VYSARN LIMITED — Annual Report 2019

Aug 25, 2019

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VYSARN LIMITED ABN 41 124 212 175

FINANCIAL REPORT for the year ended 30 June 2019

FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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CONTENTS

Corporate directory	1
Directors' report	2
Auditor's independence declaration	14
Statement of profit or loss and other comprehensive income	15
Statement of financial position	16
Statement of changes in equity	17
Statement of cash flows	18
Notes to the financial statements	19
Directors' declaration	33
Independent auditor's report to the members of Vysarn Limited	34

CORPORATE DIRECTORY

Directors

Peter Hutchinson Executive Chairman Faldi Ismail Non-Executive Director Nicholas Young Non-Executive Director Sheldon Burt Non-Executive Director Christopher Brophy Non-Executive Director

Company Secretary Kyla Garic

Registered office 108 Outram Street West Perth, WA 6005 Ph: +61 8 9486 7244

Auditor

Pitcher Partners BA&A Pty Ltd Level 11, 12-14 The Esplanade Perth, WA 6000

Share Registry

Automic Registry Services Level 2, 267 St Georges Terrace Perth, WA 6000

Bankers National Australia Bank Level 1, 1238 Hay Street West Perth, WA 6005

Westpac Banking Corporation Level 3, Tower Two, Brookfield Place 123 St Georges Tce Perth, WA 6000

Securities Exchange Listing

ASX Limited Level 40, Central Park 152-158 St Georges Terrace Perth, WA 6000 ASX Code – VYS

1 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

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The Directors present their report together with the financial statements of Vysarn Limited (“the Company”), for the financial year ended 30 June 2019 and auditor’s report thereon.

1. DIRECTORS

The names and the particulars of the Directors of the Company during the year and to the date of this report are:

Name	Status	Appointed
Peter Hutchinson	Executive Chairman	Appointed 27 October 2017
Faldi Ismail	Non-Executive Director	Appointed 20 December 2016
Nicholas Young	Non-Executive Director	Appointed 20 December 2016
Sheldon Burt	Non-Executive Director	Appointed 15 May 2019
Christopher Brophy	Non-Executive Director	Appointed 15 May 2019

2. COMPANY SECRETARY

The following person held the position of Company Secretary at the end of the financial year:

Kyla Garic

Ms Garic was appointed as Company Secretary on 15 November 2017. Ms Garic is a Chartered Accountant and Director of Onyx Corporate. Onyx Corporate provides financial reporting, accounting, company secretarial and other services primarily to ASX listed companies. Ms Garic has acted as a Non-Executive Director and Company Secretary for a number of ASX listed companies.

3. PRINCIPAL ACTIVITIES

During the financial year, the principal activities of the Company consisted of the assessment of new opportunities to facilitate the relisting of the Company on the ASX with a view to increasing shareholder value, whilst preserving the Company’s cash reserves. In April 2019 the Company entered an agreement with Ausdrill Northwest Pty Ltd and Pentium Hydro Pty Ltd under which it will acquire various waterwell drilling assets and associated inventory as described in the Review of Operations section below ( Transaction ). Upon completion, the Transaction will result in a significant change to the nature and scale of the Company’s activities and the Company will be reinstated to the Official List of the ASX as a provider of production critical waterwell drillingservices.

4. DIVIDENDS PAID OR RECOMMENDED

There were no dividends paid, recommended or declared during the current or previous financial year.

5. REVIEW OF OPERATIONS

On 11 April 2019 the Company announced it had entered into an Asset Sale Agreement with Pentium Hydro Pty Ltd ( Pentium ) and Ausdrill Northwest Pty Ltd (a subsidiary of Ausdrill Limited (ASX:ASL)) ( Ausdrill ) to acquire various waterwell drilling assets (and associated inventory) used by Ausdrill to conduct its hydrogeological drilling business known as ‘Connector Drilling’. In consideration for the acquisition of the Assets, the Company has agreed to pay Ausdrill $16 million at completion. The consideration will be paid by the Company from existing cash, funds from a Public Offer of Shares to raise at least $5M and up to $7M and an $8.8M Debt Facility obtained from Westpac Banking Corporation Ltd.

The Asset Sale Agreement is the result of a comprehensive identification and evaluation process by the Board over the past ~2 years seeking to acquire assets that it believes can provide future value for shareholders. Following Shareholder approval of the Transaction obtained at the General Meeting held on 5 July 2019, completion of the acquisition of the Assets remains conditional upon satisfaction of the various conditions precedent including the Company obtaining finance to satisfy the purchase price under the agreement and ASX approval.

In connection with the Asset Sale Agreement, the Company also entered into the Share Sale Agreement with Insight Ecosys Pty Ltd (controlled by Mr Brophy) and Connada Pty Ltd (controlled by Mr Burt), pursuant to which the Company will acquire the entire issued share capital of Pentium from the Pentium Vendors. In consideration for the acquisition of Pentium, the Company has agreed to issue to Pentium Vendors (and/or their nominees) a total of 7,800,000 shares. Completion of the Share Sale Agreement will take place just prior to completion of the Asset Sale Agreement, and Pentium will become a wholly owned (and primary operating) subsidiary of the Company.

2 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

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5. REVIEW OF OPERATIONS (CONTINUED)

Completion of the acquisition of Pentium remains subject to all the conditions precedent to the Asset Sale Agreement being satisfied.

On 15 May 2019, Messers Burt and Brophy were appointed as Non-Executive Directors of the Company. Mr Burt and Mr Brophy have key roles in implementing the Transaction and will move into Executive Director positions following completion of the Transaction.

6. LIKELY DEVELOPMENTS

Subject to satisfying the conditions precedent to the Transaction as outlined above Pentium (as a wholly owned subsidiary of the Company) intends to commence drilling services operations.

7. FINANCIAL PERFORMANCE

The loss for the Company after providing for income tax amounted to $483,826 (30 June 2018: Profit of $296,558).

Working capital, being current assets less current liabilities, was $6,924,146 (30 June 2018: $7,407,972). The Company had negative cash flows from operating activities for the year amounting to $422,620 (2018: Positive cash flows from operating activities of $227,166).

8. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Significant changes in the Company’s state of affairs during the year are presented in the Review of Operations section above. Changes subsequent to year end are presented in the Events Subsequent to Reporting Date section below. There were no other significant changes in the Company’s state of affairs during the year.

9. EVENT SUBSEQUENT TO REPORTING DATE

On 5 July 2019, the Company’s shareholders approved at its General Meeting:

• Change to the Nature and Scale of Company’s Activities;

• Ratification of prior election of Messers Burt and Mr Brophy as Directors;

• Issue of 7,800,000 Pentium Vendor shares to the Pentium Vendors pursuant to the share sale agreement on completion of the Transaction;

• Issue of up to 129,629,630 fully paid ordinary shares at an issue price of $0.054 per share under a Public Offer;

• Related party’s participation in Public Offer for Mr Hutchinson to the extent of up to 20,129,630 shares at an issue price of $0.054 per share for a subscription amount up to $1,087,000;

• Related party’s participation in Public Offer for Mr Ismail to the extent of up to 5,175,926 shares at an issue price of $0.054 per share for a subscription amount up to $279,500;

• Related party’s participation in Public Offer for Mr Young to the extent of up to 5,175,926 shares at an issue price of $0.054 per share for a subscription amount up to $279,500;

• Related party’s participation in Public Offer for Mr Burt to the extent of up to 1,851,852 shares at an issue price of $0.054 per share for a subscription amount up to $100,000;

• Related party’s participation in Public Offer for Mr Brophy to the extent of up to 1,851,852 shares at an issue price of $0.054 per share for a subscription amount up to $100,000;

• Issue up to 15,500,000 shares, or cash payment, up to $837,000 to Mr Hutchinson or his nominee for consideration of past service to the Company on completion of the Transaction;

• Issue up to 4,250,000 shares, or cash payment, up to $229,500 to Mr Ismail or his nominee for consideration of past service to the Company on completion of the Transaction;

• Issue up to 4,250,000 shares, or cash payment, up to $229,500 to Mr Young or his nominee for consideration of past service to the Company on completion of the Transaction;

• 5,000,000 Performance Rights to Mr Burt have been approved which was contemplated by the Burt ESA and to be issued on completion of the Transaction;

• 5,000,000 Performance Rights to Mr Brophy have been approved which was contemplated by the Brophy ESA and to be issued on completion of the Transaction; and

• 10,000,000 Options to Mr Hutchinson to be issued as per NED agreement on completion of the Transaction.

