U.S. investors may have difficulty enforcing civil liabilities against our Company, our directors or members of senior management and the experts named in this Annual Report.
Most of our directors and the experts named in this Annual Report are non-residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible to serve process on such persons or us in the United States or to enforce judgmentsjudgements obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States. There may be doubt as to whether the courts of England and Wales would accept jurisdiction over and enforce certain civil liabilities under U.S. securities laws in original actions or enforce judgmentsjudgements of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the United States or elsewhere are likely to be unenforceable in England and Wales (an award for monetary damages under the U.S. securities laws may be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and appears to be intended to punish the defendant). The enforceability of any judgmentjudgement in England and Wales will depend on a number of criteria, including public policy, as well as the laws and treaties in effect at the time. The United States and the United KingdomU.K. do not currently have any treaties providing for recognition and enforcement of judgmentsjudgements (other than arbitration awards) in civil and commercial matters.
U.S. holders of our shares could be subject to material adverse tax consequences if we are considered a “passive foreign investment company” forChanges in U.S. federal income tax purposes.policy, including in relation to investment tax credits, may affect the appetite of investors for renewable project investments that are eligible for such credits and could therefore have a negative impact on the economic viability of our U.S. solar development projects.
Among other factors, the economic viability of our solar development projects in the United States may depend upon U.S. federal income tax rates as well as the investment tax credit regime under Section 48 of the Internal Revenue Code (the “Code”). The federal income tax reform enacted under the Tax Cuts and Jobs Act of 2017 included a substantial reduction to the federal income corporate tax rate which reduced the economic value of federal investment tax credits. However, the Inflation Reduction Act of 2022 lifted ITCs to 30% and extended them for projects beginning construction before January 1, 2025, with solar projects also being able to take the Production Tax Credit in lieu of ITCs. Any future changes in taxation policy, including in relation to investment tax credits may have a negative impact on the economic viability of our U.S. solar development projects, all other things being equal.
From time to time, we may become involved in costly and time-consuming litigation and other regulatory proceedings which require significant attention from our management.
In addition to potential litigation related to defending our intellectual property rights, we may be named as a defendant from time to time in other lawsuits and regulatory actions relating to our business, some of which may claim significant damages.
For example, as discussed further in “Item 8. Financial Information – A. Consolidated Statements and Other Financial Information - Legal Proceedings,” on February 26, 2018, the Company’s former Chief Executive Officer, Phillip Comberg, filed a legal claim alleging the Company committed a repudiatory breach of his service agreement in connection with the termination of his employment on October 4, 2017. On April 9, 2018, the Company filed a defense and counterclaim, denying that a repudiatory breach was committed by the Company and denying the other claims asserted by Mr. Comberg, claiming that Mr. Comberg was terminated for cause. On November 26, 2018, the Company agreed to a settlement of the counterclaims against Mr. Comberg for an undisclosed amount. After aborted attempts at settlement, the matter was heard in the U.K. High Court, with judgement ruled in September 2020. The Company was successful in defending the majority of the claims, with a total of £0.62 million ($0.90 million) of the claims being settled in favor of Mr. Comberg. However final costs and interest awarded to him were $1.76 million. Of the remaining provision as at June 30, 2021 of $0.5 million for unpaid costs, $0.4 million was spent in the year ended June 30, 2022, resulting in a $0.1 million release of the remaining unutilized provision.
On May 31, 2022 the William Q. Richards Estate (the “Plaintiff” or the “Estate”) filed a complaint against VivoPower USA LLC, Caret, LLC (“Caret”), formerly Innovative Solar Ventures I, LLC (“ISV”), and related entities (the "VivoPower Defendants") alleging the VivoPower Defendants improperly included land owned by the Estate in the reinvestment zone of the tax abatement agreements executed on March 14, 2022 between Cottle County, Texas and the Company’s subsidiaries Innovative Solar 144, LLC and Innovative Solar 145, LLC. The complaint sought to nullify and/or declare the tax abatement agreements void. The Estate filed an amended complaint on August 18, 2022, further detailing their claims and requesting unspecified damages. On September 16, 2022, the VivoPower Defendants filed a motion to dismiss Plaintiff’s Amended Complaint, which the Court subsequently granted on January 23, 2023, stating that the Plaintiff had failed “to establish that the amount in controversy had been met.” On February 20, 2023, the Estate filed a second amended complaint to argue that the amount in controversy was met. Regina, widow of the late William Q. Richards, was added as a plaintiff in the second amended complaint. On March 6, 2023, the VivoPower Defendants filed a new motions to dismiss the Plaintiffs’ second amended complaint. On May 5, 2023, the Plaintiffs filed an instant opposition to the VivoPower Defendants’ motions to dismiss. On May 19, 2023, the VivoPower Defendants submitted a reply supporting their motion to dismiss requesting the dismissal of the Plaintiffs' claim. The Company does not expect the Plaintiff to be successful in its complaint. Accordingly no provision has been recorded as at June 30, 2023 in relation to this matter.
In addition to the foregoing litigation, we may be subject in the future to, or may file ourselves, claims, lawsuits or arbitration proceedings related to matters in tort or under contracts, employment matters, securities class action lawsuits, whistleblower matters, tax authority examinations or other lawsuits, regulatory actions or government inquiries and investigations. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business and financial condition, results of operations or cash flows or limit our ability to engage in certain of our business activities. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are often expensive, lengthy, disruptive to normal business operations and require significant attention from our management.
We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act (“FCPA”) and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.
Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010, or the Bribery Act, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, and other anti-corruption laws that apply in countries where we do business. The Bribery Act, the FCPA and these other laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage.
Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense. We, and those acting on our behalf, operate in a number of jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the Bribery Act, FCPA or local anticorruption laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. Furthermore, compliance with the Bribery Act, the FCPA and these other laws is expensive and difficult, particularly in countries in which corruption is a recognized problem.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United States and the U.K., and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as Trade Control laws.
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by United States, U.K. or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition. Further, the failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting.
Any such violation, even if prohibited by our policies, could subject us and such persons to criminal and/or civil penalties or other sanctions, which could have a material adverse effect on our reputation and results of operations.
Risks related to attracting and retaining talent
Our future success depends on our ability to retain our chief executive officer and other key executives.
We are highly dependent on Kevin Chin, our Chairman and Chief Executive Officer, and other principal members of our management team. Although we have formal employment agreements with each of our executive officers, these agreements do not believeprevent our executives from terminating their employment with us. We do not maintain “key person” insurance on any of our executive officers. The unplanned loss of the services of any of these persons could materially impact our business and results of operations.
The success of our Company is heavily dependent on the continuing services of key personnel as well as the recruitment and retention of additional personnel.
Our industry is characterized by intense competition for personnel, particularly technically skilled personnel. The success of our Company is highly dependent on the contributions of executives and other key personnel, and if we were to lose the contributions of any such personnel, it could have a negative impact on our business and results of operations.
Moreover, our growth plan will require us to hire additional personnel in the future. If we are not able to attract and retain such personnel, our ability to realize our growth objectives will be compromised. For Tembo in particular, given its potential growth trajectory, there is a need to hire a significant number of additional personnel including embedded engineers, software engineers, mechanical engineers and electrical engineers. Tembo’s current location in the Netherlands may not have a sufficiently deep pool of talent in this regard and/or Tembo may face competition for talent from other companies in the region. There can be no assurance that we are a passive foreign investment company,will be able to successfully recruit the employees we need to achieve our business objectives.
In addition, talented employees may choose to leave the Company because of competing companies offering better remuneration packages. When talented employees leave, we may have difficulty replacing them and our business may suffer. While we do not expectstrive to become a passive foreign investment company. However,maintain our statuscompetitiveness in any taxable year will depend on our assets, income and activities in each year, and because this is a factual determination made annually after the end of each taxable year,marketplace, there can be no assurance that we will not be considered a passive foreign investment company forable to successfully retain the current taxable yearemployees that we need to achieve our business objectives.
The loss of one or any future taxable years. If we were a passive foreign investment company for any taxable year while a taxable U.S. holder held our shares, such U.S. holder would generally be taxed at ordinary income rates on any salemore of our shareskey management or operating personnel, or the failure to attract and retain additional key personnel, could have a material adverse impact on any dividends treated as “excess distributions”. An interest charge also generally would apply based on any taxation deferred during such U.S. holder's holding period in the shares. See “Item 10.E. Taxation - Certain Material U.S. Federal Income Tax Considerations.”our business, results of operations, financial condition and prospects.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
VivoPower International PLC was incorporated on February 1, 2016, under the laws of the England and Wales, with company number 09978410, as a public company limited by shares. At the time, it had subsidiariesVivoPower recertified as a B Corporation in 2022 and was recognized in the United KingdomBest For The World program as being in the top 5% amongst B Corporations for Governance.
On November 5, 2020, the Company completed the acquisition of 51% of Tembo e-LV B. V. and its subsidiaries: Tembo 4x4 B.V. and FD 4x4 Centre B.V. (“U.K.”Tembo”) for a total consideration of €4.0 million. On February 2, 2021, the Company acquired the remaining 49% of Tembo e-LV for €1.8 million cash consideration and the United States€0.2m of America (“U.S.”) and was, itself, a wholly-owned subsidiary of Arowana International Limited (“AWN”), an Australian public company traded on the Australian Securities Exchange under the symbol “AWN”.Ordinary Shares. The primary business activity of VivoPowerTembo is to investassembly of ruggedized electric vehicles and related products, suitable for use in the origination, construction, transfer, operationoff-road and optimizationruggedized environments, including mining, infrastructure, utilities, government services, humanitarian, tourism and agriculture sectors. Tembo’s capabilities are a key element of solar electricity generation facilities globally.VivoPower’s sustainable energy solutions strategy and offering.
On August 11, 2016, VivoPower entered into a Contribution Agreement with Arowana Inc., a Cayman Islands exempted company (“ARWA”June 30, 2021, the Company acquired the remaining 50% interest in its joint venture, Caret, from the other joint venture partner, Innovative Solar Systems, LLC ("ISS"), and AWN (as amended,for $1. The primary business activity of Caret is the “Contribution Agreement”).development of utility scale solar farms in the U.S.
On December 28, 2016, we completed the transactions contemplated by the Contribution Agreement (the “Business Combination”), pursuant to which ARWA contributed cash toJuly 1, 2022 the Company in exchange for newly issued ordinary shares which shares were then distributed by ARWA to ARWA’s shareholders and warrantholders. Upon the closingdisposed of the Business Combination, we becamebusiness and assets of J.A. Martin except its solar division and the business and assets of Non-Destructive Testing Services in a public company whose shares are listed on The Nasdaq Capital Market under the symbol “VVPR”.
Contemporaneously with the Business Combination, the Company completed the acquisitions of VivoPowersale to ARA Electrical Engineering Services Pty Limited (“VivoPower Australia”) and Aevitas O Holdings Pty Ltd., the parent of Aevitas Group Limited (“Aevitas”), for a total cash consideration of $10.1 million.We acquired VivoPower Australia(ARA) for an aggregate considerationupfront cash payment of $23.1$3.4 million with $0.6less working capital adjustment of $0.8 million, sale costs of cash$0.3 million and throughan earn-out payment payable 12 months after disposal of 4.5x FY2023 EBITDA minus the issuing of shares in VivoPower International PLC. Aevitas was acquired forupfront payment, estimated on a cash consideration of $9.5discounted basis at $4.2 million.
VivoPower Australia was established on August 8, 2014 as a proprietary limited company in Australia. VivoPower Australia is a next generation renewable energy company investing in the origination, financing, building, transfer, operation, maintenance and optimization of solar electricity generation facilities in Australia and Asia. Its initial majority shareholder was Hadouken Pty Limited (an entity associated with VivoPower Australia management), with AWN subsequently acquiring an initial interest in VivoPower Australia on or around August 29, 2014 through its shareholding in the Arowana Australasian Special Situations Fund 1. Other shareholders included Aevitas, VivoPower Australia management as well as Arowana. Energy Holdings Pty Ltd, a wholly owned subsidiary of AWN. Following the Business Combination, 80.1% of VivoPower Australia’s ordinary shares are held by VivoPower International Services Ltd and 19.9% are held by Aevitas.
Aevitas O Holdings Pty Ltd was established on June 1, 2016 and is an Australian proprietary limited company. It held options to acquire 99.9% of the shares in Aevitas, an Australian unlisted public company established on February 28, 2013. Aevitas provides energy and power generation solutions including design, supply, installation and maintenance of power systems, control systems, with an increasing focus on solar and renewable energy, and energy efficiency products and strategies.
VivoPower has 2422 subsidiaries including VivoPower Australia and Aevitas.associated entities. See “Item 5.B. Liquidity and Capital Resources – Investing Activities”4.C. Organizational Structure” for a list of each subsidiaryentity and its address.jurisdiction of incorporation.
Corporate and Other Information
Our registered office is located at 91 WimpoleThe Scalpel, 18th Floor, 52 Lime Street, Marylebone, London W1G 0EF,EC3M 7AF, United Kingdom. Our telephone number is +44-203-871-2800.+44-203-667-5158 and our internet address is https://www.vivopower.com. Our website and the information contained on or accessible through our website are not part of this Annual Report. Our agent for service of process in the U.S. is CSC Global / The Law Debenture Trust. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).
VivoPower operates ais an award-winning global sustainable energy solutions B Corporation company focused on electric solutions for customised and ruggedised fleet applications, battery and microgrids, solar power platform. To capitalize on opportunities in the solar energy sector, we have developed a strategy that we call “build, transfer, operate” (“BTO”). We believe that our BTO strategy is a low risk, asset light approach to the renewable energy market, with a high return, capital efficient profile. The BTO strategy allows us to reinvest our profits and grow a base of recurring revenues, while providing data driven energy services to ourcritical power clients in the commercial, industrial and government sectors.
Pursuant to our BTO strategy, VivoPower (i) builds solar power plants that generate electricity from PV solar module installations for consumption by utilities or commercial offtakers of such electricity, which are supported by long-term PPAs with creditworthy customers; (ii) transfers ownership of such projects to investors (importantly, securing equity capital from investors prior to building the projects); and (iii) operates the projects to enhance their value over their useful life.
We believe that the opportunity for our BTO strategy is driven by a supply/demand imbalance in the solar development space. On the project supply side, we believe that the development market for utility scale solar projects is highly fragmented with a significant share of the market dominated by smaller, local developers or “wildcatters” that have significant local or regional capabilities but often lack the capabilities to design, structure and execute solar projects that would appeal to institutional investors. Even the most successful developers can fail to complete projects due to problems with limited relationships with global engineering and equipment suppliers and providers of finance. This is the market from which we identify projects to acquire and build at a significantly lower cost than buying projects that are already operating. We target the acquisition of projects at a very specific stage: after they have been developed, but before they are built, thus exposing us to what we believe is significantly less risk than a fully operational project. Our engineering team has the ability to create value by building projects efficiently and profitably by controlling design, engineering and procurement to ensure that projects are not only built on time and on budget, but are also able to generate superior returns.
We believe that there is a large and steadily growing appetite from institutional investors globally for quality solar operating projects. These investors often lack the resources to effectively screen the vast array of projects to find the most rewarding ones themselves, let alone build and operate the projects on their own. Based on our relationships and expertise, we believe we have the credibility to secure capital commitments prior to building and then to transfer projects to these investors once built. This approach allows us to lock in our BTO profit before we risk capital, as well as to generate stable recurring revenues from long term asset management agreements and residual equity interests in the projects.
After the construction of the projects and their transfer to an institutional investor near the time the projects attain commercial operation, VivoPower provides ongoing services encompassing operations, maintenance and optimization of these solar plants pursuant to long term contracts. In addition to realizing revenues from the sale of electricity (pursuant to retained equity investments by VivoPower’s subsidiaries in the projects), these contracts create a long term, stable revenue opportunity from the consumers of the electric power produced from the projects that we operate. In addition, VivoPower identifies opportunities to create further value through an asset management approach that leverages technology and dataservices. The Company’s core purpose is to improve project performanceprovide its customers with turnkey decarbonisation solutions that enable them to move toward net-zero carbon status. VivoPower has operations and returns. We also use operational information to improvepersonnel in Australia, Canada, the profitability of our projects and to take advantage of technological improvements to create additional revenues.
DuringNetherlands, the year ended March 31, 2017, we completed BTO transactions for 91 megawatts of solar projects and delivered Adjusted EBITDA of $18.9 million, which exceeded our previously upgraded forecast of $18.8 million as well as our initial forecast of $18.0 million. We believe that we have a strong forward growth outlook, and expect to increase our EBITDA next year. This outlook is supported by two strategic initiatives: a joint venture for over 1.8 gigawatts inUnited Kingdom, the United States, the Philippines, and an alliance agreement with ReNu Energy Ltd. (“ReNu Energy”) in Australia.the United Arab Emirates.
Our joint venture with Innovative Solar in the United States is at the core ofManagement analyzes our business model, as it representsin five reportable segments: Critical Power Services, Electric Vehicles, Sustainable Energy Solutions, Solar Development and Corporate Office. Critical Power Services is represented by VivoPower’s wholly owned-subsidiary Aevitas. In turn, Aevitas wholly owns Kenshaw Electrical Pty Limited (“Kenshaw”) and Kenshaw Solar Pty Ltd (previously J.A. Martin) (“Aevitas Solar”), both of which operate in Australia with a long term partnership with an established developer of utility-scale solar projects, under which we have secured exclusive rights to acquire and build a diversified portfolio of 37 utility-scale solar projects in 12 states, with projected generating capacity of over 1.8 gigawatts. We have a demonstrated track record withfocus on the developer, who was the original developer for the 91 megawatts that we completed last year. We have complementary skill sets and believe that we are mutually aligned to ensure the successful execution of the joint venture.
In addition to our global BTO model, VivoPower, through its wholly-owned Australian subsidiary, Aevitas, provides energy and power generation solutions including design, supply, installation and maintenance of critical power, control and distribution systems, including for solar farms. Electric Vehicles is represented by Tembo e-LV B.V. (“Tembo Netherlands”) and Tembo EV Australia Pty Ltd (“Tembo Australia”), (in combination “Tembo”) a specialist battery-electric and off-road vehicle company delivering electric vehicles (“EV”) for mining and other industrial customers globally. Sustainable Energy Solutions (“SES”) is the design, evaluation, sale and implementation of renewable energy infrastructure to customers, both on a standalone basis and in support of Tembo EVs. Solar Development is represented by Caret and comprises seven active utility-scale solar projects under development in the United States. Corporate Office is the Company’s corporate functions, including costs to maintain the Nasdaq public company listing, comply with applicable SEC reporting requirements, and related investor relations and is located in the U.K. See Note 4.2 to our consolidated financial statements included herein for a breakdown of our financial results by reportable segment.
Critical Power Services
VivoPower, by way of a holding entity known as Aevitas, which was established in 2013 and subsequently acquired in December 2016, wholly owns two Australian subsidiaries: Kenshaw and Aevitas Solar. Aevitas is a key player in the manufacture, distribution, installation and servicing of essential energy infrastructure solutions. Its portfolio spans the design, procurement, installation, and upkeep of power and control systems, with an increasing focus onincluding those catering to utility and industrial scale solar renewable energy, and energy efficiency. Aevitas hasfarms.
Aevitas’ reputation as reliable power consultants enables it to serve a large and diverse customer baserange of clients, spanning governmental, commercial, and industrial customers,sectors. From their headquarters located in Newcastle, within New South Wales' Hunter Valley region, these businesses extend their operations across Australia's Eastern seaboard with additional locations in Canberra and Sydney. Owing to their strategic positioning, they are well-equipped to capitalize on the robust growth from public and private sector investments within the infrastructure, renewable energy, mining, and data center industries.
The Hunter Valley region is consideredAustralia's foremost regional economy, larger than Tasmania, the Northern Territory, and the Australian Capital Territory. With an estimated 322,000 jobs and a trusted power adviser. Aevitas is locatedGDP valued at $28 billion, the region has a diverse economic landscape and skilled workforce. Traditional strengths in mining and advanced manufacturing, are being supplemented by rapidly expanding sectors such as defense, food and agribusiness, and renewables.
The region holds a favorable position to reap the benefits from overarching trends influencing the Australian economy. Factors such as an aging population and increased integration into the global economy present significant opportunities for economic advancement and growth in the Hunter ValleyValley.
The Critical Power Services businesses have several core competencies, encompassing a range of electrical and Newcastle region, whichmechanical services. In addition, the businesses are responsible for delivering electrical services and infrastructure to support VivoPower’s EV and SES offerings, including on-site renewable generation, batteries and microgrids, EV charging stations, and emergency backup power solutions.
Kenshaw Electrical Pty Limited
Established in 1981, Kenshaw is the most densely populated industrial belt in Australia, and which has amongst the most expensive power pricesa specialist in the country. Since acquiring Aevitasprovision of essential electrical and mechanical power services, with its headquarters situated in December 2016, VivoPower has introduced an origination strategy to identify attractive solar projectsNewcastle, within Aevitas’ existing customer base.Australia's Hunter Valley region.
ToKenshaw operates out of three locations across New South Wales and the Australian Capital Territory, with its head office in Newcastle and additional branches in Canberra and Sydney. The business’s longstanding history of quality is attributed to its highly skilled personnel, whose abilities span a comprehensive array of critical power generation solutions, products, and services. Their expertise covers the entire life cycle of electric motors, power generators, and mechanical equipment.
Kenshaw holds ISO9001 (Quality Management), ISO45001 (Occupational Health and Safety) and the newly acquired AS/NZS3800 (Electrical equipment for explosive atmospheres) certification as evidence of its commitment to quality and safety. With a proactive and responsive approach, the business delivers programmed and as-needed services to a dedicated clientele that exceeds 500 in number. This diverse client base spans local, national, and multinational entities, incorporating sectors from data centers and health infrastructure to mine operators and agriculture. Furthermore, it serves aged care facilities, transport providers, and utility services. Offering both contract-based and ad-hoc services, Kenshaw has built a strong reputation for reliable and timely service among its wide-ranging clientele.
Kenshaw’s core competencies include: generator design, turn-key sales and installation; generator servicing and emergency breakdown services; customized motor modifications; wheel cartridge motor electric repair and refurbishment; and industrial electrical services.
The data center sector remains an important market for Kenshaw. Propelled by the ongoing trend of digital transformation, the rise and persistence of remote work, online education, and virtual entertainment amid and subsequent to the COVID-19 pandemic, demand for Kenshaw's services has seen significant growth. This surge is further support our BTO strategyamplified by the burgeoning influence, processing and storage needs of artificial intelligence.
VivoPower believes Kenshaw will continue to benefit from the growth in Australia, VivoPower entered into an alliance agreementthe data center market through its long-term relationship with ReNu Energy (ASX: RNE) of Australia, pursuant to which ReNu Energy will have a right of first offer to acquire solar projects originated by VivoPower in Australia below 5MW in size (the “Alliance Agreement”). Under the termsdata center and facility management service providers. While Kenshaw has traditionally been focused on new data center builds, this stage of the agreement, ReNu Energy will pay an annual alliance feemarket is increasingly being dominated by original equipment manufacturers (OEMs) such as Cummins and Penske, increasing competition and making margins unattractive. As a consequence, Kenshaw has pivoted to focus more heavily on data center maintenance services, both ad-hoc and scheduled. The nature of this revenue is of a higher quality given it is at a higher margin, more predictable and in some cases, multiyear contracted.
The growing base of both Kenshaw and third party completed installation projects provides a fertile environment for the initial five year termbusiness to provide the ongoing monitoring and maintenance of the agreement calculated based on the numberthese critical Uninterruptible Power Supply ("UPS") assets, through its Generator Service division. The Canberra and Sydney branches, form an integral part of projects acquired from VivoPower, which may be extendedthis offering by VivoPowerallowing for locally stored equipment and locally available personnel with an additional five years. For each project acquired, ReNu Energy will also pay an up-front origination feeaim for Kenshaw to VivoPower, and will enter into a long-term agreement under which VivoPower will provide asset management services. The Alliance Agreement with ReNu Energy significantly strengthens our strategic acquisition of Aevitas. The historical revenue profile of Aevitas has been steady, representing energy services for over 300 commercial and industrial customers in Australia. Our goal with Aevitas is to maintain and grow their core business, and also to leverage their customer base to generate new solar projects. The agreement with ReNu Energy provides a commitment from an investor to whom we can transfer projects that we build. We believe this relationship will provide a highly efficient means to create BTO revenues for smaller projects originated in Australia with the Aevitas client base.
Industry Background
Solar power is the world’s largest potential energy source and is the fastest-growing form of renewable energy. Between 2003 and 2016, cumulative installed solar capacity increasedbecome entrenched at an average annual growth rate of 44%, according to the International Energy Agency (“IEA”). Yet, solar energy’s contribution to global energy generation remains insignificant, contributing less than 2% globally, even as panel costs have dropped more than 90% over the same time period, according to Bloomberg New Energy Finance (“BNEF”).
As a result, we believe this is a pivotal moment in the acceleration of energy industry change. Commercial and industrial customers worldwide have recognized the economic and strategic benefits of shifting their source of electricity to low carbon distributed generation. Appetite for renewable energy among corporations is increasing quickly, as demonstrated by the organization RE100. RE100 is a collection of 101 major corporations, including at least 19 members of the Fortune 500, that have committed to source 100% of their power from renewable energy by a specified year. RE100 members collectively represent approximately 146 terawatt hours (“TWh”) of annual demand, which is approximately as much energy as it takes to power the state of New York. Furthermore, Deutsche Bank recently opined in a July 19, 2017 report entitled “Global Solar Demand Scenario Analysis 2017-22,” on the demand for corporate PPAs saying, “Corporate renewable energy demand is roughly 1-3 gigawatts per annum today. However, we believe this market could grow into a 5-10 gigawatt market in the next 5 -10 years driven by a combination of growing momentum among corporate buyers and positive policy developments encouraging corporate buyers. Moreover, if self-generation reaches 10%its clients’ sites for the global industrial and commercial sectors, and solar accounts for halfentire lifecycle of the incremental demand, this can create 350 gigawatts incremental demand for solar.”these assets.
In addition demandto the data center sector, the infrastructure sector continues to be a growing contributor for Kenshaw. In the 2022-23 budget season, a record $168 billion in general government expenditure was allocated to infrastructure over the four years to FY2025-26. This is $4.5 billion higher than the 2021-22 budget season. Of particular relevance to Kenshaw, the New South Wales state government allocated $58 billion to infrastructure, an increase of $1.8 billion over the prior year, and equivalent to 17.9% of general government expenditure.
A key part of the infrastructure sector and where Kenshaw has enjoyed good growth is the rail sector. Australian railways activity across construction and maintenance rose to a record $8.5 billion in 2021-22, with activity forecast to average $9.5 billion over the next five years as a swathe of large and predominantly publicly funded projects ramp up across Australia. Railway construction work increased in real terms by 2.9% to $7 billion in 2021-22, a record level of activity. This represents the sixth consecutive year of growth in rail construction driven predominantly by publicly funded projects, which have increased by 287% since 2014-15. Overall, $85 billion in rail civil construction and maintenance is forecast for the coming decade to 2031-32, compared to $63 billion over the last decade. Over the next 15 years, $101 billion in rail construction work is expected.
Kenshaw benefits from the continued increase in public sector spending on infrastructure, and in particular rail projects, through the provision of custom critical power backup solutions and generator maintenance to clients such as civil construction contractors, government agencies and government departments.
Kenshaw's traditional clientele also extends to entities operating within or servicing Australia's mining sector—the nation's predominant industry as gauged by GDP contribution. Over the past year, the Australian mining sector has maintained strong performance, fortifying Kenshaw's position in the industry.
Furthermore, with the mining sector's increasing commitment towards sustainability and acceleration towards achieving net-zero objectives, mine site electrification, particularly with renewable energy, among utilitiesemerges as a significant growth opportunity for both Kenshaw and VivoPower. Given Kenshaw's established track record in the sector, it is optimally poised to capitalize on future expansion in the Australian mining industry, particularly in its pursuit of decarbonization.
Revenue earned within Australia is comprised of the following activities:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Generator sales and installation | 2,159 | 5,206 | 11,479 | |||||||||
Generator service and non-destructive testing | 2,372 | 1,767 | 1,761 | |||||||||
Motor sales and overhaul | 6,474 | 5,315 | 5,169 | |||||||||
Total revenue | 11,005 | 12,288 | 18,409 | |||||||||
There is no material seasonality which impacts Kenshaw, however in FY2023, the business continued to be adversely impacted by supply chain challenges, with most electrical equipment manufactured outside of Australia. The business has had to adapt to longer lead times from suppliers caused by the COVID-19 induced disruption to supply chains and crisis in Ukraine. In addition, inflationary impact has seen an increase in cost of goods sold, the majority of which has been passed on to clients.
Relationships with its primary suppliers enables Kenshaw to sell and service their equipment as a dealer or agent. The business is a primary supplier and service agent for Cummins, Deutz and CAT generators, and WEG electric motors, and maintains long-term relationships with other equipment manufacturers such as Siemens, Toshiba and Teco. This allows Kenshaw to offer a complete solution to its clients with flexibility of product choice.
With almost 500 active customers for the year ended June 30, 2023, the business is not solely reliant on one customer, nor is the business reliant on any one patent, license, material contract, or process. Further, there are no government regulations which are material to the business, beyond those generally applicable to all businesses within the same statutory regime.
VivoPower continues to expand, as utilities respond bothbelieve that Kenshaw, through its experience, capability, and track record, is well positioned competitively to benefit from the increasing cost-effectiveness of solar electricitystrong growth outlook for Australian data centers, aged and health care infrastructure as well as applicable renewable energy portfolio standards and similar mandates and incentives.the continued strength of the Australian mining sector, particularly as it transitions towards decarbonization.
AtAevitas Solar
Aligning with VivoPower's strategic vision to concentrate on its primary businesses - electrical vehicle, renewable critical power, and sustainable energy solutions - the non-solar segment of J.A. Martin was identified as non-essential. As a result, it was divested to ARA on July 1, 2022. Subsequently, the solar-focused division of J.A. Martin has been rebranded as Aevitas Solar and is now overseen by the Kenshaw leadership team.
Aevitas Solar remains committed to fulfilling existing contracts established prior to the divestiture, such as those related to the Blue Grass and Edenvale Solar Farms. Concurrently, the company actively explores new ventures in the solar sector as part of the Aevitas Solar expansion strategy. However, it maintains a prudent approach, being keenly aware of the inherent risks tied to such projects.
Results of J.A. Martin's non-solar activities have been classified under discontinued operations. Included in the net assets divested to ARA of the discontinued operation is a Newcastle-based facility, which specializes in manufacturing industrial switchboards and motor control centers. Additionally, this facility oversees end-to-end project installations, provides maintenance services, and offers both design and engineering expertise. Complementing this is an office and workshop facility situated in the Hunter Valley, dedicated to serving the mining and industrial sectors.
Despite its longstanding history and focus on the industrial, manufacturing, and mining sectors, Aevitas Solar has, in the past four years, carved out a commendable reputation and standing within the Australian solar market. In the recent fiscal year, Aevitas Solar marked significant milestones by finalizing the electrical installations and services for both its ninth and tenth solar farms, the 200MWdc Blue Grass Solar Farm and the 204MWdc Edenvale Solar Farm.
Revenue earned from continuing operations within Australia is comprised of the following activities:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Electrical installation projects | 2,591 | 8,671 | 4,172 | |||||||||
Electrical service contracts | - | - | - | |||||||||
Electrical switchboard manufacturing | - | - | - | |||||||||
Total revenue | 2,591 | 8,671 | 4,172 | |||||||||
Aevitas Solar’s solar division continued to be materially affected by high levels of rainfall along the east coast of Australia in the second half of 2022, continuing into 2023. Nationally-averaged rainfall was 26% above the 1961–1990 average at 587.8 mm, which made 2022 the ninth-wettest year on record for Australia. In eastern Australia in particular, persistent rain saw significant flooding affecting large areas multiple times during the year, including Aevitas Solar project locations. As a consequence, the occurrence of delays attributable to adverse weather have risen, resulting in delayed project completions and higher costs due to the fixed price, low margin nature, and disproportionate and unfavorable risk allocation contained within contracts in the industry.
Given the structural nature of these risks and the likely ongoing effects of climate change, Aevitas Solar is targeting opportunities with more favorable risk allocation and higher margins. These tend to be smaller, industrial projects that are behind-the-meter but where Aevitas Solar can leverage its experience and skills, without taking on burdensome contractual terms and working capital requirements.
Aevitas Solar selects its materials from an expansive network of both domestic and international suppliers. The criteria for this selection hinge on competitive pricing, timely delivery, product efficacy, and established business relations. These supplier relationships stand central to Aevitas Solar's ability to achieve its commercial objectives and its capacity to satisfy customer demands in a competitive environment.
Given that a majority of electrical equipment is manufactured overseas, the company has adjusted to extended supplier lead times. This is primarily a result of supply chain disruptions instigated by the COVID-19 pandemic and, more recently, the conflict in Ukraine. Despite these adaptations, the challenges in the supply chain have not been entirely alleviated and continue to present operational hurdles.
