VYSARN LIMITED — Interim / Quarterly Report 2020

Feb 27, 2020

ASX APPENDIX 4D

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HALF-YEAR FINANCIAL REPORT TO 31 DECEMBER 2019

1. DETAILS OF REPORTING PERIOD

Name of Entity Vysarn Limited (“the Company”) ABN 41 124 212 175 Reporting Period 31 December 2019 Previous Corresponding Period 31 December 2018

2. RESULTS FOR ANNOUNCEMENT TO THE MARKET

	31 December	31 December	Increase/	Amount
	2019	2018*	(Decrease)	change
	$	$	%	$
Revenues from ordinary activities	1,778,969	87,341	1937%	1,691,628
Profit/(Loss) after tax from ordinary	3,309,214	(24,846)	13419%	3,334,060
activities attributable to members
Profit/(Loss) after tax attributable to	3,309,214	(24,846)	13419%	3,334,060
members

The directors of Vysarn Limited (the Company) hereby present the Company's first Appendix 4D Half Year report following a significant change in the nature and scale of its activities through the completion of a Transaction with Ausdrill Northwest Pty Ltd ( Ausdrill ) under which the Company acquired waterwell drilling assets and associated inventory from Ausdrill ( Ausdrill Assets ) for cash payment of $16 million ( Transaction ). On 28 August 2019 the Company issued 7,800,000 Shares to the vendors of Pentium Hydro Pty Ltd ( Pentium ) as consideration for all of the issued capital of Pentium, at which point Pentium became a controlled entity of the Company. On 29 August 2019 the Company completed the Transaction with Ausdrill via Its wholly owned subsidiary Pentium. Refer to the Interim Consolidated Financial Statements for further information.

	Amount Per	Franked Amount
	Security	Per Security
Final Dividend	Nil	Nil
Interim Dividend	Nil	Nil
Previous Corresponding Period	Nil	Nil
Record Date for Determining Entitlements	Not	Applicable

Commentary on results:

For further information, refer to the review of activities contained in the directors’ report, which forms part of the attached Interim Financial Report.

3. NET TANGIBLE ASSETS PER SHARE

3. NET TANGIBLE ASSETS PER SHARE
	31	December 2019	30 June 2019
		$	$
Net tangible asset backing per ordinary security		6.29 cents	5.08 cents

Vysarn Limited | ABN: 41 124 212 175 | ACN: 124 212 175 | 108 Outram St, West Perth, WA 6005 | PO Box 1974, West Perth WA 6872 T +61 (0) 8 9486 7244 | F +61 (0) 8 9463 6373 | E info@vysarn.com.au | vysarn.com.au

4. DETAILS OF ENTITIES OVER WHICH CONTROL HAS BEEN GAINED OR LOST DURING THE PERIOD

Control gained over entities
Name of entity (or group of entities)	Pentium Hydro Pty Ltd
Date control gained	29 August 2019
Contribution of such entities to the reporting entity’s profit/(loss) from ordinary	$5,874,589
activities during the period (where material)
Consolidated profit/(loss) from ordinary activities of the controlled entity (or	N/A
group of entities) whilst controlled during the whole of the previous
corresponding period (where material)
Loss of control over entities
Name of entity (or group of entities)	N/A
Date control lost	N/A
Contribution of such entities to the reporting entity’s profit/(loss) from ordinary	N/A
activities during the period (where material)
Consolidated profit/(loss) from ordinary activities of the controlled entity (or	N/A
group of entities) whilst controlled during the whole of the previous
corresponding period (where material)

5. DIVIDEND DETAILS

No dividend has been paid or recommended to be paid for the half-year ended 31 December 2019.

6. DETAILS OF DIVIDEND REINVESTMENT PLANS

Not Applicable

7 DETAILS OF ASSOCIATE AND JOINT VENTURE ENTITIES

N/A

8. FOREIGN ENTITIES

Not Applicable

9. AUDIT

This report has been based on accounts that have been subject to an audit review. There are no items of dispute with the auditor and the audit review is not subject to qualification.

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James Clement

Managing Director

Dated 28 February 2020

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Page 2 of 2

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VYSARN LIMITED ABN 41 124 212 175

CONSOLIDATED INTERIM FINANCIAL REPORT for the half year ended 31 December 2019

INTERIM FINANCIAL REPORT

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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CONTENTS
Corporate directory	1
Directors' report	2
Auditor's independence declaration	4
Consolidated statement of profit or loss and other comprehensive income	5
Consolidated statement of financial position	6
Consolidated statement of changes in equity	7
Consolidated statement of cash flows	8
Notes to the interim consolidated financial statements	9
Directors' declaration	26
Independent auditor's review report to the members of Vysarn Limited	27

CORPORATE DIRECTORY

Directors

Peter Hutchinson James Clement Sheldon Burt Christopher Brophy

Non-Executive Chairman Managing Director and CEO Executive Director Non-Executive Director

Company Secretary

Kyla Garic

Registered Office and Principal Place of Business

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 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

DIRECTORS’ REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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The Directors present their report, together with the financial statements for the half-year ended 31 December 2019.