On 10 July 2019 the Company, together with Pentium, entered into a binding conditional financing agreement with Westpac Banking Corporation Limited. Under the facility, subject to the satisfaction of specified conditions, Westpac will provide debt funding of $8.8 million as part of the funding for the acquisition by the Company and Pentium of various waterwell drilling assets (and associated inventory) from Ausdrill.

3 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

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9. EVENT SUBSEQUENT TO REPORTING DATE (CONTINUED)

On 11 July 2019, the Company lodged a prospectus to ASIC for its offer to the public of up to 129,629,630 shares at an issue price of $0.054 each to raise a total of up to $7million (before costs). It was also announced that ASX has extended the Company’s de-listing deadline to the commencement of trading on 11 October 2019. The extension was granted on the basis that the Company is in the final stages of completing the Transaction.

On 26 July 2019, the Company lodged a supplementary prospectus with ASIC under which the Company announced that it had entered into a deed of assignment with Pentium, Hancock Prospecting Pty Ltd ( Hancock ) and Ausdrill under which Ausdrill’s rights and obligation under its existing drilling services contract with Hancock will be assigned to the Company and Pentium with effect from completion of the Asset Sale Agreement.

On 14 August 2019, the Company lodged a second supplementary prospectus with ASIC noting that it had received strong demand from investors under the Public Offer in excess of the full subscription amount of $7,000,000 and extended the closing date of the public offer (and ancillary offers) to Monday 26 August 2019 to allow investors sufficient time to transfer funds and return application forms.

On 16 August 2019, the Company lodged a third supplementary prospectus with ASIC under which the Company announced that Pentium had entered into a hire agreement with Easternwell in which under the agreement, will hire, on a dry hire arrangement, two rigs (and ancillary equipment) for use at BHP’s mining operation in Olympic Dam, South Australia.

There is no other matter or circumstance that has arisen since 30 June 2019 other than mentioned above that has significantly affected, or may significantly affect the Company’s operations, the results of those operations, or the Company’s state of affairs in future financial years.

10. ENVIRONMENTAL REGULATION

In the normal course of business, there are no environmental regulations or requirements that the Company is currently subject to.

11. INFORMATION ON DIRECTORS

Peter Hutchinson

Experience and Expertise:

Executive Chairman (Appointed 27 October 2017)

Mr Hutchinson holds a Bachelor of Commerce (UWA) and is a Fellow of both the Australian Institute of Company Directors and Certified Practicing Accountants. Mr Hutchinson has at the most senior level managed a diverse portfolio of investments in manufacturing, engineering, construction and property over a 30-year period.

Mr Hutchinson was a Non-Executive Director of Zeta Resources (formerly Kumarina Resources Ltd). Mr Hutchinson was the founding director of ASX listed Forge Group Ltd, floated in 2007 with a market capitalisation of $12m and reaching over $450m at the time of Mr Hutchinson’s resignation as CEO and final sell down in July 2012. More recently Mr Hutchinson has chaired ASX listed company Resource Equipment Ltd and was the founding shareholder and Chairman of Mareterram Ltd, both the subject of successful takeover bids at significant premiums to market prices.

Mr Hutchinson has substantial experience in M&A. prospectus preparation, ASX listing, compliance and corporate governance, company secretarial requirements and exit strategies, and has been a Member of Audit, Remuneration and Nomination Committees, often as Chairman.

• Other current directorships: Former directorships (last 3 years): Mareterram Limited (ceased 23 November 2017) Interests in shares: 16,978,955 fully paid ordinary shares

4 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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11. INFORMATION ON DIRECTORS (CONTINUED)

Faldi Ismail	Non-Executive Director (Appointed 20 December 2016)
Experience and Expertise:	Mr Ismail has significant experience working as a corporate advisor
	specialising in the restructure and recapitalisation of various of ASX listed
	companies having many years of investment banking experience covering
	a wide range of sectors. Mr Ismail has significant cross border experience,
	having advised on numerous overseas transactions including capital
	raisings, structuring of acquisitions and joint ventures in numerous
	countries.
Other current directorships:	Ookami Limited
Former directorships (last 3 years):	Dotz Nano Limited (ceased 1 February 2018)
	Flamingo AL Limited (ceased 27 June 2017)
	Quantify Technology Holdings Limited (ceased 1 March 2017)
	TV2U International Limited (ceased 21 October 2016)
Interests in shares:	N/A
Nicholas Young	Non-Executive Director (appointed 20 December 2016)
Experience and Expertise:	Mr Young holds a Bachelor of Commerce, majoring in Accounting and
	Finance, is a Chartered Accountant and has completed the Insolvency
	Education Program at the Australian Restructuring Insolvency and
	Turnaround Association. Mr Young commenced his career in the
	Corporate Restructuring division of an accounting firm and has gained
	valuable experience in Australia and Southern Africa, across a wide range
	of industries, including mining and exploration, mining services,
	renewable energy, professional services, manufacturing and transport. Mr
	Young has been involved in the recapitalisation and transformation of
	various ASX-listed companies.
Other current directorships:	Bunji Corporation Limited
Former directorships (last 3 years):	Raiden Resources Limited (ceased 25 March 2019)
	Calidus Resources Limited (ceased 13 June 2017)
Interests in shares:	N/A
Christopher Brophy	Non-Executive Director (appointed 15 May 2019)
Experience and Expertise:	Mr Brophy is an accomplished business leader with 15+ years of senior
	leadership and consulting experience with the Mining, Oil & Gas and
	Infrastructure industries. Mr Brophy is a specialist in strategy, portfolio
	growth, financial and operational restructuring.
	Mr Brophy currently holds the role of CEO for OnContrator and prior to
	this was Maintenance Service Director for the TRACE JV and Woodside
	Offshore Portfolio Manager Boardspectrum.
	Mr Brophy holds a Master of Business Administration, a Masters of
	Science in Mineral and Energy Economic and is a member of the Australian
	Institute of Company Directors (MAICD).
Other current directorships:	N/A
Former directorships (last 3 years):	N/A
Interests in shares:	N/A

5 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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11. INFORMATION ON DIRECTORS (CONTINUED)

Sheldon Burt Non-Executive Director (appointed 15 May 2019) Experience and Expertise: Mr Burt is a drilling industry professional with over 30 years national and international experience. Mr Burt started his career as a Drillers Offsiders in 1986 and has held differing roles over the years including field based, operations, senior management and directorship. Mr Burt’s international experience extends to South East Asia, the Middle East and West Africa. In 2004 he co-founded and was the Managing Director of SBD Drilling, an exploration drilling company with successful operations in Australia and West Africa. Mr Burt was General Manager of Easternwell Minerals and Gorey & Cole Drillers. Easternwell is subsidiary of Broadspectrum (formerly Transfield Services Ltd) Other current directorships: N/A Former directorships (last 3 years): N/A Interests in shares: N/A

12. MEETINGS OF DIRECTORS

The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2019, and the number of meetings attended by each Director was:

each Director was:
	Full Board
	Attended	Held
Peter Hutchinson	3	3
Faldi Ismail	3	3
Nicholas Young	3	3
Sheldon Burt	-	-
Chris Brophy	-	-

Held: Represents the number of meetings held during the time the Directors held office.

