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ANNUAL FINANCIAL REPORT 2013 BLUGLASS LIMITED AND CONTROLLED ENTITIES | ABN 20 116 825 793

COMPANY DIRECTORY

The company Secretary is: Mr Emmanuel Correia.

The address of the principal registered office in Australia is: 74 Asquith Street, Silverwater NSW 2128

Registers of securities are held at the following address: 770 Canning Highway, Applecross WA 6153

Stock Exchange Listing:

Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

FUTURE LOWER TEMPERATURE

111213

BLUGLASS LIMITED AND CONTROLLED ENTITIES KEY HIGHLIGHTS 2013

The environmental advantages of global installation of LEDs are enormous. In the US alone by 2025 LED lighting will reduce energy consumption in lighting by 62% and void the need to build 133 new power plants.

THE RPCVD REVOLUTION

BluGlass is a new breed of semiconductor company dedicated to bringing to market a breakthrough in the LED lighting and solar industries.

We are developing a technology called remote plasma chemical vapour deposition (RPCVD), which is a revolutionary approach to the manufacture of group III nitrides which are essential components of millions of electronic and power devices.

Our goal is to offer better performing, lower cost devices and more environmentally sustainable processes for the manufacturers of high efficiency devices such as LEDs for overhead lighting and concentrated solar cells for utility scale solar power. We believe these technologies are set to have meaningful impact on the global economy and environment as the world inevitably engages in climate change mitigation and better environmental practices.

Founded in June 2005 as a result of more than 15 years research at Sydney’s Macquarie University and listed in September 2006 on the Australian Stock Exchange (ASX: BLG). The Company holds a number of patents in key semiconductor markets including the US, China, Europe and Japan.

HIGH BRIGHTNESS LED MARKET FORECAST BY APPLICATION

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FORECAST BY APPLICATION
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
1200 2003e 2014e 2015e 2016e 2017e
OTHERS AUTOMOTIVE SIGNS LIGHTING MOBILE / DISPLAY
Market Size (Usd Million)
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“THIS IS A PIVOTAL MOMENT FOR THE COMPANY THAT HAS SIGNIFICANTLY DE-RISKED THE TECHNOLOGY. WE LOOK FORWARD TO CAPITALISING ON OUR RECENT ACHIEVEMENTS AND BRINGING OUR CUTTING EDGE TECHNOLOGY TO COMMERCIAL REALITY” – GILES BOURNE, CEO

LED EQUIPMENT MARKET OPPORTUNITY BluGlass is targeting the LED equipment market which represents a $6.1B opportunity through to 2020 (Yole Developpement 2012).

The LED share in general lighting is expected to grow from 5% today to over 45% in 2016 and 70% by 2020. The global lighting market is expected to have revenues of over $103B in 2020 (Lighting the way, McKinsey Report, August 2012).

CPV MARKET OPPORTUNITY

The CPV market is expected to grow to 4.7GW by 2020 (Global Data Concentrated Photovoltaic 2012 Report). CPV promises large scale, cost effective, renewable energy from the sun.

CONCENTRATED PV MARKET, GLOBAL, INSTALLED CAPACITY, MW 2011-2012

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INSTALLED CAPACITY, MW 2011-2012
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2011 2014 2017 2020
ANNUAL CAPACITY CUMULATIVE CAPACITY
Installed Capacity (mw)
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SOURCE: GlobalData; Primary research with C (Chief) - level marketing and technical experts in Italy, the UK, Spain, China and the US

OTHER MARKET OPPORTUNITIES:

BluGlass is now looking to broaden the paths for commercialisation for low temperature RPCVD and is targeting GaN on silicon.

The commercial opportunity for power electronics is growing with the total power electronics device market to reach $20bn in 2012 , and the power electronics market is expected to remain one of the most attractive sectors of the semiconductor industry for the next decade (Yole Développement 2012).

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2012 2022
GAN SEMICONDUCTOR MARKET REVENUE SHARES BY
APPLICATION SECTOR (2011-2022).
[COMPUTER SECTOR ] [ICT SECTOR ] [CONSUMER ELECTRONICS SECTOR ]
[AUTOMOTIVE SECTOR ] [OTHER]
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GAN SEMICONDUCTOR MARKET REVENUE SHARES BY APPLICATION SECTOR (2011-2022).

The Gallium Nitride (GaN) semiconductor device market was $12.6m at the end of 2012

GaN power semiconductors is forecast to increase at an explosive CAGR of 63.78% over 10 years from 2012 to $1.75bn by end of 2022 SOURCE: (Gallium Nitride (GaN) Semiconductor Devices (Discretes & ICs) Market, Global Forecast & Analysis (2012 – 2022) by MarketsandMarkets).

HIGHL IGHTS FOR 2013

COMPLETES P URCHASE OF SPTS HELD PORTION OF EPIBL U JOINT VENTURE COMPANY

~~The restructur~~ e has brought significant benefits to ~~shareholders of~~ BluGlass, including 100% ownership ~~of the RPCVD t~~ echnology that was developed by the EpiBlu Joint Venture.

BLUGLASS BRINGS IMPURITIES TO WITHIN IN DUSTRY STANDARDS

~~In a breakthrou~~ gh for the company, and a world first ~~achievement, B~~ luGlass was able to bring hydrogen, ~~carbon and o~~ xygen impurities in its GaN films to ~~within industr~~ y acceptable standards using its low ~~tem~~ perature RPCVD process

BLUGLASS HIT S PROOF OF CONCEPT MILESTONE

~~BluGlass prov~~ es that its low temperature RPCVD ~~process can gro~~ w n-GaN films on GaN templates that ~~meet ind~~ ustry performance benchmarks

RAISES $4.75M PLACEMENT & SPP

~~BluGlass su~~ ccessfully raised $4.75 million in ~~an institution~~ al placement and Share Purchase ~~Plan to conti~~ nue operations and commence the ~~commerc~~ ialisation and scaling activities

~~BLUGLASS~~ HITS SIGNIFICANT TECHNICAL ~~MILESTONE~~ – PRODUCING p-GaN FILMS THAT ~~MEET~~ INDUSTRY BENCHMARKS In its most significant technical milestone achieved to date, BluGlass announced that it is now capable of producing low temperature p-GaN layers on GaN templates with industry matching electrical performance

WINS $3M FUNDING THROUGH THE CLEAN TECHNOLOGY INNOVATION GRANT BluGlass was awarded $3M in federal government funding as part of the Clean Technology Innovation programme for its ‘Versatile prototype deposition machine for energy saving, lower cost LEDs on various substrates including silicon’ project. This represents an enormous commitment from the Commonwealth Government and demonstrates their continued belief in BluGlass’ ability to bring our breakthrough technology to market

SOURCE: Strategies Unlimited Feb 2013

KEY HIGHLIGHTS 2013

BLUGLASS LIMITED AND CONTROLLED ENTITIES

DEVELOPMENT ROADMAPS

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TI ME
FACILITIES
1 2 3
FACILITIES INSTALL MOCVD COMMISSION NEXT
UPGRADE MACHINE GENERATION RPCVD
PLATFORM
LED 1 2 3 4
DEM D ONSTRATE RPCVD eliver p-GaN EFFICIENCY USING Brighter LEDs INCREASE LED AcceptanceIndustry Bring to Scale DEMONSTRATE
GMR EETS INDUSTRY OWN p-GaN THAT RPCVD p-GaN ON INDUSTRY EVALUATION PRELIMINARY SCALABILITY OF RPCVD
MOCVD MQW TECHNOLOGY
BENCHMARKS LAYERS OF RPCVD p-GaN
GaN/ REVENUE
SILICON
1 2 3
DEMONSTRATE
COMMERCIALISE
DEVELOP GaN ON IMPROVED (over DEMONSTRATE Ga N
SI LCON NUCLEATION MOCVD) GaN PROCESS PROCESS ON 8” GaN/Si
LAYER TECHNOLOGY ON 2” SILICON SILICON WAFER TECHNOLOGY
WAFER
$$$$$$$$$$
InGaN REVENUE
1 4 6
SOLAR
DEM ONSTRATE HIGH PROTOTYPE PROTOTYPE
QUA LITY InGaN THAT InGaN on MULTI-JUNCTION
M EETS INDUSTRY 3 SILICON InGaN SOLAR CEL L
BENCHMARKS SOLAR CELLS
COMMERCIALISE
DEMONSTRATE InGaN PV
2 p-InGaN 5 7 TECHNOLOGY
PROTOTYPE
DEMONSTRATE
InGaN on DEMONSTRATE HIGH
IMPROVED (over SILICON EFFICIENCY InGaN
MOCVD) INDIUM TANDEM SOLAR CELL
RICH InGaN
SOLAR CELL
$$$$$$$$$$
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This indicative Roadmap is a forward looking statement based on the current expectations, estimates, projections and assumptions of BluGlass Management. Because it is a work in progress, subject to known and unknown risks and uncertainties, actual future milestones, results and timelines may differ materially from what is forecast at this time.

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04 10 12 DIRECTOR’S INFORMATION ON REMUNERATION DIRECTOR’S REPORT DIRECTORS REPORT REPORT[18] CONTINUED 20 21 22 23 AUDITOR’S FINANCIAL STATEMENT OF STATEMENT INDEPENDENCE STATEMENTS COMPREHENSIVE OF FINANCIAL DECLARATION INCOME POSITION 24 25 26 55 STATEMENT OF STATEMENT OF FINANCIAL DIRECTOR’S CHANGES IN CASHFLOW STATEMENT NOTES DECLARATION EQUITY

56 59 61 INDEPENDENT ADDITIONAL CORPORATE AUDITOR’S REPORT INFORMATION GOVERNANCE STATEMENT

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

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CHAIRMAN & CEO FOREWORD

The BluGlass Board and Management take great pleasure in presenting to you the 2013 Annual Report following what has been an outstanding year in the development of our RPCVD technology. During the course of the year we delivered a number of our key technology milestones, which have positioned the company well for its commercialisation phase. The most significant achievement for the Company during the year was, unequivocally demonstrating that our RPCVD technology can produce gallium nitride (n-GaN and p-GaN) films at low temperature, that meet industry performance benchmarks.

BluGlass has initiated discussions with the LED industry with a view to explore the commercialisation of the technology once p-GaN LED performance lift is achieved (our Brighter LEDs milestone). Our primary goal now is to demonstrate that low temperature RPCVD has the ability to improve LED light output.

While our focus is on p-GaN performance lift as the quickest route to market, there is also significant industry interest in GaN on silicon. In July 2013, the Company announced that we had been awarded a federal $2.99M Clean Technology Innovation grant which will significantly assist BluGlass in expediting our GaN on silicon research and development. GaN on silicon is expected to have significant market interest, not just for LEDs, but for solar and also the power electronics market, due to its low cost and scalable properties as a substrate.

BluGlass will also be targeting revenue generation by producing wafer templates as an early market entry point that will boost acceptance of our technology, and build credibility in the market. During the year the Company purchased a former production model MOCVD machine, second hand, and at the time of writing this tool is about to come online and commence operation. This will initially operate as an MOCVD machine to produce the LED and multi-quantum well base structures required for the demonstration of the Brighter LEDs milestone. This milestone involves BluGlass demonstrating a performance lift of an LED using low temperature RPCVD p-GaN on top of MOCVD grown multiquantum wells. During this phase, the design for its retrofit as an RPCVD machine will commence in order to demonstrate the scalability of the RPCVD technology from a 7x2” deposition machine to a 19x2” deposition machine. This will enable multiple programmes to be in place simultaneously.

BluGlass is positioned to commercialise its ground breaking technology during a period of high market growth.

WHY RPCVD FOR GaN ON SILCON?

~~In addition to the Company’s LED and PV programmes, BluGlass sees major potential benefts of the low temperature growth of nitrides on silicon for use in LEDs and power electronics as follows:~~ Traditionally GaN on large silicon substrates are very difficult to make because of the high temperature MOCVD growth causing the wafer to ‘bow’ causing damaging cracks to the overlying GaN material and reducing ~~manufacturing yield Because RPCVD is a lower temperature process, this reduction in temperature will ease the stress of the wafer during fabrication and result in little or no bow control issues and enable large scale wafer production~~

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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FY 2012 FY 2013 FY 2014 FORECAST Progressing towards reducing Proof of Concept Milestone: Brighter LEDs using low temperature impurities levels in GaN films RPCVD Low temperature n-GaN and p-GaN films Developing GaN on silicon at low that meet industry benchmarks temperature 5th Generation RPCVD 5th Generation RPCVD machine 5th Generation RPCVD machine machine Commercial scale MOCVD machine in Former production model MOCVD/ commissioning phase to be converted RPCVD machine into commercial scale RPCVD machine Additional former production model MOCVD machine On track to deliver technology Commenced LED industry engagement Early template revenue stream as a milestones market entry point (MOCVD/RPCVD) Partnering/licensing agreement with company/ies in the LED value chain

BluGlass is in a good position to achieve its milestones. Following the successful capital raise in December 2012 that brought an additional $4.75 million and the cash injection of $2.3 million through the Research and Development Tax Rebate, BluGlass ended the year with a strong balance sheet and cash reserves of $5.6 million. In July 2013, BluGlass announced that it has been awarded a $2.99M Clean Technology Innovation grant, which will significantly assist the research program and development runway.

In September the Australian Cleantech Competition announced that BluGlass had been selected as one of the 2013 Finalists to compete for the title of Australia’s best clean technology. The competition winner will be announced in October 2013.

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In its press release the Australian Cleantech Competition said the finalists were “global leaders and a demonstration of smart and sustainable technologies”. The judges assessed business plans from 30 semi-finalists, short listing those that have the greatest potential to be a commercial success and thereby facilitate the greatest environmental benefits.

commercialise its ground breaking technology during a period of high market growth.

2013 has been a landmark year to date for the company in delivering its technology milestones and entering into the commercialisation phase. The Company is well positioned for the year ahead to meet its milestones and commercialise the RPCVD technology. We look forward to keeping you, our loyal shareholders updated on the progress as we make it.

