BLUGLASS LIMITED — Interim / Quarterly Report 2014

Feb 23, 2014

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INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2013 BLUGLASS LIMITED and CONTROLLED ENTITIES ABN 20 116 825 793

BluGlass Limited

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Half Yearly Results 31 December 2009

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

CONTENTS	Page
Directors’ Report	3
Auditor’s Independence Declaration	5
Consolidated Statement of Profit or Loss and Other Comprehensive Income	6
Consolidated Statement of Financial Position	7
Consolidated Statement of Changes In Equity	8
Consolidated Statement of Cash Flows	9
Notes to the Financial Statements	10
Directors’ Declaration	12
Independent Auditor’s Review Report	13

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

DIRECTORS’ REPORT

Your directors present their report on the company and its controlled entities for the half year ended 31 December 2013.

Directors

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

Mr George Venardos

Mr Greg Cornelsen

Mr Chandra Kantamneni

Dr William Johnson

Principal Activities

The principal activity of the consolidated entity during the half year was the further development and commercialisation of novel technology for the manufacture of epitaxially grown gallium nitride at low temperature. BluGlass is also engaged in research activities in developing a high efficiency nitride solar cell prototype.

All research and development activites are conducted in BluGlass Limited. There were no other significant changes in the nature of the consolidated entity’s principal activities during the half year.

Operating Results

Revenue has decreased by $674,991 down 26% to $1,971,838 due to the following factors:

• In the comparative period, the company recognised a full 12 month R&D rebate received of $2.349,139 relating to 30 June 2012 compared to a 6 months accrual of $1,232,372 in the current period.

• Receipt of $595,332 from the Commonwealth Clean Technology Grant. Up 147% on last year, where BluGlass only received the final retention payment from the Commonwealth Climate Ready Grant.

• Receipt of the first operational revenue $61,300 (2012: nil)

Gross expenditure has increased on a consolidated basis by $158,362 up 5% due to the following factors:

• Employment of extra staff. Employee benefits expense up $1,461,387(2012: $1,135,232).

• Depreciation expense is reducing as original research equipment is progressively written off, $250,673 (2012: $413,731).

The consolidated loss for the period amounted to $1,635,006 (2012: $754,512) due to the following factors:

• Tax rebate receipts of $1,232,372 (2012: $2,349,139).

The company’s financial position remains sound with net assets of $15,858,641 (2012: $17,126,424)

The statement of Financial position does not include a value for the increasing number of 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.

Dividends Paid or Recommended

No dividends were paid or declared during the period.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

2014 Half Yearly Review of Operations

The 2014 half year saw the company accomplish a number of technical and commercial milestones; including bringing the Thomas Swan MOCVD system online at Silverwater, growing the companies intellectual property portfolio, being awarded a $2.99M Clean Technology Innovation Grant and winning the 2013 Australian Cleantech Competition and also receiving initial customer revenues.

In August BluGlass was awarded a $2.99M grant from the Federal Government as part of the Clean Technology Innovation Grant Program. These funds will be primarily used to expedite research and development into achieving the companies Brighter LEDs milestone and commencing work on GaN on silicon substrates. Silicon is a low cost, large diameter substrate that is currently limited in its application for LED semiconductor material growth. This is because the high temperatures of MOCVD growth generally lead to bowing of the substrate, which leads to poor manufacturing yields. RPCVD is a low temperature process that is potentially better suited for the growth of GaN on silicon substrates. It is anticipated that this will result in a revenue stream for the company as presently GaN on silicon is not competitive with the industry standard substrate, sapphire despite its huge commercial appeal as a low cost solution for LED’s.

In October, it was announced that BluGlass had won the 2013 Australian Cleantech Competition and had also won the Manufacturing award. The competition is an iniative of the Federal Governments Department of Industry and is supported by Industry partners. As part of the main prize, CEO Giles Bourne participated in a government sponsored Asian trade mission through Hong Kong, Singapore and China. The mission has enabled us to continue to reach out to the industry and discuss our development and future potential collaboration.