With the sale of the non-solar J.A. Martin operations, Aevitas Solar will need to diversify its customer-base in order to reduce its reliance on its key solar partner, Grupo Gransolar, S.L. The business is not dependent on any one patent, license, material contract, or process. Further, there are no government regulations which are material to the business, beyond those generally applicable to all businesses within the same time, strategicstatutory regime.
Electric Vehicles
Tembo e-LV B.V. ("Tembo"), with subsidiaries Tembo 4x4 e-LV B.V. and institutional investors increasingly view investments in solar power projects as providing attractive opportunities, which has increased the availability of capital for the deployment of solar power generating capacity. Enabled by strong capital availability and decreasing input costs, the solar industry is growing quickly, with VivoPower’s platform sitting at what we believe is a high growth position in the industry’s value chain. While we currently focus on solar energy applications, we plan to continue to evaluate other types of power generationFD 4x4 Centre B.V. (“Tembo Netherlands”), as well as energy efficiencyTembo Technologies Pty Ltd (“Tembo Australia”) are specialist battery-electric and storageoff-road vehicle companies that design and build electric battery conversion kits to replace internal combustion engines (“ICE”) in light utility vehicle fleets. Tembo customers are located across the globe and are mainly in the mining, infrastructure, government services, humanitarian, tourism, agriculture and utilities sectors. At present, Tembo is focused on completing the testing of its new generation LandCruiser LC70 EUV conversion kits ("EUV23") and preparing to commence production later in the year. It is anticipated that Tembo will start shipping these new generation LandCruiser conversion kits late in the second half of calendar year 2023.
With a secular trend of increasing Electric Vehicle ("EV") adoption globally by consumers and continuing pressure from governments and investors for possible deployment and/orcompanies to implement concrete decarbonization measures, VivoPower believes that Tembo is well placed to satisfy fleet owners' demand for its conversion kits, which are aimed at sectors with stringent requirements on reliability and safety.
Order book pipeline, deliveries and key agreements
During FY2023, Tembo successfully negotiated several large distribution agreements with partners around the globe. In August 2022, VivoPower entered into memorandum of understanding with a State-Owned Enterprise for 1,000 conversion kits in Jordan, which aligns with Tembo’s strategy to expand its commercial activities and operations in the Middle East, one of the largest market for LandCruisers in the world. In November 2022, the Company signed a definitive agreement with ETC Mauritius in Kenya for the distribution of 4,000 conversion kits, which marked Tembo’s largest agreement to date and its entry into the second-hand light utility vehicle market. In that same month, it signed a supply agreement with Evolution Group Holdings to convert their fleet of Toyota Hilux ICE vehicles in Australia and New Zealand to battery-electric, making Evolution the first traffic management company to commit to the conversion of its fleet to EVs. In February, it signed a definitive agreement with Ulti-Mech in Australia to distribute 1,000 conversion kits, adding to its geographic coverage the important Western Australia mining region, a leading destination in the world for mining investment. AccordingIn March, it signed a memorandum of understanding with Petrosea, a key supplier to BNEF, “The costthe mining and oil & gas sectors in Indonesia, to distribute 2,000 conversion kits. In June, it signed a definitive agreement with Fourche Maline, an engineering and technical services company in Ghana, one of lithium-ion batteries has fallen 73% (from $1000/kWhthe largest mining countries in the world and the number one gold mining country in Africa, for 2,500 conversion kits.
Also in June, Tembo signed a memorandum of understanding with Al Taif to $273/kWh) since 2010 onform a dollar per kWh basis. We think that chemistry improvements, lower financing costs, improved manufacturing processespartnership spanning distribution of Tembo EUV conversion kits, research & development, training in electric mobility and high voltage, as well as local assembly operations in the UAE. AL TAIF is a subsidiary of the EDGE Group, one of the world’s leading advanced technology groups, established to develop disruptive solutions for defence and beyond. Its customers include defence and police organizations in the UAE, the Middle East and Northern Africa ("MENA") region and extending to other regions.
With regard to orders, in January, Tembo hosted Acces, its distribution partner in Canada, to test drive the newest version of Tembo's converted LandCruiser 70 Series pickup truck in Italy. Acces subsequently placed an initial order for a large proportion of Tembo’s scheduled 2023 production, which are scheduled for delivery in the final quarter of 2023. Customer deliveries of ruggedised electric vehicles were executed for existing partners, including for GHH in South Africa and Jankel in the U.K in March.
Tembo continued to invest in marketing for its EUV23 kit, organizing drive days in the UAE and in Brisbane to showcase its electric LandCruiser to potential customers and partners, which resulted in new business opportunities actively pursued by Tembo's management. Tembo was also selected to showcase its technology and know-how by large companies in the mining and utilities sectors, for example in the case of the Future Forum organized by Endeavour Energy, the operator of the electrical distribution network for Greater Western Sydney, the Blue Mountains, the Southern Highlands and the Illawarra region of New South Wales.
Non EV operations in FD 4x4 for vehicle spec conversion including ruggedization of ICE vehicles comprised primarily an order to ruggedize 15 vehicles from Boliden in Ireland, delivered in December 2022. The order was not completely fulfilled due to the lack of availability of certain parts.
Post June 30 2023, Tembo signed a landmark joint venture agreement with Francisco Motors, the pioneering manufacturer of jeepneys in the Philippines. Under the agreement, Tembo will develop and supply EUV electrification kits for a new generation of electric jeepneys. One of the country’s cultural icons, jeepneys are the most common utility vehicle in the Philippines and the main mode of public transportation, accounting for just over 40% of public transportation in the country. There are more than 200,000 jeepneys on the road in the Philippines, of which more than 90% are at least 15 years old and running on second-hand diesel engines. Under the Public Utility Vehicle Modernization Program, the Philippine Government requires that all jeepneys and other public utility vehicles with at least 15 years of service be replaced with Euro 4-compliant or electric-powered vehicles. This creates a US$10bn+ addressable market for the replacement of the old jeepneys. Francisco Motors and Tembo have already secured their first orders and have commenced work to deliver on those orders. The agreement will also give Tembo access to low-cost assembly in the Philippines.
In planning for its next stage of growth, Tembo has implemented systems, procedures, and policies to underpin a smooth and seamless execution from the time it engages with a prospect through to the on-going support as required by customers as they replace ICE vehicles in their fleets. As part of this, industry-grade, scalable, cloud-based software was implemented in various processes to ensure reliability and continuity of service.
In the third quarter of FY2023, Tembo underwent an annual ISO recertification audit for its ISO9001 (Quality Management System) and ISO14001 (Environmental Management System) certifications. Both audits were successfully passed. Additionally, Tembo started two new ISO certification journeys: ISO45001 for Occupational Health & Safety and ISO27001 for Information Security. These additional certifications will add significantly to the overall safety and security of its staff as well as the data held on staff, customers and suppliers. Tembo has also completed its internal assessment in support of its B Corp Certification application and is continuing work on reducing its greenhouse gas (GHG) emissions, for example by optimising its supply chain management havefor proximity to assembly and packing facilities. Tembo expects to obtain its B Corp Certification in the potentialsecond half of FY2024 if B Lab's independent audit is successfully passed.
Tembo’s electric vehicles achieved a significant quality and reliability milestone with its longest-serving electric LandCruiser, which crossed the 5-year mark of active service with an uninterrupted safety record at an operating mine site owned by Boliden in the first quarter of calendar year 2023. Tembo believes this to bringbe the longest actively serving electrified light utility vehicle in the mining industry globally.
In preparation for the official production launch of its battery electric EUV23 conversion kits, Tembo launched Tembo Academy which is aimed at ensuring that its partners and customers are adequately trained on all aspects of onboarding an electric battery vehicle fleets, covering operation, maintenance as well as Health & Safety. Tembo set up a cross-functional project team, combining members of its engineering and safety teams and advisory council, in order to deliver carefully structured and practical course materials. An introductory training course was held in Eindhoven in October 2022 with its global partner GHH, who sent technical staff from India and Germany with positive feedback from course attendees.
Talent pool and hiring
Throughout FY2023, Tembo continued to hire despite retrenchments in other parts of the industry, taking advantage of experienced talent available on the market. Tembo selectively recruited high-quality talent in the Netherlands and the United Kingdom and invested in Engineering, Procurement, Quality and Testing. It continued to be open to hiring experienced talent in its key markets.
Tembo assembled a team of EV and OEM industry leaders, several of them pioneers in their field, to advise on various aspects of its scale-up journey. Their input has already proven tactically invaluable for Tembo and will be leveraged tangibly in FY2024 for the production scale-up phase.
VivoPower appointed Eduardo Nebot as a new member of the VivoPower Advisory Council. Based in Sydney, Eduardo is currently an Emeritus Professor at the University of Sydney and a consultant on autonomous systems for various industries, including transport and mining automation. He is a pioneer in the research, development, and deployment of autonomous systems and safety and has worked with both private companies and government organizations in Australia and internationally. Another key recruitment was Choon Lim as Senior Engineering Director. Having worked for Bosch, Tesla and Rivian, he has considerable experience in developing safety critical control systems, self-driving cars and electric cars. In his most recent role as a Senior Director he has been responsible for a significant further cost reductions by 2030.” As these technologies continueportion of the firmware at Rivian. He led teams for System Engineering, Software Functional Safety, System Architecture, Integration Testing and Controls Algorithms for the domains of Propulsion, Chassis Controls, Suspension Controls, Body Controls and Over The Air Updating.
Revenue earned within the Netherlands is comprised of the following activities:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Conversion kits | - | 789 | 137 | |||||||||
Vehicle spec conversion | 1,394 | 301 | 1,219 | |||||||||
Accessories | 70 | 400 | 37 | |||||||||
Total revenue | 1,464 | 1,490 | 1,394 | |||||||||
No EUV conversion kits were sold in FY2023, although orders were received (reflected in deferred revenue), whilst the development programme testing continued, nevertheless, vehicle spec conversions for non EV variants increased from $0.3 million in the prior year to mature, we believe that$1.4 million in FY2023, primarily as a result of Boliden orders.
Sustainable Energy Solutions (“SES”)
Augmenting its Electric Vehicle business, which deploys EUV conversion products and services to fleet owners, VivoPower is also focused on an SES strategy with its core mission being to help corporate customers achieve their decarbonization goals. The SES business delivers full-suite, holistic SES to industrial customers and other large energy users and is comprised of four key elements:
● | Critical power “electric-retrofit” of customer’s sites to enable optimised EV battery charging, encompassing charging stations, renewables, battery storage and microgrids; |
● | EV and battery leasing; |
● | EV battery reuse and recycling; and |
● | Change management and training services |
In Australia, the SES business draws on the experience and capabilities of VivoPower’s Australian Critical Power Services businesses (Kenshaw Electrical and Aevitas Solar) to deliver solutions to customers directly, whilst in other markets, it partners with experienced local critical power services and charging infrastructure companies.
Since its establishment in FY2021, the SES business has signed several key agreements to complete its offering. In December 2021, VivoPower executed a Memorandum of Understanding signed with Relectrify, a leading supplier of battery energy storage systems utilizing second-life EV batteries, with the collaboration extended to explore future redeployment of Tembo batteries. In August 2022 the Company invested in Green Gravity Energy Pty Ltd, an Australian company specializing in energy storage solutions in former mining locations. In May 2023, VivoPower signed a definitive partnership agreement for VivoPower to market and distribute Vital EV Solutions (“Vital EV”) fleet charging solutions globally. Vital EV is a specialist U.K-headquartered company, offering a comprehensive range of electric vehicle charging solutions for fleet owners and is the official re-seller of Kempower charging stations and service solutions in the U.K and across Africa. Kempower, headquartered in Finland, has high-speed EV fleet charging solutions including for off-highway working environment applications. Under the Agreement, VivoPower will be able to opportunistically expandoffer to its investments to continue its growth.customers and partners a wide range of EV fleet charging products and services from Vital EV and Kempower for an initial term of 3 years. These products include multi-voltage lightweight movable rapid chargers, hub-and-spoke rapid and ultra-rapid charging systems, satellite dispensers as well as conventional station chargers.
Our Current MarketsGiven that the SES business segment was established in FY2021, it has generated minimal revenues to date. VivoPower is actively working to originate new SES projects for both new and existing customers of the VivoPower group of companies, with significant projects already proposed to major mining and utilities companies. The impending release of Tembo's EUV23 conversion kits later in the 2023 calendar year provides a strong impetus for customers to proceed with the electrification of their light vehicle fleet and, in tandem, implement the correct charging infrastructure, which will require the whole suite of SES offerings depending on customer site infrastructure readiness. The Company therefore expects significant growth from this segment going forward.
Solar Development
Historic Solar Development Business
As a consequence of the Company’s strategic pivot to an SES strategy in FY2021, VivoPower no longer intends to engage in solar project development activities in isolation, unless it is a component of a sustainable energy solution for a corporate customer that is helping it to achieve decarbonization goals. This segment has historically been characterized as the Solar Development segment and encompassed the Company’s solar development activities in the U.S. and Australia. The Company no longer has solar development activities in Australia following the sale of its interests in solar farm projects in the country in FY2021.
VivoPower’s historic strategy in relation to solar development has been to minimize capital intensity and maximize return on invested capital by pursuing a business model predicated on developing and selling projects prior to construction and continually recycling capital rather than owning assets. The stages of solar development can be broadly characterized as: (i) early stage; (ii) mid-stage; (iii) advanced stage; (iv) construction; and (v) operation. Our business model has been to work through the development process from early stage through to advanced stage, and then sell those projects that have completed the advanced stage of development, also known as “shovel-ready” projects, to investors who will finance construction and ultimately own and operate the project.
Successful solar development requires an experienced team that can manage multiple work streams on a parallel path, from initially identifying attractive locations, to land control, permitting, interconnection, power marketing, and project sale to investors. Rather than build a substantial team internally to accomplish all of these activities, our business model has been to joint venture on a non-exclusive basis with existing experienced project development teams so that multiple projects can be advanced simultaneously and allow us to focus on provision of capital, project management, and marketing and sale of projects. In Australia we partnered with ITP Renewables (“ITP”), a global leader in renewable energy engineering, strategy and construction, and energy sector analytics. In the U.S., we entered into a development joint venture with ISS in April 2017 and in June 2021, VivoPower announced that it had secured full ownership of the remaining 50% of the equity interest in the portfolio from ISS for a nominal consideration of $1.
United States Solar Development
Vivopower's focus for its solar business remains to monetise its portfolio of US solar projects, with the aim of using the funds generated to advance the Company's SES strategy.
In July 2021 VivoPower announced that it had gained full ownership of the equity interest in the solar portfolio which was previously owned by an affiliate of ISS. Shortly thereafter, the Company effected the name change of the subsidiary from Innovative Solar Ventures I, LLC to Caret LLC.
The Company’s portfolio of U.S. utility scale electric fleet generated 4,079,079 thousand megawatt hours (“MWh”)solar projects is held by its wholly owned subsidiary, Caret. Caret owns a solar project portfolio comprising 38 projects in total, of which 7 projects totalling 365 MW-DC are being actively developed, and a further 31 projects totalling approximately 1,479 MW-DC, have either been previously discontinued or are not currently being developed.
The actively developed projects are dispersed throughout Texas and are strategically situated in regions with minimal solar power penetration. Each of these projects has reached an advanced phase of development, with substantial interconnection studies and environmental evaluations completed, and the required land secured for a duration of up to 40 years. Despite the strides made in executing our Power-to-X strategy and the passing of the Inflation Reduction Act in August 2022, which heightened investor confidence in the US solar power sector, all these projects are still carried at cost.
The Company is assessing the viability of Power-to-X development possibilities with both active and discontinued projects collaborating with data infrastructure developers who intend to place their data centres in proximity to solar farms integrated “behind-the-meter”. Solar energy's power generation pattern aligns with ERCOT's spot electricity in 2016 accordingcost curve, which allows operators at the load site to IEA data. Approximately 30.4% of this wascurb peak hour rate surges.
The company envisages that any income generated from coal fire power stations, with gas fired power stations contributing approximately 33.8%the monetization of generation. FERC data for utility scale generation plantsits US solar projects, inclusive of 1 megawatt or greater capacity shows that the U.S. had 1,190 gigawatts of installed capacity at the end of May 2017. Of this installed capacity, solar represented just 2.2%. However, FERC data shows that solar is the fastest growing utility scale generation type, with the installed base of utility scale solar plants of 1 megawatt or greater expanding at a compound average annual growth rate of 67% from 2010those related to 2016. Furthermore, FERC and IEA data show that for 2016, approximately 34% of the U.S. installed capacity represented by solar PV was attributablePower-to-X developments, will be channelled to distributed generation (“DG”) sources not included in the utility scale figures above.bolster its primary SES strategy.
Early Stage | Mid Stage | Advanced Stage | ||||||||
Capacity | Development | Land | Interconnection | Environmental | Zoning / Use | Interconnection | Interconnection | Power Purchase | ||
Project | State | (MW) | Stage | Control | Queue | Studies | Permit | Study | Agreement | Agreement |
Active Solar Projects | ||||||||||
TX 75 | TX | 55 | Advanced | ✔ | ✔ | ✔ | ✔ | ✔ | Eligible | |
NM 88 | NM | 87 | On hold | ✔ | ✔ | |||||
TX 144 | TX | 82 | Advanced | ✔ | ✔ | ✔ | ✔ | ✔ | Eligible | |
TX 145 | TX | 62 | Advanced | ✔ | ✔ | ✔ | ✔ | ✔ | Eligible | |
TX 165 | TX | 62 | Advanced | ✔ | ✔ | ✔ | ✔ | ✔ | Eligible | |
TX 177 | TX | 34 | Advanced | ✔ | ✔ | ✔ | ✔ | ✔ | ||
TX 195 | TX | 41 | Advanced | ✔ | ✔ | ✔ | ✔ | |||
TX 341 | TX | 28 | Advanced | ✔ | ✔ | ✔ | ✔ | ✔ | ||
TX 107 | TX | 93 | On hold | ✔ | ✔ | ✔ | - | |||
TX 137 | TX | 28 | On hold | ✔ | ✔ | ✔ | ||||
TX 276 | TX | 55 | On hold | ✔ | ✔ | ✔ | ||||
TX 307 | TX | 55 | On hold | ✔ | ✔ | ✔ | ✔ | |||
Subtotal | 12 Projects | 682 | ||||||||
In the U.S., VivoPower completed a joint venture through its subsidiary, VivoPower (USA) Development LLC in April 2017 with an early-stage solar development company, Innovative Solar, for a diversified portfolio of 37
Capacity | Development | ||
Project | State | (MW) | Stage |
Discontinued Solar Projects | |||
SC 76 | SC | 21 | Discontinued - FY21 |
FL 78 | FL | 75 | Discontinued - FY20 |
GA 83 | GA | 27 | Discontinued - FY21 |
SC 84 | SC | 30 | Discontinued - FY19 |
GA 86 | GA | 27 | Discontinued - FY21 |
GA 90 | GA | 27 | Discontinued - FY21 |
SC 97 | SC | 28 | Discontinued - FY19 |
GA 111 | GA | 27 | Discontinued - FY21 |
GA 112 | GA | 20 | Discontinued - FY19 |
SC 129 | SC | 28 | Discontinued - FY21 |
SC 132 | SC | 28 | Discontinued - FY21 |
FL 168 | FL | 43 | Discontinued - FY20 |
TX 207 | TX | 83 | Discontinued - FY21 |
WA 211 | WA | 56 | Discontinued - FY21 |
KS 229 | KS | 69 | Discontinued - FY21 |
CO 239 | CO | 55 | Discontinued - FY21 |
KS 244 | KS | 34 | Discontinued - FY21 |
OK 267 | OK | 41 | Discontinued - FY21 |
CO 269 | CO | 55 | Discontinued - FY21 |
KS 291 | KS | 34 | Discontinued - FY21 |
TX 305 | TX | 41 | Discontinued - FY21 |
CO 320 | CO | 41 | Discontinued - FY21 |
FL 330 | FL | 41 | Discontinued - FY20 |
OK 339 | OK | 69 | Discontinued - FY21 |
WA 370 | WA | 74 | Discontinued - FY21 |
CO 371 | CO | 86 | Discontinued - FY21 |
Subtotal | 26 Projects | 1,160 | |
Original Portfolio | 38 Projects | 1,842 |
The Company does not intend to acquire any additional utility-scale solar projects in 12 different states, representing a total electricity generating capacitythe United States at this time and is focused on maximizing value from its current portfolio of approximately 1.8 gigawatts. VivoPower anticipates that this joint venture will provide the opportunity to generate BTO revenues and profits for several years as the individual projects in the portfolio mature. Furthermore, we believe that the value of the projects in the portfolio will increase given the Company’s expectation that equipment and installation costs will continue to fall at a rapid rate, hence increasing the return profile of the projects. The portfolio provides VivoPower with significant flexibility as it also presents the opportunity to realize profits on the sale of solar systems at advanced stages of development. To date, the U.S. market has represented 77% of our revenue. See “Item 4.A. Operating Results-Revenue” for a breakdown of revenues by market.
U.S. Policy Initiatives to Encourage Solar
The U.S. has in place many incentives to encourage installation of renewable energy. The principal federal incentives as they relate to solar include:
Federal Investment Tax Credit (“ITC”): The ITC confers a tax credit of 30% of the eligible solar energy property basis at the time the solar generating facility is placed in service for tax purposes. The 30% ITC rate reduces in 2020 to 26%, 22% for 2021 and 10% for 2022 and years thereafter.
Modified Accelerated Cost Recovery System Depreciation (“MACRS”): MACRS allow an acceleration of eligible expenditure on solar energy property basis over a period of five years, notwithstanding that the economic life of a solar PV generation facility may be well over twenty five years.
The principal state based solar incentives include:
Renewable Portfolio Standards (“RPS”): RPS are state based programs typically mandating electricity providers to produce or purchase a minimum level of renewable energy as part of their electricity sales mix. A total of 29 states and the District of Columbia presently have binding RPS in place. A feature of many state based RPS programs is the use of Renewable Energy Credits (“RECs”) to provide a price signal to incentivize solar capacity installation. RECs enable an electricity provider who has insufficient renewable generation to meet their RPS obligation by buying credits.
Feed-in-Tariffs (“FIT”): Currently 6 states have FITs in place. Feed in tariffs typically apply to DG solar facilities connected to the distribution grid. They allow a solar facility owner to sell excess electricity produced back to the distribution grid. Solar FIT rates can vary depending on the time of day.
Net Metering: Net metering typically applies to DG solar facilities connected to the distribution grid. Net Metering allows a customer to net surplus production from their solar systems against their consumption of electricity from the grid.
Australia
Australia possesses some of the highest insolation in the world. According to the Australian Department of Industry, Innovation and Science, solar PV has been the most rapidly expanding renewable energy source in the country over the last ten years, growing by 59% per year on average. However, this was from a low base and solar remains a relatively small contributor to Australia’s energy mix. In 2014–15 about 6.0 TWh of electricity was generated from solar PV technologies representing only 2.4% of Australia’s total electricity generation. Australia is still highly reliant on heavily polluting coal generation, contributing 159 TWh or 63% of total electricity generation.
According to the IEA, Australia installed 839 megawatts of solar PV in 2016, and reached a cumulative installed capacity of 5.9 gigawatts. BNEF projects solar capacity additions in 2017 and 2018 of 1.0-1.11 gigawatts and 2.1-2.3 gigawatts, respectively.
In addition to the global BTO business model, VivoPower, through its wholly-owned Australian subsidiary Aevitas, provides energy and power generation solutions including design, supply, installation and maintenance of power and control systems, with an increasing focus on solar, renewable energy, and energy efficiency. Aevitas has a large and diverse base of longstanding commercial and industrial customers, and is considered a trusted power adviser. Aevitas is located in the Hunter Valley and Newcastle region, which is the most densely populated industrial belt in Australia, and which has amongst the most expensive power prices in the country. Since acquiring Aevitas in December 2016, VivoPower has introduced an origination strategy to identify attractive solar projects within Aevitas’existing customer base. To further support this initiative, VivoPower entered into an alliance agreement with ReNu Energy, with whom VivoPower intends to execute BTO transactions for solar projects originated by Aevitas.JOBS Act
In Australia, VivoPower is seeingprevious reporting periods, the benefitsCompany met the requirements under the JOBS Act as an “emerging growth company” to not (i) provide an auditor’s attestation report on its system of internal controls over financial reporting pursuant to Section 404(b) of the acquisitionSarbanes-Oxley Act ("SOX"), (ii) provide all of Aevitas in termsthe compensation disclosure that may be required of leveraging its longstanding relationshipsnon-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with an extensive base of commercial and industrial customers and originating behindany requirement that may be adopted by the meter solar projects that VivoPower can then seek to convert into BTO revenues. To enhance our ability to transfer projects for which we can provide ongoing power services, VivoPower recently consummated the Alliance Agreement with ReNu Energy in Australia. Under this agreement, ReNu Energy has agreed to pay an annual alliance fee for the right to makePCAOB regarding mandatory audit firm rotation or a first offer to acquire projects originated by VivoPower that are smaller than 5 megawatts. This Alliance Agreement will enable VivoPower to generate BTO revenues in additionsupplement to the alliance fee. We anticipate that this relationship will grow profitably over many years. To date,auditor’s report providing additional information about the Australasia market has represented 18%audit and the financial statements (auditor discussion and analysis), or (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of our revenue. See “Item 4.A. Operating Results – Revenue” forchief executive officer’s compensation to median employee compensation. Although the Company no longer qualifies as an “emerging growth company,” it still qualifies as a breakdownnon-accelerated filer and, therefore, is exempt from the requirement to provide an auditor’s attestation report on its system of revenues by market.internal controls over financial reporting pursuant to Section 404(b) of SOX.
Currently, the U.S. and Australia are our principal markets, however, in addition to our joint venture in the U.S. and the Alliance Agreement with ReNu Energy, VivoPower is exploring attractive projects that fit our BTO business strategy in Europe, Asia and Latin America.
Customers
We sell the electricity from our power plants mainly to local utilities and commercial and industrial customers through long-term, fixed-price PPAs. Our ability to generate revenue and profits depends on our ability to secure such PPA’s for our projects from utilities and commercial and industrial customers and the timely payment of such parties under the PPA’s.
Suppliers
Our solar equipment supply strategy is based on maintaining strong relationships with leading providers of solar modules, inverters, trackers and other solar equipment. Our main solar equipment suppliers include Canadian Solar, SMA and Next Tracker. Other important suppliers for us include engineering, procurement and construction companies, such as DEPCOM and Gran Solar. We also utilize service providers to provide operations and maintenance services at our project sites. Our ability to finance and build solar power plants profitably depends on the ability to secure equipment contracts on attractive terms with such suppliers of modules, inverters and other equipment.
Intellectual Property
The agreements we enter into with suppliers or providers of engineering, procurement and construction agreements generally permit us to use the intellectual property required to operate the solar power plants we develop. We are not otherwise significantly dependent on the intellectual property of third parties.
Our business is not dependent on patents or licenses. We do not currently have a material dependence on any one industrial, commercial or financial contract with suppliers or customers and we are similarly not dependent on any new manufacturing processes.
Seasonality
Weather conditions can have a significant impact on the solar power plants we develop and therefore a significant impact on our results of operations from period to period.
Competition
We compete with energy and infrastructure funds and renewable energy companies and developers, as well as conventional power companies, to acquire and invest in energy projects. Competition in the solar energy sector can be significantly affected by legal, regulatory and tax changes, as well as environmental and energy incentives provided by governmental authorities.
We believe that we can compete successfully with other market participants through our ability to source attractively-structured projects that will provide recurring long-term cash flows, enabling us to obtain access to competitively priced project financing and strong partner relationships. Some of the key attributes of our projects include long-term fixed priced PPAs, a diversified market across different geographies and regulatory environments; and cutting-edge solar technology and equipment utilized in our projects. Further contributing to our competitive strength is our approach to screen projects that offer attractive PPAs with creditworthy counterparties.
In addition, we believe that our investment in the projects we develop through our BTO model also provides us with a competitive advantage, as it aligns our interests with those of our project investors and also provides a source of recurring long-term revenues.
Currently, generators of renewable energy in the U.S. benefit from a range of federal, state and local governmental incentives and attributes that include, for example, the ITC. The ITC was extended in 2015, resulting in an expiration date for tax credits for solar facilities commencing construction with a phase down period culminating in a permanent 10% tax credit level beginning in 2022. The ITC is a key incentive that drives deployment of solar energy projects in the United States.
Key competitive considerations in the market for solar power plants include the following:
PPA rates
Savings on electricity costs
Cost and speed of installation
Electricity production of the power plant
Strength of alliance relationships
Availability and terms of project financing for construction of power plants
Reputation among customers, project finance investors and industry partners
Customer service
Regulatory Matters
Our business is affected by various regulatory frameworks, particularly ones relating to energy and the environment. These include the rules and regulations of the FERC, the U.S. Environmental Protection Agency, regional organizations that regulate wholesale electrical markets, state agencies that regulate energy development and generation and environmental matters, and foreign governmental bodies that occupy roles similar to the foregoing.
Our business is also affected by various policy mechanisms that have been used by governments to accelerate the adoption of solar power or renewable energy technologies generally. Examples of such policy mechanisms include rebates, performance-based incentives, feed-in tariffs, tax credits, accelerated depreciation schedules and net metering policies. In some cases, such mechanisms are scheduled to be reduced or to expire, or could be eliminated altogether. Rebates are provided to purchasers of solar systems based on the cost and size of the purchaser’s solar power system. Performance-based incentives provide payments to a solar system purchaser based on the energy produced by their solar power system. FITs pay solar system purchasers for solar power system generation based on energy produced at a rate that is generally guaranteed for a period of time. Tax credits permit an owner of a solar project to claim applicable credits on their tax returns. Net metering policies allow customers to deliver to the electric grid any excess electricity produced by their on-site solar power systems, and to be credited for that excess electricity at a rate that is often at or near the full retail price of electricity.
In addition, many states in the U.S. have adopted renewable portfolio standards which mandate that a certain portion of electricity delivered by utilities to their customers come from eligible renewable energy resources. Some states significantly expanded their renewable portfolio standards in recent years.
VivoPower International PLC has 2422 subsidiaries (collectively with VivoPower, “the group”Group”). Our principal operating companies areThe following list shows the Company’s shareholdings in subsidiaries owned directly and indirectly as at June 30, 2023.
Subsidiaries | Incorporated | % Owned | Purpose |
VivoPower International Services Limited | Jersey | 100% | Operating company |
VivoPower USA, LLC | United States | 100% | Operating company |
VivoPower US-NC-31, LLC | United States | 100% | Dormant |
VivoPower US-NC-47, LLC | United States | 100% | Dormant |
VivoPower (USA) Development, LLC | United States | 100% | Holding company |
Caret, LLC (formerly Innovative Solar Ventures I, LLC) | United States | 100% | Operating company |
| Caret Decimal, LLC | United States | 100% | Operating company |
VivoPower Pty Ltd | Australia | 100% | Operating company |
Aevitas O Holdings Pty Ltd | Australia | 100% | Holding company |
Aevitas Group Limited | Australia | 100% | Holding company |
Aevitas Holdings Pty Ltd | Australia | 100% | Holding company |
Electrical Engineering Group Pty Limited | Australia | 100% | Holding company |
Kenshaw Solar Pty Ltd (formerly J.A. Martin Electrical Pty Limited) | Australia | 100% | Operating company |
Kenshaw Electrical Pty Limited | Australia | 100% | Operating company |
| Tembo EV Australia Pty Ltd | Australia | 100% | Operating company |
VivoPower Philippines Inc. | Philippines | 64% | Dormant |
VivoPower RE Solutions Inc. | Philippines | 64% | Dormant |
| V.V.P. Holdings Inc | Philippines | 40% | Dormant |
Tembo e-LV B.V. | Netherlands | 100% | Holding company |
Tembo 4x4 e-LV B.V. | Netherlands | 100% | Operating company |
FD 4x4 Centre B.V. | Netherlands | 100% | Operating company |
| VivoPower International IMEA DMCC | United Arab Emirates | 100% | Operating company |
Notwithstanding a 40% ownership by the Company, V.V.P. Holdings Inc is under the control of VivoPower USA LLC, a Delaware limited liability company (“Vivo USA”),Pty Ltd, and therefore is consolidated into the group financial statements of VivoPower International Services Ltd, a Jersey based company, and Aevitas, an Australian based company, each of which is a wholly-owned subsidiary of VivoPower.PLC.
D. Property, Plant and Equipment
Our corporate headquarters is located in London, United Kingdom where we currently lease approximately 420 square feet of space under a lease expiring in December 2017.Kingdom.