As always, we thank you for your support and continued contribution to our Company and our RPCVD technology.

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GEORGE VENARDOS Non Executive Chairman

GILES BOURNE Chief Executive Officer

With the LED industry set to have its next wave of growth driven by the general lighting market along with the emergence of silicon as a viable alternative to traditional, substrates for LEDs, PV and power electronics, BluGlass is positioned to

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

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DIRECTORS’ REPORT

Your directors present their report on BluGlass Limited Group and its controlled entities (“the Group”) for the financial year ended 30 June 2013.

DIRECTORS

The names of directors in office at any time during or since the end of the year are:

on achieving its technology milestones using its patented low temperature Remote Plasma Chemical Vapour Deposition (RPCVD) technology to manufacture semiconductor materials. RPCVD has many potential advantages over the current industry technologies.

There were no significant changes in the nature of the Group’s principal activities during the financial year.

Mr George Venardos

Mr Gregory Cornelsen Mr Chandra Kantamneni Dr Alan Li (Resigned 28 August 2012)

Dr William Johnson

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

COMPANY SECRETARY

The following person held the position of company secretary at the end of the financial year:

Mr Emmanuel Correia

Mr Emmanuel Correia is a Chartered Accountant and has extensive experience in the corporate finance and equity capital markets. Emmanuel has had over 20 years public accounting and corporate finance experience both in Australia, North America and the United Kingdom. He has held various senior positions with Big 4 accounting firms and boutique corporate finance houses.

Emmanuel provides corporate advice to a diverse client base both in Australia and in overseas markets. Emmanuel has previously held a number of public company directorships and his key areas of expertise include Initial Public Offerings and secondary capital raisings, corporate strategy and structuring merger and acquisitions. He is a Non-Executive Director of Forge Resources Limited and Ambassador Oil and Gas Limited

These technologies are set to have meaningful impact on the global economy and environment as the world inevitably engages in climate change mitigation and better environmental practices.

FINANCIAL SUMMARY

Revenue has increased by $2,298,092 up 93.5% to $4,725,912 due to the following factors:

Initial eligibility and receipt of the Commonwealth’s Research and Development Tax Rebate ($2,349,139) for expenditure incurred in both BluGlass Limited ($736,112) and EpiBlu Technologies ($1,626,030) for the year ending 30 June 2012. This was the first year of the scheme so no funds were received in the year ending 30 June 2012;

PRINCIPAL ACTIVITIES

The principal activity of the consolidated entity or “the Group” during the financial year was to further the research and development of Group III nitrides for the development of new processes and equipment to manufacture high efficiency devices such as LEDs and solar cells. The Group is working

The final retention payment of $240,054 being received from the Commonwealth Climate Ready, which ended on the 30 June 2012.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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Accrual of the Research and Development Tax Rebate applicable to for the 2012/13 financial year. The Research and Development program has been registered with AusIndustry early July 2013 and the appropriate schedules prepared for inclusion with the 2012/13 tax return.

Other income, being principally interest has decreased by $113,692, down 42.2%, due to the decrease in interest rates during the year and lower cash balances held on short-term deposits.

Gross expenditure has decreased on a consolidated basis by $2,269,777, down 26.2% to $6,402,638 due to the following factors:

Research and development expenditure was no longer being incurred in EpiBlu Technologies Pty Ltd (the JV subsidiary, EpiBlu) from 1 July 2012. Salaries and wages were thus no longer being incurred for staff in the UK. Salaries and wages have decreased down to
$2,395,296, down 21.6% from $3,056,584 in 2012. The minority shareholding of 49% in EpiBlu was acquired on 9 October 2012(with the economic value being acquired from 1 July 2013);
Depreciation expense is reducing as original research equipment is progressively being written off, $719,821 (2012; $1,641,923);
The other major non cash item of expenditure; employee
incentive option amortisation increased by $235,421 due to new allocations granted in January 2013.

Cash required for operational expenses, repayment of borrowings and capital expenditure before the allocation to non-controlling interest in EpiBlu averaged $255,167 per month, (2012: $439,513). The decrease is mainly due to no expenditure on research in EpiBlu Technologies RPCVD technology.

The consolidated loss for the period amounted to $1,676,726 (2012: $6,230,574). This result was able to be achieved principally through reduced depreciation and closure of the EpiBlu joint venture operations as well as receipt and accrual of 2 years worth of Research and Development Tax Rebates.

The net assets of the consolidated entity increased by $3,794,784 from 30 June 2012 to $17,126,424 due to the following:

Successful share placement and Share Purchase Plan during the period (2012: nil);
Receipt of the Research and Development Tax Rebate for expenditure for the 2011/2012 financial year
Accrual of the 2012/13 Research and Development Tax Rebate of $1.967m.

The statement of Financial Position does not include a value for the increasing number of patent applications and patents granted during the period since listing on the ASX in 2006 as all research and development costs are expensed as incurred, and not capitalised;

Accounting Standards applicable to the acquisition of SPTS’s 49% of EpiBlu require that BluGlass recognises the EpiBlu balance sheet as at the 30th June 2012 (the effective date of the transaction) and as such does not reflect any of the $1.626m of the Research and Development Tax Rebate subsequently claimed and received by EpiBlu. Fair value of the shares issued to SPTS was $1.374m compared to the net assets at 30 June 2012 of $0.391m giving rise to a $0.981m Non-Controlling Interest (NCI) Acquisition Reserve. The subsequent receipt of this cash does not enable the NCI Acquisition Reserve to be adjusted.

REVIEW OF OPERATIONS

The 2013 Financial Year was a year of major technical breakthroughs for the Company with the achievement of a number of key technology and commercial milestones. The Company is now closer to taking the breakthrough RPCVD technology to the rapidly expanding LED market. The key achievements during the year are discussed below;

100% ownership of the RPCVD technology that was developed by the EpiBlu joint venture along with the future benefits from commercialisation of the technology
Continued support from SPTS who will continue to provide marketing assistance to promote the commercialisation of the technology
BluGlass also retains a license to the background intellectual property required in order to exploit the technology

In September 2012, BluGlass announced that the claims of one of its key patents was accepted and granted by the US Patent and Trademarks Office. This brought the total granted patent portfolio of the company to 17 international patents in five patent families, a significant advancement for the company which commenced with three provisional patents in 2006.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

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Critically in October 2012, the Company announced that it had been successful in bringing key impurity levels (carbon, hydrogen and oxygen) on par with the industry standard process, MOCVD. This was a significant step forward for the Company that represented the overcoming of a major technical hurdle. Carbon and oxygen were well known inhibitors of RPCVD for commercial application in the LED industry, and the demonstration of industry accepted levels of these materials was recognised by the LED community as an important achievement for BluGlass.

Compound Semiconductor Magazine followed this announcement with the first BluGlass feature interview since 2006 and said “The breakthrough has been a long time coming… but could have a profound effect on LED manufacturing”.

This key technical achievement enabled BluGlass to achieve its Proof of Concept Milestone shortly afterwards: In November 2012, BluGlass announced that it had successfully demonstrated n-GaN films with electrical properties that meet industry performance benchmarks.

Room temperature hall measurement results of an RPCVD n-GaN film grown on a un-doped commercial GaN template compared to a typical MOCVD grown n-GaN film

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Typical MOCVD p-GaN specification Recent RPCVD p-GaN data
IQE Data ANU Data
Mobility ≥ 250 cm [2] /V.s 250 cm [2] /V.s 300 cm [2] /V.s
For a carrier concentration of 2.0 x 1018 cm- [3] 2.0 x 1018 cm- [3] 2.1 x 1018 cm- [3]
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In December 2012 BluGlass was successful

in raising $4.75M through an Institutional Placement and Share Purchase Plan. This funding will be used to continue operations and commence the commercialisation and scaling activities in line with the published roadmaps.

Also in December 2012, BluGlass announced that its initial laboratory experiments in the development of p-GaN had been successful. A low temperature p-GaN layer was grown on a commercially produced MOCVD 456nm blue multi-quantum well structure. Preliminary testing was carried out on the sample using a 0.5 mm diameter size p-type indium contact. The light output was measured with a UV-detector positioned under the wafer calibrated at the wavelength of the light emission.

At 20 mA, 4.7V the light output was 270 µW (Light emission at 458 nm, FWHM of 19 nm)
At 50 mA, 5.5V the light output was 1.23 mW (Light emission at 456 nm, FWHM of 18 nm)

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Figure Two : Demonstration of light emission from a BluGlass low temperature RPCVD p-GaN layer grown on a MOCVD multi-quantum well structure.

In February 2013, BluGlass announced that it had succeeded in producing p-type gallium nitride films with industry equivalent performance properties using its low temperature RPCVD technology when grown on top of MOCVD GaN templates. This breakthrough followed on from the company’s proof of concept milestone achievement in November 2012.

The current was applied continuously for more than 60 minutes without the loss of function.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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Room temperature hall measurement results of an RPCVD p-GaN flm grown on a commercial GaN template compared to a typical MOCVD grown p-GaN flm	Room temperature hall measurement results of an RPCVD p-GaN flm grown on a commercial GaN template compared to a typical MOCVD grown p-GaN flm	Room temperature hall measurement results of an RPCVD p-GaN flm grown on a commercial GaN template compared to a typical MOCVD grown p-GaN flm
	Typical MOCVD p-GaN specifcation	Recent RPCVD p-GaN data
Resistivity	< 3 Ohm.cm	0.7 Ohm.cm
For a carrier concentration of	≥ 1 x 1017	1 x 1017

This is possibly the most significant technical milestone achieved to date; and the Company is now focussed on demonstrating improved LED device efficiency using RPCVD grown p-GaN layers to prove the commercial value of a low temperature technology.

In July 2013, BluGlass announced that it had won almost $3 million in funding under the Australian Federal Government’s Clean Technology Innovation Program to demonstrate higher efficiency, energy saving, lower cost nitride based LED’s on various substrates, including silicon. This funding support for the continued advancement of our RPCVD technology represents an enormous commitment from the Commonwealth Government and demonstrates their continued belief in BluGlass’ ability to bring its breakthrough technology to market .

Furthermore, in July 2013 BluGlass received final development consent to put in place the remaining infrastructure upgrades to BluGlass’ state of the art Silverwater facility. This was a lengthy Development Application (DA) process, and to receive full consent is a good step for BluGlass as it completes the facility upgrades that will allow the company to take the Silverwater facility from a predominately research focused facility to one that is ready to meet the company’s commercialisation and technology scaling milestones.

The team has been meticulously designing and developing these facility improvements since early 2013. This has involved sourcing a suitable larger scale MOCVD deposition tool (compared to the existing RPCVD tool employed at BluGlass) and it’s shipping and installation at Silverwater. This MOCVD machine arrived in Australia in March 2013 and following the recent DA approval it is now in the final stages of installation and commissioning and it is expected to come online at Silverwater in the coming weeks.

This new machine will initially operate as an MOCVD machine which the technology team will use to produce the MOCVD LED and multi-quantum well base structures for the demonstration of the Brighter LEDs milestone. While this machine is operating as an MOCVD machine, the design phase for its retrofit as an RPCVD machine will commence in order to demonstrate the scalability of the RPCVD technology from a 7x2” deposition machine capable cycle to a 19x2” deposition machine.

as it will enable BluGlass to demonstrate easily and in-house the photoluminescence and thickness profiles of RPCVD material at a wafer scale, particularly the effect of high quality, low temperature p-GaN material on top of an MOCVD grown multi-quantum well LED structure. This will significantly reduce the time it takes to evaluate material and allow us to test more of our growth runs for PL. The acquisition of the PL Mapper adds to a state of the art set of characterisation tools (like the XRD) enabling us to quickly process wafers and show progress to the industry.

Based on the technical successes during the year, BluGlass has been able to re-engage with companies in the LED value chain, including the major industry leaders to develop future commercial interest in the RPCVD technology. We look forward to furthering these discussions as the Company continues to advance the technology roadmaps.

In conclusion, 2013 has been the most significant year to date for the Company and bodes very well for an exciting 2014 as BluGlass evolves from a pure research and development company to one pursuing its commercial and market goals. The next milestone to produce Brighter LEDs using our revolutionary RPCVD approach is not just an achievement for BluGlass, but one that will have implications for the entire LED industry.

The Company will also continue to develop its low temperature RPCVD technology for other emerging market applications such as Concentrated Photovoltaics (CPV) and GaN on silicon and other optical and electrical device applications. The installation of the new tool will help expedite activity on these roadmaps objectives.

This industry continues to face two major challenges and is continually seeking ways to increase the efficiency of LED devices and also to drive down the cost of manufacture in order to enable the mass adoption of energy saving LEDs in the overhead lighting market.

The RPCVD technology has the potential to address both of these industry concerns. The Company is working towards delivering the RPCVD technology platform with its low temperature advantages as the natural choice for the industry to meet these critical challenges in a single technology solution.

BluGlass has also purchased a Photoluminescence (PL) Mapper. This machine will be a great asset for the company,

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

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DEVELOPMENT ROADMAPS

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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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SIGNIFICANT CHANGES IN STATE OF AFFAIRS

Other than the developments reported elsewhere in this report, there were no significant changes in the state of affairs during the year.

DIVIDENDS PAID OR RECOMMENDED

No dividends were declared in 2013 or 2012.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

The company was succesful in being awarded a Commonwealth Government Clean Technoloy Innovation Grant for $2,999,355 for reseach to undertaken over the next 30 months for its Nitride based LED programme.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

BluGlass will position itself to take advantage of the growing LED and PV markets in order to maximise shareholder return.

BluGlass will continue to deliver on its technology milestones as outlined in the roadmap in the Review of Operations.

These developments, together with the current strategy of continuous improvement and innovation are expected to assist in the acheivement of the Group’s long-term goals and development of its business opportunities.

