Vmoto Limited Annual Report 2021

Plain-text annual report

ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2021 VMOTO LIMITED ABN 36 098 455 460 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 BANKER National Australia Bank Level 14, 100 St Gerges Terrace Perth, Western Australia 6000 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 SECURITIES EXCHANGES Australian Securities Exchange Level 40, Central Park 152-158 St Georges Terrace Perth, Western Australia 6000 Australia ASX Code: VMT Vmoto Limited is a public company incorporated in Western Australia and listed on the Australian Securities Exchange. 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 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 WEBSITE AND EMAIL Website: www.vmoto.com Email: info@vmoto.com AUDITOR Hall Chadwick WA Audit Pty Ltd 283 Rokeby Road, Subiaco, Western Australia 6008 Australia 2 ANNUAL REPORT 2021CONTENTS 2 4 6 CORPORATE DIRECTORY MANAGING DIRECTOR’S LETTER OPERATIONS REVIEW 10 DIRECTORS’ REPORT 20 REMUNERATION REPORT 30 FINANCIAL STATEMENTS 75 DIRECTORS’ DECLARATION 76 77 82 AUDITOR’S INDEPENDENCE DECLARATION INDEPENDENT AUDITOR’S REPORT ADDITIONAL SHAREHOLDER INFORMATION 3 MANAGING DIRECTOR’S LETTER DEAR SHAREHOLDERS, It is with great pleasure and a strong sense of pride that I again find myself writing to you, our most loyal shareholders, presenting the Company’s Annual Report and results for 2021, a year to remember for many reasons. Firstly, as most of you will already know, the Company delivered exceptional results in FY2021, including the following highlights: • Record revenue of $86.2 million; • Record net profit after tax of $8.0 million; • Record earnings before interest, tax, depreciation and amortisation of $10.2 million; • Positive cash flows from operating activities of $3.8 million; and • Closing cash position of $18.6 million as at 31 December 2021. Despite the ongoing global COVID-19 pandemic and its associated disruptions, the Company continued to enjoy excellent growth across its various business units, which ultimately delivered record results as highlighted above. The decision back in 2009 to produce a product line of all electric mopeds and motorcycles, that emit “zero emissions”, is proving itself a defining moment in the Company’s history. As the world commits to net zero carbon emissions by 2050, the electrification of the transport industry finds itself front and centre in that pursuit. As a consequence, Vmoto’s ability to produce quality and affordable all electric mopeds and motorcycles continue to underpin the Company’s growth, serving B2C and B2B markets that are continuing on their meteoric rise across the globe. In support of its strategy of being an early mover in the electrification of the micro mobility industry in the form of electric mopeds and motorcycles, Vmoto established a solid foundation for growth in the form of its own manufacturing capability in Nanjing China, comprising over 30,000 square metres of land and buildings. Again, this decision taken back in 2007, is proving critical in enabling Vmoto to enjoy its current 4 success. Furthermore, it has solidified our ability to remain cost competitive on a global scale, with the capacity to continue to grow. The Company remains focussed on both the B2C and B2B markets, in particular those represented by last mile delivery business models, both of which show no signs of slowing, but rather continue to grow exponentially. COVID-19 certainly resulted in a substantial increase in the market for food delivery vehicles in particular, and we see this market continuing to rapidly adopt the use of electric modes of transport, providing strong growth opportunities for the Company. During FY21 we were proud to develop and launch new proprietary electric vehicle models under the “Vmoto” brand name. We also continued to pursue some of the largest global markets which currently remain untapped from Vmoto’s perspective, including USA, India and Indonesia. Importantly, these markets offer incredible sales potential and we are confident that some of the high-level discussions currently underway will convert to meaningful sales in those markets. In addition, we are ramping up our efforts in strengthening the marketing and branding of the Company, punctuated by the refreshing of the Vmoto brand and logo. Looking forward to FY22, the Company once again remains on track to deliver in terms of growth, sales and profitability. In the absence of any unforeseen circumstances the future for Vmoto remains a bright one. Lastly, on behalf of the Vmoto Board and Management team, I wish to thank all of our loyal shareholders for their unwavering support and very much look forward to leading the Company on its continued path of success. Yours faithfully, CHARLES CHEN MANAGING DIRECTOR ANNUAL REPORT 2021 5 OPERATIONS OVERVIEW HIGHLIGHTS FINANCIAL OVERVIEW FOR FY21 • Statutory results: × × × Total revenue of $86.2 million, up 41% on FY20 Net profit after tax (NPAT) of $8.0 million, up 120% on FY20 Earnings before interest, tax, depreciation and amortisation (EBITDA) of $10.2 million, up 76% on FY20 × Strong positive cash flows from operating activities of $3.8 million • Strong cash position of $18.6 million as at 31 December 2021, up 24% from $15 million as at 31 December 2020 • No bank debt as at 31 December 2021 • Net tangible assets of $46.0 million at 31 December 2021, up 39% on FY20 OPERATIONAL HIGHLIGHTS AND KEY PERFORMANCE INDICATORS FOR FY21 • Total sales of 31,275 units of electric motorcycles/mopeds, delivered for FY21, up 33% on FY20 and up 57% on FY19. • Total international sales of 29,945 units, delivered for FY21, up 36% on FY20 and up 64% on FY19. • Firm international orders of 12,488 units as at 31 December 2021, up 84% from 6,798 units at 31 December 2020. • 21 international distributorships established in FY21, taking the total to 61, and continuing discussions with a significant number of additional potential customers in new markets. 6 • Vmoto expanded its partnership with Helbiz (NASDAQ: HLBZ), an intra-urban transportation company headquartered in New York, USA, and will supply 2,000 additional electric mopeds to Helbiz for deployment in the Italian market. • Repeat orders from the Company’s existing B2B customers highlights the large growth opportunity represented by international B2B business - additional orders are expected for FY22 and beyond. • Vmoto signed a multi-year sponsorship and marketing agreement to supply electric mopeds and exhibit its brands at the world class electric motorcycle racing event, FIM ENEL MotoE World Cup (“MotoE”), which is part of MotoGP. • The Company launched its new “VMOTO” premium brand, focussed on supplying high quality products to international markets. • The Company launched a number of new products including new TS, new TC, CUmini, VS2, VS3, Stash and Concept F01, which complement the Company’s existing product range and target a wider group of B2C and B2B customers and consumers. FY21 – CONTINUED STRONG OPERATIONAL AND COMMERCIAL GROWTH FOR VMOTO During FY21, Vmoto continued to deliver exceptionally strong sales and revenue growth, resulting in a record NPAT of circa $8.0 million. Vmoto continues to deliver and in the process, affirm its global capability and credibility to produce quality products and brands in the electric motorcycle/moped industry, gaining more recognition and traction from both existing and new distributors and customers. ANNUAL REPORT 2021The Company is dedicated to supplying high performance and value for money zero emission electric motorcycles/mopeds into international markets and continues to expand both its B2B business and B2C distribution network worldwide. Despite the significant global economic challenges as a result of the COVID-19 pandemic in FY21, the Company sold a total of 31,275 units of zero emission electric motorcycles/mopeds representing an increase of 41% on the previous financial year, translating to total revenue of $86.2 million, both records performances in Vmoto’s history. INTERNATIONAL MARKETS During FY21, the Company signed and renewed distribution agreements with 21 international distributors across Ecuador, Peru, French Polynesia, Israel, Vietnam, Georgia, Indonesia, Mauritius, Bolivia, Czech Republic, Brazil, Cayman Islands, Azerbaijan, Guatemala, El Salvador, Honduras, Nicaragua, Hong Kong, Malaysia, Iceland and Mexico, for the warehousing, distribution and marketing of its B2C range of electric motorcycles/ mopeds. Vmoto now has a total of 61 international distributors across the world. Vmoto has also supplied samples to and/or is in discussions with a number of potential B2C and B2B distributors and customers in Austria, Australia, Belgium, Brazil, France, India, Greece, Paraguay, Portugal, Saudi Arabia, Singapore, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom and United States. The Company continues to receive significant interest in Vmoto’s B2B fleet products from business operators, which the Company is actively pursuing. ORDER BOOK As at 31 December 2021, the Company had firm international orders for 12,488 units. Repeat orders from the Company’s existing B2C and B2B customers highlights the large growth opportunity represented by international markets - additional orders are expected for FY2022 and beyond. 