There is no separate committee and all matters are dealt with by the full Board. The Board met informally on a number of occasions to discuss ongoing opportunities with formal board meetings held intermittently to fully assess such opportunities and perform government activities.

13. INDEMNITY AND INSURANCE OF OFFICERS

To the extent permitted by law, the Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as a Director or executive, for which they may be held personally liable.

During the financial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers in the Company, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Indemnity and insurance of auditor

The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

6 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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14. SHARES UNDER OPTION

At the date of this report there are nil unissued ordinary share under option of Vysarn Limited.

15. PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

16. NON-AUDIT SERVICES

During the last financial year, Pitcher Partners BA&A Pty Ltd consented to, and was appointed, as the Company’s auditors.

The Company may decide to employ the auditor on assignments in addition to their statutory audit duties where the auditor’s expertise and experience with the Company are important. Non-audit services provided during the financial year by the auditor are detailed below. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Acts 2001.

Amount paid/payable to Pitcher Partners BA&A Pty Ltd or related entities for non-audit services Pitcher Partners Accountants & Advisors WA Pty Ltd – Taxation compliance services Total auditors’ remuneration for non-audit services	30 June 2019 $ 30 June 2018 $ 4,555 -
	4,555 -

In the event that non-audit services are provided by Pitcher Partners, the Board has established certain procedures to ensure that the provision of non-audit services are compatible with, and do not compromise, the auditor independence requirement of the Corporation Act 2001. These procedures include:

• Non-audit services will be subject to the corporate governance procedures adopted by the Company and will be reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor; and

• Ensuring non-audit services do not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing risks and rewards.

• Decision on non-audit services were decided upon by the full Board in the absence of any audit committee meetings.

17. AUDITOR’S INDEPENDENCE DECLARATION

The auditor's independence declaration as required under section 307C of the Corporations Act 2001 (Cth) for the year ended 30 June 2019 has been received and can be found on page 14 of the Financial Report.

18. ROUNDING OF AMOUNTS

In accordance with ASIC Corporations (Rounding in Financial/Director’s Reports) Instrument 2016/191, the amounts in the Directors’ report and in the financial report have been rounded to the nearest $1 (where rounding is applicable).

REMUNERATION REPORT (AUDITED)

The remuneration report for the year ended 30 June 2019 outlines the remuneration arrangement of the Company in accordance with the requirements of the Corporations Act 2001 (Cth), as amended (the Act) and its regulations. This information has been audited, as required by section 308(3C) of the Act.

7 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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REMUNERATION REPORT (AUDITED)

The remuneration report is set out under the following main headings:

1. Introduction

2. Remuneration governance

3. Executive remuneration arrangement

4. Non-Executive Director fee arrangement

5. Details of remuneration

6. Share-based compensation

7. Loans to Directors and executives

8. Other transactions and balances with KMP and their related parties

Details of the nature and amount of each element of the remuneration of each of the Key Management Personnel (“KMP”) of the Company (the Directors and executives) for the year ended 30 June 2019 are set out below:

Key Management Personnel covered under this report are as follows:

Name	Status	Appointed
Peter Hutchinson	Executive Chairman	Appointed 27 October 2017
Faldi Ismail	Non-Executive Director	Appointed 20 December 2016
Nicholas Young	Non-Executive Director	Appointed 20 December 2016
Sheldon Burt	Non-Executive Director	Appointed 15 May 2019
Christopher Brophy	Non-Executive Director	Appointed 15 May 2019

1. Introduction

KMP have authority and responsibility for planning, directing and controlling the major activities of the Group. KMP comprise the Directors of the Company.

Compensation levels for KMP are competitively set to attract and retain appropriately qualified and experienced Directors and executives. The Board may seek independent advice on the appropriateness of compensation packages, given the trend in comparative companies both locally and internationally and objectives of the Company’s compensation strategy.

Principles used to determine the nature and amount of remuneration

The objective of the Company's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices:

• Competitiveness and reasonableness;

• Acceptability to shareholders;

• Performance linkage/alignment of executive compensation;

• Transparency; and

• Capital management.

The Board is responsible for determining and reviewing remuneration arrangements for its Directors and executives. The performance of the Company depends on the quality of its Directors and executives. The remuneration philosophy is to attract, motivate and retain high performing and high quality personnel.

The Company has structured a market competitive executive remuneration framework.

8 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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REMUNERATION REPORT (AUDITED) (CONTINUED)

1. Introduction (continued)

The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by:

• Focusing on shareholder value and returns; and

• Attracting and retaining high caliber executives.

Additionally, the reward framework should seek to enhance executives' interests by:

• Rewarding capability and experience;

• Reflecting a competitive reward for contribution to growth in shareholder wealth;

• Providing a clear structure for earning rewards; and

• Providing recognition for contribution.

Given the extent of the Company’s operations in the current and previous financial year, no aspects of KMP compensation has been dependent on the satisfaction of performance conditions.

2. Remuneration governance

The Directors believe the Company is not currently of a size nor are its affairs of such complexity as to warrant the establishment of a separate remuneration committee. Accordingly, all remuneration matters are considered by the full Board of Directors, in accordance with a nomination and remuneration committee charter. During the financial year, the Company did not engage any remuneration consultants.

3. Executive remuneration arrangements

The compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. Compensation packages may include a mix of fixed compensation, equity-based compensation, as well as employer contributions to superannuation funds. Shares and options may only be issued to Directors subject to approval by shareholders in a general meeting.

At this stage the Board does not consider the Company’s earnings or earnings related measures to be an appropriate key performance indicator (KPI). In considering the relationship between the Company’s remuneration policy and the consequences for the Company’s shareholder wealth measures such as successful completion of business development and corporate activities are considered.

The Company has entered into an executive services agreement on 24 June 2019 with each of Mr Burt and Mr Brophy in respect of their proposed employment as Executive Directors of the Company, subject to the completion of the Acquisition. The terms of Mr Burt and Mr Brophy’s agreements are the same, and the key terms are set out below;

• (a) Remuneration: Each Executive Director will receive:

• (i) a commencement fee of $10,500;

• (ii) a base salary of $300,000 per annum, excluding mandatory superannuation contributions;

• (iii) a short term incentive of up to $150,000 per annum, subject to the achievement of certain short term incentive key performance indicators; and

• (iv) a long term incentive being the issue of 5,000,000 Performance Rights.

• (b) General termination: the agreement can be terminated:

• (i) by either party for no reason by giving 3 months’ notice in writing to the other party;

• (ii) by the Executive Director if the Company breaches the agreement and does not remedy the breach within 10 business days on notice of breach; and

• (iii) by the Company effective immediately in the event the Executive Director is guilty of gross misconduct, becomes bankrupt or insolvent, is convicted of a criminal offence or other similar grounds.

9 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

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REMUNERATION REPORT (AUDITED) (CONTINUED)

3. Executive remuneration arrangements

• (c) Termination on material diminution: an Executive Director can terminate the agreement if he suffers material diminution in his status or position in the Company. If this occurs:

• (i) within 2 years of employment, the Company will pay the Executive Director an amount equal to 3 months base salary, and 50% of the Performance Rights held by him shall vest subject to any restrictions the Board may impose; and

• (ii) after 2 years of employment, the Company will pay the executive Director an amount equal to 3 months base salary, and all of the Performance Rights held by him shall vest subject to any restrictions by the Board may impose.

4. Non-Executive Director fee arrangement

Fees and payments to non-executive Directors reflect the demands and responsibilities of their role. Non-executive Directors' fees and payments are reviewed annually by the Board. The Board may, from time to time, receive advice from independent remuneration consultants to ensure non-executive Directors' fees and payments are appropriate and in line with the market. The Executive Chairman's fees are determined independently to the fees of other non-executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive Directors do not receive share options or other incentives.