ENVIRONMENTAL AND SAFETY ISSUES

The BluGlass RPCVD technology uses some materials classified under the Dangerous Goods Act. All materials and consumables are handled in strict compliance with relevant regulatory environmental, health and safety codes, as do all facility emmisions.

The company has in place strict OHS&E procedures and a Safety Manager who reports weekly to the CEO on all safety and environmental related matters. BluGlass meets and exceeds all state and federal OHS&E statutory requirements.

There were no reportable safety or environmental incidents during the course of the year.

With the LED industry set to experience its next wave of growth driven by the general lighting market along with the emergence of silicon as a viable alternative to traditional, expensive substrates for LEDs, PV and power electronics, BluGlass is positioned to commercialise its ground breaking technology during a period of high market growth.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

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INFORMATION ON DIRECTORS

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MR. GEORGE VENARDOS Non-Executive Chairman BCom, FCA, FTI, FAICD, FCSA

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DR. WILLIAM JOHNSON Non-Executive Director BS-Phy, MS-EE, PhD

Current Directorships:

Non-Executive Director – Ardent Leisure Group

Current Directorships:

President and CEO SPTS Pty Ltd

Non-Executive Director – IOOF Holdings Limited

Former Directorships in the last 3 years:

Non-Executive Director – Miclyn Offshore Express Limited
Director Surface Technology Systems (STS) Pt. Ltd (Wales)
Managing Director Crane Ridge Group (CA, USA)

Experience and Expertise

Extensive directorship experience across a broad range of ASX listed companies
Over 30 years experience in the finance, IT, funds management, reinsurance and corporate services sectors

Special Responsibilities

Risk and Audit Committee member, Remuneration and Nominations Committee member

George is a non-executive director with broad listed company experience across a range of different industries. He has more than 30 years experience in the Insurance and Financial Services sector and was formally Group Chief Financial Officer of Insurance Australia Group Limited; Chief Financial Officer, Legal and General Australia; and Chairman of the Insurance Council of Australia Finance and Accounting Committee. George is himself a committed shareholder of BluGlass holding over 980,118 shares.

More than 30 years executive experience in the semiconductor equipment Industry
Semiconductor equipment management and commercialisation expertise
Extensive technical, marketing and executive leadership expertise

Special Responsibilities

Remuneration and Nominations Committee member

William Johnson (“Bill”), is a seasoned CEO with extensive business development/M&A, technological leadership, and general management experience; successful hands-on leadership roles in operations ranging from high technology start-ups to Fortune 500 high technology companies. He is currently President and Chief Executive Officer of SPP Process Technology Systems (SPTS), a manufacturer of capital equipment for the semiconductor and related industries.

Bill has held technical, marketing, and executive management positions with Ford Motor Co. Scientific Research Laboratories (1973-1978), Perkin-Elmer Corp. (1978-1986), Ulvac Corp. (1987-1991), Varian Associates (1992-1994), Intevac Inc. (1994-1996), Oryx Instruments and Materials Corp. (19961999), and Therma-Wave, Inc. (1999-2002). From 20032006, he was founder and managing director of Crane Ridge Associates, a firm providing consulting and M&A guidance to select high tech clientele; his association with Sumitomo Precision Products began in 2007, and he was the architect for the formation of SPTS through the acquisition of assets of Aviza Technology.

Bill was also instrumental in leading the all equity based management buy-out of SPTS in mid 2011 which saw Bridgepoint, a leading European Private Equity company, align themselves with SPTS fully backing the management team and endorsing SPTS’s participation with BluGlass.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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MR. GREG CORNELSON Non Executive Director

BEc

Current Directorships:

Welcome Stranger Mining Limited
Arasor International Limited

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MR. CHANDRA KANTAMNENI Non Executive Director MSc, MS, MBA

Former Directorships in last 3 years:

Managing Director – Peregrine Semiconductor Australia
MOV Corporation Limited
EHG Corporation Limited
Collect Holdings Limited

Former Directorships in last 3 years:

Blackcrest Resources Limited

Experience and Expertise:

More than 30 years experience in the Semiconductor Industry
Operational, Manufacturing & Process Management Expertise
RKS Consolidated Limited
FTD Corporation Limited
Shell Villages and Resources Limited

Special Responsibilities

Risk and Audit Committee member
AAT Corporation Ltd

Experience and Expertise:

Economist and expert in growing SME’s
Track record in managing growth from start-up to success exit via listing
Previous Directorships on Numerous ASX listed companies

Special Responsibilities:

Remuneration and Nominations Committee Chairman, Risk and Audit Committee Chairman

Greg Cornelsen is an economics and business development specialist and a successful businessman having held leadership positions in both large Australian based multinationals and start-up operations. A former international rugby union player, with 25 caps for the Australian Wallabies, he is president of the Australian Barbarian Rugby Club and a board member of the Australian Schools Rugby Foundation. His rugby and business backgrounds have allowed him to develop an extensive network within the Australian business community.

Chandra Kantamneni has more than 30 years experience in the global semiconductor industry and is currently the Technical Director for the University of California Los Angeles (UCLA)’s California Nano Systems Institutes where he manages a state of the art semiconductor and cleanroom fabrication facility. Formerly he was the Vice President of Worldwide Fab Operations of US-based Peregrine Semiconductor Corporation where he managed the world wide Foundry Operations for the Corporation. Prior to that he was the Vice-President and Managing Director of Peregrine Semiconductor, Australia.

Chandra has worked in senior management and engineering positions for some of the world’s largest US-based semiconductor companies, including director of worldwide foundry operations and engineering manager for International Rectifier Corporation, director of engineering for GMT Microelectronics, and Manufacturing Manager of the Fairchild Research Centre of National Semiconductor Corporation.

Greg is a long-time passionate supporter of sustainable practises and clean technologies having grown up on a family station that employed revolutionary broad acre sustainable practises. Greg has always understood the importance of the BluGlass technology for both the LED and solar industries. He is instrumental in steering the Board’s sub committees and is a committed BluGlass shareholder holding 927,941 BLG shares.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

REMUNERATION REPORT 2012- 2013

INTRODUCTION

The Directors of BluGlass Limited present the Remuneration Report for the Company and its controlled entities for the year ended 30 June 2013. This Remuneration Report forms part of the Directors Report and is subject to audit by the external auditor in accordance with the Corporations Act 2001.

The Report details the nature and amount of remuneration for the company’s non-executive directors and the executive team who by definition are the company’s Key Management Personnel. The Key Management Personnel are the key people accountable for directing the affairs of the company and its controlled entities.

The people who currently hold these Key Management Personnel positions are listed in the table below

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NON-EXECUTIVE DIRECTORS EXECUTIVES
George Venardos Chairman Giles Bourne Chief Executive Officer
Gregory Cornelsen Director Ian Mann Chief Technology Officer
Chandra Kantamneni Director Stuart Uhlhorn Chief Financial Officer
Alan Li (Resigned 28/08/12) Director
William Johnson Director
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During the period the Remuneration and Nominations Committee comprised 3 independent directors – Greg Cornelsen (Committee Chairman), William Johnson and George Venardos. The Committee met once during the year.

REMUNERATION STRATEGY

The remuneration policy of BluGlass Limited has been designed to align shareholder objectives with the strategic business objectives of BluGlass. This is achieved by providing;

a modest market related fixed remuneration component,

a small component of short term incentives and

long-term incentives based on key performance areas affecting the consolidated entity’s ability to commercialise its technology milestones when achieved.

The remuneration policy, setting the terms and conditions for the directors and executives was developed by the remuneration committee and approved by the Board after seeking professional advice from independent external consultants. No additional advice was sought during the year.

The Board of BluGlass Limited aims for the remuneration strategy to attract and retain the appropriate executives and directors to run and manage the consolidated entity recognising that as a pre-revenue research and development company it has limited ability to pay competitive base cash salaries and short term cash incentives. The ability to attract the best staff is achieved via ensuring all staff as well as executives and directors have access to a meaningful and rewarding long term incentive scheme currently in the form of an employee option scheme that creates goal congruence between directors, executives and shareholders.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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DIRECTORS’ REMUNERATION

The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The remuneration and nominations committee determines payments for the non-executive directors and reviews their remuneration annually. The review is based on market practice, duties and accountability. Independent external advice is sought when required.

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the consolidated entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan. An issue of director options was approved at the 2011 AGM under the same terms and conditions of a October 2011 issue to staff.

The current remuneration of non-executive directors is:

Position	Remuneration $
Chairman	70,000
Director	40,000
Committee	Chairperson 5,000
Committee	member -

A non-executive directors remuneration thus comprises the base board fee, any applicable committee chairman fee and the 9% superannuation levy contribution. No LTIs were allocated to directors during the year. William Johnson’s fees in his capacity as director are paid directly to SPTS.

The options granted in the below tabled are valued in accordance with Australian Accounting Standards and the full market price of the underlying BluGlass share price at the date of grant, and may not reflect the current market value of the options granted. Additionally no discount for uncertainty has been assigned to the option valuations, which do carry the risk of not meeting vesting hurdles.

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SHORT TERM POST LONG TERM TOTAL REMUNERATION
EMPLOYMENT INCENTIVES
% of
Board and
Superannuation Options Total remuneration
Committee fees
$ $ $ that is options
$
based
Directors
George Venardos 2013 70,000 6,300 - 76,300 0.0
2012 70,000 6,300 61,600 137,900 44.7
Gregory 2013 50,000 4,500 - 54,500 0.0
Cornelsen 2012 50,000 4,500 30,800 85,300 36.1
Chandra 2013 40,000 3,600 - 43,600 0.0
Kantamneni 2012 40,000 3,600 30,800 74,400 41.4
Alan Li 2013 - - - - 0.0
2012 43,600 - 30,800 74,400 41.4
William Johnson 2013 40,000 - - 40,000 0.0
2012 40,000 - 30,800 70,800 100.0
Total 2013 200,000 14,400 - 214,400
Total 2012 243,600 14,400 184,800 442,800
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FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

EXECUTIVE REMUNERATION

The Board’s policy for determining the nature and amount of remuneration for executives of the consolidated entity is as follows:

All key management personnel receive a base salary (which is based on factors such as length of service and experience), superannuation, access to a limited short term cash incentive scheme and to the longer term incentive scheme via options.

Short term incentives are only paid once predetermined annual key performance indicators have been met and are capped at 20% of base salary.

Incentives may be paid in the form of options or rights and are intended to align the interests of the key management personnel and company with those of shareholders. In this regard, key management personnel are prohibited from limiting risk attached to those instruments by use of derivatives or other means.

The remuneration and nominations committee reviews executive packages annually by reference to the consolidated entity’s performance, executive performance and comparable information from similar industry sectors.

The performance of executives is measured against criteria agreed annually with each executive and is based predominantly on the achievement of specific BluGlass technology and commercial milestones being achieved and the efficient conduct of the company’s operations. All bonuses and incentives must be linked to these predetermined performance criteria or milestones. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to reward executives for performance that will result in long-term growth in shareholder wealth.

Executives are also entitled to participate in the employee share and option arrangements under the employee incentive scheme.

Executives receive a superannuation guarantee contribution required by the government, which for the period was 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

EXECUTIVES TOTAL REMUNERATION

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POST LONG TERM TOTAL
SHORT-TERM EMPLOY- INCENT- REMUNE-
MENT IVES RATION
Cash KPI Related Super- Options Total % of remun- % of remuner-
Salary Incentive Annuation $ $ eration that is ation that is
$ $ $ performance options based
based
Executives
Giles 2013 302,753 52,800 27,247 105,975 488,776 10.8 21.7
Bourne
2012 296,106 43,225 24,933 112,00 476,265 9.1 23.5
Ian Mann 2013 220,184 43,200 19,816 103,625 386,825 11.2 26.8
2012 208,073 19,266 24,211 100,800 352,350 5.5 28.6
Stuart 2013 213,184 43,200 26,816 77,625 360,825 12.0 21.5
Uhlhorn
2012 185,136 24,220 49,144 78,400 336,900 7.2 23.3
Total 2013 736,121 139,200 73,880 287,225 1,236,426
Total 2012 689,316 86,711 98,288 291,200 1,165,515
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The options granted in the above tabled are valued in accordance with Australian Accounting Standards and the full market price of the underlying BluGlass share price at the date of grant and may not reflect the current market value of the options granted. Additionally no discount for uncertainty has been assigned to the option valuations, which do carry the risk of not meeting vesting hurdles.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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CONTRACTED EXECUTIVE REMUNERATION

PERFORMANCE BASED REMUNERATION

The company secretary, Emmanuel Correia is contracted to BluGlass from Cardrona Energy Pty Ltd. The agreement includes provisions that the contract may be terminated by either party with one months’ notice. Payments for services to Cardrona were $85,200 in 2013. Payments for services were $79,200 in the 2012 financial year. As a contracted position, the company secretary is not eligible to participate in short term incentive scheme and does not form part of the BluGlass’ executive team.

EMPLOYMENT CONTRACTS OF EXECUTIVES

The employment terms and conditions of the CEO and other executives are formalised in contracts of employment. All executives are permanent employees of BluGlass Limited.

As part of the executive remuneration package there is a performance-based component,

consisting of key performance indicators (KPIs).

The intention of this program is to facilitate goal congruence between directors/executives with that of the business and shareholders. The KPI’s are set annually, with a certain level of consultation with executives to ensure buy-in. The measures are specifically tailored to the areas each executive is involved in and has a level of control over. The KPI’s target areas the Board believes hold greater potential for group expansion and profit, and cover financial and non-financial as well as short and long term goals. The level set for each KPI is based on budgeted figures for the group and respective industry standards.

Terms of employment require that the relevant group entity provide an executive contracted person with a minimum of one months’ notice prior to termination of contract. The CEO’s contract is subject to 3 months’ notice. Termination payments are determined by the remuneration and the nominations committee if a termination payment is appropriate. A contracted person deemed employed on a permanent basis may terminate their employment by providing at least one months’ notice. Termination payments are not payable on resignation or under the circumstances of unsatisfactory performance.