Directors

The names and the particulars of the Directors of Vysarn Limited ( Company ) during the half year and to the date of this report are:

re:
Name	Status	Appointed	Resigned
Peter Hutchinson	Non-Executive Chairman	27 October 2017	-
James Clement	Managing Director and CEO	3 February 2020	-
Sheldon Burt	Executive Director	15 May 2019	-
Chris Brophy	Non-Executive Director	15 May 2019	-
Faldi Ismail	Non-Executive Director	20 December 2016	29 August 2019
Nicholas Young	Non-Executive Director	20 December 2016	29 August 2019

Significant changes in the state of affairs

The Company has undertaken a significant change in the nature and scale of its activities during the half year through the completion of a Transaction with Ausdrill Northwest Pty Ltd ( Ausdrill ) under which it has acquired waterwell drilling assets and associated inventory from Ausdrill ( Ausdrill Assets ) for cash payment of $16 million ( Transaction ). On 28 August 2019 the Company issued 7,800,000 Shares to the vendors of Pentium Hydro Pty Ltd ( Pentium ) as consideration for all of the issued capital of Pentium, at which point Pentium became a controlled entity of the Company. On 29 August 2019 the Company completed the Transaction with Ausdrill via its wholly owned subsidiary Pentium. Refer to Note 3 of the Interim Consolidated Financial Statements for further information.

Acquisition of the Ausdrill Assets underpins the Company's aim to become a significant provider of production critical services and solutions to the resources, construction and utilities industries. Following completion of the Transaction, the Company has focused on its business and growth strategy, which will include both organic growth through further utilisation of the Ausdrill Assets, as well as growth through acquisition as the Company seeks opportunities to complement and expand its service offering.

Review of operations

The Company has made significant operational progress since the conclusion of the Ausdrill Transaction at the end of August 2019. Vysarn has achieved a number of major milestones since listing in September 2019. From a standing start the Company has been able to establish a business servicing top tier resource clients, with growing demand for its assets and services.

• has established an experienced board and management team;

• entered into contracts to provide five rigs and/or provide borefield and construction services;

• awarded a Master Services Agreement (MSA) with Roy Hill Iron Ore (RHIO) and Fortescue Metals Group (FMG); and

• the Group's leased premises from 6 January 2020 for an initial term of two years with a two-year extension option.

The establishment of new premises in Wangara comprising of 13,300 sq.m and a 500 sq.m office facility enables the centralisation of all managerial, operational and administrative functions as well as the housing of the company's fleet of plant and equipment.

Financial Performance

The profit for the consolidated entity after tax for the six months ended 31 December 2019 was $3,309,214 (31 December 2018: loss of $24,846).

Working capital, being current assets less current liabilities, was $5,620,368 (30 June 2019: $6,924,146).

2 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

DIRECTORS’ REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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Significant events after the balance sheet date

The Group's operational progress continued subsequent to balance date through the receipt of a purchase order from Roy Hill Iron Ore Pty Ltd to supply a second rig under the General Works Contract in January 2020. Rig mobilisation occurred in February 2020. The estimated first phase value of the purchase order is approximately $1.3m and based on the current scope is expected to be complete within three to four months of mobilisation.

The Group was awarded a Goods and Services Contract with Iluka Resources Limited in January 2020. The estimated value of the contract Is $1,875,000 and based on the current scope is expected to be completed before the end of FY2020. Rig mobilisation occurred in February 2020.

The Group's leased premises commenced 6 January 2020 for an initial term of two years with a two-year extension option. Annual premises rental Is $213,750 plus GST.

In February 2020, the Group welcomed James Clement to the Board of Directors as Managing Director and CEO. On 3 February 2020 Mr Clement was issued 5,000,000 Performance Rights expiring 3 February 2025 and 10,000,000 Unlisted Incentive Options exercisable at $0.075 on or before 3 February 2023, The equity Issued as performance incentives was approved at a meeting of the Company's shareholders held on 30 January 2020 and forms part of remuneration package.

There are no other matters or circumstances that have arisen since 31 December 2019 that significantly affect, or may significantly affect the Company’s operations, the results of those operations, or the Company’s state of affairs in future financial years.

Auditor independence

The auditor’s independence declaration can be found on the following page.

Signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001 .

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James Clement

Managing Director Dated 28 February 2020

3 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

AUDITOR’S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF VYSARN LIMITED AND ITS CONTROLLED ENTITY

In relation to the independent review for the half-year ended 31 December 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 (including Independence Standards).

This declaration is in respect of Vysarn Limited and the entity it controlled during the period.

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PITCHER PARTNERS BA&A PTY LTD

PAUL MULLIGAN Executive Director Perth, 28 February 2020

Pitcher Partners BA&A Pty Ltd

Adelaide Brisbane Melbourne Newcastle Perth Sydney

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.

14

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

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Note Revenue from contracts with customers 4 Other income 5 Material expense 6 Labour expense Share based payment expense 18 Depreciation expense 6 Finance expense 6 Transaction expenses 6 Other expenses from ordinary activities 6 Profit/(Loss) before income tax Income tax benefit Profit/(Loss) for the half year Other comprehensive income Total comprehensive income/(loss) for the half year attributable to owners of the Company Earnings/(loss) per Share attributable to owners of the Company Basic earnings/(loss) per share (cents per share) 8 Diluted earnings/(loss) per share (cents per share) 8	31 December 31 December 2019 2018 $ $ 1,778,969 - 7,034,825 87,341 (509,970) - (1,165,717) - (1,622,772) - (1,589,501) - (148,707) - (431,642) - (549,585) (112,187)
	2,795,900 (24,846) 513,314 -
	3,309,214 (24,846) - -
	3,309,214 (24,846)
	1.34 (0.02) 1.29 (0.02)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the

accompanying notes.