7 VMOTO DRIVES EUROPEAN SALES WITH MOTOE AGREEMENT Vmoto signed a sponsorship and marketing agreement to supply electric mopeds and exhibit its brands at the world class electric motorcycle racing event, FIM ENEL MotoE World Cup (“MotoE”) for the 2021-2023 seasons. MotoE, part of MotoGP, is a world class motorcycle racing event that uses only electric motorcycles. The sponsorship has provided Vmoto with significant exposure to potential B2C and B2B customers and has significantly enhanced Vmoto’s brand recognition and standing to be alongside a number of the world’s most prestigious brands and companies. NEW “VMOTO” PREMIUM BRAND As part of Vmoto’s global expansion strategy, the Company has launched its new “VMOTO” premium brand, with the aim of supplying a high quality and competitively priced range of zero emission electric motorcycles and mopeds to international markets. The new “VMOTO” premium brand is proprietary and representative of the Company’s strategic, global expansion plans. The Company’s vision for the new brand is to create a feeling of excitement and joy for riders of Vmoto’s zero emission electric motorcycles and mopeds. The Company’s mission is to remain at the forefront of the ever expanding, zero emission electric motorcycle & moped sectors globally through uncompromising quality, customer service and innovation. NEW PRODUCTS During FY21, the Company launched a number of new products including the new TS, new TC, CUmini, VS2, VS3, Stash and Concept F01, which have received significant interest and attention from distributors, customers and press/media. This is part of the Company’s strategy to continue extending its product range to widen its reach and appeal to a broader spectrum of the market for electric vehicle users which includes developing new products. The Company is also collaborating with renowned global brands to incorporate their existing products and technologies into Vmoto’s electric motorcycles/mopeds and distribution network. 8 ANNUAL REPORT 2021OUTLOOK In summary, FY21 has been a successful and profitable year for the Company, and in the absence of any material unforeseen events, the Board is anticipating continued and similar success in FY22. Vmoto continues to execute on its strategy of selling high performance and value for money electric motorcycles/mopeds into international markets and expanding both its B2B businesses and B2C distribution network worldwide. The Company also continues to focus on extending its product range to widen its reach and appeal to a broader spectrum of the market for electric vehicle users. This includes developing new products and collaborating with renowned brands and companies to incorporate their existing products and technologies into Vmoto’s electric motorcycles/ mopeds and distribution network. The Company’s recently launched “VMOTO” premium brand provides an important platform to further promote Company growth while simultaneously consolidating the Company’s already strong market position. Following the successful launch, the Company will now focus on promoting the VMOTO and Super Soco product series to B2C distribution and B2B fleet operations distributors and customers. The global focus on mitigating the impacts of climate change and the transition towards electric vehicles, combined with Vmoto’s market leading position, provides a strong platform from which to accelerate growth opportunities. The Company continues to broaden its commercialisation strategy and is confident it will be able to continue delivering strong sales and revenue growth for FY22 and beyond. The Company’s vision is to create a feeling of excitement and joy for riders of Vmoto’s zero emission electric motorcycles and mopeds, to mitigate the risks of climate change and to preserve the environment for future generations. 9 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 2021 to 31 December 2021. 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 Experience and responsibilities: 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. 10 IVAN TEO FINANCE DIRECTOR Experience and responsibilities: Mr Teo joined the Company as Chief Financial Officer since 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. ANNUAL REPORT 202111 NON-EXECUTIVE DIRECTORS 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. SHANNON COATES INDEPENDENT NON-EXECUTIVE DIRECTOR 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. 12 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. 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. KAIJIAN CHEN INDEPENDENT NON-EXECUTIVE DIRECTOR 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. Mr Chen holds a degree from the Beijing Institute of Technology and resides in China. COMPANY SECRETARY SHANNON COATES Experience and responsibilities: Ms Coates has been the Company Secretary of the Company since 10 May 2007. A summary of Ms Coates’ qualifications and experience appears above. A sum 13 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 2021 are as follows: DIRECTOR COMPANY FROM Mr Charles Chen Mr Ivan Teo Mr Blair Sergeant - - Bowen Coking Coal Limited Rincon Resources Limited - - 2018 2020 Ikwezi Mining Limited 2020 Celsius Resources Limited 2021 Ms Shannon Coates Bellevue Gold Ltd 2020 Flinders Mines Limited 2018 Kopore Metals Limited 2015 Mr Kaijian Chen - - TO - - 2021 Current 2021 2021 Current 2019 2021 - DIRECTORS’ MEETINGS PRINCIPAL ACTIVITY 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 2021 are: The principal activity of the Group during the year ended 31 December 2021 was the development and manufacture, marketing and distribution of electric two-wheel vehicle (electric motorcycles and electric mopeds). BOARD MEETINGS OPERATING AND FINANCIAL REVIEW DIRECTOR HELD WHILE DIRECTOR ATTENDED REVIEW OF OPERATIONS Mr Charles Chen Mr Ivan Teo Mr Blair Sergeant Ms Shannon Coates Mr Kaijian Chen 3 3 3 3 3 3 3 3 3 3 There is presently no separate Audit, Nomination or Remuneration Committee, with all committee functions being addressed by the full Board. 14 Vmoto Limited is a global electric two-wheel vehicle (EV) manufacturing and distribution group. The Company specialises in high quality electric two-wheel vehicle and manufactures a range of high-end electric two-wheel vehicle 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 the following primary brands: • E-Max, its own proprietary brand, targeting international B2B markets; • Super Soco, a B2C brand for which Vmoto holds international marketing rights outside of China; and • Vmoto, its own proprietary brand, targeting international premium B2C and B2B markets. ANNUAL REPORT 2021Total consolidated sales of $86.2 million were recorded for the Group for the year ended 31 December 2021 (FY2020: $61 million). The revenue of the Group has increased 41% compared to the year ended 31 December 2020, 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 2021, the Group recorded a net profit of $8,034,030 after income tax (FY2020: $3,655,860). The earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ended 31 December 2021 was $10,225,753 (FY2020: $5,806,014). The following table provides a reconciliation between the EBITDA and statutory net profit after tax for the year ended 31 December 2021 and 31 December 2020: Earnings before interest, tax, depreciation and amortisation Depreciation and amortisation Profit before interest and tax Interest income Interest expense Income tax expense FY2021 FY2020 $10,225,753 $5,806,014 ($1,643,173) $8,582,580 $189,705 ($23,101) ($1,594,082) $4,211,932 $124,510 ($116,070) ($715,154) ($564,512) NET PROFIT AFTER TAX $8,034,030 $3,655,860 Directors believe this information is useful to provide investors with transparency on the underlying performance of the Company. A more detailed review of operations for the year ended 31 December 2021 is set out in the Operations Review preceding the Directors’ Report. REVIEW OF FINANCIAL POSITION The Group’s net assets increased by approximately $12.9 million to $46 million during the year ended 31 December 2021. Cash balances increased by approximately $3.6 million during the year ended 31 December 2021 due to increased sales and orders from customers. During the year, the Group has continued to receive significant deposits and funds from its existing and new 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 leading electric two-wheel vehicle company in the world. The Company launched its new “VMOTO” premium brand and to continuously design and develop new premium products, aiming to supply high quality products to international markets. Trade and other receivables increased by $6.1 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 sales activities. The Group’s long term strategic customers have paid all their trade receivables due in full on time post 31 December 2021. Inventories increased by $8 million and prepayments increased by approximately $3.4 million, which reflect the significant increase in 15 orders from customers. This represents increase in inventories level to ensure products ordered by customers are delivered on time in full in the most efficient manner post 31 December 2021. 