Performance in relation to the KPI’s is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPI’s achieved and the period of employment for the period. Following the assessment, the KPI’s are reviewed by the remuneration committee in light of the desired and actual outcomes, and their efficiency is assessed in relation to the group’s goals and shareholder wealth, before the KPI’s are set for the following year.

The following table shows the gross revenue and losses over the last 7 years as well as the increasing portfolio of patents that has been built.

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2007 2008 2009 2010 2011 2012 2013
Revenue $'000 1,059.8 3,216.1 1,845.0 1,720.8 2,085.1 2427.8.1 4,725.9
Loss attributable to the -2,241.2 -2,686.9 -8,443.3 -5,348.7 -4,170.6 -3,273.3 -1,676.7
Parent Entity $’000
Share price at year-end 0.57 0.47 0.21 0.112 0.115 0.086 0.15
cents
Patents lodged - 10 15 15 1 1 2
Patents Granted - - 3 6 2 2 2
Cumulative Patents 29 39 54 69 70 71 73
managed
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BluGlass’ potential value exists in it being able to finalise its research and development programmes and to then commercialise its IP portfolio into the rapidly growing global market for LED manufacturing equipment and high efficiency solar cells.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

OPTIONS ISSUED AS PART OF REMUNERATION FOR THE YEAR ENDED 30 JUNE 2013

Options and Rights Granted

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Grant Details Overall
Date No. Value Exercised Lapsed Vested Vested Unvested Lapsed
Directors
$ no. no. no. % %
30/06/2012
- - - - - - - - -
George Venardos
- - - - - - - - -
Greg Cornelsen
Chandra - - - - - - - - -
Kantamneni
Alan Li - - - - - - - - -
William Johnson - - - - - - - - -
- - -
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Grant Details Overall
Date No. Value Exercised Lapsed Vested Vested Unvested Lapsed
Executives
$ no. no. no. % % %
30/06/2013
Giles Bourne 18/02/2013 471,000 105,975 - - - - 314,00 -
Stuart Uhlhorn 18/02/2013 345,000 77,625 - - - - 230,000 -
Ian Mann 18/02/2013 460,000 103,500 - - - - 306,667 -
- - -
- - -
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DESCRIPTION OF OPTIONS GRANTED AS REMUNERATION 2013

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Options Options Grant Date Value per Exercise Price First Exercise Last Exercise
Vested Granted Option Date
Directors No. No. $ $ N/A
- - - - - - -
George Venardos
- - - - - - -
Greg Cornelsen
Chandra Kantamneni - - - - - - -
Alan Li - - - - - - -
William Johnson - - - - - - -
-
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Options Options Grant Date Value per Exercise Price First Exercise Last Exercise
Vested Granted Option Date Date
Executives
Giles Bourne - 471,000 18/01/2013 0.225 0.00 N/A 18/01/2016
Ian Mann - 460,000 18/01/2013 0.225 0.00 N/A 18/01/2016
Stuart Uhlhorn - 345,000 18/01/2013 0.225 0.00 N/A 18/01/2016
1,276,000
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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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DESCRIPTION OF OPTIONS GRANTED AS REMUNERATION 2013 (CONT.)

The value of options in the above table reflects the full market price of the underlying BluGlass share price at the date of grant and may not reflect the current market value of the options granted. Additionally no discount for uncertainty has been assigned to these option valuations, which do carry the risk of not meeting vesting hurdles.

Staffs were granted options as remuneration during the year, in line with the Board’s approval in November 2012 and communicated to the ASX at the time of issue in January 2013.

Conditions of issues were;

Vest conditionally over a three year period from the grant date and expire on 18 January 2016
1/3rd of the options vest when the BLG achieves the milestone of MOCVD equivalent P GaN
1/3rd of the options vest when the BLG achieves the milestone of a commercial arrangement

Options also became exercisable from the 2011and 2013 employee incentive scheme issues. These options when issued under the BluGlass Option Incentive Scheme are assigned to the BluGlass Employee Incentive Plan Pty Ltd (the Trust), where they are held in trust for employees. When options are exercisable after having met vesting criteria they are converted to shares by the Trust and the shares continue to be held by the Trust until employees are ready to withdraw their share entitlement from the Trust. The shares are taxable to the employees when they are withdrawn from the Trust.

When options are exercised by staff they are restricted from trading in BluGlass Limited shares by the company’s share trading policy. They are also limited in their ability to trade, during the recognised trading windows of this policy, if they are in possession of any inside company information that is not known to the market as a whole.

REMUNERATION ADVISORS

During the period no remuneration advisors were retained or used by the company.

with customer
1/3rd of the options vest base on 24 months continuous employment with BluGlass

Options issued in accordance with the company’s approved Incentive Option Scheme.

All options were granted for nil consideration.

SHARES ISSUED ON EXERCISE OF COMPENSATION OPTIONS

4,058,444 options were exercised during the year that had been granted as compensation in prior periods.

There were 2,905,000 options exercisable at 17cents from the 2010 employee incentive scheme issue, this tranche represented 50% of the options from this issue that had met the requisite hurdle criteria to be exercised. Directors and staff exercised 1,320,000 options, realising $224,000 for the company. The second tranche of these 2010 options lapsed in May 2013 as they had not met the hurdle criteria. The discount to prevailing market price of the share (if any) at the time of exercise is taxable to the director/employee at that time.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

DIRECTORS’ REPORT CONTINUED

MEETINGS OF DIRECTORS

During the financial year, 7 meetings of directors (including committees of directors) were held. Attendances by each director during the year were:

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DIRECTORS’ MEETINGS COMMITTEE MEETINGS
Audit & Risk Committee Remuneration & Nominations
Committee
Number eligible Number Number eligible Number Number eligible Number
to attend Attended to attend Attended to attend Attended
George Venardos 7 7 3 3 2 2
Gregory Cornelsen 7 7 3 3 2 2
Chandra 7 7 3 1 - -
Kantamneni
Alan Li (Resigned 1 - - - - -
28/08/12)
William Johnson 7 7 - - 2 2
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INDEMNITIES GIVEN AND INSURANCE PREMIUMS PAID TO AUDITORS AND OFFICERS

The Group has entered into Deeds of Indemnity, Insurance and Access with each of the directors and the Company Secretary. Each deed provides officers with the following:

A right to access certain Board papers of the Group during the period of their tenure and for a period of seven years after that tenure ends.
Subject to the Corporations Act 2001, an indemnity in respect of liability to persons other than the Group and its related bodies corporate that they may incur while acting in their capacity as an officer of the Group or a related body corporate, except where that liability involves a lack of good faith, and for defending certain legal proceedings; and the requirement that the Group maintains appropriate directors’ and officers’ insurance for the officer.

The Company has paid premiums to insure each of the directors, secretary and executives against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of a director or officer of the company, other than conduct involved in a wilful breach of duty in relation to the company.

The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor.
No liability has arisen under these indemnities as at the date of this report.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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OPTIONS

At the date of this report, the unissued ordinary shares of BluGlass Limited under option are as follows:

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Grant Date Date of Expiry Exercise Price Number Under Option
$
13/10/2011 13/10/2014 0.00 988,223
29/11/2011 13/10/2014 0.00 1,400,000
31/01/2012 13/10/2014 0.00 396,000
26/01/2013 26/01/2016 0.00 1,832,668
4,616,891
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During the year ended 30 June 2012, 5,004,778 ordinary shares of BluGlass Limited were issued on the exercise of options.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party of taking responsibility on behalf of that company for all or any part of those proceedings.

The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2013:

	$
Government grant review services	4,000

NON-AUDIT SERVICES

The Board of directors, in accordance with advice from the Audit and Risk committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the Audit and Risk committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES:110:Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

AUDITOR’S INDEPENDENCE DECLARATION

The lead auditor’s independence declaration as required by s307C of the Corporation Act 2001 for the year ended 30 June 2013 has been received and can be found on page 20 and forms part of the directors’ report.

This Directors’ Report incorporating the Remuneration Report is signed in accordance with a resolution of the Board of Directors.

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George Venardos DIRECTOR Dated the 26[th ] day of August 2013

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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ANNUAL REPORT FINANCIALSTATEMENTS

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

COMPREHENSIVE INCOME

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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Note Consolidated Entity
2013 2012
$ $
Revenue 2 180,113 269,624
Other income 2 4,545,799 2,158,196
Employee benefits expense 18 (3,033,870) (3,372,266)
Professional fees (257,296) (61,900)
Board and secretarial fees (268,680) (371,149)
Corporate compliance & legal expense (192,583) (71,811)
Consultant fees (259,153) (337,017)
Rent expense (236,319) (218,320)
Travel and accommodation expense (116,327) (117,141)
Consumables (674,116) (1,650,017)
Depreciation and amortisation expense (719,821) (1,641,923)
Other expenses (644,473) (816,850)
Loss before income tax 3 (1,676,726) (6,230,574)
Income tax expense 4 - -
Loss for the period (1,676,726) (6,230,574)
- -
Other comprehensive income
Total comprehensive income (1,676,726) (6,230,574)
Loss attributable to:
- Members of the parent entity (1,676,726) (3,237,312)
-
- Non-controlling interest (2,993,262)
(1,676,726) (6,230,574)
Total Comprehensive Income attributable to:
- Members of the parent entity (1,676,726) (3,237,312)
-
- Non-controlling interest (2,993,262)
(1,676,726) (6,230,574)
Earnings Per Share
Basic loss per share (cents per share) 7 (0.63) (1.35)
Diluted loss per share (cents per share) 7 (0.63) (1.35)
Dividends per share (cents) N/A N/A
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The financial statements should be read in conjunction with the following notes.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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FINANCIAL POSITION

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013

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Note Consolidated Entity
2013 2012
$ $
Current Assets
Cash and cash equivalents 8 5,589,870 3,731,750
Trade and other receivables 9 1,967,784 -
Consumables 10 144,062 210,727
Other current assets 11 113,564 68,059
TOTAL CURRENT ASSETS 7,815,280 4,010,536
Non-Current Assets
Property, plant and equipment 12 1,327,286 1,380,890
Intangible assets 13 8,695,000 8,695,000
TOTAL NON-CURRENT ASSETS 10,022,286 10,075,890
TOTAL ASSETS 17,837,566 14,086,426
Current Liabilities
Trade and other payables 15 251,101 133,452
Short-term provisions 17 161,958 174,528
Short-term borrowings 16 - 182,781
TOTAL CURRENT LIABILITIES 413,059 490,671
Non Current Liabilities
Long-term provisions 17 298,083 264,025
TOTAL NON-CURRENT LIABILITIES 298,083 264,025
TOTAL LIABILITIES 711,142 754,786
NET ASSETS 17,126,424 13,331,640
Equity
Issued capital 19 42,673,992 36,022,046
Reserves 20 (572,538) 1,192,445
-
Non-controlling interest 391,283
Accumulated Losses (24,975,030) (24,274,134)
TOTAL EQUITY 17,126,424 13,331,640
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The financial statements should be read in conjunction with the following notes.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

CHANGES IN EQUITY

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2013
Share-Based Other Non-Controlling Accumulated
Issued Capital Total
Payments Reserves Interest Losses
$ $ $ $ $ $
Consolidated Entity
Balance at 30 June 2011 36,022,046 876,763 - 749,614 (21,036,822) 16,611,601
Total comprehensive income for - -
(2,993,262) (3,237,312) (6,230,574)
the period
- - -
(2,993,262) (3,237,312) (6,230,574)
Transactions with owners in their
capacity as owners
- - - -
Shares issued during the year 2,634,931 2,634,931
Transaction costs - - - - - -
- - - -
Share options issued 315,682 315,682
- - - - - -
Transfer of retained earnings
- - - - - -
Dividends paid or provided for
Balance at 30 June 2012 36,022,046 1,192,445 - 391,283 (24,274,134) 13,331,640
-
Balance at 1 July 2012 36,022,046 1,192,445 391,283 (24,274,134) 13,331,640
Total comprehensive income for - -
(1,676,726) (1,676,726)
the period
- -
(1,676,726) (1,676,726)
Transactions with owners in their
capacity as owners
- - -
Shares issued during the year 4,828,205 4,828,205
Share transaction costs during - - -
(132,478) (132,478)
the year
Purchase of 49% non-controlling - - -
1,373,735 (982,452) (391,283)
interest
- - -
Share options issued 551,383 551,383
- - -
Exercise of share option 582,484 (358,084) 224,400
- - -
Transfer of retained earnings (975,830) 975,830
- - - - -
Dividends paid or provided for
Balance at 30 June 2013 42,673,992 409,914 (982,452) - (24,975,030) 17,126,424
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The financial statements should be read in conjunction with the following notes.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

CASHFLOWS

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2013
Note Consolidated Entity
2013 2012
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from grants 240,054 2,158,196
Interest and other income recieved 2,518,074 269,624
Payments to suppliers and employees (4,971,138) (6,814,769)
Net cash used in operating activities 23 (2,213,010) (4,386,949)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (666,217) (151,030)
Net cash used in investing activities (666,217) (151,030)
CASH FLOWS FROM FINANCING ACTIVITIES
-
Proceeds from issue of shares, net of transaction costs 4,695,728
-
Proceeds from options exercised 224,400
Repayment of borrowings (182,781) (736,172)
Proceeds from issue of shares from non-controlling interest -
1,028,976
in subsidiary
Net cash provided by financing activities 4,737,347 292,804
Net (decrease)/increase in cash held 1,858,120 (4,245,175)
Cash at beginning of financial year 3,731,750 7,976,925
Cash at end of financial year 8 5,589,870 3,731,750
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The financial statements should be read in conjunction with the following notes.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The financial report covers BluGlass Limited as a consolidated entity (“Group”). BluGlass Limited is a listed public company, incorporated and domiciled in Australia.

