Volt Power Group Limited
Annual Report 2017

Plain-text annual report

VOLT POWER GROUP LIMITED ABN 62 009 423 189 ANNUAL REPORT For the year ended 31 December 2017 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Contents Corporate Directory .............................................................................................................................. 3 Corporate Governance Statement........................................................................................................... 4 Corporate and Operational Review ......................................................................................................... 4 Directors’ report ................................................................................................................................... 6 Auditors’ independence declaration ....................................................................................................... 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income ............................................... 17 Consolidated Statement of Financial Position ......................................................................................... 18 Consolidated Statement of Changes in Equity ........................................................................................ 19 Consolidated Statement of Cash Flows ................................................................................................. 20 Notes to the Consolidated Financial Statements ..................................................................................... 21 Directors' declaration .......................................................................................................................... 46 Independent audit report ..................................................................................................................... 47 Investor information ............................................................................................................................ 51 2 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Corporate Directory ABN: 62 009 423 189 Directors Simon Higgins Non-Executive Chairman Adam Boyd CEO and Managing Director Peter Torre Non-Executive Director Company Secretary Ian Sydney Principal place of business 1 Channel Close Henderson WA 6166 ph (08) 9437 4966 Registered office Unit B9, 431 Roberts Road Subiaco WA 6008 Share register Link Market Services Pty Ltd Level 12 250 St George’s Terrace Perth WA 6000 Auditor BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 Solicitors DLA Piper Level 31 152-158 St George’s Terrace Perth WA 6000 Bankers Commonwealth Bank of Australia Corporate Financial Services Level 14C, 300 Murray Street Perth WA 6000 Stock Exchange Listings Australian Securities Exchange (ASX) ASX Code: VPR Website www.votlpower.com.au 3 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Corporate Governance Statement Volt Power Group Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance. Volt Power Group Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2017 corporate governance statement is dated as at 28 April 2017 and reflects the corporate governance practices in place throughout the financial year. A description of the Group's current corporate governance practices is set out in the Group's corporate governance statement which can be viewed at www.voltpowergroup.com.au/about. Corporate and Operational Review The directors provide you with the following corporate and operational review of the consolidated entity (referred to hereafter as the Group) consisting of Volt Power Group Limited ("Volt" or "the Company") and the entities it controlled at the end of, or during, the year ended 31 December 2017. 1. Summary (a) Operations • At a general meeting of shareholders on 28 April 2017, it was resolved that the Company undertake a capital raising via a private placement of shares to ECM and parties procured by ECM at an issue price of $0.001 per share to raise $5,600,000 before costs subject to certain conditions. • On 10 May 2017, the Company’s wholly owned subsidiary, Enerji Holdings Pty Ltd exited administration, upon the effectuation of a Deed of Company Arrangement. All claims of Enerji Holding’s creditors, prior to the appointment of the administrator, have now been extinguished. • On 19 May 2017, the Company exited administration, upon the effectuation of a deed of company arrangement. All claims of creditors (except for any excluded claims) against the Company have now been extinguished. • On 31 May 2017, at the Company’s Annual General Meeting, members resolved via special resolution to change the company name from Enerji Ltd to Volt Power Group Limited. This name change took effect from 1 June 2017. • • • • The Recapitalisation was completed and 5,600,000,000 fully paid ordinary shares were issued on 2 June 2017. The Company’s shares were reinstated to trading on the ASX from Wednesday 14 June 2017. The Group completed a detailed process engineering review of the ATEN Technology, focusing on process flow rates, electricity generation performance, efficiency improvements and reliability enhancements. The engineering review confirmed the technical viability of the ATEN Technology and identified several flowsheet enhancement opportunities that are expected to improve the efficiency and commercial viability of the ATEN Technology (ATEN Engineering Review). The Group has also completed a preliminary feasibility study into the installation of the ATEN Technology at a mine site power station located in Western Australia (Preliminary Feasibility Study). The Preliminary Feasibility Study included a review of the critical equipment and technologies that comprise the ATEN Technology (ATEN Technology Review). The ATEN Technology Review was undertaken to ensure the ATEN Technology was capable of achieving maximum potential performance efficiency combined with lowest life-cycle maintenance and operating costs. • A commercial proposal to install the ATEN Technology at the aforementioned mine site power station has been presented to the mine owner for consideration. Discussions are continuing between the mine owner and the Company to finalise arrangements for the provision of critical services to and installation of the ATEN Technology at the mine site power station. • On 21 December 2017, the Company completed the acquisition of 50% of the issued capital of EcoQuip Australia Pty Ltd (EcoQuip). EcoQuip is a developer, manufacturer and supplier of innovative mobile solar / Li-Ion battery powerbox towers compatible with LED lighting, LTE/Wi-Fi repeater communication solutions and CCTV solution retro-fit (MSPT). EcoQuip owns a rental fleet of 25 LED lighting MSPT units supplied under contract to infrastructure construction and resource sector companies. • EcoQuip secured and advanced to near completion an order to design and manufacture diesel fueled lighting skids and mobile towers for AngloGold Ashanti Australia Pty Limited for the Tropicana Gold Mine. The equipment order was completed in two tranches with the final delivery of equipment occurring during February 2018. 4 VOLT POWER GROUP LIMITED ABN 62 009 423 189 • Consideration for the 50% EcoQuip investment comprised the issue of 50,00,000 Volt shares to interests associated with the EcoQuip founder and a share subscription payment to EcoQuip of $1,000,000 in cash as consideration for the issue of new EcoQuip shares to the Company. The $1,000,000 cash investment was funded from the Company’s cash reserves. • Subsequent to year end, on 24 January 2018, the Company completed the acquisition of 100% of the issued shares of Wescone Distribution Pty Ltd, a leading supplier of proprietary sample crushing equipment to the global iron ore industry. Consideration for the purchase comprised a total of $4,750,000 cash, the issue of 100,000,000 Volt shares and the grant of a revenue royalty to the vendor (Wescone Acquisition). • To finance and conclude the Wescone Acquisition, the Company successfully completed a $4,750,000 capital raising (before costs). (b) Financial performance and financial position The financial results of the Group for the year ended 31 December 2017 are summarised as follows: Revenue Profit/(loss) for the period attributable to members Profit/(loss) per share Cash and cash equivalents Net tangible asset / (deficiency) per share 2017 $ - 2,625,618 0.068 2,988,650 0.0005 2016 $ - (2,548,183) (0.444) 250,926 (0.0097) % Change 0% 203% 115% 1091% 105% The Group made a profit for the year of $2,625,618 (2016: loss of $2,548,183), experienced net cash inflows from operating activities of $170,347 (2016: cash outflow of $778,830) and has a net asset balance of $3,184,822 (2016: deficiency of $5,754,445). The profit for the year includes the following items of significance: • • a gain on effectuation of the Enerji Limited deed of company arrangement of $1,132,476; a gain on effectuation on the deed of company arrangement of the wholly owned subsidiary, Enerji Holdings Pty Ltd, of $2,419,475; and • the Group’s 2016 research and development tax rebate of $361,959. 5 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Directors’ report For the year ended 31 December 2017 The directors present their report together with the financial report of the consolidated entity (referred to hereafter as the Group) consisting of Volt Power Group Limited ("Volt" or "the Company") and the entities it controlled at the end of, or during, the year ended 31 December 2017 and the auditor's report thereon. 1. Directors The names of the Company’s directors in office during the year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. • Mr Simon Higgins • Mr Adam Boyd • Mr Peter Torre • Mr Rod Phillips • Mr Peter Avery • Mr John Dekker Non-Executive Chair (appointed 28 April 2017) Chief Executive Officer and Managing Director (appointed 28 April 2017) Non-Executive Director (appointed 28 April 2017) Non-Executive Chair (resigned 28 April 2017) Non-Executive Director (resigned 28 April 2017) Non-Executive Director (resigned 28 April 2017) 2. Directors and officers Simon Higgins – Non-Executive Chair (appointed 28 April 2017) Mr Higgins is currently the Chief Executive Officer and Managing Director of the ECM group of companies. ECM is a leading construction and maintenance company servicing clients in the mining, oil and gas, power generation and infrastructure sectors. During his tenure at ECM, Mr Higgins has overseen significant growth and development, including the diversification of service offering, entry into the oil and gas sector and interstate and intrastate expansion. Mr Higgins is a past chairman of the National Electrical and Communications Association (NECA) WA, Electrical Group Training and the College of Electrical Training. Other current and former directorships in last 3 years None Special responsibilities Chair of the board Interests in shares and options 775,000,000 ordinary shares in Volt Power Group Limited Nil options in Volt Power Group Limited Adam Boyd – Managing Director (appointed 28 April 2017) Mr Boyd most recently served as Chief Executive Officer and Managing Director of Pacific Energy Limited (ASX: PEA) from June 2006 to March 2015. During his tenure at Pacific Energy Limited, Mr Boyd led the company to becoming the pre-eminent remote mine site contract power business in Australia, with a 250 MW generation footprint across Australia. During this period Pacific Energy's enterprise value increased from $9 million to approximate $250 million. Prior to joining Pacific Energy Limited, Mr Boyd was a senior executive with Global Renewables Group when it was jointly owned by GRD Limited and Hastings Fund Management Limited. During that tenure Mr Boyd was principally involved in the successful commercialisation of the Global Renewables alternative waste treatment and renewable energy process technology in Australia and the United Kingdom. Mr Boyd is a renewable infrastructure and energy specialist with considerable experience in areas of resource sector power generation, energy and waste infrastructure project development, business development and business acquisitions, technology commercialisation, public company management and equity and credit finance. Other current and former directorships in last 3 years Managing Director and Chief Executive Officer of Pacific Energy Limited from June 2006 to March 2015. Special responsibilities None 6 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Interests in shares and options 710,000,000 ordinary shares in Volt Power Group Limited 350,000,000 options in Volt Power Group Limited Peter Torre - Non-Executive Director (appointed 28 April 2017) Mr Peter Torre is a chartered accountant, a chartered secretary and a member of the Australian Institute of Company Directors. Mr Torre is the principle of Torre Corporate, an advisory firm which provides corporate secretarial services to a range of ASX listed companies. He was previously a partner of an internationally affiliated firm of chartered accountants working within its corporate services division. Mr Torre was the Company Secretary of the Company from September 2014 until 28 April 2017. Other current and former directorships in last 3 years Currently a director of Mineral Commodities Ltd Special responsibilities None Interests in shares and options 25,000,000 ordinary shares in Volt Power Group Limited Nil options in Volt Power Group Limited Ian Sydney - Company Secretary (appointed 22 August 2017) Mr Sydney is a CPA and Corporate Governance professional. Mr Sydney has over 25 years' experience as an accountant and company secretary working for mining companies, oil and gas companies and large contracting companies. 