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 60 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 – Vmoto signed a joint investment agreement with Super Soco in February 2020, to establish a 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. Trade and other payables increased by approximately $9.3 million during the period primarily due to significant increase in deposits from customers for more orders, which are unearned until the products are delivered to customers. Issued capital increased by $0.7 million during the year ended 31 December 2021, primarily due to vesting of share based expenses in relation to its directors and employees. 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 2021. 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 B2B markets; • Expand its international distribution network including North America and Asia, and to work with strategic distributors/customers to target large projects in their local markets; and • Expand its international B2B business and target large B2B customers in ride-sharing and delivery sectors. 16 ANNUAL REPORT 2021IMPACT 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 2021. 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 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 ORDINARY SHARES OPTIONS SERVICE & PERFORMANCE RIGHTS Mr Charles Chen1 23,087,784 Mr Ivan Teo2 1,621,207 Mr Blair Sergeant3 90,000 Ms Shannon Coates4 437,929 Mr Kaijian Chen5 3,002,427 - - - - - 4,771,703 1,985,586 - - - 1. 23,087,784 shares and 4,771,703 service and performance rights are held directly by Mr Charles Chen. 2. 1,621,207 shares and 1,985,586 service and performance rights are held directly by Mr Ivan Teo. 3. 90,000 shares are held indirectly by Rio Super Pty Ltd as trustee for Rio Grande Do Norte Super Fund. Mr Sergeant is a beneficiary of Rio Grande Do Norte Super Fund. 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. 5. 3,002,427 shares are held directly by Mr Kaijian Chen. 17 OPTIONS At the date of this Annual Report, there are no options over unissued ordinary shares of the Company. SERVICE & PERFORMANCE RIGHTS On 17 May 2021, the Company issued 1,320,708 performance rights to Mr Charles Chen and 549,464 performance rights to Mr Ivan Teo as approved by shareholders on 13 May 2021. 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. On 20 December 2021, the Company issued 600,000 shares to Mr Charles Chen and 250,000 shares to Mr Ivan Teo as a result of vesting of 850,000 service rights. 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. 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: The Company has not agreed to indemnify their current auditors, Hall Chadwick WA Audit Pty Ltd. INSURANCE PREMIUMS CLASS 2020 Service Rights NUMBER 850,000 2020 Performance rights 4,037,117 2021 Performance rights 1,870,172 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 2021 was $58,998. Non-audit services During the year, Hall Chadwick WA Audit Pty Ltd, the Company’s auditor, did not perform any non- audit services in addition to their statutory duties. Auditor’s Independence Declaration The Auditor’s Independence Declaration is set out on page 76 and forms part of the Directors’ Report for the year ended 31 December 2021. 18 ANNUAL REPORT 202119 REMUNERATION REPORT This remuneration report outlines the Director and executive remuneration arrangements of the Company and the Group. 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 The following persons acted as Directors of the Company during or since the end of the financial year: • Mr Charles Chen • Mr Ivan Teo • Mr Blair Sergeant • Ms Shannon Coates • Mr Kaijian Chen 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: • Mr Jeffrey Wu (Sales Manager) • Mr Gaetan Orselli (Sales Manager) • Mr Maik Spaan (Europe After Sales & Service Manager) • Ms Susan Xie (Sales Manager) • Mr Adam Cui (Sales Manager) 20 OVERVIEW OF REMUNERATION POLICIES 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 Group given trends in comparative companies both locally and internationally, and the objectives of the Company’s remuneration strategy. 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. FIXED REMUNERATION 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. ANNUAL REPORT 2021Executive 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. 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. SERVICE AGREEMENTS 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. 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. 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 In AUD Revenue Net profit / (loss) before tax Net profit / (loss) after tax In AUD 31 Dec 2021 12 months 31 Dec 2020 12 months 31 Dec 2019 12 months 31 Dec 2018 12 months 31 Dec 2017 12 months $’000 86,167 8,749 8,034 $’000 61,013 4,220 3,656 $’000 45,672 1,301 1,301 $’000 19,578 (918) (918) $’000 15,079 (8,097) (8,097) 31 Dec 2021 12 months 31 Dec 2020 12 months 31 Dec 2019 12 months 31 Dec 2018 12 months 31 Dec 2017 12 months Share price at start of period $0.44 Share price at end of period $0.43 $0.245 $0.056 $0.058 $0.099 $0.44 $0.245 $0.056 $0.058 Dividend - - - - - Basic earnings/ (loss) per share Diluted earnings/ (loss) per share 2.89 cents 1.45 cents 0.58 cents (0.43 cents) (4.68 cents) 2.82 cents 1.45 cents 0.57 cents (0.43 cents) (4.68 cents) 21 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 2021 and 31 December 2020 are: SHORT-TERM POST EMPLOY- MENT SHARE BASED Salary & fees STI cash bonus Superan- nuation benefits Shares Total Propor- tion of remu- neration shares related Propor- tion of remu- neration perfor- mance related In AUD $ $ $ $ $ $ $ EXECUTIVE DIRECTORS Mr Charles Chen Mr Ivan Teo 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 390,8331 350,000 185,5212 152,500 NON-EXECUTIVE DIRECTORS 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 Mr Blair Sergeant3 Ms Shannon Coates4 Mr Kaijian Chen5 Mr Phillip Campbell (resigned 4 Nov 2020) Total, all Directors 22 120,000 10,000 54,795 45,662 - - - 55,000 751,149 613,162 - - - - - - - - - - - - - 5,205 4,338 - - - - 870,745 1,261,578 69% 44% 465,102 815,102 57% 2% 362,461 547,982 66% 42% 193,780 346,280 56% 2% - - - - 120,000 10,000 60,000 50,000 - - - - 42,603 42,603 100% 82,424 82,424 100% - - - 128,795 183,795 70% - - - - - - - - 5,205 63% 39% 4,338 870,101 58% 2% ANNUAL REPORT 20211. Mr Chen’s Director fees for the year ended 31 December 2021 was USD312,667. 2. Mr Teo’s Director fees for the year ended 31 December 2021 was USD148,417. 3. Mr Sergeant was appointed as Non-executive Director on 4 November 2020. 4. 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 2021 financial year, the Company paid Evolution Corporate Services Pty Ltd $72,000 for these services, which is not included in the amount above. 5. 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 2022 Annual General Meeting. Mr Chen’s FY2020 Director fees were also paid in shares. 23 SHORT-TERM POST- SHARE BASED Salary & fees STI cash bonus Super- annu- ation benefits Shares Total Propor- tion of remu- ner- ation shares related Propor- tion of remu- ner- ation perfor- mance related $ $ $ $ $ $ $ In AUD EXECUTIVES Mr Jeffrey Wu (Sales Manager) Mr Gaetan Orselli (Sales Manager, appointed 1 July 2020) Mr Maik Spaan (Europe After Sales & Service Manager, appointed 1 Jun 2020) 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 63,569 29,804 63,519 63,135 131,250 49,552 12 months to Dec 2021 110,122 12 months to Dec 2020 63,805 - - - - Ms Susan Xie (Sales Manager) Mr Adam Cui (Sales Manager) Mr Marcel Koper (Europe After Sales & Service Director, resigned 31 May 2020) Total, all Executives 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 12 months to Dec 2021 12 months to Dec 2020 51,563 32,081 36,802 30,110 51,873 34,151 35,376 5,227 - 116,668 - - 96,036 365,722 98,472 24 - - - - - - - - - - - - - - 39,260 132,633 30% 22% 23,488 150,142 16% 42% - - 131,250 49,552 - - 7,944 118,066 7% - 63,805 - - - - - 22,934 106,578 22% 30% 14,289 81,201 18% 37% - - - - 86,024 40,603 - 116,668 - - - - 40% 13% - - 70,138 574,551 12% 17% 37,777 501,971 8% 20% ANNUAL REPORT 2021SHARE-BASED PAYMENT ARRANGEMENTS SHARES 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. 