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2023 ReportVOLT POWER GROUP LIMITED ABN 62 009 423 189 ANNUAL REPORT For the year ended 31 December 2018 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 ............................................................................................................................................................... 45 Independent Audit Report ........................................................................................................................................................ 46 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 Elvio Ruggiero 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 2018 corporate governance statement is dated as at 29 March 2019 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 2018. 1. Summary (a) Operations Corporate • At a general meeting of shareholders on 22 January 2018, it was resolved for the Company to undertake a capital raising via a private placement of shares to professional and sophisticated investors, who are not related parties with the exception of Mr Adam Boyd and ECM parties, at an issue price of $0.0025 per share to raise $4,750,000. • At the same meeting it was resolved for the Company to acquire 100% of the issued capital of Wescone Distribution Ltd for consideration of $4,750,000 cash, the issue of 100,000,000 shares and the payment of a revenue royalty. • 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). ATEN (100% owned) The ATEN technology achievements during the period comprise: • An ATEN ‘Waste Heat to Power’ technology flow sheet redesign was completed during the 12-months ended 31 December 2018. The redesign changes have delivered an 80% increase in estimated system efficiency and commensurate increase in estimated power generation relative to the ATEN flowsheet developed under previous management. • ATEN technology ‘patent pending’ status was confirmed. • The Company continued to advance technical development and commercial negotiations for the installation of the ATEN technology at a mine site power station in the WA Goldfields (WA Goldfields ATEN Project). The mine owner recently advised the Company that it had made a decision to advance a new processing plant expansion study that was expected to require an increase in power generation capacity of up to 12MW. The Company is working with the existing mine site IPP to include ATEN as part of an expanded power supply solution. Wescone (100% owned) Wescone salient activities and outcomes during the period comprised: • The Wescone business continues to generate surplus cashflow albeit below the business’ historical positive cashflow performance. • Wescone is the owner of the proprietary and unique W300 sample crusher installed extensively in port loading and assays system infrastructure utilized by the global iron industry and metallurgical laboratory sector. 4 VOLT POWER GROUP LIMITED ABN 62 009 423 189 • Subsequent to the Wescone Acquisition, BHP Ltd advised the Company, inter alia, that BHP had conducted a trial of the Wescone W300-3 sample crusher between about October 2015 and December 2015 (BHP Trial). BHP has advised the Company that in December 2015, BHP advised Wescone that the W300-3 was no longer a viable technical solution for BHP. The non-disclosure of these matters by the vendor of Wescone to the Company prior to the Wescone Acquisition are issues in the legal proceedings. • On 18 September 2018, the Company announced that BHP Ltd had suspended its service relationship with Wescone. • On 4 January 2019, the Company announced that it had filed a Writ against the vendor of Wescone seeking an order that the agreement providing for the sale and purchase of Wescone is void by reason of misleading and deceptive conduct and further or alternatively, damages for breach of contract as well as interest and costs. • Wescone and its local engineering partners completed an extensive W300-3 redesign initiative to develop and manufacture updated W300 components (New W300). The New W300 is dimensionally identical to the W300-3 from an installation perspective (with the exception of a negligible height gain of 25mm), can accept 60% dimensionally larger iron ore lump (<80mm) and has significantly increased wear component strength. The re-design was prompted by the performance deficiencies raised by BHP. The extent to which those deficiencies were disclosed to the Company by the vendor of Wescone is also an issue in the legal proceedings. EcoQuip Australia Pty Ltd (EcoQuip) (50% owned) EcoQuip salient achievements and activities to the date of this report include: • 75% utilization rate of its existing Mobile Solar Light Tower (MSLT) fleet. • Establishment of all initial USA domiciled manufacturing supply chain arrangements and implementation of prototype design improvements. • Completed Manufacture and assembly of 16 new ‘next generation’ MSLT Gen4 units and shipped 14 MSLT Gen4 units to Australia for delivery in March 2019. • Finalised the MSLT Gen4 pricing structure to deliver a compelling 50% (approx..) cost saving relative to diesel fueled alternatives used throughout the resource sector and road traffic markets. • Completed an exclusive national cross-hire alliance with RSEA Safety to deploy up to 50 MSLT units across national road construction markets after a successful 6-month trial period. (b) Financial performance and financial position The financial results of the Group for the year ended 31 December 2018 are summarised as follows: Revenue Profit/(loss) for the period attributable to members Profit/(loss) per share Cash and cash equivalents Net tangible assets per share 2018 $ 1,687,252 (4,510,785) (0.0056) 1,233,662 0.0004 2017 $ - 2,625,618 0.0680 2,988,650 0.0005 % Change - -272% -182% -58% -20% The Group made a loss for the year of $4,773,892 (2017: profit of $2,625,618), experienced net cash outflows from operating activities of $1,384,366 (2017: cash inflow of $170,347) and has a net asset balance of $3,495,341 (2017: $3,207,839). The loss for the year includes the following items of significance: • Impairment loss on Goodwill of $3,525,706 5 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Directors’ Report