 $ 31 December 2019 $ (e) Current tax liabilities Income tax payable (f) Deferred tax balances 308,254 Deferred tax balances are presented in the consolidated statement of financial position as follows: Deferred tax liabilities - - - (g) Tax Rates The potential tax benefit at 31 December 2020 in respect of tax losses not brought into account has been calculated at 27.5% for Australian entities. The tax rate applied for the year ended 31 December 2019 was 27.5%. The tax benefit and expense at 31 Decem- ber 2020 in respect of tax effect brought into account in relation to China operations has been calculated at 15% for China entities. The tax benefit and expense at 31 December 2020 in respect of tax effect brought into account in relation to Europe operations has been calculated at 19% for the Netherlands entities and 24% for Italy entities. 5. CASH AND CASH EQUIVALENTS Cash and bank balances 6. TRADE AND OTHER RECEIVABLES Current Trade receivables Less: Provision for impairment loss Other receivables Less: Provision for impairment loss 31 December 2020 $ 31 December 2019 $ 14,997,486 6,648,039 7,181,176 - 7,181,176 1,835,033 (291,333) 8,724,876 1,221,225 - 1,221,225 1,200,096 (291,333) 2,129,988 Impaired trade receivables – Expected credit losses Trade receivables are non-interest bearing and are generally on 30-60 days terms. A provision for expected credit losses is by reference to past default experience and an analysis of the ageing and known financial position of the debtor. The Company writes off a receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. 45 VMOTO LIMITED Movements in the provision for impairment of trade and other receivables were as follows: At beginning of the period Provision for impairment during the period Write off At end of the period 31 December 2020 $ 31 December 2019 $ 291,333 - - 291,333 291,333 28,753 (28,753) 291,333 At 31 December 2020, the ageing analysis of trade and other receivables is as follows: 0 – 30 Days 31 – 60 Days 61 – 90 Days past due not impaired +90 Days past due not impaired +90 Days considered impaired Provision for impairment 31 December 2020 $ 31 December 2019 $ 7,250,093 562,502 144,346 767,935 291,333 (291,333) 8,724,876 948,835 709,862 115,746 355,545 291,333 (291,333) 2,129,988 As of 31 December 2020, trade and other receivables of $912,281 (31 December 2019: $471,291) were past due but not impaired. $728,894 of the $767,935 past due relates to deferred payment arrangement with a B2B customer. The customer has been making payments on time in full. The remaining trade and other receivables relate to a number of independent customers for whom there is no recent history of default. 7. INVENTORIES Raw materials Semi-finished goods Finished goods 8. OTHER ASSETS Prepayments 1,003,746 24,764 3,459,213 4,487,723 437,710 437,710 1,770,813 324,953 2,272,000 4,367,766 4,032,493 4,032,493 The prepayments are payments in advance to suppliers for the supply of electric two-wheel vehicle inventories for the Group’s electric two-wheel vehicle operations. 46 VMOTO LIMITED 9. PROPERTY, PLANT & EQUIPMENT Year ended 31 December 2019 At 1 January 2019, net of accumulated depreciation Additions Depreciation for the period Exchange differences At 31 December 2019, net of accumulated depreciation At 31 December 2019 Cost Plant & equipment Motor vehicles Land1 Building1 Total 2,155,534 12,126 1,047,883 5,340,792 8,556,335 163,977 (948,513) (3,293) 46,536 (15,197) (684) - - - 210,513 (488,191) (1,451,901) (7,031) (59,455) (70,463) 1,367,705 42,781 1,040,852 4,793,146 7,244,484 2,422,137 121,888 1,040,852 6,863,521 10,448,398 Accumulated depreciation (1,054,432) (79,107) - (2,070,375) (3,203,914) Net carrying amount 1,367,705 42,781 1,040,852 4,793,146 7,244,484 Year ended 31 December 2020 At 1 January 2020, net of accumulated depreciation 1,367,705 42,781 1,040,852 4,793,146 7,244,484 Additions 75,086 62,856 Depreciation for the period (608,104) (14,540) - - 426,968 564,910 (559,712) (1,182,356) Exchange differences At 31 December 2020, net of accumulated depreciation At 31 December 2020 Cost (39,267) (5,313) (29,426) (56,475) (130,481) 795,420 85,784 1,011,426 4,603,927 6,496,557 1,924,486 127,392 1,011,426 6,971,520 10,034,824 Accumulated depreciation (1,129,066) (41,608) - (2,367,593) (3,538,267) Net carrying amount 795,420 85,784 1,011,426 4,603,927 6,496,557 1. During 2019, an independent external property valuation company valued the Company’s Nanjing land and Stage 1 & Stage 2 buildings at $12.7 million AUD. 47 VMOTO LIMITED10. INTANGIBLES Year ended 31 December 2019 Balance at 1 January 2019 Amortisation for the period Balance at 31 December 2019 At 31 December 2019 Cost Accumulated amortisation Accumulated impairment Net carrying amount Year ended 31 December 2020 Balance at 1 January 2020 Amortisation for the period Balance at 31 December 2020 At 31 December 2020 Cost Accumulated amortisation Accumulated impairment Net carrying amount Licences, trademarks and production rights Goodwill Development Costs - - - 446,650 (148,884) 297,766 - - - Total 446,650 (148,884) 297,766 3,971,428 2,015,687 4,836,105 10,823,220 - (499,336) (565,657) (1,064,993) (3,971,428) (1,218,585) (4,270,448) (9,460,461) - - - - 297,766 297,766 (297,766) - - - - - 297,766 297,766 (297,766) - 3,971,428 - 2,015,687 (797,102) 4,836,105 10,823,220 (565,657) (1,362,759) (3,971,428) (1,218,585) (4,270,448) (9,460,461) - - - - 48 VMOTO LIMITED11. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD On 24 February 2020, Vmoto entered into a joint investment agreement with Super Soco Intelligent Technology (Shanghai) Co, Ltd to establish a new jointly owned Chinese registered manufacturing company, Nanjing Vmoto Soco Intelligent Technology Co Ltd (Vmoto Soco Manufacturing). Under the terms of the agreement, Vmoto was required to contribute RMB 30 million (~A$5.9 million) in cash and/or assets by end of June 2020, which served as the initial working capital for Vmoto Soco Manufacturing. Vmoto has fulfilled this commitment. Super Soco will also contribute RMB 30 million (~A$5.9 million) in cash and/or assets progressively by no later than June 2025, based on the commercial requirements of the joint venture company. This may include contributions of Super Soco’s intangible assets, including patents and molds. Vmoto has a 50% equity interest in Vmoto Soco Manufacturing, and it is the sole and exclusive manufacturer for both Vmoto’s and Super Soco’s electric scooter and motorcycle products. The Group’s interest in Vmoto Soco Manufacturing is accounted for using equity method in the consolidated financial statements as the Group does not control or have joint control over Vmoto Soco Manufacturing. Summarised financial information of the Group’s share in Vmoto Soco Manufacturing is as follows: 31 December 2020 $ 31 December 2019 $ Current assets Non-current assets Current liabilities Non-current liabilities Net assets (100%) Group’s share of net assets (50%) Carrying amount of interest in equity accounted investments 20,074,222 6,014,106 (14,200,557) - 11,887,771 5,943,885 5,943,885 - - - - - - - Year ended 31 December 2020 $ Year ended 31 December 2019 $ Revenue Cost of sales Administrative expenses Losses for the period from continuing operations (100%) Other comprehensive income Total comprehensive income for the period from continuing operations (100%) Group’s share of losses for the period (50%) 38,477,854 (30,378,306) (8,142,810) (43,262) - (43,262) (21,631) During the FY2020, the Group purchases $33,667,383 of goods from Vmoto Soco Manufacturing. Vmoto Soco Manufacturing had no contingent liabilities or capital commitments as at 31 December 2020. - - - - - - - 12. TRADE AND OTHER PAYABLES Current – unsecured Trade creditors Advance and deposits from customers Other creditors and accruals 49 31 December 2020 $ 31 December 2019 $ 1,640,926 4,235,260 1,712,020 7,588,206 1,224,748 3,661,911 745,991 5,632,650 VMOTO LIMITED 13. LOANS AND BORROWINGS Current Secured – Interest bearing Bank operating facility The carrying amounts of non-current assets pledged as security are: Land and buildings Financing arrangements The Group has access to the following facilities: Total facilities available: Bank operating facility Facilities utilised at end of the period: Bank operating facility Facilities not utilised at end of the period: Bank operating facility Bank operating facility 31 December 2020 $ 31 December 2019 $ - - - - - - - - - - 2,045,994 2,045,994 5,883,998 5,883,998 5,114,985 5,114,985 2,045,994 2,045,994 3,068,991 3,068,991 During the year ended 31 December 2020, the bank operating facility was secured by the Company’s Nanjing manufacturing facility, including the land, Stage 1 and Stage 2 of the manufacturing facility. This bank operating facility is a revolving line of credit facility and the undrawn facility is available for draw down throughout the period. The loan facility does not have any bank covenant conditions. In December 2020, the Group fully repaid the bank operating facility drawn down and the security over the Company’s Nanjing manufacturing facility has been released. Reconciliation of liabilities arising from financing activities 31 December 2019 Non-cash changes Foreign exchange movement Cash flows 31 December 2020 Short term bank operating facility 2,045,994 (2,026,599) Total liabilities from financing activities 2,045,994 (2,026,599) (19,395) (19,395) - - 50 VMOTO LIMITED 14. LEASES The Group leases warehouse and office facilities in the Netherlands and Italy for its electric two-wheel vehicle operations. The leases typically run for a period between 5 and 6 years, with an option to renew the lease after that date. Lease payments are adjusted based on changes in local price indices. The Group is restricted from entering into any sub-lease arrangements. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected in the consolidated statement of financial position as a right-of-use assets and lease liabilities. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment. Right-of-use assets Year ended 31 December 2020 Gross carrying amount Balance at 1 January 2020 Additions Disposals Balance at 31 December 2020 Depreciation and impairment Balance at 1 January 2020 Depreciation Balance at 31 December 2020 Net carrying amount at 31 December 2020 Year ended 31 December 2019 Gross carrying amount Balance at 1 January 2019 Additions Disposals Balance at 31 December 2019 Depreciation and impairment Balance at 1 January 2019 Depreciation Balance at 31 December 2019 Net carrying amount at 31 December 2019 Lease liabilities Lease liabilities are presented in the consolidated statement of financial position as follows: Current Non-current Buildings 617,497 - - Total 617,497 - - 617,497 617,497 (27,548) (111,344) (138,892) 478,605 Buildings - 617,497 - 617,497 - (27,548) (27,548) 589,949 31 Dec 2020 $ 107,416 402,171 509,587 (27,548) (111,344) (138,892) 478,605 Total - 617,497 - 617,497 - (27,548) (27,548) 589,949 31 Dec 2019 $ 95,312 510,809 606,121 Total cash outflow for leases for the year ended 31 December 2020 was $146,427 (FY2019: $37,098). 51 VMOTO LIMITED Operating leases The Group leases out partial of its Nanjing manufacturing facilities and these leases have been classified as operating leases because they do not transfer substantially the risks and rewards incidental to the ownership of the assets. Rental income recognised by the Group during the year ended 31 December 2020 was $440,378 (FY2019: $448,987). 