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. During the year ended 31 December 2021, no options were granted to Key Management Personnel under the Plan. SERVICE & PERFORMANCE RIGHTS 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. 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. 25 PERFORMANCE RIGHTS GRANTED IN FY2021 During the year ended 31 December 2021, 1,320,708 performance rights were granted to Mr Charles Chen and 549,464 performance rights were granted to Mr Ivan Teo pursuant to the shareholder approval on 13 May 2021. 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 HURDLES Performance right grants Performance period Share price hurdle 25% vest 50% vest 100% vest 2020 performance rights 2021 performance rights 2 years to 31 December 2022 3 years to 31 December 2023 5% 5% 5% 5% 10% 15% 10% 15% FAIR VALUE OF PERFORMANCE 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 2021 performance rights Grant date Fair value at measurement date Share price at grant date Performance rights life 26 13 May 2021 $0.1938 $0.425 3 years ANNUAL REPORT 2021SHARE HOLDINGS AND TRANSACTIONS OF KEY MANAGEMENT PERSONNEL The movement during the year ended 31 December 2021 in the number of ordinary shares held, directly, indirectly or beneficially by each key management person, including their personally-related entities, is as follows: Held at 1 Jan 2021 Held at date of ap- pointment Net change1 Granted as remunera- tion Received on vest of service rights Held at date of resigna- tion Held at 31 Dec 2021 DIRECTORS Mr C Chen 22,487,784 Mr I Teo 1,371,207 Mr B Sergeant - Ms S Coates 437,929 Mr K Chen 2,912,539 EXECUTIVES N/A N/A - N/A N/A - - 90,000 - - - - - - 89,888 Mr J Wu 1,050,000 N/A (150,000) 100,000 Mr G Orselli Mr M Spaan - - Ms S Xie 650,000 Mr A Cui - - - N/A N/A - - - 50,000 (60,000) 50,000 - - 600,000 250,000 - - - - - - - - N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 23,087,784 1,621,207 90,000 437,929 3,002,427 1,000,000 - 50,000 640,000 - 1. Net change represents the acquisition and disposal of shares on market and exercise of options by the Key Management Personnel. 27 OPTION HOLDINGS OF KEY MANAGEMENT PERSONNEL The movement during the year ended 31 December 2021 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 2021 Held at date of ap- pointment Net change1 Granted as remunera- tion Received on vest of service rights Held at date of resigna- tion Held at 31 Dec 2021 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 - - - - - - - - - - DIRECTORS Mr C Chen Mr I Teo - - Mr B Sergeant - Ms S Coates Mr K Chen EXECUTIVES Mr J Wu Mr G Orselli Mr M Spaan Ms S Xie Mr A Cui - - - - - - - 28 ANNUAL REPORT 2021SERVICE AND PERFORMANCE RIGHTS OF KEY MANAGEMENT PERSONNEL The movement during the year ended 31 December 2021 in the number of service and performance 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 2021 Held at date of ap- pointment Net change1 Granted as remunera- tion Received on vest of service rights Held at date of resigna- tion Held at 31 Dec 2021 DIRECTORS Mr C Chen 4,050,995 Mr I Teo 1,686,122 Mr B Sergeant - Ms S Coates Mr K Chen EXECUTIVES Mr J Wu Mr G Orselli Mr M Spaan Ms S Xie Mr A Cui - - - - - - - N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A - - - - - - - - - - 1,320,708 (600,000) 549,464 (250,000) - - - - - - - - - - - - - - - - N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 4,771,703 1,985,586 - - - - - - - - OTHER KEY MANAGEMENT PERSONNEL TRANSACTIONS During the year ended 31 December 2021, 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$72,000 for the year ended 31 December 2021. 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 2022. 29 FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 Notes Year ended 31 December 2021 $ Year ended 31 December 2020 $ Revenue from sale of goods 86,167,219 61,013,045 Cost of sales Gross Profit Other income (62,520,741) (46,655,366) 23,646,478 14,357,679 2(a) 2,294,341 1,757,431 Operational expenses (10,917,613) (7,517,213) Marketing and distribution expenses (1,644,402) (750,607) Corporate and administrative expenses (4,577,367) (3,330,413) Occupancy expenses (177,396) (158,804) Other expenses 2(b) (491,927) - Share of losses from equity accounted investments Finance costs Profit from continuing operations before tax 640,171 (23,101) (21,631) (116,070) 8,749,184 4,220,372 Income tax expense 4(a) (715,154) (564,512) Profit after tax from continuing operations 8,034,030 3,655,860 30 ANNUAL REPORT 2021Notes Year ended 31 December 2021 $ Year ended 31 December 2020 $ 3,179,413 3,179,413 (2,037,580) (2,037,580) 11,213,443 1,618,280 Other comprehensive income 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 8,082,465 3,736,956 Non-controlling interests (48,435) (81,096) 8,034,030 3,655,860 Total comprehensive income for the year attributable to: Owners of the Company 11,261,878 1,699,376 Non-controlling interest (48,435) 11,213,443 (81,096) 1,618,280 Earnings per share 20 Basic earnings/(loss) per share 2.89 cents 1.45 cents Diluted earnings/(loss) per share 2.82 cents 1.45 cents The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 31 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 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 5 6 7 8 9 13 10 11 18,633,879 14,997,486 14,812,971 8,724,876 12,527,456 4,487,723 3,847,521 437,710 49,821,826 28,647,795 5,988,074 6,496,557 360,509 478,605 - - 7,132,878 5,943,885 Total Non-Current Assets 13,481,461 12,919,047 TOTAL ASSETS 63,303,287 41,566,842 32 ANNUAL REPORT 2021CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 (CONTINUED) CURRENT LIABILITIES Trade and other payables Current tax liabilities Lease liabilities 12 4(e) 13 16,863,435 7,588,206 9,451 110,494 308,254 107,416 Total Current Liabilities 16,983,380 8,003,876 282,768 282,768 402,171 402,171 17,266,149 8,406,047 46,037,138 33,160,795 NON-CURRENT LIABILITIES Lease liabilities 13 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Non-controlling interests 14 14 17 15 90,559,203 89,823,509 1,394,952 (2,711,667) (45,842,953) (53,925,418) (74,064) (25,629) TOTAL EQUITY 46,037,138 33,160,795 The consolidated statement of financial position is to be read in conjunction with the accompanying notes. 33 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 Notes Year ended 31 December 2021 $ 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 95,511,785 (92,944,871) 189,705 - 1,038,256 56,278,610 (52,917,135) 124,139 (84,373) 628,845 Net cash generated by operating activities 24 3,794,875 4,030,086 Cash flows from investing activities Payments for property, plant & equipment Payments for equity-accounted investments (615,084) (590,946) - (6,182,635) Net cash used in investing activities (615,084) (6,773,581) Cash flows from financing activities Proceeds from issue of equity shares Payments for share issue costs Repayment of borrowings Net cash generated by financing activities Net (decrease)/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 3,179,791 8,655,552 14,997,486 6,648,039 456,602 (306,105) 18,633,879 14,997,486 The consolidated statement of cash flows is to be read in conjunction with the accompanying notes. 34 ANNUAL REPORT 2021CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Issued Capital $ Reserves $ Accumulated Losses $ Non-con- trolling Interests Total $ 75,353,596 (720,969) (57,662,374) 55,467 17,025,720 - - - - 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 Balance as at 1 January 2020 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 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 Balance as at 1 January 2021 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 89,823,509 (2,711,667) (53,925,418) (25,629) 33,160,795 89,823,509 (2,711,667) (53,925,418) (25,629) 33,160,795 - - - - 8,082,465 (48,435) 8,034,030 3,179,413 - - 3,179,413 3,179,413 8,082,465 (48,435) 11,213,443 Issue of ordinary shares 429,694 - - 1,233,206 306,000 (306,000) - - - - - - 429,694 1,233,206 - Issue of service and performance rights Transfer vested service rights reserve to issued capital Balance as at 31 December 2021 90,559,203 1,394,952 (45,842,953) (74,064) 46,037,138 The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. 35 NOTES TO FINANCIAL STATEMENTS 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES of parent company) are more useful to the users and shareholders of the Company who are predominantly in Australia. 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 2021 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 2022. 