We lease all of our facilities and do not own any real property. We intend to procure additional space as we add employees and expand geographically. We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate planned expansion of our operations. A new lease was taken out for Kenshaw Electrical Pty Ltd for an additional workshop facility in Newcastle, New South Wales to relieve capacity constraints. Leased real property as at June 30, 2023 is as follows:
Company | Office Location | Purpose |
VivoPower Pty Ltd | Sydney, Australia | SES and Solar Development |
Kenshaw Electrical Pty Limited | Cardiff, Australia | Head office, workshop, service |
Kenshaw Electrical Pty Limited | Cardiff, Australia | Workshop, service - additional facility |
Kenshaw Electrical Pty Limited | Canberra, Australia | Regional service |
Kenshaw Electrical Pty Limited | Sydney, Australia | Regional service |
Tembo 4x4 e-LV B.V. | Eindhoven, Netherlands | Head office, workshop, service |
VivoPower International PLC | London, United Kingdom | Corporate office |
The groupCompany has $3.7 million invested in property, plant, and equipment at June 30, 2023 (June 30, 2022: $3.7 million; June 30, 2021: $2.6 million). This includes plant and equipment of $1.0 million (June 30, 2022: $0.7 million; June 30, 2021: $0.7 million), motor vehicles of $0.2 million (June 30, 2022: $0.2 million; June 30, 2021: $0.6 millionmillion), computer equipment, fittings and equipment of vehicle assets, $0.3 million (June 30, 2022: $0.3 million; June 30, 2021: $0.2 million), and right-of-use assets of which are held under finance leases. The group also has $0.9$2.3 million of solar panel systems relating to our Australian Amaroo project.(June 30, 2022: $2.5 million; June 30, 2021: $1.0 million), representing leases for property and motor vehicles.
In addition, as part of our BTO business model, we co-investinvest in solar energydevelopment projects that include long-term leases, easements or other real property rights relating to the property on which such projects are developed. SomeThe costs of these projects, suchleases are capitalized as our two projects in North Carolina, are material to our business.part of project development costs and accounted for as investments.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of numerous factors, including, but not limited to, the risks discussed in this Annual Report in“Item 3. Key Information— - D. Risk Factors.Factors”” or in other parts of this Annual Report. Our audited consolidated financial statements included elsewhere in this Annual Report are prepared in accordance with IFRS, as issued by the International Accounting Standards Board and are presented in U.S. dollars.
OverviewNote, results reported in years ended June 30, 2022 and 2021 have been adjusted to exclude the results of the ex-solar operations of Aevitas Solar and shown as a single line item in the income statement after profit after tax. Details of results for discontinued operations are included in Note 22 to the financial statements.
VivoPower operates a global solar power platform and has developed a strategy that we call “build, transfer, operate” (“BTO”). We believe that the BTO strategy is a low risk, asset-light approach to the renewable energy market, with a high return, capital efficient profile. The BTO strategy allows us to reinvest our profits and grow a base of recurring revenues, while providing data driven energy services to our power clients in the commercial, industrial and government sectors.
Pursuant to the BTO strategy, VivoPower (i) builds solar power plants that generate electricity from PV solar module installations for consumption by utilities or commercial offtakers of such electricity, and which are supported by long-term PPAs with creditworthy customers, (ii) transfers ownership of the projects to investors (importantly, securing equity capital from investors prior to building the projects), and (iii) operates the projects to enhance value over their useful life.
We derive revenue primarily from development services relating to the building and construction of solar projects, which generated $24.6 million in revenue for the year ended March 31, 2017. We recognize revenue on a percentage completion basis as the value is accrued by the end user over the life of the contract. In addition to our global BTO business model, VivoPower, through its wholly-owned Australian subsidiary, Aevitas, provides energy and power generation solutions including design, supply, installation and maintenance of power and control systems, with an increasing focus on solar, renewable energy, and energy efficiency. Aevitas has a large and diverse base of commercial and industrial customers, and is considered a trusted power adviser.
During the year ended March 31, 2017, the group generated revenue of $32.3 million, net income of $5.6 million, Adjusted EBITDA of $18.9 million and Adjusted Net Income of $12.3 million. As of March 31, 2017, the group had net assets of $64.6 million, with intangible assets, including goodwill, of $46.3 million and investments of $18.1 million. There were no measurable operations in the two month period of 2016 for which to compare the current year results.
As of March 31, 2017, the group’s current assets were $30.8 million of which $11.0 million was cash and cash equivalents. Current liabilities were $12.2 million, which equals asset-to-liability ratio of 2.5:1.
Revenue growth was supported by the completion of the group’s first solar project and the near completion of a second project, both of which are located in North Carolina, United States. Combined revenue for both projects was $24.6 million with further revenue of $0.4 million due to the power generation of the first project. Further BTO revenue in Australia from projects acquired in December 2016 generated $0.1 million. Aevitas generated revenue of $5.6 million for the three months ended March 31, 2017. The financial statements of our subsidiaries are recorded in their native currency, then converted to U.S. dollars for consolidated reporting. See “Item 3.A. Selected Financial Data” for a table of relevant exchange rate history.
The group generated cash flows from operating activities of $6.4 million. At March 31, 2017, the group had cash reserves of $11.0 million and debt of $20.0 million, giving a net debt position of $9.0 million.
The group financed activities until the Company became public through a loan from AWN, a publicly traded company in Australia of which VivoPower was, prior to December 28, 2016, a wholly owned subsidiary. At March 31, 2017, the amounts owing to AWN were $20.5 million, of which $19.0 million was a non-current related party loan with an initial repayment date of April 1, 2018. The remaining balance of $1.5 million was a current liability which was repaid in June 2017.
During the year ended March 31, 2017, the group invested $18.0 million in two solar energy projects in the U.S. in North Carolina. The group, as part of its long-term strategy, has retained a 14.5% and 10% equity interest in the projects respectively which we expect will generate recurring revenue in the future. In addition to the U.S. solar assets, VivoPower has aggregated a 2.6 megawatt portfolio of Commercial, Industrial and Government (“CIG”) solar assets in Australia that are in the process of being structured for BTO transactions. These projects are considered to be “behind-the-meter,” because they are designed for on-site use in the commercial facility, and do not require transmission or distribution through utility owned assets.
Key Factors Affecting Our Performance
We believe that the growth of our business and our future success are dependent upon a number of key factors, including the following:
Acquiring new projects. A central tenet of our BTO model is to create a profit from buying and building projects and then transferring the completed projects to long term investors. There are many factors involved in this process, each of which might serve to increase or decrease our revenues and earnings.
The first step is to capitalize on relationships within a highly fragmented developer market to acquire projects at a lower cost than buying operating assets. We employ professionals with relationships in the market as well as the experience to identify and value projects that are available for sale. These professionals screen numerous opportunities to identify the most rewarding projects, and then conduct due diligence and negotiate a purchase price. Our senior management reviews and evaluates investment opportunities identified by our professionals in a formal investment committee process. For an acquisition to be successful, the process of originating, evaluating and concluding investments must be thorough and careful. We believe that we have the experience to conduct this review and acquisition phase in a manner that will generate attractive acquisition opportunities.
The next critical step is to identify long term investors that will commit to acquire completed projects at a valuation which provides an attractive profit on our investment. Not only must we maintain strong relationships and credibility with institutional investors to secure such commitments, but we also have to manage the investment process conducted by these investors so to avoid unexpected problems and anticipate likely outcomes. Importantly, because we will seek to secure commitments in advance of building projects, if we fail to manage this process properly, we may not be able to ultimately complete the investment by such investors, and even if the investment is completed, the profit may not meet our expectations. We believe that we have the experience and capabilities to secure long-term capital on terms and conditions that will allow us to generate the profit that we predict, and to execute the transfer of the projects to investors as we predict.
The third critical step is to capture the value of the optimal engineering, procurement and financing strategies, to ensure that we can build projects on time and on budget. Equally important, it is essential that the project technical specifications, such as energy output and operating costs, can generate the level of profit expected by the long-term investors. In order to maintain our profit expectations, it is critical to manage all phases of design, engineering, procurement and financing in the manner that we predict. We believe that our engineering team actively manages all stages of design and construction to ensure that projects are not only built on time and on budget, but are also able to generate superior returns.
Investment inGrowth. We are expanding our operations, increasing our headcount and developing software to both enhance our current offerings and build new features. We expect our total operating expenses to increase, particularly as we continue to increase the number of personnel involved in our project development and financing activities and in our general and administrative activities.
Currency Fluctuations. We conduct business in the United States, Australia and the United Kingdom and other countries in Asia and elsewhere. As a result, we are exposed to risks associated with fluctuations in currency exchange rates, particularly between the U.S. dollar, the British Pound and the Australian dollar.
Regulation.We operate in a significant number of regulated markets. The degree of regulation to which our activities are subject varies by country. In a number of the countries in which we operate, regulation is carried out by national regulatory authorities. In some countries, such as the United States and, to a certain degree, Australia, there are various additional layers of regulation at the state, regional and/or local levels. In such countries, the scope, nature, and extent of regulation may differ among the various states, regions and/or localities.
While we believe the requisite authorizations, permits, and approvals for our existing activities have been obtained and that our activities are operated in substantial compliance with applicable laws and regulations, we remain subject to a varied and complex body of laws and regulations that both public officials and private parties may seek to enforce and that can have a significant impact on our results of operations.
Power purchase agreements and other contracted revenue agreements.We seek investments in projects that are supported by long term power purchase agreements with credit worthy counterparties, pursuant to which the price for the sale of electricity is highly certain. We believe that long term investors prefer projects with such characteristics, and will consider such projects to be more valuable. However, it is not certain that sufficient number of projects with such PPAs will exist, as the market could be affected by, among other things, the presence or absence of governmental incentives or mandates, prevailing market prices, and the availability of other energy sources. Power prices in the markets in which we conduct business can be volatile, and the willingness of credit worthy counterparties to commit to purchase power from our projects may not be sufficient to support our profit expectations.
Tax incentives in the United States for renewable energy assets.U.S. federal, state and local governments have established numerous incentives and financial mechanisms to reduce the cost of renewable energy and spur the development of energy from renewable, non-carbon–based, sources. Some of the major tax incentives applied in our projects are, among others, ITC and accelerated depreciation under the MACRS.
Investments.The level of BTO revenue and recurring revenue after transfer of project ownership to the long-term owners depends on the terms and structure of our equity interest in the applicable project.
Market demand for solar power. Our business and revenues depend on the demand for solar power. Although solar power technology has been used for several decades, the solar power market has only started to grow significantly in the past few years. See “Item 3.C. Risk Factors”
Access to adequate financing with competitive interest rates and terms.The development and construction of solar projects is capital intensive, and requires significant amounts of debt and equity financing, as well as tax equity financing in the U.S. In order to execute our BTO model, we require access to capital in amounts and on terms that allow us to build and transfer projects profitably. We believe that sufficient capital is available in amounts and terms that we currently require in all of the markets in which we operate, and we maintain excellent and current relationships with a wide variety of institutional and strategic providers of such capital. In addition, we intend to utilize shareholder contributions and our own operating cash flows to supplement these traditional sources of financing.
A typical project will require both a construction loan and an equity commitment sufficient to provide the funds required to complete the construction of the project. The construction loan may be obtained from project finance banks or institutional investors, and may be structured as a short term construction period-only loan, or a longer term which may equal or exceed the term of the project PPA. In U.S. projects, this loan may be supplemented by a commitment by a tax equity investor for a portion of the construction financing. In addition, we intend to seek an equity commitment from a long-term investor in advance of committing to build a project, which can serve to minimize our own equity investment amounts.
As our business continues to grow and as we develop solar projects, our ability to generate revenues and profits depends on securing sufficient amounts of debt and equity financing on suitable terms within the time periods required. As our portfolio continues to grow, especially with the addition of larger capacity solar projects, we expect to incur significantly more borrowings from banks and other lenders. Fluctuations in interest rates and currencies, for which we currently do not hedge our exposure, may impact our cost of financing and affect our financial condition and results of operations. Our access to such financing, and therefore our results of operations, are also significantly affected by financial institutions’ confidence in the success of our business, the renewable energy industry as a whole and general financial market conditions.
Our project development and operations capabilities.A. Our financial condition and results of operations depend on our ability to successfully continue to build and transfer new solar developments and operate our existing solar investments. As we continue to grow, we expect to build and manage a greater number of large-scale solar projects and to enter new geographies, which we expect to present additional challenges to our internal processes, external construction management, working capital management and financing capabilities. Our financial condition, results of operations and future success depend, to a significant extent, on our ability to continue to identify suitable sites, expand our pipeline of solar projects with attractive returns, obtain required regulatory approvals, arrange necessary financing, manage the construction of our solar projects on time and within budget and successfully operate solar investments.
Key Performance Indicators
In addition to traditional financial metrics, such as revenue, net income/(loss) and revenue growth trends, we monitor several other key performance indicators to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies. The key performance indicators that we monitor are as follows:
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Gross Profit Percentage. Gross profit percentage is calculated as gross profit divided by revenue. We provide our services in each of the regions in which we operate: United States, United Kingdom and Australasia. Costs related to supporting and hosting our product offerings and delivering our services are incurred in the region in which the related revenue is recognized. As a result, our gross profit percentage in actual terms is the same as it would be on a constant currency basis.
Project pipeline. We maintain an active pipeline of qualified projects on a global basis, representing projects which we intend to acquire from developers and expect to generate BTO transactions. Currently our primary markets of activity are the U.S. and Australia, but we are also maintaining activities in Europe, Latin America and Asia. We define qualified projects to be potential acquisitions subject to a term sheet or letter of intent, pending diligence and financing, or similar discussion for potential acquisition. On this basis, our current pipeline is approximately 2.3 gigawatts, 78% of which is in the United States, 12% in Europe, 7% is Latin America and 3% in Australasia. We believe that our pipeline is sufficient to support a strong financial profile, and if we are able to replicate the same level BTO revenues per megawatt for 2018 as we achieved in 2017, we believe that we can achieve our EBITDA guidance for the year ended March 30, 2018 by converting only 125 megawatts, or approximately 5.4% of our qualified pipeline.
In the United States, VivoPower entered into a joint venture in April 2017 with the developer Innovative Solar for a portfolio of 37 solar projects in 12 different states, representing a total potential electricity generating capacity of approximately 1.8 gigawatts. The projects in the joint venture are all at a “pre-developed” stage, in that several key development milestones must be achieved before VivoPower will acquire the projects. Importantly, the joint venture is actively pursuing interconnection rights and power purchase agreements with local utilities. It is not assured that all projects will achieve a developed stage, and even if some of the projects reach a developed stage, it is not assured that the projects will provide an attractive return profile. As a result, the amount of BTO revenues and EBITDA cannot be predicted with certainty. However, we believe that the ability to control a large diversified portfolio of early stage projects is valuable, and we anticipate that this joint venture will provide the opportunity to generate BTO revenues and profits for several years as the individual projects in the portfolio mature. Furthermore, VivoPower believes that the value of the projects in the portfolio will increase given the Company’s expectation that equipment and installation costs will continue to fall at a rapid rate, hence increasing the return profile of the projects.
In Australia, we are leveraging Aevitas’s longstanding relationships with an extensive base of commercial and industrial customers and originating behind the meter solar projects that we can then seek to convert into BTO revenues. To enhance our ability to transfer projects for which we can provide ongoing power services, VivoPower recently consummated an Alliance Agreement with ReNu Energy in Australia. Under this agreement, ReNu Energy has agreed to pay an annual alliance fee for the right to make a first offer to acquire projects originated by VivoPower that are smaller than 5 MW’s. This alliance agreement will enable VivoPower to generate BTO revenues in addition to the alliance fee. We anticipate that this relationship will grow profitably over many years.
In addition to our joint venture in the United States and the Alliance Agreement with ReNu Energy, VivoPower is exploring attractive projects that fit our BTO business strategy in Europe, Asia and Latin America.
The portfolio provides VivoPower with significant flexibility as it also presents the opportunity to realize profits on the sale of solar systems at advanced stages of development.
Components of Consolidated Statements of Operations
Revenue
During the year ended March 31, 2017, we generated a substantial proportion of our revenue from development fees connected to the successful completion of our first two solar projects, under our BTO business model, in North Carolina, USA. $24.9 million or 77% of our revenue was generated on a percentage completion basis during the course of FY 2017.
Revenue generated through the Aevitas operations is recognized in two ways. On smaller projects revenue is recognized when the project is completed and is invoiced at that time. On larger projects, revenue is recognized on the achievement of specific milestones defined in each individual project. When the milestones are reached the customer is invoiced and the revenue is then recognized.
We have also generated revenue in the United Kingdom through a global preferred supplier arrangement and based upon the terms of the contract revenue is recognized when the legal obligation to pay has been satisfied.
The amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. The level of deferred revenue is low as a percentage of total amount invoiced. The level of deferred revenue as of March 31, 2017 was $0.3 million and is all short-term in nature.
BTO revenue is recognized on a percentage completion basis. Projects are invoiced upon substantial completion requiring revenue to be accrued as a project progresses through different stages of completion. Our deferred revenue as of March 31, 2017 was $13.2 million. The project to which this deferred revenue relates was completed in May 2017 and subsequently invoiced and paid during the same month.
Cost of Revenue
Cost of revenue relating to Aevitas in Australasia consists primarily of product or equipment purchases, direct labor costs including staff salary costs, motor vehicle expenses and any directly related costs attributable to production and the cost of sales. We allocate overhead costs, such as rent and facility costs and telecommunication costs to arrive at a true cost of sale.
Revenues in the U.S. are the proceeds of the development fees of the two projects in North Carolina. There are no costs of revenue associated with these development fees.
In the U.K., the proceeds of our global preferred supplier arrangement have no associated cost of revenue.
Administrative Expenses
Administrative expenses consist primarily of operational expenses, such as those related to employee salaries and benefits, professional fees and expenses, office, rental and travel expenses and other expenses.
Depreciation
Depreciation is charged on property plant and equipment on a straight-line basis and is charged in the month of addition. We depreciate the following class of assets at differing rates dependent on their estimated useful lives. The net book value of assets held as of March 31, 2017 was $2.2 million.
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Amortization
Amortization costs relate to the amortization of intangible assets generated on the acquisition of VivoPower Australia and Aevitas as part of the Business Combination. The intangible assets identified in the acquisition of Aevitas and VivoPower Australia and their estimated useful life is provided in the table below:
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Goodwill under IFRS is subject to an annual impairment review and following the impairment review as of March 31, 2017. No impairment was required at that date based upon discounted future cash flow calculations.
Transaction Related Costs
Non-recurring costs relating to the transaction were incurred in connection with the Business Combination. The costs incurred were recharged costs from AWN including legal, accounting and professional fees in relation to our operations in the United States. The costs by nature were one-time incurrences, and therefore, we believe have no bearing on the financial performance of our business. To enable comparability in future periods, the costs are disclosed separately on the face of the Statement of Comprehensive Income.
Other Income (Expense)
Other income (expense) is comprised of the following items:
Interest income
Interest income includes interest income earned on our cash and cash equivalents balance. We expect interest income to vary each reporting period depending on our average cash and cash equivalents balance during the period and market interest rates.
Interest expense
Interest expense consists primarily of interest expense associated with the interest payable on the convertible preference shares and convertible loan notes and our outstanding debt with AWN.
Foreign exchange income (expense)
Foreign exchange income (expense) consists primarily of foreign exchange fluctuations related to short-term intercompany accounts and foreign currency exchange gains and losses related to transactions denominated in currencies other than the functional currency for each of our subsidiaries. We expect our foreign currency exchange gains and losses to continue to fluctuate in the future as foreign currency exchange rates change. We expect our exposure to currency fluctuations to be minimal and immaterial, and as such, have not entered into any hedging contracts.
Provision forIncome Taxes
We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business. We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
A.Operating Results
Overview
Year Ended June 30 | ||||||||||||||||||||||||||||||||||||
2023 | 2022 (restated) | 2021 | ||||||||||||||||||||||||||||||||||
(US dollars in thousands) | Continuing | Discontinued | Total | Continuing | Discontinued | Total | Continuing | Discontinued | Total | |||||||||||||||||||||||||||
Revenue from contracts with customers | 15,060 | - | 15,060 | 22,448 | 15,168 | 37,616 | 23,975 | 16,436 | 40,411 | |||||||||||||||||||||||||||
Cost of sales | (13,472 | ) | - | (13,472 | ) | (20,308 | ) | (13,842 | ) | (34,150 | ) | (19,614 | ) | (14,470 | ) | (34,084 | ) | |||||||||||||||||||
Cost of sales - non-recurring events | (3,850 | ) | - | (3,850 | ) | (1,881 | ) | - | (1,881 | ) | - | - | - | |||||||||||||||||||||||
Gross profit | (2,262 | ) | - | (2,262 | ) | 259 | 1,326 | 1,585 | 4,361 | 1,966 | 6,327 | |||||||||||||||||||||||||
General and administrative expenses | (7,620 | ) | - | (7,620 | ) | (13,811 | ) | (1,485 | ) | (15,296 | ) | (9,651 | ) | (1,482 | ) | (11,133 | ) | |||||||||||||||||||
Other gains/(losses) | 30 | (4,207 | ) | (4,177 | ) | (13 | ) | - | (13 | ) | 769 | - | 769 | |||||||||||||||||||||||
Other income | 119 | - | 119 | 662 | 324 | 986 | 960 | 552 | 1,512 | |||||||||||||||||||||||||||
Depreciation of property and equipment | (750 | ) | - | (750 | ) | (770 | ) | (445 | ) | (1,215 | ) | (638 | ) | (451 | ) | (1,089 | ) | |||||||||||||||||||
Amortization of intangible assets | (831 | ) | (831 | ) | (850 | ) | (322 | ) | (1,172 | ) | (815 | ) | (352 | ) | (1,167 | ) | ||||||||||||||||||||
Operating (loss)/profit | (11,314 | ) | (4,207 | ) | (15,521 | ) | (14,523 | ) | (602 | ) | (15,125 | ) | (5,014 | ) | 233 | (4,781 | ) | |||||||||||||||||||
Restructuring and other non-recurring costs | (2,084 | ) | - | (2,084 | ) | (443 | ) | - | (443 | ) | (2,877 | ) | (3 | ) | (2,880 | ) | ||||||||||||||||||||
Finance income | 1,156 | - | 1,156 | 173 | 2 | 175 | 2,176 | 3 | 2,179 | |||||||||||||||||||||||||||
Finance expense | (7,366 | ) | - | (7,366 | ) | (8,604 | ) | (174 | ) | (8,778 | ) | (2,450 | ) | (140 | ) | (2,590 | ) | |||||||||||||||||||
Loss before income tax | (19,608 | ) | (4,207 | ) | (23,815 | ) | (23,397 | ) | (774 | ) | (24,171 | ) | (8,165 | ) | 93 | (8,072 | ) | |||||||||||||||||||
Income tax | (540 | ) | - | (540 | ) | 1,968 | 149 | 2,117 | 138 | (24 | ) | 114 | ||||||||||||||||||||||||
Loss for the period | (20,148 | ) | (4,207 | ) | (24,355 | ) | (21,429 | ) | (625 | ) | (22,054 | ) | (8,027 | ) | 69 | (7,958 | ) | |||||||||||||||||||
Adjusted EBITDA | (5,735 | ) | (4,207 | ) | (9,942 | ) | (9,122 | ) | 166 | (8,956 | ) | (2,483 | ) | 1,035 | (1,448 | ) | ||||||||||||||||||||
Management analyzes our business in five reportable segments: Critical Power Services, Electric Vehicles, Sustainable Energy Solutions, Solar Development, and Corporate Office.
During the year ended March 31, 2017,June 30, 2023, the groupGroup (including discontinued operations) generated total revenue of $15.1 million, gross loss of $2.3 million, operating loss of $15.3 million and a net loss of $22.4 million. Of these amounts, continuing operations of the Group generated revenue of $32.3$15.1 million, gross loss of $2.3 million, operating loss of $11.1 million and a net loss of $18.1 million. For the year ended June 30, 2022, the Group (including discontinued operations) generated total revenue of $37.6 million, gross profit of $1.6 million, operating loss of $15.1 million and a net loss of $22.1 million. Of these amounts, continuing operations of the Group generated revenue of $22.4 million, gross profit of $0.3 million, operating loss of $14.5 million and a net loss of $21.4 million, including $0.5 million prior year adjustments relating to timing on the recognition of general and administration expenses from 2023 to 2022.
Adjusted EBITDA (including discontinued operations) for the year ended June 30, 2023 was a loss of $9.9 million, compared to a loss of $9.0 million for the previous year. Adjusted EBITDA for continuing operations was a loss of $5.7 million, compared to a loss of $9.1 million for the previous year, restated for $0.5 million of general and administration expenses from 2023 to 2022. Adjusted EBITDA is a non-IFRS financial measure. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, impairment of assets, impairment of goodwill, other finance income and expenses, one-off non-recurring costs including restructuring expenses and non-cash equity remuneration.
The results for the year ended June 30, 2023 reflect a reduction in the number of Aevitas Solar projects completed in the year and the impact of severe one-off weather events on the Edenvale project, which incurred a $3.9 million loss.
Revenue in Critical Power Services (excluding discontinued operations) declined by $7.4 million to $13.6 million in the year, impacted by $6 million from a reduction in the number of solar projects undertaken by Aevitas Solar. Kenshaw, which expanded into an additional facility in Newcastle, New South Wales due to increasing demand, saw revenues flat compared to the previous year on a constant AUD to USD exchange rate, with an increase in higher margin sales in generator service and motor sales and overhaul, offset by a reduction in generator sales and installation due to competitive market conditions and constrained supply chain. Electric Vehicles contributed $1.5 million revenue in the year, predominantly from non-EV ruggedization conversions, whilst EV activity is focused entirely on product development. There was no revenue contribution from Solar Development or Sustainable Energy Solutions in the year ended June 30, 2023 (year ended June 30, 2022: nil).
Gross profit (including discontinued operations) decreased by $3.8 million to a loss of $2.3 million, although on a continuing basis excluding J.A. Martin ex-Solar operations, gross profit decreased by $2.5 million to a loss of $2.3 million. In percentage terms, gross margin from continuing operations fell from 1% to (14%), largely driven by one-off extreme weather events impact on Aevitas Solar projects in FY2023, having a more significant impact than COVID-19 lockdowns and impact on supply chain in the prior year. Gross loss in FY2023 includes $3.9 million specific costs of non-recurring extreme weather events on Edenvale project for AevitasSolar. In the prior year, $1.9 million of non-recurring costs on the Blue Grass project were also incurred in Aevitas Solar, due to state border closures during the project execution phase. Excluding these non-recurring costs, gross margin for continuing operations increased from 9.5% in the prior year, to 10.5% in FY2023, reflecting increased focus on high margin service revenues in Kenshaw. Electric Vehicles contributed nil gross profit (prior year: nil) while Solar Development contributed nil (prior year: nil).
The gain on Solar Development projects from continuing operations was net nil for the year ended June 30, 2023 . Included within discontinued operations was a $4.2 million loss on disposal of J.A. Martin ex-solar operations in July 2022. Compared to the book value of assets less liabilities held for sale as at June 30, 2023, the loss results primarily from a reduction in the contingent consideration payable based on the earn out fee calculated as a multiple of the post disposal earnings of J.A. Martin ex-solar in FY2023. The gain on Solar Development projects from continuing operations was net nil for the year ended June 30, 2022, comprising a $0.1 million write off of costs incurred on uneconomic projects in Caret, offset by a $0.1 million gain on sale of tangible assets in Critical Power Systems.
The results for the year ended June 30, 2023 also reflect a restated $6.2 million decrease in general and administrative costs related to continuing operations to $7.6 million. The decrease includes a $1.1 million decrease in marketing expenses, a $1.7 million decrease in non-cash equity remuneration, and a $3.6 million decrease in salaries and other overheads from reduction in Tembo and Aevitas executive management and administrative team.
The results of operations for the year ended June 30, 2023 include $2.1 million restructuring and other non-recurring costs primarily due a provision in respect of fiscal refunds on prior receivables, which the Company is defending.
Net finance costs from continuing operations of $6.2 million for the year ended June 30, 2023 include $3.8 million interest on related party loans, $1.6 million net incomeforeign exchange losses and $0.8 million combined costs from dividends from Aevitas Preference Shares, interest on leases and interest on other debt.
As at June 30, 2023, the Group’s current assets were $10.3 million (as at June 30, 2022: $21.7 million restated; June 30, 2021: $24.5 million restated), representing a decrease from June 30, 2022, mostly due to the disposal of $5.6assets held for sale relating to the J.A. Martin ex-solar segment (as at June 30, 2022: $8.2 million) upon the sale of the business to ARA in July 2022. Current assets were comprised of $0.6 million Adjusted EBITDA of cash and cash equivalents (as at June 30, 2022: $1.3 million; June 30, 2021: $8.6 million), $0.6 million of restricted cash (as at June 30, 2022: $1.2 million; June 30, 2021: $1.1 million;), and $7.0 million of trade and other receivables (as at June 30, 2022: $9.1 million; June 30, 2021: $12.8 million), and $2.1m of inventory (as at June 30, 2022: $1.9 million; June 30, 2021: $2.0 million). 30 June 2022 and 30 June 2021 current assets were restated for a $0.5m reclassification from Intangible Assets to Deposits.
Current liabilities were $18.9 million as at June 30, 2023 (as at June 30, 2022, $23.3 million restated; June 30, 2021: $13.4 million). The decrease from prior year reflects negotiation of shareholder loans and Adjusted Net Incomeaccrued interest to non-current terms, and disposal of $12.3 million. liabilities held for sale (as at June 30, 2022, $1.5 million) following sale of J.A. Martin ex-solar to ARA in July 2022. 30 June 2022 current liabilities were restated for an accrual of $0.5m expenses relating to 2022 but incurred in 2023.
Current asset-to-liability ratio as at June 30, 2023 was 0.54:1 (as at June 30, 2022 restated: 0.93:1; June 30, 2021 restated: 1.82:1).
As of March 31, 2017,at June 30, 2023, the groupCompany had net assets of $64.6$3.7 million with(as at June 30, 2022 restated, $21.6 million; June 30, 2021: $40.4 million), including intangible assets including goodwill, of $46.3$42.2 million (as at June 30, 2022 restated: $39.6 million; June 30, 2021 restated: $46 million). Property, plant and investments of $18.1 million. Thereequipment remained at $3.7 million as at June 30, 2023 (as at June 30, 2022, $3.7 million), mainly reflecting $0.6 million capital expenditure on plant and equipment, an additional leased property in Kenshaw, offset by depreciation charges. 30 June 2022 and 30 June 2021 were no measurable operations in the two month period of 2016restated for whicha $0.5m reclassification from Intangible Assets to compare the current year results.Deposits.
As of March 31, 2017, the group’s current assets were $30.8 million of which $11.0 million was cash and cash equivalents. Current liabilities were $12.2 million, which equals asset-to-liability ratio of 2.5:1.
Revenue growth was supported by the completion of the group’s first solar project and the near completion of a second project, both of which are located in North Carolina, United States. Combined revenue for both projects was $24.6 million with further revenue of $0.4 million due to the power generation of the first project. Further BTO revenue in Australia from projects acquired in December 2016 generated $0.1 million. Aevitas generated revenue of $5.6 millionCash outflow for the 3 monthsyear ended March 31, 2017. The financial statements of our subsidiaries are recorded in their native currency, then adjusted to U.S. dollars for consolidated reporting. See “Item 3.A. Selected Financial Data” for a table of relevant exchange rate history.
The group generatedJune 30, 2023, was $0.7 million, arising from cash flowsoutflows from operating activities of $6.4 $8.6 million and from cash used in investing activities of $1.9 million partially offset by cash inflow from financing activities of $9.8million. At March 31, 2017,June 30, 2023, the groupCompany had cash reserves of $11.0$0.6 million (June 30, 2022: $1.3 million) and debt of $20.0$32.4 million (June 30, 2022: $28.6 million), giving a net debt position of $9.0 million.$31.8 million (June 30, 2022: $27.3 million).
Net cash outflows from investing activities of $1.9 million in the current year comprised $1.0 million net purchases of property, plant and equipment and $3.9 million investment in additional intangible assets pertaining to the EUV23 development project in Tembo, offset by the $2.9 million proceeds from the J.A Martin sale.
Cash inflows from financing activities of $9.8 million in the year ended June 30, 2023 comprises $5.1 million net proceeds from the Nasdaq shelf raise in July 2022 and $3.6 million bridging loans from related party AWN, $1.3 million additional debtor financing, less $0.9 million repayments of related party and other borrowings paid.