For the year ended 31 December 2018 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 2018 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 Non-Executive Chair (appointed 28 April 2017) Chief Executive Officer and Managing Director (appointed 28 April 2017) Non-Executive Director (appointed 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, privately owned 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 803,000,000 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 an 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 Interests in shares and options 910,000,000 ordinary shares in Volt Power Group Limited 350,000,000 options in Volt Power Group Limited 6 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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, Zenith Energy Ltd and VEEM 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 Elvio Ruggiero - Company Secretary (appointed 22 September 2018) Mr Ruggiero is a member of the Institute of Chartered Accounts in Australia and New Zealand and has worked in a variety of senior finance positions with ASX, TSX and FTSE listed companies. Mr Ruggiero has extensive experience with companies operating in the contracting and mining services industries Special responsibilities None Interests in shares and options Nil shares in Volt Power Group Limited Nil options in Volt Power Group Limited 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 Meetings held 4 4 4 Meetings attended 4 4 4 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: ATEN (100% owned) • • Completion of the ATEN ’Waste Heat to Power” technology flowsheet redesign that delivered an estimated 80% increase in estimated system efficiency in both water & air cooled variants. Extensive business development activities aimed at securing commercial arrangements to install the Company’s first ATEN ‘Waste Heat to Power’ facility in Australia. EcoQuip (50% owned) • The continued development of a new innovative Mobile Solar Light & Communications Tower solution incorporating robust design features, high quality solar / lithium battery power system, autonomous telemetry and control system (MSLT Gen4). 7 VOLT POWER GROUP LIMITED ABN 62 009 423 189 • • • • • • • • Deployment of the existing EcoQuip Mobile Solar Light Tower (MSLT) fleet that achieved a 75% hire utilisation for the period. Establishment of all initial USA domiciled manufacturing supply chain arrangements and implemented enhanced design changes after extensive MSLT Gen4 prototype testing. Manufacture completion of 16 new MSLT Gen4 units in the USA. 14 MSLT Gen4 units were shipped to Australia for planned arrival in March 2019. Execution of an exclusive national cross-hire alliance with RSEA Safety to deploy up to 50 EcoQuip MSLT units across national road construction and traffic markets. Wescone (100% owned) Completion of the Wescone Acquisition. The operation of the Wescone business – the owner of the Wescone W300 sample crusher predominantly deployed throughout the global iron ore and assay laboratory industry. Clarification of historical circumstances relating to a decision by BHP (Wescone’s largest historical customer by revenue and crusher sales) in September 2018 to cease using Wescone for the service and repair of BHP’s fleet of Wescone sample crushers. Commencement of legal proceedings against the Wescone vendor and a related party, seeking an order that the agreement providing for the sale and purchase of Wescone is void by reason of misleading and deceptive conduct and further or alternatively, damages for breach of contract as well as interest and costs. 5. Dividends There were no dividends paid or declared by the Company to members since the end of the previous financial year. 6. 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. 7. Use of cash and assets readily convertible to cash The Group has used its cash and assets readily convertible to cash during the period in a way that was consistent with its business objectives. 8. 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 acquisition of 100% of Wescone Distribution Pty Ltd. 9. Events since the end of the financial year • An Exclusive Distribution and Alliance Agreement was signed by EcoQuip Australia Pty Ltd and RSEA Pty Limited on 4 March 2019. There are no other events that occurred subsequent to the reporting period ending, that would have a material impact on the financial statements as at 31 December 2018 10. Likely developments and expected results of operations The following events are likely to occur over the coming year: • Progress towards the installation of the first ATEN waste heat to power technology at a mine site power station. • Expansion of the EcoQuip MSLT Gen4 fleet in both light and communications tower variants and deployment of the expanded fleet in resource sector and national construction markets • Improved Wescone W300 sales and repairs activities through expanding global distributor arrangements and trial completion, intellectual property protection and sales and repair of the New W300. 11. Environmental regulation 8 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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. 12. 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 2018. 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 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 Executives Mr Adam Boyd Position Term as KMP Non-Executive Chair Non-Executive Director Appointed 28 April 2017 Appointed 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. 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. 9 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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 2018 (4.773) 0.002 - (0.055) Y/E1 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) 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 In 2017, 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. 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. 