VOLT GROUP LIMITED — Annual Report 2014

Feb 26, 2015

ASX Announcement

Enerji Ltd (ASX:ERJ) 27 February 2015

Appendix 4E – Preliminary Final Report

ABN 06 009 423 189

Current Reporting Period: 31 December 2014 Previous Corresponding Reporting Period: 31 December 2013

Results for Announcement to the Market

	Current Period $’000	Percentage increase/ (decrease) over previous corresponding period
Revenue from ordinaryactivities	144	374%
Loss from ordinary activities after tax attributable to members	10,675	117%
Loss for the period attributable to members	10,675	117%

cash expenses of $1,017,692 for depreciation and amortisation. The loss after tax included a tax benefit of $852,915 after receiving a Research and Development tax rebate of $2,524,534 during 2014.

During 2014 the Group raised $1,105,088 in new equity and made net repayments of debt of $135,500.

At 31 December 2014 the Group held $690,606 in cash. The Groups 2014 Research and Development tax rebate is expected to yield up to an additional $800,000 in cash when received in the 2[nd] quarter of 2015.

Net Tangible Assets

Dividends

There are no dividends or distribution reinvestment plans in operation and there have been no dividend or distribution payments during the financial year ended 31 December 2014.

Comments

The loss from ordinary activities after tax for the period is $10,674,665.

The result for the period included a non-cash impairment charge of $7,489,646 which consists of an impairment of prepayments of $5,422,978 relating to Opcon Powerboxes that Enerji has not taken delivery of and Property Plant and Equipment of $2,066,668 relating to the Carnarvon Assets. Whilst the existence of these assets remain and the Board is confident that these assets will ultimately provide future economic benefit to the Company when used in future proposed projects, it could not justify carrying the assets at their stated values with sufficient certainty in order to satisfy the requirements of Australian Accounting Standards.

Also included in the result for the period are non-

	Current Period	Previous corresponding period
Net tangible liabilities	(3,779,743)	4,574,781
Number of shares at reporting date	550,763,677	272,515,576
Net tangible asset backing per ordinary security	(0.7) cents	1.7 cents

Audit/Review Status

This Appendix 4E and the attached Consolidated Statements are based on accounts which are in the process of being audited.

The attached Consolidated Statements (Profit or Loss and Other Comprehensive Income, Financial Position, Changes in Equity and Cashflows) form part of this Appendix 4E.

As in prior periods, it is likely that the Audit Report will contain an Emphasis of Matter drawing attention to the uncertainty of the Company’s ability to continue as a going concern. In order to make instalments on further Powerboxes and

Enerji Limited is a clean power company focused on delivering heat-to-power systems. The technology transforms heat into electricity and therefore has potential for significant energy cost savings and reduced CO2 emissions.

complete projects as and when secured, the Company will be required to secure debt funding in the form of project or equipment finance or raise equity. The Company also continues to obtain funding via the Research and Development Rebate each year. The Board is confident in its ability to raise additional funds as and when required and therefore have reasonable grounds to believe that the Company will be able to meet its obligations as and when they fall due.

Enquiries:

Peter Torre Company Secretary

Enerji Ltd +61 8 9268 3800 www.enerji.com.au

Enerji Limited is a clean power company focused on delivering heat-to-power systems. The technology transforms heat into electricity and therefore has potential for significant energy cost savings and reduced CO2 emissions.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2014 Notes Revenue from continuing operations Other Income 1 Expenses Employment benefits expense Impairment of assets 2 Directors payments Share based payments Consulting and professional costs Depreciation and amortisation 2 Other expenses Finance income Finance costs Loss before income tax expense from continuing operations Income tax benefit 3 Loss after income tax benefit from continuing operations Loss after income tax benefit for the year Loss for the year is attributable to: Owners of Enerji Limited Loss per share for loss attributable to the ordinary equity holders of the company: Basic loss per share Diluted loss per share	2014 2013 $ $ 143,614 30,327 (188,305) (861,729) (7,489,646) (816,284) (150,719) (216,625) - - (2,185,480) (1,456,721) (1,017,692) (1,025,994) (470,884) (1,310,440) 21,721 7,611 (190,189) (465,213)
	(11,527,580) (6,115,068) 852,915 1,190,658
	(10,674,665) (4,924,410)
	(10,674,665) (4,924,410)
	(10,674,665) (4,924,410)
	(10,674,665) (4,924,410)
	($0.023) ($0.002) n/a n/a