3. Directors' meetings The number of meetings of directors held during the year and the number of meetings attended by each director were as follows: Simon Higgins Peter Torre Adam Boyd Rod Phillips Peter Avery John Dekker Meetings held 2 2 2 1 1 1 Meetings attended 2 2 2 1 1 - Number of meetings held is for the time the director held office during the year. Other matters of Board business have been resolved by circular resolutions of Directors, which are a record of decisions made at a number of informal meetings of Directors held to control, implement and monitor the Company’s activities throughout the year. 4. Principal activities The principal activities of the Group during the financial year were: • • • • • Effectuation of deeds of company arrangements that allowed the Company and its wholly owned subsidiary, Enerji Holdings Pty Ltd to exit administration. Recapitalisation of the Company via a private placement of shares to ECM and parties procured by ECM to raise $5,600,000 before costs, and subsequent reinstatement to trading on the ASX. Completion of the ATEN Technology Review and ATEN Engineering Review that identified opportunities to improve the efficiency and viability performance of the Company’s ATEN Technology. Completion of the Preliminary Feasibility Study into the installation of the ATEN Technology at a mine site power station located in Western Australia. Presentation of a commercial proposal to install the ATEN Technology at the aforementioned mine site to the mine owner for consideration. 7 VOLT POWER GROUP LIMITED ABN 62 009 423 189 • The acquisition of 50% of the issued capital of EcoQuip Australia Pty Ltd (EcoQuip), a leading developer, manufacturer and supplier of mobile solar / Li-Ion battery enabled powerbox towers compatible with LED lighting, LTE/Wi-Fi repeater and CCTV solution retro-fit. Incomplete records 5. The 2016 Financial Report was prepared by Directors who were in office for the entire period presented in that report, however their duties and responsibilities were suspended from the date the Company entered administration, 18 October 2016. For the period in which the Company was in administration, until the effectuation of the DOCA in May 2017, the Directors did not have oversight or control over the Group’s financial reporting systems, including (but not limited to) being able to obtain access to complete accounting records of the Company. Every reasonable effort was made by the Directors to ascertain the true position of the Company as at 31 December 2016, however the Directors are of the opinion that it is not possible to state that the 2016 comparative financial statements, and the gain on effectuation of the DOCA of $3,551,951 recognised in the Statement of Profit or Loss for the year ended 31 December 2017, and accompanying notes were in accordance with the Corporations Act 2001. 6. Dividends There were no dividends paid or declared by the Company to members since the end of the previous financial year. 7. Operational and financial review Information on the operations and financial position of the group and its business strategies and prospects is set out in the corporate and operational review on pages 4 – 5 of this annual report. 8. Use of cash and assets readily convertible to cash The Group has used its cash and assets readily convertible to cash during the period since relisting on the ASX (14 June 2017 to 31 December 2017) in a way that was consistent with its business objectives. 9. Significant changes in the state of affairs Significant changes in the state of affairs of the Group during the financial year were as follows: • The exiting from administration of the Company and its wholly owned subsidiary, Enerji Holdings Pty Ltd. • Recapitalisation of the Company with the raising of $5,600,000 before costs. • The acquisition of 50% of the EcoQuip business. 10. Events since the end of the financial year The following events have occurred since the end of the financial year: • • The acquisition of 100% of the issued shares of Wescone Distribution Pty Ltd, a leading supplier of proprietary sample crushing equipment to the global iron ore industry. Consideration for the purchase comprised a total of $4,750,000 cash and the issue of 100,000,000 Volt shares (Wescone Acquisition). Refer to note 34 for further details. To finance and complete the Wescone Acquisition, the Company successfully undertook a $4,750,000 capital raising (before costs). Refer to note 34 for further details. 11. Likely developments and expected results of operations The following events are likely to occur over the coming year: • Advancement of arrangements for the provision of services to and installation of the ATEN Technology at a mine site power station and commencement of the front-end engineering design for the installation of the ATEN Technology. • Continuation of the Company's activities in relation to the expansion of its power generation footprint through the development and/or acquisition of micro-grid power supply solutions and other power generation assets that can further the exploitation and roll-out of the ATEN technology. • Activity to grow the EcoQuip business through the design completion and manufacture of a new generation MSPT solution for supply under rental contract with infrastructure construction and resource sector companies. • Transition of the Wescone business from an equipment sale and service business model to a recurring revenue ‘serviced exchange equipment rental’ business model, and expansion of the Wescone W300 sample crusher footprint into new and existing customer project opportunities. 8 VOLT POWER GROUP LIMITED ABN 62 009 423 189 12. Environmental regulation The Group is subject to environmental regulation in respect of any continuing operations. There have been no significant known breaches of any environmental regulations to which the Group is subject. 13. Remuneration report (audited) This Remuneration Report sets out information about the remuneration of the key management personnel (KMP) of the Company and its controlled entities for the year ended 31 December 2017. This Report forms part of the Directors’ Report and has been audited in accordance with section 300A of the Corporations Act 2001. The Report details the remuneration arrangements for the Group’s key management personnel: • Non-executive directors (NED’s); and • Executive directors and senior executives (collectively the Executives). KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the major activities of the Company and the Group. The Company was in administration from 18 October 2016 to 19 May 2017. During the period of administration, the Administrators were responsible for the remuneration policies of the Company. The Directors who are in office at the date of this report had no involvement in adopting, implementing or complying with those remuneration policies during the period in which the Company was in administration. These policies may or may not have been in place during the period in which the Company was in administration. The report is structured as follows: (a) Key Management Personnel (KMP) covered in this report (b) Remuneration policy, link to performance and elements of remuneration (c) Link between remuneration and performance (d) Contractual arrangements for executive KMP (e) Remuneration expenses for executive KMP (f) Non-executive director arrangements (g) Share-based compensation (h) Other statutory information (a) Key Management Personnel (KMP) covered in this report The table below outlines the KMP of the Group covered in this report.: Name Non-executive directors Mr Simon Higgins Mr Peter Torre Mr Rod Phillips Mr Peter Avery Mr John Dekker Executives Mr Adam Boyd Position Term as KMP Non-Executive Chair Non-Executive Director Non-Executive Chair Non-Executive Director Non-Executive Director Appointed 28 April 2017 Appointed 28 April 2017 Resigned 28 April 2017 Resigned 28 April 2017 Resigned 28 April 2017 Managing Director and CEO Appointed 28 April 2017 Changes since the end of the reporting period There have been no changes to the non-executive directors and other key management personnel covered in this report since the end of the reporting period. (b) Remuneration policy, link to performance and elements of remuneration The Company’s remuneration committee is comprised of the Chair and a non-executive director. The committee reviews and determines our remuneration policy and structure annually to ensure it remains aligned to business needs, and meets our remuneration principles. In particular, the board aims to ensure that remuneration practices are: (i) competitive and reasonable, enabling the company to attract and retain key talent, (ii) aligned to the company’s strategic and business objectives and the creation of shareholder value, (iii) transparent and easily understood, and (iv) acceptable to shareholders. 9 VOLT POWER GROUP LIMITED ABN 62 009 423 189 During the reporting period, no payments were made to a person before the person took office as part of the consideration for the person agreeing to hold office. Non-executive directors On appointment to the Board, all non-executive directors enter into a service agreement with the company in the form of a letter of appointment. The letter summarises the board policies and terms, including compensation, relevant to the office of director. Presently no element of non-executive director remuneration is ‘at risk’, that is, fees are not based on the performance of the Company or equity based. Executive management Executive management have authority and responsibility for planning, directing and controlling the activities of the company. Compensation levels for executive management of the Company are set competitively to attract and retain appropriately qualified and experienced senior executives. The compensation structures for executives are designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of the creation of value for shareholders. The compensation structure takes into account the executives’ capability and experience, level of responsibility and ability to contribute to the Company’s performance, including the establishment of revenue streams and growth in shareholder returns. Fixed compensation consists of a base salary or fee (calculated on a total cost basis, including any fringe benefits tax related to employee benefits) as well as employer contributions to superannuation funds. The board through a process that considers individual and company achievement reviews compensation levels annually. (c) Link between remuneration and performance The Group has in place an Incentive Option Scheme (long-term incentive (LTI) scheme), the purpose of which is to: (i) encourage participation by Eligible Participants in the Company through Share ownership; and (ii) attract, motivate and retain Eligible Participants. At present the Group does not have any short-term incentive (STI) scheme, but the remuneration committee will consider this in due course. Options were issued to the Managing Director as part of his package, which represent performance linked remuneration. Key performance indicators of the group over the last five years: NPAT $m Share price $ Dividend paid EPS $ Y/E 2017 2.626 0.004 - 0.068 Y/E1 2016 (2.548) 0.005 - (0.444) Y/E 2015 (0.578) 0.038 - (0.001) Y/E 2014 (10.675) 0.009 - (0.023) Y/E 2013 (4.924) 0.002 - (0.002) 1 Shares in the Company were suspended from trading on the ASX prior to market open on 18 October 2016. The closing price on 17 October 2016 was $0.005 per share. (d) Contractual arrangements for executive KMP Managing Director During the year the Group appointed Mr Adam Boyd as Managing Director and Chief Executive Officer. Mr Boyd is contracted to the Company through his private company, and the contract does not have a fixed timeframe. The termination provisions in the contract are as follows: MD notice period (by Company or executive) Termination for cause None Termination by redundancy or notice without cause 3 months1 Resignation 1 month 1 The notice period is increased by one month for each completed year of service. 