The separate financial statements of the parent entity BluGlass Limited have not been presented within this financial report as permitted by the Corporations Act 2001.

The financial statements were authorised for issue on 26th August 2013 by the directors of the company.

The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial report.

Basis of Preparation

The consolidated general purpose financial statements of the Group have 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. Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). BluGlass Limited is a for-profit entity for the purpose of preparing financial statements. The accounting policies set out below have been consistently applied to all years presented.

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by BluGlass Limited at the end of the reporting period. A controlled entity is any entity BluGlass Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities.

Where controlled entities have entered or left the Group during the year, the financial performance of those entities are included only for the period of the year they were controlled. A list of controlled entities is contained in Note 14 to the financial statements. All controlled entities have a June financial year-end.

In preparing the consolidated financial statements all inter-group balances and transactions between entities in the consolidated group have been eliminated on consolidation. Accounting policies of subsidiaries are consistent with those adopted by the parent entity.

Non-controlling interests, presented as part of equity, represents the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries and the non-controlling interests bond on their respective ownership interests.

(b) Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (revenue) and deferred tax expense (revenue).

Current income tax expense charged to the profit and loss is the tax payable on taxable income calculated using applicable tax rates enacted, or substantially enacted, as at reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

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FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(b) Income Tax (cont.)

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Tax consolidation

BluGlass Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. BluGlass Limited is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. The group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 21 September 2006. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.

(c) Inventories

Inventories are measured at the lower of cost and net realisable value.

(d) Plant and Equipment

Each class of plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fixed assets including building and capitalised lease assets is depreciated on a straight-line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset	Depreciation Rate
Furniture and Fittings	10%
Plant and equipment	20-60%
Leasehold improvements	33.33%
Computer hardware and software	33.33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(e) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the consolidated entity are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over their estimated useful lives.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

(f) Financial Instruments

Recognition and measurement

Financial instruments, incorporating financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.

Financial instruments are initially measured at fair value plus transaction costs where the instrument is not classified as at fair value through profit and loss. Transaction costs related to instruments classified as at fair value through profit and loss are expensed to the profit and loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Impairment

At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

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FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(g) Impairment of assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

(h) Intangibles

Patents and trademarks

Patents and trademarks are recognised at cost of acquisition. Patents and trademarks and intellectual property have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life ranging from 5 to 10 years.

Research and development

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technically feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably.

Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.

Intellectual property

Intellectual property (IP) which represents in process research is recognised at cost of acquisition. IP has a finite life once the asset is ready for use. Once the asset is ready for use the asset will be carried at cost less any accumulated amortisation and any impairment losses.

(i) Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent and controlled entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(j) Employee Benefits

Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

Equity-settled compensation

The Group operates an equity-settled share-based payment employee share and option scheme. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using the Cox-Ross-Rubenstein Binomial pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

(k) Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(l) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

(m) Revenue and Other Income

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument.

All revenue is stated net of the amount of goods and services tax (GST).

(n) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(o) Government Grants

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis.

(p) Borrowing Costs

Borrowing costs are expensed in the period in which they are incurred and reported in finance costs.

(q) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(r) Critical accounting estimates and judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key estimates — Impairment

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. See Note 13: Intangible assets for further disclosure of impairment.

Key estimates — Share options

The company issued options under the BluGlass Limited prospectus and the employee incentive option scheme. The options granted in the year were valued using the BluGlass share price at the date of grant. The prior year options were valued the same as they are currently valued. The key inputs to the pricing model are disclosed on Note 24. In addition to the pricing, key judgements revolve around the likelihood of vesting and estimated vesting date where there are vesting conditions. These judgements impact the expense recorded for the period.

(s) Adoption of New and Revised Accounting Standards AASB 2010-8 Amendments to Australian Accounting Standard – Deferred Tax: Recovery of Underlying Assets (Applies to annual reporting periods beginning on or after 1 January 2012)

AASB 2010-8 provides clarification on the determination of deferred tax assets and deferred tax liabilities when investment property is measured using the fair value model in AASB 140 Investment Property. It introduces a rebuttable presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model where the objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

AASB 2010-8 also includes the requirement that the measurement of deferred tax assets and deferred tax liabilities on nondepreciable assets measured using the revaluation model in AASB 116 Property, Plant and Equipment should always be based on recovery through sale.

These amendments have had no impact on the Group

AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income (Applies annual reporting periods beginning on or after 1 July 2012

AASB 2011-9 requires entities to group items presented in Other Comprehensive Income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently, and changes the title of ‘statement of comprehensive income’ to ‘statement of profit or loss and other comprehensive income’.

The adoption of the new and revised Australian Accounting Standards and Interpretations has had no significant impact on the Group’s accounting policies or the amounts reported during the current period. The adoption of AASB 2011-9 has resulted in changes to the Group’s presentation of its financial statements..

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(t) Accounting standards issued but not yet effective and not been adopted early by the Group

AASB 9 Financial Instruments (January 2015)

ASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are:

i. Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business model for managing the financial assets; and (2) the characteristics of the contractual cash flows.
ii. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are
not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.
iii. Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so
eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or
liabilities, or recognising the gains and losses on them, on different bases.
iv. Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows:

The change attributable to changes in credit risk are presented in other comprehensive income (OCI); and The remaining change is presented in profit or loss.

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. Otherwise, the following requirements have generally been carried forward unchanged from AASB 139 into AASB 9:

Classification and measurement of financial liabilities; and
Derecognition requirements for financial assets and liabilities.

Consequential amendments arising from AASB 9 are contained in AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) , AASB 2010-10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters and AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures.

The Group does not have any financial liabilities measured at fair value through profit or loss. Therefore, there will be no impact on the financial statements when these amendments to AASB 9 are first adopted.

AASB 10 Consolidated Financial Statements (January 2013)

AASB 10 establishes a revised control model that applies to all entities. It replaces the consolidation requirements in AASB 127 Consolidated and Separate Financial Statements and AASB Interpretation 112 Consolidation – Special Purpose Entities. The revised control model broadens the situations when an entity is considered to be controlled by another entity and includes additional guidance for applying the model to specific situations, including when acting as an agent may give control, the impact of potential voting rights and when holding less than a majority voting rights may give ‘de facto’ control. This is likely to lead to more entities being consolidated into the group.

When this standard is first adopted for the year ended 30 June 2014, there will be no impact on the transactions and balances recognised in the financial statements.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

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FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(t) Accounting standards issued but not yet effective and not been adopted early by the Group (cont.)

AASB 11 Joint Arrangements (January 2013)

AASB 11 replaces AASB 131 Interests in Joint Ventures and AASB Interpretation 113 Jointly-controlled Entities – Nonmonetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition, AASB 11 removes the option to account for jointlycontrolled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations for liabilities are accounted for by recognising the share of those assets and liabilities. Joint ventures that give the venturers a right to the net assets are accounted for using the equity method.

When this standard is first adopted for the year ended 30 June 2014, there will be no impact on transactions and balances recognised in the financial statements because the entity has not entered into any joint arrangements.

AASB 12 Disclosure of Interests in Other Entities (January 2013)

AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. New disclosures introduced by AASB 12 include disclosures about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.

As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required for interests in associates and joint arrangements, as well as for unconsolidated structured entities.

AASB 127 Separate Financial Statements (January 2013)

As a consequence of issuing AASB 10, AASB 11 and AASB 12, revised versions of AASB 127 and AASB 128 have also been issued.

AASB 127 now only deals with separate financial statements. AASB 128 incorporates the requirements in Interpretation 113 Jointly Controlled Entities – Non-Monetary Contributions by Venturers, and guidance relating to the equity method for associates and joint ventures.

When these revised standards are adopted for the first time for the financial year ending 30 June 2014, there will be no impact on the financial statements because they introduce no new requirements.

AASB 13 Fair Value Measurement (January 2013)

AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted by other Standards.

AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined.

The entity is yet to undertake a detailed analysis of the differences between the current fair valuation methodologies used and those required by AASB 13. However, when this standard is adopted for the first time for the year ended 30 June 2014, there will be no impact on the financial statements because the revised fair value measurement requirements apply prospectively from 1 January 2013.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(t) Accounting standards issued but not yet effective and not been adopted early by the Group (cont.)

AASB 1053 Application of Tiers of Australian Accounting Standards (July 2013)

AASB 1053 establishes a differential financial reporting framework consisting of two Tiers of reporting requirements for preparing general purpose financial statements:

a) Tier 1: Australian Accounting Standards; and

b) Tier 2: Australian Accounting Standards - Reduced Disclosure Requirements.

Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 and substantially reduced disclosures corresponding to those requirements.

The following entities apply Tier 1 requirements in preparing general purpose financial statements: a) for-profit entities in the private sector that have public accountability; and

b) the Australian Government and State, Territory and Local Governments.

The following entities apply either Tier 2 or Tier 1 requirements in preparing general purpose financial statements: a) for-profit private sector entities that do not have public accountability;

b) all not-for-profit private sector entities; and

c) public sector entities other than the Australian Government and State, Territory and Local Governments.

Consequential amendments to other standards to implement reduced disclosure requirements were introduced by AASB 2010-2.

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (July 2013)

The Standard amends AASB 124 Related Party Disclosures to remove the individual key management personnel (KMP) disclosures required by Australian specific paragraphs. This amendment reflects the AASB’s view that these disclosures are more in the nature of governance disclosures that are better dealt within the legislation, rather than by the accounting standards.

In March 2013, the Australian government released Corporations Legislation Amendment Regulation 2013 which proposed to insert these disclosures into Corporations Regulations 2001 to ensure the disclosure requirements continue to be operative for financial years commencing on or after 1 July 2013. The closing date for submissions was 10 May 2013.

When these amendments are first adopted for the year ending 30 June 2014, they are unlikely to have any significant impact on the entity.

AASB 2011-4 makes amendments to AASB 124 Related Party Disclosures to remove individual key management personnel disclosure requirements, to achieve consistency with the international equivalent (which includes requirements to disclose aggregate (rather than individual) amounts of KMP compensation), and remove duplication with the Corporations Act 2011. The amendments are applicable for annual periods beginning on or after 1 July 2013. The Group’s management have yet to assess the impact of these amendments.

AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements

Standards (January 2013)

AASB 2011-7 makes various consequential amendments to Australian Accounting Standards arising from AASB 10, AASB 11, AASB 12, AASB 127 (August 2011) and AASB 128 (August 2011).

When these amendments are first adopted for the year ending 30 June 2014, they are unlikely to have any significant impact on the entity given that they are largely of the editorial nature.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(t) Accounting standards issued but not yet effective and not been adopted early by the Group (cont.)

AASB 119 Employee Benefits (January 2013)

Main changes include:

Elimination of the ‘corridor’ approach for deferring gains/losses for defined benefit plans
Actuarial gains/losses on remeasuring the defined benefit plan obligation/asset to be recognised in OCI rather than in profit or loss, and cannot be reclassified in subsequent periods
Subtle amendments to timing for recognition of liabilities for termination benefits
Employee benefits ‘expected to be settled’ (as opposed to ‘due to be settled’ under current standard) within 12
months after the end of the reporting period are short-term benefits, and therefore not discounted when calculating leave liabilities. Annual leave not expected to be used within 12 months of end of reporting period will in future be discounted when calculating leave liability.

Consequential amendments were also made to other standards via AASB 2011-10.

The Group does not have any defined benefit plans. Therefore, these amendments will have no significant impact on the Group.

AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities (January 2013)

This Standard amends the required disclosures in AASB 7 to include information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position.

This Standard also amends AASB 132 to refer to the additional disclosures added to AASB 7 by this Standard. When this AASB 2012-2 is first adopted for the year ended 30 June 2014, there will be no impact on the entitiy as the entity does not have any netting arrangements in place.

AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities

(January 2014)

AASB 2012-3 adds application guidance to AASB 132 to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement.

When AASB 2012-3 is first adopted for the year ended 30 June 2015, there will be no impact on the entitiy as this standard merely clarifies existing requirements in AASB 132.

AASB 2012-4 Amendments to Australian Accounting Standards – Government Loans (January 2013)

A ASB 2012-4 adds an exception to the retrospective application of Australian Accounting Standards under AASB 1 Firsttime Adoption of Australian Accounting Standards to require that first-time adopters apply the requirements in AASB 139 (or AASB 9) and AASB 120 Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans (including those at a below-market rate of interest) existing at the date of transition to Australian Accounting Standards.

When AASB 2012-4 is first adopted for the year ended 30 June 2014, there will be no impact on the entitiy as this standard is only relevant to first-time adoptors of Australian Accounting Standards.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(t) Accounting standards issued but not yet effective and not been adopted early by the Group (cont.)

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle (January 2013)

These amendments are a consequence of the annual improvements process, which provides a vehicle for making non-urgent but necessary amendments to Standards.

The amendments made are largely of the nature of clarifications or removals of unintended inconsistencies between Australian Accounting Standards (for example, AASB 101 is amended to clarify that related notes to an additional statement of financial position are not required in the event of a change in accounting policy, reclassification or restatement).

When these amendments are first adopted for the year ended 30 June 2014, they are unlikely to have any significant impact on the entity given that they are largely of the nature of clarifications or removals of unintended inconsistencies between Australian Accounting Standards.

AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures (January 2013)

AASB 2012-6 amends the mandatory effective date of AASB 9 so that AASB 9 is required to be applied for annual reporting periods beginning on or after 1 January 2015 instead of 1 January 2013. It also modifies the relief from restating prior periods by amending AASB 7 to require additional disclosures on transition from AASB 139 to AASB 9 in some circumstances.

The entity will be able to provide transition disclosures, instead of restating comparatives, upon initial application of AASB 9.

AASB 2012-9 Amendment to AASB 1048 arising from the Withdrawal of Australian Interpretation 1039 (January 2013)

AASB 2012-9 amends AASB 1048 Interpretation of Standards as a consequence of the withdrawal of Australian Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia.