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2014

s at 31 December 2014
Notes ASSETS Current assets Cash and cash equivalents 4 Prepayments and other receivables 5 Loans 5 Total current assets Non-current assets Prepayments and other receivables 5 Property, plant and equipment 6 Intangible assets 7 Total non-current assets Total assets LIABILITIES Current Liabilities Trade and other payables 8 Loans and borrowings 9 Provisions Total current liabilities Total liabilities Net liabilities EQUITY Contributed equity 11 Reserves 11 Accumulated losses Total equity	2014 2013 $ $ 690,606 105,201 17,714 119,131 321,916 319,320
	1,030,236 543,652
	- 5,674,089 31,267 3,744,614 - 1,009,399
	31,267 10,428,102
	1,061,503 10,971,754
	4,219,620 4,543,060 621,625 805,500 - 39,014
	4,841,245 5,387,574
	4,841,245 5,387,574
	(3,779,742) 5,584,180
	61,063,087 59,733,407 5,853,602 5,872,539 (70,696,431) (60,021,766)
	(3,779,742) 5,584,180
	(3,779,742) 5,584,180

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of Enerji Limited

At 1 January 2013 Total comprehensive loss for the year Loss for the year Total comprehensive loss for the period Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs Equity-based payment transaction – expenses Equity-based payment transaction – loan repayments Employee shares scheme Conversion of convertible notes At 31 December 2013 At 1 January 2014 Total comprehensive loss for the year Loss for the year Total comprehensive loss for the period Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs Equity-based payment transaction – expenses Equity-based payment transaction – loan repayments Employee shares scheme Conversion of convertible notes At 31 December 2014 11	Share capital Reserves Accumulated losses Total equity $ $ $ $
	56,405,682 6,086,217 (55,097,356) 7,394,543
	- - (4,924,410) (4,924,410)
	- - (4,924,410) (4,924,410)
	702,756 - - 702,756 1,777,969 (155,980) - 1,621,989 617,000 - - 617,000 - (57,698) - (57,698) 230,000 - - 230,000
	3,327,725 (213,678) - 3,114,047
	59,733,407 5,872,539 (60,021,766) 5,584,180
	59,733,407 5,872,539 (60,021,766) 5,584,180
	- - (10,674,665) (10,674,665)
	- - (10,674,665) (10,674,665)
	1,105,088 - - 1,105,088 124,592 - - 124,592 - - - - - (18,937) - (18,937) 100,000 - - 100,000
	1,329,680 (18,937) - 1,310,743
	61,063,087 5,853,602 (70,696,431) (3,779,742)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2014

Cash flows from operating activities Receipts from customers Payments to suppliers and employees (inclusive of goods and services tax) Interest received R&D tax refund Net cash outflow from operating activities 13 Cash flows from investing activities Payments for property, plant and equipment Net cash outflow from investing activities Cash flows from financing activities Interest paid Proceeds from issue of shares and other equity securities Proceeds from issue of convertible notes Repayment of convertible notes Proceeds from borrowings Repayment of borrowings Payment of transaction costs Net cash inflow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year	2014 2013 $ $ - 30,000 (3,012,892) (2,545,955) 19,125 7,611 2,524,534 1,190,658
	(469,233) (1,317,686)
	(57,890) (1,254,034)
	(57,890) (1,254,034)
	(81,652) (115,946) 1,390,789 741,320 310,000 230,000 (140,000) - 500,000 3,562,913 (805,500) (1,940,413) (61,109) (47,424)
	1,112,528 2,430,450
	585,405 (141,270) 105,201 246,471
	690,606 105,201