10 VOLT POWER GROUP LIMITED ABN 62 009 423 189 The terms of his remuneration package are as follows: 1. The Company shall pay a fee of $360,000 per annum. 2. The Company shall issue to Mr Boyd (or his nominee): a. 175,000,000 Options exercisable at 0.15 cents each and expiring 36 months after the date of issue (Tranche 1); and b. 175,000,000 Options exercisable at 0.20 cents each and expiring 48 months after the date of issue (Tranche 2). The options have a vesting period of 12 months for Tranche 1 and 24 months for Tranche 2. 3. In consideration for Mr Boyd agreeing to join the board of the Company, the Company will provide the Mr Boyd or his nominee with the opportunity to subscribe for up to 800,000,000 Shares at $0.001 per Share pursuant to the Capital Raising. Options issued to Mr Boyd will vest subject to him being continuously employed by the Group for a period of 12 months, in the case of Tranche 1 options, and for a period of 24 months in the case of Tranche 2 options. (e) Remuneration expenses for executive KMP The following table shows the details of the remuneration expense recognised for the group’s executive key management personnel for the current and previous financial year measured in accordance with the accounting standards. Name Adam Boyd (from 28 April 2017) Andrew Vlahov (until 1 August 2016) Stephen Jones (until 18 October 2016) Total executive KMP Salary & fees 240,000 75,854 Year 2017 2016 2017 2016 - 195,606 2017 2016 - 124,179 2017 2016 240,000 395,639 Post employ- ment benefits - - Non- mone- tary benefits - - Termin- ation benefits - - Rights to deferred shares - - Options 88,544 - Total 328,544 75,854 - - - - - - - - - - - - - 85,000 - (24,539) - (6,199) - 249,868 - - - - - - - 124,179 - 85,000 - (24,539) 88,544 (6,199) 328,544 449,901 Perform- ance related 27% 0% 0% -2% 0% 0% 27% -1% Mr Adam Boyd was interim Chief Executive Officer from 8 August 2016 until 19 October 2016. (f) Non-executive director arrangements Non-executive directors are paid base fees only, which are fixed by the Board. There is no additional fee for serving on board committees. They do not receive performance-based pay or retirement allowances. Fees are reviewed annually by the board with the level of Directors’ remuneration being set having regard to independent survey data and publicly available information about fees paid to non-executive directors in a range of comparable companies. The Directors are entitled to be reimbursed for all travel and related expenses properly incurred in connection with the business of the Company. The Company makes contributions at the statutory minimum rate to superannuation funds nominated by directors, included in the base fee. The total amount of remuneration, including superannuation, for all non-executive directors must not exceed the limit approved by shareholders. The aggregate cash remuneration of all non-executive directors was set at $400,000 per annum at a general meeting held on 1 December 2009. During the period the Company appointed Mr Simon Higgins and Mr Peter Torre as Non- Executive Directors. The terms of their appointment are as follows: • Mr Higgins –For his services as a Non-Executive Director and Chairman of the Company, the Company will pay him an all-inclusive annual fee as is determined by the Board and approved by shareholders from time to time during his appointment. The monthly fee payable is payable in arrears and will be initially set at $4,166,67 plus GST. This equates to an annual fee of $50,000 plus GST, commencing 1 May 2017. • Mr Torre –For his services as a Non-Executive Director and Chairman of the Company, the Company will pay him an all- inclusive annual fee as is determined by the Board and approved by shareholders from time to time during his 11 VOLT POWER GROUP LIMITED ABN 62 009 423 189 appointment. The monthly fee payable is payable in arrears and will be initially set at $3,333 plus GST. This equates to an annual fee of $40,000 plus GST, commencing 1 May 2017. Details of the nature and amount of each major element of remuneration are set out below: Simon Higgins (28 April 2017 to 31 December 2017) Peter Torre (28 April 2017 to 31 December 2017) Rod Phillips (to 28 April 2017) John Dekker (to 28 April 2017) Peter Avery (to 28 April 2017) Total non-executive directors Year 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Short-term benefits 33,333 - 26,640 - - 53,266 - 53,266 - 55,403 59,973 161,935 Post employment - - - - - 2,137 - 2,137 - - - 4,274 Total 33,333 - 26,640 - - 55,403 - 55,403 - 55,403 59,973 166,209 (g) Share-based compensation During the year options were issued to the Managing Director as part of his remuneration package. Further details are provided under contractual arrangements for executive KMP above. The board does not have a policy that restricts the holders of securities issued as share based payments as part of their remuneration from entering into other arrangements that limit their exposure to losses that would result from share price decreases. Other than noted above no terms of equity-settled share based payment transactions (including options granted as compensation to a key management person or director) have been altered or modified by the Company during the reporting period. No options have been exercised as a result of previously issued remunerations options. (h) Other statutory information The following tables show the relative proportions of remuneration that are linked to performance and those that are fixed based on the amounts disclosed as statutory remuneration expense in (e) and (f) above. (i) Proportions of remuneration linked to performance Fixed At risk STI At risk LTI Non-executive directors Simon Higgins Peter Torre Rod Phillips Peter Avery John Dekker Executive KMP Adam Boyd Andrew Vlahov Stephen Jones 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 100% - 100% - - 100% - 100% - 100% 73% 100% - 84% - 100% - - - - - - - - - - - - - - - - - - - - - - - - - - 27% - - 16% - - 12 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (ii) Reconciliation of ordinary shares and options held by KMP Shareholdings The number of shares in the Company held during the financial year by each director and other key management personnel of the Group, including their personally related parties, are set out below. Name Non-executive directors Simon Higgins Peter Torre Executive KMP Adam Boyd Balance at start of the year Granted as compensation Acquired for cash Other changes - - - - - - 775,000,000 25,000,000 710,000,000 Balance at the end of the year - - - 775,000,000 25,000,000 710,000,000 Options The number of options over ordinary shares in the Company held during the financial year by each director of the Company and other key management personnel of the Group, including their personally related parties, are set out below: Balance at start of year Vested Forfeited Balance at end of year Name S Higgins P Torre A Boyd Vested and exercisable - - - Unvested Granted as compensation - - 350,000,000 - - - Number - - 350,000,000 % Exercised Number % 0% 0% 100% - - - - - - Other changes Vested and exercisable - - 350,000,000 - - - 0% 0% 0% Unvested - - - (iii) Loans to key management personnel During the year, there were no loans made to directors of the Company or any other key management personnel of the Group, including any related parties. (iv) Other transactions with key management personnel ECM Pty Ltd (ECM) is a related party of Mr Simon Higgins and during the year ECM entered into the following transactions with the Company: • ECM Pty Ltd provided accounting and support services to the Group during the year, for which ECM was paid $90,000 (2016: Nil). • During the period ECM paid DOCA related costs of $2,596,552 (2016: Nil) on behalf of the Company pursuant to the DOCA. $2,000,000 of this amount was converted to equity and the remainder was repaid to ECM as part of the DOCA settlement. • The Group’s subsidiary EcoQuip Australia Pty Ltd entered into a contract with ECM, for the provision of construction services by ECM, prior to Volt taking control of EcoQuip, and at 31 December 2017 EcoQuip had an outstanding amount payable to ECM of $566,016. 13 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (v) Reliance on external remuneration consultants The Board have not sought any recommendations from external remuneration consultants. Remuneration levels for Directors and KMP are reviewed annually by the Board with the level of Non-Executive Directors’ remuneration being set having regard to independent survey data and publicly available information about fees paid to non-executive directors in a range of comparable companies. (vi) Voting of shareholders at last year's annual general meeting Volt Power Group Limited received more than 95% of “yes” votes on its remuneration report for the 2016 financial year. The company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. (vii) Remuneration received The amounts disclosed in the table below as Executive KMP remuneration for the 2017 year reflect the actual benefits received by each KMP during the reporting period. The remuneration values disclosed below have been determined as follows: Fixed remuneration Fixed remuneration includes base salaries received, payments made to superannuation funds, the taxable value of non- monetary benefits received and any once-off payments such as sign-on bonuses or termination benefits. Fixed remuneration excludes any accruals of annual or long service leave. Short-term incentives Cash STI benefits represent bonuses awarded and paid during the year. No cash STI’s were awarded during the year. Long-term incentives Vested LTI benefits represent the intrinsic value of the options at the date of vesting, being the difference between the share price on that date and the exercise price payable by the KMP. No options vested during the year. The information in this section has been audited, together with the rest of the Remuneration Report. This is the end of the Remuneration Report 14. Shares under option (a) Unissued ordinary shares Unissued ordinary shares of Volt Power Group Limited under option at the date of this report are as follows: Date options granted 24 May 2017 24 May 2017 9 November 2017 9 November 2017 Expiry date 23 May 2020 23 May 2021 8 November 2020 8 November 2021 Issue price of options 0.0015 0.0020 0.0040 0.0045 Number under option 175,000,000 175,000,000 20,000,000 20,000,000 No option holder has any right under the options to participate in any other share issue of the company or any other entity. Included in these options were options granted as remuneration to the directors and the five most highly remunerated officers during the year. Details of options granted to key management personnel are disclosed in the remuneration report above. In addition, the following options were granted to officers who are among the five highest remunerated officers of the company and the group, but are not key management persons and hence not disclosed in the remuneration report: Name of Officer Tim Banner – Lead Process Engineer Tim Banner – Lead Process Engineer Date granted 9 November 2017 9 November 2017 Issue price of options 0.0040 0.0045 Number of options granted 20,000,000 20,000,000 No options were granted to the directors or any of the five highest remunerated officers of the company since the end of the financial year. (b) Shares issued on the exercise of options No shares were issued during the year ended 31 December 2017 on the exercise of options. 15. Insurance of officers During the financial year, Volt Power Group Limited paid a premium to insure the directors and secretaries of the company and its Australian-based controlled entities. The Group has not disclosed the premium paid for the insurance policy as there is a confidentiality condition contained in the contract. 14 VOLT POWER GROUP LIMITED ABN 62 009 423 189 The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. 16. Proceedings on behalf of the Company No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. 17. Non-audit services The Company may decide to employ the auditor (BDO) on assignments additional to their statutory audit duties where the auditor’s experience and expertise with the Company and/or the Group are important. Details of amounts paid or payable to the auditor for non-audit services provided during the year are set out below: Independent Experts Report Total 2017 $ - - 2016 $ 19,933 19,933 The Board of Directors is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. 