15. ISSUED CAPITAL AND RESERVES Issued capital 31 December 2020 $ 31 December 2019 $ 277,347,515 (31 December 2019: 224,762,983) fully paid ordinary shares 89,823,509 75,353,596 The following movements in issued capital occurred during the period: Balance at beginning of period 224,762,983 221,016,020 75,353,596 74,814,382 Number of Shares 31 Dec 2020 Number of Shares 31 Dec 2019 Year ended 31 Dec 2020 $ Year ended 31 Dec 2019 $ Issue of Shares at 12 cents each Issue of Shares at 12 cents each Issue of Shares at 6.5 cents each Issue of Shares at 8.5 cents each Issue of Shares at nil consideration Issue of Shares at 16.6297 cents each Issue of Shares at 6.5 cents each Issue of Shares at 8.5 cents each Issue of Shares at 34 cents each Issue of Shares at 34 cents each Issue of Shares at 45 cents each Issue of Shares at nil consideration Vesting of share-based expenses Share issue costs a) b) c) d) e) f) g) h) i) j) k) l) - - - - 2,850,000 23,737,844 1,982,174 282,174 378,808 242,424 21,411,108 1,700,000 - - 579,719 886,138 290,553 1,990,553 - - - - - - - - - - - - - - - 3,947,500 128,841 23,985 128,795 82,424 9,635,000 612,000 226,324 (314,956) 69,578 106,355 18,886 169,197 - - - - - - - - 175,198 - Balance at end of period 277,347,515 224,762,983 89,823,509 75,353,596 a) 16 May 2019 – Issue 579,719 shares at deemed issue price of 12 cents each to a Director in lieu of unpaid Director fees. b) 16 May 2019 – Issue 886,138 shares at deemed issue price of 12 cents each to a Director in lieu of unpaid Director fees. c) 7 August 2019 – Issue 290,553 shares at 6.5 cents each as a result of exercise of options. d) 7 August 2019 – Issue 1,990,553 shares at 8.5 cents each as a result of exercise of options. e) 17 March 2020 – Issue 2,850,000 shares at nil consideration to employees of the Company in recognition of their efforts and contribution to the Company. These share-based expenses will be recognised over a three-year vesting period. f) 19 May 2020 – Issue 23,737,844 shares at 16.6297 cents each pursuant to completion of share purchase plan. g) 21 May 2020 – Issue 1,982,174 shares at 6.5 cents each as a result of exercise of options. h) 21 May 2020 – Issue 282,174 shares at 8.5 cents each as a result of exercise of options. i) 2 July 2020 – Issue 378,808 shares at 34 cents each to a director in lieu of unpaid director fees. j) 2 July 2020 – Issue 242,424 shares at 34 cents each to a Director in lieu of unpaid Director fees. k) 18 August 2020 – Issue 21,411,108 shares at 45 cents each for completion of a $9.6 million placement. l) 22 December 2020 – Issue 1,700,000 shares to directors as a result of vest of 1,700,000 service rights. 52 VMOTO LIMITED Options The movements of options over unissued ordinary shares of the Company for the year ended 31 December 2020 were: Expiry Date Exercise Price Balance at 1 Jan 2020 Granted/ Issued Exercised/ Forfeited Held at 31 Dec 2020 Tranche A options 22 May 2021 6.5 cents 1,982,174 Tranche B options 22 May 2021 8.5 cents 282,174 Total 2,264,348 - - - (1,982,174) (282,174) (2,264,348) - - - Service and performance rights The Company has the following service and performance rights issued to directors in existence during the current reporting period. There were no service and performance rights issued in the year ended 31 December 2019. Class Grant date Expiry date Number of rights Vested during the year Rights exercised Rights expired Rights vested at 31 Dec 2020 Rights unvested at 31 Dec 2020 2020 service rights 16 Dec 2020 18 Dec 2020 1,700,000 1,700,000 2020 service rights 16 Dec 2020 18 Dec 2021 850,000 2020 service rights 16 Dec 2020 18 Dec 2022 850,000 2020 performance rights 16 Dec 2020 31 Dec 2022 4,037,117 - - - - - - - - - - - 1,700,000 - - - - 850,000 850,000 4,037,117 Valuation of the service rights was undertaken using Black-Scholes valuation methodology with the following factors and assumptions being used in determining the fair value of each right on the grant date. Class Grant date Period (years) Share price at grant date Risk free rate (%) Volatility (%) Valuation per right 2020 service rights 2020 service rights 2020 service rights 16 Dec 2020 16 Dec 2020 16 Dec 2020 n/a 1 2 $0.36 $0.36 $0.36 n/a 0.1051 0.1051 n/a 70% 70% $0.36 $0.36 $0.36 Valuation of the performance rights was undertaken using Monte Carlo valuation methodology with the following factors and assumptions being used in determining the fair value of each right on the grant date. Class Grant date Period (years) Share price at grant date Risk free rate (%) Volatility (%) Valuation per right 2020 performance rights 16 Dec 2020 2 $0.36 0.1051 99.6 $0.3369 Vesting of the service rights issued in the period is subject to continuing employment, with no other performance conditions. The performance rights vest subject to: • Continuing employment • Minimum performance hurdle of a minimum share price compound annual growth rate (CAGR) increases • • of 5% over the performance period No performance rights will vest if CAGR is less than 5% over the respective period 50% of the performance rights will vest if CAGR of 10% is achieved, up to maximum of 100% of the performance rights will vest if CAGR of 15% is achieved and pro rata of the performance rights will vest if CAGR is >5%&<10% and >10%&<15%. 53 VMOTO LIMITEDGrant date Expiry Date Class Total valuation Expense recorded to 31 Dec 2020 Expense recorded to 31 Dec 2019 16 Dec 2020 18 Dec 2020 2020 service rights 16 Dec 2020 18 Dec 2021 2020 service rights 16 Dec 2020 18 Dec 2022 2020 service rights $612,000 $306,000 $306,000 16 Dec 2020 31 Dec 2022 2020 performance rights $1,360,105 $612,000 $12,750 $6,375 $27,757 - - - - Reserves Reserves at the beginning of the period Transfer expired options reserve to accumulated losses Issue of service and performance rights Transfer vested service rights to issued capital Movements in foreign currency translation reserve Reserves at the end of the period Comprises of: Share-based payment reserve Foreign currency translation reserve Reserves at the end of the period 31 December 2020 $ 31 December 2019 $ (720,969) - 658,882 (612,000) (2,037,580) (2,711,667) 46,882 (2,758,549) (2,711,667) (513,144) (96,419) - - (111,406) (720,969) - (720,969) (720,969) The share-based payments reserve is used to recognise the fair value of options issued but not exercised and to recognise the fair value of service and performance rights issued but not yet vested. The foreign currency translation reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations. 