5 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

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CURRENT ASSETS Note Cash and cash equivalents 9 Trade and other receivables 10 Inventory 11 Contract fulfilment costs 4 Other current assets Assets classified as held for sale 12 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment 13 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 14 Contract liabilities 4 Borrowings 15 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings 15 Provisions Deferred tax liability TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS SHAREHOLDERS’ EQUITY Issued capital 16 Reserve 17 Accumulated losses SHAREHOLDERS’ EQUITY	31 December 30 June 2019 2019 $ $ 4,324,910 6,983,931 1,339,189 36,206 2,257,325 - 294,105 - 269,910 14,501
	8,485,439 7,034,638 152,728 -
	8,638,167 7,034,638
	22,455,686 -
	22,455,686 -
	31,093,853 7,034,638
	1,272,559 110,492 246,074 - 1,217,866 -
	2,736,499 110,492
	6,964,669 - 7,006 - 2,653,323 -
	9,624,998 -
	12,361,497 110,492
	18,732,356 6,924,146
	38,170,294 29,912,298 241,000 - (19,678,938) (22,988,152)
	18,732,356 6,924,146

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

6 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 31 DECEMBER 2019

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Balance at 1 July 2018 Loss for the period Other comprehensive income Total comprehensive loss for the period Balance at 31 December 2018 Balance at 1 July 2019 Profit for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Issue of shares Capital raising costs Share based payments Balance at 31 December 2019	Issued Capital Share Based Payment Reserve Accumulated losses Total $ $ $ $ 29,912,298 - (22,504,326) 7,407,972 - - (24,846) (24,846) - - - -
	- - (24,846) (24,846)
	29,912,298 - (22,529,172) 7,383,126
	29,912,298 - (22,988,152) 6,924,146 - - 3,309,214 3,309,214 - - - -
	- - 3,309,214 3,309,214
	8,717,200 - - 8,717,200 (459,204) - - (459,204) - 241,000 - 241,000
	38,170,294 241,000 (19,678,938) 18,732,356

The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.

7 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment for completion of Ausdrill Transaction 3 Proceeds from disposal of plant and equipment Purchase of plant and equipment 13 Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from the issue of shares Proceeds from borrowings Repayment of borrowings Net cash provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the half year Cash and cash equivalents at the end of the half year	31 December 31 December 2019 2018 $ $ 945,615 - (1,998,225) (130,725) 16,717 91,508 (148,707) -
	(1,184,600) (39,217)
	(16,000,000) - 440,000 - (451,279) -
	(16,011,279) -
	6,540,796 - 8,800,000 - (803,939) -
	14,536,857 -
	(2,659,022) (39,217) 6,983,931 7,411,551
	4,324,910 7,372,334

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

8 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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The interim financial report ( Repo rt) of Vysarn Limited (the Company ) and its controlled entity (the Group or Consolidated Entity ) for the half year ended 31 December 2019 was authorised for issue in accordance with a resolution of the Directors.

Vysarn Limited is a listed public company, trading on the Australia Securities Exchange, limited by shares, incorporated and domiciled in Australia.

The Group’s registered office and principal place of business is 108 Outram Street, West Perth WA 6005.

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation of the financial report

a) Statement of Compliance

The half-year financial statements are general purpose financial statements prepared in accordance with the requirements of the Corporations Act 2001 , applicable accounting standards including AASB 134: Interim Financial Reporting, Accounting Interpretation and other authoritative pronouncements of the Australian Accounting Standard Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

This interim financial report does not include the full disclosures of the normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the Company as in the full financial report.

It is recommended that this interim financial report is read in conjunction with the annual financial report for the year ended 30 June 2019 and any public announcements made by Vysarn Limited during and since the end of the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

b) Basis of Measurement and Reporting Conventions

The financial statements, except for cash flow information, have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Amounts are presented in Australian dollars and have been rounded off to the nearest dollar, unless stated otherwise.

The Company has undertaken a significant change in the nature and scale of its activities during the half year through the completion of a Transaction with Ausdrill Northwest PtId ( Ausdrill ) under which it has acquired waterwell drilling assets and associated inventory from Ausdrill for cash payment of $16 million ( Transaction ). On 28 August 2019, the Company issued 7,800,000 Shares to the vendors of Pentium Hydro Pty Ltd ( Pentium ) as consideration for all of the issued capital of Pentium, at which point Pentium became a controlled entity of the Company. On 29 August 2019 the Company completed the Transaction with Ausdrill via Its wholly owned subsidiary Pentium. The Transaction has been accounted for as a business combination, refer Note 3 for further details.

The 31 December 2019 figures presented in this half year report are for the Group consisting of Vysarn Limited and its fully owned subsidiary Pentium Hydro Pty Ltd. The 30 June 2019 and 31 December 2018 comparative figures are for the Company only; accordingly, comparatives may not be entirely comparable.

These half-year financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and liabilities in the normal course of business.

9 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Having reviewed budgets and forecasts for operations in the next 12 months, Management believe there are sufficient funds to meet the Group's working capital requirements as at the date of this report to meet it's obligations as and when they fall due.

c) Adoption of New Accounting Standards

Following completion of the Transaction, a number of accounting standards became applicable to the Group for the first time at 31 December 2019. The impact of the adoption of these standards and the new accounting policies are disclosed in Note 2 below. Apart from the adoption of the accounting policies disclosed in Note 2, accounting policies applied in the half year report are consistent with those applied in the 30 June 2019 Annual Report.

NOTE 2: NEW ACCOUNTING POLICIES APPLIED AT 31 DECEMBER 2019

The Company has applied the following new accounting policies at 31 December 2019:

a) Principles of Consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiary as at 31 December 2019. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee, and

• The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee,

• Rights arising from other contractual arrangements,

• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit or loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

a) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits available on demand with banks with original maturity of three months or less.