18. Auditor's Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 16. This report is made in accordance with a resolution of directors. Simon Higgins Chairman Perth Dated: 28 March 2018 15 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF VOLT POWER GROUP LIMITED As lead auditor of Volt Power Group Limited for the year ended 31 December 2017, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Volt Power Group Limited and the entities it controlled during the period. Jarrad Prue Director BDO Audit (WA) Pty Ltd Perth, 28 March 2018 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees VOLT POWER GROUP LIMITED ABN 62 009 423 189 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2017 Continuing operations Other Income/(expenses) Consultants and advisors Employment benefits expense General and administration expenses Operating profit/(loss) Finance income Finance expenses Finance costs – net Profit/(loss) before income tax benefit/(expense) Income tax benefit/(expense) Profit/(loss) from continuing operations Note 7 8 9 10 11 11 12 2017 $ 3,913,910 (728,646) (492,725) (70,459) 2,622,080 3,840 (302) 3,538 2016 $ 1,065,778 (2,208,067) (331,221) (624,941) (2,098,451) 4,979 (454,711) (449,732) 2,625,618 (2,548,183) - 2,625,618 - (2,548,183) Other comprehensive profit for the year, net of tax - - Total comprehensive profit/(loss) for the year 2,625,618 (2,548,183) Profit/(loss) for the year is attributable to: Owners of Volt Power Group Limited Total comprehensive profit/(loss) for the year is attributable to: Owners of Volt Power Group Limited 2,625,618 (2,548,183) 2,625,618 (2,548,183) Earnings per share for loss from continuing operations attributable to the ordinary equity holders of the company: Basic profit/(loss) per share Diluted profit/(loss) per share 26 26 cents 0.068 0.062 cents (0.444) (0.444) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 17 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Consolidated Statement of Financial Position As at 31 December 2017 Assets Current assets Cash and cash equivalents Trade and other receivables Prepayments and other receivables Total current assets Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Interest bearing loans and borrowings Employee benefit liabilities Other current liabilities Current tax liabilities Total current liabilities Non-current liabilities Interest bearing loans and borrowings Total non-current liabilities Total liabilities Net assets/(liabilities) Shareholders’ equity/(deficit) Share capital Reserves Accumulated losses Total attributable to owners of parent Non-controlling Interest Total shareholders’ equity/(deficit) Note 2017 $ 2016 $ 13 14 15 16 17 18 19 20 21 22 23 24 2,988,650 553,690 58,183 3,600,523 626,402 679,195 12,654 200,000 1,518,251 250,926 220,700 32,412 504,038 11,721 - - - 11,721 5,118,774 515,759 1,362,426 208,395 33,783 - 37,063 1,641,667 292,285 292,285 5,691,687 305,679 33,523 239,315 - 6,270,204 - - 1,933,952 6,270,204 3,184,822 (5,754,445) 25(a) 25(c) 67,964,945 5,946,446 (71,197,374) 2,714,017 470,805 3,184,822 62,214,945 5,853,602 (73,822,992) (5,754,445) - (5,754,445) The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 18 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Consolidated Statement of Changes in Equity As at 31 December 2017 At 1 January 2016 Total comprehensive profit/(loss) for the year Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners Equity-based payment transaction – expenses Conversion of convertible notes At 31 December 2016 At 1 January 2017 Total comprehensive profit/(loss) for the year Profit for the year Total comprehensive profit for the year Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs Equity-based payment transaction Non-controlling interests on acquisition of subsidiary At 31 December 2017 Attributable to owners of Volt Power Group Limited Note Share capital $ 61,834,828 Reserves $ 5,884,340 Accumulated losses $ (71,274,809) Total attributable to owners of parent $ (3,555,641) - - - - (2,548,183) (2,548,183) (2,548,183) (2,548,183) 25(b) - 380,117 380,117 62,214,945 (30,738) - (30,738) 5,853,602 - - - (73,822,992) (30,738) 380,117 349,379 (5,754,445) 62,214,945 5,853,602 (73,822,992) (5,754,445) - - - - 2,625,618 2,625,618 2,625,618 2,625,618 Non- controlling interest $ - - - - - - - - - - 25(a) 25(b) 5,750,000 - - 5,750,000 67,964,945 - 92,844 - 92,844 5,946,446 - - - - (71,197,374) 5,750,000 92,844 - 5,842,844 2,714,017 - - 470,805 470,805 470,805 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Total equity $ (3,555,641) (2,548,183) (2,548,183) (30,738) 380,117 349,379 (5,754,445) (5,754,445) 2,625,618 2,625,618 5,750,000 92,844 470,805 6,313,649 3,184,822 19 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Consolidated Statement of Cash Flows As at 31 December 2017 Note 2017 $ Cash flows from operating activities Receipts from customers Payments to suppliers and employees (inclusive of GST) Interest received Interest paid R&D tax refund Income taxes received/(paid) Net cash inflows/(outflows) from operating activities Cash flows from investing activities Payments for property, plant and equipment Payment for acquisition of subsidiary, net of cash acquired Deposit payment for acquisition of subsidiary post balance date Net cash outflows from investing activities Cash flows from financing activities Net proceeds from issue of shares and other equity securities Proceeds from issue of convertible loans Repayment of borrowings Net cash inflows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year 13 13 1,062,600 (884,344) 3,843 (312) - (11,440) 170,347 - 27,689 (200,000) (172,311) 3,725,288 - (985,600) 2,739,688 2,737,724 250,926 2,988,650 2016 $ 60,000 (1,743,300) 4,979 - 899,491 - (778,830) (2,005) - - (2,005) - 519,644 (100,000) 419,644 (361,191) 612,117 250,926 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 20 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Notes to the Consolidated Financial Statements As at 31 December 2017 1. Reporting entity The consolidated financial report of Volt Power Group Limited (the Group) and its subsidiaries for the year ended 31 December 2017 was authorised for issue in accordance with a resolution of directors on 28 March 2018. Volt Power Group Limited is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The Group’s registered office is Unit B9, 431 Roberts Rd Subiaco WA 6008. The nature of the operations and principal activities of the Group are power generation technology solutions, mobile solar powerbox towers compatible with LED lighting, LTE/WiFi repeater communication solutions and CCTV retro-fit and sample crushing equipment, all of which service the resources and construction sectors. 2. Basis of preparation (a) General information The financial report is a general purpose financial report, which: • • • • • has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board as applicable to a for- profit entity; has been prepared on a historical cost basis; is presented in Australian dollars, which is the functional currency of the Company and each of its subsidiaries; adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or before 1 January 2017; and does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective. (b) Incomplete financial information 31 December 2016 The 2016 Financial Report was prepared by Directors who were in office for the entire period presented in that report, however their duties and responsibilities were suspended from the date the Company entered administration, 18 October 2016. For the period in which the Company was in administration, until the effectuation of the DOCA in May 2017, the Directors did not have oversight or control over the Group’s financial reporting systems, including (but not limited to) being able to obtain access to complete accounting records of the Company. Every reasonable effort was made by the Directors to ascertain the true position of the Company as at 31 December 2016, however the Directors are of the opinion that it is not possible to state that the 2016 comparative financial statements, and the gain on effectuation of the DOCA of $3,551,951 recognised in the Statement of Profit or Loss for the year ended 31 December 2017, and accompanying notes were in accordance with the Corporations Act 2001. (c) Going concern The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The Group made a comprehensive profit after tax for the year ended 31 December 2017 of $2,625,618 (2016: loss of $2,548,183) and experienced net cash inflows from operating activities of $170,347 (2016: cash outflows of $778,830). At 31 December 2017 the Group had cash and cash equivalents of $2,988,650 and a working capital excess of $1,958,856. The Group has prepared cash flow forecasts for each of its businesses that indicate the Group has sufficient funding to support its business activities without the need for additional funding. Having regard to the matters set out above the Directors believe that at the date of signing the financial statements, there are reasonable grounds to believe that the Group will be able to meet its obligations as and when they fall due. 21 VOLT POWER GROUP LIMITED ABN 62 009 423 189 3. Significant accounting policies (a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2017. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights results in control. Consolidation of the subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a debit balance. (b) Business combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer. Acquisition-related costs are expensed as incurred. (c) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is the Group’s functional and presentational currency. (ii) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cashflow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income. (d) Financial instruments (i) Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. 22 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has the following non-derivative financial assets. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables. (ii) Non-derivative financial liabilities The Group recognises financial liabilities (including liabilities designated at fair value through profit or loss) initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has non-derivative financial liabilities comprising trade and other payables and loans, which are recognised initially at fair value and subsequently at amortised cost. Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group has an obligation to make future payments in respect of the purchase of these goods and services. (iii) Convertible note liability Convertible notes issued by the Group comprise convertible notes that can be converted to share capital at the option of the holder and a convertible note derivative whose fair value changes with the Company’s underlying share price. The liability component of a convertible note is recognised initially at the fair value of a similar liability that does not have an equity conversion option. Any directly attributable transaction costs are allocated to the convertible note liability. Subsequent to initial recognition, the liability component of the convertible note is measured at amortised cost using the effective interest method. The convertible note liability is removed from the statement of financial position when the obligations specified in the contract are discharged. This can occur upon the option holder exercising their option or the option period lapses requiring the company to discharge the obligation. On initial recognition, the fair value of the convertible note will equate to the proceeds received and subsequently the liability is measured at fair value at each reporting date until settlement. The fair value movements are recognised on the Consolidated Statement of Profit or Loss as financial costs. (e) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group’s activities. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Income tax (f) Volt Power Group Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 19 January 2010. Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss 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 is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that 23 VOLT POWER GROUP LIMITED ABN 62 009 423 189 affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they 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. Additional income tax expenses that arise from the distribution of cash dividends are recognised at the same time that the liability to pay the related dividend is recognised. The Group does not distribute non-cash assets as dividends to its shareholders. (g) Goods and services tax Revenue, 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 ATO 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 ATO are classified as operating cash flows. (h) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation the amount of which at can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (i) Leases Operating lease payments are recognised as an operating expense in the statement of profit or loss and other comprehensive income on a straight-line basis over the lease term. (j) Goodwill Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash- generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes. (k) Impairment (i) Financial assets (including receivables) A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. 