When AASB 2012-9 is first adopted for the year ended 30 June 2014, there will be no impact on the entitiy as this standard will not affect current practice.

AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments (January 2013)

AASB 2012-10 clarifies the transition guidance in AASB 10 Consolidated Financial Statements.

It also provides additional transition relief in AASB 10, AASB 11 Joint Arrangements and AASB 12 Disclosure of Interests in Other Entities by limiting the requirement to provide adjusted comparative information only to the immediately preceding comparative period. In addition, for disclosures related to unconsolidated structured entities, AASB 2012-10 removes the requirement to present comparative information for any periods beginning before the first annual reporting period for which AASB 12 is applied.

Furthermore, AASB 2012-10 defers the mandatory effective date of AASB 10, AASB 11, AASB 12, AASB 127 Separate Financial Statements (August 2011) and AASB 128 Investments in Associates and Joint Arrangements (August 2011) for not-for-profit entities

When these amendments are first adopted for the year ended 30 June 2015, they are unlikely to have any significant impact on the entity given that they are largely clarification of existing transitional provisions

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

(u) Going Concern

Notwithstanding the net loss for the year and the accumulated losses for the consolidated entity, the directors have performed a review of the cash flow forecasts and have considered the cash flow needs and consider the company a going concern.

The directors have approved the company’s forward business plans with an understanding that sufficient cash resources are available to meet the company’s net commitments over the next twelve months.

The directors have prepared the financial statements on a going concern basis as the company has a number of options for raising future capital requirements and the directors are confident that one or more of these options will be successful during the period. Additionally as a fall back equity based funding options are available to the company to continue its research and development efforts.

NOTE 2: REVENUE AND OTHER INCOME

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Consolidated Entity
2013 2012
$ $
Revenue
—
interest received from other persons 155,932 255,603
—
sundry income 24,181 14,021
Total Revenue 180,113 269,624
Other Income
—
grant revenue 240,054 2,158,196
— R&D tax rebate 4,305,745 -
Total other income 4,545,799 2,158,196
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NOTE 3: LOSS FOR THE YEAR

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Consolidated Entity
2013 2012
Expenses:
$ $
Rental Expense on operating leases
—
Minimum lease payments 236,319 218,320
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NOTE 4: INCOME TAX EXPENSE

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Consolidated Entity
2013 2012
$ $
(a) The components of tax expense comprise:
— Current tax - -
— Deferred tax - -
- -
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FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 4: INCOME TAX EXPENSE (CONT.)

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Consolidated Entity
2013 2012
$ $
(b) The prima facie tax on loss before income tax is reconciled to the income tax as
follows:
Prima facie tax payable on loss before income tax at 30% (2012: 30%)
— consolidated entity (503,018) (1,869,539)
Add:
Tax effect of:
—
IPO related costs (deductible over 5 years) 92,709 92,709
— share based payments during year 165,415 94,705
— other non-allowable items 46,712 76,836
340,836 264,250
Add:
Income tax benefit not bought to account (198,182) (1,604,922)
- -
Income tax benefit attributable to the entity
Accumulated tax losses and temporary differences not brought to account 6,025,028 5,827,446
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NOTE 5: INTERESTS OF KEY MANAGEMENT PERSONNEL

Refer to the Remuneration Report contained in the Report of the Directors for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2013.

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(a) The totals of remuneration paid to KMP of the Group during the year are as follows.
2013 2012
$ $
Short term employee benefits 1,075,321 932,916
Post-employment benefits 88,280 112,688
- -
Other long-term benefits
- -
Termination benefits
Share-based payments 287,225 476,000
1,450,826 1,521,604
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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 5: INTEREST OF KEY MANAGEMENT PERSONNEL (CONT).

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Option Holdings
Balance at Granted as Exercised Other Balance Vested Vested and Vested and
30 June beginning remuneration during the changes at end of during the exercise- unexercise-
2013 of year during the year during the year year able [(1)] able
year year
George - -
1,160,000 (300,000) (300,000) 560,000 673,333 373,333
Venardos
Gregory - -
580,000 (100,000) (200,000) 280,000 236,666 186,667
Cornelsen
Chandra
- -
580,000 (75,000) (225,000) 280,000 236,666 186,667
Kantamneni
William
- -
580,000 (150,000) (150,000) 280,000 236,666 186,667
Johnson
Giles
- -
2,143,607 471,000 (1,210,274) 1,404,333 622,221 779,221
Bourne
Stuart
-
1,153,333 345,000 (250,000) (250,000) 998,333 685,555 550,555
Uhlhorn
Ian Mann 1,340,000 460,000 (650,000) (250,000) 900,000 850,000 313,333 -
-
7,536,940 1,276,000 (1,525,000) (2,585,274) 4,702,666 3,541,107 2,576,443
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30 June 2012	Balance at beginning of year	Granted as remuneration during the year	Exercised during the year	Other changes during the year	Balance at end of year	Vested during the year	Vested and exercise- able(1) Vested and unexercise- able
*George* *Venardos*	600,000	560,000	-	-	1,160,000	-	- -
*Gregory* *Cornelsen*	300,000	280,000	-	-	580,000	-	- -
*Chandra* *Kantamneni*	300,000	280,000	-	-	580,000	-	- -
*Alan Li*	300,000	280,000	-	-	580,000	-	- -
*William* *Johnson*	300,000	280,000	-	-	580,000	-	- -
*Giles* *Bourne*	1,210,274	933,333	-	-	2,143,607	-	310,274 -
*Stuart* *Uhlhorn*	500,000	653,333	-	-	1,153,333	-	- -
*Ian Mann*	500,000	840,000	-	-	1,340,000	-	- -
TOTAL	4,010,274	4,106,666	-	-	8,116,940	-	310,274 -

(1) Exercisable subject to board approval

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 5: INTEREST OF KEY MANAGEMENT PERSONNEL (CONT).

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(c) Number of Shares held by Key Management Personnel
Balance at Granted as Issued on Other changes Balance at
beginning of remuneration exercise of during the end of year
30 June 2013 year during the year options during year
the year
-
George Venardos 600,118 300,000 80,000 980,118
- -
Gregory Cornelsen 927,941 100,000 1,027,941
Chandra Kantamneni 117,647 - 75,000 - 192,647
William Johnson - - 150,000 - 150,000
Giles Bourne 243,730 - - (149,497) 94,233
Stuart Uhlhorn - - 650,000 (400,000) 250,000
Ian Mann - - 250,000 (181,500) 68,500
-
1,889,436 1,525,000 (650,997) 2,763,439
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Balance at Granted as Issued on Other Balance at
beginning of remuneration exercise of changes end of year
30 June 2012 year during the year options during during the
the year year
-
George Venardos 400,118 200,000 600,118
- -
Gregory Cornelsen 877,941 50,000 927,941
Chandra Kantamneni 117,647 - - - 117,647
Alan Li - - - - -
William Johnson - - - - -
Giles Bourne 243,730 - - - 394,127
- -
1,639,436 250,000 1,889,436
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(d) Other Key Management Personnel Transactions

There have been no other transactions involving equity instruments other than those described in the tables above. For details of other Key Management Personnel refer to Note 25: Related Party Transactions

NOTE 6: AUDITORS’ REMUNERATION

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Consolidated Entity
2013 2012
$ $
Remuneration of the auditor for:
—
auditing or reviewing the financial report 53,784 49,300
— taxation services - 9,000
— Other audit services 4,000 3,600
57,784 61,900
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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 7: LOSS PER SHARE

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Consolidated Entity
2013 2012
$ $
(a) Loss attributable to members of the parent entity (1,676,726) (3,237,312)
(b) Basic and diluted loss per share (cents per share) (0.63) (1.35)
No. No.
(c) Weighted average number of ordinary shares outstanding during the year
266,568,591 239,845,017
used in calculating basic EPS.
(d) Weighted average number of ordinary shares outstanding during the year
266,568,591 239,845,017
used in calculating diluted EPS.
Consolidated Entity
2013 2012
$ $
(e) Weighted average number of potential ordinary shares not included in diluted EPS as anti-dilutive. - -
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NOTE 8: CASH AND CASH EQUIVALENTS

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Consolidated Entity
2013 2012
$ $
Cash at bank and in hand 3,335,603 72,469
Short-term bank deposits 2,233,508 3,658,675
Petty cash 759 606
5,589,870 3,731,750
The effective interest rate on short-term bank deposits was 3.4% (2012:4.4%), these deposits have an average maturity of less
than 14 days.
Reconciliation of cash
Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows:
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The effective interest rate on short-term bank deposits was 3.4% (2012:4.4%), these deposits have an average maturity of less than 14 days.	The effective interest rate on short-term bank deposits was 3.4% (2012:4.4%), these deposits have an average maturity of less than 14 days.	The effective interest rate on short-term bank deposits was 3.4% (2012:4.4%), these deposits have an average maturity of less than 14 days.

Reconciliation of cash
Cash at the end of the fnancial year as shown in the cash fow statement is reconciled to items in the balance sheet as follows:
Cash and cash equivalents	5,589,870	3,731,750
	5,589,870	3,731,750

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 9: TRADE AND OTHER RECEIVABLES

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Consolidated Entity
2013 2012
$ $
-
2013 Research and Development Tax Rebate 1,967,784
-
1,967,784
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NOTE 10: CONSUMABLES

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Consolidated Entity
2013 2012
$ $
CURRENT
Consumables 144,062 210,727
144,062 210,727
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NOTE 11: OTHER CURRENT ASSETS

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Consolidated Entity
2013 2012
$ $
CURRENT
Prepayments 28,566 44,100
Security deposit 14,516 14,516
Other receivables 70,482 9,443
113,564 68,059
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All amounts are short-term. The net carrying value of other receivables is considered a reasonable approximation of fair value. No impairment of receivables is deemed to exist. There were no bad debts during the year.

NOTE 12: PLANT AND EQUIPMENT

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Consolidated Entity
2013 2012
$ $
PLANT AND EQUIPMENT
Plant and equipment:
At cost 5,720,368 5,139,718
Accumulated depreciation (4,556,947) (4,001,957)
Total plant and equipment: 1,163,421 1,137,761
Leased plant and equipment
At cost 1,006,170 1,000,000
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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 12: PLANT AND EQUIPMENT (CONT.)

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Consolidated Entity
2013 2012
$ $
Accumulated depreciation (1,006,170) (960,120)
-
Total leased plant and equipment 39,880
Leasehold improvements
At cost 2,978,737 2,916,222
Accumulated depreciation (2,901,173) (2,845,814)
Total leasehold improvements 77,564 70,408
Furniture and fittings
At cost 120,062 118,875
Accumulated depreciation (69,604) (56,563)
Total furniture and fittings 50,458 62,312
Computer equipment
At cost 262,083 246,387
Accumulated depreciation (226,237) (175,858)
Total computer equipment 35,846 70,529
Total property, plant and equipment 1,327,286 1,380,890
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(a) Movements in Carrying Amounts

Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year

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Leased Plant Computer
Plant and Equipment
and Equipment Equipment
$ $ $ $ $ $
Consolidated Entity:
Balance at 30 June 2012 39,880 1,137,761 70,408 62,312 70,529
Additions 6,170 580,650 62,515 1,186 15,696
- - - - -
Disposals
Depreciation expense (46,050) (554,990) (55,359) (50,379)
Balance at 30 June 2013 - 1,163,421 77,564 50,458 35,846
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FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 13: INTANGIBLE ASSETS

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Parent Entity
2013 2012
$ $
In process research and development:
Cost 12,130,080 12,130,080
Accumulated impaired losses (3,435,080) (3,435,080)
Net carrying value 8,695,000 8,695,000
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The company obtained a valuation of the intellectual property from an independent valuer Acuity Technology Management Pty Ltd to assist the directors in assessing impairment. The methodology used by the independent valuer to determine the value of the intellectual property was based on a discounted cash flow (DCF) method adjusted for the probability of achieving certain milestones. The DCF was based on management cash flow projections for 3 years and extrapolated for a further 9 years by the valuer. Greater than 5 years is appropriate based on the expected life cycle of the technology. The DCF has been discounted at between 12% and 15% (2012:15% to 17%). Other general market considerations have been considered including the market capitalisation of BluGlass. The IP was assessed thave a value between $24.3 million to $33.9 million.

NOTE 14: CONTROLLED ENTITIES

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(a) Controlled Entities Consolidated Percentage Owned (%)
Country of
2013 2012
Incorporation
Parent Entity:
BluGlass Limited Australia - -
Subsidiaries of BluGlass Limited:
Gallium Enterprises Pty Ltd Australia 100 100
BluSolar Pty Ltd Australia 100 100
BluGlass Deposition Technologies Pty Ltd Australia 100 100
BluGlass Research Pty Ltd Australia 100 100
EpiBlu Technologies Pty Ltd Australia 100 51
Percentage of voting power is in proportion to ownership
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NOTE 15: TRADE AND OTHER PAYABLES

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Consolidated Entity
2013 2012
$ $
CURRENT
Trade payables 117,782 90,511
Sundry payables and accrued expenses 133,319 42,941
251,101 133,452
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The carrying values of trade payables, sundry and accrued payables are considered to be reasonable approximation of fair value.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 16: BORROWINGS

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Note Consolidated Entity
2013 2012
$ $
CURRENT
Lease liability 21(a) - 182,781
-
182,781
NON-CURRENT
Lease liability 21(a) - -
- -
Total non-current borrowings
-
Total borrowings 182,781
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NOTE 17: PROVISIONS

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Consolidated Entity
2013 2012
$ $
Current 161,958 174,528
Non-Current 298,083 264,025
460,041 438,553
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Lease Make Good Employee Total
$ $ $
Consolidated Group
Opening Balance at 1 July 2012 200,000 238,553 438,553
-
Additional provisions 21,488 21,488
Amounts used - - -
Unused amounts reversed - - -
Balance at 30 June 2013 200,000 260,041 460,041
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NOTE 18: EMPLOYMENT BENEFITS EXPENSE

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Consolidated Entity
2013 2012
$ $
Wages, Salaries 2,296,379 2,885,857
Share-base payments 551,383 315,682
Superannuation 186,108 170,727
3,033,870 3,372,266
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FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 19: ISSUED CAPITAL

			Consolidated Entity	Consolidated Entity
			2013 $	2012 $
284,964,498 (2012: 239,845,016) fully paid ordinary shares			42,673,994	36,022,046
			42,673,994	36,022,046
The company has authorised share capital amounting to 284,964,498 ordinary shares.
(a)	Ordinary Shares		No.	$
	At the beginning of reporting period		239,845,016	36,022,046
	Shares issued during the year:
	—	9 October 2012	15,973,678	1,604,397
	—	5 December 2012	950,000	161,500
	—	7 December 2012	11,766,025	2,353,205
	—	13 December 2012	2,768,444	-
	—	17 December 2012	15,000	2,550
	—	31 December 2012	12,375,000	2,475,000
	—	17 April 2013	946,334	-
	—	1 May 2013	325,000	55,250
	At reporting date		284,964,498	42,673,948
	Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.
(b)	Options
	i.	For information relating to the BluGlass Limited employee option plan, including details of options issued, exercised and lapsed during the fnancial year and options outstanding at the end of the fnancial year, refer toNote 24 Share-based Payments.
	ii.	For information relating to share options issued to key management personnel during the fnancial year, refer to Note 5 Interests of Key Management Personnel.