The maximum aggregate amount of fees that can be paid to Non-Executive Directors is presently limited to an aggregate of $200,000 per annum and any change in subject to approval by shareholder at the general meeting. Fees for Non-Executive Directors are not linked to the performance of the Company.

Voting and comments made at the company's 2018 Annual General Meeting ('AGM')

Vysarn Limited received more than 90% of "yes" votes on its remuneration report for the 2018 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

5. Details of remuneration

Amounts of remuneration

Details of the remuneration of key management personnel of the Company are set out in the following tables.

No percentage of the remuneration paid to KMP’s in the year was performance based (2018: $NIL)

2019 Chairman: Peter Hutchinson Non-Executive Directors: Faldi Ismail1 Nicholas Young1 Christopher Brophy2 Sheldon Burt2 Total	Short-term Salary, Fees & Commissions Post-employment Superannuation Other Share-based payments Total $ $ $ $ $ - - - - - 66,000 - - - 66,000 66,000 - - - 66,000 21,000 - - - 21,000 21,000 - - - 21,000
	174,000 - - - 174,000

1 Mr Ismail and Mr Young’s director fees are for the period November 2017 to March 2019.

2 Mr Brophy and Mr Burt were appointed as Non-Executive Directors on 15 May 2019. For the financial year ending 30 June 2019, Mr Brophy and Mr Burt did not receive director fee payments. The payments made to Mr Brophy and Mr Burt were for project management and consultation services received in relation to the Ausdrill Transaction (refer to the Review of Operations on page 2 for further information on the Transaction).

10 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT

FOR THE YEAR ENDED 30 JUNE 2019

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REMUNERATION REPORT (AUDITED) (CONTINUED)

5. Details of remuneration (continued)

2018 Chairman: Peter Hutchinson1 Non-Executive Directors: Faldi Ismail2 Nicholas Young3 Bryn Hardcastle4 Total	Short-term Salary, Fees & Commissions Post-employment Superannuation Other Share-based payments Total $ $ $ $ $ - - - - - 16,000 - - - 16,000 16,000 - - - 16,000 16,000 - - - 16,000
	48,000 - - - 48,000

• 1 Mr Peter Hutchinson was appointed as Chairman on 27 October 2017.

• 2 Mr Faldi Ismail was appointed as Non-Executive Director on 20 December 2016.

• 3 Mr Nicholas Young was appointed as Non-Executive Director on 20 December 2016.

• 4 Mr Bryn Hardcastle resigned as Non-Executive Director on 27 October 2017.

Bonuses

No bonuses have been awarded during the financial year ending 30 June 2019 (2018: Nil).

6. Share-based compensation

Issue of shares

There were no shares issued to Directors and other key management personnel as part of compensation.

Options

There were no options over ordinary shares issued to Directors and other key management personnel as part of compensation that were outstanding as at 30 June 2019.

There were no options over ordinary shares granted to or vested by Directors and other key management personnel as part of compensation during the year ended 30 June 2019.

Shareholding

The number of shares in the Company held during the financial year by each Director and other members of key management personnel of the Company, including their personally related parties, is set out below;

30 June 2019 Peter Hutchinson Faldi Ismail Nicholas Young Sheldon Burt Christopher Brophy Total	Balance at the start of the year Granted as Remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of Year 16,978,955 - - - 16,978,955 - - - - - - - - - - - - - - - - - - - -
	16,978,955 - - - 16,978,955

11 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

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REMUNERATION REPORT (AUDITED) (CONTINUED)

6. Share-based compensation

30 June 2018 Peter Hutchinson Faldi Ismail Nicholas Young Bryn Hardcastle Total	Balance at the start of the year Granted as Remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of Year - - - 16,978,955 16,978,955 - - - - - - - - - - - - - - -
	- - - 16,978,955 16,978,955

7. Loans to Directors and executives

There are no loans to Directors or other KMP of Vysarn Limited.

8. Other transactions and balances with KMPs and their related parties

Purchases from and sales to related parties are made on terms equivalent to those that prevail in arm’s length transactions. The Company acquired the following services from entities that are controlled by members of the Company’s KMP.

Some Directors, or former Directors of the Company, hold or have held positions in other companies, where it is considered they control or significantly influence the financial or operating policies of those entities. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

	Key Management Personnel	2019	2018
		$	$
Payment for goods and services:
Payment for services to Onyx Corporate	Mr Nicholas Young	54,150	28,000
Payment for services to Otsana Capital	Mr Faldi Ismail / Mr Nicholas Young	30,000	5,000
Payment for services to Bellanhouse Legal	Mr Bryn Hardcastle	-	12,765

Onyx Corporate Pty Ltd, an entity associated with Mr Nicholas Young, received payments totalling $54,150 in relation to accounting and Company secretarial services provided to the Company (2018: $28,000).

During the year, the Company engaged with Otsana Pty Ltd trading as Otsana Capital ( Otsana ), an entity associated with Messers Ismail and Young, to act as corporate advisor and lead manager in relation to the Transaction. The mandate will continue until the date of transaction completion, being successful reinstatement of the Company to the Official List of ASX or when either party terminates the agreement. Under the terms of the mandate, the Company will pay the Lead Manager (and/or its nominee) a fee of $180,000 (excluding GST) for corporate advisory and project management services provided in connection with the Transaction and a capital raising fee of 6% (excluding GST) on the amount raised under the Public Offer. The services are otherwise being provided on terms standard for an agreement of this nature. During the year ended 30 June 2019, the Company has paid Otsana $30,000 (2018: $5,000). Commitments of $150,000 remain at the end of reporting period (2018: Nil).

Bellanhouse Legal, an entity associated with former Director Mr Bryn Hardcastle, received payments in financial year 2018 of $12,765 in relation to legal services provided to the Company.

There were no trade receivables from or trade payables to related parties for the financial year ending 30 June 2019 (2018: Nil).

There were no loans to / from related parties for the financial year ending 30 June 2019 (2018: Nil).

12 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019

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REMUNERATION REPORT (END)

This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001 .

Signed in accordance with a resolution of the Board of Directors

_________ Peter Hutchinson Chairman

Dated 23 August 2019

13 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF VYSARN LIMITED

In relation to the independent audit for the year ended 30 June 2019, to the best of my knowledge and belief there have been:

(i) No contraventions of the auditor independence requirements of the Corporations Act 2001 ; and

(ii) No contraventions of APES 110 Code of Ethics for Professional Accountants .

PITCHER PARTNERS BA&A PTY LTD

PAUL MULLIGAN Executive Director Perth, 23 August 2019

• 14 -

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019

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Note Revenue Income Other income 4 Expenses Administration expense Accounting and company secretarial expense Auditor remuneration 7 Corporate consulting expense Employee benefit expense 6 Insurance expense Legal fees Business development expense Transaction costs Other expenses (Loss)/profit before income tax Income tax expense 5 (Loss)/profit after income tax expense (Loss)/profit after income tax expense for the year attributable to the owners of Vysarn Limited Other comprehensive income: Items that may be reclassified subsequently to profit or loss Foreign currency translation Loss on the revaluation of assets Other comprehensive loss for the year, net of tax Total comprehensive (loss)/income for the year attributable to the owners of Vysarn Limited Basic and diluted earnings per share for (loss)/profit attributable to the owners of Vysarn Limited	30 June 2019 30 June 2018 $ $ 163,459 132,453 - 460,499 (30,455) (41,407) (57,097) (72,620) (33,545) (27,000) (11,000) (33,690) (174,000) (48,000) (19,222) (24,920) (14,341) (37,242) (34,061) - (238,711) - (34,853) (11,515)
	(483,826) 296,558
	- -
	(483,826) 296,558
	(483,826) 296,558 - (15,366) - (135,000)
	- (150,366)
	(483,826) 146,192
	(0.355) 0.218

The accompanying notes form part of these financial statements.