24 VOLT POWER GROUP LIMITED ABN 62 009 423 189 The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. In assessing the collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. (ii) Non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (l) Share based payments The fair value of options issued as share-based payment are measured using an appropriate pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk- free interest rate (based on government bonds). The fair value of shares issued as share-based payment is measured based on the share price on the date of issue. 4. Other accounting policies Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. 5. Key judgements and estimates The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Management have identified the following critical accounting policies for which significant judgements, estimates and assumptions are made: 25 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (i) Taxation Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised in the consolidated statement of financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised in the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustments, resulting in a corresponding credit or charge to the income statement. (ii) Consolidation of EcoQuip Judgement is required in assessing whether an investment is to be treated as a subsidiary or an associate. The Company holds 50% of the ordinary shares and voting rights in EcoQuip Australia Pty Ltd. One other investor holds the remaining 50%. Management has assessed its ownership of EcoQuip in accordance with AASB10 – Consolidated Financial Statements and considers that EcoQuip is a subsidiary as it has a casting vote at Board Meetings. (iii) Impairment Judgement is required in assessing whether goodwill has suffered any impairment on an annual basis. In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. Refer to note 17(b). 6. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Volt Power Group Limited. The Group has determined that it has one operating segment. 7. Other income/(expenses) Profit or loss on sale of assets Unrealised FX gains/losses Research and development tax incentive rebate (a) Profit on DOCA – Enerji Limited Profit on DOCA – Enerji Holdings Other income (a) Research and development tax incentive rebate Receipt of a R&D tax rebate Total income tax benefit Attributable to: Continuing operations 2017 $ - - 361,959 1,132,476 2,419,475 - 3,913,910 361,959 361,959 361,959 361,959 2016 $ (9,579) 115,866 899,491 - - 60,000 1,065,778 899,491 899,491 899,491 899,491 Under the R&D tax incentive legislation, small companies can claim an R&D tax offset, under section 355-100 of the Income Tax Assessment Act 1997 (ITAA97), that is, a refundable tax offset, equivalent to the value of certain deductions available under the R&D tax incentive. For the 2016 year, total eligible R&D expenditure was $804,353 (2015: $1,998,868) therefore R&D tax offset refund entitlement received for 2016 @ 45% was $361,959 (2015: $899,491). 26 VOLT POWER GROUP LIMITED ABN 62 009 423 189 8. Consultants and advisors Accounting & finance Advertising & marketing Consultants and contractors Listing expenses Legal expenses Administrator expenses Other 9. Employee benefit expense Salary and wages Superannuation Other 10. General and administration expenses Occupancy Costs Insurance IT expenses Travel & Accommodation Depreciation & Amortisation Other 11. Finance costs - net Interest income Interest expense Bank charges Establishment fees FX gains/losses from borrowings Total finance expenses Finance costs- net 2017 $ 159,380 450 - 508 292,085 276,223 - 728,646 2017 $ 390,250 8,025 94,450 492,725 2016 $ 73,861 83,265 1,136,405 365,466 222,113 300,737 26,220 2,208,067 2016 $ 343,879 14,353 (27,011) 331,221 2017 $ 2016 $ 4,290 33,434 19,421 1,044 3,063 9,207 70,459 2017 $ 3,840 3,840 - 302 - - 302 3,538 36,317 12,412 17,861 57,263 3,981 497,107 624,941 2016 $ 4,979 4,979 374,575 114 51,964 28,058 454,711 (449,732) Recognition and measurement Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings and convertible notes, unwinding of the discount on provisions, and impairment losses recognised on financial assets. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis. 27 VOLT POWER GROUP LIMITED ABN 62 009 423 189 12. Income tax benefit (a) Income tax benefit 2017 $ 2016 $ Deferred tax credit arising from temporary differences Total income tax benefit Attributable to: Continuing operations - - - - (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit/(loss) from continuing operations before income tax expense Tax at the Australian tax rate of 27.5% (2016: 30.0%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Non-assessable income Deferred tax assets not brought to account Income tax benefit Reconciliation of deferred tax assets Adjustment from prior year - tax benefit Change in corporate tax rate from 30% to 27.5% Tax loss benefit from current year Change in tax loss benefit 2017 $ 2,625,618 (722,045) 1,088,295 366,250 - (19,137) (470,610) 366,250 (123,497) - - - - 2016 $ (2,548,183) 764,455 - 764,455 - - - - - The franking account balance at year-end was $nil (2016: nil). Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 27.5% (2016: 30.0%) 2017 $ 20,156,225 5,542,962 2016 $ 18,888,197 5,666,459 All unused tax losses were incurred by Australian entities. Unrecognised deferred tax balances will only be available subject to continuing to meet the relevant statutory tests. 13. Cash and cash equivalents Cash at bank 2017 $ 2,988,650 2016 $ 250,926 (a) Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities Profit/(loss) for the year Adjustments for Depreciation and amortisation Net (gain)/loss on sale of non-current assets Gain on effectuation of DOCAs net of costs Finance expense / (income) Net exchange differences Share-based payment transactions Changes in operating assets and liabilities, net of effects from purchase of controlled entity and reversal of amounts subject to the deeds of company arrangement 2017 $ 2,625,618 3,063 - (3,551,951) (3,840) - 92,844 2016 $ (2,548,183) 3,980 9,579 - 426,540 (87,808) (30,738) 28 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (Increase)/decrease in trade & other receivables (Increase)/decrease in prepayments (Decrease)/Increase in trade & other payables (Decrease)/Increase in employee benefit liability (Decrease)/Increase in GST (Decrease)/Increase in PAYG (Decrease)/Increase in other current liabilities (Decrease)/Increase in provision for income tax Net cash inflow/(outflow) from operating activities 2017 $ (553,690) (58,183) 1,478,062 33,783 39,156 20,342 - 45,143 170,347 2016 $ - (32,412) 1,300,367 1,764 (33,835) - 194,000 17,916 (778,830) Recognition and measurement Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (b) Non-cash investing and financing activities Acquisition of EcoQuip shares by issue of Volt shares (note 27) Issue of shares on conversion of loan (note 32(c)) 14. Trade and other receivables Accounts receivable Provision for doubtful debts Bank guarantee Other debtors Impaired receivables and receivables past due None of the current receivables are impaired. 15. Prepayments and other receivables Prepaid insurance Other prepayments 2017 $ 150,000 2,000,000 2017 $ 191,731 - - 361,959 553,690 2016 $ - - 2016 $ 409,200 (409,200) 220,000 700 220,700 2017 $ 58,183 - 58,183 2016 $ 12,412 20,000 32,412 29 VOLT POWER GROUP LIMITED ABN 62 009 423 189 16. Property, plant and equipment 31 December 2016 Opening net book amount Additions Disposals Impairment charge Depreciation charge 31 December 2016 31 December 2016 Cost or fair value Accumulated depreciation Impairment of assets Net book amount 31 December 2017 Opening net book amount Additions Disposals Impairment charge Depreciation charge 31 December 2017 31 December 2017 Cost or fair value Accumulated depreciation Impairment of assets Net book amount Plant and equipment $ Office furniture, fittings and equipment $ Total $ - - - - - - - - - - - 617,744 - - - 617,744 617,744 - - 617,744 23,275 2,005 (9,579) - (3,980) 11,721 81,123 (69,402) - 11,721 11,721 - - - (3,063) 8,658 81,123 (72,465) - 8,658 23,275 2,005 (9,579) - (3,980) 11,721 81,123 (69,402) - 11,721 11,721 617,744 - - (3,063) 626,402 698,867 (72,465) - 626,402 Recognition and measurement Property, plant and equipment All classes of property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in the income statement as incurred. Depreciation is calculated on a straight-line basis on all classes of property, plant and equipment. The estimated useful life of plant and equipment is between 3 and 20 years. The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. An item of property, plant and equipment is de-recognised upon disposal or when no further future economic benefits are expected from its use or disposal. 17. Intangible assets (a) Goodwill The movements in the net carrying amount of goodwill are as follows: Balance 1 January Acquired through business combination Balance 31 December 2016 $ 2017 $ - 679,195 679,195 - - - 30 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (b) Impairment tests for goodwill The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a CGU is determined based on the higher of its value-in-use or fair value less costs to sell which require the use of assumptions. In assessing the goodwill for impairment for the year ended 31 December 2017 the Group used a discounted cash flow model in accordance with the fair value less costs to sell methodology (level 3 fair value hierarchy). The significant inputs and key assumptions used by management within the discounted cash flow model are: The cash flows for the first 18 months of the model is based on the 2018 budget as prepared by management • • Short term growth rate between 2% and 5% • Capital outlay of 20% of EBITDA • CPI inflation of 2% • Pre-tax discount rate of 20% to calculate net present value The Group has determined that there is no adjustment required to the carrying value of the assets in the current reporting period. Sensitivity of assumptions The Directors and management have not identified any reasonable possible changes to key assumptions and significant inputs noted above that could result in impairment for the CGU. 18. Deferred tax assets and liabilities Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows: Deferred tax liabilities / (assets) Current assets Prepayments Current liabilities Superannuation and other employee obligations Net deferred tax assets 1 January 2016 $ Recognised in business combination $ Recognised in profit or loss $ 31 December 2016 $ - - - - - - - - - - - - - - - - - - - - Deferred tax liabilities / (assets) Current assets Prepayments Current liabilities Superannuation and other employee obligations Net deferred tax assets 1 January 2017 $ Recognised in business combination $ Recognised in profit or loss $ 31 December 2017 $ - - - - 486 486 (13,140) (12,654) - - - - 486 486 (13,140) (12,654) The deferred tax assets and liabilities are amounts in respect of the Group’s 50% owned subsidiary, EcoQuip Australia Pty Ltd, which is not consolidated for income tax purposes. There are no deferred tax assets or liabilities for the Group companies that are consolidated for income tax, as there are large tax losses that are not certain to be recovered in the near future. 19. Other Non-current assets Deposit payment for acquisition of subsidiary post balance date 2017 $ 200,000 200,000 2016 $ - - The Company paid a deposit of $200,000 for the acquisition of a subsidiary that was completed in January 2018. 31 VOLT POWER GROUP LIMITED ABN 62 009 423 189 20. Trade and other payables Trade Creditors - Opcon AB Trade Creditors Accrued Expenses GST PAYG Sundry Creditors 21. Interest bearing loans and borrowings Convertible Notes Non-bank loans Finance leases 22. Employee benefit liabilities FBT Superannuation Salary sacrifice 2017 $ - 512,061 650,867 39,156 20,342 140,000 1,362,426 2017 $ - 42,291 166,104 208,395 2017 $ - 33,783 - 33,783 2016 $ 2,198,730 1,719,716 1,789,513 (94,302) 1,431 76,599 5,691,687 2016 $ 305,679 - - 305,679 2016 $ (4,872) 35,178 3,217 33,523 Note 28 Recognition and measurement (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and accumulating annual leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the Statement of Financial Position. (ii) Other long-term employee benefit obligations The liabilities for long term benefits is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. (iii) Termination benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value. (iv) Share-based payment transactions The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity. Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group. 