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 36 iv. Standards and interpretations affecting amounts reported in current period (and/or prior periods) Accounting Standards that are mandatorily effective for the current reporting year 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 ANNUAL REPORT 2021Standards 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 2021 of $8,034,030 (31 December 2020: $3,655,860). At 31 December 2021, the Group had a working capital surplus of $32,838,446 (31 December 2020: $20,643,919). 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 $3.8 million for the year ended 31 December 2021; • 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 37 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$6.4 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 profitable; and • the Directors have prepared cash flow forecasts that indicate the Group will be cash flow positive for the year ending 31 December 2022 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. 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). 38 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. 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. ANNUAL REPORT 2021On 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. Sale of goods 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 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 39 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. 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. 40 ANNUAL REPORT 2021Investments 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. • 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: 3 – 10 years i. Property, Plant and Equipment Motor vehicles: 4 years • Recognition and measurement Office furniture & equipment: 5 years Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Building: 20 years Leasehold improvements: 5 years 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. Moulds: 5 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. • Impairment 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. 41 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. 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. 42 ANNUAL REPORT 2021m. Inventories 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. n. Leases 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. 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 13. 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. 43 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. 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. 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. p. Interest-bearing loans and borrowings 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. 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”). 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. All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. 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. 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. 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’). 44 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. ANNUAL REPORT 2021The dilutive effect, if any, of outstanding weighted average number of options as at the reporting date is considered not material and accordingly the basic loss per share is the same as the diluted loss per share. 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. 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 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. 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 Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: 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 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 amortisation and accumulated impairment losses, on the same basis as patents that are acquired separately. 45 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. x. Comparative figures This Annual Report relates to the year ended 31 December 2021. Comparatives are for the year ended 31 December 2020. 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. Valuation techniques 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 46 ANNUAL REPORT 2021available to measure fair value. The availability of sufficient and relevant 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. Level 3 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 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: if a market that was previously considered i. 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. z. Critical judgements in applying accounting policies and key sources of estimation uncertainty 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. 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 47 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 2021 was nil (31 December 2020: 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. Fair value measurements and valuation processes in relation to business combination acquisition 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. 48 ANNUAL REPORT 20212. REVENUES AND EXPENSES (a) Other income Interest income Contributions from customers Government subsidies Net foreign exchange gain Rent income Other income (b) Other expenses Net foreign exchange loss (c) Employee benefits expense Wages and salaries costs (d) Depreciation and amortisation Depreciation of property, plant and equipment 1,643,173 Amortisation of intangibles 3. AUDITOR’S REMUNERATION Audit services: Audit of financial reports by Hall Chadwick WA Audit Pty Ltd 4. INCOME TAX (a) Income tax credit / (expense) Current tax Deferred tax - 1,643,173 92,946 92,946 (715,154) - (715,154) Year ended 31 December 2021 $ Year ended 31 December 2020 $ 189,705 960,686 314,434 - 812,566 16,950 124,510 817,559 292,794 44,909 440,378 37,281 2,294,341 1,757,431 491,927 491,927 4,549,996 4,549,996 - - 3,436,619 3,436,619 1,296,316 297,766 1,594,082 93,592 93,592 (564,512) - (564,512) 49 Year ended 31 December 2021 $ Year ended 31 December 2020 $ (b) Numerical reconciliation between tax benefit/(expense) and pre-tax net profit Profit before income tax expense Income tax credit/(expense) calculated at 30% 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 8,749,184 (2,624,755) (488,083) 1,899,293 498,391 (715,154) 3,655,860 (1,005,362) 276,849 491,109 (327,108) (564,512) Unused tax losses for which no deferred tax asset has been recognised (as recovery is currently not probable) Potential at 30% (31 December 2020: 27.5%) 7,555,938 7,412,549 All tax losses relate to Australian based entities. (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 19,500 19,500 16,500 16,500 (e) Current tax liabilities Income tax payable (f) Deferred tax balances 9,451 308,254 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 2021 in respect of tax losses not brought into account has been calculated at 30% for Australian entities. The tax rate applied for the year ended 31 December 2020 was 27.5%. The tax benefit and expense at 31 December 2021 in respect of tax effect brought into account in relation to China operations has been calculated at 25% for China entities. The tax benefit and expense at 31 December 2021 in respect of tax effect brought into account in relation to Europe operations has been calculated at 25% for the Netherlands entities and 24% for Italy entities. 50 ANNUAL REPORT 2021Year ended 31 December 2021 $ Year ended 31 December 2020 $ 5. CASH AND CASH EQUIVALENTS Cash and bank balances 18,633,879 14,997,486 6. TRADE AND OTHER RECEIVABLES Current Trade receivables Less: Provision for impairment loss Other receivables Less: Provision for impairment loss 7,595,767 - 7,595,767 7,217,204 14,812,971 7,181,176 - 7,181,176 1,835,033 (291,333) 8,724,876 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. 51 Movements in the provision for impairment of trade and other receivables were as follows: Year ended 31 December 2021 $ Year ended 31 December 2020 $ At beginning of the period Provision for impairment during the period Write off At end of the period 291,333 - (291,333) - At 31 December 2021, 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 5,736,203 948,505 677,478 7,450,785 - - 14,812,971 291,333 - - 291,333 7,250,093 562,502 144,346 767,935 291,333 (291,333) 8,724,876 As of 31 December 2021, trade and other receivables of $8,690,567 (31 December 2020: $912,281) were past due but not impaired. $2,354,260 of the $8,128,263 past due relates to deferred payment arrangement with a B2B customer. The customer has been making payments on time in full. $5,621,622 of the $8,128,763 past due relates to a short-term advance to Nanjing Vmoto Soco Intelligent Technology Co, Ltd (Vmoto Soco Manufacturing), which is the Company’s jointly owned Chinese registered manufacturing company. The short-term advance has been repaid to the Company subsequent to the 2021 financial year. 