15 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

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Note ASSETS CURRENT ASSETS Cash and cash equivalents 9 Trade and other receivables 10 Other assets 11 TOTAL CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables 12 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS SHAREHOLDERS’ EQUITY Issued capital 13 Accumulated losses SHAREHOLDERS’ EQUITY	30 June 30 June 2019 2018 $ $ 6,983,931 7,411,551 36,206 18,839 14,501 9,068
	7,034,638 7,439,458
	7,034,638 7,439,458
	110,492 31,486
	110,492 31,486
	110,492 31,486
	6,924,146 7,407,972
	29,912,298 29,912,298 (22,988,152) (22,504,326)
	6,924,146 7,407,972

The accompanying notes form part of these financial statements.

16 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2019

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	Issued Capital	Reserves		Accumulated	Total
				Losses
	$	$		$	$
Balance at 1 July 2017	29,912,298	150,366		(22,800,884)	7,261,780
Profit after income tax expense for the year	-		-	296,558	296,558
Other comprehensive loss for the year, net of tax	-	(150,366)		-	(150,366)
Total comprehensive income/(loss) for the year	-	(150,366)		296,558	146,192
Balance at 30 June 2018	29,912,298		-	(22,504,326)	7,407,972
Balance at 1 July 2018	29,912,298		-	(22,504,326)	7,407,972
Loss after income tax expense for the year	-		-	(483,826)	(483,826)
Other comprehensive income for the year, net
of tax	-		-	-	-
Total comprehensive loss for the year	-		-	(483,826)	(483,826)
Balance at 30 June 2019	29,912,298		-	(22,988,152)	6,924,146

The accompanying notes form part of these financial statements.

17 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2019

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CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees (inclusive of GST) Payments for business development Payment for transaction costs Interest received R&D tax offset Net cash (used in)/provided by operating activities 9a CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equity investments Payment for disposal of assets Proceeds from disposal of property, plant and equipment Net cash provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Transaction costs related to loans and borrowings Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of financial year 9	30 June 2019 30 June 2018 $ $ (379,523) (293,697) (57,460) - (164,745) - 179,108 113,905 - 406,958
	(422,620) 227,166
	- 289,355 - (15,000) - (1,059)
	- 273,296
	(5,000) -
	(5,000) -
	(427,620) 500,462 7,411,551 6,926,219 - (15,130)
	6,983,931 7,411,551

The accompanying notes form part of these financial statements.

18 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 1: GENERAL INFORMATION

Vysarn Limited is a listed public Company limited by shares, incorporated and domiciled in Australia. The Company is a forprofit entity. Its registered office and principal place of business is 108 Outram Street, West Perth, WA 6005.

The financial statements are presented in Australian dollars, which is Vysarn Limited's functional and presentation currency.

The financial statements were authorised for issue, in accordance with a resolution of Directors, on 23 August 2019. The Directors have the power to amend and reissue the financial statements.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Statement of Compliance

These financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (“AASBs”) (including Australian interpretations) adopted by the Australian Accounting Standard Board (“AASB”) and the Corporations Act 2001 . These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').

b) Basis of preparation

The financial statements, except for cash flow information, have been prepared on an accruals basis and are based on historical costs.

Comparatives

The comparatives include the results of Alreco Pty Ltd, MHM Corporation USA LLC and Goldstock Ease Africa Limited (former subsidiaries). During the year ended 30 June 2018 the Company disposed of its 100% interest in the subsidiaries. The financial statements at 30 June 2019 are for the Company as a single entity. Supplementary information about the parent entity for financial year ending 30 June 2018 is disclosed in Note 15.

Historical cost convention

The financial statements have been prepared on an accrual basis and are based on historical cost modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Critical accounting estimates

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

c) Foreign currency translation

Foreign currency transactions

In the prior year, 30 June 2018, foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign operations

In the prior year, 30 June 2018, the assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.

19 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d) Revenue recognition

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Other revenue

Other revenue is recognised when it is received or when the right to receive payment is established.

e) Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

f) Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Company’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the Company’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

g) Financial Instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Company commits itself to either the purchase or sale of the assets (ie, trade date accounting is adopted).

20 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• g) Financial Instruments (continued)

Classification and subsequent measurement

Financial liabilities

Financial instruments are subsequently measured at amortised cost using the effective interest methods.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition.

Financial assets

Financial assets are subsequently measured at fair value through profit or loss.

The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time option on initial classification and is irrevocable until the financial asset is deregognised.

Derecognition

Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position.

Derecognition of financial liabilities

A liability is derecognised when it is extinguished (ie, when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability is treated as an extinguishment of the existing liability and recognition of a new financial liability.

The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Derecognition of financial assets

A financial asset is derecognised when the holder’s contractual rights to its cash flows expire, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred.

All the following criteria need to be satisfied for derecognition of financial assets:

• the right to receive cash flows from the asset has expired or been transferred;

• all risk and rewards of ownership of the asset have been substantially transferred; and

• the Company no longer controls the asset (ie, the Company has no practical ability to make a unilateral decision to sell the asset to a third party).

h) Impairment of non-financial assets

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other nonfinancial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cashgenerating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

i) Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

21 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Goods and Services Tax ('GST') and other similar taxes (continued)

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.

j) Research and Development Incentive refund

To the extent the Company incurs eligible expenditure, annual R&D claims will continue to be made. Claims are submitted based on expenditure incurred during the year and independently verified for eligibility. The accounting policy adopted by the Company is to recognise the claims once reviewed by an independent expert and submitted to the ATO. During the year, the Company has not received R&D tax incentive refund (2018: $406,958 R&D tax incentive refund received).

k) New Accounting Standards adopted for the period

The following Australian Accounting Standards have been issued or amended and are applicable to financial report of the Company for the first time at 30 June 2019.

AASB 9 ‘Financial Instruments’

AASB 9 supersedes pronouncement AASB 139 ‘Financial Instruments: Recognition and Measurement’ and was adopted by the Company effective 1 July 2018. The standard brings together all three aspects of the accounting for financial instruments: classification and measurement, impairment, and hedge accounting. With the exception of hedge accounting, the Company has applied AASB 9 retrospectively, with the initial application date of 1 July 2018, as mentioned above. The Company does not currently apply hedge accounting.

As at the date of initial application, and following assessment by management, the effect of adopting AASB 9 did not have a material impact on the transactions and balances recognised in the financial statements.

The Company’s accounting policies for financial instruments from 1 July 2018 are as follows:

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit and loss.

The classification of financial instruments at initial recognition depends on the financial asset’s contractual cashflow characteristics and the Company’s business model for managing them. With the exception of the Company’s trade receivables that do not contain a significant financing component, the Company initially measures the financial asset at its fair value plus, in the case of a financial asset not at fair value through profit and loss, transaction costs. Trade receivables that do not contain a significant financing component are measured at the transaction price determined in accordance with the Company’s accounting policy for revenue recognition.

The Company applies the simplified approach in calculating Expected Credit Loss (ECLs) in respect to trade receivables. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. In determining the provision required, the Company utilises its historical credit loss experience, adjusted only where appropriate for forward-looking factors specific to the debtors and economic environment.

Financial liabilities are classified, at initial recognition, as financial liabilities through fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade creditors and other payables which are carried at amortised cost.

22 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

k) New Accounting Standards adopted for the period (continued)

AASB 15 ‘Revenue from Contracts with Customers’

AASB 15 supersedes AASB 111 ‘Construction Contracts’, AASB 118 ‘Revenue’ and related interpretations and it applies with limited exceptions, to all revenue arising from contracts with its customers. AASB 15 established a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

AASB 15 requires the Company to exercise judgement, taking into account all the relevant facts and circumstances when applying each step of the model to contracts with customers. At the initial date of application (1 July 2018), the effect of adopting AASB 15 did not have a material impact on the transactions and balances recognised in the financial statements.