(c) Capital Management

Management controls the capital of the consolidated entity in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the consolidated entity can fund its operations and continue as a going concern.

The consolidated entity’s capital comprises ordinary share capital.

There are no externally imposed capital requirements.

There have been no changes in the strategy adopted by management to control the capital of the consolidated entity since the prior year.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 20: RESERVES

(a) Share based payments

The option reserve records items recognised as expenses on valuation of employee share options. During 2012 the company has elected to reclassify amounts representing expired options to accumulated losses.

(b) Other Reserves This reserve is used to recognise the difference between purchase consideration paid and the non-controlling interest carrying value.

NOTE 21: CAPITAL AND LEASING COMMITMENTS

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Consolidated Entity
2013 2012
$ $
(a) Finance Lease Commitments
Commonwealth Bank hire purchase lease for research and development equipment.
Payable- minimum lease payments
— not later than 12 months - 197,242
— - -
between 12 months and 5 years
-
Minimum lease payments 197,242
-
Less future finance charges (14,461)
-
Present value of minimum lease payments 182,781
(b) Operating Lease Commitments:
Non-cancellable operating lease contracted for but not capitalised in the financial
statements
Payable — minimum lease payments
— not later than 12 months 200,000 108,238
— -
Between 12 months and 5 years 716,667
— - -
greater than 5 years
916,667 108,238
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The lease was renewed for an additional term of five years from February 2013. The property lease is a non-cancellable lease with a five year term, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments shall be increased by the greater of CPI or 4.0% per annum. The lease does not allow for subletting of any lease areas.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE FINANCIAL STATEMENT NOTES

NOTE 22: OPERATING SEGMENTS

(a) Business and geographical segments

The Group identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group is managed primarily on the basis of research and development activities. The Groups operation has one main risk profile and performance assessment criteria. Operating segments are therefore determined on the same basis.

Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:

the products sold and/or services provided by the segment;
the manufacturing process;
the type or class of customer for the product or service;
the distribution method; and any external regulatory requirements

Applying the above criteria, the Group only has one operating division being the research and manufacture of Gallium Nitride (GaN).

The Group operates in one geographical area being in Australia. The Group did not undertake any new operations and it did not discontinue any of its existing operations during the year.

NOTE 23: CASH FLOW INFORMATION

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Consolidated Entity
2013 2012
$ $
(a) Reconciliation of Cash Flow from Operations with Loss after Income Tax
Loss after income tax (1,676,726) (6,230,574)
Non-cash flows in loss
Depreciation expense 719,821 1,748,328
Share based payment 551,383 315,682
Other Non-cash items
Changes in assets and liabilities, net of the effects of purchase and disposal
of subsidiaries
(Increase)/decrease in trade and term receivables (1,967,785) 27,175
(Increase)/decrease in other assets (45,505) 121,974
(Decrease)/Increase in deposits - 500
Decrease in inventory 66,665 184,983
Increase/(decrease) in trade payables and accruals (117,649) (657,202)
Increase in provisions 21,488 102,185
Cash flow from operations (2,213,010) (4,386,949)
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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 23: CASH FLOW INFORMATION (CONT.)

Non-cash Financing and investing activities

(b) Options granted

2,749,000 share options were granted to staff under the BluGlass Limited employee incentive scheme to take up ordinary shares at an exercise price of $0.00 each. Also 7,123,080 options lapsed during the year. Expense for the year was $551,383.

(c) Loan Facilities

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Consolidated Entity
2013 2012
$ $
-
Hire purchase facility 1,516,344
Amount utilised - (1,516,344)
- -
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The hire purchase facility expires in February 2013.

NOTE 24: SHARE-BASED PAYMENTS

The following share-based payments existed at 30 June 2013:

On 29 October 2012 580,000 share options lapsed following the resignation of a director.

On 13 December 2012 the first and second milestones for the vesting of the BluGlass staff options were achieved. 2,768,444 options were transferred to the BluGlass Incentive Option Scheme Trust.

On 18 January 2013, 2,749,000 options were issued to BluGlass Incentive Option Scheme Trust under the BluGlass Limited employee incentive scheme to take up ordinary shares at an exercise price of $0.00 each subject to technical milestones. These options will only vest in three equal tranches. The first tranche will vest when a P Gan Layer with MOCVD equivalent qualities is achieved and verified. The second tranche when a Beta machine is placed with a customer or similar commercial milestone. The third tranche will vest upon 24 months of continuous employment with BluGlass from the date of issue.

On 17 April 2013 the first milestones for the vesting of the BluGlass staff options was achieved. 916,334 options were transferred to the BluGlass Incentive Option Scheme Trust.

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Consolidated Entity
2013 2012
Number Weighted Average Number Weighted Average
of Options Exercise Price of Options Exercise Price
$ $
Outstanding at the beginning
13,995,748 0.10 9,638,971 0.24
of the year
Granted 2,749,000 0.00 5,832,667 0.00
Forfeited - -
Exercised (5,004,777) - - -
Expired (7,123,080) 0.16 (1,475,890) 0.16
Outstanding at year-end 4,616,891 0.10 13,995,748 0.10
Exercisable at year-end - - 2,053,081 0.38
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FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 24: SHARE-BASED PAYMENTS (CONT.)

5,004,777 employee options were exercised during the year ended 30 June 2013.

The options outstanding at 30 June 2013 had a weighted average share price of $0.00 and a weighted average remained contractual life of 2.7 years. (Option prices were $0.10 in respect of options outstanding at 30 June 2012).

The weighted average fair value of the options granted during the year was $0.00

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Included under employee benefits and expense in the income statement relating to share-based payment is $551,383 (2012: $315,682) and relates, in full, to equity-settled share-based payment transactions.

NOTE 25: RELATED PARTY TRANSACTIONS

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Consolidated Entity
2013 2012
$ $
Transactions between related parties are on normal commercial terms and conditions
no more favourable than those available to other parties unless otherwise stated
Transactions with related parties:
Other Related Parties
-
Macquarie ARC Linkage Grant Collaboration 100,000
-
Alan Li RPCVD Consulting Fees 10,000
-
110,000
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Key Management Personnel have no related party transactions.

NOTE 26: FINANCIAL RISK MANAGEMENT

The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, loans to a subsidiary and leases.

The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 26: FINANCIAL RISK MANAGEMENT (CONT.)

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Note Consolidated Entity
2013 2012
$ $
Financial Assets
Cash and cash equivalents 8 5,589,870 3,731,750
5,589,870 3,731,750
Financial Liabilities
Trade and other payables 15 251,101 133,452
Borrowings 16 - 182,781
251,101 316,233
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The Audit and Risk Committee (ARC) has been delegated responsibility by the Board of Directors for, amongst other issues, monitoring and managing financial risk exposures of the Group. The ARC monitors the Group’s financial risk management policies and exposures and approves financial transactions within the scope of its authority. It also reviews the effectiveness of internal controls relating to commodity price risk, counter party credit risk, currency risk, financing risk and interest rate risk. The ARC meets regularly and minutes are reviewed by the Board.

The ARC’s overall risk management strategy seeks to assist the consolidated group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of the use of hedging derivative instruments, credit risk policies and future cash flow requirements.

Specific Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments is interest rate risk. Other risks include foreign currency risk, liquidity risk, credit risk, and commodity and equity price risk.

The maximum exposure to financial risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

(a) Credit Risk

The group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the consolidated entity.

(b) Price Risk

The group has no exposure to commodity price risk.

(c) Liquidity Risk

Liquidity risk is that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 26: FINANCIAL RISK MANAGEMENT (CONT.)

(c) Liquidity Risk (cont.)

The Group’s objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.

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 significantly exceed the current cash outflow requirements.

As at 30 June 2013 the Groups non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

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Current Non-Current
30 June 2013 Within 6 months 6 to 12 months 1 to 5 years Later than 5 years
$ $ $ $
- - - -
Finance Lease Obligation
- - -
Trade and other payables 251,101
Total 251,101 - - -
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Current Non-Current
30 June 2012 Within 6 months 6 to 12 months 1 to 5 years Later than 5 years
$ $ $ $
- - -
Finance Lease Obligation 182,781
- - -
Trade and other payables 133,452
Total 316,233 - - -
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(d) Market Risk

(i) Foreign Exchange Risk

The group does not have any material foreign exchange risk exposure to any single asset or liability or group of assets or liabilities under financial instruments entered into by the consolidated entity.

(ii) Interest Rate Risk

The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets is as follows:

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

FINANCIAL STATEMENT NOTES

NOTE 26: FINANCIAL RISK MANAGEMENT (CONT.)

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Weighted Average Effective Interest Rate Floating Interest Rate
2013 2012 2013 2012
$ % $ %
Consolidated Entity
Financial Assets:
Cash 3,356,362 2.27 73,075 2.27
Investments in term deposits and
2,233,508 4.40 3,658,675 4.40
bank bills
Total Financial Assets 5,589,870 3,731,750
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All other financial assets and liabilities are non-interest bearing.

(iii) Financial instrument composition and maturity analysis

All trade and sundry payables are expected to be paid within the next 45 days.

(iv) Net Fair Values

All financial assets and liabilities at 30 June 2013 have maturities of less than 45 days and carrying value represents net fair value.

(v) Sensitivity analysis

The consolidated and parent entity do not have projected exposure to foreign currency risk or price risk and no material projected exposure to interest rate risk.

NOTE 27: CONTINGENT LIABILITIES

Contingent liabilities include:

The lease for 74 Asquith Street is supported by a CBA bank guarantee for $133,100. Collateral for the bank guarantee is
a set-off against cash invested with the CBA for $133,100. The CBA also holds a Guarantee against the company credit cards of $50,000.

NOTE 28: EVENTS AFTER BALANCE SHEET DATE

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

FINANCIAL STATEMENT NOTES

NOTE 29: BLUGLASS LTD PARENT COMPANY INFORMATION

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2013 2012
$ $
Parent entity
Assets
Current assets 7,848,391 5,574,148
Non-current assets 15,499,222 15,516,847
Total assets 23,347,613 19,090,995
Liabilities
Current liabilities 2,606,101 685,037
Non-current liabilities 298,083 264,025
Total liabilities 2,904,184 949,062
Net Assets 20,443,429 18,141,933
Equity
Issued capital 42,673,992 36,022,046
Accumulated Losses (22,640,476) (19,072,558)
Share option reserve 409,913 1,192,445
Total Equity 20,443,429 18,141,933
Financial performance
Loss for the year (3,170,714) (123,416)
- -
Other comprehensive income
Total comprehensive income (3,170,714) (123,416)
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NOTE 30: COMPANY DETAILS AND PRINCIPAL PLACE OF BUSINESS

The registered office and principal place of business of the company is:

BLUGLASS LIMITED 74 ASQUITH STREET

SILVERWATER NSW 2128

Ph: +61 2 9334 2300

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

DIRECTORS’ DECLARATION

1. In the opinion of the directors of BluGlass Limited:

a. the consolidated financial statements and notes of BluGlass Limited are in accordance with the Corporations Act 2001, including
- i giving a true and fair view of its financial position as at 30 June 2013 and of its performance for the financial year ended on that date; and
- ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
b. there are reasonable grounds to believe that BluGlass Limited will be able to pay its debts as and when they become due and payable.

2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2013.

3. Note 2 confirms that the consolidated financial statements also comply with International Financial Reporting Standards.