10 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 2: NEW ACCOUNTING POLICIES APPLIED AT 31 DECEMBER 2019 (CONTINUED)

b) Trade receivables

Trade receivables are amounts due from customers for goods or services performed in the ordinary course of business. They are generally due for settlement within 30 days are therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional which is considered to be fair value; none of the Group’s trade receivables contain a financing component. The Group holds the trade receivables with the objective to collect the contractual cashflows and therefore measures them subsequently at amortised cost using the effective interest method.

The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.

To measure the expected credit losses, trade receivables have been grouped based on share credit risk characteristics and the days past due. The expected loss rates are based on existing market conditions and forward-looking estimates at the end of each reporting period.

c) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories includes expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

e) Plant & Equipment

Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation. Historical cost includes expenditure that Is directly attributable to the acquisition of the items.

Subsequent costs are included In the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the Item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets.

Depreciation

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, less its residual value.

An asset is depreciated from the date it is ready for use, meaning the date it reaches the location and condition required for it to operate in the manner intended by management.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed asset item, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets.

The estimated useful lives are as follows:

• Plant and equipment – 3 - 10 years; and

• Trucks, trailers and light vehicles – 4 - 5 years.

11 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 2: NEW ACCOUNTING POLICIES APPLIED AT 31 DECEMBER 2019 (CONTINUED)

e) Plant & Equipment (continued)

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

f) Trade and other payables

Liabilities for trade creditors and other amounts carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Interest, when charged by the lender, is recognised as an expense on an accruals basis.

g) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

h) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental costs relating the actual draw-down of the facility, are recognised as prepayments and amortised on a straight -line basis over the term of the facility.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

i) Equity and reserves

Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. The share based payment reserve records the value of share-based payments.

j) Revenue Recognition

Revenue from contracts with customers

The Group provides drilling services and hires drill rigs and related equipment to the exploration and mining industry pursuant to service contracts with a variety of clients in the sector.

The revenue associated with drilling contracts is recognised in accordance with AASB 15 Revenue From Contracts from Customers, that is in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group is expected to be entitled in exchange for those goods or services. Revenue from customer contracts is recognised upon satisfaction of a performance obligation under those contracts either over time in accordance with specified units of production (for example meters drilled or hours worked) or a point in time when risks and rewards pass to the customer under those contracts (for example the sale of certain items including consumables).

For rental of equipment, as the customer simultaneously receives and consumes the benefits, the Group has an enforceable right to payment and as such the performance obligation is satisfied over time.

12 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 2: NEW ACCOUNTING POLICIES APPLIED AT 31 DECEMBER 2019 (CONTINUED)

i) Revenue Recognition (continued)

The Group has no material contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

Contract assets and liabilities

AASB 15 uses the terms "contract asset" and "contract liability" to describe what is commonly known as "accrued revenue" and "deferred revenue." Deferred revenue arises where payment Is received prior to work being performed and is allocated to the performance obligations within the contract and recognised on satisfaction of the performance obligation.

Contract fulfilment costs

Costs generally incurred prior to the commencement of a contract may arise due to mobilisation/site setup costs as these costs are incurred to fulfil a contract. Where the costs are expected to be recovered, they are capitalised and expensed over the period of revenue recognition. Where the costs, or a portion of these costs, are reimbursed by the customer, the amount received is recognised as deferred revenue.

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.

j) Operating expenses

Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.

k) Borrowing costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred.

l) Employee Benefits

Wages, salaries and annual leave

Liabilities for wages and salaries and annual leave are recognised and measured as the amount unpaid at the reporting date at current pay rates in respect of employees' services up to that date.

Superannuation

Contributions to employee superannuation plans are charged as an expense as the contributions are paid or become payable.

Equity-settled compensation

Share-based payments to directors are measured at the fair value of the instruments issued and amortised over the vesting periods. The fair value of Performance Rights is determined using the satisfaction of certain performance criteria (Performance Milestones). The number of share options and Performance Rights expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. The fair value is determined using a Black Scholes or Hoadley simulation model.

13 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 2: NEW ACCOUNTING POLICIES APPLIED AT 31 DECEMBER 2019 (CONTINUED)

n) Share Based Payments

Share-based payments are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of options is determined using a Black-Scholes or Hoadley pricing model. The number of share options and Performance Rights expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

o) Earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to member of the parent entity, 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 year (if any).

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 additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

p) Leases

AASB 16 Leases (’AASB 16’) became mandatorily effective on 1 January 2019. Accordingly, this standard applies for the first time to this set of financial statements. AASB 16 replaces AASB 117 Leases and introduces a single lessee accounting model that requires a lessee to recognise right-of-use assets and lease liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Right-of-use assets are initially measured at cost and lease liabilities are initially measured on a present value basis.

Subsequent to initial recognition:

• (a) Right-of-use assets are accounted for on a similar basis to non-financial assets, whereby the right-of-use asset is accounted for on a cost basis unless the underlying asset is accounted for on a revaluation basis, in which case if the underlying asset is:

• i. Investment property, the lessee applies the fair value model in AASB 140 Investment Property to the rightof-use asset; or

• ii. Property, plant or equipment, the applies the revaluation model in AASB 116 Property, Plant and Equipment to all of the right-of-use assets that relate to that class of property, plant and equipment; and

• (b) Lease liabilities are accounted for on a similar basis to other financial liabilities, whereby interest expense is recognised in respect of the lease liability and the carrying amount of the lease liability is reduced to reflect the principal portion of lease payments made.