NOTES TO THE CONSOLIDATED STATEMENTS

1 Other income

	2014	2013
Settlement of convertible notes	143,308	-
Realised foreign exchange gain (net)	306	327
Other income	-	30,000
	143,614	30,327
2 Expenses
Loss before income tax includes the following specific expenses:
Depreciation	2014	2013
Plant and equipment	8,293	16,590
Total depreciation	8,293	16,590
Amortisation
Distribution rights	1,009,399	1,009,404
Total amortisation expense	1,009,399	1,009,404
Total depreciation and amortisation	1,017,692	1,025,994
Impairment of assets
Prepayments	5,422,978	-
Plant and equipment	2,066,668	816,284
Total impairment	7,489,646	816,284
On review of the future value of pilot plant at Carnarvon Power Station it was determined to write-down the asset value
to its estimated recoverable amount. (Refer Note 6).
Loss on disposal of assets	(24,657)	-
Settlement of receivables	(43,761)	-
Rental expenses relating to operating leases	95,286	22,074
Defined contribution superannuation expense	25,508	81,645
3 Income tax benefit
(a) Income tax benefit
Deferred tax credit arising from temporary differences	2014	2013
Write-back of tax effect on tax treatment of impairment	(1,671,619)	-
Receipt of a R&D tax rebate	2,524,534	1,190,658
Total income tax benefit	852,915	1,190,658
Attributable to:
Continuing operations	852,915	1,190,658
	852,915	1,190,658

Under the R&D tax incentive legislation, small companies can claim an R&D tax offset, under section 355-100 of the Income Tax Assessment Act 1997 (ITAA97), that is, a refundable tax offset, equivalent to the value of certain deductions available under the R&D tax incentive. For the 2013 year, total eligible R&D expenditure was $5,610,077 (2012: $2,645,907) therefore R&D tax offset refund entitlement received in 2014 @ 45% was $2,524,534 (2013: $1,190,658).

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Loss from continuing operations before income tax expense Tax at the Australian tax rate of 30% (2013 – 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: • R&D tax rebate • Write-back of tax effect on tax treatment of impairment • Non-deductible expenses • Deferred tax assets not brought to account Income tax benefit	2014 2013 11,528,043 6,115,068
	3,458,413 1,834,520 (2,524,534) (1,190,658) 1,671,619 - 15,588 3,820 (1,768,171) (1,838,340)
	852,915 1,190,658

The franking account balance at year end was $nil (2013: $nil). All unused tax losses were incurred by Australian entities.

Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised.

4 Current assets – Cash and cash equivalents Cash at bank and in hand Restricted cash – bank guarantee The bank guarantee will be release on satisfaction of the underlying contract. 5 Current assets - Prepayments and other receivables Current Other receivables Loan to related party Non-current Prepayments – Opcon Powerboxes Capitalised borrowing costs Other receivables	2014 2013 590,606 5,201 100,000 100,000
	690,606 105,201
	2014 2013 17,714 119,131 321,916 319,320
	339,630 438,451
	- 5,491,767 - 19,128 - 163,194
	- 5,674,089

Fair value and credit risk

The fair value of securities held for certain trade receivables is insignificant as it is the fair value of any collateral sold or repledged.

Impaired receivables and receivables past due

None of the current receivables are impaired.

Loan to related party

This loan is with entities associated with Mr Colin Stonehouse. Mr Stonehouse is engaged by the Company through his engineering company Ames Associates Pty Ltd. During 2013 Mr Stonehouse provided loan funds to the Group. At the 13 November 2013 General Meeting of the Company the shareholders approved the payment of outstanding fees and loan funds with equity, and provided for an additional issue of shares to Mr Stonehouse (or nominee) in the same amount as the payment of outstanding fees and loan funds, to be funded with a twelve month loan (Share Purchase Loan) to purchase the equivalent securities. The Share Purchase Loan is a Loan to related party.