16. NON-CONTROLLING INTERESTS Balance at the beginning of the period Share of loss for the year Non-controlling interests arising on incorporation of subsidiary Balance at the end of the period 31 December 2020 $ 31 December 2019 $ 55,467 (81,096) - (25,629) 121,399 (65,932) - 55,467 54 VMOTO LIMITED 17. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure its ability to continue as a going concern and to achieve returns to the shareholders and benefits for other stakeholders through the optimisation of debt and equity balance. The capital structure of the Group is adjusted to achieve its goals whilst ensuring the lowest cost of the capital. Management monitors capital on the basis of the gearing ratio (debt/total capital). During the year ended 31 December 2020, the Group’s strategy is to utilise lowest cost of the capital from the capital markets and continuously negotiating lower interest cost with provider of its operating facility to achieve its expansion program. The gearing ratios at 31 December 2020 and 31 December 2019 were as follows: Total borrowings Total equity Total capital Gearing ratio 31 December 2020 $ 31 December 2019 $ 509,587 33,160,795 33,670,382 1.5% 2,652,115 17,025,720 19,677,835 13.5% The gearing ratio of the Company has decreased from 13.5% to 1.5% during the year ended 31 December 2020. 18. ACCUMULATED LOSSES Accumulated losses at the beginning of the period Profit/(Loss) for the period Transfer from share-based payment reserve Year ended 31 December 2020 $ Year ended 31 December 2019 $ (57,662,374) 3,736,956 - (59,125,561) 1,366,768 96,419 Accumulated losses at the end of the period (53,925,418) (57,662,374) 55 VMOTO LIMITED 19. SEGMENT REPORTING AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The continuing operations of the Group are predominantly in the electric two-wheel vehicles manufacture and distribution industry. Reported segments were based on the geographical segments of the Group, being Australia, China, Europe and Singapore. The management accounts and forecasts submitted to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance are split into these components. The electric two-wheel vehicles segment is managed on a worldwide basis, but operates in four principal geographical areas: Australia, China, Europe and Singapore. In China, manufacturing facilities are operated in Nanjing. In Europe, the warehouse and distribution centre are operated in Netherlands and Italy. The following table presents revenue and profit or loss in relation to geographical segments for the twelve-month period ended 31 December 2020 and 31 December 2019: Australia $A Nanjing, China $A Europe $A Year ended 31/12/20 Year ended 31/12/19 Year ended 31/12/20 Year ended 31/12/19 Year ended 31/12/20 Year ended 31/12/19 3,355 18,620 53,120,471 41,539,690 4,614,203 4,110,911 (2,099,840) (998,042) 5,606,292 2,672,035 155,992 (362,508) 873,684 898,041 70,368,944 40,572,983 2,995,035 3,555,728 (175,259) (143,744) (39,585,632) (27,064,023) (1,834,904) (1,172,944) (667) (56) (1,140,007) (1,443,786) (155,642) (36,568) (297,766) (148,884) - - - - Singapore $A Intersegment elimination $A Consolidated $A Year ended 31/12/20 Year ended 31/12/19 Year ended 31/12/20 Year ended 31/12/19 Year ended 31/12/20 Year ended 31/12/19 3,275,016 3,133 (6,584) (10,649) - - - - 61,013,045 45,672,354 3,655,860 1,300,836 612,604 1,094,332 (33,283,425) (20,810,599) 41,566,842 25,310,485 (93,677) (714,653) 33,283,425 20,810,599 (8,406,047) (8,284,765) - - - - - - - - (1,296,316) (1,480,410) (297,766) (148,884) Revenue Segment revenue Result Segment profit/ (loss) Assets Segment assets Liabilities Segment liabilities Depreciation of fixed assets Amortisation of intangible assets Revenue Segment revenue Result Segment profit/ (loss) Assets Segment assets Liabilities Segment liabilities Depreciation of fixed assets Amortisation of intangible assets The principal activity of the continuing Group is the design, manufacture, marketing and distribution of electric two-wheel vehicles. Information about major customers: The Group has generated revenue from sales to its largest customer at approximately $13.3 million (2019: $8.6 million). No other single customers contributed 15% or more of the Group’s revenue for the year. 56 VMOTO LIMITED 20. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Group’s principal financial instruments comprise bank and other loans, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations. It is, and has been throughout the period under review, the Group’s policy that no trading in derivative instruments shall be undertaken. Fair values The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values. The following table details the fair value of financial assets and liabilities of the Group: 31 December 2020 31 December 2019 Carrying amount $ Fair Value $ Carrying amount $ Fair Value $ Financial assets Cash and cash equivalents Trade and other receivables 14,997,486 8,724,876 14,997,486 8,724,876 Total financial assets 23,722,362 23,722,362 Financial liabilities Trade and other payables 7,588,206 7,588,206 Borrowings Lease liabilities - - 509,587 509,587 6,648,039 2,129,988 8,778,027 5,632,650 2,045,994 606,121 6,648,039 2,129,988 8,778,027 5,632,650 2,045,994 606,121 Total financial liabilities 8,097,793 8,097,793 8,284,765 8,284,765 Net financial assets / (liabilities) 15,624,569 15,624,569 493,262 493,262 The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Sensitivity analysis In managing interest rate and currency risks, the Company endeavours to reduce the impact of short-term fluctuations on the Company’s earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates will have an impact on consolidated earnings, although the extent of that impact will depend on the level of cash resources held by the Group. A general increase of one percentage point in interest rates would not be expected to materially impact earnings. 