In November 2013, BluGlass announced that it has successfully commissioned a former production Thomas Swan MOCVD platform at Silverwater to assist the company towards achieving its ‘Brighter LED’s milestone. BluGlass now has two deposition systems operating at the Silverwater site to enable multiple programmes to be in place simultaneously. We are also in the process of commissioning a larger scale RPCVD system to come online in the coming months trebling our deposition capacity at Silverwater.

With this increased capacity and development tasks, BluGlass has added two experienced semiconductor equipment engineers to the team to assist BluGlass in reaching it’s next milestone, but more critically to be completely ready for the commercialisation milestones which include scaling the technology and bringing RPCVD to market upon the delivery of our Brighter LEDs milestone.

During the half year BluGlass was granted an additional three patents in the international semiconductor market, bringing the companies total granted patent portfolio to 20 patents in key semiconductor countries, including the US, Japan, China and Europe. The BluGlass Intellectual Property portfolio continues to be an important aspect of preparing the business for commercialisation.

Following the successful commissioning of the MOCVD machine at Silverwater at the end of 2013, BluGlass has received modest revenue from customers for the manufacture of high quality MOCVD niche templates. This work has continued in January and February and supplements the current research efforts. The company only undertakes third party works where it does not detract from the principle RPCVD research effort, and will continue to undertake this work as capacity allows. BluGlass also has commitments from customers for further revenue for the delivery of niche products. These successful customer relationships will help build the reputation and credibility of the BluGlass material engineers as they produce unique template solutions to industry challenges to meet the needs of our customers.

The first half of the 2014 Financial Year has been an exciting and productive six months that has placed the company well to meet its coming milestones.

A copy of the auditor’s independence declaration is required under s307 of the Corporations Act 2001 and is included on page 5 of this report.

Director George Venardos

Dated this 24[th] day of February 2014

BluGlass Limited

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Half Yearly Results 31 December 2013

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Grant Thornton Audit Pty Ltd ACN 130 913 594

Level 17, 383 Kent Street Sydney NSW 2000

Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230

T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au

Auditor’s Independence Declaration To The Directors of BluGlass Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of BluGlass Limited for the half-year ended 31 December 2013, I declare that, to the best of my knowledge and belief, there have been:

• a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b no contraventions of any applicable code of professional conduct in relation to the review.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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G S Layland Director - Audit & Assurance

Sydney, 24 February 2014

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

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BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2013

Note Revenue 2 Employee benefits expense Professional fees Board and secretarial fees Corporate compliance & legal expenses Consultant fees Rent expense Travel and accommodation expense Engineering, consumable & repairs expense Depreciation expense Share based payment Other expenses Loss before income tax Income tax expense Loss for the period Other comprehensive income Total comprehensive income attributable to members of the parent entity Profits attributable to: --members of the parent entity Total Comprehensive income attributable -- members of the parent entity Earnings per share Basic earnings per share (cents per share) Diluted earnings per share (cents per share)	Consolidated Group 31.12.2013 31.12.2012 $ $ 1,971,838 2,646,829 (1,461,387) (1,135,232) (121,426) (232,657) (154,073) (142,196) (50,704) (144,232) (363,805) (141,173) (121,000) (113,001) (37,277) (43,413) (362,103) (302,075) (250,673) (413,731) (367,223) (386,884) (317,173) (346,747)
	(1,635,006) (754,512) - -
	(1,635,006) (754,512)
	- -
	(1,635,006) (754,512)
	(1,635,006) (754,512)
	(1,635,006) (754,512)
	(1,635,006) (754,512)
	(1,635,006) (754,512)
	(0.56) (0.67) (0.56) (0.67)

These financial statements should be read in conjunction with the accompanying notes.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

ASSETS Current Assets Cash and cash equivalents Trade and other receivables Consumables Other current assets TOTAL CURRENT ASSETS Non-Current Assets Property, plant and equipment Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Short-term provisions TOTAL CURRENT LIABILITIES Non-current Liabilities Long-term provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated Losses TOTAL EQUITY