32 VOLT POWER GROUP LIMITED ABN 62 009 423 189 23. Other current liabilities Non-bank loans Convertible loan - default penalties and fees Ames Associates - contribution to voluntary administration 24. Non-current liabilities Finance leases 25. Equity (a) Contributed equity Fully paid ordinary shares 2017 $ - - - - 2017 $ 292,285 292,285 2016 $ 100,000 45,315 94,000 239,315 2016 $ - - Note 28 No. of shares 2017 6,244,533,558 No. of shares 2016 594,533,558 $ 2017 67,964,945 $ 2016 62,214,945 Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Capital Management The Company’s capital management policy provides a framework to maintain a capital structure to support the development of the business into one that is income producing. The Company seeks to utilise available borrowing facilities when and to the extent prudent to do so, in order to maximise returns for equity shareholders and limit the need to raise additional equity capital. Dividends There were no dividends declared or paid during the reporting period. Movements in ordinary shares Details 1 January 2016 Shares issued on conversion of notes 31 December 2016 Shares issued for cash Shares issued on conversion of loan Shares issued to purchase investment 31 December 2017 (b) Other equity No. of options 2017 No. of options 2016 $0.30 expiry 30 June 2015 $2.00 expiry 31 December 2016 $0.0015 expiry 22 May 2020 $0.0020 expiry 22 May 2021 $0.0040 expiry 9 November 2020 $0.0045 expiry 9 November 2021 - - 175,000,000 175,000,000 20,000,000 20,000,000 390,000,000 - - - - - - - $ 2017 838,364 1,545,238 57,635 30,909 2,373 1,927 2,476,446 No. of shares $ 574,130,854 20,402,704 594,533,558 3,600,000,000 2,000,000,000 50,000,000 6,244,533,558 61,834,828 380,117 62,214,945 3,600,000 2,000,000 150,000 67,964,945 $ 2016 838,364 1,545,238 - - - - 2,383,602 33 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Movements in other equity $0.25 options expiry 2 September 2017 1 January 2016 Options forfeited during the year 31 December 2016 31 December 2017 $0.0015 options expiry 22 May 2020 1 January 2016 31 December 2016 Options issued 31 December 2017 $0.0020 options expiry 22 May 2021 1 January 2016 31 December 2016 Options issued 31 December 2017 $0.0040 options expiry 8 November 2020 1 January 2016 31 December 2016 Options issued 31 December 2017 $0.0045 options expiry 8 November 2021 1 January 2016 31 December 2016 Options issued 31 December 2017 $0.25 options expiry 2 September 2017 1 January 2016 Options forfeited during the year 31 December 2016 31 December 2017 (c) Reserves Share based reserves - Reserve holding shares subject to the achievement of performance based measures Options based reserves No. of options $ 7,500,000 (7,500,000) - - - - 175,000,000 175,000,000 - - 175,000,000 175,000,000 - - 20,000,000 20,000,000 - - 20,000,000 20,000,000 No. of performance rights 17,500,000 (17,500,000) - - 2017 $ 3,470,000 2,476,446 5,946,446 6,199 (6,199) - - - - 57,635 57,635 - - 30,909 30,909 - - 2,373 2,373 - - 1,927 1,927 $ 24,539 (24,539) - - 2016 $ 3,470,000 2,383,602 5,853,602 Recognition and measurement Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognised directly in equity as a deduction, net of tax, from the proceeds. 26. Earnings/(loss) per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding adjusted for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. 34 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (a) Basic earnings per share From continuing operations attributable to the ordinary equity holders of the company Total basic earnings per share attributable to the ordinary equity holders of the company (b) Diluted earnings per share From continuing operations attributable to the ordinary equity holders of the company Total basic earnings per share attributable to the ordinary equity holders of the company (c) Reconciliation of earnings used in calculating earnings per share Profit/(loss) attributable to the ordinary equity holders of the company used in calculating basic earnings per share: From continuing operations Profit/(loss) attributable to the ordinary equity holders of the company used in calculating diluted earnings per share: From continuing operations 2017 cents 2016 cents 0.068 0.068 (0.444) (0.444) 2017 cents 2016 cents 0.062 0.062 (0.444) (0.444) 2017 $ 2016 $ 2,625,618 2,625,618 (2,548,183) (2,548,183) 2017 $ 2016 $ 2,625,618 2,625,618 (2,548,183) (2,548,183) (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as denominator for calculating basic profit/(loss) per share Adjustments for calculation of diluted profit/(loss) per share: Options Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted loss per share 2017 No. of shares 2016 No. of shares 3,863,848,626 574,277,437 350,000,000 - 4,213,848,626 574,277,437 (e) Information concerning the classification of securities (i) Options Options granted to employees are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The 40,000,000 options granted on 9 November 2017 have not been included in the calculation of diluted earnings per share because they are antidilutive for the year ended 31 December 2017. These options could potentially dilute basic earnings per share in the future. 27. Acquisitions On 21 December 2017 the Group acquired 50% of the equity instruments of EcoQuip Australia Pty Ltd (EcoQuip), a Perth based business, and it was determined that Volt obtained ‘control’ of EcoQuip pursuant to AASB10 Consolidated Financial Statements. The acquisition was made to enhance the Group’s position in the mining services sector giving the Group access to additional services and customers. The details of the business combination are as follows: Fair value of consideration transferred Amount settled in cash Amount settled in equity Total $ 1,000,000 150,000 1,150,000 35 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Recognised amounts of identifiable net assets Cash and cash equivalents Trade and other receivables Prepayments Total current assets Property, plant and equipment Deferred Tax Assets Total non-current assets Trade and other payables Interest bearing loans and borrowings Employee benefit liabilities Director loans Current tax liabilities Total current liabilities Interest bearing loans and borrowings Total non-current liabilities Identifiable net assets Non-controlling interest Goodwill on acquisition Net assets acquired Consideration transfer settled in cash Cash and cash equivalents acquired Net cash inflow on acquisition Acquisition costs charged to expenses Net cash paid relating to the acquisition $ 1,027,689 1,254,331 1,765 2,283,785 617,744 12,654 630,398 (1,222,666) (323,530) (26,466) (70,563) (37,063) (1,680,288) (292,285) (292,285) 941,610 (470,805) 679,195 1,150,000 1,000,000 (1,027,689) (27,689) 35,747 8,058 Consideration transferred The acquisition of EcoQuip was settled by the issue of 50,000,000 Volt shares that were valued at $150,000, and the payment of $1,000,000 cash for new shares in EcoQuip. Identifiable net assets The fair value of the trade and other receivables acquired as part of the business combination amounted to $1,254,331, which is equal to the gross contractual amount. Goodwill Goodwill of $679,195 is primarily related to growth expectations, expected future profitability and expected cost synergies. Goodwill has been allocated to cash-generating units at 31 December 2017. The goodwill that arose from this business combination is not expected to be deductible for tax purposes. EcoQuip’s contribution to the Group results There was no profit contribution from EcoQuip as the acquisition was made 10 days prior to the end of the year. If EcoQuip had been acquired on 1 January 2017, revenue for the Group for 2017 would have been $2,376,080, and profit would have increased by $123,205. Information not disclosed as not yet available At the time the financial statements were authorised for issue, the Company had not yet finalised the completion statement with the vendor, and the fair values of the assets and liabilities disclosed above have only been determined provisionally. 36 VOLT POWER GROUP LIMITED ABN 62 009 423 189 28. Leases The Group’s subsidiary EcoQuip has various items of plant and equipment that are held under finance lease arrangements. As at 31 December 2017, the net carrying amount held under finance lease arrangements is $458,389 (2016: Nil). The Group’s finance lease liabilities, which are secured by the related assets held under finance leases, are classified as follows: Finance lease liabilities Current: Finance lease liabilities Non-current: Finance lease liabilities 2017 $ 2016 $ 166,104 292,285 Future minimum finance lease payments at the end of each reporting period under review were as follows: Within 1 Year $ 1-5 years $ After 5 years $ Total $ 2016 Lease payments Finance charges Net present values 2017 Lease payments Finance charges Net present values - - - 205,782 (39,678) 166,104 - - - 333,514 (41,229) 292,285 - - - - - - - - - - - 539,296 (80,907) 458,389 Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and are not recognised as assets in the Group’s statement of financial position. 29. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: BDO Audit and review of financial statements Independent Experts Report Review of 6 June financial report Total remuneration for audit and other assurance services Total remuneration of BDO 30. Contingencies The Group has no contingent liabilities. 2017 $ 2016 $ 33,787 - 5,100 38,887 38,887 61,300 19,333 - 80,633 80,633 31. Commitments (a) Non-cancellable operating leases The Group leases office space from ECM in Henderson on a rolling one-month term, which commenced on 1 July 2017. The Group leases a workshop and office, for its wholly owned subsidiary Wescone Distribution Pty Ltd, under non-cancellable operating leases expiring within 3 years, with an option to extend the lease for a period of between 1 and 3 years. The option for renewal includes a CPI increase in the rent. 37 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years 32. Related party transactions (a) Key management personnel compensation Short-term employee benefits Post-employment benefits Termination benefits Share based payments Detailed remuneration disclosures are provided in the remuneration report. (b) Transactions with other related parties The following transactions occurred with related parties: Sales and purchases of goods and services Purchase of investor relations services Purchase of accounting support services during administration – ECM Purchase of rent and administration support services – ECM 2017 $ 2016 $ 35,000 70,000 105,000 2017 $ 299,973 - - 88,544 388,517 - - - 2016 $ 557,574 4,274 85,000 (30,738) 616,110 2017 $ 2016 $ - 53,090 90,000 143,090 110,806 - - 110,806 ECM Pty Ltd (ECM) is a related party of Mr Simon Higgins, who are paid for providing office rent and accounting and IT support at a rate of $15,000 per month, which commenced on 1 July 2017. While the Company was in administration ECM provided support services in relation to the effectuation of the DOCA at a cost of $53,090. The total amount invoiced by ECM for services in the year is $143,090 (2016: nil). The total amount paid for these services in the year is $128,090 (2016: nil). The Group’s subsidiary EcoQuip Australia Pty Ltd entered into a contract with ECM, for the provision of construction services by ECM, prior to Volt taking control of EcoQuip, and at 31 December 2017 EcoQuip had an outstanding amount payable to ECM of $566,016. (c) Loans to/from related parties Beginning of the year Loan repayments received End of year 2017 $ - - - 2016 $ 100,000 (100,000) - During the period ECM Pty Ltd paid DOCA related costs of $2,596,552 (2016: Nil) on behalf of the Company pursuant to the DOCA. $2,000,000 of this amount was converted to equity and the remainder was repaid to ECM Pty Ltd as part of the DOCA settlement. 