57 VMOTO LIMITED Interest rate risk The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s short-term debt obligations. Cash includes funds held in term deposits and cheque accounts during the year, which earned interest at rates ranging between 0% and 2.4%, depending on account balances. The following annual interest rates apply to the Group’s credit facilities: Bank operating facility 4.15% variable All other financial assets and liabilities are non-interest bearing. At balance date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk that are not designated in cash flow hedges: Financial assets Cash and cash equivalents Financial liabilities Bank operating facility Net exposure 31 December 2020 $ 31 December 2019 $ 14,997,486 6,648,039 - 14,997,486 (2,045,994) 4,602,045 The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 31 December, if interest rates had moved, as illustrated in the table below, with all other variables held constant, pre-tax profit and equity would have been affected as follows: Judgements of reasonable possible movements 31 December 2020 $ 31 December 2019 $ +1% (100 basis points) Pre-tax profit increase/(decrease) Equity increase/(decrease) -1% (100 basis points) Pre-tax profit increase/(decrease) Equity increase/(decrease) Foreign currency risk 149,975 149,975 (149,975) (149,975) 46,020 46,020 (46,020) (46,020) The Group is exposed to foreign currency on sales, purchases and borrowings that are denominated in a currency other than Australian Dollars. The currency giving rise to this risk is primarily US dollars, Chinese RMB and Europe Euro. 58 VMOTO LIMITED At balance date, the Group had the following exposure to US dollars, Chinese RMB, Europe EUR and Singapore SGD foreign currency that is not designated in cash flow hedges: 31 December 2020 AUD 31 December 2019 AUD Financial assets Cash and cash equivalents (USD) Cash and cash equivalents (RMB) Cash and cash equivalents (EUR) Cash and cash equivalents (SGD) Trade and other receivables (USD) Trade and other receivables (RMB) Trade and other receivables (EUR) Trade and other receivables (SGD) Financial liabilities Trade and other payables (USD) Trade and other payables (RMB) Trade and other payables (EUR) Borrowings (RMB) Net exposure 5,321,351 5,288,805 858,585 - 11,468,741 6,946,449 1,089,188 670,573 - 8,706,210 (4,584,325) (2,465,975) (1,325,317) (8,375,617) - 11,799,334 4,300,882 1,046,552 718,898 19,996 6,086,328 138,563 1,613,555 362,686 10,768 2,125,572 (1,949,266) (2,973,742) (566,823) (5,489,831) (2,045,994) 4,768,063 The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 31 December 2020, if interest rates had moved, as illustrated in the table below, with all other variables held constant, pre-tax profit and equity would have been affected as follows: Judgements of reasonable possible movements: 31 December 2020 $ 31 December 2019 $ AUD/USD, AUD/RMB and AUD/EUR +20% Equity increase/(decrease) AUD/USD, AUD/RMB and AUD/EUR -20% Equity increase/(decrease) (1,881,625) 2,257,949 (11,659) 13,991 The Group actively working with banks to hedge this exposure to ensure minimal impacts from foreign currency risks. Credit risk The credit risk on financial assets of the Group which have been recognised on the statement of financial position is generally the carrying amount, net of any provision for impairment losses. The Group continuously monitors credit risks arising from its trade receivables which are principally with significant and reputable companies. It is the Group’s policy that credit verification procedures, including assessment of credit ratings, financial position, past experience and industry reputation, are performed on new customers that request credit terms. Risk limits are set for each customer and regularly monitored. Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. 59 VMOTO LIMITED The total credit risk exposure of the Group could be considered to include the difference between the carrying amount of the receivable and the realisable amount. At balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Details with respect to credit risk of trade and other receivables are provided in Note 6. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: 1. preparing forward-looking cash flow analyses in relation to its operational, investing and financing activities; 2. monitoring undrawn credit facilities; 3. obtaining funding from a variety of sources; 4. maintaining a reputable credit profile; and 5. managing credit risk related to financial assets. The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Financial liability and financial asset maturity analysis Within 1 Year 1 to 5 Years Over 5 Years Total Consolidated Group 31/12/2020 $000 31/12/2019 $000 31/12/2020 $000 31/12/2019 $000 31/12/2020 $000 31/12/2019 $000 31/12/2020 $000 31/12/2019 $000 Financial liabilities due for payment Bank operating facility and loans Trade and other payables Lease liabilities Current tax liabilities Other liabilities Total contractual outflows Total expected outflows Financial assets – cash flows realisable Cash and cash equivalents Trade and other receivables Total anticipated inflows Net (outflow)/ inflow on financial instruments - 2,046 7,588 5,633 108 308 - 95 - - 8,004 7,774 8,004 7,774 14,997 6,648 8,725 2,130 23,722 8,778 - - 402 - - 402 402 - - - - - 511 - - 511 511 - - - 15,718 1,004 (402) (511) - - - - - - - - - - - - - - - - - - - - - - - 2,046 7,588 5,633 510 308 - 606 - - 8,406 8,285 8,406 8,285 14,997 6,648 8,725 2,130 23,722 8,778 15,316 493 Financial assets pledged as collateral There are no financial assets that have been pledged as security for debt and their realisation into cash is not restricted. 60 VMOTO LIMITED21. CONTINGENT LIABILITES The Company is currently a defendant in a proceeding brought against the Company by a former employee in relation to the employee’s past employment. Having considered legal advice, the Directors believe that the claim can be successfully defended, without any losses (including for costs) being incurred by the Company. 