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 2,925,039 7,621 9,594,796 12,527,456 1,003,746 24,764 3,459,213 4,487,723 3,847,521 437,710 The prepayments are payments in advance to suppliers for the supply of electric motorcycle/moped inventories for the Group’s electric two-wheel vehicle operations. 52 ANNUAL REPORT 2021Plant & equipment Motor vehicles Land Building Total 9. PROPERTY, PLANT & EQUIPMENT 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 (39,267) (5,313) (29,426) (56,475) (130,481) At 31 December 2020, net of accumulated depreciation At 31 December 2020 795,420 85,784 1,011,426 4,603,927 6,496,557 Cost 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 Year ended 31 December 2021 At 1 January 2021, net of accumulated depreciation 795,420 85,784 1,011,426 4,603,927 6,496,557 Additions 67,645 321,177 Depreciation for the period (465,271) (23,889) - - 114,381 503,203 (1,045,421) (1,534,581) Exchange differences 26,052 3,568 88,524 404,751 522,895 At 31 December 2021, net of accumulated depreciation At 31 December 2021 423,846 386,640 1,099,950 4,077,638 5,988,074 Cost 2,039,440 431,278 1,099,950 7,725,968 11,296,636 Accumulated depreciation (1,615,594) (44,638) - (3,648,330) (5,308,562) Net carrying amount 423,846 386,640 1,099,950 4,077,638 5,988,074 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. 53 Goodwill Licences, trademarks and production rights Development Costs Total - - - 297,766 (297,766) - - - - 297,766 (297,766) - 10. INTANGIBLES Year ended 31 December 2020 Balance at 1 January 2020 Amortisation for the period Balance at 31 December 2020 At 31 December 2020 Cost 3,971,428 2,015,687 4,836,105 10,823,220 Accumulated amortisation - (797,102) (565,657) (1,362,759) Accumulated impairment (3,971,428) (1,218,585) (4,270,448) (9,460,461) Net carrying amount Year ended 31 December 2021 Balance at 1 January 2021 Amortisation for the period Balance at 31 December 2021 At 31 December 2021 - - - - - - - - - - - - - - - - Cost 3,971,428 2,015,687 4,836,105 10,823,220 Accumulated amortisation - (797,102) (565,657) (1,362,759) Accumulated impairment (3,971,428) (1,218,585) (4,270,448) (9,460,461) Net carrying amount - - - - 54 ANNUAL REPORT 202111. 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: Current assets Non-current assets Current liabilities Non-current liabilities Net assets (100%) Group’s share of net assets (50%) 31 December 2021 $ 31 December 2020 $ 31,320,307 6,970,398 20,074,222 6,014,106 (24,024,949) (14,200,557) - 14,265,756 7,132,878 - 11,887,771 5,943,885 Carrying amount of interest in equity accounted investments 7,132,878 5,943,885 Revenue Cost of sales Administrative expenses Profit/(Loss) 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%) Year ended 31 December 2021 $ Year ended 31 December 2020 $ 54,018,270 (43,716,551) (9,021,377) 38,477,854 (30,378,306) (8,142,810) 1,280,342 (43,262) - 1,280,342 640,171 - (43,262) (21,631) During the FY2021, the Group purchases $60,022,010 of goods from Vmoto Soco Manufacturing. Vmoto Soco Manufacturing had no contingent liabilities or capital commitments as at 31 December 2021. 55 12. TRADE AND OTHER PAYABLES Current – unsecured Trade creditors Advance and deposits from customers Other creditors and accruals Year ended 31 December 2021 $ Year ended 31 December 2020 $ 4,058,010 10,686,808 2,118,617 16,863,435 Buildings $ 1,640,926 4,235,260 1,712,020 7,588,206 Total $ 13. LEASES The Group leases warehouse and office facilities in Netherlands and Italy for its electric two-wheel vehicle distribution and after sales 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 2021 Gross carrying amount Balance at 1 January 2021 Additions Disposals Exchange difference Balance at 31 December 2021 Depreciation and impairment Balance at 1 January 2021 Depreciation Balance at 31 December 2021 617,497 617,497 - - (15,122) 602,375 (138,892) (102,974) (241,866) - - (15,122) 602,375 (138,892) (102,974) (241,866) Net carrying amount at 31 December 2021 360,509 360,509 56 ANNUAL REPORT 202113. LEASES (CONTINUED) 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 Lease liabilities Current Non-current Buildings $ Total $ 617,497 617,497 - - - - 617,497 617,497 (27,548) (111,344) (138,892) 478,605 (27,548) (111,344) (138,892) 478,605 31 Dec 2021 $ 31 Dec 2020 $ 110,494 282,768 393,262 107,416 402,171 509,587 Total cash outflow for leases for the year ended 31 December 2021 was $146,584 (FY2020: $146,427). 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 2021 was $812,566 (FY2020: $440,378). 57 14. ISSUED CAPITAL AND RESERVES Issued capital 279,360,084 (31 December 2020: 277,347,515) fully paid ordinary shares The following movements in issued capital occurred during the period: 31 December 2021 $ 31 December 2020 $ 90,559,203 89,823,509 Number of Shares 31 Dec 2021 Number of Shares 31 Dec 2020 Year ended 31 Dec 2021 $ Year ended 31 Dec 2020 $ Balance at beginning of period 277,347,515 224,762,983 89,823,509 75,353,596 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 Issue of Shares at nil consideration Issue of Shares at 44.5 cents each Issue of Shares at 36.5 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 1,700,000 970,000 89,888 102,681 850,000 - - - - - - - - - - - - - - 40,000 37,500 306,000 - 3,947,500 128,841 23,985 128,795 82,424 9,635,000 612,000 - - - - 352,194 226,324 - (314,956) Balance at end of period 279,360,084 277,347,515 90,559,203 89,823,509 58 ANNUAL REPORT 2021a. 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. b. 19 May 2020 – Issue 23,737,844 shares at 16.6297 cents each pursuant to completion of share purchase plan. c. 21 May 2020 – Issue 1,982,174 shares at 6.5 cents each as a result of exercise of options. d. 21 May 2020 – Issue 282,174 shares at 8.5 cents each as a result of exercise of options. e. 2 July 2020 – Issue 378,808 shares at 34 cents each to a director in lieu of unpaid director fees. f. 2 July 2020 – Issue 242,424 shares at 34 cents each to a director in lieu of unpaid Director fees. g. 18 August 2020 – Issue 21,411,108 shares at 45 cents each for completion of a $9.6 million placement. h. 22 December 2020 – Issue 1,700,000 shares to directors as a result of vest of 1,700,000 service rights. i. 8 February 2021 – Issue 970,000 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. j. 13 May 2021 – Issue 89,888 shares at 44.5 cents each to a director in lieu of unpaid Director fees. k. 13 May 2021 – Issue 102,681 shares at 36.5 cents each to a director in lieu of unpaid Director fees. l. 20 December 2021 – Issue 850,000 shares to directors as a result of vest of 850,000 service rights. Options There are no movements of options over unissued ordinary shares of the Company for the year ended 31 December 2021. Service and performance rights The Company has the following service and performance rights issued to directors in existence during the current reporting period. Class Grant date Expiry date Number of rights Vested during the year Rights exercised 2020 service rights 2020 service rights 2020 performance rights 2021 performance rights 16 Dec 2020 16 Dec 2020 16 Dec 2020 13 May 2021 18 Dec 2021 18 Dec 2022 31 Dec 2022 31 Dec 2023 850,000 850,000 850,000 4,037,117 1,870,172 - - - - - - - Rights vested at 31 Dec 2021 Rights unvested at 31 Dec 2021 850,000 - - - - 850,000 4,037,117 1,870,172 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. 59 Class Grant date Period (years) Share price at grant date Risk free rate (%) Volatility (%) Valuation per right 2020 service rights 16 Dec 2020 2020 service rights 16 Dec 2020 1 2 $0.36 0.1051 $0.36 0.1051 70% 70% $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 2021 performance rights 16 Dec 2020 13 May 2021 2 3 $0.36 0.1051% 99.6% $0.3369 $0.425 0.0800% 70% $0.1938 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%. Grant date Expiry date Class Total valuation Expense recorded to 31 Dec 2021 Expense recorded to 31 Dec 2020 16 Dec 2020 18 Dec 2020 2020 service rights $612,000 - $612,000 16 Dec 2020 18 Dec 2021 2020 service rights $306,000 $293,250 $12,750 16 Dec 2020 18 Dec 2022 2020 service rights $306,000 $153,000 $6,375 16 Dec 2020 31 Dec 2022 2020 performance rights $1,360,105 $666,174 $27,757 13 May 2021 31 Dec 2023 2021 performance rights $362,347 $120,782 - 60 ANNUAL REPORT 202131 December 2021 $ 31 December 2020 $ Reserves Reserves at the beginning of the period (2,711,667) (720,969) 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 - 1,233,206 (306,000) 3,179,413 1,394,952 974,088 420,864 1,394,952 - 658,882 (612,000) (2,037,580) (2,711,667) 46,882 (2,758,549) (2,711,667) 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. Year ended 31 December 2021 $ Year ended 31 December 2020 $ 15. 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 (25,629) (48,435) - (74,064) 55,467 (81,096) - (25,629) 61 16. 