10 VOLT POWER GROUP LIMITED ABN 62 009 423 189 3. In consideration for Mr Boyd agreeing to join the board of the Company, the Company will provide 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) Total executive KMP Year 2018 2017 2018 2017 Salary & fees 360,000 240,000 360,000 240,000 Post employ- ment benefits - - Non- mone- tary benefits - - Termin- ation benefits - - Rights to deferred shares - - Options 87,685 88,544 Total 447,685 328,544 Perform- ance related 20% 27% - - - - - - - - 87,685 88,544 447,685 328,544 20% 27% (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 appointment. The monthly fee payable is payable in arrears and will be initially set at $3,330 plus GST. This equates to an annual fee of $39,960 plus GST, commencing 1 May 2017. Details of the nature and amount of each major element of remuneration are set out below: Simon Higgins Peter Torre Total non-executive directors Year 2018 2017 2018 2017 2018 2017 Short-term benefits 50,000 33,333 39,960 26,640 89,960 59,973 Post employment - - - - - - Total 50,000 33,333 39,960 26,640 89,960 59,973 (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. 11 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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 Non-executive directors Simon Higgins Peter Torre Executive KMP Adam Boyd Fixed At risk STI At risk LTI 2018 2017 2018 2017 2018 2017 100% 100% 100% 100% 80% 73% - - - - - - - - - - 20% 27% 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 775,000,000 25,000,000 710,000,000 Granted as compensation Acquired for cash Other changes - - - 28,000,000 - 200,000,000 Balance at the end of the year - - - 803,000,000 25,000,000 910,000,000 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 - - 350,000,000 Unvested Granted as compensation - - - - - - Number - - 350,000,000 % Exercised Number % 0% 0% 50% - - - - - - 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 (ECM) is a related party of Mr Simon Higgins, who are paid for providing office rent and accounting, tax and IT support at a rate of $15,000 per month, plus any outgoings relating to the group. ECM Pty Ltd was contracted to recover a switch room asset from a site in Carnarvon for a total cost of $28,679. • The Group’s subsidiary EcoQuip Australia Pty Ltd entered into a contract with ECM, for the provision of construction services by ECM. These transactions totalled $407,896 for the year ended 31 December 2018. ECM Pty Ltd entered into an agreement providing office rent to EcoQuip at $3,583 per month, starting 1 May 2018. • On a Consolidated level, these transactions with ECM total $436,575 for goods and services purchased and $238,266 for rent and administration support services purchased 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 2017 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 2018 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 13. 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 2018 on the exercise of options. 14. 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. 15. 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. 16. 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: Review of 6 June financial report Total 2018 $ - - 2017 $ 5,100 5,100 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. 17. 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: 29 March 2019 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 2018, 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, 29 March 2019 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 2018 Income from trading activities Cost of sales Gross profit Other income Consultants and advisors Employment benefits expense General and administration expenses Impairment of Goodwill 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 19 12 12 13 2018 $ 1,687,252 (670,526) 1,016,726 27,375 (399,403) (1,316,632) (542,192) (3,525,706) (4,739,832) 9,550 (49,089) (39,539) 2017 $ - - - 3,913,910 (728,646) (492,725) (70,459) - 2,622,080 3,840 (302) 3,538 (4,779,371) 2,625,618 5,479 (4,773,892) - 2,625,618 Other comprehensive income/(loss) for the year, net of tax - - Total comprehensive income/(loss) for the year (4,773,892) 2,625,618 Profit/(loss) for the year is attributable to: Minority interests Owners of Volt Power Group Limited Total comprehensive income/(loss) for the year is attributable to: Minority interests Owners of Volt Power Group Limited Earnings per share (EPS): Basic profit/(loss) for the period attributable to ordinary equity holders of the parent Earnings per share from continuing operations: Basic profit/(loss) from continuing operations attributable to ordinary equity holders of the parent (263,107) (4,510,785) - 2,625,618 (263,107) (4,510,785) cents (0.0555) - 2,625,618 cents 0.0680 25(a) 25(a) (0.0555) 0.0680 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 2018 Assets Current assets Cash and cash equivalents Trade and other receivables Inventory Other current assets Total current assets Non-current assets Property, Plant & Equipment Intangible assets Deferred Tax Asset Non-current prepayment Total non-current assets Total assets Liabilities Current Liabilities Trade & Other Payables Employee Benefit Liability Interest Bearing Loans Current Income Tax Payable Total current liabilities Non-current assets Interest bearing loans and borrowings Total non-current assets Total liabilities Net assets Shareholders’ Equity Share capital Reserves Retained losses Total attributable to owners of parent Non-controlling interest Total Shareholders’ Equity Note 2018 $ 14 15 16 17 18 19 20 22 21 23 24 24 2017 $ Restated 2,988,650 680,387 - 58,183 3,727,220 626,402 599,391 12,654 200,000 1,438,447 1,233,662 256,763 346,140 78,815 1,915,380 899,195 1,348,219 5,479 - 2,252,893 4,168,273 5,165,667 299,486 41,522 113,137 - 454,145 218,787 218,787 1,347,135 24,226 208,395 85,787 1,665,543 292,285 292,285 672,932 1,957,828 3,495,341 3,207,839 72,792,329 6,060,456 (75,732,466) 3,120,319 375,022 3,495,341 67,964,945 5,946,446 (71,221,681) 2,689,710 518,129 3,207,839 Comparative number are restated, please refer to note 2 and 27. 