33. Subsidiaries and transactions with non-controlling interests Significant investments in subsidiaries during the year ended 31 December 2017 are set out below: Name of entity ATEN Operations Pty Ltd Enerji Holdings Pty Ltd Enerji Research Pty Ltd Enerji PE Management Pty Ltd Enerji GMRL SPV Pty Ltd EcoQuip Australia Pty Ltd Country of incorporation Australia Australia Australia Australia Australia Australia Class of shares Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Equity holding 2017 % 100 100 100 100 100 50 Equity holding 2016 % 100 100 100 100 100 0 38 VOLT POWER GROUP LIMITED ABN 62 009 423 189 34. Events occurring after the reporting period The following events have occurred subsequent to the reporting period ending: (a) Acquisition of Wescone Distribution Pty Ltd The acquisition of 100% of the issued shares of Wescone Distribution Pty Ltd (Wescone), a leading supplier of proprietary sample crushing equipment to the global iron ore industry. Consideration for the purchase comprised a total of $4,750,000 cash, the issue of 100,000,000 Volt shares and the grant of a revenue royalty to the vendor (Wescone Acquisition). The acquisition is expected to increase the Group’s exposure to the mining industry, giving the Group access to additional services and customers. The financial effects of this transaction have not been recognised at 31 December 2017. The operating results and assets and liabilities of the acquired company will be consolidated from the date of acquisition. Purchase consideration (i) Details of the consideration transferred and provisionally determined values of the assets and liabilities of Wescone as at the date of acquisition are: Fair value of consideration transferred Amount settled in cash Amount settled in equity Total Recognised amounts of identifiable net assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Property, plant and equipment Other non-current assets Total non-current assets Trade and other payables Interest bearing loans and borrowings Total current liabilities Interest bearing loans and borrowings Total non-current liabilities Identifiable net assets Goodwill on acquisition Net assets acquired $ 4,750,000 250,000 5,000,000 222,630 75,013 291,806 46,555 636,004 92,774 985 93,759 (142,743) (37,285) (180,028) (1,045) (1,045) 548,690 4,451,310 5,000,000 The goodwill is attributable to Wescone’s position and profitable trading in the mining services market, and the expected increase in profitability with the change in Wescone’s business model from an equipment sale and service business model to a recurring revenue ‘serviced equipment’ rental business model, and expanding the Wescone W300 crusher footprint into new and existing customer project opportunities. None of the goodwill is expected to be deductible for tax purposes. Contingent consideration (ii) The contingent consideration is a royalty arrangement pursuant to which the Wescone vendor has been granted: • • a 25% royalty on all gross revenue received by Wescone exceeding $2 million per annum (Primary Royalty) expiring on the earlier of total Primary Royalty payments reaching $6 million or the 10th anniversary of completion of the Wescone Acquisition; and a 2% royalty on all gross revenue received by Wescone exceeding $2 million per annum commencing on expiry of the Primary Royalty and ceasing on the 15th anniversary of completion of the Wescone Acquisition. Acquisition related costs (iii) Acquisition-related costs will be included in other expenses in profit or loss in the reporting period ending 31 December 2018. Information not disclosed as not yet available (iv) At the time the financial statements were authorised for issue, the group had not yet completed the accounting for the acquisition of Wescone. In particular, the fair values of the assets and liabilities disclosed above have only been determined 39 VOLT POWER GROUP LIMITED ABN 62 009 423 189 provisionally as the independent valuations have not been finalised. It is also not yet possible to provide detailed information about each class of acquired receivables and any contingent liabilities of the acquired entity. (b) Capital raising To finance and complete the Wescone Acquisition, the Company successfully undertook a $4,750,000 capital raising (before costs). 35. Share based payments (a) Employee share scheme A scheme under which shares may be issued by the Company to employees with an interest free loan for the purchase price of the shares was approved by shareholders at a general meeting on 1 December 2009. (b) Other share-based payments Options were issued to the Managing Director on the following terms: 175,000,000 Options exercisable at 0.15 cents each and expiring 36 months after the date of issue (Tranche 1) • • 175,000,000 Options exercisable at 0.20 cents each and expiring 48 months after the date of issue (Tranche 2) • Options issued to Mr Boyd will vest subject to him being continuously employed by the Group for a period of 12 months, in the case of Tranche 1 options, and for a period of 24 months in the case of Tranche 2 options. Options were issued to an employee during the year on the following terms: • • 20,000,000 Options exercisable at 0.40 cents each and expiring 36 months after the date of issue (Tranche 3) 20,000,000 Options exercisable at 0.45 cents each and expiring 48 months after the date of issue (Tranche 4) The Board has valued the options issued to employees and determined on the basis of the assumptions set out below the technical value of the options as follows: Exercise price Underlying spot price Dividend yield Expected volatility Risk free interest rate Vesting period Fair value per option Options Tranche 1 0.0015 0.001 0% 100% 1.95% 12 months $0.00054 Options Tranche 2 0.0020 0.001 0% 100% 1.95% 24 months $0.00054 Options Tranche 3 0.0040 0.003 0% 100% 1.95% 24 months $0.00138 Options Tranche 4 0.0045 0.003 0% 100% 1.95% 24 months $0.00130 The number of Options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Company, including their personally related parties is as set out below: Vested and exercisable Unv- ested Granted as compen- sation Name Exercised Forfeited Other changes Balance at the end of the year Vested and exercisable Unv- ested Executive KMP Adam Boyd 350,000,000 - 350,000,000 - - - 350,000,000 350,000,000 - (c) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Expense arising from equity-settled share based payment transaction Reversal of previously expensed share based payment transaction Total expense arising from share-based payment transactions Note 25(b) 2017 $ 2016 $ 92,844 - 92,844 54,616 (85,354) (30,738) 40 VOLT POWER GROUP LIMITED ABN 62 009 423 189 36. Financial instruments Financial risk management policies The Group financial instruments consist mainly of deposits with banks, accounts receivables and payables and domestic loans. The Board of Directors analyse financial risk exposure at Board Meetings to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Board’s overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst minimizing potential adverse effects on financial performance. (a) Market risk (i) Foreign exchange risk At present the Group has no foreign exchange risk in respect of forecast sales and purchases. The Group also has no hedges in place for its trade receivables and trade payables denominated in a foreign currency. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States Dollar (USD). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. Management has set up a policy that all transactions in foreign currencies be transacted at spot. Management will continually review this policy based on volumes of foreign currency required. The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows: Trade payables - Airec AB Trade payables- Opcon AB Convertible Notes- Magna 31 December 2017 EUR SEK USD - - - - - - - - - 31 December 2016 EUR 45,697 SEK - - 2,243,231 - - USD - - 305,679 Amounts recognised in profit or loss and other comprehensive income During the year, the following foreign-exchange related amounts were recognised in profit or loss and other comprehensive income: Amounts recognised in profit or loss foreign exchange gain/(loss) Net income/other expenses Total net foreign exchange gain/(loss) recognised in profit before income tax for the period Net gains/(loss) recognised in other comprehensive income Loss/(gain) reclassified from other comprehensive income in other included Note 7 2017 $ 2016 $ - - - - 115,866 115,866 - - Sensitivity At the end of the year the Group had no exposure to changes in exchange rates. At the end of the previous year the Group had exposure to changes in the SEK/$ exchange rates. SEK/$ exchange rate- increase 10% SEK/$ exchange rate- decrease 10% 2017 $ - - 2016 $ (33,176) 34,208 (ii) Cash flow and fair value interest rate risk The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer term borrowings are therefore usually at fixed rates. The Group’s exposure to interest rate risk relate primarily to cash and cash equivalents. As at 31 December 2017, the Group has hire purchase financial liabilities that are at fixed rates and has no financial liabilities subject to interest rate movements. The Group’s maximum exposure to interest rate risk at reporting date is shown below. As such, sensitivity to interest rate risk is considered immaterial. 41 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Trade and other receivables - current Cash and cash equivalents Note 14 13 2017 $ 553,690 2,988,650 3,542,340 2016 $ 700 250,926 251,626 (b) Credit risk Credit risk arises from cash and cash equivalents, held-to-maturity investments, favourable derivative financial instruments and deposits with banks and financial institutions, as well as the credit exposures to wholesale and retail customers, including outstanding receivables. The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was Trade and other receivables - current Cash and cash equivalents Note 14 13 2017 $ 553,690 2,988,650 3,542,340 2016 $ 700 250,926 251,626 The Group manages credit risk through dealing with creditworthy counterparties and balances are monitored on an ongoing basis. For bank and financial institutions, only independently rated parties with a minimum Standard & Poor’s credit rating of A (or equivalent) are accepted. In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counter parties having similar characteristics. Trade receivables consist of blue chip companies in mining and mining services industries. Management consider the credit quality of trade receivables that are not past due or impaired to be good. (c) Liquidity risk The Group has limited exposure to liquidity risk as the Group’s main liabilities are trade and other payables and hire purchase liabilities. The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources and trade receivables (see Notes 13 and 14) significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months. (d) Recognised fair value measurements The net fair value and carrying amounts of financial assets and financial liabilities are disclosed in the Consolidated Statement of Financial Position and in the Notes to the Consolidated Statement of Financial Position. This note provides an update on the judgements and estimates made by the group in determining the fair values of the financial instruments. Financial Instruments Measured at Fair Value The financial instruments recognised at fair value in the Statement of Financial Position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. Fair value hierarchy The fair value hierarchy consists of the following levels: • Quoted prices in active markets for identical assets and liabilities (Level 1); • Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and • Inputs for the asset or liability that are not based on observable market date (unobservable inputs) (Level 3) 42 VOLT POWER GROUP LIMITED ABN 62 009 423 189 31 December 2016 Financial liabilities Convertible loan Total 31 December 2017 Financial liabilities Convertible loan Total Note Level 1 Level 2 Level 3 Total 21 21 - - - - - - - - 305,679 305,679 305,679 305,679 - - - - There were no transfers between levels for recurring fair value measurements during the year. The group’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as at the end of the reporting date. Level 1: the fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Level 2: the fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximises the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument is observable, the instrument is included in level 2. Level 3: if one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities. The fair value of the convertible loan not traded in an active market is determined using an internally prepared discounted cash flow valuation technique using observable imports (such as share price and the terms and conditions of the convertible loan as disclosed in Note 21) and released of the initial calibration adjustment to the profit or loss. At 31 December 2017, the fair value of the convertible note equates to its carrying (redemption) amount, as the conversion option is out of the money. Valuation techniques used to determine fair values Specific valuation techniques used to value financial instruments include: • Use of the quoted market prices or dealer quotes for similar instruments • The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date The fair value of the remaining financial instruments as determined using discounted cash flow analysis • • Capital management The Board’s policy is to maintain a strong asset base so as to maintain investor, creditor and market confidence and to sustain future development of the business. There were no changes in the Group’s approach to capital management during the year. Neither the Group nor any of its subsidiaries is subject to externally imposed capital requirements. 