Prepayments to Opcon

Prepayments in 2013 comprised deposits and other amounts paid to Opcon AB with respect to orders for Powerboxes. During the year to 31 December 2014, no further prepayments have been made to Opcon AB (December 2013: $nil) for 3rd Generation Powerboxes ordered. At 31 December 2014 the directors have recorded an impairment of this prepayment value in accordance with accounting standards. The Group still has valid claims to the 3[rd] Generation Powerboxes in construction that these prepayments were made for.

6 Non-current assets - Property, plant and equipment

Year ended 31 December 2013 Opening net book amount Additions Impairment charge Depreciation charge Net book amount at 31 December 2013 At 31 December 2013 Cost or fair value Accumulated depreciation Impairment of assets Net book amount Year ended 31 December 2014 Opening net book amount Additions Disposals Impairment charge Depreciation charge Net book amount at 31 December 2014 At 31 December 2014 Cost or fair value Accumulated depreciation Impairment of assets Net book amount	Construction in progress Office furniture, fittings and equipment Total 3,692,052 74,109 3,766,161 808,377 2,950 811,327 (816,284) - (816,284) - (16,590) (16,590)
	3,684,145 60,469 3,744,614
	6,422,429 135,150 6,557,579 - (74,681) (74,681) (2,738,284) - (2,738,284)
	3,684,145 60,469 3,744,614
	3,684,145 60,469 3,744,614 54,142 3,748 57,890 - (24,657) (24,657) (3,738,287) - (3,738,287) - (8,293) (8,293)
	- 31,267 31,267
	6,476,571 96,734 6,573,305 - (65,467) (65,467) (6,476,571) - (6,476,571)
	- 31,267 31,267

At the end of 2013 a review was undertaken of the fair value of the Carnarvon project. The result of this review was to impair the carrying value down to the replacement value of the project, resulting in an impairment amount of $816,284 and a carrying value of $3,684,145 at 31 December 2013.

The 2013 R&D rebate received in 2014 of $2,524,534 included an R&D deduction of $1,671,619 related to the write off of value of assets employed in the R&D activity. Under accounting standard AASB 120 the Group has recorded the R&D rebate received that is related to this deduction as an impairment in the asset value.

At 31 December 2014 the directors undertook a further review of the carrying value of the Carnarvon project. In accordance with Accounting Standard AASB 116 the Group has provided for a further impairment $2,066,668 reducing the carrying value to nil.

7 Non-current assets - Intangible assets

Year ended 31 December 2013 Opening net book amount Amortisation charge Closing net book amount At 31 December 2013 Cost Impairment of asset - 2010 Accumulated amortisation and impairment Net book amount Year ended 31 December 2014 Opening net book amount Amortisation charge Closing net book amount At 31 December 2014 Cost Impairment of asset - 2010 Accumulated amortisation and impairment Net book amount	Distribution rights 2,018,803 (1,009,404)
	1,009,399
	8,340,284 (3,340,284) (3,990,601)
	1,009,399
	1,009,399 (1,009,399)
	-
	8,340,284 (3,340,284) (5,000,000)
	-

Intangible assets comprise distribution rights associated with the purchase of Enerji Holdings Pty Ltd (formerly Jamalcom Pty Ltd) with a carrying value of NIL.

8 Current liabilities - Trade and other payables

Trade payables - Opcon AB Trade payables - other	2014 2013 2,295,676 2,764,671 1,923,944 1,778,389
	4,219,620 4,543,060

The trade payables to Opcon AB relate to invoices that have been presented by Opcon AB for Powerboxes that have been completed but not delivered to the Group. No payment of these amounts will be made without delivery of the Powerbox units.

9 Current liabilities – Loans and borrowings

Current liabilities – Loans and borrowings
Short term facility Unsecured loans Unsecured convertible notes Loan Liability Embedded derivative	2014 2013 500,000 705,500 - 100,000 90,375 - 31,250 -
	621,625 805,500

Short-term facility

On 18 December 2014 Enerji Ltd executed a Facility Agreement which provided for a loan facility of up to $500,000, at an interest rate of 14%pa, secured against R&D Tax Refunds. This facility will be repaid upon receipt of the R&D tax refund for the 2014 financial year, which is expected to be received following lodgement of the Group’s 2014 tax return. The Facility Agreement includes a general security against all the assets of the Group.