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 2018 At 1 January 2017 Total comprehensive loss for the year Loss for the half-year Total comprehensive loss for the year Transactions with owners in their capacity as owners Issue of shares Share based payments Non-controlling interest assumed At 31 December 2017 restated At 1 January 2018 Total comprehensive loss for the year Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners Issue of share capital Share based payments At 31 December 2018 Attributable to owners of Volt Power Group Limited Share capital Reserves Retained losses Note $ 62,214,945 $ 5,853,602 $ (73,847,299) Total attributable to owners $ (5,778,752) Non- controlling interest $ - Total equity $ (5,778,752) - - - - 2,625,618 2,625,618 2,625,618 2,625,618 - - 2,625,618 2,625,618 24(a) 24(b) 5,750,000 - - 5,750,000 67,964,945 - 92,844 - 92,844 5,946,446 - - - - (71,221,681) 5,750,000 92,844 - 5,842,844 2,689,710 - - 518,129 518,129 518,129 5,750,000 92,844 518,129 6,360,973 3,207,839 67,964,945 5,946,446 (71,221,681) 2,689,710 518,129 3,207,839 - - - - (4,510,785) (4,510,785) (4,510,785) (4,510,785) (263,107) (263,107) (4,773,892) (4,773,892) 24(a) 24(b) 4,827,384 - 4,827,384 72,792,329 - 114,010 114,010 6,060,456 - - - (75,732,466) 4,827,384 114,010 4,941,394 3,120,319 120,000 - 120,000 375,022 4,947,384 114,010 5,061,394 3,495,341 Comparative number are restated, please refer to note 2 and 27. The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 19 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Consolidated Statement of Cash Flows As at 31 December 2018 Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Interest paid R&D tax refund Income tax refund/(payment) Net cash outflows from operating activities Cash flows from investing activities Payments for property, plant and equipment Payment for acquisition of subsidiary, net of cash acquired Net cash inflows / (outflows) from investing activities Cash flows from financing activities Proceeds from issue of shares and other equity securities Transaction costs on issue of shares 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 Note 2018 $ 14(a) 26(b) 1,700,870 (3,374,812) 9,550 (49,089) 361,959 (32,844) (1,384,366) (193,553) (4,527,371) (4,720,924) 4,730,000 (172,616) (207,082) 4,350,302 (1,754,988) 2,988,650 1,233,662 2017 $ 1,062,600 (884,344) 3,843 (312) - (11,440) 170,347 - (172,311) (172,311) 3,725,288 - (985,600) 2,739,688 2,737,724 250,926 2,988,650 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 2018 1. Reporting entity The consolidated financial report of Volt Power Group Limited (the Group) and its subsidiaries for the year ended 31 December 2018 was authorised for issue in accordance with a resolution of directors on 29 March 2019. 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 2018; and does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective. In the current year the Company has adopted two standards issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2018. AASB 9 Financial Instruments AASB 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Group will not restate comparative information. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The Group has adopted this standard from 1 January 2018 and has assessed expected credit losses associated on a forward looking basis noting no material impact from this assessment. AASB 15 Revenue from Contracts with Customers AASB 15 establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. There will be no material impact to the Group on initial recognition from adopting this standard. The adoption of new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) has no material effect on the accounts reported in the current and prior periods. (b) 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 loss after income tax benefit for the year ended 31 December 2018 of $4,773,892 and experienced net cash outflows from operating activities of $1,384,366. 21 VOLT POWER GROUP LIMITED ABN 62 009 423 189 The group had cash and cash equivalents of $1,233,662 and a working capital excess of $1,461,235 at 31 December 2018. 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. 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 2018. 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. 22 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (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. 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 based on the consideration specified in contracts with customers. The Group recognises revenue when it transfers control of products and services to a customer. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. The Group’s revenue consists of the following streams: • Revenue from the sale of goods and services delivered to customers • Revenue from lease of equipment to customers. 23 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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 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. 24 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (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. 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 the expected credit loss (ECL) model to recognise an allowance in accordance with AASB 9. For trade receivables, the Group uses the simplified approach of the ECL model to determine the allowance. 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 25 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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: (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 19(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. Revenue from trading activities Revenue from sales of inventory Revenue from equipment leases Timing of revenue recognition At a point in time Over time 2017 $ 2018 $ 1,328,040 359,212 1,687,252 1,328,040 359,212 1,687,252 - - - - - - 26 VOLT POWER GROUP LIMITED ABN 62 009 423 189 8. Other income/(expenses) Profit on DOCA - Enerji Limited Profit on DOCA - Enerji Holdings Research and development tax incentive rebate (a) Profit/(loss) on sale of assets Other income (a) Research and development tax incentive rebate Receipt of a R&D tax rebate Total income tax benefit Attributable to: Continuing operations 9. Consultants and advisors Audit, Tax, Accounting and finance Administrator expenses Legal expenses Investor relations Other 10. Employee benefit expense Salary and wages Superannuation Share based payments Other 11. General and administration expenses Occupancy Costs Insurance IT Expenses Travel & Accommodation Depreciation & Amortisation Foreign currency losses Other expense 2018 $ - - - 5,206 22,169 27,375 - - - - 2018 $ 295,606 - 58,504 44,718 575 399,403 2018 $ 1,154,171 38,746 114,010 9,705 1,316,632 2017 $ 1,132,476 2,419,475 361,959 - - 3,913,910 361,959 361,959 361,959 361,959 2017 $ 159,830 276,223 231,297 61,296 - 728,646 2017 $ 390,250 8,025 94,450 - 492,725 2018 $ 2017 $ 114,356 52,009 33,391 38,539 138,295 5,659 159,943 542,192 4,290 33,434 19,421 1,044 3,063 - 9,207 70,459 27 VOLT POWER GROUP LIMITED ABN 62 009 423 189 12. Finance costs - net Interest income Bank fees Interest expense Finance benefit/(expense) 2018 $ 2017 $ 9,550 9,550 3,115 45,974 49,089 (39,539) 3,840 3,840 302 - 302 3,538 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. 