22. EARNINGS PER SHARE Basic earnings per share From continuing operations Total earnings per share Diluted earnings per share From continuing operations Total earnings per share Year ended 31 Dec 2020 Cents per share Year ended 31 Dec 2019 Cents per share 1.45 1.45 1.45 1.45 0.58 0.58 0.57 0.57 61 The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: Profit for the year attributable to owners of the Group Earnings used in the calculation of basic and diluted earnings/loss per share from continuing operations Weighted average number of ordinary shares for the purposes of basic earnings per share Weighted average number of ordinary shares for the purposes of diluted earnings/loss per share Year ended 31 Dec 2020 Cents per share 3,655,860 3,655,860 Year ended 31 Dec 2019 Cents per share 1,300,836 1,300,836 251,540,695 222,858,403 252,688,648 226,638,589 62 23. CONTROLLED ENTITIES Parent entity Vmoto Limited Controlled entities Vmoto Australia Pty Ltd Vmoto Soco International Limited1 Nanjing Vmoto Co, Ltd Nanjing Vmoto Manufacturing Co, Ltd Vmoto Europe B.V Vmoto Soco Italy srl Vmoto Soco International Pte Ltd Associate Country of Incorporation Entity interest 31 December 2020 Entity interest 31 December 2019 Australia Australia Hong Kong China China Netherlands Italy Singapore 100% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 50% 100% Nanjing Vmoto Soco Intelligent Technology Co, Ltd China 50% - 1. Vmoto International Limited changed company name to Vmoto Soco International Limited during the year. 24. KEY MANAGEMENT PERSONNEL DISCLOSURES Details of Key Management Personnel (i) Directors Mr Charles Chen Managing Director (Executive) – appointed Executive Director 5 January 2007 and Managing Director 1 September 2011 Mr Ivan Teo Finance Director (Executive) – appointed Chief Financial Officer 17 June 2009 and Finance Director 29 January 2013 Mr Phillip Campbell Chairman (Non-Executive) – appointed 31 May 2017 and resigned 4 November 2020 Mr Kaijian Chen Director (Non-Executive) – appointed 1 September 2011 Ms Shannon Coates Director (Non-Executive) – appointed 23 May 2014 Mr Blair Sergeant Director (Non-Executive) – appointed 4 November 2020 (ii) Executives Mr Jeffrey Wu Sales Manager - appointed 1 May 2014 Ms Susan Xie Sales Manager - appointed 1 March 2010 Mr Xiaoliang Wan Purchasing Manager - appointed 31 December 2014 Mr Maik Spaan Europe After Sales & Service Manager - appointed 1 June 2020 Mr Gaetan Orselli Sales Manager - appointed 1 July 2020 Mr Marcel Koper Europe After Sales & Service Director - appointed 1 April 2019 and resigned 31 May 2020 63 VMOTO LIMITED 24. KEY MANAGEMENT PERSONNEL DISCLOSURES The total remuneration paid to Key Management Personnel of the Company and the Group during the period ended 31 December 2020 was as follows: Short-term employee benefits Share-based payments Total KMP compensation Year ended 31 Dec 2020 $ 1,091,902 920,334 2,012,236 Year ended 31 Dec 2019 $ 1,083,235 208,788 1,292,023 Refer to the remuneration report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s Key Management Personnel for the year ended 31 December 2020. 25. RECONCILIATION OF CASH FLOWS USED IN OPERATING ACTIVITIES Year ended 31 December 2020 $ Year ended 31 December 2019 $ Cash flows from operating activities Profit for the year Adjustments for: Depreciation and amortisation Share based payment expenses (Increase)/decrease in receivables (Increase)/decrease in inventories (Increase)/decrease in other assets (Decrease)/ increase in payables Net cash generated by operating activities 3,655,860 1,300,836 1,594,082 1,096,426 2,690,508 (6,594,889) (119,956) 3,594,782 803,781 4,030,086 1,629,293 351,131 1,980,424 (31,541) 1,270,403 (2,283,469) (549,570) 1,687,083 64 VMOTO LIMITED 26. NON-DIRECTOR RELATED PARTIES Non-director related parties are the Company’s controlled entities. Details of the Company’s interest in controlled entities are set out in Note 23. Details of dealings with these entities are set out below. Transactions - The loans to controlled entities are unsecured, interest-free and of no fixed term. The loans are provided primarily for capital purchases and working capital purposes. Receivables - Aggregate amounts receivable from non-director related parties: Non-current Unsecured loans to controlled entities Provision for non-recovery 27. SUBSEQUENT EVENTS Company Year ended 31 Dec 2020 $ 33,283,425 (33,283,425) - Year ended 31 Dec 2019 $ 20,810,599 (20,810,599) - On 14 January 2021, the Company announced it had secured a significant B2B order of 5,904 units from its strategic B2B customer, Greenmo Group, representing a total sales value of approximately A$13 million. On 8 February 2021, the Company granted 970,000 shares to employees as an incentive and to recognise their efforts in the year ended 31 December 2020. On 15 March 2021, the Company announced it had signed a memorandum of understanding (MOU) with Bird Group of India regarding potential exclusive distribution of the Company’s CUX and CUmini range of electric two-wheel vehicles across India. Apart from the above, there has not arisen in the interval between the end of the financial period and the date of this Annual Report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 65 VMOTO LIMITED 28. PARENT ENTITY DISCLOSURES 31 December 2020 $ 31 December 2019 $ Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total Liabilities Net assets Equity Issued capital Accumulated losses Reserves Share based payment premium reserve Total equity Financial performance Loss for the period Other comprehensive income Total comprehensive income 861,392 23,844,970 24,706,362 175,258 - 175,258 24,531,104 89,823,509 (65,339,287) 46,882 24,531,104 539,899 11,715,577 12,255,476 142,319 - 142,319 12,113,157 75,353,596 (63,240,439) - 12,113,157 Year ended 31 December 2020 $ Year ended 31 December 2019 $ 2,098,848 - 2,098,848 1,102,003 - 1,102,003 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity has not entered into any guarantees in relation to the debts of its subsidiaries during the year ended 31 December 2020. Commitments for the acquisition of property, plant and equipment by the parent entity The parent entity has no commitments for any acquisition of property, plant and equipment. 