Year Ended June 30, 2023, Compared to Years Ended June 30, 2022 and June 30, 2021
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
Year Ended June 30, 2023 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | Total | Critical Power | |||||||||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Continuing | Services | |||||||||||||||||||||||||
Revenue from contracts with customers | 13,596 | - | 1,464 | - | - | 15,060 | - | 15,060 | ||||||||||||||||||||||||
Costs of sales - other | (11,900 | ) | - | (1,572 | ) | - | - | (13,472 | ) | - | (13,472 | ) | ||||||||||||||||||||
Cost of sales - non-recurring events | (3,850 | ) | - | - | - | - | (3,850 | ) | - | (3,850 | ) | |||||||||||||||||||||
Gross profit | (2,154 | ) | - | (108 | ) | - | - | (2,262 | ) | - | (2,262 | ) | ||||||||||||||||||||
General and administrative expenses | (1,390 | ) | (297 | ) | (1,005 | ) | (367 | ) | (4,561 | ) | (7,620 | ) | - | (7,620 | ) | |||||||||||||||||
Other gains/(losses) | - | - | - | 30 | - | 30 | (4,207 | ) | (4,177 | ) | ||||||||||||||||||||||
Other income | 50 | 69 | - | - | - | 119 | - | 119 | ||||||||||||||||||||||||
Depreciation and amortization | (895 | ) | - | (673 | ) | (3 | ) | (10 | ) | (1,581 | ) | - | (1,581 | ) | ||||||||||||||||||
Operating loss | (4,389 | ) | (228 | ) | (1,786 | ) | (340 | ) | (4,571 | ) | (11,314 | ) | (4,207 | ) | (15,521 | ) | ||||||||||||||||
Restructuring and other non-recurring costs | (1 | ) | - | (214 | ) | - | (1,869 | ) | (2,084 | ) | - | (2,084 | ) | |||||||||||||||||||
Finance expense - net | (6,841 | ) | (34 | ) | 936 | (50 | ) | (221 | ) | (6,210 | ) | - | (6,210 | ) | ||||||||||||||||||
Profit/(loss) before income tax | (11,231 | ) | (262 | ) | (1,064 | ) | (390 | ) | (6,661 | ) | (19,608 | ) | (4,207 | ) | (23,815 | ) | ||||||||||||||||
Income tax | (619 | ) | - | (40 | ) | 119 | - | (540 | ) | - | (540 | ) | ||||||||||||||||||||
Loss for the year | (11,850 | ) | (262 | ) | (1,104 | ) | (271 | ) | (6,661 | ) | (20,148 | ) | (4,207 | ) | (24,355 | ) | ||||||||||||||||
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
Year Ended June 30, 2022 (restated) | Critical Power | Solar | Electric | Sustainable Energy | Corporate | Total | Critical Power | |||||||||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Continuing | Services | |||||||||||||||||||||||||
Revenue from contracts with customers | 20,958 | - | 1,490 | - | - | 22,448 | 15,168 | 37,616 | ||||||||||||||||||||||||
Costs of sales - other | (18,804 | ) | - | (1,504 | ) | - | - | (20,308 | ) | (13,842 | ) | (34,150 | ) | |||||||||||||||||||
Cost of sales - non-recurring events | (1,881 | ) | - | - | - | - | (1,881 | ) | - | (1,881 | ) | |||||||||||||||||||||
Gross profit | 273 | - | (14 | ) | - | - | 259 | 1,326 | 1,585 | |||||||||||||||||||||||
General and administrative expenses | (1,568 | ) | (80 | ) | (2,901 | ) | (1,660 | ) | (7,602 | ) | (13,811 | ) | (1,485 | ) | (15,296 | ) | ||||||||||||||||
Other gains/(losses) | 103 | (139 | ) | - | 23 | - | (13 | ) | - | (13 | ) | |||||||||||||||||||||
Other income | 662 | - | - | - | - | 662 | 324 | 986 | ||||||||||||||||||||||||
Depreciation and amortization | (1,165 | ) | - | (443 | ) | (3 | ) | (9 | ) | (1,620 | ) | (767 | ) | (2,387 | ) | |||||||||||||||||
Operating loss | (1,695 | ) | (219 | ) | (3,358 | ) | (1,640 | ) | (7,611 | ) | (14,523 | ) | (602 | ) | (15,125 | ) | ||||||||||||||||
Restructuring and other non-recurring costs | 45 | - | (429 | ) | - | (59 | ) | (443 | ) | - | (443 | ) | ||||||||||||||||||||
Finance expense - net | (7,470 | ) | - | (974 | ) | 23 | (10 | ) | (8,431 | ) | (172 | ) | (8,603 | ) | ||||||||||||||||||
Profit/(loss) before income tax | (9,120 | ) | (219 | ) | (4,761 | ) | (1,617 | ) | (7,680 | ) | (23,397 | ) | (774 | ) | (24,171 | ) | ||||||||||||||||
Income tax | 1,349 | - | 575 | 192 | (148 | ) | 1,968 | 149 | 2,117 | |||||||||||||||||||||||
Loss for the year | (7,771 | ) | (219 | ) | (4,186 | ) | (1,425 | ) | (7,828 | ) | (21,429 | ) | (625 | ) | (22,054 | ) | ||||||||||||||||
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
Year Ended June 30, 2021 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | Total | Critical Power | |||||||||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Continuing | Services | |||||||||||||||||||||||||
Revenue | 22,396 | 185 | 1,394 | - | - | 23,975 | 16,436 | 40,411 | ||||||||||||||||||||||||
Costs of sales - other | (18,322 | ) | - | (1,292 | ) | - | - | (19,614 | ) | (14,470 | ) | (34,084 | ) | |||||||||||||||||||
Cost of sales - non-recurring events | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Gross profit | 4,074 | 185 | 102 | - | - | 4,361 | 1,966 | 6,327 | ||||||||||||||||||||||||
General and administrative expenses | (1,522 | ) | (1,309 | ) | (1,923 | ) | - | (4,897 | ) | (9,651 | ) | (1,482 | ) | (11,133 | ) | |||||||||||||||||
Other gains/(losses) | 36 | 733 | - | - | - | 769 | - | 769 | ||||||||||||||||||||||||
Other income | 960 | - | - | - | - | 960 | 552 | 1,512 | ||||||||||||||||||||||||
Depreciation and amortization | (1,099 | ) | (4 | ) | (346 | ) | - | (4 | ) | (1,453 | ) | (803 | ) | (2,256 | ) | |||||||||||||||||
Operating profit/(loss) | 2,449 | (395 | ) | (2,167 | ) | - | (4,901 | ) | (5,014 | ) | 233 | (4,781 | ) | |||||||||||||||||||
Restructuring and other non-recurring costs | (24 | ) | - | (631 | ) | - | (2,222 | ) | (2,877 | ) | (3 | ) | (2,880 | ) | ||||||||||||||||||
Finance expense - net | 1,824 | (24 | ) | (1 | ) | - | (2,073 | ) | (274 | ) | (137 | ) | (411 | ) | ||||||||||||||||||
Profit/(loss) before income tax | 4,249 | (419 | ) | (2,799 | ) | - | (9,196 | ) | (8,165 | ) | 93 | (8,072 | ) | |||||||||||||||||||
Income tax | (691 | ) | 96 | 733 | - | - | 138 | (24 | ) | 114 | ||||||||||||||||||||||
Loss for the year | 3,558 | (323 | ) | (2,066 | ) | - | (9,196 | ) | (8,027 | ) | 69 | (7,958 | ) | |||||||||||||||||||
Income Statement from continuing operations
Revenue
Revenue from continuing operations for the year ended June 30, 2023 decreased $7.4 million or 33% to $15.1 million, from $22.4 million in the year ended June 30, 2022. Revenue from continuing operations for the year ended June 30, 2022 decreased $1.5 million or 6% to $22.4 million, from $24.0 million in the year ended June 30, 2021.
Revenue from continuing operations by product and service is follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Electrical products and related services | $ | 13,596 | $ | 20,958 | $ | 22,581 | ||||||
Electric vehicles & related products & services | 1,464 | 1,490 | 1,394 | |||||||||
Total revenue | $ | 15,060 | $ | 22,448 | $ | 23,975 | ||||||
The group financed activities untilsale of electrical products, related services and solutions is generated from our Australian-based Critical Power Services businesses and is focused on the Company became public through a loan from AWN, a publicly traded companydesign, supply, installation and maintenance of power and control systems. Revenue generated in Australia of which VivoPower was, prior to December 28, 2016, a wholly owned subsidiary. At March 31, 2017, the amounts owing to AWN were $20.5 million, of which $19.0 million was a non-current related party loan with an initial repayment date of April 1, 2018. The remaining balance of $1.5 million was a current liability which was repaid in June 2017.
VivoPower’s ordinary shares began trading on The Nasdaq Capital Market on December 29, 2016 under the symbol “VVPR.” The Business Combination generated gross proceeds of $22.5 million and we incurred transaction costs of $11.5 million. Contemporaneously with the transaction, the group completed the acquisitions of VivoPower Australia and Aevitas, for total cash consideration of $10.1 million.
During the year ended March 31, 2017, we invested $18.0 millionthese operations is recognized in two solar energyways. On smaller projects, in the U.S. The group, as part of its long-term strategy, has retained a 14.5% and 10% equity interest in the projects respectively which we expect will generate recurring revenue in the future. In addition to the U.S. solar assets, we aggregated a 2.6 megawatt portfolio of Commercial, Industrial and Government (“CIG”) solar assets in Australia that are in the process of being structured for BTO transactions. These projects are considered to be “behind-the-meter,” because they are designed for on-site use in the commercial facility, and do not require transmission or distribution through utility owned assets.
Currently, our operations consist of three geographic areas: United States, Australasia and the United Kingdom. Below are the results of operations for the twelve months ended March 31, 2017 broken down by geographic area:
| (US dollars in thousands) | United States | Australasia | United Kingdom | Total | ||||||||||||
Revenue | $ | 24,945 | $ | 5,705 | $ | 1,600 | $ | 32,250 | ||||||||
Costs of sales | - | 4,977 | - | 4,977 | ||||||||||||
Gross profit | 24,945 | 728 | 1,600 | 27,273 | ||||||||||||
Administrative expenses | 4,120 | 879 | 4,317 | 9,316 | ||||||||||||
Depreciation and amortization | 3 | 647 | 1 | 651 | ||||||||||||
Operating Profit | 20,822 | (798 | ) | (2,718 | ) | 17,306 | ||||||||||
Transaction related costs | 5,800 | - | - | 5,800 | ||||||||||||
Finance income | (1 | ) | (7 | ) | (5 | ) | (13 | ) | ||||||||
Finance expense | 172 | 372 | 56 | 600 | ||||||||||||
Profit before taxation | 14,851 | (1,163 | ) | (2,769 | ) | 10,919 | ||||||||||
Income tax expense | 6,116 | (332 | ) | (446 | ) | 5,338 | ||||||||||
Profit for the year | $ | 8,735 | $ | (831 | ) | $ | (2,323 | ) | $ | 5,581 | ||||||
Revenue
Period ended March31, | Period-to-periodchange | |||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | Amount | %Change | ||||||||||||
Revenue | $ | 32,250 | $ | 0 | $ | 32,250 | N.M. | |||||||||
Our business operates in three principal countries or regions:
United Kingdom
United States
Australasia
| (US dollars in thousands) | United States | Australasia | United Kingdom | Total | ||||||||||||
Revenue | $ | 24,945 | $ | 5,705 | $ | 1,600 | $ | 32,250 | ||||||||
Revenues of $24.9 million, or 77% of the total revenue was generated in the U.S. These revenues were primarily derived from successful completion of our first two solar projects, under our BTO business model, in North Carolina, USA. Components of revenue include: BTO revenues, electrical installations, electrical servicing and maintenance and generator sales. One of these projects became fully operational as of March 31, 2017. BTO Revenue is recognized on a percentage completion basis and the projects are invoiced upon substantial completion requiring the revenue to be accrued as a project progresses through different stages of completion. Deferred revenue as of March 31, 2017 was $13.2 million. The project to which this deferred revenue relates was completed in May 2017 and subsequently invoiced and paid during the same month.
Revenues of $5.7 million in Australasia were primarily generated through the Aevitas operations.
Revenues of $1.6m in the United Kingdom were derived through a global preferred supplier arrangement with one customer and based upon the terms of the contract the revenue is recognized when the legal obligation to pay has been satisfied.project is completed and is invoiced at that time. On larger projects, revenue is recognized on the achievement of specific milestones defined in each individual project. When the milestones and performance obligations are reached, the customer is invoiced, and the revenue is then recognized.
AsRevenue from continuing operations from electrical products, related services and solutions for the companyyear ended June 30, 2023, of $13.6 million decreased $7.4 million compared to the $21.0 million earned for the year ended June 30, 2022. This is primarily a result of a $6.0 million reduction in solar project revenue in Aevitas Solar, as a result of (i) Edenvale Solar Project being the only major active project during the current period, compared to having two major active projects, Hillston and Bluegrass, in the prior period, and (ii) ongoing skills shortages in the electrical and building & construction industry causing difficulties in resourcing projects to meet demand. Revenue was formedalso impacted by a net $0.9 million reduction in February 1, 2016, there were no reportableKenshaw revenues, although on a constant AUD to USD exchange rate basis, revenues in Kenshaw were flat on the two month period ended March 31, 2016.prior year. This comprises a $3.0 million reduction in generator sales and installation, offset by a $2.2 million increase in higher margin sales in generator service and motor sales and overhaul.
Revenue from electric vehicles, related products, services and solutions is generated from our Electric Vehicles businesses in the Netherlands: Tembo 4x4 and FD 4x4 Centre and is focused on electric vehicle conversion kits, and vehicle ruggedization products. Revenue generated in these operations is recognized when the products are delivered to customers. Revenue from electric vehicles and related products and services amounted to $1.5 million for the year ended June 30, 2023 compared to $1.5 million for the year ended June 30, 2022. No significant revenue was recognised on EUV conversion kit development whilst the EUV23 development project advanced towards production. Vehicle conversion revenues for ruggedization of non-EV vehicles benefitted from a significant ruggedization contract for 15 vehicles with Boliden mine in Ireland in FY2023. It should be noted that orders for the EUV23 conversion kits received in FY2023 were accounted for in Deferred Revenues on the Balance Sheet.
Revenue from continuing operations by geographic location is follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Australia | $ | 13,596 | $ | 20,958 | $ | 22,581 | ||||||
Netherlands | 1,464 | 1,490 | 1,394 | |||||||||
United States | - | - | - | |||||||||
Total revenue | $ | 15,060 | $ | 22,448 | $ | 23,975 | ||||||
Australian revenue of $13.6 million for the year ended June 30, 2023 was comprised solely of $13.6 million revenue from Critical Power Services provided by Kenshaw and Aevitas Solar. This compares to $21.0 million in the year ended June 30, 2022 and $22.6 million for the year ended June 30, 2021. The decrease in Australian revenue in the year ended June 30, 2023, compared to the prior year, is primarily driven by (i) Edenvale Solar Project being the only major active project during the current period, compared to having two major active projects, Hillston and Bluegrass, in the prior period, and (ii) ongoing skills shortages in the electrical and building & construction industry causing difficulties in resourcing projects to meet demand.
Netherlands revenue was $1.5 million for the year ended June 30, 2023 and $1.5 million for the year ended June 30, 2022, representing contribution from the Electric Vehicle business unit, in particular driven by Boliden ruggedization contracts in FY2023. The business remains primarily focused on development of its core EUV23 conversion kit solution for which it has already received orders. It should be noted that the cash down-payment on orders for the EUV23 conversion kits received in FY2023 were accounted for in Deferred Revenues on the Balance Sheet.
The Group had one customer representing more than 10% of revenue for the year ended June 30, 2023 (year ended June 30, 2022: one).
Cost of RevenueSales
Period endedMarch31, | Period-to-periodchange | |||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | Amount | %Change | ||||||||||||
Cost of revenue | $ | 4,977 | $ | 0 | $ | 4,977 | N.M. | |||||||||
Cost of revenue is generated through Aevitas in Australasia and consists primarily ofsales from continuing operations by product or equipmentservice is as follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Electrical products and related services - other | $ | 11,900 | $ | 18,804 | $ | 18,322 | ||||||
Electrical products and related services - extreme weather and COVID 19 disruption | 3,850 | 1,881 | - | |||||||||
Electric vehicles & related products & services | 1,572 | 1,504 | 1,292 | |||||||||
Other revenue | - | - | ||||||||||
Total cost of sales | $ | 17,322 | $ | 22,189 | $ | 19,614 | ||||||
Total cost of sales from continuing operations were $17.3 million for the year ended June 30, 2023, as compared to $22.2 million for the year ended June 30, 2022, and $19.6 million for the year ended June 30, 2021.
Cost of sales related to electrical products and related services consists of material purchases and direct labor costs including staff salary costs, motor vehicle expenses and any directly related costs attributable to production and themanufacturing, service, or other cost of sales. We allocate overheadCost of sales for electrical products and related services for the year ended June 30, 2023 included $3.9 million of non-recurring costs suchon the Edenvale project in Aevitas Solar, and $1.9 million of non-recurring costs on the Blue Grass project in Aevitas Solar in the prior year. Other Cost of sales related to electrical products and related services was $11.9 million for the year ended June 30, 2023, as rentcompared to $18.8 million for the year ended June 30, 2022 and facility$18.3 million for the year ended June 30, 2021. The decrease in cost of sales was primarily driven by the impact of reduction in solar projects in Aevitas Solar, and generator installations in Kenshaw.
Cost of sales related to electric vehicles and related products consists of material purchases and direct labor costs and telecommunicationany other costs directly attributable to arrive at a true costassembly. Cost of sale.sales related to electric vehicles and related products were $1.6 million for the year ended June 30, 2023 and $1.5 million for the year ended June 30, 2022.
As the company was formed in February 1, 2016, there were no reportable costs of revenue in that two month period.Gross Profit
Gross Profit/Gross Marginprofit from continuing operations by product and service is as follows:
OurGross profit/(loss) by product or service is as follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Electrical products and related services | $ | (2,154 | ) | $ | 273 | $ | 4,259 | |||||
Electric vehicles & related products & services | (108 | ) | (14 | ) | 102 | |||||||
Other revenue | - | - | - | |||||||||
Total gross (loss)/profit | $ | (2,262 | ) | $ | 259 | $ | 4,361 | |||||
The Company’s gross margin(loss)/ profit from continuing operations is equal to revenue less cost of revenue. Gross profit margin is equal to gross profit divided by revenue. Our gross profit marginsales and totalled a loss of $(2.3) million for the Aevitas segmentyear ended June 30, 2023, a profit of the business is affected by a number of factors, inducing the competitive pressures within the industry as well as the cost of labor and equipment. The gross profit margin for that segment was 12.8%$0.3 million for the periodyear ended March 31, 2017. AsJune 30, 2022, and a profit of $4.4 million for the company was acquiredyear ended June 30, 2021. Excluding one-off extreme COVID-19 disruption costs of $3.9 million on Edenvale project in late 2016, there were no reportableFY2023 and $1.9 million on the Blue Grass project in the prior year, gross profits decreased from $2.1 million in that period.the prior year to $1.6 million in FY2023. In percentage terms, gross margins decreased from 1.2% in the prior year, to (15.9%) in FY2023, but excluding one-off extreme weather and COVID-19 disruption costs, increased from 9.5% in the prior year to 10.5% in FY2023.
Operating ExpensesThe gross (loss) / profit from electrical products and related services (the Critical Power Services business) was a loss of $(2.2) million for the year ended June 30, 2023, compared to a profit of $0.3 million in the prior year. Excluding one-off extreme COVID-19 disruption costs of $3.9 million on Edenvale project in FY2023 and $1.9 million on Blue Grass project in the prior year, gross profits decreased from $2.2 million to $1.7 million in FY2023. In percentage terms, gross margins decreased from 1.5% in the prior year, to (18.1%) in FY2023, but excluding one-off extreme weather and COVID-19 disruption costs, increased from 11.5% to 14.3% in FY2023.
Period ended March 31, | Period-to-period change | |||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | Amount | % Change | ||||||||||||
Salaries and benefits | $ | 4,973 | $ | 102 | $ | 4,871 | 4,775 | % | ||||||||
Travel | 574 | 30 | 544 | 1,813 | % | |||||||||||
Professional Fees | 2,847 | 106 | 2,741 | 2,586 | % | |||||||||||
Office and Facilities | 220 | 40 | 180 | 450 | % | |||||||||||
Other | 702 | 1 | 701 | 70,100 | % | |||||||||||
Total general and administrative expenses | $ | 9,316 | $ | 279 | $ | 9,037 | 3,239 | % | ||||||||
The Electric Vehicle business generated a gross loss of $(0.1) million in the year ended June 30, 2023, (June 30, 2022, £nil), reflecting customized test kit componentry and assembly during low volume product development phase.
| (US dollars in thousands) | United States | Australasia | United Kingdom | Total | ||||||||||||
Administrative expenses | $ | 4,120 | $ | 879 | $ | 4,317 | $ | 9,316 | ||||||||
Salaries and benefits | 2,648 | 549 | 1,776 | 4,973 | ||||||||||||
Travel | 221 | 8 | 345 | 574 | ||||||||||||
Professional Fees | 1,057 | 92 | 1,698 | 2,847 | ||||||||||||
Office and Facilities | 8 | 35 | 177 | 220 | ||||||||||||
Other | $ | 186 | $ | 195 | $ | 321 | $ | 702 | ||||||||
General and Administrative Expenses
Year Ended June 30 | ||||||||
(US dollars in thousands) | 2023 | 2022 (restated) | ||||||
Salaries and benefits | $ | 3,333 | $ | 8,670 | ||||
Professional fees | 2,325 | 2,198 | ||||||
Insurance | 570 | 474 | ||||||
Travel | 187 | 141 | ||||||
IT licensing and support | 694 | 482 | ||||||
Marketing and public relations | 199 | 1,279 | ||||||
Office and other expenses | 312 | 567 | ||||||
Total general and administrative expenses | $ | 7,620 | $ | 13,811 | ||||
AdministrativeGeneral and administrative expenses from continuing operations decreased by $6.2 million to $7.6 million for the year ended June 30, 2023, compared to $13.8 million for the year ended June 30, 2022 restated. These expenses consist primarily of operational expenses, such as those related to employee salaries and benefits, professional fees, and expenses,insurance, travel, IT, marketing, office rental and travel expenses and other expenses. expenses, as well as vesting at grant date share price of non-cash equity incentive costs of share awards previously granted under the Company’s Omnibus Incentive Plan, in accordance with IFRS 2 Share-based Payments.
Salaries and benefits are $5.0were $3.3 million for the year ended June 30, 2023, (year ended June 30, 2022 restated, $8.7 million), accounting for 44% of total general and administrative expenses, (year ended June 30, 2022, 63%). Non-cash equity incentive costs contributed $0.1 million (year ended June 30, 2022: $1.9 million) to the salaries and benefits expense. Underlying cash salaries and benefits of $3.2 million decreased by $3.6 million or 53.4% of administrative expenses. Key management personnel account for $3.3 million53% in the year, reflecting a realignment of the $5.0 million. Travel expenses are $0.6 million, or 6.2%,team onto product development project activity and are a result of travel requirements to supportcommensurate increase in capitalized intangible costs, and reduction in Aevitas personnel following the global naturesale of the J.A. Martin ex-solar business. 30 June 2022 was restated for $0.1 million payroll costs paid in the period 30 June 2023 but relating to services provided in the period to 30 June 2022.
Professional fees at $2.8of $2.3 million for the year ended June 30, 2023 or 30.6%31% of total general and administrative expenses are(year ended June 30, 2022 restated, $2.2 million), were comprised of audit and accounting fees, consulting fees to support business development and legal fees. 30 June 2022 was restated for $0.3m legal expenses originally capitalised in the period to 30 June 2023 in Caret but should be expensed in the period to 30 June 2022.
Government SubsidiesInsurance expense of $0.6 million for the year ended June 30, 2023 was marginally higher than the $0.5 million for the year ended June 30, 2022 reflecting improved coverage.
SolarIT licensing and support expenses represent the costs of accounting, operations, email and office, file storage, and security software products and licenses. IT expenses increased by $0.2 million to $0.7 million for the year ended June 30, 2023, comprising $0.2 million in the Corporate Office segment due to increased activity to support growth activities and automate processes with scalable software.
Marketing expenses include promotional advertisements and trade shows. Marketing costs of $0.2 million for the year ended June 30, 2023 reduced significantly compared to the prior year, relying more efficiently on sales team-driven partnerships and customer presentations, than paid marketing arrangements.
Office and other expenses include office and meeting space rental, communication, bank fees and general office administrative costs. Office and other expenses of $0.3 million for the year ended June 30, 2023 decreased by $0.3 million in the year due to savings in Aevitas following sale of J.A. Martin ex-solar.
Other gains/(losses)
Other gains/(losses) were nil for the year ended June 30, 2023. This compares to a nil gain in the year ended June 30, 2022, comprising a $0.1 million write-off of costs incurred on uneconomic projects in Caret, offset by $0.1 million gain on sale of tangible assets in Critical Power Systems. In the year ended June 30, 2021 a gain of $0.8 million arose comprising a $0.9 million bargain purchase gain on acquisition of the remaining 50% interest in Caret offset by a $0.2 million loss on solar development projects in VivoPower Pty Ltd in Australia.
Other Income
Other income of $0.1 million for the year ended June 30, 2023 compares to $0.7 million for the year ended June 30, 2022, mainly relating to COVID-19 grants and subsidies in Critical Power Services in Australia.
Depreciation and amortization
Depreciation is charged on property, plant and equipment on a straight-line basis and is charged in the month of addition. We depreciate the following class of assets at differing rates dependent on their estimated useful lives. The net book value of assets held as of June 30, 2023, was $3.7 million (June 30, 2022: $3.7 million).
Tangible asset | Estimated useful life (in years) | |||
Computer equipment | 3 | |||
Fixtures and fittings | 3 to 20 | |||
Motor vehicles | 5 | |||
Plant and equipment | 3.5 to 10 | |||
Right-of-use assets | Remaining useful life | |||
Amortization costs relate to the amortization of intangible assets generated on the acquisition of:
● | VivoPower Australia and Aevitas - customer relationships and trade names |
● | Caret - solar project development expenditure |
● | Tembo - customer relationships and trade names |
The intangible assets identified above, and their estimated useful life is provided in the table below:
Identifiable intangible asset | Estimated useful life (in years) | |||
Development expenditure | 5 to 10 | |||
Customer relationships | 10 | |||
Trade names | 15 to 25 | |||
Favorable supply contracts | 15 | |||
Other | 5 | |||
Under IFRS, intangible assets and goodwill are subject to an annual impairment review. No impairment charge was recorded for the year, following the impairment review as of June 30, 2023.
An impairment review tests the recoverable amount of the cash-generating unit which gave rise to the intangible asset or goodwill in order to determine the existence or extent of any impairment loss. The recoverable amount is the higher of fair value less costs to sell and the value in use to the Group. An impairment loss is recognized to the extent that the carrying value exceeds the recoverable amount. In determining a cash-generating unit’s or asset’s value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and risks specific to the cash-generating unit or asset that have not already been included in the estimate of future cash flows. All impairment losses are recognized in the Statement of Comprehensive Income.
The Group conducts impairment tests on the carrying value of goodwill annually, or more frequently if there are any indications that goodwill might be impaired. The recoverable amount of the Cash Generating Unit (“CGU”) to which goodwill has been allocated are determined from value in use calculations. The key assumptions in the calculations are the discount rates applied, expected operating margin levels and long-term growth rates. Management estimates discount rates that reflect the current market assessments while margins and growth rates are based upon approved budgets and related projections.
The Group prepares cash flow forecasts using the approved budgets for the coming fiscal year and management projections for the following two years. Cash flows are also projected for subsequent years as management believe that the investment is held for the long term. These budgets and projections reflect management’s view of the expected market conditions and the position of the CGU’s products and services within those markets.
The CGU represented by Aevitas O Holdings Limited (being Critical Power Services) was assessed to have a value in excess of its carrying value and hence no additional adjustments to goodwill were considered necessary. Key assumptions used in the assessment of impairment were discount rate based on the weighted average cost of capital of 12% (June 30, 2022: 11%; June 30, 2021: 10%) and annual growth rate of 3% per annum.
The Sustainable Energy Solution ("SES") element of the CGU represented by VivoPower Pty Ltd goodwill was assessed to have a value in excess of its carrying value and hence no additional adjustments to goodwill were considered necessary. Key assumptions used in the assessment of impairment were weighted average cost of capital of 12.1% (June 30, 2022: 11.3%; June 30, 2021: 10.7%), a rapid growth phase of the business in years 1 through 5 in tandem with the growth of Tembo, with an average of 50% of electric light vehicles sold by the Company in fleet sizes over 50 vehicles will be sold with an additional sustainable energy generationsolution and with additional training services provided to partners and end-users.
The CGU represented by Tembo e-LV and subsidiaries was assessed to have a value in excess of its carrying value. Key assumptions used in the assessment of impairment were discount rate based on the weighted average cost of capital of 12% and average annual growth rate of 31% per annum in years 2-5. Growth rates reflect commencement of planned series production at volume during the 5 year period, as the product development project is completed for the current variant, to meet customer demand per sales agreements of over 15,000 units with international distribution partners, including Acces, Bodiz, GHH, ETC, Ulti-Mech, Petrosea and Fourche Maline. No sensitivity analysis is provided as the Company expects no foreseeable changes in the assumptions that would result in impairment of the goodwill.
The CGU represented by Caret solar projects was assessed to have a value in excess of its carrying value and hence no adjustments to capitalized development costs were considered necessary. Key assumptions used in the assessment of impairment were weighted average cost of capital of 12.9%, $4 million free cash flow from project sales in years 1-4, $14.4 million development fees from power-to-x partnerships.
Restructuring and Other Non-Recurring Costs
Restructuring costs by nature are one-time incurrences, and therefore, we believe have no bearing on the financial performance of our business. To enable comparability in future periods, the costs are disclosed separately on the face of our Statement of Comprehensive Income.
(US dollars in thousands) | Year Ended June 30 | |||||||||||
2023 | 2022 | 2021 | ||||||||||
Corporate restructuring - legal and other fees | $ | 200 | $ | 189 | $ | 179 | ||||||
Corporate restructuring - litigation provision | - | (128 | ) | 2,042 | ||||||||
| Fiscal refunds provision | 1,768 | - | - | |||||||||
Impairment and write-off | 422 | - | - | |||||||||
Relocation | - | - | 27 | |||||||||
Remediation costs | (361 | ) | 382 | - | ||||||||
Acqusition related costs | 55 | 631 | ||||||||||
Total restructuring costs | $ | 2,084 | $ | 443 | $ | 2,880 | ||||||
For the year ended June 30, 2023, the Company incurred non-recurring costs primarily related to a provision in respect of fiscal refunds on prior receivables, which the Company is defending. This also includes restructuring activities of $0.2 million and provision for inventory obsolescence and write-off of bad debts of $0.4 million, offset by $0.4 million release of remediation provision. For the year ended June 30, 2022, the Company incurred non-recurring costs related to restructuring activities of $0.2 million and one-off remediation expenses of $0.4 million, offset by $0.1 million release of unutilized provision related to the Comberg Claims. For the year ended June 30, 2021, the Company incurred non-recurring costs for legal fees as well as a litigation provision relating to legal costs and settlement monies pertaining to the Comberg Claims of $0.2 million and $2.0 million respectively (see “Item 8. Financial Information – A. Consolidated Statements and Other Financial Information – Legal Proceedings”).
Finance Income and Expense
Finance income of $1.2 million, $0.2 million and $2.2 million for the years ended June 30, 2023 and 2022and 2021 respectively comprise foreign exchange gains for the year.
Finance expense of $7.4 million for the year ended June 30, 2023 consists primarily of interest expense associated with the interest payable on outstanding related party loans with AWN of $3.8 million and foreign exchange losses of $2.7 million. In the year ended June 30, 2022, the Company incurred finance costs of $8.6 million comprising $3.4m interest on AWN loans, interest on Aevitas Preference Shares of $0.2 million, interest on lease liabilities of $0.1 million and net foreign exchange losses of $4.7 million. In the year ended June 30, 2021, the Company incurred finance costs of $2.5m consisting of $2.0 million on the parent company loan, interest on the Aevitas convertible preference share, loan notes and non-convertible preference shares of $1.2 million, interest and fees on debtor invoice financing in Critical Power Services of $0.1 million, and interest on lease liabilities of $0.1 million offset by $1.0 million of waived dividends and interest on convertible preference shared and loan notes.
The components of net finance expense from continuing operations are as follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Shareholder loan | $ | 3,801 | $ | 3,351 | $ | 1,986 | ||||||
Convertible preference shares and loan notes | 254 | 217 | 1,228 | |||||||||
Debtor invoice financing | 100 | 24 | 96 | |||||||||
Interest on leases | 171 | 133 | 91 | |||||||||
Other finance costs | 330 | 167 | 90 | |||||||||
Foreign exchange | 1,554 | 4,540 | (2,222 | ) | ||||||||
Waived dividends and interest on convertible preference shares and loan notes | - | - | (995 | ) | ||||||||
Total net finance expenses | $ | 6,210 | $ | 8,431 | $ | 274 | ||||||
Foreign exchange gain/losses consists primarily of foreign exchange fluctuations related to short-term intercompany accounts and foreign currency exchange gains and losses related to transactions denominated in currencies other than the functional currency for each of our subsidiaries. We expect our foreign currency exchange gains and losses to continue to fluctuate in the future as foreign currency exchange rates change. The Group’s investments in overseas subsidiaries are not hedged as those currency positions are either USD denominated and/or considered to be long-term in nature. AWN loans of $32.4 million are mostly denominated in USD, upon which there is minimal foreign currency risk.