13. Income tax benefit (a) Income tax benefit Deferred tax credit arising from temporary differences Total income tax benefit Attributable to: Continuing operations 2018 $ 2017 $ 5,479 5,479 5,479 5,479 - - - - (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% Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Non-deductible expenses Deferred tax assets/(liabilities) not brought to account Income tax benefit 2018 $ (4,779,371) 1,314,327 969,569 2,289,375 5,479 2017 $ 2,625,618 (722,045) 1,088,295 366,250 - The franking account balance at year-end was $nil (2017: 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% 2018 $ 21,409,890 5,887,720 2017 $ 20,156,225 5,542,962 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. 28 VOLT POWER GROUP LIMITED ABN 62 009 423 189 14. Cash and cash equivalents Cash at bank 2018 $ 1,233,662 1,233,662 2017 $ 2,988,650 2,988,650 (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 Impairment of goodwill 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 (Increase)/decrease in trade & other receivables (Increase)/decrease in Inventory (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 2018 $ (4,773,892) 138,295 3,525,706 (5,206) - 4,956 - 114,010 797,658 (54,334) (20,632) (971,500) (38,390) (56,726) 3,476 (9,464) (38,323) (1,384,366) 2017 $ 2,625,618 3,063 - (3,551,951) (3,840) - 92,844 (553,690) - (58,183) 1,478,062 33,783 39,156 20,342 - 45,143 170,347 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 26) Acquisition of Wescone shares by issue of Volt shares (note 26) 2018 $ - 250,000 250,000 2017 $ 150,000 - 150,000 Issue of shares on conversion of loan - 2,000,000 29 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (c) Reconciliation of cash and non cash movements in financial liabilities Cash and cash equivalents Borrowings repayable within one year Borrowings repayable after one year Cash and liquid assets Gross Debt - Fixed interest rate 15. Trade and other receivables Accounts receivable Other debtors Note 21 23 2018 $ 1,233,662 (113,137) (218,787) 901,738 1,233,662 (331,924) 901,738 2017 $ 2,988,650 (208,395) (292,285) 2,487,970 2,988,650 (500,680) 2,487,970 2018 $ 233,589 23,174 256,763 2017 Restated $ 680,387 - 680,387 Impaired receivables and receivables past due The Group applied ECL to calculate losses. These were found to be immaterial. 16. Inventory Completed goods and parts on hand 17. Prepayments and other receivables Prepaid insurance Other prepayments 18. Property, plant and equipment 31 December 2017 Opening net book amount Additions Depreciation charge 31 December 2017 31 December 2017 Cost or fair value Accumulated depreciation Net book amount 2018 $ 346,140 346,140 2017 $ - - 2018 $ 77,050 1,765 78,815 2017 $ 56,418 1,765 58,183 Plant and equipment $ - 617,744 - 617,744 617,744 - 617,744 Office furniture, fittings and equipment $ 11,721 - (3,063) 8,658 81,123 (72,465) 8,658 Total $ 11,721 617,744 (3,063) 626,402 698,867 (72,465) 626,402 30 VOLT POWER GROUP LIMITED ABN 62 009 423 189 31 December 2018 Opening net book amount Additions Disposals Depreciation charge 31 December 2018 31 December 2018 Cost or fair value Accumulated depreciation Net book amount Plant and equipment $ 617,744 413,994 - (135,744) 895,994 1,083,248 (187,254) 895,994 Office furniture, fittings and equipment $ 8,658 - (2,906) (2,551) 3,201 18,703 (15,502) 3,201 Total $ 626,402 413,994 (2,906) (138,295) 899,195 1,101,951 (202,756) 899,195 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 or diminishing value basis for 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. 19. Intangible assets (a) Goodwill The Group has determined the cash generating units to be as follows: • Wescone Distribution Pty Ltd • Ecoquip Australia Pty Ltd The movements in the net carrying amount of goodwill are as follows: Balance 1 January Acquired through business combination – Ecoquip Australia Pty Ltd Impairment of Goodwill - Ecoquip Australia Pty Ltd Acquired through business combination – Wescone Distribution Pty Ltd Impairment of Goodwill – Wescone Distribution Pty Ltd Balance 31 December 2018 $ 599,391 - - 4,274,534 (3,525,706) 1,348,219 2017 Restated $ - 599,391 - - - 599,391 (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 2018 the Group used a discounted cash flow model in accordance with the value-in-use (VIU) method, which reflect the present value of the future cash flows expenditure to be derived from the CGU. The significant inputs and key assumptions used by management within the discounted cash flow model for both CGUs are: 31 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Ecoquip Australia Pty Ltd: The cash flows for the first 18 months of the model is based on the 2019 budget as prepared by management • • Short term growth rate of 1% • CPI inflation of 2% • Pre-tax discount rate of 20% to calculate net present value Wescone Distribution Pty Ltd: The cash flows for the first 18 months of the model is based on the 2019 budget as prepared by management • • Pre-tax discount rate of 20% to calculate net present value The Group has determined that there is an impairment to the carrying value of the Wescone goodwill in the current reporting period due to the loss of expected business with BHP, a key customer. The impact of that loss is an issue in the legal proceedings commenced against the vendor of Wescone. Sensitivity of assumptions Ecoquip Australia Pty Ltd: The Directors and management have not identified any reasonable possible changes to the key assumptions and significant inputs noted above (in isolation) which would have a material impact on the carrying value of the CGU. Wescone Distribution Pty Ltd: The Directors and management have performed a sensitivity analysis on the discount rate applied which indicates a 10% increase in the discount rate would result in an increase of impairment of $84,719 and a 10% decrease in the discount rate would result in a decrease in impairment recognised of $104,276. 