Consolidated Group 31.12.2013 30.06.2013 $ $ 4,525,151 5,589,870 1,346,007 1,967,784 164,078 144,062 116,030 113,564 6,151,266 7,815,280 1,892,740 1,327,286 8,695,000 8,695,000 10,587,740 10,022,286 16,739,006 17,837,566 324,258 251,101 236,898 161,958 561,156 413,059 , 319,209 298,083 319,209 298,083 880,365 711,142 15,858,641 17,126,424 42,673,992 42,673,992 (246,382) (572,538) (26,568,969) (24,975,030) 15,858,641 17,126,424

These financial statements should be read in conjunction with the accompanying notes.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2013

Balance at 1 July 2012 Total comprehensive income for the period Transactions with owners in their capacity as owners: Shares issued during the period Share transaction costs during the period Purchase of 49% Non-controlling interest Stock options issued Exercise of share options Transfer of retained earnings Dividends paid or provided for Balance at 31 December 2012 Balance at 1 July 2013 Total comprehensive income for the period Transactions with owners in their capacity as owners: Stock options issued Transfer of retained earnings Dividends paid or provided for Balance at 31 December 2013	Issued Capital Share based payments Reserve Other Reserve Non- controlling interest Accumulated Losses Total $ $ $ $ $ $ 36,022,046 1,192,445 - 391,283 (24,274,134) 13,331,640 - - - - (754,512) (754,512) 4,992,256 - - - - 4,992,256 (57,103) - - - - (57,103) 1,373,735 (982,453) (391,283) - - - 386,884 - - - 386,884 355,904 (355,904) - - - - - (750,365) - - 750,366 - - - - - - -
	42,686,838 473,060 (982,453) - (24,278,280) 17,899,165
	42,673,992 409,914 (982,452) - (24,975,030) 17,126,424 - - - - (1,635,006) (1,635,006) - 367,223 - - - 367,223 - (41,067) - 41,067 - - - - - - -
	42,673,992 736,070 (982,452) (26,568,969) 15,858,641

These financial statements should be read in conjunction with the accompanying notes.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2013

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from grants Interest & other income received Payments to suppliers and employees Net cash provided (used)\by in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Net cash (used)/provided by in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Share issue costs Proceeds from borrowings Hire purchase repayments Net cash provided by financing activities Net (decrease)/increase in cash held Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	Consolidated Group 31.12.2013 31.12.2012 $ $ 595,332 240,054 1,326,159 2,406,775 (2,170,084) (2,508,487)
	(248,593) 138,342
	(816,126) (26,469)
	(816,126) (26,469)
	- 4,992,256 - (57,103) - - - (148,086)
	4,787,066
	(1,064,719) 4,898,939 5,589,870 3,731,750
	4,525,151 8,630,689

These financial statements should be read in conjunction with the accompanying notes.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2013

Note 1: Basis of Preparation

These general purpose financial statements for the half-year reporting period ended 31 December 2013 have been prepared in accordance with requirements of the Corporations Act 2001 and AASB 134: Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial reporting standard IAS34 Interim Financial Reporting. The group is a for profit entity for financial reporting purposes under Australian Accounting standards.

This interim financial report is intended to provide users with an update on the latest annual financial statements of BluGlass Limited and its controlled entities (the Group). As such, it does not contain information that represents relatively insignificant changes occurring during the half year within the Group. It is therefore recommended that this financial report be read in conjunction with the annual financial report of the Group for the year ended 30 June 2013, together with any public announcements made during the half-year.

The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements except in relation to the matters discussed below.

Significant Accounting Policies

The interim financial statements have been prepared in accordance with the accounting policies adopted in the Group’s last annual financial statements for the year ended 30 June 2013, except for the applications of the following standards as of 1 January 2013:

• AASB 10 Consolidated Financial Statements;

• AASB 11 Joint Arrangements; and

• AASB 13 Fair Value Measurement.

The effects of applying these standards are described below.

AASB 10 Consolidated Financial Statements

AASB 10 supersedes AASB 127 Consolidated and Separate Financial Statements and Interpretation 112 Consolidation – Special Purpose Entities . AASB 10 revises the definition of control and provides extensive new guidance on its application. These new requirements have the potential to affect which of the Group’s investees are considered to be subsidiaries and therefore change the scope of consolidation. The requirements on consolidation procedures, accounting for changes in non-controlling interests and accounting for loss of control of a subsidiary are unchanged.