29. Fair Value Measurement In accordance with AASB 13, Fair Value Measurement, the group is required to disclose for each class of assets and liabilities measured at fair value, the level of the fair value hierarchy within which the fair value method is categorised. The group view that no assets or liabilities are measured at fair value, other than cash, trade and other receivables, trade and other payables and borrowings with carrying amounts assumed to approximate their fair value. 66 VMOTO LIMITED DIRECTORS’ DECLARATION In the opinion of the Directors of Vmoto Limited: (a) the financial statements and notes, set out on pages 25 to 66, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of the Group as at 31 December 2020 and its performance, as represented by the results of its operations and cash flows, for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the attached financial statements also comply with International Financial Reporting Standards, as stated in Note 1 to the financial statements; and (c) 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 required by Section 295A of the Corporations Act 2001 from the Managing Director and the Finance Director for the year ended 31 December 2020. Signed in accordance with a resolution of the Directors: Yiting (Charles) Chen Managing Director Dated at Western Australia, this 30th day of March 2021. 67 68 To The Board of Directors Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit partner for the audit of the financial statements of Vmoto Limited for the financial year ended 31 December 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of:   the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours faithfully BENTLEYS Chartered Accountants DOUG BELL CA Partner Dated at Perth this 30th day of March 2021 69 VMOTO LIMITED Independent Auditor's Report To the Members of Vmoto Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Vmoto Limited (“the Company”) and its subsidiaries (“the Consolidated Entity”), 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: a. the accompanying financial report of the Consolidated Entity is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2020 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a). Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Consolidated Entity 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. 70 Independent Auditor’s Report To the Members of Vmoto Limited (Continued) 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. Key Audit Matter How our audit addressed the key audit matter Existence and valuation of inventories As disclosed in note 7 of the financial report, the Consolidated Entity had an inventories balance of $4,487,723 at year end. Existence and valuation of inventory were considered key audit matters due to: − − − − The quantum of inventories on hand; The various locations of the inventories; Risk of stock obsolescence from changing technology; and The importance of inventory in relation to generating positive operating cash flows. Our procedures amongst others included: − − − − Attending stock takes conducted at year end and performing sample counts; During stock takes we observed to consider damaged or obsolete stock on hand; Performed analytical procedures reviewing margins and inventory turnover; and including For a sample of items we tested unit costs of inventory items and related sales to supporting documentation to assess whether the inventory is held at the lower of cost and net realisable value. Revenue Recognition During the year ended 31 December 2020, the Consolidated Entity generated sales revenue of $61,013,045 (2019: $45,672,354). Revenue recognition is considered a key audit matter due to its financial significance and the significant increase in revenue during the year. Our procedures amongst others included: − We reviewed the Consolidated Entity’s revenue accounting policy and their contracts with customers and assessed its compliance with AASB 15 Revenue from Contracts with Customers; − Performed substantive audit procedures on a sample basis by verifying revenue to relevant supporting documentation including approved price lists, delivery/shipping documentation, verification of receipts and ensuring the revenue was recognised at the appropriate time and classified correctly; and − Performed a range of substantive analytical and cutoff procedures. 71 Independent Auditor’s Report To the Members of Vmoto Limited (Continued) Key Audit Matter How our audit addressed the key audit matter Valuation of Trade Receivables As disclosed in note 6 of the financial report the Consolidated Entity had a trade and other receivables (2019: balance of $8,724,876 at year end $2,129,988). Our procedures amongst others include the following: − We analysed the aging of trade receivables with reference to trade terms; Valuation of trade and other receivables is a key audit matter in the audit due to the size of the balance and the judgement used in assessing whether there are any indications of credit losses. Investments accounted for using equity method As disclosed in note 11 of the financial report, during the year the Consolidated Entity entered into a joint investment agreement with Super Soco Intelligent Technology (Shanghai) Co, Ltd, to establish a new jointly owned Chinese registered manufacturing Intelligent company, Nanjing Vmoto Soco Technology Co Ltd (Vmoto Soco Manufacturing). We were required to assess whether the agreement constituted an investment in joint arrangement or an associate and assess the accounting treatment applied. The investment is considered a key audit matter due to the significance of the balance, and the judgement required in assessing the terms of the agreement and the