20. Trade and other payables Trade Creditors Accrued Expenses GST PAYG FBT Sundry Creditors 21. Interest bearing loans and borrowings Non-bank loans Finance leases 22. Employee benefit liabilities Employee Entitlements Superannuation 2018 $ 2017 Restated $ 131,975 137,478 4,337 12,796 7,200 5,700 299,486 2018 $ 9,616 103,521 113,137 2018 $ 14,666 26,856 41,522 496,770 650,867 39,156 20,342 - 140,000 1,347,135 2017 $ 42,291 166,104 208,395 2017 Restated $ 5,799 18,427 24,226 Note 27 32 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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. 23. Non-current liabilities Non-bank loans Finance leases 24. Equity (a) Contributed equity Fully paid ordinary shares Note 27 2018 $ 1,048 217,739 218,787 2017 $ - 292,285 292,285 No. of shares 2018 8,244,533,558 No. of shares 2017 6,244,533,558 $ 2018 72,792,329 $ 2017 67,964,945 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. 33 VOLT POWER GROUP LIMITED ABN 62 009 423 189 Dividends There were no dividends declared or paid during the reporting period. Movements in ordinary shares Details 1 January 2017 Shares issued for cash Shares issued on conversion of loan Shares issued to purchase investment 31 December 2017 Shares issued to purchase investment Shares issued as part of acquisition consideration Transaction costs 31 December 2018 No. of shares $ 594,533,558 3,600,000,000 2,000,000,000 50,000,000 6,244,533,558 1,900,000,000 100,000,000 - 8,244,533,558 62,214,945 3,600,000 2,000,000 150,000 67,964,945 4,750,000 250,000 (172,616) 72,792,329 (b) Other equity $0.0015 expiry 22 May 2020 $0.0020 expiry 22 May 2021 $0.0040 expiry 9 November 2020 $0.0045 expiry 9 November 2021 No. of options 2018 175,000,000 175,000,000 20,000,000 20,000,000 390,000,000 No. of options 2017 175,000,000 175,000,000 20,000,000 20,000,000 390,000,000 $ 2018 36,865 50,820 13,425 12,900 114,010 $ 2017 57,635 30,909 2,373 1,927 92,844 Movements in other equity There were no movements in other equity during the financial year ending 31 December 2018. (c) Reserves Share based reserves - Reserve holding shares subject to the achievement of performance based measures Options based reserves 2018 $ 3,470,000 2,590,456 6,060,456 2017 $ 3,470,000 2,476,446 5,946,446 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. 25. 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. (a) Basic earnings/(loss) 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) 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 2018 cents 2017 cents (0.0555) (0.0555) 0.068 0.068 2018 $ 2017 $ (4,510,785) (4,510,785) 2,625,618 2,625,618 34 VOLT POWER GROUP LIMITED ABN 62 009 423 189 26. Acquisitions Acquisition of EcoQuip Australia Pty Ltd (a) The net effect of the adjustments made to the values of assets and liabilities, as included at 31 December 2017, assumed on the acquisition of EcoQuip are as follows: EcoQuip assets and liabilities values Amount settled in cash Amount settled in equity Total 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 Previous Amount 1,000,000 150,000 1,150,000 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 Adjustment (32,480) - (32,480) 1,242 94,217 - 95,459 - - - (56,514) - 9,557 70,563 (24,417) (811) - - 94,648 (47,324) (79,804) (32,480) (32,480) (1,242) (33,722) - (33,722) Restated Amount 967,520 150,000 1,117,520 1,028,931 1,348,548 1,765 2,379,244 617,744 12,654 630,398 (1,279,180) (323,530) (16,909) - (61,480) (1,681,099) (292,285) (292,285) 1,036,258 (518,129) 599,391 1,117,520 967,520 (1,028,931) (61,411) 35,747 (25,664) 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. Subsequent to the completion statement being finalised the previous owner paid Volt $32,480 as an adjustment to the purchase price, based on the value of net assets acquired. Identifiable net assets The fair value of the trade and other receivables acquired as part of the business combination amounted to $1,348,548, which is equal to the gross contractual amount. Goodwill Goodwill of $599,391 is primarily related to growth expectations, expected future profitability and expected cost synergies. Goodwill has been allocated to cash-generating units at 31 December 2018. The goodwill that arose from this business combination is not expected to be deductible for tax purposes 35 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (b) Acquisition of Wescone Distribution Pty Ltd On 23 January 2018 the Group acquired 100% of the equity instruments of Wescone Distribution Pty Ltd (Wescone), a Perth based business, and it was determined that Volt obtained ‘control’ of Wescone pursuant to AASB 10 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 Completion working capital adjustment Total Recognised amounts of identifiable net assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Current tax asset Total current assets Property, plant and equipment Deferred Tax Assets Total non-current assets Trade and other payables Employee entitlements Interest bearing loans and borrowings Total current liabilities Interest bearing loans and borrowings Total non-current liabilities Identifiable net assets Goodwill on Acquisition 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 $ 4,750,000 250,000 (12,398) 4,987,602 222,629 58,166 491,806 266 10,908 783,775 158,361 - 158,361 (149,813) (40,925) (37,285) (228,023) (1,045) (1,045) 713,068 4,274,534 (4,750,000) (222,629) (4,527,371) 73,497 4,600,868 The goodwill on acquisition was attributable to Wescone’s position and profitable trading in the mining services market. Due to the suspension of a service agreement with a key customer, management conducted a review of the carrying value of goodwill on acquisition. Based on an assessment of the loss of profitability from suspension of these arrangements and the requirements of AASB 136 Impairment of Assets, the group determined that it incurred an impairment expense of $3,525,706 in the December 2018 financial year. Contingent consideration 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 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 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 27. Leases The Group’s has various items of plant and equipment that are held under finance lease arrangements. As at 31 December 2018, the net carrying amount held under finance lease arrangements is $321,260 (2017: $458,389). 