The Company’s accounting policy for revenue and other income from 1 July 2018 is as follows:

Revenue is measured at the fair value of the consideration received or receivable after taking into account any discounts and rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. Revenue from contracts with customers is recognised when control of services is transferred to the customer at an amount of that reflects the consideration to which the Company expects to be entitled in exchange for those services. This standard has no impact as there is no revenue for the year ended 30 June 2019.

l) New Accounting Standards not yet adopted AASB 16 ‘Leases’

AASB 16 requires leases to account for all leases under a single on balance sheet model in a similar way to finance leases under AASB 117 ‘Leases’. The standard includes two recognition exemptions for leases of ‘low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payment (I.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).

Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting is substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. AASB 16 also requires enhanced disclosure to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk. This standard will have no impact on transition. The Transaction occurred after the balance date and hence do not impact the Company at 1 July 2019.

The Company has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

m) Going concern

The financial statements have been prepared on a going concern basis. The Company is currently in process of completing the acquisition of various waterwell drilling assets from Ausdrill Limited (refer to Note 18 for further details) and expects to complete the Transaction and commence drilling service within the first half of the 2020 financial year.

Subsequent to year end, the Company has entered a binding conditional financing agreement with Westpac Banking Corporation Limited for a $8.8 million debt funding facility. The Company has also lodged a prospectus to raise a total of up to $7 million before costs (refer to note 18 for further information).

23 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

m) Going concern

The Directors have reviewed a budget/forecast and having considered the above, are of the opinion that the use of the going concern basis is appropriate and that the Company will be able to pay its debts as and when they fall due for the next 12 months.

n) Critical accounting judgement, estimates and assumption

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. Following is the significant management judgements made in applying the accounting policies of the Company.

Business combination/asset acquisition (Transaction)

As announced on 11 April 2019, the Company has entered into:

• an Asset Sale Agreement with Pentium Hydro Pty Ltd (“Pentium”) and Ausdrill Northwest Pty Ltd (“Ausdrill”) to acquire waterwell drilling assets (and associated inventory) for $16,000,000 cash. The acquisition underpins the Company’s aim to become a significant provider of production critical services and solutions to the resources, construction and utilities industry.

• a Share Sale Agreement with the shareholders of Pentium Hydro Pty Ltd (“Pentium”) to acquire all the issued shares of Pentium in consideration for the issue of 7,800,000 shares in the Company at which point Pentium will become subsidiary of the Company.

At the date of this report the Transaction has not been completed and the accounting treatment for the transaction is yet to be assessed and finalised.

NOTE 3: OPERATING SEGMENTS

Identification of reportable operating segments

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

Accounting policy for operating segments

The operating segments were previously identified by management based on the nature of activities. The financial information presented to the chief operating decision makers is consistent with that presented in the statement of profit and loss and other comprehensive income, statement of financial position and statement of cash flows for the current and prior year.

NOTE 4: OTHER INCOME

Net gain in sale of equity investments R&D tax incentive refunds Total Other income	30 June 2019 30 June 2018 $ $ - 53,541 - 406,958
	- 460,499

To the extent the Company incurs eligible expenditure, annual R&D claims will continue to be made. Claims are submitted based on expenditure incurred during the year and independently verified for eligibility. The accounting policy adopted by the Company is to recognise the claims once reviewed by an independent expert and submitted to the ATO, therefore, no amount has been recorded for a potential R&D tax incentive refund as at 30 June 2019.

24 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 5: INCOME TAX EXPENSE

Numerical reconciliation of income tax expense and tax at the statutory rate (Loss)/Profit before income tax expense from continuing operations Tax at the statutory tax rate of 30% (2018: 30%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: - R&D incentive recognised in other income not taxable - Unrecognised DTA on tax losses Income tax expense attributable to (loss)/profit

2019 2018 $ $ (483,826) 296,558 (145,148) 88,968 - (122,087) 145,148 33,119

- -

At 30 June 2019, the Company has carried forward revenue tax losses of $512,951 (2018: $29,125). These losses remain available to offset against future taxable income amounts subject to passing the Ownership and business continuity tests as required by the Australian Taxation Office.

NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION

The total of remuneration paid to Key Management Personnel during the year are as follows:

Short-term employee benefits(1) Total KMP Compensation	2019 $ 2018 $ 174,000 48,000
	174,000 48,000

(1) Short-term employee benefits for 30 June 2019 include $42,000 payment to Mr Sheldon Burt and Mr Chris Brophy for project management and consultation services received in relation to the Ausdrill Transaction and $66,000 payment each for Mr Faldi Ismail and Mr Nicholas Young’s director fees for the period from November 2017 to March 2019.

Loans to Key Management Personnel

There were no loans made to Key Management Personnel during the financial year (2018: Nil).

Other Key Management Personnel Transactions

Refer to Note 16 for detailed notes on other transactions with Key Management Personnel.

NOTE 7: REMUNERATION OF AUDITORS

During the financial year the following fees were paid or payable for services provided by the auditor of the Company:

Remuneration of the auditor of the Company (Pitcher Partners BA&A Pty Ltd and its related entities) for: - Auditing or reviewing the financial reports - Non-audit services	2019 $ 2018 $ 28,990 27,000 4,555 - 33,545 27,000

In the prior year, the Company’s auditor was Pitcher Partners Corporate (WA) Pty Ltd.

25 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 8: EARNINGS PER SHARE

OTE 8: EARNINGS PER SHARE
Earnings per share for (loss)/profit (Loss)/profit after income tax attributes to the owners of Vysarn Limited Weighted average number of ordinary shares used in calculating basic and diluted earnings per share Basic and diluted (loss)/earnings per share	2019 $ 2018 $ (483,826) 296,558
	Number Number
	136,228,616 136,228,616
	Cents Cents (0.355) 0.218

Accounting policy for earnings per share

Basic earnings per share

Basic earnings or loss per share is calculated by dividing the profit or loss attributable to the owners of Vysarn Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

NOTE 9: CURRENT ASSETS – CASH AND CASH EQUIVALENTS

NOTE 9: CURRENT ASSETS – CASH AND CASH EQUIVALENTS Cash at bank	30 June 2019 30 June 2018 $ $
	6,983,931 7,411,551
	6,983,931 7,411,551

Accounting policy for cash and cash equivalents

Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions.

NOTE 9a: CASH FLOW INFORMATION

(Loss)/profit after income tax expense for the year Adjustments for: Exchange (gain)/loss Net gain on sale of equity investments Transaction costs related to loans/borrowings Change in operating assets and liabilities: - (Increase)/decrease in trade and other receivables - Increase/(decrease) in trade and other payables Net cash (used in)/provided by operating activities	(483,826) 296,558 - (237) - (54,355) 5,000 - (22,800) 596 79,006 (15,396)
	(422,620) 227,166

26 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

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Trade and other receivables are held at amortised cost. NOTE 12: CURRENT LIABILITIES – TRADE AND OTHER PAYABLES NOTE 10: CURRENT ASSETS – TRADE AND OTHER RECEIVABLES GST receivable Interest receivable NOTE 11: CURRENT ASSETS – OTHER Prepayments Trade payables Other payables	30 June 2019 30 June 2018 $ $ 33,307 291 2,899 18,548
	36,206 18,839
	30 June 2019 30 June 2018 $ $ 14,501 9,068
	14,501 9,068
	30 June 2019 30 June 2018 $ $ 68,824 3,977 41,668 27,509
	110,492 31,486

Refer to Note 14 for further information on financial instruments.

Accounting policy for trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

NOTE 13: EQUITY - ISSUED CAPITAL Ordinary shares - fully paid	30 June 2019 30 June 2018 30 June 2019 30 June 2018 Number Number $ $
	136,228,616 136,228,616 29,912,298 29,912,298
	136,228,616 136,228,616 29,912,298 29,912,298

There were no movement in the issued capital of the Company for the current financial year and previous financial year.