application to Australian Accounting Standards. − We obtained aged receivables reports and assessed the recoverability of debtors by performing subsequent receipt testing, enquiry with management, payment arrangements and consideration of credit losses incurred; and review of − We assessed the disclosures included in note 6 to the financial report. Our procedures amongst others included: − − − − − − Reviewing the Joint Investment Agreement; Assessing management’s assessment as to the method of accounting for the investment in Accounting compliance with Standards; Australian Assessing the application of the equity accounting for the investment including the recognition of the share of the loss for the year; Verifying the payment of the contribution of the investment; Assessing whether impairment; and there are indicators of Assessing the adequacy of the related disclosures within note 11 of the financial report. Other Information The directors are responsible for the other information. The other information comprises the information included in the Consolidated Entity’s annual report for the year ended 31 December 2020, but does not include the financial report and our auditor’s report thereon. 72 Independent Auditor’s Report To the Members of Vmoto Limited (Continued) 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 Note 1(a), the directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Consolidated Entity’s ability 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 Consolidated Entity or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Consolidated Entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. 73 Independent Auditor’s Report To the Members of Vmoto Limited (Continued) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Consolidated Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Consolidated Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Consolidated Entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Consolidated Entity audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 31 December 2020. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with s 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. Auditor’s Opinion In our opinion, the Remuneration Report of the Company, for the year ended 31 December 2020, complies with section 300A of the Corporations Act 2001. BENTLEYS Chartered Accountants DOUG BELL CA Partner Dated at Perth this 30th day of March 2021 74 ADDITIONAL SHAREHOLDER INFORMATION The following information is current as at 12 March 2021: Voting Rights The voting rights attaching to ordinary shares are that on a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote. Performance and service rights do not carry any voting rights. Substantial Shareholders The number of shares held by substantial shareholders and their associates who have provided the Company with substantial shareholder notices are set out below: Name of Substantial Shareholder Yiting (Charles) Chen Raymond and Susan Munro ATF Munro Family Super Fund2 Xiaona Zhao Xiaorui Ding 1. As lodged with ASX on 3 July 2019. 2. As lodged with ASX on 24 July 2019. 3. As lodged with ASX on 29 June 2017. 4. As lodged with ASX on 29 June 2017. On-Market Buy Back Number of Shares 20,805,3831 15,000,0002 10,606,9483 8,823,5294 There is no current on-market buy back. Distribution Schedules Distribution schedules for each class of security as at 12 March 2021 are set out below. Fully paid ordinary shares - - - - - Holders 1,000 5,000 10,000 100,000 Over 455 1,394 669 1,170 275 Units 284,282 3,831,741 5,457,165 40,283,249 228,461,078 3,963 278,317,515 % 0.10 1.38 1.96 14.47 82.09 100.00 Range 1 1,001 5,001 10,001 100,001 Total 75 VMOTO LIMITED Director Performance Rights Range 1 1,001 5,001 10,001 100,001 Total Director Service Rights Range 1 1,001 5,001 10,001 100,001 Total - - - - - - - - - - Holders Units 1,000 5,000 10,000 100,000 Over 1,000 5,000 10,000 100,000 Over Holders - - - - 2 2 - - - - 2 2 - - - - 4,037,117 4,037,117 Units - - - - 1,700,000 1,700,000 % - - - - 100 100 % - - - - 100 100 Securities subject to Voluntary Escrow 3,400,000 fully paid ordinary shares are currently subject to voluntary escrow until 19 December 2021. 2,850,000 fully paid ordinary shares are currently subject to voluntary escrow until 17 March 2023. 970,000 fully paid ordinary shares are currently subject to voluntary escrow until 8 February 2024. Unmarketable Parcels Holdings of less than a marketable parcel of ordinary shares (being 1,220 Shares as at 12 March 2021): Holders 561 Units 402,833 VMOTO LIMITED 76 Top Holders The 20 largest registered holders of quoted securities as at 12 March 2021 were: Fully paid ordinary shares Rank Holder Units % Units 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 MR YITING CHEN MR RAYMOND EDWARD MUNRO + MRS SUSAN ROBERTA MUNRO MS XIAONA ZHAO MS MALAKY KAZEM MR ERCHUAN ZHOU CITICORP NOMINEES PTY LIMITED CS THIRD NOMINEES PTY LIMITED OUTRIGHT INTERNATIONAL BUSINESS GROUP LIMITED MR YI CHEN MR TAO YU NATIONAL NOMINEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR LIANG CHEN MR BRENDAN DAVID GORE MR KAIJIAN CHEN MR TU SHE EDLINS PROSPERITY PLUS PTY LTD MR THOMAS JOSEPH FALVEY MR LEI LIU 20 Totals SILVERLIGHT HOLDINGS PTY LTD 22,487,784 21,570,000 19,226,470 13,045,309 11,864,812 8,751,081 7,710,938 6,670,000 4,981,204 4,241,393 4,053,435 3,955,395 3,667,787 3,245,000 2,912,539 2,464,872 2,405,000 2,187,540 2,032,531 1,700,000 8.08 7.75 6.91 4.69 4.26 3.14 2.77 2.40 1.79 1.52 1.46 1.42 1.32 1.17 1.05 0.89 0.86 0.79 0.73 0.61 149,173,090 53.60 Securities Exchange Quotation The Company’s ordinary shares are listed on the Australian Securities Exchange (Code: VMT). The Home Exchange is Perth. Corporate Governance The Company’s Corporate Governance Statement for the 2020 financial year can be accessed at: http://www.vmoto.com/Download/Index?typeId=16 77 78 VMOTO LIMITED ABN 36 098 455 460 WWW.VMOTO.COM EMAIL: INFO@VMOTO.COM 79 

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