AASB 16 substantially carries forward the lessor accounting requirements of the predecessor standard, AASB 117. Accordingly, under AASB 16 a lessor continues to classify its leases as operating leases or finance leases subject to whether the lease transfers to the lessee substantially all of the risks and rewards incidental to ownership of the underlying asset, and accounts for each type of lease in a manner consistent with the current approach under AASB 117.

The adoption of AASB 16 for the half-year ending 31 December 2019 did not have any impact on the transactions and balances recognised in the Interim Consolidated Financial Statements.

14 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 2: NEW ACCOUNTING POLICIES APPLIED AT 31 DECEMBER 2019 (CONTINUED)

q) Non-Current Assets Held For Sale

Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

r) Critical Accounting Estimates and Judgements

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

Accounting for Ausdrill Transaction

For accounting purposes, the acquisitions of Ausdrill Assets and Pentium equity (Acquisitions) described in Note 3 are considered to be one transaction given the intents of all parties and the terms and conditions precedent of the respective acquisition agreements.

The Company has determined that the Acquisitions constitute a business combination in accordance with the definitions and guidance provided by AASB 3 Business Combinations and has accounted for the Acquisitions in accordance with that standard at 31 December 2019. In accordance with AASB 3 the assets and liabilities acquired have been recorded by the Group at their acquisition date fair values, resulting in a gain on bargain purchase of $6,910,466.

For further details refer to Note 3.

Share based payments

The Group initially measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant.

This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them, as well as an assessment of the probability of achieving non-market based vesting conditions.

The probability of achieving non-market based vesting conditions of performance rights is assessed at each reporting period. The Company has applied judgement in assessing the likelihood of achieving the performance milestones in relation to the 10,000,000 Performance Rights issued 28 August 2019.

The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 18.

15 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 3: ACQUISITIONS OF PENTIUM HYDRO PTY LTD AND AUSDRILL ASSETS

Summary of Acquisitions

The Company has undertaken a significant change in the nature and scale of its activities during the half year through the completion of a Transaction with Ausdrill Northwest Pty Ltd ( Ausdrill ) under which it has acquired waterwell drilling assets and associated inventory from Ausdrill ( Ausdrill Assets ) for cash payment of $16 million ( Transaction ).

On 28 August 2019 the Company issued 7,800,000 Shares to the vendors of Pentium Hydro Pty Ltd ( Pentium ) as consideration for all of the issued capital of Pentium, at which point Pentium became a controlled entity of the Company. Pentium is an Australian company incorporated on 15 January 2019 by Sheldon Burt and Chris Brophy for the purposes of seeking drilling opportunities.

On 29 August 2019 the Company completed the Transaction with Ausdrill via its wholly owned subsidiary Pentium. For accounting purposes, the acquisitions of Ausdrill Assets and Pentium equity ( Acquisitions ) are considered to be one transaction given the intents of all parties and the terms and conditions precedent of the respective acquisition agreements. The Company has determined that the Acquisitions constitute a business combination in accordance with the definitions and guidance provided by AASB 3 Business Combinations and it is the acquiree for accounting purposes.

Details of the Acquisitions are as follows:

a) Purchase Consideration Cash Ordinary shares issued (7,800,000 Shares at the Public Offer price of $0.054) Total purchase consideration b) Fair Value of Assets and Liabilities at Acquisition Date Trade and other receivables Inventory Plant and equipment (Note 13) Trade and other payables Intercompany loan payable to Vysarn Limited Deferred tax liability Total identifiable net assets at acquisition date fair value	31-Dec-19 $ 16,000,000 421,200
	16,421,200
	10,879 2,307,002 24,248,453 (1,930) (60,603) (3,166,636)
	23,337,165

The fair values of inventory and plant and equipment have been determined provisionally at 31 December 2019 as further explained at Note 3c).

The deferred tax liability relates to the difference between the fair value and cost of acquired plant and equipment. No contingent liabilities have been identified as arising from the Transaction.

• c) Gain on Bargain Purchase

Total purchase consideration Net assets acquired Gain on bargain purchase	(16,421,200) 23,337,165
	6,910,466

AASB 3 requires that the initial measurement of assets acquired and liabilities assumed must be recorded at fair value rather than allocated cost as in an asset acquisition transaction.

16 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 3: ACQUISITIONS OF PENTIUM HYDRO PTY LTD AND AUSDRILL ASSETS (CONTINUED)

c) Gain on Bargain Purchase (continued)

The Company has determined the fair value of plant & equipment and provisionally accounted for acquired inventory at 31 December 2019, the Company is working through the process of finalising the assessment of the Inventory fair values at reporting date.

The fair values of assets acquired as part of the Transaction have been determined with reference to the Market Values included within the valuation report prepared by Slattery Valuations Australia Pty Ltd ( Slattery ). The Slattery valuation report was disclosed as an Appendix in the Company’s prospectus released on 11 July 2019.

The gain on bargain purchase does not give rise to an increase in net cash and is not taxable.

d) Analysis of cash flows on acquisition

Transaction costs of the acquisition (included in cash flows from operating activities) Net cash paid (included in cash flows from investing activities)	31-Dec-19 $ (497,690) (16,000,000)
	(16,497,690)

e) Revenue and results contributions

From the date of acquisition, the Acquisitions have contributed $1,778,969 of revenue and $5,874,589 profit before tax from continuing operations of the Group. If the Acquisitions had been completed at 1 July 2019, the Acquisitions would have contributed revenue of $1,778,969 and $5,841,563 to profit before tax from continuing operations of the Group.