Management has reviewed its control assessments in accordance with AASB 10 and has concluded that there is no effect on the classification (as subsidiaries or otherwise) of any of the Group’s investees held during the period or comparative periods covered by these financial statements.

AASB 11 Joint Arrangements

AASB 11 supersedes AASB 131 Interests in Joint Ventures and Interpretation 113 Jointly Controlled Entities – Nonmonetary-Contributions by Venturers . It aligns more closely the accounting by the investors with their rights and obligations relating to the joint management. In addition, AASB 131’s option of using proportionate consolidation of joint ventures has been eliminated and the standard now requires the use of equity accounting method.

The application of AASB 11 has had no material impact on the financial statements of the Group.

AASB 13 Fair Value Measurement

AASB 13 clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It does not affect which items are required to be fair-valued. AASB 13 applies prospectively for annual periods beginning on or after 1 January 2013.

The application of AASB 13 has had no material impact on the financial statements of the Group.

The financial statements of BluGlass Limited for the half year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 24 February 2013.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2013

Going Concern

Notwithstanding the accumulated losses for the company and the consolidated entity, the directors have performed a review of the cash flow forecasts and have considered the cash flow needs of the company and consolidated entity. The directors have prepared the financial statements on a going concern basis, as the directors have a number of strategies in progress to generate revenues from operations and maintain the company in a cashflow positive position.

Note 2: Loss for the Period

Note 2: Loss for the Period
	Consolidated Group
	31.12.2013	31.12.2012
The following revenue and expense items are relevant in explaining the financial
performance for the interim period:
Grant revenue	595,332	240,054
R&D Tax rebate	1,232,372	2,349,139

Note 3: Dividends

There were no dividends paid or declared during the period.

Note 4: Operating Segments

The consolidated group operates and reports in one business and geographic segment.

Note 5: Contingent liabilities

There has been no change in contingent liabilities since the last annual reporting date.

Note 6: Events subsequent to reporting date

There were no events subsequent to reporting date.

BluGlass Limited

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Half Yearly Results 31 December 2013

BLUGLASS LIMITED and Controlled Entities ABN 20 116 825 793

DIRECTORS’ DECLARATION

The directors of the company declare that:

1. the financial statements and notes as set out on pages 7 to 12 are in accordance with the Corporations Act 2001 and:

2. (a) comply with Accounting Standards AASB 134 Interim Financial Reporting; and

3. (b) give a true and fair view of the financial position as at 31 December 2013 and of the performance for the half year ended on that date.

4. in the directors’ opinion there are reasonable grounds to believe that the group will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

Dated this 24th day of February 2014

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Director George Venardos

Dated this 24th day of February 2014

BluGlass Limited

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Half Yearly Results 31 December 2013

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Grant Thornton Audit Pty Ltd ACN 130 913 594

Level 17, 383 Kent Street Sydney NSW 2000

Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230

T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au

Independent Auditor’s Review Report To the Members of BluGlass Limited

We have reviewed the accompanying half-year financial report of BluGlass Limited (“Company”), which comprises the consolidated financial statements being the statement of financial position as at 31 December 2013, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a statement or description of accounting policies, other explanatory information and the directors’ declaration of the consolidated entity, comprising both the Company and the entities it controlled at the half-year’s end or from time to time during the half-year.

Directors’ responsibility for the half-year financial report

The directors of BluGlass Limited are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such controls as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the consolidated half-year financial report based on our review. We conducted our review in accordance with the Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the BluGlass Limited consolidated entity’s financial position as at 31 December 2013 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of BluGlass Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

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A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of BluGlass Limited is not in accordance with the Corporations Act 2001, including:

• a giving a true and fair view of the consolidated entity’s financial position as at 31 December 2013 and of its performance for the half-year ended on that date; and

• b complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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G S Layland Director - Audit & Assurance

Sydney, 24 February 2014

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