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Options

There were no Options on issue at the end of the financial year (2018: Nil).

27 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 13: EQUITY - ISSUED CAPITAL (CONTINUED)

Capital risk management

The Company's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.

Capital is regarded as total equity as recognised in the statement of financial position.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets.

Accounting policy for issued capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

NOTE 14: FINANCIAL INSTRUMENTS

Financial risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company uses different methods to measure different types of risk to which it is exposed.

Financial risk management objectives

These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk.

Market risk

Foreign currency risk

The Company is not exposed to any significant foreign currency risk.

Price risk

The Company is not exposed to any significant price risk.

Interest rate risk

The Company’s only exposure to interest rate risk is in relation to deposits held. Deposits are held with reputable banking financial institutions.

The weighted average effective interest rate of the Company’s deposit was 2.29% (2018: 1.60%).

The table below illustrate the impact on profit before tax based upon expected volatility of interest rates using market date and analysis forecasts.

Basis points change 30 June 2019 Cash and equivalents 50 30 June 2018 Cash and equivalents 50	Basis points increase effect on profit before tax Effect on equity Basis points % change Basis points decrease effect on profit before tax Effect on equity 35,989 35,989 50 (35,989) (35,989) 37,058 37,058 50 (37,058) (37,058)

28 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 14: FINANCIAL INSTRUMENTS (CONTINUED)

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk related to balances with banks and other financial institutions is managed by the Group in accordance with approved Board policy. Such policy requires that surplus funds are only invested with counterparties with a Standard and Poor’s rating of at least AA-. The Company has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Company does not hold any collateral.

The following table provides information regarding the credit risk relating to cash and money market securities based on Standard and Poor’s counterparty credit ratings.

Note Cash and cash equivalents – AA Rated 9	30 June 2019 $ 30 June 2018 $ 6,983,931 7,411,551
	6,983,931 7,411,551

Liquidity risk

Liquidity risks arises from the possibility that the Company might encounter difficulty in settling its debts or otherwise meeting its obligation related to financial liabilities. Vigilant liquidity risk management requires the Company to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable.

The Company manages liquidity risk by maintaining adequate cash reserves and continuously monitoring actual and forecast cash flows.

Remaining contractual maturities

The following tables detail the Company’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.

30 June 2019 Non-derivatives Non-interest bearing Trade payables Other payables Total non-derivatives 30 June 2018 Non-derivatives Non-interest bearing Trade payables Other payables Total non-derivatives	1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ 68,824 - - - 68,824 41,668 - - - 41,668
	110,492 - - - 110,492
	3,977 - - - 3,977 27,509 - - - 27,509
	31,486 - - - 31,486

29 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 14: FINANCIAL INSTRUMENTS (CONTINUED)

Fair value of financial instruments

Unless otherwise stated, the carrying amounts of financial instruments approximate their fair value. The carrying amounts of trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial instruments.

NOTE 15: PARENT ENTITY INFORMATION

Set out below is the supplementary information about the parent entity for financial year ending 30 June 2018. During the year ended 30 June 2018 the Company disposed of its 100% interest in the subsidiaries.

Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity - Issued capital - Reserves - Accumulated losses Total equity	Parent 2018 $ 164,394
	164,394
	Parent 2018 $ 7,439,458
	7,439,458
	31,486
	31,486
	29,912,298 - (25,204,326)
	7,407,972

NOTE 16: RELATED PARTY TRANSACTIONS

Purchases from and sales to related parties are made on terms equivalent to those that prevail in arm’s length transactions.

Some Directors, or former Directors of the Company, hold or have held positions in other companies, where it is considered they control or significantly influence the financial or operating policies of those entities. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

therwise stated.
	Key Management Personnel	2019	2018
		$	$
Payment for goods and services:
Payment for services to Onyx Corporate	Mr Nicholas Young	54,150	28,000
Payment for services to Otsana Capital	Mr Faldi Ismail / Mr Nicholas Young	30,000	5,000
Payment for services to Bellanhouse Legal	Mr Bryn Hardcastle	-	12,765

30 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 16: RELATED PARTY TRANSACTIONS (CONTINUED)

Onyx Corporate Pty Ltd, an entity associated with Mr Nicholas Young, received payments totalling $54,150 in relation to accounting and Company secretarial services provided to the Company (2018: $28,000).

During the year, the Company engaged with Otsana Pty Ltd trading as Otsana Capital ( Otsana ), an entity associated with Messer’s Ismail and Young, to act as corporate advisor and lead manager in relation to the Transaction with Ausdrill Northwest Pty Ltd. The mandate will continue until the date of transaction completion, being successful reinstatement of the Company to the Official List of ASX or when either party terminates the agreement. Under the terms of the Mandate, the Company will pay the Lead Manager (and/or its nominee) a fee of $180,000 (excluding GST) for corporate advisory and project management services provided in connection with the Acquisition and a capital raising fee of 6% (excluding GST) on the amount raised under the Public Offer. The services are otherwise being provided on terms standard for an agreement of this nature. During the year ended 30 June 2019, the Company has paid Otsana $30,000 (2018: $5,000). Commitments of $150,000 remain at the end of reporting period (2018: Nil).

Bellanhouse Legal, an entity associated with former Director Mr Bryn Hardcastle, received payments in financial year 2018 of $12,765 in relation to legal services provided to the Company.

There were no trade receivables from or trade payables to related parties for the financial year ending 30 June 2019 (2018: Nil).

There were no loans to / from related parties for the financial year ending 30 June 2019 (2018: Nil).

NOTE 17: COMMITMENTS AND CONTINGENCIES

On 11 April 2019 the Company announced it had entered into an Asset Sale Agreement with Pentium Hydro Pty Ltd ( Pentium ) and Ausdrill Northwest Pty Ltd (a subsidiary of Ausdrill Limited (ASX:ASL)) ( Ausdrill ) to acquire various waterwell drilling assets (and associated inventory) used by Ausdrill to conduct its hydrogeological drilling business known as ‘Connector Drilling’. In consideration for the acquisition of the Assets, the Company has agreed to pay Ausdrill $16 million at completion. The consideration will be paid by the Company from existing cash, funds from a Public Offer of Shares to raise at least $5M and up to $7M and an $8.8M Debt Facility obtained from Westpac Banking Corporation Ltd.

The Asset Sale Agreement is the result of a comprehensive identification and evaluation process by the Board over the past ~2 years seeking to acquire assets that it believes can provide future value for shareholders. Following Shareholder approval of the Transaction obtained at the General Meeting held on 5 July 2019, completion of the acquisition of the Assets remains conditional upon satisfaction of the various conditions precedent including the Company obtaining finance to satisfy the purchase price under the agreement and ASX approval.

In connection with the Asset Sale Agreement, the Company also entered into the Share Sale Agreement with Insight Ecosys Pty Ltd (controlled by Mr Brophy) and Connada Pty Ltd (controlled by Mr Burt), pursuant to which the Company will acquire the entire issued share capital of Pentium from the Pentium Vendors. In consideration for the acquisition of Pentium, the Company has agreed to issue to Pentium Vendors (and/or their nominees) a total of 7,800,000 shares. Completion of the Share Sale Agreement will take place just prior to completion of the Asset Sale Agreement, and Pentium will become a wholly owned (and primary operating) subsidiary of the Company.

Completion of the acquisition of Pentium remains subject to all the conditions precedent to the Asset Sale Agreement being satisfied.

The Company has entered into corporate advisor and lead manager mandate with Otsana (an entity associated with Mr Faldi Ismail). Under the terms of the Mandate, the Company will pay the Lead Manager (and/or its nominee) a fee of $180,000 (excluding GST) for corporate advisory and project management services provided in connection with the Acquisition (please refer to Note 2(n)) and a capital raising fee of 6% (excluding GST) on the amount raised under the Public Offer. The services are otherwise being provided on terms standard for an agreement of this nature. During the financial year ended 30 June 2019, the Company has paid Otsana $30,000. Commitments of $150,000 remain at the end of reporting period (2018: Nil).