Income Tax
We are subject to income tax for the year ended June 30, 2023 at rates of 19% to 25%, 21%, 26% to 30%, 9% and 15% to 25.8% in the U.K., the U.S., Australia, United Arab Emirates and the Netherlands respectively. We use estimates in determining our provision for income taxes. We account for income taxes in accordance with IFRS Standard IAS 12 Income Taxes, using an asset and liability approach that requires recognition of deferred tax assets currently benefit from, orand liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax basis, and for net operating loss and tax credits.
Key Factors Affecting Our Performance
We believe that the growth of our business and our future success are affecteddependent upon a number of key factors, including the following:
Market demand for our products and services. Our business and revenues depend on the demand for our products and services. The market demand for electric vehicles, critical power services, sustainable energy solutions and solar development projects is heavily influenced by variousa range of factors that include the governmental economic, fiscal, and political polices at both the national and state levels in the U.S., Australia, Europe, the United Kingdom and local governmental incentivesthe rest of the world, as well as global economic and political factors affecting the cost, availability, and desirability of renewable energy, other energy sources. Other external factors such as the COVID-19 pandemic and geopolitical tension in Ukraine may also affect demand for our products and services.
Competitiveness of our products and services. Our products and services need to be competitive in terms of price and quality with competition in each of our markets. Tembo in particular operates in a market that is relatively new, rapidly evolving, characterized by rapidly changing technologies, new competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. In order to stay competitive and relevant, it needs to continuously innovate and invest in product development and new technologies. Our critical power services businesses face pricing pressure in a competitive market and must continually improve cost efficiencies.
Operational scale up of electric vehicle assembly and delivery capabilities. Tembo faces operational risks as a maker of battery-electric ruggedized and off-road vehicles embarking on an exponential scale up of its assembly and delivery capabilities. Growth is dependent on securing appropriate premises and equipment, achieving design and manufacturing process goals, achieving compliance with safety regulations and standards, recruiting and retaining suitably qualified personnel, overcoming any delays and, resolving any supply chain shortages, to be able to deliver the volume and quality of products required to meet customer commitments.
Delivering electric vehicle products and services to customers’ requirements and regulatory policies. If anystandards. Following the acquisition of Tembo, we signed distribution agreements with a number of partners globally, to sell Tembo EUV conversion kits. Meeting the technical specifications, quality and safety standards of our customers and partners is a key driver of ensuring Tembo’s brand, reputation, revenue and future prospects. Product failures in service could leave us exposed to future warranty claims. Failure to meet the required regulations and standards in the markets we serve could require product recalls and fines and penalties.
Development and scale up of the laws SES solutions business. Whilst we have experience in developing, financing, building and operating solar power systems and distributed generation solar systems, we have limited experience and track record in combining this experience to then develop and offer a complete SES solution with microgrids, battery recycling and reuse and are still in the process of building the capabilities in the team. Developing and/or governmental regulations or policies that support renewableacquiring these capabilities is a key factor in expanding our SES solutions business.
Supply chain execution. Materials deliveries from suppliers are at risk of disruption due to external events and factors such as COVID-19, semiconductor shortages and conflict in Ukraine. Overcoming challenging supply chain issues is a key factor in our businesses being able to deliver goods and services to our customers in line with their requirements and meet our revenue growth targets.
Inflation. The economic volatility attributable initially to COVID-19 and then to Russia’s invasion of Ukraine is part of and contributing to a larger trend of rising inflation around the globe, which may have a significant adverse effect on economic activity and our business.
Ability to secure capital at attractive rates and terms. Our businesses are capital intensive requiring significant investment in operational expenditure and capital expenditure to realize the growth potential of our electric vehicle, critical power services, sustainable energy change, or ifsolutions and solar development businesses. In addition, we are subject to newsignificant and burdensome laws or regulations, such changes may haveongoing administrative and related expenses required to operate and grow a material adverse effect onpublic company. Together these items impose substantial legal and financial compliance costs. As a result, we expect to require some combination of additional financing options in order to execute our strategy and meet the operating cash flow requirements necessary to operate and grow our business.
Currency fluctuations. We conduct business in the U.S., Australia, United Arab Emirates, the Netherlands and the U.K. As a result, we are exposed to risks associated with fluctuations in currency exchange rates, particularly between the U.S. dollar, the British Pound, the Euro and the Australian dollar.
Ability to attract and retain talent. We are looking to rapidly hyperscale our business financial condition, resultsin the face of operationsfierce competition for talent and cash flows.short timeframes. To achieve our operational goals, we need to attract high caliber talent quickly.
B.B. Liquidity and Capital Resources
Our principal sources of liquidity to date have been loansin the year ended June 30, 2023 were $3.6 million from AWN cashloans, $5.1 million net proceeds from thecapital raises, $2.9m of proceeds on sale of the Business Combination as well as cash flow generatedJ.A. Martin and $1.3m from our operations. We utilize construction loans in certain projects to meet working capital requirements of the development costs.debtor financing. Our principal uses of cash have been for acquisitions, pipeline development,$8.6 million outflow from operating activities, including $17.2 million growth focused operating costs in the Electric Vehicles, Solar Development, Sustainable Energy Solutions and Corporate segments less a $8.6 million decrease in working capital comprising movements in trade and general corporate purposes. other receivables and payables, $1.0 million purchase of property, plant and equipment including capitalized lease facilities in Tembo and Kenshaw, $3.9 million development capital expenditure in Tembo and Caret.
Our principal sources of liquidity in the year ended June 30, 2022 were $4.2 million from AWN short-term loans and $0.3 million net proceeds from capital raises. Our principal uses of cash have been $5.1 million outflow from operating activities, including $14.7 million growth focused operating costs in the Electric Vehicles, Solar Development, Sustainable Energy Solutions and Corporate segments less a $9.6 million decrease in working capital comprising movements in trade and other receivables and payables, $0.6 million payment of interest on AWN loans, $1.2 million purchase of property, plant and equipment including capitalized lease facilities in Tembo and Kenshaw, $4.3 million development capital expenditure in Tembo and Caret.
Our principal sources of liquidity in the year ended June 30, 2021, were $32.0 million net proceeds from capital raises and $0.4 million proceeds from sale of solar projects. Our principal uses of cash have been $5.0 million outflow from operating activities, including net inflows in Critical Power Services offset by growth operating costs in the Electric Vehicles, Solar Development, Sustainable Energy Solutions and Corporate segments, a $10.4 million increase in working capital primarily comprising a decrease in trade and other payables, $2.1 million net cash outflow on the acquisition of Tembo e-LV, comprising $7.1 million consideration less $4.9 million acquired cash, $2.2 million repayment of AWN related party loan principal, $5.3 million payment of interest on the AWN loan, Aevitas hybrids and other borrowings, including catch up of related party arrears, $0.9 million purchase of property, plant and equipment and $0.5 million net repayment of variable short term debtor finance facilities for J.A. Martin and Kenshaw.
The following table shows net cash provided by (used in) operating activities, net cash used in investing activities, and net cash provided by (used in) financing activities for the yearsyear ended March 31, 2017June 30, 2023, 2022 and 2016:2021:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Net cash used in operating activities | (8,552 | ) | (5,130 | ) | (15,377 | ) | ||||||
Net cash used in investing activities | (1,921 | ) | (5,343 | ) | (2,682 | ) | ||||||
Net cash provided by financing activities | 9,804 | 3,555 | 23,537 | |||||||||
Total cash flow | (669 | ) | (6,918 | ) | 5,478 | |||||||
If we continue to experience losses and we are not able to raise additional financing to provide the funding to grow the revenue streams of the Company to become profit making, or generate cash through sales of assets, we may not have sufficient liquidity to sustain our operations and to continue as a going concern, accordingly there is a material uncertainty that may cause significant doubt about the going concern nature of the Group. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. See section 2.1 on “Basis of Preparation”.
| Year Ended March 31, | ||||||||
| (US dollars in thousands) | 2017 | 2016 | ||||||
Net cash provided by (used in) operating activities | $ | 6,376 | $ | (95 | ) | |||
Net cash used in investing activities | (26,736 | ) | (3 | ) | ||||
Net cash provided by financing activities | $ | 31,302 | $ | 126 | ||||
Net cash provided by operating activities are derived from net income of $5.6 million plus non-operating and working capital items totaling $12.4 million for a total of $6.4 million cash provided from operations. These non-operating items consist of $5.3 million of income tax expense, $5.8 million of costs relating to the Business Combination, $0.6 million of finance expense and $0.7 million of depreciation and amortization expense. The increase in accounts receivable of $13.1 million is partially offset by the increase in trade payables of $8.1 million. Finally, there was in increase in provisional expenses for employee paid time off of $1.3 million.
Net cash used in investing activities of $26.7 million primarily consist of an investment of $18.0 million in the two North Carolina solar projects, one of which was operational as of March 31, 2017, and acquisition costs of $10.1 million. We consummated a series of acquisitions from 40% ownership to 100% ownership in FY17 to include the following:
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Net cash provided by financing activities include a $12.0 million loan from AWN as well as net proceeds of $11.1 million from the Business Combination which closed in December 2016. Pursuant to the Business Combination, on December 28, 2016, we issued ordinary shares to ARWA in exchange for gross proceeds of $22.5 million and we concurrently completed two acquisitions for an aggregate cash consideration of $10.5 million.
We believe we have sufficient working capital for our present requirements. Current cash reserves of $10.9 million are unrestricted and are domiciled as follows:
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Our treasury policy is to maintain sufficient cash reserves denominated in the currencies required for near term working capital to minimize the risk of currency fluctuation. Cash reserves are monitored on a daily basis to maximize capital efficiency. Our cash position is reviewed weekly with upper management to ensure the allocation best meets the coming needs of the business.
The recent joint venture with Innovative Solar for a portfolio of 37 solar projects in 12 states representing a total potential electricity generating capacity of approximately 1.8 gigawatts. We anticipate this joint venture will provide the opportunity to generate BTO revenues and profits over the next several years as individual projects in the portfolio mature.
We require significant financial resources to expand and develop our existing project pipeline. The development of solar projects can take months or years. We may need to make significant upfront investments, such as payments for site control and transmission and PPA deposits, in advance of the receipt of any revenue. Historically, apart from bank borrowing, shareholder contributions and our own operating cash flows, we have relied on financing for the construction of large solar projects, including project funding, pre-financing agreements with offtakers and supply-chain financing.
We may need additional cash resources in the future if we experience changed business conditions or other developments or if we decide to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If we determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt, equity or equity-linked securities or obtain a credit facility. Any issuance of equity or equity-linked securities could cause dilution for our shareholders. Any incurrence of indebtedness could increase our debt service obligations and subject us to restrictive operating and financial covenants. It is possible that, when we need additional cash resources, financing will not be available to us in amounts or on terms acceptable to us, or at all.
We aim to maintain the sufficiency of cash flows with availability of unutilized banking facilities, internally generated funds and funds obtained from financing activities, if required. We review our forecasted cash flows on an on-going basis to ensure that we will have sufficient capital from a combination of internally generated cash flows and proceeds from financing activities, if required, in order to fund our working capital and capital expenditure requirements and to meet our short term debt obligations and other liabilities and commitments as they become due. We believe that our current cash and cash equivalents, proceeds from the Business Combination, anticipated cash flows from operations and financing available to us pursuant to project funding and financial lease arrangements that have been signed will be sufficient to meet our cash requirements for at least the next 12 months.
Borrowings
The group financed activities until the Company became public through a related party loan from AWN, a publicly traded company in Australia of which VivoPower was, prior to December 28, 2016, a wholly owned subsidiary. At March 31, 2017, the amounts owing to AWN were $20.0 million, of which $19.0 million was a non-current related party loan with an initial repayment date of April 1, 2018. The remaining balance of $1.5 million was a current liability which was repaid in June 2017.
| (US dollars in thousands) | As of March 31, 2017 | |||
Current liabilities: | ||||
Bank loan | $ | 90 | ||
Non-current liabilities: | ||||
Bank loan | 933 | |||
Related party loan | 18,992 | |||
Total Liabilities | $ | 20,015 | ||
The bank loan with ANZ Bank is repayable over an 11.5 year period at a monthly repayment amount of approximately $7,500 (or AU$ 9,783) per month for 138 months. The related party loan is with AWN. Repayments of the loan will commence from April 2018 for 24 months and the debt is therefore non-current in nature.
Operating Activities
Our net cash generatedoutflow from operating activities in the periodyear ended March 31, 2017June 30, 2023, was $27.4$8.6 million. This cash inflow was primarily attributable to a net incomeinflow from working capital movements of $5.3$8.6 million plusand a net cash outflow after tax from operations of $17.2 million. The working capital movements of $8.6 million comprise of increase in trade and other payables of $2.3 million, decrease in trade and other receivables of $5.9 million, an increase in inventory of $0.2 million and increase in provisions of $0.7 million. The $17.2 million outflow after tax from operations consists of the $24.4 million loss, other non-cash and non-operating items consisting of: $5.3components of earnings including $4.9 million of income tax expense, $5.8 million of costs relating to the Business Combination, $0.6 million ofnet finance expense, $0.7$1.6 million of depreciation and amortization, expense, $8.1$0.1 million increase in trade payables,share-based payments, and an increase in provisional expenses for employee paid time off of $1.3 million.$0.6 million tax.
Our net cash used inoutflow from operating activities in the periodyear ended March 31, 2017June 30, 2022, was $13.1$5.1 million. This was attributable to a net inflow from working capital movements of $9.6 million and a net cash outflow after tax from operations of $14.7 million. The working capital movements of $9.6 million comprise of increase in trade and other payables of $6.6 million, decrease in trade and other receivables of $3.4 million, decrease in inventory of $0.1 million and a decrease in provisions of $0.6 million. The $14.7 million outflow after tax from operations consists of the $22.1 million loss, other non-cash and non-operating components of earnings including $5.3 million of net finance expense, $1.9 million depreciation and amortization, $2.0 million share-based payments, less $1.9 million tax credits.
Our net cash outflow from operating activities in the year ended June 30, 2021, was primarily$15.4 million. This was attributable to a net outflow from working capital movements of $10.4 million and a net cash outflow after tax from operations of $6.1 million. The working capital movements of $10.3 million comprise a decrease in trade and other payables of $9.5 million, an increase in accounts receivable.inventory of $0.8 million and a decrease in provisions of $0.1 million. The $6.1 million outflow after tax from operations consists of the $8.0 million loss, other non-cash and non-operating components of earnings including $1.1 million share-based payments, $0.4 million of net finance expense, $0.8 million gain on solar development and $2.3 million depreciation and amortization.
Investing Activities
Subsidiaries. We have made significant investmentsNet cash outflow from investing activities of $1.9 million in the year ended June 30, 2023 comprised of $1.0 million investment in property, plant and equipment in particular new leased properties for Tembo and Kenshaw, and a net $3.9 million net cash outflow attributable to additional investment in capital projects in Tembo and Caret. This is offset by $2.9 million proceeds from the sale of J.A Martin operations.
Net cash outflow from investing activities of $5.3 million in the year ended June 30, 2022comprised of $1.1 million investment in property, plant and equipment in particular new leased properties for Tembo and Kenshaw, and a net $4.3 million cash outflow attributable to additional investment in capital projects in Tembo and Caret.
Net cash outflows from investing activities of $2.7 million in the year ended June 30, 2021 comprised $0.4 million proceeds from sale of solar project assets in Australia, offset by $0.9 million investment in property, plant and equipment, and a net $2.1 million cash outflow attributable to the acquisition of synergisticTembo e-LV. The net acquisition outflow comprised $7.1 million cash consideration, less $4.9 million cash acquired.
No companies to fuelwere acquired by the growthGroup in the years ended June 30, 2023 and development of the company. DuringJune 30, 2022. In the year ended March 31, 2017, we made investments in the following subsidiaries:June 30, 2021, two acquisitions were consummated. These comprised Tembo e-LV B.V. and subsidiaries, for cash consideration of $7.1 million, or $2.2 million net of cash acquired, and Caret for cash consideration of $1, also $l net of cash acquired.
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In addition we made investments in associate undertakings of 40% to 64% as follows:
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The Philippine entities above, listed as Associates, are under the control of VivoPower Singapore Pte Limited, and therefore are consolidated into the consolidated financials of VivoPower International PLC. This is in line with IFRS 10 where it satisfies all three criteria to determine whether control exists.
There are development investments of $18.0 million related to the two North Carolina projects, one of which was fully operational as of March 31, 2017, and the second was fully operational in May 2017.
The value of the investments carried as of March 31, 2017 represents the fair value of project investment. We will monitor the carrying value of these investments to assess for impairment on a quarterly basis.
Financing Activities
Cash generated from financing activities in FY17for the year ended June 30, 2023, was $31.1$9.8 million. This cash inflowcomprised $3.6 million AWN loans, $1.3 million debtor financing and $5.1 million capital raises net of capital raise costs, partly offset by $0.9 million repayment of other financing costs.
Cash generated from financing activities for the year ended June 30, 2022, was primarily attributed$3.6 million. This comprised $4.2 million AWN short term loans and $0.2 million capital raises net of capital raise costs. This is partly offset by $0.6 million interest paid to AWN on shareholder loans, and other financing costs.
Cash generated from financing activities for the year ended June 30, 2021, was $23.5 million. This comprised $32.6 million capital raise proceeds fromnet of $2.8 million capital raise costs, less $0.4 million lease repayments in Critical Power Services businesses, $2.2 million repayment of AWN related party borrowingsloan principal, $0.5 million net repayments against the debtor finance facility in Critical Power Services businesses and $5.3 million AWN loan and Aevitas hybrid interest, including catch up on amounts accrued from prior periods.
Borrowing obligations outstanding at the end of $11.0the period were as follows:
As at June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Current liabilities: | ||||||||||||
Debtor financing | 1,329 | - | - | |||||||||
Lease liabilities | 462 | 505 | 669 | |||||||||
Project financing agreement | - | - | 59 | |||||||||
Short-term shareholder loan | 497 | 4,285 | - | |||||||||
Bank loan | 7 | 145 | 152 | |||||||||
Chattel mortgage | 89 | 142 | 88 | |||||||||
Other borrowings | - | 32 | 36 | |||||||||
| 2,384 | 5,109 | 1,004 | ||||||||||
Non-current liabilities: | ||||||||||||
Shareholder loan – payments due beyond 12 months | 28,111 | 21,121 | 21,175 | |||||||||
Lease liabilities | 1,843 | 1,959 | 326 | |||||||||
Financing agreement | - | 108 | 183 | |||||||||
Bank loan | - | - | 159 | |||||||||
Chattel mortgage | 50 | 264 | 244 | |||||||||
| 30,004 | 23,452 | 22,087 | ||||||||||
Total borrowings | 32,388 | 28,561 | 23,091 | |||||||||
Tembo, Aevitas Solar and Kenshaw have lease arrangements in place to finance business properties and motor vehicle fleets. During the year ended June 30, 2023, lease liabilities have decreased by $0.2 million proceedsto $2.3 million mainly due to amortization during the year. The obligation for future minimum lease payments under the facilities are as follows:
Minimum lease payments | Present value of minimum lease payments | |||||||||||||||||||||||
As at June 30 | As at June 30 | |||||||||||||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||
Amounts payable under finance leases: | ||||||||||||||||||||||||
Less than one year | 576 | 546 | 683 | 462 | 444 | 669 | ||||||||||||||||||
Later than one year but not more than five | 2,223 | 2,545 | 379 | 1,843 | 2,020 | 326 | ||||||||||||||||||
| 2,799 | 3,091 | 1,062 | 2,305 | 2,464 | 995 | |||||||||||||||||||
Future finance charges | (494 | ) | (627 | ) | (67 | ) | - | - | - | |||||||||||||||
Total obligations under finance lease | 2,305 | 2,464 | 995 | 2,305 | 2,464 | 995 | ||||||||||||||||||
On June 30, 2021, the Company agreed a refinancing of its existing $21.1 million shareholder loan with AWN, with repayment of principal from January 1, 2023 in sixty monthly instalments of $0.35 million to loan maturity on December 31, 2027. The interest rate and line fee was agreed at 8% and 0.8% respectively, but no interest or line fee settlements were required until after a corporate liquidity event had occurred. In addition, the Business CombinationCompany agreed to a refinancing fee of $22.5$0.34 million in two tranches on June 30, 2022 and December 2016,31, 2022. Security granted to AWN comprised of a specific security deed over the assets of Aevitas (the "Specific Security Deed") and a general security over the assets of the Company (the "General Security").
On June 30, 2022 further amendments to the loan were agreed with AWN:
(i) | to defer repayment of principal to commence on October 1, 2023, with repayments over 60 months to September 30, 2028, |
(ii) | to defer interest payments from October 1, 2021, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2023. |
(iii) | to increase the interest rate and line fee to 10.00% and 2.00% per annum respectively during the period from October 1, 2021 to the earlier of a) September 30, 2023 or b) the date a minimum prepayment of $1,000,000 is made. |
(iv) | the initial refinancing fee of $0.34 million is to be amended to accrue incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) October 1, 2023. |
(v) | a new fixed facility extension fee of $0.355 million is payable in return for this amendment, to accrue immediately but becoming payable on October 1, 2023. |
On January 11, 2023, further amendments to the loan were agreed with AWN:
(i) | to defer repayment of principal to commence on April 1, 2025, with repayments over 60 months to March 31, 2030. |
(ii) | to defer interest payments from October 1, 2023, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2024. |
(iii) | to extend the increased interest rate and line fee of 10.00% and 2.00% per annum respectively commenced on October 1, 2021 to the earlier of a) March 31, 2025 or b) the date a minimum prepayment of $1,000,000 is made. |
(iv) | to extend the initial refinancing fee accruing incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) April 1, 2025. |
(v) | to defer the repayment date of the previous fixed facility extension fee of $0.355 million, becoming payable on April 1, 2025. |
(vi) | In addition to previously agreed refinancing fees, an additional $0.855 million fixed refinancing fee will accrue immediately and become payable on April 1, 2025. |
On June 30, 2023, further amendments to the loan were agreed with AWN:
(i) to defer interest payments from October 1, 2024 to April 1, 2025, and to replace the conditional requirement to repay accrued interest upon completion by VivoPower of a debt or equity raise of at least $25 million, with the conditional requirement to make repayments of interest and/or principal to meet the mandatory repayment schedule described in sections (ii) and (iii) below following a qualifying liquidity event.
(ii) upon completion by VivoPower International PLC of a qualifying liquidity event of at least $5.0 million, Aevitas O Holdings Pty Limited are required to make mandatory prepayment of principal and interest to AWN in accordance with the following schedule:
a) proceeds $5 million to $7.5 million - pay 25% of amounts raised;
b) proceeds $7.5 million to $12.5 million - pay $1.875 million plus 45% of amounts raised;
c) proceeds $12.5 million and above - pay $4.125 million plus 50% of amounts raised.
(iii) for the purposes of the mandatory prepayment requirement, a ‘qualifying liquidity event’ excludes direct investments into VivoPower’s subsidiary, Tembo, and debt raised in respect of working capital finance facilities, but includes:
a) equity or debt raise;
b) trade sale of underlying subsidiary or business unit (including, for example, Aevitas and Caret); and
c) loan repayment from Tembo to VivoPower.
(iv) as consideration for the concessions agreed with AWN, VivoPower International PLC committed to issue AWN with 500,000 warrants, with a duration of 12 months, at an exercise price of $0.67 per share.
In December 2021, a short term loan of $1.1 million (A$1.5 million) was provided from AWN to Aevitas O Holdings Pty Limited at an interest rate of 10.0%, increasing to 12.5% from January 1, 2022. The loan is set to expire on April 1, 2025 (initially set as April 30, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower International PLC of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $29,000 (A$40,000) and $43,500 (A$60,000) are payable upon maturity, relating to the two extensions respectively.
On February 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas O Holdings Pty Limited, with interest rate of 10.00% per annum payable on the principal sum upon maturity. The loan is set to expire on April 1, 2025 (initially set as May 13, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $85,000 and $110,000 are payable upon maturity, relating to the two extensions respectively.
On December 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas O Holdings Pty Limited, with interest rate of BBSY bid floating rate (on average 3.60% for the period from inception to June 30, 2023) plus fixed margin of 15.0% per annum payable on the principal sum upon maturity. A 1% facility establishment fee of $30,000 was deducted upon initial loan drawdown, and a further 3% exit fee of $90,000 is payable on expiry. The loan is set to expire on April 1, 2025 (initially set as October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was agreed on January 11, 2023, then dropped on June 30, 2023. A facility extension fee of $115,000 is payable upon maturity.
In February and March 2023, further short term loans of A$0.5 million and A$0.25 million were established between AWN and Aevitas O Holdings Pty Limited, drawn down between February and May 2023. The loans have interest rate of BBSY bid floating rate plus fixed margin of 15.0% per annum payable on the principal sum upon maturity, with expiry dates of June 30, 2023. 1% facility establishment fees of total A$7,500 were deducted upon loan drawdowns, and further 3% exit fees of total A$22,500 are payable on expiry. On June 30, 2023, the expiry of the loans was amended to August 31, 2023.
Following the sale of ex-solar J.A. Martin operations on July 1, 2022, the J.A. Martin debtor finance facility was cancelled, but a new facility with a limit of A$2.5 million and variable interest rate (initial rate 7.75%) was opened by Kenshaw, as well as a trade finance facility of $0.5 million. The debtor finance facility was partially drawn down at June 30, 2023, with an outstanding balance of $1.3 million (A$2.0 million), due to timing of operating activities (June 30, 2022: nil).
Cash Reserves and Liquidity
Cash reserves at June 30, 2023, of $0.6 million are unrestricted and are domiciled as follows:
Local currency | Amount in USD | |||||||
AUD | 800,542 | 543,044 | ||||||
EUR | 15,184 | 19,547 | ||||||
USD | 18,364 | 18,364 | ||||||
GBP | (21,983 | ) | (27,741 | ) | ||||
Total cash reserve | 553,214 | |||||||
Our treasury policy is to maintain sufficient cash reserves denominated in the currencies required for near term working capital to minimize the risk of currency fluctuation. Cash reserves are monitored on a daily basis to maximize capital efficiency. Our cash position is reviewed weekly by senior management to ensure the allocation best meets the coming needs of the business.
The SES business is reliant for liquidity on the completion of and, or sale of specific projects. As the projects are dependent on negotiations with external parties, delays in the sale process could adversely affect our liquidity.
The Electric Vehicles business is reliant for liquidity on financing from asset and working capital financing, equity capital raises, and a growing revenue stream as the business scales.
We review our forecasted cash flows on an on-going basis to ensure that we will have sufficient capital from a combination of internally generated cash flows and proceeds from financing activities, if required, in order to fund our working capital and capital expenditure requirements and to meet our short-term debt obligations and other borrowings of $1.3 million. This cash inflow was primarily offset by the costs of listing of $11.5 millionliabilities and the purchase of shares into treasury of $0.6 million.commitments as they become due.
If we continue to experience losses and we are not able to raise additional financing to provide the funding to grow the revenue streams of the Company to become profit making, or generate cash through sales of assets, we may not have sufficient liquidity to sustain our operations and to continue as a going concern, accordingly there is a material uncertainty that may cause significant doubt about the going concern nature of the Group. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. See section 2.1 on “Basis of Preparation”.
C. Research and Development, Patents and Licenses, etc.
Our BTO business model does not currently entail substantial investment inResearch and development expenditure includes the product development project for Tembo’s ruggedized electric vehicles, comprising pre-series-production expenditure on developing vehicle specifications and production processes that are fit for purpose for rugged off road environments including mining sites. Capitalized costs include primarily internal payroll costs, external expert consultants, equipment and technology hardware and software. In addition, there is additional research and development patents or licensesbeing conducted into other than standard third-party licenses or similarelements of vehicle electrification for off-road and rugged environments, including specialized batteries, charging devices, electric wire harnesses, telemetry, data capture and analytics and software tools.
Development expenditure on U.S. solar projects includes securing land rights, obtained incompleting feasibility studies, negotiating power purchase agreements, and other costs incurred to prepare project sales for Notice to Proceed with construction and hence sale to a partner as a shovel ready project.
The Company expects to obtain adequate technical, financial and other resources to complete the ordinary course of business relatingprojects, and management consider that it is probable for the future economic benefits attributable to the equipment and/or technology used in our projects.development expenditure to flow to the entity; and that the cost of the asset can be measured reliably. Accordingly, the development expenditure is recognized under IAS 38 – Intangible Assets as an intangible asset.
Other than as disclosed elsewhere in this annual report on Form 20-F,Annual Report, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources.
Off-Balance Sheet ArrangementsE. Critical Accounting Estimates
Up to and including the most recent fiscal year, we have not had any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As a result, we are not exposed to related financing, liquidity, market or credit risks that could arise if we had engaged in those types of arrangements.
Contractual Obligations and Commitments
The following table represents our contractual obligations as of March 31, 2017, aggregated by type:
Payments Due by Period | ||||||||||||||||||||
(US dollars in thousands) | Total | Less than 1 | 1 - 3 years | 3 - 5 years | More than 5 | |||||||||||||||
Debt obligations, principal | $ | 20,015 | $ | 90 | $ | 19,171 | $ | 179 | $ | 574 | ||||||||||
Debt obligations, interest | 3,332 | 1,643 | 1,600 | 54 | 36 | |||||||||||||||
Operating lease obligations | 272 | 165 | 107 | - | - | |||||||||||||||
Total | $ | 23,619 | $ | 1,898 | $ | 20,878 | $ | 233 | $ | 610 | ||||||||||
We have a bank loan of $1.0 million with ANZ Bank, which is repayable over an 11.5 year period at a monthly repayment amount of approximately $7,500 for 138 months. The interest rate on this note is 2.87%. In addition, there is a related party loan with AWN, which bears interest at 8.5% and repayments of the loan will commence from April 2018 for 24 months.
Obligations Under Finance Leases
| (US dollars in thousands) | 2017 Minimum lease payments | 2017 Present value of minimum lease payments | ||||||
Amounts payable under finance leases: | - | |||||||
Less than one year | $ | 165 | $ | 145 | ||||
Later than one year but not more than five | 107 | 95 | ||||||
| 272 | 240 | |||||||
Future finance charges | $ | 32 | $ | - | ||||
Recently Issued and Adopted Accounting Pronouncements
For information on recent accounting pronouncements, see section 2.2.15 “New standards, amendments and interpretations not yet adopted” in the notes topreparing the consolidated financial statements.
Critical Accounting Policies and Estimates
Our consolidated financial statements, and the related notes included elsewhere in this Annual Reportdirectors are prepared in accordance with accounting principles generally accepted in IFRS. The preparation of these consolidated financial statements requires usrequired to make judgements in applying the Group’s accounting policies and in making estimates and making assumptions that affectabout the reported amountsfuture. These estimates could have a significant risk of causing a material adjustment to the carrying value of assets and liabilities and disclosure of contingent assets and liabilitiesin the future financial periods. The critical judgements that have been made in arriving at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations.
Under the JOBS Act, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. However, we have irrevocably chosen to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption is required for non-emerging growth companies.
Revenue RecognitionRevenue comprises the fair value of the consideration received or receivable for the sale of services in the ordinary course of the group’s activities. Revenue is shown net of discounts, value-added tax, other sales related taxes, and after the elimination of sales within the group.
Revenue comprises BTO revenues from our US and Australian projects, Aevitas revenue, including electrical installations, servicing and maintenance and generator sales. In addition, VivoPower recognised revenue in relation to a participation fee for a global preferred supplier agreement.
Revenue associated with longer term projects is recognized on a percentage completion basis. Revenue for smaller projects is recognized upon completion.
IFRS 15 is mandatory for adoption from accounting periods beginning on or after January 1, 2017. However, the group has elected to adopt the standard early, with effect from February 1, 2016.
The group has a number of different revenue streams and the key components in determining the correct recognition are as follows:
BTO revenue, which is revenue generated from development services relating to the building and construction of solar projects, is recognized on a percentage completion basis as the value is accrued by the end user over the life of the contract. The periodic recognition is calculated through weekly project progress reports.
Aevitas revenue for short term projects is recognized when projects are completed. On longer term projects revenue is recognized on a percentage completion basis. The projects have defined milestones which determines the timing of the billing to the customers. The achievement of the milestones then also provides an accurate indication of how much of the project is complete.
Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from Aevitas projects described above and is recognized as the revenue recognition criteria are met.
Deferred revenue that is expected to be recognized during the succeeding twelve month period is recorded as current deferred revenue and the remaining portion is recorded as non-current in the accompanying consolidated balance sheets.