The 31 December 2013 facility of $705,500 was repaid upon receipt of the R&D tax refund for the 2013 financial year in July 2014.

Unsecured loans

The balance at 31 December 2013 was from an existing shareholder for working capital purposes and were repaid through the issue of shares.

Convertible note liability

Convertible notes have been issued at a coupon rate of 4% pa. They have a 12 month maturity from issue date, however are convertible during this period at the discretion of the holder. As a result, the effective interest rate on the bonds is 100%.

On 20 January 2014 the parent entity issued 22 notes totalling $220,000 to Barclay Engineering under a Facility Agreement as approved by shareholders on 13 November 2013. These funds were used to settle outstanding invoices for works carried out at the Carnarvon Power Station.

On 7 February 2014 the parent entity issued 9 notes totalling $90,000 to Primero under a Facility Agreement as approved by shareholders on 13 November 2013. These funds were used to settle outstanding invoices for works carried out at the Carnarvon Power Station.

An embedded derivative exists as the notes are convertible into ordinary shares of the parent entity at the lesser of $0.005 and 80% of the VWAP over the 5 ASX trading days prior to the relevant issue, with 1 free attaching Class A Option for every 2 shares issued, on the option of the holder, or repayable as follows:

19 January 2015 - $220,000

6 February 2015 - $90,000

In August 2014 the company settled the convertible notes issue to Barclay Engineering for a cash payment of $140,000 refer to the Consolidated Statement of Cash Flows and Note 7.

A Monte-Carlo valuation was performed to determine the note liability component and embedded derivative component at both inception and reporting date. The convertible notes can be converted to share capital at the option of the holder and the Group, at repayment date, can settle the conversion by making either a cash payment to the note holder or settle by the issue of shares.

The liability component of the note is initially recognised at fair value and subsequently recognised at amortised cost using the effective interest rate method. The embedded derivative component is initially measured at fair value and subsequently measured at fair value through profit or loss at the end of each reporting period.

The embedded derivative component was recognised on inception at a fair value of $69,546 (Primero convertible notes only) and re-valued at the end of the reporting period to fair value of $31,250. The decrease in fair value of $38,296 has been recognised as part of finance costs in the consolidated statement of profit or loss and other comprehensive income.

The remaining convertible notes mature and are payable on 6 February 2015.

10 Current liabilities - Provisions

Employee	2014 2013 - 39,014
	- 39,014

The entire amount of the employee provision is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months.

Leave obligations expected to be settled after 12 months

2014 2013 - 27,310

11 Equity (a) Contributed equity

The Company completed a consolidation of capital on 17 February 2014. This was approved at a general meeting of shareholders on 31 January 2014 for every 10 shares / options to be converted in 1 share / option. The following tables are presented on a post-consolidation basis.

Share Capital Ordinary shares Fully paid Options $2.00 Expiry 31 December 2016 $0.30 Expiry 30 June 2015 Total contributed equity	2014 2013 Shares Shares	2014 2013 $ $
	550,673,677 272,515,576 Options Options 6,473,904 6,473,904 133,147,686 133,147,686	61,063,087 59,733,407 - - - -
		61,063,087 59,733,407

The following movements in issued capital	occurred during the year:
	2014		2013 (after consolidation)
	No. of Shares	$	No. of Shares	$
Balance at the beginning of the year	272,515,576	59,733,407	149,932,398	56,405,682
Adjustment after consolidation	214	-	-	-
Shares issued for cash	233,239,571	1,166,197	32,405,886	741,320
Shares issued on conversion of notes	20,000,000	100,000	13,982,297	230,000
Shares issued for services rendered	24,918,316	124,592	42,583,920	1,401,996
Shares issued for interest payable	-	-	4,634,925	185,397
Shares issued to repay loans	-	-	28,976,150	617,000
Shares issue and capital raising costs	-	(61,109)		(38,564)
Equity adjustments for share-based payments	-	-		190,576
Total contributed equity	550,673,677	61,063,087	272,515,576	59,733,407

Ordinary shares

The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Capital Management

Enerji’s capital management policy provides a framework to maintain a capital structure to support the development of the business into one that is income producing.