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 2021, 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 2021 and 31 December 2020 were as follows: Total borrowings Total equity Total capital Gearing ratio Year ended 31 December 2021 $ Year ended 31 December 2020 $ 393,262 46,037,138 509,587 33,160,795 46,430,400 33,670,382 0.8% 1.5% The gearing ratio of the Company has decreased from 1.5% to 0.8% during the year ended 31 December 2021. 17. ACCUMULATED LOSSES Accumulated losses at the beginning of the period (53,925,418) (57,662,374) Profit for the period 8,082,465 3,736,956 Transfer from share-based payment reserve - - Accumulated losses at the end of the period (45,842,953) (53,925,418) 18. 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 2021 and 31 December 2020: 62 ANNUAL REPORT 2021Australia $A Nanjing, China $A Europe $A Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 2,495,265 9,704 80,816,097 54,558,296 6,695,497 4,908,752 136,317 (2,099,840) 7,677,849 5,606,292 146,191 155,992 2,653,678 873,684 86,742,638 70,368,944 6,304,838 2,995,035 (157,175) (175,259) (44,996,395) (39,585,632) (4,709,114) (1,834,904) (649) (667) (1,515,349) (1,140,007) (127,175) (155,642) - (297,766) - - - - Singapore $A Intersegment elimination $A Consolidated $A Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 888,592 3,293,722 (2,433,891) 73,673 (6,584) - - - 88,461,560 62,770,476 8,034,030 3,655,860 256,696 612,604 (32,654,563) (33,283,425) 63,303,287 41,566,842 (58,028) (93,677) 32,654,563 33,283,425 (17,266,149) (8,406,047) - - - - - - - - (1,643,173) (1,296,316) - (297,766) 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. 63 Information about major customers: The Group has generated revenue from sales to its largest customer at approximately $26.4 million (2020: $13.3 million). No other single customers contributed 15% or more of the Group’s revenue for the year. 19. 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 2021 31 December 2020 Carrying amount $ Fair Value $ Carrying amount $ Fair Value $ Financial assets Cash and cash equivalents 18,633,879 18,633,879 14,997,486 14,997,486 Trade and other receivables 14,812,971 14,812,971 8,724,876 8,724,876 Total financial assets Financial liabilities 33,446,850 33,446,850 23,722,362 23,722,362 Trade and other payables 16,863,435 16,863,435 7,588,206 7,588,206 Borrowings Lease liabilities - - - - 393,262 393,262 509,587 509,587 Total financial liabilities 17,256,697 17,256,697 8,097,793 8,097,793 Net financial assets / (liabilities) 16,190,153 16,190,153 15,624,569 15,624,569 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. 64 ANNUAL REPORT 202119. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT’D) 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 2.5%, depending on account balances. The Group current do not have credit facilities. 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: 31 December 2021 $ 31 December 2020 $ Financial assets Cash and cash equivalents 18,633,879 14,997,486 Financial liabilities Bank operating facility Net exposure - - 18,633,879 14,997,486 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 2021 $ 31 December 2020 $ +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 186,339 186,339 (186,339) (186,339) 149,975 149,975 (149,975) (149,975) 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. 65 19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONT’D) 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: Financial assets Cash and cash equivalents (USD) Cash and cash equivalents (RMB) Cash and cash equivalents (EUR) Cash and cash equivalents (HKD) Cash and cash equivalents (SGD) Trade and other receivables (USD) Trade and other receivables (RMB) Trade and other receivables (EUR) Financial liabilities Trade and other payables (USD) Trade and other payables (RMB) Trade and other payables (EUR) Borrowings (RMB) Net exposure 31 December 2021 $ 31 December 2020 $ 7,210,313 785,890 7,646,960 27,088 23,576 15,693,827 6,918,396 7,001,212 890,344 14,809,952 (7,428,296) (4,968,960) (4,315,852) (16,713,108) - 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) - 13,790,671 11,799,334 The following sensitivity is based on the foreign currency risk exposures in existence at the reporting date. At 31 December 2021, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, equity would have been affected as follows: Judgements of reasonable possible movements: 31 December 2021 $ 31 December 2020 $ AUD/USD, AUD/RMB and AUD/EUR +20% Equity increase/(decrease) (2,232,902) (1,881,625) AUD/USD, AUD/RMB and AUD/EUR -20% Equity increase/(decrease) 2,679,482 2,257,949 66 ANNUAL REPORT 2021The 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. 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. 67 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 Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 Year ended 31/12/21 Year ended 31/12/20 $000 $000 $000 $000 $000 $000 $000 $000 Consolidated Group Financial liabilities due for payment Bank operating facility and loans - - Trade and other payables 16,863 7,588 - - - - Lease liabilities 110 Current tax liabilities Other liabilities 9 - 108 308 - 283 402 - - - - Total contractual outflows Total expected outflows 16,982 8,004 283 402 16,982 8,004 283 402 Financial assets – cash flows realisable Cash and cash equivalents 18,634 14,997 14,813 8,725 33,447 23,722 - - - - - - Trade and other receivables Total anticipated inflows Net (outflow)/ inflow on financial instruments 16,465 15,718 (283) (402) - - - - - - - - - - - - - - - - - - - - - - - - 16,863 7,588 393 9 - 510 308 - 17,265 8,406 17,265 8,406 18,634 14,997 14,813 8,725 33,447 23,722 16,182 15,316 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. 68 ANNUAL REPORT 202120. 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 31 December 2021 $ 31 December 2020 $ 2.89 2.89 2.82 2.82 1.45 1.45 1.45 1.45 The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: Year ended 31 December 2021 $ Year ended 31 December 2020 $ Profit for the year attributable to owners of the Group 8,082,465 3,736,956 Earnings used in the calculation of basic and diluted earnings/loss per share from continuing operations 8,082,465 3,736,956 Weighted average number of ordinary shares for the purposes of basic earnings per share 278,363,181 251,540,695 Weighted average number of ordinary shares for the purposes of diluted earnings/loss per share 285,245,693 252,688,648 69 Country of Incorporation Entity interest 31 December 2021 Entity interest 31 December 2020 21. CONTROLLED ENTITIES Parent entity Vmoto Limited Controlled entities Australia Vmoto Australia Pty Ltd Australia Vmoto Soco International Limited Hong Kong Nanjing Vmoto Co, Ltd Nanjing Vmoto Manufacturing Co, Ltd China China Vmoto Europe B.V Netherlands Vmoto Soco Italy srl Italy Vmoto Soco International Pte Ltd Singapore China Nanjing Vmoto Intelligent Technology Co, Ltd Associate Nanjing Vmoto Soco Intelligent Technology Co, Ltd 100% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 100% 50% 100% - China 50% 50% 22. 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 Blair Sergeant Director (Non-Executive) – appointed 4 November 2020 Ms Shannon Coates Director (Non-Executive) – appointed 23 May 2014 Mr Kaijian Chen Director (Non-Executive) – appointed 1 September 2011 70 ANNUAL REPORT 2021(ii) Executives Mr Jeffrey Wu Sales Manager - appointed 1 May 2014 Ms Susan Xie Sales Manager - appointed 1 March 2010 Mr Adam Cui Sales Manager - appointed 17 February 2020 Mr Maik Spaan Europe After Sales & Service Manager - appointed 1 June 2020 Mr Gaetan Orselli Sales Manager - appointed 1 July 2020 23. KEY MANAGEMENT PERSONNEL DISCLOSURES The total remuneration paid to Key Management Personnel of the Company and the Group during the period ended 31 December 2021 was as follows: Short-term employee benefits Share-based payments Year ended 31 December 2021 $ Year ended 31 December 2020 $ 1,260,767 1,345,947 1,081,694 907,878 Total KMP compensation 2,606,714 1,989,572 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 2021. 71 24. RECONCILIATION OF CASH FLOWS USED IN OPERATING ACTIVITIES Year ended 31 December 2021 $ Year ended 31 December 2020 $ Cash flows from operating activities Profit for the year Adjustments for: Depreciation and amortisation Share based payment expenses 8,034,030 3,655,860 1,643,173 1,662,910 1,594,082 1,096,426 3,306,083 2,690,508 (Increase)/decrease in receivables (6,088,095) (6,594,889) (Increase)/decrease in inventories (8,039,733) (119,956) (Increase)/decrease in other assets (3,409,811) 3,594,782 (Decrease)/ increase in payables 9,992,401 803,781 Net cash generated by operating activities 3,794,875 4,030,086 25. 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 21. 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: Year ended 31 December 2021 $ Year ended 31 December 2020 $ Non-current Unsecured loans to controlled entities 32,654,563 33,283,425 Provision for non-recovery (32,654,563) (33,283,425) - - 72 ANNUAL REPORT 202127. SUBSEQUENT EVENTS 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. 