Income Taxes
We are subject to income tax in the United Kingdom, the United States and other international jurisdictions, and we use estimates in determining our provision for income taxes. We account for income taxes in accordance with IFRS 12,using an asset and liability approach that requires recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax basis, and for net operating loss and tax credit carry forwards.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such position are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. At March 31, 2017 and 2016, we did not have any uncertain tax positions that would impact our net tax provision.discussed below.
JOBS ActRevenue from contracts with customers – determining the timing of satisfaction of services
As disclosed in Note 2.15 to the Financial Statements, the Group concluded that Solar Development revenue and revenue from other long-term projects is recognized over time as the customer simultaneously receives and consumes the benefits provided. The Group determined that the percentage completion basis is the best method in measuring progress because there is a direct relationship between the Group’s effort and the transfer of services to the customer. The judgement used in applying the percentage completion basis affects the amount and timing of revenue from contracts.
Impairment of non-financial assets
The carrying values of property, plant and equipment, investments and intangible assets other than goodwill are reviewed for impairment only when events indicate the carrying value may be impaired. Goodwill is tested annually for impairment or when events or changes to circumstances indicate that it might be impaired.
Impairment assessments require the use of estimates and assumptions. To assess impairment, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and risks specific to the related cash-generating unit. Judgement was applied in making estimates and assumptions about the future cash flows, including the appropriateness of discounts rates applied and operating performance (which includes production and sales volumes), as further disclosed in Note 14. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs.
Operating profit/(loss)
In April 2012,preparing the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an “emerging growth company,” we have irrevocably elected not to take advantageconsolidated financial statements of the extended transition period afforded byGroup, judgement was applied with respect to those items which are presented in the JOBS Act forConsolidated Statement of Comprehensive Income as included within operating profit/(loss). Those revenues and expenses which are determined to be specifically related to the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107on-going operating activities of the JOBS Act provides that our decisionbusiness are included within operating profit/(loss). Expenses or charges to earnings which are not take advantagerelated to operating activities, are one-time costs determined to be not representative of the extended transition period for complying with new or revised accounting standards is irrevocable. In addition, we are in the process of evaluating the benefits of relying on the other exemptions and reduced reporting requirements provided by the JOBS Act.
Subject to certain conditions set forth in the JOBS Act, if as an “emerging growth company” we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404normal trading activities of the Sarbanes-Oxley Act, (ii) provide allbusiness, or that arise from revaluation of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), or (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of our chief executive officer’s compensation to median employee compensation.
These exemptions will apply for a period of five years following the completion of the Business Combination or until we no longer meet the requirements of being an “emerging growth company,” whichever is earlier.
assets, are reported below operating profit/(loss).
Litigation provision
No litigation provision was recorded at June 30, 2023. The provision of $0.5 million for disputed legal success fees related to the Mr. Comberg litigation recorded at June 30, 2021 was estimated by management, making a judgement in conjunction with advice from legal counsel, on the likely outcome of the claim. $0.4 million of this provision was utilized in the year ended June 30, 2022, and the remainder released.
Capitalization of product development costs
The Group capitalizes costs for product development projects in the EV segment. The capitalization of costs is based on management’s judgement that technological and economic feasibility is confirmed, and all other recognition criteria within IAS 38 can be demonstrated. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation, discount rates to be applied and the expected period of benefits. As of June 30, 2023, the carrying amount of capitalized development costs were $7.9 million (June 30, 2022: $3.8 million).
Contingent consideration on disposals
Included within the assessment of recoverable value for impairment purposes of assets held for sale related to the sale of the J.A. Martin ex-solar business, as at June 30, 2023, were estimates of the contingent consideration included within the sale agreement. The contingent consideration receivable 12 months following sale, is based on a multiple of earnings before interest, tax, depreciation and amortization of the business. The fair value of contingent consideration of $0.6 million applied a contracted 4.5x multiple to year 1 forecast EBITDA of $0.8 million, less purchase price paid. Final settlement of the contingent consideration was paid in August 2023, and the receivable amount and loss on disposal adjusted accordingly.
ITEM6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth the names, ages and positions of our directors and executive officers and directors.officers. Unless otherwise indicated, the business address of all of our directors and executive officers and directors is 91 WimpoleThe Scalpel, 18th Floor, 52 Lime Street, Marylebone, London W1G 0EF.EC3M 7AF, United Kingdom.
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Peter Jeavons (1)(2)(3)(4) | 58 | Non-Executive Director | June 16, 2020 | |||||||||||
William Langdon (1)(2)(3) | 62 | Non-Executive Director | June 16, 2020 | |||||||||||
Michael Hui | 43 | Non-Executive Director | January 22, 2020 | |||||||||||
Gemma Godfrey (1)(2)(3)(4) | 39 | Non-Executive Director | December 15, 2020 | |||||||||||
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(1) | Member (or in the case of Mr. Chin, non-voting observer) of the | |||
(2) | Member of the | |||
(3) | Member of the | |||
(4) | Member of the Sustainability Committee |
The following sets forth biographical information regarding our directors and executive officers and directors.officers. There are no family relationships between any director or executive officer or director and any other director or executive officer or director. officer.
There are also no arrangementsother arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management, except thatthat: Kevin Chin, or entities he controlsour Chairman, beneficially owns 48.5% of VVPR at June 30, 2023, through his holdings as the Chairman of AWN, which is a significant stockholderbeneficial owner of ReNu Energy.39.5% of VivoPower as of June 30, 2023for which Mr. Chin has shared voting power.and individually is the beneficial owner of 9.0% of VivoPower as of June 30, 2023.
Executive Officers
Kevin Chin
Dr. Philip Comberg became
Kevin Chin has served as our Chief Executive Officer on September 1, 2016since March 2020. Reference is made to his biography below.
Directors
Kevin Chin
Kevin Chin is the founder of Arowana, a B Corporation certified investment group with operating companies across the U.K., U.S., Europe, Asia and has served as a board member of VivoPower since May 1, 2016. Dr. Comberg brings twenty years of experience as a chief executive officer, board member, investor, investment banker and attorney in Europe, the United States and Asia. Since 2014 Dr. Comberg has served as non-executive Chairman of Solarcentury Holdings, a leading London based solar development and EPC company. He has advised U.S. hedge fund Magnetar Capital on the build-up of its more than 300 megawatts solar power asset portfolio in the U.K. and served on the boards of technology and industrial companies in Silicon Valley and Germany. From 2011 to 2014, Dr. Comberg was Chairman and CEO of Conergy, one of Germany’s foremost solar companies, leading its restructuring and sale to U.S. financial investor Kawa Capital. Prior to that, he served as an Independent Director on the board of Solarfun Power Holdings (now Hanwha QCells), a fully integrated Chinese solar manufacturer, following its listing on Nasdaq in 2006. In 2004, he co-founded Alcosa Capital, a Frankfurt based special situation investment and advisory firm focusing on investments in the German SME sector, advising companies on M&A, debt and equity transactionsAustralia, as well as operational issuesowning other unlisted companies and serving as their board member. From 2001 to 2003, Dr. Comberg worked as an investment banker at Deutsche Bank and from 1995 to 2000 as an M&A lawyer with Freshfields Bruckhaus Deringer in Germany and China and completing his legal articles. Dr. Comberg studied law and Chinese at the Universityinvestments. One of Heidelberg in Germany and Zhong Shan University in China, subsequently completing his Master’s degree at New York University and a Doctor of Law at the University of Düsseldorf, Germany. He speaks English, French, Chinese and German.
Carl Weatherley-White has served as Chief Financial Officer since April 1, 2017, prior tothose operating companies is AWN, which he served as Group Director of Finance of VivoPower since July 13, 2016. Mr. Weatherley-White brings over twenty-five years of renewable energy transactional experience to VivoPower, with a particular focus on acquisitions, project and corporate finance, private equity and joint ventures. Previously, he was President of Lightbeam Electric Company from December 2013 to February 2016 which aggregated a diversified, international portfolio of renewable energy projects to support an initial public offering. From January 2012 to December 2013, he was Chief Financial Officer of K Road Power Holdings, a private solar development company and portfolio company of Barclays. Prior to this, he was at Barclays from September 2008 to December 2011, where he was Managing Director and head of project finance, and Lehman Brothers from December 2005 to September 2008, and held the same role. He has global energy infrastructure transaction experience for a wide variety of private equity and strategic clients. He also led renewable energy tax equity investing at Credit Suisse and Lehman Brothers. Mr. Weatherley-White holds a bachelor of science with honors from Brown University, and held a Graduate Fellowship in economics and political science at the University of Cape Town. He is a Chartered Financial Analyst (“CFA”) holder.
Non-Executive Directors
KevinTserFahChinhas served as our Non-Executive Chairman of the board since the closing of the Business Combination. In 2007, Mr. Chin co-founded Arowana & Co., which today comprises Arowana Partners Group, Arowana Capital and AWN. Arowana Partners Group operates a number of unlisted investment funds and arranges and manages acquisitions and syndicated investments in unlisted companies. Arowana Capital operates as an Early Stage Venture Capital Limited Partnership venture capital fund, having formerly managed a Venture Capital Limited Partnership private equity fund. AWN is a company listed on the Australian Securities Exchange with operating subsidiariesExchange. AWN is the largest shareholder in VivoPower, as well as owning other unlisted companies and investments in the United States, Australia, New Zealand, the U.K. and South East Asia.investments.
Over his 25-plus year career, Mr. Chin has accumulated extensive experience in “hands on” strategic and operational management having served as Managing PartnerCEO, CFO and COO of Arowana Capital from June 2007various public and private companies across a range of industries, including solar energy, software, traffic management, education, funds management and vocational education. He is the author of the business book, HyperTurnaround! which chronicles the privatization, rapid turnaround and subsequent global scale up of a software company called RuleBurst Haley culminating in a sale to June 2013 and has served as Chief Executive Officer of AWN since January 2013 and as Executive Chairman since February 2015. Prior to founding Arowana & Co.,Oracle. Mr. Chin led the management buyout of an ASX listed software business, SoftLaw Corporation (which was later renamed to RuleBurst Haley Limited) in November 2004regularly writes for Inc.com on topics such as turnarounds and became its Chief Financial Officer (and for a periodgrowing pains challenges. He also its Chief Operating Officer). RuleBurst Haley was acquired by Oracle Corporation in November 2008. Between October 2003 and October 2004, Mr. Chin worked as investment manager I analyst with a family office called the Lowy Family Group. Prior to that, he was with J.P. Morgan as a Vice President in its Investment Banking division gaininghas significant international experience in Australia, the United States and Asia across bothprivate equity, buyouts of public companies, mergers and acquisitions and equity capital raisings as well as funds management, accounting, litigation support and derivative markets. Before joiningvaluations with prior roles at LFG, J.P. Morgan, Mr. Chin worked as a corporate finance executive with an Australian merchant bank, Ord Minnett. He was previously also with Price Waterhouse in their corporate financePWC and litigation support team and Deloitte in their business consulting division. Deloitte.
Mr. Chin holds a Bachelor of Commerce degree from the University of New South Wales where he was one of the inaugural University Co-Op Scholars with the School of Banking and Finance. Mr. ChinHe is a Fellow of FINSIA (Financial Services Institute of Australia) where he also lectured for the FINSIA Master’s Degree course, Advanced Industrial Equity Analysis. Mr. Chin is a qualified Chartered Accountant and a Fellow of FINSIA, where he was a curriculum writer and lecturer in the Master of Applied Finance program. Mr. Chin divides his time between the UK, UAE and Australasia.
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William Langdon
William Langdon has had a 25-plus year career in the software, technology and enterprise data sectors after starting his career at Disney in finance and marketing. He served as CFO of venture-backed OmniTicket Network and after served in a series of senior management roles at digital mapping leader NAVTEQ (acquired by Nokia). After starting in European Sales, he became General Manager of the global Distribution division and President of NAVTEQ’s first acquisition, a digital mapping company based in Seoul, South Korea. Since that time, he has served in a series of senior management roles with venture-backed French technology start-ups including Goldman Sachs backed Nuxeo and Intersec, backed by Highland Europe.
Mr. Langdon received his MBA from Yale University and is a member of the Young Presidents Organization (YPO)Board of Directors of Tech2Deal, a private French company, and Entrepreneurs Organization (EO).Singula Institute, a New York City based mental health non-profit organization. He resides in Long Island outside of New York City, United States.
Mr. Langdon serves as Chairman of the Audit and Risk Committee of the Company.
Peter Jeavons
Peter Jeavons has over 30 years’ experience working in a number of executive-level international roles predominantly focused on leading technology and enterprise software solutions across many industry sectors. His career has been spent working for small start-ups, medium-sized and large corporate businesses, helping to drive strong growth, turnarounds and with involvement from both sides in successful merger and acquisition activities. He specializes in policy, regulatory and legislative compliance-based solutions and has a strong interest in how technology can help to drive sustainability and save the planet.
Mr. Jeavons was part of the global leadership team of RuleBurst Haley, which was acquired by Oracle and then successfully relaunched their regulatory compliance solution as a native SaaS platform internationally. During his career he has also worked for companies including Infor, who are another large enterprise software company and was responsible for the European business at Nuxeo, a Goldman Sachs backed, open source, enterprise content management software provider. He recently completed an interim CEO role for a next generation events management SaaS business.
He currently works as an advisor to several SaaS businesses and start-ups, specialising in innovative technologies that make the world better, less complex, and more sustainable. Mr. Jeavons completed his Non-Executive Director’s diploma with Pearson in 2013. He resides in the Cotswolds, United Kingdom.
Mr. Jeavons is the Senior Independent Director at Vivopower and Chairman of the Remuneration and Sustainability Committees of the Company.
Edward HyamsMichael Hui
Michael Hui brings a unique background to the Board given his dual Information Technology and Law degrees and experiences. During his career, he has built significant expertise across a diverse range of sectors in both an investment as well as an operational capacity.
Mr. Hui serves as Managing Director (Australasia) for VivoPower’s largest shareholder, AWN, and also the broader Arowana group. In 2011, he joined our boardArowana as an Investment Director, and since then he has worked across a range of Arowana’s operating businesses including education and asset management. Mr. Hui led the formation and structuring of the Arowana Australasian Special Situations Fund (AASSF) and most recently, the building of Arowana’s education business, EdventureCo. His primary focus at present is driving corporate development (including mergers and acquisitions and technology-based transformation), working alongside the leadership teams of Aevitas and EdventureCo. Previously, Michael was Co-founder and CEO of an online-payments business, and spent more than 10 years as a lawyer practicing corporate and commercial law. He resides in Brisbane, Australia.
Gemma Godfrey
Gemma Godfrey is a non-executive director upon the closingand advisor with experience across financial services, technology, media, public policy and sustainable energy. With a 20-year career, her track record of the Business Combination. Mr. Hyams has over forty years’experience in Power Engineering, Renewablesstrategic planning, innovation and in Energy Efficiency as an Executive, Private Equity Partner and as a Non-Executive Director. He was a Partner at Englefield Capital from 2004 to 2012 where he co-led the Renewable Energy Fund, investing in Solar, Wind and Biomass developments in Europe. He joined Englefield having led the management team which Englefield and another PE firm backed to invest in Zephyr, the first structured financing of a portfolio of renewables assets in the U.K. Prior to Englefield, Mr. Hyams held senior executive roles as CEO of BizzEnergy from 2001to 2003, Managing Director of Eastern Group PLC from 1996 to 2001 and Director of Engineering at Southern Electric Plc from 1992 to 1996. Mr. Hyams was a non-executive Director of the U.K. Energy Saving Trust following the electricity and gas privatizations in the early 1990’s. He re-joined the Trust as Non-Executive Chairman in 2005 and was appointed as a NED at the U.K. Carbon Trust in the same year. Mr. Hyams is a Chartered Engineer, graduating with a degree in Electrical Engineering from Imperial College, London and holds a Diploma in Accounting and Finance from the Association of Certified Chartered Accountants. He has completed executive programs in finance at Harvard Business School and in strategy and organization at Stanford.consumer insight helps ambitious businesses achieve their goals.
Peter Sermol joined our board asMs. Godfrey is a non-executive director uponfor Saga plc, Oberon Investments, Kingswood Holdings and Eight Capital Partners. She was the closing of the Business Combination. Mr. Sermol has over thirty years of experience in institutional finance. Mr. Sermol is the co-founder of North Star Solar Ltd, a company formed by him in September 2014 focused on installing U.K. rooftop solar PVFounder and battery storage which developed a model to install renewable technologies without any need for government subsidies. Prior to this, Mr. Sermol ran the Toronto office of Amstel Securities, a Dutch regulated brokerage firm, from Aug 2004 to September 2012. During this period he also served as CEO of an onlineFCA-authorized digital investing service, which was acquired by FTSE 250 insurer JLT. She pioneered new technology and went on to launch a digital media distribution company. Previously, Mr. Sermol workedbusiness for News U.K., part of News Corp.
A former boardroom adviser to Arnold Schwarzenegger on ‘The Apprentice,’ Ms. Godfrey is a business expert on ITV and Sky News. She was previously Head of Investment Strategy at FTSE-AIM wealth manager, Brooks Macdonald. She started her career at Goldman Sachs and GAM, with specialist brokerage and advisory firms including Anca Capital Partners and Amstel as well as co-founding his own brokerage firm, Global Markets Ltd trading Asian Convertible Bonds and GDRs. Mr. Sermol studied marine electronics at the Merchant Naval College, Greenhithe.
GarySanHuijoined our board as a non-executive director upon the closing of the Business Combination. Mr. Hui joined AWN as an Executive Director and Fund Managerbackground in November 2014. From 2007 to November 2014 when he joined ARWA, Mr. Hui was with Indus Capital, a hedge fund founded by former Soros Fund Management Partners. Mr. Hui joined Indus as a senior analyst, before becoming Managing Director and Chief Representative of Indus’ Singapore officequantum physics. She resides in December 2011, prior to relocating to San Francisco in July 2013. From 1999 to 2007, Mr. Hui was with J.P. Morgan, including as an equity capital and derivatives banker responsible for the origination, structuring and execution of mandates in the Asian region. Prior to this, he worked at Deloitte in audit, business consulting and corporate finance. Mr. Hui qualified as a Chartered Accountant and completed the Securities Institute of Australia (now FINSIA) program. He holds a Bachelor of Commerce degree from the University of New South Wales.London, United Kingdom.
B. Board Diversity Compensation
The table below provides certain information regarding the diversity of our Board as of the date of this Annual Report
Board Diversity Matrix | ||||
Country of Principal Executive Offices: | United Kingdom | |||
Foreign Private Issuer | Yes | |||
Disclosure Prohibited under Home Country Law | No | |||
Total Number of Directors | 5 | |||
Female | Male | Non- Binary | Did Not | |
Part I: Gender Identity | ||||
Directors | 1 | 4 | 0 | 0 |
Part II: Demographic Background | ||||
Underrepresented Individual in Home Country Jurisdiction | 2 | |||
LGBTQ+ | 0 | |||
Did Not Disclose Demographic Background | 0 | |||
DirectorDirectorssand Executive Management Compensation
The tabletables below setsset out the remunerationcompensation paid to our directors duringand executive officers for the year ended March 31, 2017,June 30, 2023 and in the case of Mr. Comberg, reflects the compensation paid for his service as an executive.year ended June 30, 2022.
Name | Salary & Fees | Benefits | Pension | Annual Bonus | Long- Term Incentives | Total | ||||||||||||||||||
Executive | ||||||||||||||||||||||||
Philip Comberg | $ | 393,750 | $ | 15,750 | $ | 39,375 | $ | 787,500 | $ | - | $ | 1,236,375 | ||||||||||||
Carl Weatherley-White | $ | 242,708 | $ | 24,810 | $ | - | $ | 243,123 | $ | - | $ | 510,641 | ||||||||||||
Non-Executive | ||||||||||||||||||||||||
Kevin Chin | $ | 250,000 | $ | - | $ | - | $ | - | $ | - | $ | 250,000 | ||||||||||||
Edward Hyams | $ | 34,583 | $ | - | $ | - | $ | - | $ | - | $ | 34,583 | ||||||||||||
Peter Sermol | $ | 24,346 | $ | - | $ | - | $ | - | $ | - | $ | 24,346 | ||||||||||||
Gary Hui | $ | 91,239 | $ | - | $ | - | $ | - | $ | - | $ | 91,239 | ||||||||||||
Year Ended June 30, 2023 | Salary & Fees | Benefits | Pension | Long Term Incentives | Severance | Total | ||||||||||||||||||
Directors: | ||||||||||||||||||||||||
Kevin Chin (Chair) 1 | $ | 81,819 | $ | - | $ | - | $ | - | $ | - | $ | 81,819 | ||||||||||||
Peter Jeavons 2 | $ | 73,000 | $ | - | $ | - | $ | - | $ | - | $ | 73,000 | ||||||||||||
William Langdon 3 | $ | 65,500 | $ | - | $ | - | $ | - | $ | - | $ | 65,500 | ||||||||||||
Michael Hui 4 | $ | 50,000 | $ | - | $ | - | $ | 7,361 | $ | - | $ | 57,361 | ||||||||||||
Gemma Godfrey 5 | $ | 69,500 | $ | - | $ | - | $ | - | $ | - | $ | 69,500 | ||||||||||||
Executive Officers: | ||||||||||||||||||||||||
Kevin Chin 6 | $ | 455,863 | $ | 45,991 | $ | - | $ | 312,002 | $ | - | $ | 813,856 | ||||||||||||
1 | Mr. Chin is paid a salary of £68,000 ($81,819) per annum as Chairman during the year, payable to Arowana Partners Group Pty Ltd. |
2 | Mr. Jeavons is paid fees of $50,000 per annum during the year. Mr. Jeavons also received an annual fee of $7,500 as chair of the sustainability committee, $7,500 annual fee as chair of the remuneration committee, $4,000 annual fee as member of the audit and risk committee and $4,000 annual fee as member of the nomination committee. Mr. Jeavons elected to receive 100% of his fees for the year in cash. $12,777 remaining accrued and payable as at June 30, 2023. |
3 | Mr. Langdon is paid fees of $50,000 per annum during the year. Mr. Langdon also received an annual fee of $7,500 as chair of the audit and risk committee, $4,000 annual fee as member of the remuneration committee and $4,000 annual fee as member of the nomination committee. Mr. Langdon elected to receive 100% of his fees in cash. $16,500 remaining accrued and payable as at June 30, 2023. |
4 | Mr. Hui is paid fees of $50,000 per annum during the year. Mr. Hui elected to receive 100% of his fees in cash. $25,000 remaining accrued and payable as at June 30, 2023. Mr. Hui also receives equity-based remuneration in relation to his involvement in management of Critical Power Services segment, and the hyper-turnaround and hyperscaling program. Of the 17,500 ($13,125) annual retention Restricted Stock Units ("RSUs") granted on April 1, 2020, vesting annually from June 2021 to June 2026, 3,500 RSUs ($2,625) vested in the current year. Of the 52,500 ($39,375) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 6,314 RSUs ($4,736) vested in the current year. A further 20,000 annual retention RSUs ($5,200) were granted to Mr. Hui on January 11, 2023, vesting annually from December 2023 to December 2025. |
5 | Mrs. Godfrey is paid fees of $50,000 per annum Mrs. Godfrey also received $4,000 annual fee as member of the audit and risk committee, $4,000 as member of the remuneration committee and $4,000 annual fee as member of the nomination committee. Mrs. Godfrey elected to receive 100% of her fees in cash. $9,217 remaining accrued and payable as at June 30, 2023. |
6 | Comprises £325,000 base fees, £38,000 annual professional development allowance. Of the base salary £325,000, 4 months were paid in cash, whilst for 8 months, Mr. Chin agreed to receive payment in the form of 541,666 cashless warrants in VivoPower shares, exerciseable in the period 3 June 2024 to 3 June 2029 at an exercise price of $0.60. Shares issued following exercising of warrants will remain restricted for 12 months. Mr. Chin has allocated these warrants to a benevolent cause, the ASEAN foundation. Mr. Chin receives equity-based remuneration in relation to his involvement in leading the hyper-turnaround and hyperscaling program. Of the 87,200 ($65,400) annual retention RSUs granted on April 1, 2020, vesting annually from June 2021 to June 2026, 17,440 RSUs ($13,080) vested in the current year. Of the 261,600 ($196,200) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 31,456 RSUs ($23,592) vested in the current year. In December 2021, the Remuneration Committee approved an equity award of RSUs in relation to short term incentives for the year ended June 30, 2022, vesting in June 2023 deferred from June 2022. The award vested 94,291 RSUs ($275,330), based on Mr. Chin's base salary £325,000 x 1.3237 exchange rate x 64% performance measurement / $2.92 VWAP share price. A further 20,000 annual retention RSUs ($5,200) were granted to Mr. Chin on January 11, 2023, vesting annually from December 2023 to December 2025. |
Year Ended June 30, 2022 | Salary & Fees | Benefits | Pension | Long Term Incentives | Severance | Total | ||||||||||||||||||
Directors: | ||||||||||||||||||||||||
Kevin Chin (Chair) 1 | $ | 91,029 | $ | - | $ | - | $ | - | $ | - | $ | 91,029 | ||||||||||||
Matthew Cahir 2 | $ | 38,336 | $ | - | $ | - | $ | - | $ | - | $ | 38,336 | ||||||||||||
Peter Jeavons 3 | $ | 69,000 | $ | - | $ | - | $ | - | $ | - | $ | 69,000 | ||||||||||||
William Langdon 3 | $ | 61,500 | $ | - | $ | - | $ | - | $ | - | $ | 61,500 | ||||||||||||
Michael Hui 4 | $ | 50,000 | $ | - | $ | - | $ | 8,178 | $ | - | $ | 58,178 | ||||||||||||
Gemma Godfrey 5 | $ | 58,000 | $ | - | $ | - | $ | - | $ | - | $ | 58,000 | ||||||||||||
Executive Officers: | ||||||||||||||||||||||||
Kevin Chin 7 | $ | 434,969 | $ | 51,388 | $ | - | $ | 273,039 | $ | - | $ | 759,396 | ||||||||||||
1 | Mr. Chin was paid a salary of £68,000 ($92,029) per annum as Chairman during the year ended June 30, 2022, payable to Arowana Partners Group Pty Ltd. In addition to his monthly salary, along with other directors of the Company, on December 14, 2020, Mr. Chin was granted 7,788 ($50,000) RSUs vesting in the year, to bring compensation in line with market levels as benchmarked by Pearl Meyer. |
2 | Mr. Cahir was paid a salary of $50,000 per annum in cash from July 1, 2021 through February 2022 as a result of his resignation as a director on March 17, 2022. | |
| Mr. Cahir was also paid a consulting fee as President of VivoPower USA and sales director for electric vehicles, via Middleburg Juice Company, LLC. The Remuneration Committee (with Mr. Cahir recused) approved an extension to Mr. Cahir’s consulting agreement effective July 1, 2021, with cash remuneration of $32,000 per month and healthcare allowance of $5,000 per month. Following his resignation on March 17, 2022, the Committee approved the continued monthly payment of $32,000 per month and healthcare allowance of $5,000 per month until the end of his notice period on September 17, 2022, in accordance with the terms of his contract. In December 2021, the Committee approved an equity award of 70,000 ($229,600) RSUs in relation to short term incentives for the year ended Jun 30, 2021, vesting in December 2021. In addition, the Committee approved the following equity awards to Mr. Cahir following his resignation in March 2022, being fulfilment of business development incentives for the year ended June 30, 2022: |
| ● | a business development payment of 182,432 ($270,000) RSUs, vesting May 1, 2022; | ||
● | a business development stretch payment of 109,459 ($162,000) RSUs vesting conditional on certain commercial settlement goals being achieved. These goals were achieved and RSUs vested during the year ended June 30, 2022. | ||
| ● | a business development upside payment of 36,486 ($54,000) RSUs vesting conditional on certain commercial settlement goals being achieved. This condition remains outstanding as at August 30, 2022. | ||
| ● | 2.5 points in a future Caret Omnibus incentive plan. |
3 | Mr. Jeavons was paid a salary of $50,000 per annum during the year ended June 30, 2022. Mr. Jeavons also received an annual fee of $7,500 as chair of the sustainability committee, $7,500 annual fee as chair of the remuneration committee and $4,000 annual fee as member of the audit and risk committee. Mr. Jeavons elected to receive 75% of all his fees for the year in equity (7,099 RSUs), 25% in cash. |
4 | Mr. Langdon was paid a salary of $50,000 per annum during the year ended June 30, 2022. Mr. Langdon also received an annual fee of $7,500 as chair of the audit and risk committee and $4,000 annual fee as member of the remuneration committee. Mr. Langdon elected to receive 100% of his salary as equity (1,989 RSUs) and 100% of his committee fees in cash. |
5 | Mr. Hui was paid a salary of $50,000 per annum during the year. Mr. Hui also receives equity-based remuneration in relation to his involvement in management of Critical Power Services segment, and the hyper-turnaround and hyperscaling program. Of the 17,500 ($13,125) annual retention RSUs granted on April 1, 2020, vesting annually from June 2021 to June 2026, 3,500 RSUs ($2,625) vested in the current year. Of the 52,500 ($39,375) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 8,124 RSUs ($6,093) vested in the year ended June 30, 2022. |
6 | Mrs. Godfrey was paid a salary of $50,000 per annum in the year ended June 30, 2022. Mrs. Godfrey also received $4,000 annual fee as member of the audit and risk committee and $4,000 as member of the remuneration committee. Mrs. Godfrey elected to receive 25% of her salary and committee fees as equity; 75% in cash. |
7 | Comprises £325,000 base salary, £38,000 annual professional development allowance. In December 2021, the Remuneration Committee approved an equity award of 70,000 ($229,600) RSUs in relation to short term incentives for the year ended June 30, 2021, vesting in December 2021. Mr. Chin also receives equity-based remuneration in relation to his involvement in leading the hyper-turnaround and hyperscaling program. Of the 87,200 ($65,400) annual retention RSUs granted on April 1, 2020, vesting annually from June 2021 to June 2026, 17,440 RSUs ($13,080) vested in the year ended June 30, 2022. Of the 261,600 ($196,200) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 40,479 RSUs ($30,359) vested in the year ended June 30, 2022. |
Employment Agreements
Gary Hui is also paid an annual salary of $360,000 through U.S. payroll, in compensation for additional work undertaken for the benefit of the Company, including his role on the investment committee. A proportion of this salary is recharged to AWN; the amount presented in the table above reflects the amount that is not recharged to AWN.
The value of the annual bonus awarded to Philip Comberg was based on completion of certain performance targets as described below.
Employment and Consulting Agreements
Executive Agreements
Philip Comberg entered into a service agreement with VivoPower, via its 100% owned subsidiary VivoPower International Services Limited (“Services”), on August 4, 2016, pursuant to which he has served
Mr. Chin’s remuneration as Chief Executive Officer effective Septemberhas remained at £325,000 per annum as Chief Executive since July 1, 2016.2020, payable monthly in arrears. This remuneration plan was decided upon by the Remuneration Committee following a market benchmarking by Pearl Meyer, to align to the new strategy and additional responsibilities. The agreement runs for an indefinite term and until noticeremuneration includes the cost of not less than 12 months is provided by Services orany support resources required by Mr. Comberg. PursuantChin to fulfil the roles. Of the base salary £325,000, 4 months were paid in cash, whilst for 8 months, Mr. Chin agreed to receive payment in the form of 541,666 cashless warrants in Ordinary Shares of the Company, exercisable in the period 3 June 2024 to 3 June 2029 at an exercise price of $0.60. Ordinary Shares issued following exercising of warrants will remain restricted for 12 months. Mr. Chin has allocated these warrants to a benevolent cause, the ASEAN foundation. The Committee also approved an additional annual £38,000 fee payable as a professional development allowance to Mr. Chin as Chief Executive Officer. This payment will be made on 1 January each year.
In the year ended June 30, 2020, Mr. Chin was granted 87,200 RSUs and 261,600 Performance Stock Units (“PSUs”) in the Company, issued pursuant to the agreement, Mr. Comberg is entitled toCompany’s Omnibus Incentive Plan adopted on September 5, 2017, at an initial annual base salaryissue price of $675,000 subject to review and upward adjustment annually; an additional 10% of his base salary in lieu of pension contributions; participation in the Company’s incentive plan(s); company paid life insurance at four times his base salary; at Mr. Comberg’s election, participation in company sponsored benefits plans offered to other employees or an amount of $2,250$0.75 per month contribution to he and his family’s private medical insurance; participation in any company permanent health insurance scheme; and relocations costs. Mr. Comberg will also participate in a special bonus scheme where he could earn up to an additional amount of 150% of his annual base salary for achieving specified performance objectives. In addition to observing English public holidays, Mr. Comberg is entitled to 30 days personal holidays each year. Mr. Comberg is restricted from pursuing interests in other competing businesses and is subject to customary terms regarding confidentiality, intellectual property, and non-competition and gardening leave protections afforded the company.