31 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

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NOTE 18: EVENTS SUBSEQUENT AFTER THE REPORTING DATE

On 5 July 2019, the Company’s shareholders approved at its General Meeting:

• Change to the Nature and Scale of Company’s Activities;

• Ratification of prior election of Messer’s Burt and Mr Brophy as Directors;

• Issue of 7,800,000 Pentium Vendor shares to the Pentium Vendors pursuant to the share sale agreement on completion of the Transaction;

• Issue of up to 129,629,630 fully paid ordinary shares at an issue price of $0.054 per share under a Public Offer;

• Related party’s participation in Public Offer for Mr Hutchinson to the extent of up to 20,129,630 shares at an issue price of $0.054 per share for a subscription amount up to $1,087,000;

• Related party’s participation in Public Offer for Mr Ismail to the extent of up to 5,175,926 shares at an issue price of $0.054 per share for a subscription amount up to $279,500;

• Related party’s participation in Public Offer for Mr Young to the extent of up to 5,175,926 shares at an issue price of $0.054 per share for a subscription amount up to $279,500;

• Related party’s participation in Public Offer for Mr Burt to the extent of up to 1,851,852 shares at an issue price of $0.054 per share for a subscription amount up to $100,000;

• Related party’s participation in Public Offer for Mr Brophy to the extent of up to 1,851,852 shares at an issue price of $0.054 per share for a subscription amount up to $100,000;

• Issue up to 15,500,000 shares, or cash payment, up to $837,000 to Mr Hutchinson or his nominee for consideration of past service to the Company on completion of the Transaction;

• Issue up to 4,250,000 shares, or cash payment, up to $229,500 to Mr Ismail or his nominee for consideration of past service to the Company on completion of the Transaction;

• Issue up to 4,250,000 shares, or cash payment, up to $229,500 to Mr Young or his nominee for consideration of past service to the Company on completion of the Transaction;

• 5,000,000 Performance Rights to Mr Burt have been approved which was contemplated by the Burt ESA and to be issued on completion of the Transaction;

• 5,000,000 Performance Rights to Mr Brophy have been approved which was contemplated by the Brophy ESA and to be issued on completion of the Transaction; and

• 10,000,000 Options to Mr Hutchinson to be issued as per NED agreement on completion of the Transaction.

On 10 July 2019 the Company, together with Pentium, entered into a binding conditional financing agreement with Westpac Banking Corporation Limited. Under the facility, subject to the satisfaction of specified conditions, Westpac will provide debt funding of $8.8 million as part of the funding for the acquisition by the Company and Pentium of various waterwell drilling assets (and associated inventory) from Ausdrill.

On 11 July 2019, the Company lodged a prospectus to ASIC for its offer to the public of up to 129,629,630 shares at an issue price of $0.054 each to raise a total of up to $7million (before costs). It was also announced that ASX has extended the Company’s de-listing deadline to the commencement of trading on 11 October 2019. The extension was granted on the basis that the Company is in the final stages of completing the Transaction.

On 26 July 2019, the Company lodged a supplementary prospectus with ASIC under which the Company announced that it had entered into a deed of assignment with Pentium, Hancock Prospecting Pty Ltd ( Hancock ) and Ausdrill under which Ausdrill’s rights and obligation under its existing drilling services contract with Hancock will be assigned to the Company and Pentium with effect from completion of the Asset Sale Agreement.

On 14 August 2019, the Company lodged a second supplementary prospectus with ASIC noting that it had received strong demand from investors under the Public Offer in excess of the full subscription amount of $7,000,000 and extended the closing date of the public offer (and ancillary offers) to Monday 26 August 2019 to allow investors sufficient time to transfer funds and return application forms.

On 16 August 2019, the Company lodged a third supplementary prospectus with ASIC under which the Company announced that Pentium had entered into a hire agreement with Easternwell in which under the agreement, Easternwell will hire, on a dry hire arrangement, two rigs (and ancillary equipment) for use at BHP’s mining operation in Olympic Dam, South Australia.

There is no other matter or circumstance that has arisen since 30 June 2019 other than mentioned above that has significantly affected, or may significantly affect the Company’s operations, the results of those operations, or the Company’s state of affairs in future financial years.

32 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

DIRECTORS’ DECLARATION

FOR THE YEAR ENDED 30 JUNE 2019

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In the opinion of the Directors of Vysarn Limited:

1. The financial statements and notes thereto are in accordance with the Corporations Act 2001 , including:

2. (a) Giving a true and fair view of the Company’s financial position as at 30 June 2019 and of its performance for the financial year ended on that date; and

3. (b) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

4. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

5. 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 2019.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for an on behalf of the Directors by:

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Peter Hutchinson

Chairman

Dated 23 August 2019

33 | Vysarn Limited ABN 41 124 212 175 –Financial Report 30 June 2019

VYSARN LIMITED ABN 41 124 212 175

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VYSARN LIMITED

Opinion

We have audited the financial report of Vysarn Limited “the Company”, which comprises the statement of financial position as at 30 June 2019, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the Directors’ declaration.

In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the Company’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and

• (b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Adelaide Brisbane Melbourne Newcastle Perth Sydney

Pitcher Partners BA&A Pty Ltd

• 34 -

Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.

An independent Western Australian Company ABN 76 601 361 095. Level 11, 12-14 The Esplanade, Perth WA 6000 Registered Audit Company Number 467435. Liability limited by a scheme under Professional Standards Legislation.

VYSARN LIMITED ABN 41 124 212 175

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VYSARN LIMITED

Key Audit Matter	How our audit addressed the key audit matter
Going concern
Refer to Note 1(m)
The Company is currently in the process of	Our procedures included, amongst others:
completing the acquisition of certain waterwell
drilling assets from Ausdrill Limited
(‘Transaction’).
For the year ended 30 June 2019, the Company	Checking and satisfying ourselves that the cash
has incurred a deficit of $483,826 and has net	flow forecasts prepared by Directors were
cash outflow from operating and investing	consistent with the Company’s strategy and
activities of $422,620.	current position.
The Directors have continued to adopt the going	Challenging management assumptions regarding
concern basis of preparation in preparing the	the likelihood that the transaction will complete
Company’s financial statements, and having	and that drilling will commence within the first half
prepared detailed cash flow forecasts which	of the 2020 financial year. This includes, amongst
support the assertion that the Company will have	others, checking the mathematical accuracy of
sufficient resources to continue for a period of at	the financial model, assessing the assumptions
least 12 months from the date of these financial	of inputs used in the cash flow forecasts such as
statements were approved.	working capital requirements, drilling revenue,
	consumables, rent and outgoings and labour rate
	inputs.
The Director’s assessment of the Company’s	Assessing the Company’s disclosures within the
going concern ability was an area of audit focus	financial report and the appropriateness,
and particular attention was paid to the key	including consistency with the assumptions and
assumptions and judgements taken by the	judgements made by management.
Directors that most significantly impacted these
cash flow forecasts, including the likelihood that
the Transaction would complete and that drilling
would commence within the first half of the 2020
financial year, and the assumptions used in
forecasting projected drilling revenue and cash
outflows.

Other Information

The Directors are responsible for the other information. The other information comprises the information included in the Directors’ report, which was obtained as at the date of our audit report, and any additional other information included in the Company’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

• 35 -

VYSARN LIMITED ABN 41 124 212 175

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VYSARN LIMITED

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• 36 -

VYSARN LIMITED ABN 41 124 212 175

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VYSARN LIMITED

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Vysarn Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001 .

Responsibilities

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

PITCHER PARTNERS BA&A PTY LTD

PAUL MULLIGAN Executive Director Perth, 23 August 2019

• 37 -