	31-Dec-19	31-Dec-18
NOTE 4: REVENUE FROM CONTRACTS WITH CUSTOMERS	$	$
Revenue recognised over a period of time from contracts with Australian
customers:
- Drilling services	965,128	-
- Hire revenue	635,750	-
	1,600,878	-
Revenue recognised at a point in time from contracts with Australian
customers		-
- Sale of goods (consumables)	178,091	-
	178,091	-
Total revenue	1,778,969	-
The Group has recognised the following assets and liabilities related to contracts with customers:
- Contract fulfilment costs (asset)	294,105	-
- Contract liabilities	(246,074)	-

17 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 5: OTHER INCOME Other income includes the following: - Gain on bargain purchase (Note 3) - Gain on disposal of plant and equipment - Interest income Total other income NOTE 6: EXPENSES Breakdown of expenses by nature: Material expense: - Repairs and maintenance - Bore construction materials - Other direct expense Total material expense Depreciation expense: - Plant and equipment depreciation (Note 13) Total depreciation expense Finance expense: - Interest paid Total finance expense Transaction expense: - Management fee - ASIC and ASX fees - Other professional fees - Asset relocation and inspection - Other Total transaction expense Other expense: - Insurance - Professional services and consultants - Travel - Rent and outgoings - Other Total other expense	31-Dec-19 31-Dec-18 $ $ 6,910,466 - 107,913 - 16,446 87,341
	7,034,825 87,341
	31-Dec-19 31-Dec-18 $ $ 102,668 - 258,705 - 148,597 -
	509,970 -
	1,589,501 -
	1,589,501 -
	148,707 -
	148,707 -
	150,000 - 75,537 - 65,609 - 75,118 - 65,378 -
	431,642 -
	121,422 7,772 220,866 47,523 69,081 - 63,483 - 74,733 56,892
	549,585 112,187

18 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 7: RELATED PARTY TRANSACTIONS

Key management personnel or their related party	Nature of transactions	Transaction value	Transaction value	Payable balance	Payable balance
		31-Dec-19	31-Dec-18	31-Dec-19	30-Jun-19
		$	$	$	$
Mr Sheldon Burt	Executive salary inclusive of superannuation	112,113	-	-	-
Connada Pty Ltd / Mr Sheldon Burt	Non-executive director and consulting fees	35,000	-	-	-
Mr Chris Brophy	Executive salary inclusive of superannuation	62,113	-	-	-
Insight Ecosys Pty Ltd / Mr Chris Brophy	Non-executive director and consulting fees	110,000	-	-	-
Otsana Pty Ltd trading as Otsana Capital / Mr Faldi Ismail and Mr Nicholas Young	Lead manager fee of $150,000 and capital raising fee of $420,000	570,000	-	-	-
Onyx Corporate Pty Ltd / Mr Nicholas Young, Mr Faldi Ismail and Ms Kyla Garic1	CFO, accounting and company secretarial fees	113,500	19,250	25,000	-

Details of share-based payment transactions with Key Management Personnel are disclosed in Note 18.

NOTE 8: EARNINGS/(LOSS) PER SHARE Earnings/(Loss) per share (EPS) a) Profit/(Loss) used in calculation of basic EPS and diluted EPS b) Weighted average number of ordinary shares outstanding during the year used in calculation of basic earnings/(loss) per share c) Weighted average number of ordinary shares outstanding during the year used in calculation diluted earnings/(loss) per share Basic earnings/(loss) per share (cents per share) Diluted earnings/(loss) per share (cents per share) NOTE 9: CASH AND CASH EQUIVALENTS Cash and cash equivalents Cash and cash equivalents - term deposit	31-Dec-19 31-Dec-18 $ $ 3,309,214 (24,846)
	246,494,757 136,228,616 256,740,658 136,228,616 1.34 (0.02) 1.29 (0.02) 31-Dec-19 30-Jun-19 $ $ 2,991,577 6,983,931 1,333,333 -
	4,324,910 6,983,931

1 Ms Kyla Garic, through Onyx Corporate Pty Ltd, at 31 December 2019, provided the Group with CFO, accounting and company secretarial services. Mr Ismail and Mr Young are shareholders of Onyx Corporate and Mr Young is a director.

19 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 10: TRADE AND OTHER RECEIVABLES Trade receivables Loss allowance Other receivables	31-Dec-19 30-Jun-19 $ $ 1,079,428 - - - 259,761 36,206
	1,339,189 36,206

For further Information regarding trade and other receivables see Note 2 (b), recoverability Is based on the underlying terms of the contract.

NOTE 11: INVENTORY Inventory at cost - current	31-Dec-19 30-Jun-19 $ $ 2,257,325 -
	2,257,325 -

As disclosed at Note 3, the Group acquired a significant amount of inventory through the Ausdrill transaction.

NOTE 12: ASSETS CLASSIFIED AS HELD FOR SALE Non-current assets held for sale Plant and equipment at cost	31-Dec-19 30-Jun-19 $ $ 152,728 -
	152,728 -

The Company has identified several items of plant and equipment for disposal. These items have been listed for sale with an equipment broker, with sales expected to complete in 2020.