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 2018 $ 2017 $ 103,521 217,739 166,104 292,285 Future minimum finance lease payments at the end of each reporting period under review were as follows: 2017 Lease payments Finance charges Net present values 2018 Lease payments Finance charges Net present values Within 1 Year $ 1-5 years $ After 5 years $ Total $ 205,782 (39,678) 166,104 124,738 (21,217) 103,521 333,514 (41,229) 292,285 237,450 (19,711) 217,739 - - - - - - 539,296 (80,907) 458,389 362,188 (40,928) 321,260 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. 28. 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 Review of 6 June financial report Review of Wescone Acquisition Total remuneration for audit and other assurance services Total remuneration of BDO 2018 $ 2017 $ 40,546 - 4,000 44,456 44,656 33,787 5,100 - 38,887 38,887 29. Contingencies Contingent consideration 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. The Group has no contingent liabilities as at 31 December 2018. 37 VOLT POWER GROUP LIMITED ABN 62 009 423 189 30. 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. 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 31. 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: Purchases: Purchases of goods and services – EC&M Ltd Purchase of accounting support services during administration – EC&M Ltd Purchase of rent and administration support services – EC&M Ltd 2018 $ 2017 $ 34,992 34,992 69,984 35,000 70,000 105,000 2018 $ 449,960 - - 87,685 537,645 2017 $ 299,973 - - 88,544 388,517 2018 $ 2017 $ 436,575 - 238,266 674,841 - 53,090 90,000 143,090 ECM Pty Ltd (ECM) is a related party of Mr Simon Higgins, who are paid for providing office rent and accounting, tax and IT support at a rate of $15,000 per month, plus any outgoings relating to the group. ECM Pty Ltd was contracted to recover a switch room asset from a site in Carnarvon for a total cost of $28,679. The Group’s subsidiary EcoQuip Australia Pty Ltd entered into a contract with ECM, for the provision of construction services by ECM. These transactions totalled $407,896 for the year ended 31 December 2018. ECM Pty Ltd entered into an agreement providing office rent to EcoQuip at $3,583 per month, starting 1 May 2018. 38 VOLT POWER GROUP LIMITED ABN 62 009 423 189 32. Subsidiaries and transactions with non-controlling interests Significant investments in subsidiaries during the year ended 31 December 2018 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 Wescone Distribution Pty Ltd EcoQuip Australia Pty Ltd 33. Non-controlling interests (a) Ecoquip Summarised balance sheet Current assets Current liabilities Current net assets Non-current assets Non-current liabilities Non-current net assets Net Assets Accumulated NCI Country of incorporation Australia Australia Australia Australia Australia Australia Australia Class Of Shares Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Equity holding 2018 % 100 100 100 100 100 100 50 Equity holding 2017 % 100 100 100 100 100 0 50 2018 2017 461,905 (82,925) 378,980 748,109 (377,045) 371,064 750,044 2,063,935 (1,223,993) 839,942 630,398 (458,389) 172,009 1,011,951 375,022 518,129 (b) Ecoquip Summarised statement of comprehensive income Revenue Profit for period other comprehensive Total comprehensive income Profit allocated to NCI (c) Ecoquip Summarised cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net increase/ (decrease) in cash and cash equivalents 34. Events occurring after the reporting period 2018 531,299 (526,214) - (526,214) (263,107) 2018 (1,277,404) (213,097) 77,249 (1,413,252) An Exclusive Distribution and Alliance Agreement was signed by EcoQuip Australia Pty Ltd and RSEA Pty Ltd on 4 March 2019. There are no other events that occurred subsequent to the reporting period ending, that would have a material impact on the financial statements as at 31 December 2018 39 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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 23 March 2017, with 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 on 8 November 2017, with 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 - (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) 2018 $ 2017 $ 114,010 - 114,010 92,844 - 92,844 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. 40 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (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 – Fujian Robust Power 31 December 2018 EUR USD SEK 31 December 2017 EUR USD SEK 409 - - - - - - - - - - - - - - - - - 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 Net foreign exchange gain/(loss) 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 11 2018 $ 5,659 5,659 - - 2017 $ - - - - Sensitivity At the end of the year the Group had exposure to changes in the USD exchange rates. The impact is immaterial. USD exchange rate- increase 10% USD exchange rate- decrease 10% 2018 $ 66 (66) 2017 $ - - (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 2018, 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. Note 2018 Trade and other receivables - current Cash and cash equivalents 15 14 $ 256,763 1,233,662 1,490,425 2017 Restated $ 553,690 2,988,650 3,542,340 41 VOLT POWER GROUP LIMITED ABN 62 009 423 189 (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 Note 2018 Trade and other receivables - current Cash and cash equivalents 15 14 $ 256,763 1,233,662 1,490,425 2017 Restated $ 553,690 2,988,650 3,542,340 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) 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) Note Level 1 Level 2 Level 3 Total 31 December 2017 Financial liabilities Convertible loan Total 31 December 2018 Financial liabilities Convertible loan Total - - - - - - - - - - - - - - - - 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. 