Signed in accordance with a resolution of the directors:

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George Venardos Director Dated this 26th Day of August 2013

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

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FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

ADDITIONAL INFORMATION

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

1. Shareholding

a. Distribution of Shareholders

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Distribution of Shareholders Holders Ordinary Shares % of Issued Capital
1 – 1,000 141 81,951 .03
1,001 – 5,000 685 2,141,531 .75
5,001 – 10,000 474 3,948,255 1.38
10,001 – 100,000 1140 42,838,836 15.01
100,001 – and over 331 236,327,258 82.82
Total on Register 2771 285,337,831 100.00
Total Unmarketable Parcels 532
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b. The names of substantial shareholders in the company register as at 30 August 2013 are:

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Shareholder Ordinary Shares % of Issued Capital
SPTS TECHNOLOGIES UK LTD 63,702,837 22.33
HSBC CUSTODY (Wellington ACC) 27,703,401 9.71
ACCESS MACQUARIE LTD BLUGLASS 20,204,966 7.08
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c. Voting Rights

The voting rights attached to each class of equity security are as follows:

Ordinary Shares

Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

ADDITIONAL INFORMATION

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

d. 20 Largest Shareholders – Ordinary Shares

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Number of Fully % Held of Issued
Name
Paid Shares Held Ordinary Capital
1 SPTS TECHNOLOGIES UK LTD 63,702,837 22.33
2 HSBC CUSTODY NOM AUST LTD 27,703,401 9.71
3 ACCESS MACQUARIE LTD 20,204,966 7.08
4 HSBC CUSTODY NOM AUST LTD 4,069,649 1.43
5 UBS WEALTH MGNT AUST NOM 4,021,123 1.41
6 UNIVERSITY MACQUARIE 2,997,756 1.05
7 BLUGLASS EMPLOYEE INCENTI 2,510,778 .88
8 GRIMA GARY WAYNE + G D 1,867,209 .65
9 LOVERY HAROLD F + J C 1,825,000 .64
10 STRATEGIC DVLMT PTNRS AUS 1,750,647 .61
11 CANEMOON INV PL 1,745,000 .61
12 BRIDGESUN PL 1,647,433 .59
13 ARMELEK PL 1,655,000 .58
14 NETWEALTH INV LTD 1,584,302 .56
15 RAFTSEA PL 1,505,486 .53
16 ESCAY INV PL 1,504,490 .53
17 MAURICI ANTHONY PHILLIP 1,470,439 .52
18 NATIONAL NOM LTD 1,456,242 .51
19 GEOMAR SUPER PL 1,375,000 .48
20 CITYSTYLE HLDGS PL 1,344,500 .47
145,968,285 51.17
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2. The company Secretary is:

Mr Emmanuel Correia.

3. The address of the principal registered office in Australia is:

74 Asquith Street, Silverwater NSW 2128

4. Registers of securities are held at the following address:

770 Canning Highway, Applecross WA 6153

5. Stock Exchange Listing:

Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange.

6. Unquoted Securities:

A total of 2,410,890 unlisted incentive plan options are on issue which expire on 13th October 2014.

A total of 1,832,606 unlisted incentive plan options are on issue which expire on 18th January 2016.

BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

CORPORATE GOVERNANCE STATEMENT 30 JUNE 2013

The principal features of the Company’s Corporate Governance policies and practices are summarized below.

The Company has adopted a comprehensive system of control and accountability as the basis for the administration of corporate governance.

The Board is responsible to Shareholders for the overall management of the Company’s business and affairs. The Directors’ overriding objective is to increase Shareholder value within an appropriate framework which protects the rights and interests of Shareholders and ensures the Company is properly managed.

The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs. To the extent they are applicable, the Company has adopted the Corporate Governance Principles (2nd edition) (“ Principles ”) as published by ASX Corporate Governance Council (“ASXCGC”).

The Company’s corporate governance principles and policies are structured with reference to the ASXCGC’s Corporate Governance Principles (2nd edition), which are as follows:

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Recommendation Description
Recommendation 1 Lay solid foundations for management and oversight;
Recommendation 2 Structure the Board to add value;
Recommendation 3 Promote ethical and responsible decision making;
Recommendation 4 Safeguard integrity in financial reporting;
Recommendation 5 Make timely and balanced disclosures;
Recommendation 6 Respect the rights of shareholders;
Recommendation 7 Recognise and manage risk;
Recommendation 8 Remunerate fairly and responsibly;
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In accordance with recommendations of the ASX, information published on the Company’s web site includes charters of Board and its subcommittees, codes of conduct and other policies and procedures relating to the Board and its responsibilities. A copy of the Company’s Corporate Governance Statement can be found on the Company’s website www.bluglass.com.au under the Corporate Governance Section.

The Board will consider on an ongoing basis its Corporate Governance procedures and whether they are sufficient as the Company’s activities develop in size, nature and scope. Bluglass Limited’s corporate governance practices were in place for the year ending 30th June 2013 and other than outlined below the corporate governance practices of Bluglass Limited were compliant with the Council’s recommendations during the year.

BOARD RESPONSIBILITIES

The Company has established the Role and Responsibilities of the Chairman, the Board (i.e. Board Charter) and the Company’s CEO. A description of these functions and matters delegated to the CEO can be found in Annexure 1 of the Company’s Corporate Governance Statement on the Company’s website.

BOARD STRUCTURE

The composition of the board is determined in accordance with the following principles and guidelines:

the board should comprise directors with an appropriate range of qualifications and expertise; and
the board shall meet at least every second month and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

LOWER TEMPERATURE

Each of the directors are considered independent by virtue of the fact that each individual is not a member of management, is not a substantial shareholder of the Company and is free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with – the independent exercise of their judgment.

In accordance with the ASXCGC principles, the majority of the Company’s directors, including the Chairman are independent.

As part of discharging its obligations as directors of the Company, the Directors will, from time to time need to seek independent professional advice at the expense of the Company. Accordingly, the board has agreed that where issues or matters arise in relation to the running of the Company, that in the opinion of the directors require independent professional advice to assist in the decision making surrounding the resolution of these issues, the board may engage such professional advice providing it is on standard commercial terms for advice of its nature.

Please refer to page 10 of the 2013 Annual Financial Report for the relevant skills and experience of each of the directors.

BOARD SUB COMMITTEES

The Board has established a nomination and remuneration committee and an audit and risk management committee. The name of members of each committee and their attendance at meetings is contained on page 18 of the Annual Report. A copy of each respective Committee’s Charter is contained in Annexure 5 and 6 of the Company Corporate Governance statement, a copy of which is available on the Company’s website.

One of the responsibilities of the audit and risk management committee is to ensure that the Company’s external auditors have in place an appropriate policy in relation to partner rotation. The audit and risk management committee assesses each proposed audit partner to ensure they have the appropriate level of experience and expertise to adequately lead the independent audit function.

The Nomination and Remuneration Committee Charter specifically indicates that the remuneration packages of non-executive directors, executive directors and senior executives are to be considered separately and structured appropriately for the role undertaken.

The Board can confirm that it has received written assurance from the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) that to the best of their knowledge and belief, the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively and in relation to financial reporting risks. The Board notes that due to its nature, internal control assurance from the CEO and CFO can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures.

CODE OF CONDUCT AND DIVERSITY

The Company has established a Code of Conduct and an Employee/Executive Share Trading Policy which is contained in Annexure 2 and 3 respectively of the Company’s Corporate Governance Statement, a copy of which is available on the Company’s website.

BluGlass has established a Diversity Policy that outlines the Company’s commitment to diversity and the active steps the Company will take in implementing the policy, commensurate with a company of its size and the industry with which it operates. A copy of the Diversity Policy is contained in Annexure 7 of the Company’s Corporate Governance Statement, a copy of which is available on the Company’s website.

Our policy is to recruit and manage on the basis of qualification for the position and performance, regardless of gender, age, nationality, race, religious beliefs, cultural background, sexuality or physical ability. Due to the Company’s current size and level of activity there has been limited opportunity with which to measure the Company’s commitment to its diversity policy during the 2013 financial year. During the year there was minimal staff movement and no change to the Company’s executive team. The board discusses its diversity policy at board meeting’s were potential changes to the work force is discussed.

It is essential that the Company employs the appropriate person for each job and that each person strives for a high level of performance.

ETHNIC DIVERSITY

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Total Staff Australian and NZ Asian Americas European
16 8 3 1 4
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BLUGLASS LIMITED AND CONTROLLED ENTITIES

BRIGHTER FUTURE

GENDER DIVERSITY

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Male Female
Total Staff 11 5
Senior Executives 3 0
Senior Research Staff 2 1
Non-Executive Directors 4 0
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EDUCATIONAL DIVERSITY

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Total Staff PHD Masters Bachelor Other Qualifications No Qualifications
16 8 10 12 N/A 4
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TIMELY DISCLOSURE

The Company’s Corporate Governance Statement contains the Company’s policy to ensure compliance with ASX Listing Rules continuous disclosure obligations and the Company’s policy to ensure timely and effective shareholder communication, including the encouragement for shareholders to participate at the Company’s Annual General Meeting. A copy of the Company’s Corporate Governance Statement is available on the Company’s website.

BOARD AND SENIOR EXECUTIVE PERFORMANCE EVALUATION

ASX Corporate Governance Council (“ASXCGC”) recommendation 2.5 requires the disclosure of the process for performance evaluation of the board, its committees and individual directors, and key executives.

In conjunction with the Nomination and Remuneration Committee, the directors formally review, on an annual basis the composition and performance of the board to ensure that an appropriate balance of required skills is present. If deemed necessary a formal process of board nomination and subsequent director election is undertaken by the board and at times the board may utilise the services of external consultants to assist in the nomination and election of board members and to assist in evaluating the board’s performance.

The board is responsible for evaluating the performance of the CEO. A formal review of the CEO’s performance is conducted on an annual basis. The performance of the CEO is assessed and measured against predefined key performance indicators and generally accepted good business principles. During the year, the board evaluated the performance of the CEO on a formal basis in accordance with its evaluation process.

The CEO is responsible for evaluating the performance of the Company’s senior executives. The CEO evaluates the performance of the Company’s senior executives on an annual basis against predefined key performance indicators and generally accepted good business principles. In addition to the formal performance evaluation process which was undertaken during the year, given the size of the Company’s current operations and the limited number of senior executives, the CEO evaluates the performance of the senior executives on an ongoing basis.

OTHER INFORMATION

There are currently no schemes for retirement benefits, other than superannuation, for any directors.

The Company’s corporate governance practices and policies are publicly available at the Company’s registered office.

FINANCIAL STATEMENTS YEAR END 30 JUNE 2013 | ABN 20 116 825 793

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NOTES
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NOTES

BLUGLASS LIMITED AND CONTROLLED ENTITIES

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74 ASQUITH STREET, SILVERWATER NSW 2128 P + 61 (0)2 9334 2300 F + 61 (0)2 9748 2122 E [email protected] WWW.BLUGLASS.COM.AU

AI assistant

BLUGLASS LIMITED — Annual Report 2013

64532_rns_2013-09-26_480ba5d5-13ae-4aaf-b4b8-51c2d2b47630.pdf

COMPANY DIRECTORY

Stock Exchange Listing:

FUTURE LOWER TEMPERATURE

111213

THE RPCVD REVOLUTION

HIGH BRIGHTNESS LED MARKET FORECAST BY APPLICATION

CPV MARKET OPPORTUNITY

CONCENTRATED PV MARKET, GLOBAL, INSTALLED CAPACITY, MW 2011-2012

OTHER MARKET OPPORTUNITIES:

~~HIGHL~~ IGHTS FOR 2013

~~COMPLETES P~~ URCHASE OF SPTS HELD PORTION ~~OF EPIBL~~ U JOINT VENTURE COMPANY

~~BLUGLASS~~ BRINGS IMPURITIES TO WITHIN ~~IN~~ DUSTRY STANDARDS

~~BLUGLASS HIT~~ S PROOF OF CONCEPT MILESTONE

~~RAISES~~ $4.75M PLACEMENT & SPP

DEVELOPMENT ROADMAPS

CONTENTS

LOWER TEMPERATURE

CHAIRMAN & CEO FOREWORD

~~WHY RPCVD FOR GaN ON SILCON?~~

DIRECTORS’ REPORT

DIRECTORS

Mr George Venardos

COMPANY SECRETARY

Mr Emmanuel Correia

FINANCIAL SUMMARY

PRINCIPAL ACTIVITIES

REVIEW OF OPERATIONS

LOWER TEMPERATURE

DEVELOPMENT ROADMAPS

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

DIVIDENDS PAID OR RECOMMENDED

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

ENVIRONMENTAL AND SAFETY ISSUES

INFORMATION ON DIRECTORS

Current Directorships:

Current Directorships:

Former Directorships in the last 3 years:

Former Directorships in the last 3 years:

Experience and Expertise

Experience and Expertise

Special Responsibilities

Special Responsibilities

Current Directorships:

Former Directorships in last 3 years:

Former Directorships in last 3 years:

Experience and Expertise:

Special Responsibilities

Experience and Expertise:

Special Responsibilities:

REMUNERATION REPORT 2012- 2013

INTRODUCTION

REMUNERATION STRATEGY

DIRECTORS’ REMUNERATION

LOWER TEMPERATURE

EXECUTIVE REMUNERATION

EXECUTIVES TOTAL REMUNERATION

CONTRACTED EXECUTIVE REMUNERATION

PERFORMANCE BASED REMUNERATION

EMPLOYMENT CONTRACTS OF EXECUTIVES

LOWER TEMPERATURE

OPTIONS ISSUED AS PART OF REMUNERATION FOR THE YEAR ENDED 30 JUNE 2013

Options and Rights Granted

DESCRIPTION OF OPTIONS GRANTED AS REMUNERATION 2013

DESCRIPTION OF OPTIONS GRANTED AS REMUNERATION 2013 (CONT.)

REMUNERATION ADVISORS

SHARES ISSUED ON EXERCISE OF COMPENSATION OPTIONS

DIRECTORS’ REPORT CONTINUED

MEETINGS OF DIRECTORS

INDEMNITIES GIVEN AND INSURANCE PREMIUMS PAID TO AUDITORS AND OFFICERS

OPTIONS

PROCEEDINGS ON BEHALF OF COMPANY

NON-AUDIT SERVICES

AUDITOR’S INDEPENDENCE DECLARATION

ANNUAL REPORT FINANCIALSTATEMENTS

COMPREHENSIVE INCOME

FINANCIAL POSITION

BLUGLASS LIMITED Annual Report 2013

HIGHL IGHTS FOR 2013

COMPLETES P URCHASE OF SPTS HELD PORTION OF EPIBL U JOINT VENTURE COMPANY

BLUGLASS BRINGS IMPURITIES TO WITHIN IN DUSTRY STANDARDS

BLUGLASS HIT S PROOF OF CONCEPT MILESTONE

RAISES $4.75M PLACEMENT & SPP

WHY RPCVD FOR GaN ON SILCON?