28. PARENT ENTITY DISCLOSURES 31 December 2021 $ 31 December 2020 $ 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 2,640,395 23,846,893 26,487,288 155,504 - 155,504 861,392 23,844,970 24,706,362 175,258 - 175,258 26,331,784 24,531,104 90,559,203 89,823,509 (64,227,419) (65,339,287) Share based payment premium reserve Total equity - 26,331,784 46,882 24,531,104 73 Financial performance Profit/(Loss) for the period Other comprehensive income Total comprehensive income 31 December 2021 $ 31 December 2020 $ 137,780 - 137,780 (2,098,848) - (2,098,848) 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 2021. 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. 74 ANNUAL REPORT 2021DIRECTORS’ DECLARATION IN THE OPINION OF THE DIRECTORS OF VMOTO LIMITED: a. the financial statements and notes, set out on pages 30 to 74, 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 2021 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 2021. Signed in accordance with a resolution of the Directors: YITING (CHARLES) CHEN MANAGING DIRECTOR Dated at Western Australia, this 30th day of March 2022. 75 AUDITOR’S INDEPENDENCE DECLARATION To the Board of Directors, Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit Director for the audit of the financial statements of Vmoto Limited for the financial year ended 31 December 2021, 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 HALL CHADWICK WA AUDIT PTY LTD MARK DELAURENTIS CA Director Dated Perth, Western Australia this 30th day of March 2022 76 ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT 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 2021, 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) giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2021 and of its financial performance for the year then ended; and (ii) 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. 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 77 INDEPENDENT AUDITOR’S REPORT 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 inventory (refer note 7) The Consolidated Entity had an inventory balance of $12,527,456 at year end, an increase of $8,039,733 from 2020. Existence and valuation of inventory were considered key audit matters due to: Our procedures amongst others included: • Attending stock takes conducted by affiliated firms at year end and performing sample counts; • During site visits we observed to consider damaged or obsolete stock on hand; • • The quantum and increase of inventory on hand • Reviewing gross margins on sales during the year The location of the inventory on a monthly basis; • Risk of stock obsolescence from changing • For a sample of items we tested unit costs of technology • The importance of inventory in relation to generating positive operating cash flows. inventory items and related sales to supporting documentation to assess whether the inventory is held at the lower of cost and net realisable value • Reviewing margins and inventory turnover via analytical procedures; and • Assessing the adequacy of the disclosures included in Note 7 to the financial statements Revenue Recognition During the year ended 31 December 2021, the Consolidated Entity generated sales revenue of $86,167,219 (2020: $61,013,045). We reviewed the Consolidated Entity’s revenue accounting policy and their contracts with customers and considered how management: In 2018, the Consolidated Entity adopted AASB 15 Revenue from Contracts with Customers for the first time. The core principal of the standard is that an • • Identified the contract Identified the performance obligations within the contracts; entity must recognise revenue to depict the transfer of goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. AASB 15 introduced a 5-step approach to revenue recognition with prescriptive guidance with respect to the identification of contracts with a customer, the performance obligations in the contract, the 78 • Determined the transaction price; • Allocated the transaction price to the performance obligations • Recognised revenue when the performance obligation was satisfied ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT Key Audit Matter How our audit addressed the Key Audit Matter transaction price, the allocation of the transaction price to the performance obligations and the recognition of revenue when (or as) the entity satisfies the performance obligation. In addition to the above our procedures amongst others included: • We analysed the aging of trade receivables with reference to trade terms; and • We obtained aged receivables reports and assessed the recoverability of debtors by performing subsequent receipt testing, enquiry with management, review of payment arrangements and consideration of credit losses incurred. 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 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In 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. 79 INDEPENDENT AUDITOR’S REPORT Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional 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. • 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. 80 ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT 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 2021. 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 Vmoto Limited, for the year ended 31 December 2021, complies with section 300A of the Corporations Act 2001. HALL CHADWICK WA AUDIT PTY LTD MARK DELAURENTIS CA Director Dated in Perth, Western Australia this 30 th day of March 2022 81 ADDITIONAL SHAREHOLDER INFORMATION The following information is current as at 1 March 2022: 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 and options held by substantial shareholders and their associates who have provided the Company with substantial shareholder notices are set out below: Name of Substantial Shareholder Number of Shares 20,805,3831 15,000,0002 13,952,8833 10,606,9484 8,823,5295 Yiting (Charles) Chen Raymond and Susan Munro ATF Munro Family Super Fund2 Ms Malaky Kazem 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 1 July 2021. 4. As lodged with ASX on 29 June 2017. 5. As lodged with ASX on 29 June 2017. On-Market Buy Back There is no current on-market buy back. Distribution Schedules Distribution schedules for each class of security as at 1 March 2022 are set out below. 82 ANNUAL REPORT 2021FULLY PAID ORDINARY SHARES Range 1 1,001 5,001 10,001 100,001 Total 1,000 5,000 10,000 100,000 Over Holders 438 1,554 678 1,254 275 Units 246,762 4,295,483 5,475,294 42,248,185 227,094,360 % 0.09 1.54 1.96 15.12 81.29 4,199 279,360,084 100.00 DIRECTOR PERFORMANCE RIGHTS Range 1 1,001 5,001 10,001 100,001 Total 1,000 5,000 10,000 100,000 Over DIRECTOR SERVICE RIGHTS Range 1 1,001 5,001 10,001 100,001 Total 1,000 5,000 10,000 100,000 Over Holders Units - - - - 2 2 - - - - 5,907,289 5,907,289 Holders Units - - - - 2 2 - - - - 850,000 850,000 % - - - - 100 100 % - - - - 100 100 83 Securities subject to Voluntary Escrow 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 1,280 Shares as at 1 March 2022): Holders 599 Top holders Units 433,398 The 20 largest registered holders of quoted securities as at 1 March 2022 were: Rank Name Units % Units 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 MR YITING CHEN MR RAYMOND EDWARD MUNRO + MRS SUSAN ROBERTA MUNRO MS XIAONA ZHAO MS MALAKY KAZEM MR ERCHUAN ZHOU CS THIRD NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED MR YI CHEN MR TAO YU OUTRIGHT INTERNATIONAL BUSINESS GROUP LIMITED OUTRIGHT INTERNATIONAL BUSINESS GROUP LIMITED MR LIANG CHEN MR BRENDAN DAVID GORE HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR KAIJIAN CHEN MR TU SHE EDLINS PROSPERITY PLUS PTY LTD BNP PARIBAS NOMINEES PTY LTD MR JOSEPH WILLIAM RE MR YIN HOW TEO 23,087,784 22,381,500 20,056,470 16,337,124 11,864,812 7,092,402 5,656,191 4,981,204 4,241,393 3,400,000 3,270,000 3,247,787 3,245,000 3,118,394 3,002,427 2,464,872 2,351,352 2,280,376 1,900,000 1,621,207 8.26 8.01 7.18 5.85 4.25 2.54 2.02 1.78 1.52 1.22 1.17 1.16 1.16 1.12 1.07 0.88 0.84 0.82 0.68 0.58 Top 20 holders of ORDINARY FULLY PAID SHARES (Total) 145,600,295 52.12 84 ANNUAL REPORT 2021Unquoted Equity Security Holders DIRECTOR PERFORMANCE RIGHTS Rank Name MR YITING CHEN MR YIN HOW TEO 1 2 Total DIRECTOR SERVICE RIGHTS Rank Name MR YITING CHEN MR YIN HOW TEO 1 2 Total Securities Exchange Quotation Units % Units 4,171,703 1,735,586 70.62 29.38 5,907,289 100.00 Units % Units 600,000 250,000 70.59 29.41 850,000 100.00 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 2021 financial year can be accessed at: http://www.vmoto.com/Download/Index?typeId=16 85 www.vmoto.com

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