NOTE 13: PLANT AND EQUIPMENT Cost Accumulated depreciation Net carrying amount Balance at 1 July 2019 Acquired from Ausdrill (Note 3) Additions Transferred to assets held for sale (Note 12) Disposals Depreciation expense (Note 6) Balance at 31 December 2019	31-Dec-19 30-Jun-19 $ $ 24,045,187 - (1,589,501) - 22,455,686 - Plant and equipment Trucks, trailers and light vehicles Total $ $ $	31-Dec-19 30-Jun-19 $ $ 24,045,187 - (1,589,501) -
		22,455,686 -
	- - - 15,939,361 8,309,092 24,248,453 365,864 85,415 451,279 - (152,728) (152,728) (501,817) - (501,817) (1,037,480) (552,021) (1,589,501)
	14,765,928 7,689,758 22,455,686

20 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 14: TRADE AND OTHER PAYABLES Trade payables Other payables and accrued expenses NOTE 15: BORROWINGS CURRENT Short-term bank loans Current maturities of long-term bank loan NON-CURRENT Long-term bank loan, net of current maturities		31-Dec-19 30-Jun-19 $ $ 820,320 68,824 452,239 41,668
		1,272,559 110,492
		31-Dec-19 30-Jun-19 $ $ 186,473 - 1,031,392 - 1,217,866 - 6,964,669 - 6,964,669 -

The Group has a long-term bank loan with a major bank which bears interest at 4.41% per annum. The loan is secured by items of plant and equipment; the Group has also provided a general security agreement to the bank in respect of the Group's existing and future assets. The loan is repayable in monthly instalments until its expiry in July 2023.

NOTE 16: ISSUED CAPITAL Ref (a) Share Capital 297,658,246 (30 June 2019: 136,228,616) fully paid ordinary shares 16b	31-Dec-19 30-Jun-19 $ $
	38,170,294 29,912,298

(b) Movement in Ordinary Capital

Date Opening balance at 1 July 2019 - Shares issued under the Public Offer 28-Aug-19 Shares issued under the Directors Past Services Offer to directors as remuneration for past services (Note 18) 28-Aug-19 Shares issued under the Pentium Offer to Pentium vendors as consideration for the Company's acquisition of the entire issued capital of Pentium (Note 18) 28-Aug-19 Costs of capital raising Closing balance at 31 December 2019

No. Unit Price $ Total $ 136,228,616 29,912,298 129,629,630 $0.054 7,000,000 24,000,000 $0.054 1,296,000 7,800,000 $0.054 421,200 (459,204)

297,658,246 38,170,294

21 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 17: RESERVES Ref a) Share Based Payment Reserve 10,000,000 Options (30 June 2019: Nil) and 5,000,000 Performance Rights (30 June 2019: Nil) on issue 17b b) Movement in Share Based Payment Reserve Opening balance at 1 July 2019 Options issued under the Chairman Options Offer (Note 18) Performance Rights issued as performance incentives to Executive Directors (Note 18) Closing balance at 31 December 2019	31-Dec-19 30-Jun-19 $ $ 241,000 -
	241,000 -
	No. $ - - 10,000,000 241,000 5,000,000 -
	15,000,000 241,000

NOTE 18: SHARE BASED PAYMENTS

During the half year ended 31 December 2019 the Company recorded the following share-based payments:

Remuneration of Directors for Past Services (Related Party)

The issue of 24,000,000 Shares to directors as remuneration for past services under the Directors Past Services Offer to directors. The Shares were valued based on the Public Offer Price of $0.054.

Mr Peter Hutchinson (or nominee) received 15,500,000 shares equivalent to a fee of $837,000 under the Director Past Services offer. Mr Nicholas Young (or nominee) received 4,250,000 shares equivalent to a fee of $229,500 under the Director Past Services offer. Mr Faldi Ismail (or nominee) received 4,250,000 shares equivalent to a fee of $229,500 under the Director Past Services offer.

Pentium Offer (Related Party)

The issue of 7,800,000 Shares to Pentium vendors as consideration for the Company's acquisition of the entire issued capital of Pentium under the Pentium Offer. The Shares were valued based on the Public Offer Price of $0.054. A total of 7,800,000 shares were issued to related party vendors of Vysarn Limited as noted below.

Connada Pty Ltd an entity controlled by Executive Director Mr Sheldon Burt received 3,900,000 shares under the Pentium offer equivalent to consideration of $157,950. Insight Ecosys Pty Ltd an entity controlled by Non-Executive Director Mr Chris Brophy received 3,900,000 shares under the Pentium offer equivalent to consideration of $157,950.

Chairman Option Offer (Related Party)

The issue of 10,000,000 Options exercisable at $0.054 on or before 28 August 2024 as performance incentives under the Chairman Options Offer.

The options were issued to Chairman Mr Peter Hutchinson in lieu of cash fees for the first 6 months following completion of the Acquisitions.

The Options have been valued using a Hoadley option pricing model, refer inputs below.

Fair Value

The Hoadley option pricing model was used to determine the fair value of the unlisted options issued. The Hoadley inputs and valuation were as follows:

22 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 18: SHARE BASED PAYMENTS (CONTINUED)

Options	Chairman Options
Number of options	10,000,000
Grant date	5-Jul-19
Share price at grant date	$0.033
Issue date	28-Aug-19
Exercise price	$0.054
Expected volatility	100%
Implied option life	5 years
Expected dividend yield	-
Risk free rate	1.50%
Valuation per option $	$0.0241
Total valuation $	$241,000

Executive Performance Rights (Related Party)

The issue of 10,000,000[1] Executive Performance Rights in three tranches as performance incentives for Executive Directors. Based on the Public Offer Price of $0.054 the Performance Rights have a total valuation of $540,000, assuming satisfaction of Performance Conditions in full and 100% vesting rate. Vesting of the Performance Rights is subject to achievement of vesting conditions as follows:

Tranche	Number of Performance Rights Issued1	Condition Test Date	Vesting Condition
1	3,333,333	30 June 2022	• Employment Condition • Cumulative EPS Condition
2	3,333,333	30 June 2023
3	3,333,334	30 June 2024

Where the:

• Employment condition – means the holder of the Rights remains employed by the Company at the Condition Test Date; and

• Cumulative EPS Condition – means the Earnings per Share (EPS) based on the achievement of compound annual growth in the Company’s EPS of 15% per annum from the financial year 30 June 2020, subject to a minimum EPS of $0.01 for the financial year ending 30 June 2020. The EPS calculation will be based on the Company’s cumulative net profit after tax up until the relevant Condition Test Date divided by the weighted average number of Shares on issue over the relevant period, taking into account any new Shares issued (or cancelled by the Company in the relevant period).