37. Parent entity financial information Statement of financial position Current assets Non-current assets Total assets Current liabilities Total liabilities Net Assets Shareholders’ equity/(deficit) Issued Capital Reserves Retained losses Total shareholders’ equity/(deficit) Profit/(loss) for the year Total comprehensive profit/(loss) 2017 $ 1,632,378 1,358,658 2,991,036 (135,446) (135,446) 2,855,590 68,104,943 5,946,446 (71,195,799) 2,855,590 227,266 227,266 2016 $ 276,632 - 276,632 (3,631,153) (3,631,153) (3,354,521) 62,214,943 5,853,602 (71,423,066) (3,354,521) (2,276,497) (2,276,497) 43 VOLT POWER GROUP LIMITED ABN 62 009 423 189 38. Accounting standards issued not yet effective Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ended 31 December 2017. Standards Likely to Have a Financial Impact Reference AASB 9 Financial Instruments Summary AASB 9 contains accounting requirement for financial instruments, replacing AASB 139. The standard: Application date 1 January 2018 (a) contains a simpler model for classification and measurement of financial assets; (b) a single, forward looking ‘expected loss’ impairment model that will require more timely recognition of expected credit losses; (c) a substantially reformed approach to hedge accounting including changes treatment of hedging costs, risk to hedge effectiveness components that can be hedged and disclosures. testing, AASB 15 Revenue from contracts with customers AASB 16 Leases The Group has not yet completed its review of the application of this Standard. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Identify the contract(s) with a customer Identify the performance obligations in the contract Step 1 Step 2 Step 3 Determine the transaction price Step 4 Allocate the transaction price to the performance obligations in the contract Step 5 Recognise revenue when (or as) the entity satisfies a performance obligation Guidance is provided on topics such as when revenue should be recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced. The new revenue standard will supersede all current revenue recognition requirements under IFRS. In particular, the standard replaces AASB 118 ‘Revenue’ and AASB 11 ‘Construction Contracts’, upon which the Group’s current revenue recognition policies are based. Either a full retrospective application or a modified retrospective application is required for the reporting period beginning on 1 January 2018. The Group is in the process of evaluating which transition method will be applied. The Group will continue to carry out a systematic review of the impact of AASB 15 on existing contracts and new contracts as they are awarded. The quantitative impact of AASB 15 will not be reasonably estimable until the review is completed. However, AASB 15 will have a material impact on the disclosures required in the Group’s consolidated financial reports. A further update will be provided as part of the 30 June 2018 interim financial reporting. The key features of AASB 16 are as follows: Lessee accounting • Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. • A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. • Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. 1 January 2018 1 January 2019 44 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Reference Summary Application date • AASB 16 contains disclosure requirements for lessees. Lessee accounting • AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. • AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk. As at the reporting date, the Group has no non-cancellable operating lease commitments. The Group has not quantified the effect of the new standard, however the potential impacts will include: • • Total assets and liabilities on the Statement of Financial Position will increase; and Interest expense will increase due to the unwinding of the effective interest rate implicit in the lease. The Group has decided not to early adopt any of the new and amended pronouncements. The impact of the above-mentioned standards and pronouncements is yet to be determined. There are no other standards that are not yet effective and that would be expected to have material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 45 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Directors' declaration In accordance with a resolution of the directors of Volt Power Group Limited, I state that: 1. In the opinion of the directors: (a) the financial statements and notes of Volt Power Group Limited for the financial year ended 31 December 2017 are 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 2017 and of its performance for the year ended on that date; and (ii) complying with Accounting Standards and the Corporations Regulations 2001; (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(a); 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. 2. This declaration has been made after receiving the declarations required to be made to the directors by the chief executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 31 December 2017. On behalf of the board. Simon Higgins Chairman Perth 28 March 2018 46 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of Volt Power Group Limited Report on the Audit of the Financial Report Qualified opinion We have audited the financial report of Volt Power Group Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion, except for the effects of the matter described in the Basis for qualified opinion section of our report, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for qualified opinion Comparatives Attention is drawn to the comparative figures in the consolidated statement of financial position at 31 December 2016. As stated in note 2(b) of the financial report, on the 18th October 2016, the Company (Enerji Limited) was placed into Administration (subject to a Deed of Company Arrangement) and the duties and responsibilities of the Directors were suspended from the date the Company entered into Administration. For the period in which the Company was in Administration the Directors did not have oversight or control over the Group’s financial reporting systems, including (but not limited to) being able to obtain access to complete accounting records. As a result, we did not have access to the complete books and financial records of the Group, and this caused us to disclaim our audit opinion on the financial report for the year ended 31 December 2016. Our opinion on the current year’s financial report is also modified because of the possible effect of this matter on the comparability of the current period’s figures and the corresponding figures. Current year 31 December 2017 Attention is also drawn to the gain on effectuation of the Deed of Company Arrangement of $3,551,951 recognised in the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2017. As a result of the matters outlined in the comparatives paragraph above, we have not been able to obtain sufficient appropriate audit evidence to satisfy ourselves as to the completeness of this amount. Our audit opinion has been modified accordingly. 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. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for qualified opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report. Accounting for Business Combinations Key audit matter How the matter was addressed in our audit As disclosed in note 27 of the financial report, during the Our procedures included, but were not limited to the year the Group acquired 50% of the equity instruments of following: EcoQuip Australia Pty Ltd (EcoQuip) for a total consideration (cid:127) Reviewing the Sale and Purchase Agreement of $1,150,000 (settled by the issue of shares valued at and the Subscription Agreement to understand $150,000 and cash payment of $1,000,000). the key terms and conditions, and confirming This is a key audit matter due to the size of the acquisition, the complexities inherent in a business combination and the significant judgements made by management, including the identification and measurement of the fair value of assets and liabilities acquired. Under Australian Accounting Standards, management is required to identify all assets and liabilities acquired and estimate the fair value of each item. Any excess consideration that is not attributed to an asset or liability is to be recognised as goodwill. At 31 December 2017, the acquisition accounting for this business is provisional and, in line with the Australian Accounting Standards, the Group has up to 12 months from the date of acquisition to finalise the accounting for these acquisitions. our understanding of the transaction with management; (cid:127) Agreeing the purchase price to the acquisition agreement and agreeing the cash consideration paid to banking and accounting records, and the shares consideration to the share price used in the calculation to the ASX quoted share price at acquisition date; Obtaining an understanding of the transaction including an assessment as to whether the transaction constituted the acquisition of a business or an asset acquisition; Assessing management’s fair value estimation of the fair value of the assets and liabilities identified in the acquisitions, and comparing the asset and liabilities recognised against the Sale and Purchase Agreement and the Subscription Agreement and the historical financial information of the acquired business; Testing the mathematical accuracy of the calculation of the resultant goodwill; and Assessing the appropriateness of the related disclosures in Note 27 of the financial report. (cid:127) (cid:127) (cid:127) (cid:127) Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 31 December 2017, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Qualified Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 9 to 14 of the directors’ report for the year ended 31 December 2017. In our opinion, with the exception of those matters disclosed in the Basis of Qualified Opinion paragraph, the Remuneration Report of Volt Power Group Limited, for the year ended 31 December 2017, complies with section 300A of the Corporations Act 2001. Basis for Qualified Opinion As stated in note 2(b) of the financial report, on 18 October 2016 the Company (Enerji Limited) was placed into Administration and the Directors did not have control of the Company until control was transferred to them on the effectuation of the Deed of Company Agreement (DOCA) on 19 May 2017. For the period in which the Company was in Administration the Directors did not have oversight or control over the Company’s financial reporting systems, including (but not limited to) being able to access financial records that correctly record and explain the transactions included in the Remuneration Report. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Jarrad Prue Director Perth, 28 March 2018 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Investor information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The information is current at 23 March 2018. Distribution of equity securities The number of shareholders, by size of holding, in each class of share are detailed below: Category 100,001 and over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Unmarketable parcels No. ordinary shareholders 617 621 187 288 435 2,148 1,622 No. ordinary shares 8,217,943,516 24,145,891 1,515,456 814,255 114,440 8,244,533,558 39,916,142 % of issued capital 99.7% 0.3% 0.0% 0.0% 0.0% 100.0% 0.5% Twenty largest shareholders The names of the twenty largest holders of quoted shares are: Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 13 15 16 17 17 19 20 Name ECM Pty Ltd Mr Michael Campbell Hender Renewable Initiative Pty Ltd S & N Higgins Super Pty Ltd Simon Higgins AHB Super Pty Ltd Hoodwinked Pty Ltd Nireb Nominees Pty Ltd Bouchi Pty Ltd Darryl Peter Oldfield Higgins Western Pty Ltd Act6 Pty Ltd Mark John Clark Botsis Holdings Pty Ltd Mr Gregory John Bittar John Hender Elecon International Pty Ltd RT Weeks Super Pty Ltd Mr Paul Alexander Everingham & Mrs Elissa Jean Everingham Mr Carrick Durrant Ryan Total Balance of register Grand total No. ordinary shares 2,000,000,000 660,000,000 589,500,000 428,000,000 345,000,000 320,000,000 200,000,000 150,000,000 115,000,000 110,000,000 109,000,000 100,000,000 100,000,000 97,037,796 92,500,000 88,000,000 82,000,000 80,000,000 71,998,159 68,592,088 5,806,628,043 2,437,905,515 8,244,533,558 % of issued capital 24.3% 8.0% 7.2% 5.2% 4.2% 3.9% 2.4% 1.8% 1.4% 1.3% 1.3% 1.2% 1.2% 1.2% 1.1% 1.1% 1.0% 1.0% 0.9% 0.8% 70.4% 29.6% 100.0% Substantial shareholders The following shareholders have declared a relevant interest in the number of voting shares at the date of giving notice under Part 6C.1 of the Corporations Act 2001. Name ECM Pty Ltd Adam Boyd No. ordinary shares 3,665,000,000 910,000,000 % of issued capital 44.5% 11.0% Voting rights Each ordinary shareholder present at a general meeting in person, by proxy or by representative is entitled to one vote on a show of hands, or on a poll, one vote for each fully paid ordinary share subject to any voting restrictions that may apply. 51 

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