Carl Weatherley-White, our Chief Financial Officer, entered into an employment agreement with Vivo USA on July 13, 2016. Mr. Weatherley-White’s agreement provides for base compensation, currently at a rate of $348,000, and eligibility to participate in an annual bonus poolshare, based on Vivo USA’s and Mr. Weatherley-White’s performance.the Company share price on March 25, 2020. The payment and timing of the bonus is at the sole discretion of Vivo USA. Mr. Weatherley-White’s target bonus under the bonus is up to 100% of his base compensation.
Mr. Weatherley-White’s agreement also provides for participation in Vivo USA’s standard benefits, reimbursement of reasonable work related expenses and at least twenty days of paid time off each year.RSUs vest annually over 5 years. The terms and conditions are determined by Vivo USAPSU’s vest quarterly over 3.25 years and are subject to achieving performance goals. This was approved by the Remuneration and Nomination Committee of the Board on June 16, 2020. Of the awards previously granted, a numbertotal of customary conditions and restrictions, including17,440 RSUs ($13,080) vested in the year ended June 30, 2023 (year ended June 30, 2022: 17,440 RSUs - $13,080). A total of 31,456 ($23,592) PSUs also vested in the year, following achievement of quarterly performance goals (year ended June 30, 2022: 40,479 PSUs - $30,359).
In December 2021, the Remuneration Committee approved an equity award of RSUs in relation to short term incentives for the year ended June 30, 2022, vesting periods and employee tenure.in June 2023 deferred from June 2022. The award vested 94,291 RSUs ($275,330) based on Mr. Chin's base salary £325,000 x 1.3237 exchange rate x 64% performance measurement / $2.92 VWAP share price. In December 2021, the Remuneration Committee approved an equity award of 70,000 RSUs ($229,600) in relation to short term incentives for the year ended June 30, 2021, which vested in December 2021.
Mr. Weatherley-White agreedChin is also paid an annual Chairman’s fee of £68,000 ($92,119) as Chairman of the Board, payable by the Company to non-solicitation and non-competition provisions forArowana Partners Group Pty Ltd. The fee was increased as from July 1, 2021, following a periodreview by the Remuneration Committee of six months following his last day with Vivo USA.Mr. Chin’s compensation, including market benchmarking by Pearl Meyer. In the year ended June 30, 2021, Mr. Chin also received 7,788 ($50,000) RSUs in this capacity.
Potential Payments Upon Termination or Change in Control
The Company may terminate the CEO's employment summarily for gross misconduct or similar grounds or by serving twelve months' written notice on the CEO. The CEO may terminate his employment by serving 12 months' written notice on the Company.
In circumstances where the employment is terminated on notice, the Company may elect to put in place any of the following arrangements:
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If the CEO is terminated (otherwise than for cause) the CEO shall also be entitled to reimbursement for his costs of relocation back to Germany on a grossed up for tax basisKevin Chin, Executive Chairman and shall remain eligible to receive a pro-rata proportion of any bonus calculated up to the termination date.
Pursuant to the employment agreements, Mr. Weatherley-White is employed on an “at will” basis andChief Executive Officer, may be terminated upon twelve months’ notice at any time, for any reason, with or without causecause. Other than the twelve-month notice period, there are no other special payments upon termination or notice. In the event that Mr. Weatherley-White is terminated without cause or resigns for good reason, he is entitled to receive severance in the form of twelve months’ continuation of his current base salary and an amount equal to the average of his last two years’ bonus. If Mr. Weatherley-White’s employment is terminated by reason of death or disability, in addition to any accrued and unpaid salary, he (or his estate) would also receive any pro-rata bonus.
If Mr. Weatherley-White’s employment, six months prior to, or within two years following, a change of control, is terminated involuntarily by Vivo USA other than for cause, death, disability, Mr. Weatherley-White shall be entitled to twelve months’ continuation of his current base salary and a bonus equal to the greater of (1) the average of his last two years’ bonus or (2) two-thirds of his base salary.control.
The appointment letters of the non-executive directors of the Company are generally terminable upon one month’s written notice and do not contain provisions providing for special payments upon termination or change inof control.
EquityDuring FY2023, Tembo e-LV BV established a performance incentive plan for participants to benefit from any potential future trade sale, IPO, recapitalization or merger of Tembo e-LV and subsidiaries within the EV business unit. In the event of such an action, participants will earn Long Term Incentive Plan
On July 3, 2017,("LTI") points according to an allocation decided by the boardRemuneration Committee of directors approved adoptiona profit share of 20% of the Company’s 2017 Omnibus Incentive Plan (the “Incentive Plan”), subjectnet gain made by the Company from the corporate action, less previously invested amounts.
Board Composition and Classification of Directors
We have five directors on our Board. All of the current directors are members pursuant to approval by shareholders, the Board composition provisions of which will be described in a Current Report on Form 6-K filed by the Company. Shareholder approval for the Incentive Plan will be sought at the Company’s Annual General Meeting, which is expected to occur on September 5, 2017.
C. Board Practicesour articles of association.
Staggered Board Composition
Our business affairs are managed underIn accordance with the directionterms of our boardarticles of directors, which currently comprises five members. Kevin Chin has served as a director since April 27, 2016. Gary Hui has served as a director since December 21, 2016. Edward Hyams has served as a director since November 2, 2016. Peter Sermol has served as a director since December 21, 2016. Philip Comberg has served as a director since May 1, 2016. Our board of directors has determined that Messrs. Hyams and Sermol are “independent” under the listing rules of The Nasdaq Stock Market.
ClassificationofDirectors
Pursuant toassociation, our Articles, which were adopted upon the closing of the Business Combination, the directors of VivoPower areBoard is divided into three staggered classes as nearly equal in number as possible and designated as Class A, Class B and Class C. The initial termof directors of the initial Class A Directors, Gary Huisame or nearly the same number and Philip Comberg, shall expire at the Company’s first annual general meeting; the initial termeach will be assigned to one of the initial Class B Directors, consisting of Peter Sermol and Edward Hyams, shall expire at the second annual general meeting; and the initial term of the initial Class C Directors, consisting of Kevin Chin, shall expire at the third annual general meeting. Commencing at the first annual general meeting following the adoption of the Articles and atthree classes. At each succeeding annual general meeting of VivoPower thereafter, successors to the shareholders, a class of directors whose term expires at that annual general meeting shallwill be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the third annual general meeting following such election. Kevin Chin isof stockholders to be held during the Chairmanyears 2023 for Class A directors, 2024 for Class B directors and 2025 for Class C directors:
● | our Class A directors are Peter Jeavons and Michael Hui. |
● | our Class B directors are Gemma Godfrey. |
● | our Class C directors are Kevin Chin and William Langdon. |
Our articles of association provide that the board.number of our directors shall not be subject to any maximum but shall not be less than two, unless otherwise determined by a majority of our Board.
The division of our Board into three classes with staggered three-year terms may delay or prevent stockholder efforts to effect a change of our management or a change in control.
Corporate Governance and CommitteesDirector Independence
Rule 5605 of the Nasdaq Listing Rules requires a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. Under Rule 5605(a)(2), a director will only qualify as an “independent director” if, in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent judgement in carrying out the responsibilities of a director.
Our Board has determined that Gemma Godfrey, Peter Jeavons and William Langdon are “independent directors” under the Rule 5605 of the Nasdaq Listing Rules.
Corporate Governance
The Sarbanes-Oxley Act of 2002, as well as related rules subsequently implemented by the SEC, requires foreign private issuers, including our company, to comply with various corporate governance practices. In addition, Nasdaq rules provide that foreign private issuers may follow home country practice in lieu of the Nasdaq corporate governance standards,requirements, subject to certain exceptions and except to the extent that such exemptions would be contrary to U.S. federal securities laws. We currently do not intend to take advantage of any such exemptions.
We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable requirements of the rules adopted by the SEC.
Because we are a foreign private issuer, our directors and senior management are not subject to short-swing profit and insider trading reporting obligations under Section 16 of the Exchange Act. They will, however, be subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act and related SEC rules.
Committees of the Board
We have established an audit committee,Audit and Risk Committee, a nominating committeeRemuneration Committee, a Nomination Committee and a remunerations committeeSustainability Committee and have a charter for each of these committees.
AuditCommitteeInformationAudit and Risk Committee
The audit committeeAudit and Risk Committee is comprised of Peter Sermol, Edward Hyams and Kevin Chin. EachWilliam Langdon (who is Chair of the membersAudit and Risk Committee), Gemma Godfrey and Peter Jeavons, each of whom the audit committee, other than Mr. Chin, isBoard has determined to be independent under the applicable Nasdaq listing standards. Pursuant to Nasdaq’s “phase-in” rules for newly listed companies, we have one year fromPeter Jeavons and William Langdon joined the datecommittee on which we are first listedJune 16, 2020 and Gemma Godfrey joined the committee on Nasdaq to have our audit committee be comprised solely of independent members. We intend to identify an additional independent director to serve on the audit committee within the applicable time period, at which time Mr. Chin resign from the committee. July 1, 2021.
The audit committeeAudit and Risk Committee has a written charter, a form of which is available free of charge on VivoPower’s website atwww.vivopower.com.at www.vivopower.com.
The purpose of the audit committee,Audit and Risk Committee, as specified in the audit committeeAudit and Risk Committee charter, includes, but is not limited to, assisting the board of directorsBoard in overseeing and monitoring:
• | the Company’s accounting and financial reporting processes and internal control over financial reporting; |
the Company's accounting and financial reporting processes and internal control over financial reporting;
• | the audit and integrity of the Company’s financial statements; |
the audit and integrity of the Company’s financial statements;
• | the qualifications, independence, and performance of the Company’s registered public accounting firm; |
the qualifications, independence, remuneration, engagement terms with and performance of the Company’s registered public accounting firm;
• | the Company’s compliance with accounting, regulatory and related legal requirements; |
the Company's compliance with accounting, regulatory and related legal and requirements;
• | risk assessment and risk management; and |
the adequacy and security of the Company’s compliance and fraud-detection procedures; and
risk assessment and risk management.
• | such other duties and responsibilities as are enumerated in or consistent with the terms of reference. |
FinancialExpertsonAuditThe Audit and Risk Committee
Subject to Nasdaq’s “phase-in” rules for newly listed companies, the audit committee is required to be composed exclusively of “independent directors,” as defined for audit committee members under the Nasdaq listing standards and the rules and regulations of the SEC, who areand each of whom must be, among other requirements, “financially literate,” as defined under Nasdaq’sthe Nasdaq listing standards. Nasdaq’sThe Nasdaq listing standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. In addition, VivoPower is required to certify to Nasdaq that the committee has and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.
The board of directorsBoard has determined that Kevin ChinWilliam Langdon satisfies Nasdaq’s definition of financial sophistication and also qualifiesqualified as an “audit committee financial expert” as defined under rules and regulations of the SEC.
NominatingCommitteeInformation
Nomination Committee
The nominating committeeNomination Committee of the board of directorsBoard is comprised of Edward Hyams, Peter Sermol and Kevin Chin. EachGemma Godfrey (who is Chair of the membersNomination Committee), William Langdon, and Peter Jeavons, each of whom the nominating committee, other than Mr. Chin, isBoard has determined to be independent under the applicable Nasdaq listing standards. Pursuant to Nasdaq’s “phase-in” rules for newly listed companies, we have one year fromGemma Godfrey joined the datecommittee on which we are first listedMarch 17, 2022 and William Langdon and Peter Jeavons joined the committee on Nasdaq to have our nominating committee be comprised solely of independent members. We intend to identify one additional independent director to serve on the nominating committee within the applicable time period, at which time Mr. Chin will resign from the committee. June 16, 2020.
The nominating committeeNomination Committee has a written charter, a form of which is available free of charge aton VivoPower’s website atwww.vivopower.com.The nominating committeeat www.vivopower.com.
The Nomination Committee is responsible for overseeing the selection of persons to be nominated to serve on VivoPower’s board of directors.Board.
Selection ofDirectorNominees
The nominating committeeNomination Committee considers persons identified by its members, management, shareholders, investment bankers and others. Pursuant to its charter, the nominating committee,Nomination Committee, before any appointment is made by the board of directors,Board, evaluates the balance of skills, knowledge, experience and diversity on the Board, and, in the light of this evaluation, prepares a description of the role and capabilities required for a particular appointment, and consider candidates on merit and against objective criteria and with due regard for the benefits of diversity on the Board, taking care that appointees have enough time available to devote to the position.
The nominating committeeNomination Committee considers a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors.Board. The nominating committeeNomination Committee may require certain skills or attributes, such as financial or accounting experience, to meet specific boardBoard needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of boardBoard members. The nominating committeeNomination Committee will not distinguish among nominees recommended by shareholders and other persons.
RemunerationCommitteeInformation Committee
The remuneration committee consistsRemuneration Committee is comprised of Peter Sermol, Edward Hyams and Kevin Chin. EachJeavons (Chair of the membersRemuneration Committee), William Langdon and Gemma Godfrey, each of whom the remuneration committee, other than Mr. Chin,Board has determined is independent under the applicable Nasdaq listing standards. Pursuant to Nasdaq’s “phase-in” rules for newly listed companies, we have one year fromPeter Jeavons and William Langdon joined the datecommittee on which we are first listedJune 16, 2020. Gemma Godfrey joined the committee on Nasdaq to have our remuneration committee be comprised solely of independent members. We intend to identify an additional independent director to serve on the remuneration committee within the applicable time periods, at which time Mr. Chin will resign from the committee. July 1, 2021.
The remuneration committeeRemuneration Committee has a written charter, a form of which will beis available free of charge on VivoPower’s website atwww.vivopower.com.The remuneration committee’sat www.vivopower.com.
The Remuneration Committee’s duties, which are specified in our Remuneration Committee Charter, include, but are not limited to:
• | setting the remuneration policy for all executive directors and executive officers, including pension rights and any compensation payments; | |
• | reviewing the appropriateness and relevance of the remuneration policy; | |
• | determining total individual compensation packages; | |
• | reviewing and designing share incentive and share option plans, determining awards thereunder and administering such plans; | |
• | approving design of, and targets for, performance-related pay schemes; | |
• | determining pension arrangements; | |
• | appointing compensation consultants; | |
• | approving contractual appointment terms for directors and senior executives; and | |
• | related duties. |
Setting the remuneration policy for all executive directors and executive officers, with the exception
Sustainability Committee
The Sustainability Committee is comprised of Peter Jeavons (chair of the chief executive officer (whose remuneration is determined by the board of directors)Sustainability Committee), including pension rightsKevin Chin and any compensation payments;Gemma Godfrey.
Reviewing the appropriateness and relevance of the remuneration policy;
Determining total individual compensation packages;
Reviewing and designing share incentive and share option plans, determining awards thereunder and administering such plans;
Approving design of and targets for performance-related pay schemes;
Determining pension arrangements;
Appointing compensation consultants;
Approving contractual appointment terms for directors and senior executives;
and related duties.
The Sustainability Committee has a written charter, a form of which is available on VivoPower’s website at www.vivopower.com.
The Sustainability Committee’s duties, which are specified in our Sustainability Committee Charter include, but are not limited to:
| • | oversee and monitor VivoPower’s Safety and Health policies, procedures and programs and track any safety and health scorecards against benchmarks; |
| • | review VivoPower’s B Corp certification and governance policies and initiatives with a view to continuously improving VivoPower’s B score; | |
| • | maintain, update and review the effectiveness of VivoPower’s environmental policies and initiatives designed to ensure environmental sustainability and the minimization of the Company’s environmental footprint; |
| • | determining total individual compensation packages; | |
| • | review the effectiveness of VivoPower’s policies and initiatives with regards to community and staff engagement as well as broader corporate social responsibility; and | |
| • | oversee and monitor the reputational impacts of VivoPower’s business strategies and practices, including policies and to ensure appropriate safeguards are in place for dealing fairly and ethically with customers, suppliers, competitors and other stakeholders. |
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics applicable to all of our directors, executive officers and employees, including our chief executive officer, chief financial officer, controller, or other persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Form 20-F promulgated by the SEC. The full text of the Code of Business Conduct and Ethics is posted on the investor relations section of our website atwww.vivopower.com.www.vivopower.com.
If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC. Under Item 16B of Form 20-F, if a waiver or amendment of the Code of Business Conduct and Ethics applies to our principal executive officer, principal financial officer, or controller and relates to standards promoting any of the values described in Item 16B(b) of Form 20-F, we are required to disclose such waiver or amendment on our website in accordance with the requirements of Instruction 4 to such Item 16B.
D.
As of March 31, 2017,June 30, 2023, we had 151108 (June 30, 2022: 242; June 30, 2021: 255) employees and subcontractors, as follows:
As at June 30, 2023 | Australia | US | U.K. | Netherlands | Total | |||||||||||||||
Sales and Business Development | 3 | 1 | - | 9 | 13 | |||||||||||||||
Central Services and Management | 10 | 1 | 3 | 4 | 18 | |||||||||||||||
Engineering and Critical Power Services | 53 | - | - | 24 | 77 | |||||||||||||||
Total employees | 66 | 2 | 3 | 37 | 108 | |||||||||||||||
As at June 30, 2022 | Australia | US | U.K. | Netherlands | Total | |||||||||||||||
Sales and Business Development | 9 | 1 | - | 2 | 12 | |||||||||||||||
Central Services and Management | 23 | 1 | 3 | 2 | 30 | |||||||||||||||
Engineering and Critical Power Services | 187 | - | - | 14 | 201 | |||||||||||||||
Total employees | 219 | 2 | 3 | 18 | 242 | |||||||||||||||
As at June 30, 2021 | Australia | US | U.K. | Netherlands | Total | |||||||||||||||
Sales and Business Development | 10 | 1 | - | 2 | 13 | |||||||||||||||
Central Services and Management | 22 | 1 | 4 | 8 | 35 | |||||||||||||||
Engineering and Critical Power Services | 201 | - | - | 6 | 207 | |||||||||||||||
Total employees | 233 | 2 | 4 | 16 | 255 | |||||||||||||||
J.A. Martin ex-solar operations contributed93employees to headcount in prior year, whereas headcount in FY2023 excludes employee numbers from the disposed entity.
Both Aevitas Solar and Kenshaw have in place enterprise agreements jointly developed by the businesses and their employees with 137 located in the Australia, 8 inpurpose of developing and implementing workplace reform strategies so as to produce continuously improved environments aimed directly at improving the U.S., 4 in U.K. and 2 in Asia. As of March 31, 2016, we had 6 employees and subcontractors with 0 located in the Australia, 5 in the U.S., 1 in U.K. and 0 in Asia. The following table shows the breakdown of our global workforce of employees and subcontractors by category of activity ascompetitiveness of the dates indicated:businesses within their marketplaces and delivering job satisfaction and security for their employees.
| Summary | Australia | US | U.K. | Asia | Total | |||||||||||||||
Sales and Business Development | 10 | 2 | - | 2 | 14 | |||||||||||||||
Central Services and Management | 27 | 4 | 4 | - | 35 | |||||||||||||||
Engineering and Power Services | 100 | 2 | - | - | 102 | |||||||||||||||
Total | 135 | 8 | 4 | 2 | 149 |
None of our employees work under any collective bargaining agreements. We have never experienced labor-related work stoppages or strikes and believe that we have good relations with our employees.
The following table sets forth information regarding the beneficial ownership of VivoPower ordinary sharesOrdinary Shares as of July 25, 2017August 31, 2023, by:
| each of our executive officers and directors; and |
| all of our executive officers and directors as a group. |
The beneficial ownership of VivoPower’s ordinary sharesOrdinary Shares is based on 13,557,376 ordinary shares25,788,260 Ordinary Shares issued and outstanding on July 25, 2017.August 31, 2023. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days.
Unless otherwise indicated, we believe that all persons named in the table below have solesignificant voting and investment power with respect to all ordinary sharesOrdinary Shares beneficially owned by them.
Name and Address of Beneficial Owner(1) |
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| Number of Shares Beneficially Owned |
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| Percentage of Outstanding Shares |
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Kevin Chin(2) |
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| 1,266,531 | (3)(4) |
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| 9.3 | % |
Gary Hui(2) |
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| 325,045 | (5) |
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| 2.4 | % |
Dr. Philip Comberg |
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| 0 |
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| 0 | % |
Edward Hyams |
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| 0 |
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| 0 | % |
Peter Sermol |
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| 0 |
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| 0 | % |
Carl Weatherley-White |
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| 12,610 |
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| 0.1 | % |
All directors and executive officers as a group (6 persons) |
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| 1,604,186 |
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| 11.8 | % | |
Name and Address of Beneficial Owner (1) | Number of Shares Benficially Owned | Percentage of Outstanding Shares | |||||||
Kevin Chin (2) | 12,557,349 | (3) | 48.7 | % | |||||
Michael Hui | 43,489 | <1% | |||||||
William Langdon | 38,936 | <1% | |||||||
Peter Jeavons | 37,926 | <1% | |||||||
Gemma Godfrey | 5,934 | <1% | |||||||
All Directors and Executive officers as a group (6 persons) | 12,683,634 | 49.2 | % | ||||||
(1) | Unless otherwise indicated, the business address of each of the individuals is c/o VivoPower International PLC, |
(2) | The business address |
(3) | Represents shares held by |
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None of the above shareholders have different voting rights from other shareholders as of the date of this Annual Report.
Equity Incentive Plan
On July 3, 2017, the Board approved adoption of the Company’s 2017 Omnibus Incentive Plan (the “Incentive Plan”), which was subsequently approved by shareholders. The purpose of the Incentive Plan is to provide a means through which the Company and its subsidiaries may attract and retain key personnel and to provide a means whereby personnel of the Company and its subsidiaries can acquire and maintain equity interests in the Company and align their interests with those of the Company’s stockholders. Types of awards that may be granted under the Incentive Plan include options, stock appreciation rights, restricted stock and restricted stock units, stock bonus awards and performance compensation awards. The Remuneration Committee of the Board administers the Incentive Plan and determines the terms and conditions of the awards. Awards are evidenced by an award agreement containing the terms and conditions of each award. Under the Incentive Plan (or a Sub-Plan for Non-Employees that was also approved with the Incentive Plan), the Company may grant awards to employees, executives, officers, consults, or advisors of the Company or its subsidiaries.
On July 6, 2023, the shareholders approved an amendment to the Incentive Plan allowing the number of Ordinary Shares reserved under the Incentive Plan to automatically increase each July 1, beginning on July 1, 2023, and ending on July 2, 2032, by 5.0% of the outstanding number of Ordinary Shares on the immediately preceding June 30, or such lesser amount as determined by the Company’s Remuneration Committee.
During the years ended June 30, 2023 and June 30, 2022, the following awards under the Incentive Plan have been granted, and have vested or forfeit:
Number of RSUs, PSUs and BSAs (thousands) | Weighted average grant date fair value $000 | |||||||
Outstanding at June 30, 2021 | 460 | $ | 1,186 | |||||
Granted | 706 | 1,838 | ||||||
Vested | (755 | ) | (1,877 | ) | ||||
Forfeit | (132 | ) | (676 | ) | ||||
Outstanding at June 30, 2022 | 279 | $ | 471 | |||||
Granted | 912 | 303 | ||||||
Vested | (356 | ) | (123 | ) | ||||
Forfeit | (178 | ) | (320 | ) | ||||
Outstanding at June 30, 2023 | 657 | $ | 331 | |||||
G. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation
There was no erroneously awarded compensation attributable to accounting restatements during or after the fiscal year ending 30 June 2023.
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Major Shareholders |
The following table sets forth information with respect to beneficial ownership of our ordinary sharesOrdinary Shares as of the date of this annual reportAugust 1, 2023 by each person known to us to beneficially own 5% and more of our ordinary shares.Ordinary Shares.
The beneficial ownership of VivoPower’s ordinary sharesOrdinary Shares is based on determined based on 13,557,376 ordinary shares25,788,260 Ordinary Shares issued and outstanding on July 25, 2017.August 31, 2023. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Approximate Percentage of Beneficial Ownership | ||||||
AWN Holdings Limited (1) | 10,136,144 | 39.3 | % | |||||
| Armistice Capital Master Fund Ltd (2) | 4,230,779 | 14.1 | % | |||||
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Approximate Percentage of Beneficial Ownership | ||||||
The Panaga Group Trust(1) | 1,241,531 | 9.2 | % | |||||
Arowana International Limited(2) | 8,176,804 | 60.3 | % | |||||
(1) |
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| According to a Schedule 13D filed January 31, 2017, on behalf of AWN (formerly Arowana International On July 21, 2021, AWN was issued a further 1,959,339 restricted Ordinary Shares, pursuant to the contracted terms of conversion of Aevitas convertible preferred shares and convertible notes. As at June 30, 2022, AWN held a 47.5% equity interest in the Company. As at June 30, 2023, AWN held a 39.5% equity interest in the Company, which was reduced to 39.3% following the vesting of Omnibus Incentive Plan related shares in August 2023. | |
| (2) | Consists of 4,230,770 Ordinary Shares issuable upon the exercise of the Series A Warrants subject to certain beneficial ownership limitations held by the selling shareholder. The Ordinary Shares upon exercise would be directly held by Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”), and may be deemed to be indirectly beneficially owned by: (i) Armistice Capital, LLC (“Armistice Capital”), as the investment manager of the Master Fund; and (ii) Steven Boyd, as the Managing Member of Armistice Capital. Armistice Capital and Steven Boyd disclaim beneficial ownership of the Ordinary Shares except to the extent of their respective pecuniary interests therein. The address of Armistice Capital Master Fund Ltd. is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, NY 10022. |
None of the above shareholders have different voting rights from other shareholders as of the date of this Annual Report.
86% of our outstanding ordinary shares were held in the United States by 2 holders of record (the United States record holders include Cede & Co., the nominee of the Depositary Trust Company).
Advances fromTransactions and Balances with Related Persons
On June 30, 2021, the Company agreed to refinance its existing $21.1 million shareholder loan with AWN Holdings Limited (“AWN"), with repayment of principal from January 1, 2023 in sixty monthly instalments of $0.35 million to loan maturity on December 31, 2027. The interest rate and line fee was agreed at 8% and 0.8% respectively, but no interest or line fee settlements are required until after a corporate liquidity event has occurred. In addition, the Company agreed to a refinancing fee of $0.34 million in two tranches on June 30, 2022 and December 31, 2022. Security granted to AWN comprised of the Specific Security Deed and the General Security.
On January 11, 2023, amendments to the loan were agreed with AWN:
(i) to defer repayment of principal to commence on April 1, 2025, with repayments over 60 months to March 31, 2030.
(ii) to defer interest payments from October 1, 2023, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2024.
(iii) to extend the increased interest rate and line fee of 10.00% and 2.00% per annum respectively commenced on October 1, 2021 to the earlier of a) March 31, 2025 or b) the date a minimum prepayment of $1,000,000 is made.
(iv) to extend the initial refinancing fee accruing incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) April 1, 2025.
(v) to defer the repayment date of the previous fixed facility extension fee of $0.355 million, becoming payable on April 1, 2025.
(vi) In addition to previously agreed refinancing fees, an additional $0.855 million fixed refinancing fee will accrue immediately and become payable on April 1, 2025.
Arowana EnergyOn June 30, 2023, further amendments to the loan were agreed with AWN:
(i) to defer interest payments from October 1, 2024 to April 1, 2025, and to replace the conditional requirement to repay accrued interest upon completion by VivoPower of a debt or equity raise of at least $25 million, with the conditional requirement to make repayments of interest and/or principal to meet the mandatory repayment schedule described in sections (ii) and (iii) below following a qualifying liquidity event.
(ii) upon completion by VivoPower of a qualifying liquidity event of at least $5.0 million, Aevitas O Holdings Pty Limited are required to make mandatory prepayment of principal and interest to AWN in accordance with the following schedule:
a) proceeds $5 million to $7.5 million - pay 25% of amounts raised;
b) proceeds $7.5 million to $12.5 million - pay $1.875 million plus 45% of amounts raised;
c) proceeds $12.5 million and above - pay $4.125 million plus 50% of amounts raised.
(iii) for the purposes of the mandatory prepayment requirement, a ‘qualifying liquidity event’ excludes direct investments into VivoPower’s subsidiary, Tembo, and debt raised in respect of working capital finance facilities, but includes:
a) equity or debt raise;
b) trade sale of underlying subsidiary or business unit (including, for example, Aevitas and Caret); and
c) loan repayment from Tembo to VivoPower.
(iv) as consideration for the concessions agreed with AWN, VivoPower International PLC committed to issue AWN with 500,000 warrants, with a duration of 12 months, at an exercise price of $0.67 per share.
In December 2021, a short term loan of $1.1 million (A$1.5 million) was indebtedprovided from AWN to Aevitas O Holdings Pty Limited at an interest rate of 10.0%, increasing to 12.5% from January 1, 2022. The loan is set to expire on April 1, 2025 (initially set as April 30, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for approximately A$587,967 for deferred consideration underthe loan to expire upon completion by VivoPower International PLC of a transactiondebt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $29,000 (A$40,000) and $43,500 (A$60,000) are payable upon maturity, relating to the saletwo extensions respectively.
On February 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas O Holdings Pty Limited, with interest rate of 10.00% per annum payable on the principal sum upon maturity. The loan is set to expire on April 1, 2025 (initially set as May 13, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $85,000 and $110,000 are payable upon maturity, relating to the two extensions respectively.
On December 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas O Holdings Pty Limited, with interest rate of BBSY bid floating rate (on average 3.60% for the period from inception to June 30, 2023) plus fixed margin of 15.0% per annum payable on the principal sum upon maturity. A 1% facility establishment fee of $30,000 was deducted upon initial loan drawdown, and a further 3% exit fee of $90,000 is payable on expiry. The loan is set to expire on April 1, 2025 (initially set as October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was agreed on January 11, 2023, then dropped on June 30, 2023. A facility extension fee of $115,000 is payable upon maturity.
In February and March 2023, further short term loans of A$0.5 million and A$0.25 million were established between AWN and Aevitas O Holdings Pty Limited, drawn down between February and May 2023. The loans have interest rate of BBSY bid floating rate plus fixed margin of 15.0% per annum payable on the principal sum upon maturity, with expiry dates of June 30, 2023. 1% facility establishment fees of total A$7,500 were deducted upon loan drawdowns, and further 3% exit fees of total A$22,500 are payable on expiry. On June 30, 2023, the expiry of the loans was amended to August 31, 2023.
Michael Hui, non-executive director of VivoPower Australia ordinary shares, which was repaidInternational PLC, is also an employee and director of AWN. Mr. Hui is paid fees of $50,000 per annum during the year. Mr. Hui elected to receive 100% of his fees in connection withcash. $25,000 remaining accrued and payable as at June 30, 2023. Mr. Hui also receives equity-based remuneration in relation to his involvement in management of Critical Power Services segment, and the closinghyper-turnaround and hyperscaling program. Of the 17,500 ($13,125) annual retention RSUs granted on April 1, 2020, vesting annually from June 2021 to June 2026, 3,500 RSUs ($2,625) vested in the current year. Of the 52,500 ($39,375) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 6,314 RSUs ($4,736) vested in the current year. A further 20,000 annual retention RSUs ($5,200) were granted to Mr. Hui on January 11, 2023, vesting annually from December 2023 to December 2025.
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Aevitas is indebted
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Aevitas was indebted to APG, an affiliateyear of Mr. Chin’s for approximately $528,439, which was also$22,895 at 8% plus a 2% facility fee, plus a one-off establishment fee of $7,400. The loan plus interest were repaid in connection with the closing of the Business Combination via the APG Aevitas Repayment Notice
VivoPower USA LLC is indebted to AWN via a related party receivable account of $227,163. Interest is payable at a rate of 6% per annum. The total amount outstanding has subsequently been repaid.
VivoPower International Services Ltd. is indebted to AWN via a related party loan on normal commercial terms with interest charged at 8.5% per annum and principal is repayable one year after the initial drawdown date. Interest is payable monthly. At March 31, 2017 the principal balance due to AWN by VivoPower International Services Limited under this loan was $18,992,636.
Kevin Chin or entities controlled by Kevin Chin are investors in ReNu Energy, with whom we entered into the Alliance Agreement discussed above at Item 4.B.
VivoPower Policy on Conflicts of Interest
VivoPower’s Code of Business Conduct and Ethics requires that situations that could be reasonably expected to give rise to a conflict of interest be fully disclosed to the Company’s Compliance Officer, and provides that conflicts of interest may only be waived by the board of directorsBoard or an appropriate committee of the board of directors.Board. Under the Code of Business Conduct and Ethics, a conflict of interest is deemed to occur when an employee’s private interest interferes, or appears to interfere, with the interests of the Company as a whole, and in general the Code of Business Conduct and Ethics provides that, subject to certain exceptions in the Code, the following should be considered conflicts of interest: (i) no employee may be employed or engaged by a business that competes with the Company or deprives it of any business; (ii) no employee should use corporate property, information or his or her position with the Company to secure a business opportunity that would otherwise be available to the Company; (iii) no employee may obtain loans or guarantees of personal obligations from, or enter into any other personal financial transaction with, any company that is a material customer, supplier, financing partner or competitor of the Company. This guideline does not prohibit arms-length transactions with recognized banks or other financial institutions; (iv) no employee may have any financial interest (ownership or otherwise), either directly or indirectly through a spouse or other family member, in any other business or entity if such interest adversely affects the employee’s performance of duties or responsibilities to the Company, or requires the employee to devote time to it during such employee’s working hours at the Company except that with the prior approval of the board of directors of the Company,Board, an employee may hold up to 5% ownership interest in a publicly traded company that is in competition with the Company; provided that if the employee’s ownership interest in such publicly traded company increases to more than 5%, the employee must immediately report such ownership to the Compliance Officer; no employee may hold any ownership interest in a privately held company that is in competition with the Company except with the prior approval of the board; and no employee may hold any ownership interest in a company that has a business relationship with the Company if such employee’s duties at the Company include managing or supervising the Company’s business relations with that company.