42 VOLT POWER GROUP LIMITED ABN 62 009 423 189 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. 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) 2018 $ 702,117 2,734,847 3,436,964 (193,874) (193,874) 3,243,090 72,792,329 6,060,457 (75,609,696) 3,243,090 (4,413,897) (4,413,897) 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 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 2018. Standards Likely to Have a Financial Impact; Reference AASB 16 Leases Application date 1 January 2019 Summary 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. • 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. 44 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 2018 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 2018 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 2018. On behalf of the board. Simon Higgins Chairman Perth 29 March 2019 45 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 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 2018, 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 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 2018 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 opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 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 Accounting for Business Combination Key audit matter How the matter was addressed in our audit As disclosed in Note 26 of the financial report, during Our procedures included, but were not limited to the the year the Group acquired the business of Wescone following: Distribution Pty Ltd. Ltd (Wescone). • Reviewing the Acquisition Agreements to Under Australian Accounting Standards, management is understand the key terms and conditions, and required to identify all assets and liabilities acquired confirming our understanding of the transaction and estimate the fair value of each item. Any excess with management; consideration that is not attributed to an asset or liability is to be recognised as goodwill. • Agreeing the purchase price to the Agreements and agreeing the cash consideration paid to This is a key audit matter due to the size of the banking and accounting records, and the shares acquisition, the complexities inherent in a business consideration to the share price used in the combination and the significant judgements made by calculation to the ASX quoted share price at management, including the identification and acquisition date; measurement of the fair value of assets and liabilities acquired. • 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 Acquisition Agreements 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 26 of the financial report. Carrying Value of Intangible Assets - Goodwill Key audit matter How the matter was addressed in our audit As disclosed in Note 19 of the financial report, an Our procedures included, but were not limited to the impairment of goodwill was recognised for the year following: ended 31 December 2018. • Holding discussions with management about As required by the Australian Accounting Standards, the performance of each of the CGUs; Group performed an annual impairment test for each cash generating unit (CGU) to which goodwill has been allocated to determine whether the recoverable amount is below the carrying amount as at 31 December 2018. This was determined to be a key audit matter as management’s assessment of the recoverability of the goodwill is supported by a value in use (VIU) cash flow forecast which requires estimates and judgements about future performance. • Challenging key inputs used in the VIU model including the following: • Comparing growth rates with historical data and economic and industry growth factors; • Comparing the Group’s forecast cash flows to the Board approved budget; • Comparing the discount rates utilised by management to an independently calculated discount rate by our internal valuation specialist; • Performing sensitivity analysis on the key inputs used in the VIU models; and • Assessing the adequacy of the related disclosures in note 19 of the financial report. 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 2018, 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 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 2018. In our opinion, the Remuneration Report of Volt Power Group Limited, for the year ended 31 December 2018, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Jarrad Prue Director Perth, 29 March 2019 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 28 March 2019. 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 735 545 181 279 435 2,175 1,743 No. ordinary shares 8,220,411,172 21,729,000 1,483,105 795,316 114,965 8,244,533,558 95,092,086 % of issued capital 99.71 0.26 0.02 0.01 0.00 100.00 1.15 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 13 16 17 18 19 19 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 MR BERNARD OWEN STEPHENS & MRS ERIN JOSEPHINE STEPHENS BOUCHI PTY LTD MR GREGORY JOHN BITTAR DARRYL PETER OLDFIELD HIGGINS WESTERN PTY LTD MARK JOHN CLARK ACT6 PTY LTD BOTSIS HOLDINGS PTY LTD JOHN HENDER ELECON INTERNATIONAL PTY LTD RT WEEKS SUPER PTY LTD CHEMBANK PTY LIMITED AUSTRALIAN GYPSUM INDUSTRIES PTY LTD Total Balance of register Grand total No. ordinary shares 2,000,000,000 692,000,000 589,500,000 428,000,000 345,000,000 320,000,000 200,000,000 150,000,000 % of issued capital 24.26% 8.39% 7.15% 5.19% 4.18% 3.88% 2.43% 1.82% 125,000,000 110,351,594 110,000,000 109,000,000 100,000,000 100,000,000 100,000,000 88,000,000 82,000,000 80,000,000 60,000,000 60,000,000 5,848,851,594 2,395,681,964 8,244,533,558 1.52% 1.34% 1.33% 1.32% 1.21% 1.21% 1.21% 1.07% 0.99% 0.97% 0.73% 0.73% 70.94% 29.06% 100.00% 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 (and related) Adam Boyd (and related) No. ordinary shares 3,807,351,594 910,000,000 % of issued capital 46.20% 11.00% 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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