On the 28 October 2019 Mr Chris Brophy transitioned from Executive Director to Non-Executive Director, the 5,000,000 Executive Performance Rights issued to Mr Brophy where cancelled as the Employment Condition as an Executive was no longer met.

1 At transaction completion date.

23 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 18: SHARE BASED PAYMENTS (CONTINUED)

At 31 December 2019 the Company has assessed the likelihood of the achievement of the Vesting Conditions in respect of Tranches 1 – 3 of the 5M Performance Rights and determined that the achievement of the Vesting Conditions is uncertain, with nil attributable to the Performance Rights recorded as a share based payment expense at 31 December 2019 representing the Company’s best estimate of the Performance Rights that will eventually vest. Based on the Public Offer Price of $0.045 the Performance Rights have a total valuation of $270,000, assuming satisfaction of Performance Conditions in full and 100% vesting rate.

Share Based Payments Expense

Share based payment expense is comprised as follows:

24,000,000 Shares issued to directors as remuneration for past services 10,000,000 Options as performance incentives Payroll Tax expense on directors renumeration for past services Total share-based payments expense	31-Dec-19 31-Dec-18 $ $ 1,296,000 - 241,000 - 85,772
	1,622,772 -

NOTE 19: OPERATING SEGMENTS

Segment Information

Identification of reportable segments

The Group 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. The Group’s sole operating segment is consistent with the presentation of these consolidated financial statements.

NOTE 20: CONTROLLED ENTITY

The ultimate legal parent entity of the Group is Vysarn Limited, incorporated and domiciled in Australia. The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policies described in Note 2.

Controlled entity	Country of Incorporation	Percentage Owned
		31-Dec-19	30-Jun-19
Pentium Hydro Pty Ltd	Australia	100%	-

The entire issued capital of Pentium Hydro Pty Ltd was acquired by the Company on 28 August 2019 (refer Note 3 for details).

NOTE 21: COMMITMENTS

As disclosed at Note 23, the Group entered into a premises lease in January 2020. This will be accounted for under AASB 16 Leases and result in a right of use asset and a corresponding lease liability for the expected term of the lease at the incremental borrowing rate of the Group.

The Group has no other known commitments at 31 December 2019 and between 31 December 2019 and the date of this report.

24 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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NOTE 22: CONTINGENT LIABILITIES

The Group has no known contingent liabilities as at 31 December 2019 or at the date of this report.

NOTE 23: EVENTS SUBSEQUENT TO REPORTING DATE

The Group's operational progress continued subsequent to balance date through the receipt of a purchase order from Roy Hill Iron Ore Pty Ltd to supply a second rig under the General Works Contract in January 2020. Rig mobilisation occurred in February 2020. The estimated first phase value of the purchase order is approximately $1.3m and based on the current scope is expected to be complete within three to four months of mobilisation.

The Group was awarded a Goods and Services Contract with Iluka Resources Limited in January 2020. The estimated value of the contract Is $1,875,000 and based on the current scope Is expected to be completed before the end of FY2020. Rig mobilisation occurred in February 2020.

The Group's premises lease commenced 6 January 2020 for an initial term of two years with a two-year extension option. Annual premises rental Is $213,750 plus GST. This will be accounted for under AASB 16 Leases and result in a right of use asset and a corresponding lease liability for the expected term of the lease at the incremental borrowing rate of the Group.

In February 2020, the Group welcomed James Clement to the Board of Directors as Managing Director and CEO. On 3 February 2020 Mr Clement was issued 5,000,000 Performance Rights expiring 3 February 2025 and 10,000,000 Unlisted Incentive Options exercisable at $0.075 on or before 3 February 2023, The equity Issued as performance incentives was approved at a meeting of the Company's shareholders held on 30 January 2020 and forms part of remuneration package.

There were no other significant events after reporting date.

25 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

DIRECTORS’ DECLARATION FOR THE HALF YEAR ENDED 31 DECEMBER 2019

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In the opinion of the Directors of Vysarn Limited:

1. The financial statements and notes, as set out on pages 5-25 are in accordance with the Corporations Act 2001, including:

2. (i) giving a true and fair view of the Group’s financial position as at 31 December 2019 and its performance for the half-year ended on that date; and

3. (ii) (ii) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting.

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

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

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James Clement

Managing Director

Dated 28 February 2020

26 I Vysarn Limited ABN 41 124 212 175 – Interim Financial Report 31 December 2019

VYSARN LIMITED ABN 41 124 212 175

INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF VYSARN LIMITED

We have reviewed the accompanying half-year financial report of Vysarn Limited (the “Company”) and its controlled entity Pentium Hydro Pty Ltd (the “Group”) , which comprises the condensed statement of financial position as at 31 December 2019, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ Responsibility for the Half-Year Financial Report

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

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 December 2019 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of the Company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

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

Independence

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

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Company’s financial position as at 31 December 2019 and of its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

PITCHER PARTNERS BA&A PTY LTD

PAUL MULLIGAN Executive Director Perth, 28 February 2020

Pitcher Partners BA&A Pty Ltd

Adelaide Brisbane Melbourne Newcastle Perth Sydney

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.

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