The Company seeks to utilise available borrowing facilities when and to the extent prudent to do so, in order to maximise returns for equity shareholders and limit the need to raise additional equity capital

Dividends

There were no dividends declared or paid during the reporting period.

(b) Reserves Share based reserves - Reserve holding shares subject to the achievement of performance based measures Options based reserves	2014 2013 $ $ 3,470,000 3,470,000 2,383,602 2,402,539
	5,853,602 5,872,539

The following movements in reserves occurred during the year:

$0.30 Options expiry 30 June 2015 Balance at the beginning of the year Options issued for cash1 Adjustment after consolidation Options issued on conversion of notes2 Options issued for services rendered3 Options issued for interest payable3 Equity adjustments for share-based payments Options issued to repay loans4 Total Options $2.00 Options expiry 31 December 2016 Balance at the beginning of the year Total Options	2014 2013 No. of Options $ No. of Options $ 133,147,686 838,364 76,107,399 994,344 - - 16,202,943 - - - 140 - - - 6,991,149 - - - 17,040,518 - - - 2,317,463 - - - - (155,980) - - 14,488,074 -
	133,147,686 838,364 133,147,686 838,364
	No. of Options $ No. of Options $ 6,473,904 1,545,238 6,473,904 1,545,238
	6,473,904 1,545,238 6,473,904 1,545,238

Notes:

1. Options were free attaching to capital raising and no value has been separately ascribed to them.

2. Options were attached to conversion of convertible note. No value has been separately allocated to these options.

3. Options were issued in addition to shares issue. No value has been separately ascribed to these options.

4. Options issued as free attaching to shares issued to settle loan liabilities. No value has been separately ascribed to these options.

The following Options are embedded in employee share scheme:

Balance 1 January Reversal due to caseation of employment Interest on loan from issue of 10,000,000 ordinary shares under employee share scheme Balance 31 December	2014 2013 18,937 76,635 45,411 (18,937) - - 31,224 (57,698)
	- 18,937 76,635

Nature and purpose of other reserves

The issue of options in lieu of cash are considered share based payments.

Under the employee share scheme the provision of an interest free Company loan results in an embedded option and the implied interest is included as a share based payment.

$2.00 options expiry December 2016 for the purchase of ordinary shares on payment of exercise price.

$0.30 options expiry June 2015 for the purchase of ordinary shares on payment of exercise price.

12 Events occurring after the reporting period

On 3 February 2015 the Company announced it had reached a binding agreement with Carbon Reduction Ventures Pty Ltd and Morawa Solar Thermal Pty Ltd for the planned development of a Hybrid Solar Thermal Project.

Convertible notes to a value of $90,000 (plus interest) matured and became redeemable on 6 February 2015. The Company has agreed with Primero for these convertible notes and accrued interest to be redeemed following the receipt of the companies R&D Tax rebate expected in April 2015.

There are no other events occurring after the reporting period that need to be disclosed.

13 Reconciliation of loss after income tax to net cash inflow from operating activities

Loss for the period Finance expense / (income) Depreciation and amortisation Asset impairment Unrealised foreign exchange losses Loss on disposal of assets Share-based payment transactions Change in other receivables Change in prepayments Change in trade and other payables Change in employee provision R&D Tax concession offset Net cash outflow from operating activities	2014 2013 $ $ (10,674,665) (4,924,410) 151,250 (7,611) 1,017,692 1,065,774 3,738,288 816,284 - 420,314 24,657 (18,937) 1,587,393 98,820 (34,203) 5,674,089 (319,320) (441,413) 1,326,810 (39,014) (65,670) - (1,190,658)
	(469,233) (1,325,297)