VivoPower’s audit committee,The Company’s Audit and Risk Committee, pursuant to its written charter, is responsible for maintaining oversight of conflict of interest transactions to help to ensure that they are appropriately disclosed and make recommendations to the board of directorsBoard regarding authorization. The audit committeeAudit and Risk Committee considers all relevant factors when determining whether to approve a conflict of interest transaction, including whether the conflict of interest transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. VivoPowerThe Company requires each of its directors and executive officers to complete an annual directors’and officers’questionnaire that elicits information about conflict of interest transactions.
These procedures are intended to determine whether any such conflict of interest impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
VivoPowerThe Company also complies with English law provisions in relation to directors’conflicts contained in the Companies Act 2006 and specific provisions contained in the Company’s articles of association. The Companies Act 2006 permits directors of U.K. public limited companies to have conflicts of interests provided that their articles of association permit directors to authorize a conflict and the directors do authorize any such conflict in accordance with such provision.
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Not applicable.
A. Consolidated Statements and Other Financial Information
See “Item 18—Financial Statements”and the financial statements referred to therein.
Legal Proceedings
From timeAs described above, on February 26, 2018, the Company’s former Chief Executive Officer, Phillip Comberg, filed a legal claim alleging the Company committed a repudiatory breach of his service agreement in connection with the termination of his employment on October 4, 2017. On April 9, 2018, the Company filed a defense and counterclaim, denying that a repudiatory breach was committed by the Company and denying the other claims asserted by Mr. Comberg, claiming that Mr. Comberg was terminated for cause. On November 26, 2018, the Company agreed to time, we are subject to legal proceedings and claimsa settlement of the counterclaims against Mr. Comberg for an undisclosed amount. After aborted attempts at settlement, the matter was heard in the ordinary courseU.K. High Court, with judgement ruled in September 2020. The Company was successful in defending the majority of business. Although we believethe claims, with a total of £0.62 million ($0.90 million) of the claims being settled in favor of Mr. Comberg. However final costs and interest awarded to him were $1.76 million. Of the remaining provision as at June 30, 2021 of $0.5 million for unpaid costs, $0.4 million was spent in the year ended June 30, 2022, resulting in a $0.1 million release of the remaining unutilized provision.
Additionally, on May 31, 2022 the William Q. Richards Estate (the “Plaintiff” or the “Estate”) filed a complaint against VivoPower USA LLC, Caret, LLC (“Caret”), formerly Innovative Solar Ventures I, LLC (“ISV”), and related entities (the "VivoPower Defendants") alleging the VivoPower Defendants improperly included land owned by the Estate in the reinvestment zone of the tax abatement agreements executed on March 14, 2022 between Cottle County, Texas and the Company’s subsidiaries Innovative Solar 144, LLC and Innovative Solar 145, LLC. The complaint sought to nullify and/or declare the tax abatement agreements void. The Estate filed an amended complaint on August 18, 2022, further detailing their claims and requesting unspecified damages. On September 16, 2022, the VivoPower Defendants filed a motion to dismiss Plaintiff’s Amended Complaint, which the Court subsequently granted on January 23, 2023, stating that the outcomePlaintiff had failed “to establish that the amount in controversy had been met.” On February 20, 2023, the Estate filed a second amended complaint to argue that the amount in controversy was met. Regina, widow of any such matters willthe late William Q. Richards, was added as a plaintiff in the second amended complaint. On March 6, 2023, the VivoPower Defendants filed a new motion to dismiss the Plaintiffs’ second amended complaint. On May 5, 2023, the Plaintiffs filed an instant opposition to the VivoPower Defendants’ motions to dismiss. On May 19, 2023, the VivoPower Defendants submitted a reply supporting their motion to dismiss requesting the dismissal of the Plaintiffs' claim. The Company does not have a material adverse effect on our business, such outcomes are not ascertainableexpect the Plaintiff to be successful in advance and litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, damages or penalties and other factors.its complaint. Accordingly no provision has been recorded as at June 30, 2023 in relation to this matter.
Dividend Policy
We have never declared or paid any dividends on our ordinary shares,Ordinary Shares, and we currently do not plan to declare dividends on our ordinary sharesOrdinary Shares in the foreseeable future. Any determination to pay dividends to holders of our ordinary sharesOrdinary Shares will be at the discretion of our board of directorsBoard and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our debt arrangements and other factors that our board of directorsBoard deem relevant.
Not applicable.Except as disclosed elsewhere in this Annual Report, there have been no significant changes since June 30, 2023.
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The following table sets forthprincipal host market for the reported high and low sale prices in US dollars on theOrdinary Shares of VivoPower is The Nasdaq Capital Market for our ordinary shares for each quarter, the most recent six months and the first trading day.shares are traded under the symbol “VVPR.”
High | Low | |||||||
Annual highs and lows | ||||||||
Calendar year ended December 31, 2016 (from December 29, 2016) | $ | 7.34 | $ | 5.50 | ||||
Quarterly highs and lows | ||||||||
First quarter calendar 2017 | 7.08 | 3.99 | ||||||
Second quarter calendar 2017 | 4.73 | 2.80 | ||||||
Monthly highs and lows | ||||||||
Dec-16 | 7.34 | 5.50 | ||||||
Jan-17 | 7.08 | 3.99 | ||||||
Feb-17 | 5.31 | 4.60 | ||||||
Mar-17 | 5.01 | 4.00 | ||||||
Apr-17 | 4.73 | 3.20 | ||||||
May-17 | 4.02 | �� | 3.29 | |||||
June-2017 | 3.09 | 2.80 | ||||||
First Trading Day | ||||||||
December 29, 2016 | $ | 7.34 | $ | 6.50 | ||||
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Not applicable.
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Since December 29, 2016, our ordinary sharesOrdinary Shares have been listed on The Nasdaq Capital Market under the symbol “VVPR.”
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Not applicable.
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Not applicable.
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Not applicable.
ITEME. 10. ADDITIONAL INFORMATIONDilution
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Not applicable.
Not applicable.
ITEM10. ADDITIONAL INFORMATION
Not applicable.
B. Memorandum and Articles of Association
We incorporate by reference into this Annual Report the description of our memorandum and articles of association set forth under “Description of VivoPower Securities – Key Provisions of our Articles of Association” in our registration statement on Form F-4 (File No. 333-213297) filed with the SEC on November 21, 2016.
See “Item 4.B-Business4.B. Business Overview,” “Item 5.B-Liquidity5.B. Liquidity and Capital Resources”, “Item 6-Directors,6. Directors, Senior Management and Employees” and “Item 7.B-Related7.B. Related Party Transactions.”
In April, 2017, a subsidiaryThe following material contracts, which were outside of the Company, VivoPower (USA) Development LLC (“DevCo”)ordinary course of business, were entered into a joint venture with Innovative Solar Systems, LLC (“Innovative Solar”), a developer of utility-scale ground mounted solar projects based in Asheville, North Carolina. The Company intends to design, finance and construct each project that it acquires throughduring the joint venture under its build, transfer and operate model. The joint venture is governed by an Amended and Restated Operating Agreement between Innovative Solar Ventures I LLC (“JV LLC”), DevCo and Innovative Solar, effective as of April 17, 2017 (“JV Operating Agreement”), which set forthyear ended June 30, 2023 (including the terms and conditions of the establishment and operation of the JV LLC. The purpose of the JV LLC is to provide funding for and invest in early stage development of solar fields throughout the United States, including by investing in project companies holding utility-scale solar assets. Under the JV Operating Agreement, DevCo is entitled to appoint three members of the JV LLC Board of Directors, and Innovative Solar is entitled to appoint two members. Under the JV Operating Agreement, the JV LLC is managed by a manager, which initially is ISV I Management LLC. The JV Operating Agreement provides a mechanism for the funding, development and sale to DevCo as well as third parties of utility-scale solar projects in the JV LLC’s portfolio.exhibits thereto):
● | Equity Distribution Agreement Amendment for the issue and sale through A.G.P/Alliance Global Partners of Ordinary Share having an aggregate offering price of up to $1,055,361; | |
● | A definitive agreement with a single U.S. institutional investor for the purchase and sale of 4,230,770 ordinary shares of the Company (or ordinary share equivalents in lieu thereof) at an offering price of $1.30 per share and, in a concurrent private placement, unregistered warrants to purchase up to 4,230,770 of the Company’s ordinary shares. The warrants will have an exercise price of $1.30 per ordinary share, will be exercisable on the six-month anniversary of the issuance date and will expire five years from initial exercise date; |
● | A strategic direct equity investment into its wholly owned subsidiary, Tembo e-LV B.V. (“Tembo”) at a pre-money valuation of $120 million comprising an initial investment commitment of $2.5 million and the option to increase its cumulative investment in subsequent closings, up to US$10 million. |
The Company is also an investor in two utility-scale solar energy projects in North Carolina, in Bladen County and Robeson County, respectively, NC-31 and NC-47. These projects have achieved commercial operation. The Membership Interest Purchase Agreement, dated as of June 14, 2016, by and between Innovative Solar Systems, LLC and IS-31 Holdings, LLC, and the Membership Interest Purchase Agreement, dated as of August 29, 2016, by and between Innovative Solar Systems, LLC and IS-47 Holdings, LLC, by which the interests in the applicable project companies were acquired, have previously been filed with the SEC and are hereby incorporated by reference. In addition, the Financing Agreement, dated July 29, 2016, among Innovative Solar 31, LLC, KeyBank National Association and the Lenders party thereto, and Financing Agreement, dated as of October 25, 2016, by and among Innovative Solar 47, LLC and Keybank National Association, have also been previously filed and are hereby incorporated by reference.
ThereOther than applicable taxation, anti-money laundering and counter-terrorist financing law and regulation and certain economic sanctions which may be in force from time to time, there are no governmentEnglish laws decrees, regulations or other legislation in the United Kingdom that may affectregulation, or any provision of our articles of association, which would prevent the import or export of capital including the availability of cash and cash equivalents for use by us, or that may affect the remittance of dividends, interest or other payments by us to non-resident holders of our ordinary shares, other than withholding tax requirements. There is no limitation imposed by English law or our articlesOrdinary Shares who are not residents of associationthe U.K. on the right of non-residents to hold or vote shares.
a general basis.
U.K. Tax Considerations
The following statements are a general guide to certain aspects of current U.K. tax law and the current published practice of HM Revenue and Customs, both of which are subject to change, possibly with retrospective effect.
The following statements are intended to apply to holders of ordinary sharesOrdinary Shares who are only resident for tax purposes in the U.K., who hold the ordinary sharesOrdinary Shares as investments and who are the beneficial owners of the ordinary shares.Ordinary Shares. The statements may not applyto certain classes of holders of ordinary shares,Ordinary Shares, such as dealers in securities and persons acquiring ordinary sharesOrdinary Shares in connection with their employment. Prospective investors in ordinary sharesOrdinary Shares who are in any doubt as to their tax position regarding the acquisition, ownership and disposition of the ordinary sharesOrdinary Shares should consult their own tax advisers.
Dividends
Withholding tax
We will not be required to deduct or withhold U.K. tax at source from dividend payments we make.
Individuals
U.K. resident and domiciled holders do not have to pay tax on the first £5,000£2,000 of dividend income received in the 2022/2023 U.K. tax year (the “dividend allowance”). However, tax will be levied on any dividends received over the dividend allowance at 7.5%8.75% on dividend income within the basic rate band, 32.5%33.75% on dividend income within the higher rate band and 38.1%39.35% on dividend income within the additional rate band. In the Spring Budget 2017, the U.K. government announced an intention to reduce the amount of the dividend allowance from £5,000 to £2,000 for dividends received from April 6, 2018.
Corporate shareholders within the charge to U.K. corporation tax
Holders of ordinary sharesOrdinary Shares within the charge to U.K. corporation tax which are “small companies” for the purposes of Chapter 2 of Part 9A of the Corporation Tax Act 2009 (for the purposes of U.K. taxation of dividends) will not be subject to U.K. corporation tax on any dividend received from us provided certain conditions are met (including an anti-avoidance condition).
Other holders within the charge to U.K. corporation tax will not normally be subject to tax on dividends from us, provided that one of a number of possible exemptions applies.
If the conditions for exemption are not met or cease to be satisfied, or such a holder elects for an otherwise exempt dividend to be taxable, the holder will be subject to U.K. corporation tax on dividends received from us, at the rate of corporation tax applicable to that holder.
Capital gains
Individuals
For individual holders who are resident in the U.K. and individual holders who are temporarily non-resident and subsequently resume residence in the U.K. within a certain time, the principal factors that will determine the U.K. capital gains tax position on a disposal or deemed disposal of ordinary sharesOrdinary Shares are the extent to which the holder realizes any other capital gains in the U.K. tax year in which the disposal is made, the extent to which the holder has incurred capital losses in that or earlier U.K. tax years, and the level of the annual allowance of tax-free gains in that U.K. tax year (the “annual exemption”). The annual exemption for the 2017/20182022/2023 U.K. tax year is £11,300.£12,300.
Subject to any annual exemption or relief, an individual holder will be subject to gains above the annual exemption amount at a rate of 10% or 20% depending on the total amount of the individual’s taxable income.
Companies
A disposal or deemed disposal of ordinary sharesOrdinary Shares by a holder within the charge to U.K. corporation tax may give rise to a chargeable gain or allowable loss for the purposes of U.K. corporation tax, depending on the circumstances and subject to any available exemptions or reliefs. Corporation tax is charged on chargeable gains at the rate applicable to that company. Holders within the charge to U.K. corporation tax will, for the purposes of computing chargeable gains, be allowed to claim an indexation allowance which applies to reduce capital gains (but not to create or increase an allowable loss) to the extent that such gains arise due to inflation.inflation although the allowance has now been frozen and is calculated only on movements in inflation up to December 31, 2017.
Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)
The statements in this section entitled “Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)are intended as a general guide to the current United Kingdom stamp duty and SDRT position. The discussion below relates to holders wherever resident, but investors should note that certain categories of person are not liable to stamp duty or SDRT and others may be liable at a higher rate or may, although not primarily liable for tax, be required to notify and account for SDRT under the Stamp Duty Reserve Tax Regulations 1986.
General
Except in relation to depositary receipt systems and clearance services (to which the special rules outlined below apply):
● | No stamp duty or SDRT will arise on the issue of our shares; |
| An agreement to transfer our shares will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer. SDRT is, in general, payable by the purchaser; |
| Instruments transferring our shares will generally be subject to stamp duty at the rate of 0.5% of the consideration given for the transfer (rounded up to the next £5). The purchaser normally pays the stamp duty; and, |
| If a duly stamped transfer completing an agreement to transfer is produced within six years of the date on which the agreement is made (or, if the agreement is conditional, the date on which the agreement |
Depositary Receipt Systems and Clearance Services
U.K. domestic law provides that where our ordinary sharesOrdinary Shares are issued or transferred to a depositary receipt system or clearance service (or their nominees or agents) SDRT (in the case of an issue of shares) and stamp duty or SDRT (in the case of a transfer of shares) may be payable, broadly at the higher rate of 1.5% of the amount or value of the consideration given (or, in certain circumstances, the value of the shares) (rounded up to the nearest £5 in the case of stamp duty). Generally, transfers within such depositary receipt system or clearance service are thereafter not subject to stamp duty or SDRT, provided that (in the case of a clearance service) no election under section 97A of the Finance Act 1986 has been made (as to which, see further below).
However, following the European Court of Justice decision in C-569/07 HSBC Holdings Plc,PLC, Vidacos Nominees Limited v. The Commissioners of Her Majesty'sMajesty’s Revenue & Customs and the First-tier Tax Tribunal decision in HSBC Holdings Plc and The Bank of New York Mellon Corporation v. The Commissioners of Her Majesty'sMajesty’s Revenue & Customs (“HMRC”), HMRC has confirmed that a charge to 1.5% SDRT is no longer payable when new shares are issued to a depositary receipt system or clearance service (such as, in our understanding, DTC)The Depository Trust Company (“DTC”).
HMRC remains of the view that where our shares are transferred (a) to, or to a nominee or an agent for, a person whose business is or includes the provision of clearance services or (b) to, or to a nominee or an agent for, a person whose business is or includes issuing depositary receipts, stamp duty or SDRT will generally be payable at the higher rate of 1.5% of the amount or value of the consideration given or, in certain circumstances, the value of our shares.
There is an exception from the 1.5% charge on the transfer to, or to a nominee or agent for, a clearance service where the clearance service has made and maintained an election under section 97A(1) of the Finance Act 1986 which has been approved by HMRC and which applies to our shares.HMRC. In these circumstances, SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer will arise on any transfer of our shares into such a clearance service and on subsequent agreements to transfer such shares within such clearance service. It is our understanding that DTC has not made an election under section 97A(1) of the Finance Act of 1986, and that therefore transfers or agreements to transfer shares held in book entry (i.e., electronic) form within the facilities of DTC should not be subject to U.K. stamp duty or SDRT.
Any liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt system, or in respect of a transfer within such a service, which does arise will strictly be accountable by the clearance service or depositary receipt system operator or their nominee, as the case may be, but will, in practice, be payable by the participants in the clearance service or depositary receipt system.
Certain Material U.S. Federal Income Tax Considerations
The following is a summary of certain material U.S. federal income tax considerations relating to the acquisition, ownership, and disposition of our ordinary sharesOrdinary Shares by a U.S. holder (as defined below). This summary addresses only the U.S. federal income tax considerations for U.S. holders that hold such ordinary sharesOrdinary Shares as capital assets. This summary does not address all U.S. federal income tax matters that may be relevant to a particular U.S. holder. This summary does not address tax considerations applicable to a holder of ordinary sharesOrdinary Shares that may be subject to special tax rules including, without limitation, the following:
● | banks, financial institutions or insurance companies; |
● | brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts; | |
● | tax-exempt entities or organizations, including an “individual retirement account”or “Roth IRA”as defined in Section 408 or 408A of the Code (as defined below), respectively; |
● | real estate investment trusts, regulated investment companies or grantor trusts; |
● | persons that hold the |
● | partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or persons that will hold our shares through such an entity; |
● | S corporations; |
● | certain former citizens or long-term residents of the United States; |
● | persons that received our shares as compensation for the performance of services; |
● | holders that own directly, indirectly, or through attribution 10% or more of the voting power or value of our shares; and |
● | holders that have a “functional currency”other than the U.S. dollar. |
Further, this summary does not address the U.S. federal estate, gift, or alternative minimum tax considerations, or any U.S. state, local, or non-U.S. tax considerations of the acquisition, ownership, and disposition of our ordinary shares.Ordinary Shares.
This description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof,thereof; and the income tax treaty between the U.S. and the U.K., in each case as in effect and available on the date hereof. All the foregoing is subject to change, which change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations described below. There can be no assurances that the U.S. Internal Revenue Service, or the IRS, will not take a contrary or different position concerning the tax consequences of the acquisition, ownership, and disposition of our ordinary sharesOrdinary Shares or that such a position would not be sustained.
For the purposes of this summary, a “U.S. holder”is a beneficial owner of ordinary sharesOrdinary Shares that is (or is treated as), for U.S. federal income tax purposes:
● | an individual who is a citizen or resident of the United States; |
● | a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; |
● | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or, |
● | a trust, if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person. |
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds ordinary shares,Ordinary Shares, the U.S. federal income tax consequences relating to an investment in our ordinary sharesOrdinary Shares will depend in part upon the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor regarding the U.S. federal income tax considerations of acquiring, owning and disposing of our ordinary sharesOrdinary Shares in its particular circumstances.
As indicated below, this discussion is subject to U.S. federal income tax rules applicable to a “passive foreign investment company,” or a PFIC.
The following summary is of a general nature only and is not a substitute for careful tax planning and advice. Persons considering an investment in our ordinary sharesOrdinary Shares should consult their own tax advisors as to the particular tax consequences applicable to them relating to the acquisition, ownership and disposition of our ordinary shares,Ordinary Shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Distributions. Subject to the discussion under “Passive Foreign Investment Company Considerations,” below, the gross amount of any distribution actually or constructively received by a U.S. holder with respect to ordinary sharesOrdinary Shares will be taxable to the U.S. holder as a dividend to the extent of the U.S. holder’s pro rata share of our current and accumulated earnings and profits as determined under U.S. federal income tax principles. Distributions in excess of earnings and profits will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S. holder’s adjusted tax basis in the ordinary shares.Ordinary Shares. Distributions in excess of earnings and profits and such adjusted tax basis will generally be taxable to the U.S. holder as either long-term or short-term capital gain depending upon whether the U.S. holder has held our ordinary sharesOrdinary Shares for more than one year as of the time such distribution is received. However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. With respect to non-corporate U.S. holders, dividends generally will be taxed at the lower applicable long-term capital gains rate if our ordinary sharesOrdinary Shares are readily tradable on an established securities market in the U.S. or we are eligible for benefits of the income tax treaty between the U.S. and the U.K. and certain other requirements are met. In addition, if we are classified as a PFIC in a taxable year in which a dividend is paid or the prior year, this lower tax rate will not be available. U.S. Holdersholders should consult their tax advisors regarding the availability of such lower rate for any dividends paid with respect to our ordinary shares.Ordinary Shares.
In general, the amount of a distribution paid to a U.S. holder in a foreign currency will be the dollar value of the foreign currency calculated by reference to the spot exchange rate on the day the U.S. holder receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. holder realizes on a subsequent conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in a foreign currency are converted into U.S. dollars on the day they are received, a U.S. holder should not be required to recognize foreign currency gain or loss in respect of the dividend.
Sale, Exchange or Other Taxable Disposition of Our Ordinary Shares. Subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale, exchange or other taxable disposition of ordinary sharesOrdinary Shares in an amount equal to the difference between the U.S. dollar value of the amount realized from such sale or exchange and the U.S. holder’s tax basis for those ordinary shares.Ordinary Shares. Subject to the discussion under “Passive Foreign Investment Company Considerations “” below, this gain or loss will generally be a capital gain or loss and will generally be treated as from sources within the United States. The adjusted tax basis in an ordinary share generally will be equal to the cost of such ordinary share. Capital gain from the sale, exchange or other taxable disposition of ordinary sharesOrdinary Shares of a non-corporate U.S. holder is generally eligible for a preferential rate of taxation applicable to capital gains, if the non-corporate U.S. holder’s holding period determined at the time of such sale, exchange or other taxable disposition for such ordinary sharesOrdinary Shares exceeds one year (i.e., such gain is long-term taxable gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.
Medicare Tax. Certain U.S. holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of ordinary shares.Ordinary Shares. Each U.S. holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the Medicare tax to its income and gains in respect of its investment in our ordinary shares.Ordinary Shares.
Passive Foreign Investment Company Considerations. If we are classified as a passive foreign investment company, or PFIC, in any taxable year, a U.S. holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.
A corporation organized outside the United States generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules with respect to the income and assets of its subsidiaries, either: (i) at least 75% of its gross income is “passive income” or (ii) at least 50% of the average quarterly value of its total gross assets (which, assuming we are not a CFCControlled Foreign Company (“CFC”) for the year being tested, would be measured by fair market value of the assets, and for which purpose the total value of our assets may be determined in part by the market value of our ordinary shares,Ordinary Shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production of “passive income.”
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions and the excess of gains over losses from the disposition of assets which produce passive income, and also includes amounts derived by reason of the temporary investment of funds raised in offerings of our ordinary shares.Ordinary Shares. If a non-U.S. corporation owns directly or indirectly at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income.income for the purposes of the PFIC tests. If we are classified as a PFIC in any year with respect to which a U.S. holder owns our ordinary shares,Ordinary Shares, we will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years during which the U.S. holder owns our ordinary shares,Ordinary Shares, regardless of whether we continue to meet the tests described above, unless (i) we cease to be a PFIC and (ii) the U.S. holder makes a “deemed sale” election under PFIC rules.
We believe that we were not a PFIC during our 20162023 taxable year and do not expect to be a PFIC during our 20172024 taxable year. Our status for any taxable year will depend on the composition of our income and the projected composition and estimated fair market values of our assets and activities in each year, and because this is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable year. The market value of our assets may be determined in large part by reference to the market price of our ordinary shares,Ordinary Shares, which is likely to fluctuate. Further, even if we determine that we are not a PFIC after the close of our taxable year, there can be no assurances that the IRS will agree with our conclusion.
If we are a PFIC, for any taxable year, then unless a U.S. holder makes one of the elections described below, a special tax regime will apply to both (a) any “excess distribution” by us to such U.S. holder (generally, the U.S. holder’s ratablerateable portion of distributions in any year which are greater than 125% of the average annual distribution received by the U.S. holder in the shorter of the three preceding years or the U.S. holder’s holding period for our ordinary shares)Ordinary Shares) and (b) any gain realized on the sale or other disposition of the ordinary shares.Ordinary Shares. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had been realized ratablyrateably over the U.S. holder’s holding period, (b) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. holder’s regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition, dividend distributions made to the U.S. holder will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under “Distributions.”
Certain elections exist that may alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares.Ordinary Shares. If a U.S. holder makes the mark-to-market election, the U.S. holder generally will recognize as ordinary income any excess of the fair market value of the ordinary sharesOrdinary Shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ordinary sharesOrdinary Shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. holder makes the election, the U.S. holder’s tax basis in the ordinary sharesOrdinary Shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of ordinary sharesOrdinary Shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). The mark-to-market election is available only if we are a PFIC and our ordinary sharesOrdinary Shares are “regularly traded” on a “qualified exchange.” Our ordinary sharesOrdinary Shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the ordinary sharesOrdinary Shares are traded on a qualified exchange on at least 15 days during each calendar quarter (subject to the rule that trades that have as one of their principleprincipal purposes the meeting of the trading requirement are disregarded). The Nasdaq Capital Market is a qualified exchange for this purpose and, consequently, if the ordinary sharesOrdinary Shares are regularly traded, the mark-to-market election will be available to a U.S. holder.
WeIf we are a PFIC for any year during which a U.S. holder holds our Ordinary Shares, we must generally continue to be treated as a PFIC by that U.S. holder for all succeeding years during which the U.S. holder holds our Ordinary Shares, unless we cease to meet the requirements for PFIC status and the U.S. holder makes a “deemed sale” election with respect to our Ordinary Shares. If such election is made, the U.S. holder will be deemed to have sold our Ordinary Shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale would be subject to the consequences applicable to sales of PFIC shares described above. After the deemed sale election, the U.S. holder’s Ordinary Shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.
The tax consequences that would apply if we were a PFIC would also be different from those described above if a U.S. holder were able to make a valid “qualified electing fund,” or QEF, election. However, we do not currently intend to provide the information necessary for U.S. holders to make qualified electing fund electionsa QEF election if we were treated as a PFIC for any taxable year.year and prospective investors should assume that a QEF election will not be available. U.S. holders should consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.
If we are determined to be a PFIC, the general tax treatment for U.S. holders described in this section would apply to indirect distributions and gains deemed to be realized by U.S. holders in respect of any of our subsidiaries that also may be determined to be PFICs.
If a U.S. holder owns ordinary sharesOrdinary Shares during any taxable year in which we are a PFIC and the U.S. holder recognizes gain on a disposition of our ordinary shares,Ordinary Shares, receives distributions with respect to our ordinary shares,Ordinary Shares, or has made a mark-to-market election with respect to our ordinary sharesOrdinary Shares the U.S. holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to the company, generally with the U.S. holder’s federal income tax return for that year. In addition, in general, a U.S. person who is shareholder of a PFIC is required to file an IRS Form 8621 annually to report information regarding such person’s PFIC shares if on the last day of the shareholder’s taxable year the aggregate value of all stock owned directly or indirectly by the shareholder exceeds $25,000 ($50,000 for joint filers), or for stock owned indirectly through another PFIC exceeds $5,000. If a U.S. person holds an interest in a domestic partnership (or a domestic entity or arrangement treated as a partnership for U.S. federal income tax purposes) or an S corporation that owns interest in a PFIC, as long as the partnership or S corporation itself has filed the form and has made a qualified electing fund or mark-to-market election, the members of the partnership aren’t required to file the IRS Form 8621. If our company were a PFIC for a given taxable year, then U.S. holders should consult their tax advisor concerning their annual filing requirements.
The U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. holders are urged to consult their own tax advisers with respect to the acquisition, ownership and disposition of our ordinary shares,Ordinary Shares, the consequences to them of an investment in a PFIC, any elections available with respect to our ordinary sharesOrdinary Shares and the IRS information reporting obligations with respect to the acquisition, ownership and disposition of our ordinary share.
Backup Withholding and Information Reporting. U.S. holders generally will be subject to information reporting requirements with respect to dividends on ordinary sharesOrdinary Shares and on the proceeds from the sale, exchange or disposition of ordinary sharesOrdinary Shares that are paid within the United States or through U.S.-related financial intermediaries, unless the U.S. holder is an “exempt recipient.” In addition, U.S. holders may be subject to backup withholding on such payments, unless the U.S. holder provides a correct taxpayer identification number and a duly executed IRS Form W-9 or otherwise establishes an exemption. Backup withholding is not an additional tax, and the amount of any backup withholding will be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Certain Reporting Requirements Withwith Respect to Payments of Offer Price. U.S. holders paying more than $100,000 for our ordinary sharesOrdinary Shares generally may be required to file IRS Form 926 reporting the payment of the offer price for our ordinary sharesOrdinary Shares to us. Substantial penalties may be imposed upon a U.S. holder that fails to comply. Each U.S. holder should consult its own tax advisor as to the possible obligation to file IRS Form 926.
Foreign Asset Reporting. Certain U.S. holders who are individuals areand certain entities controlled by individuals may be required to report information relating to an interest in our ordinary shares,Ordinary Shares, subject to certain exceptions (including an exception for shares held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their U.S. federal income tax return. An asset with respect to which an IRS Form 8621 has been filed does not have to be reported on IRS Form 8938, however, U.S. holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their acquisition, ownership and disposition of our ordinary shares.Ordinary Shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
F. Dividends and Paying Agents
Not applicable.
Not applicable.
Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the Annual Report, the contract or document is deemed to modify the description contained in this Annual Report. You must review the exhibits themselves for a complete description of the contract or document.
We are subject to the reporting requirements of foreign private issuers under the Exchange Act. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the form and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act. Pursuant to the Exchange Act, we file reports with the SEC, including this Annual Report. We also submit reports to the SEC, including Form 6-K Reports of Foreign Private Issuers. You may read and copy such reports at the SEC’s publicPublic Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information about the Public Reference Room. Such reports are also available to the public on the SEC’s website at www.sec.gov. Some of this information may also be found on our website at www.vivopower.com.www.vivopower.com.
You may request copies of our reports, at no cost, by writing, toemailing, or telephoning us as follows:
VivoPower International PLC
Attention: Carl Weatherley-WhitePhilip Wray
28thThe Scalpel, 18th Floor, 140 Broadway,52 Lime Street
New York, NY 10005London EC3M 7AF
Telephone: (718) 230-4580, x2406United Kingdom
Email: shareholders@vivopower.com
Telephone: +44-203-667-5158
Not applicable.
ITEM11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency rates, although we also have some exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.
Foreign Exchange Risk
The majority of ourGroup operates internationally and is exposed to foreign exchange risk on sales in 2017and purchases that are denominated in U.S. dollars, Australian dollarscurrencies other than the respective functional currencies of the Group entities to which they relate, primarily between USD, AUD, EUR and British pounds sterling, withGBP.
The Group’s investments in overseas subsidiaries are not hedged as those currency positions are either USD denominated and/or considered to be long-term in nature.
The Group is exposed to foreign exchange risk on the remainder in other currencies such as Singapore dollars,following balances at June 30, 2023:
● | Cash and cash equivalents of $0.54 million denominated in AUD, $0.02 million denominated in EUR and ($0.03) million denominated in GBP. |
● | Restricted cash of $0.6 million denominated in AUD. |
● | Trade and other receivables of $4.0 million denominated in AUD, $1.0 million denominated in EUR and $2.6 million in GBP. |
● | Trade and other payables of $5.0 million denominated in AUD, $2.0 million in EUR and $2.7 million in GBP. |
● | Borrowings of $2.9 million denominated in AUD and $0.9 million in EUR. |
● | Provisions of $0.7 million denominated in AUD and $1.2m in GBP. |
Of the majoritytotal shareholder loans of our costs and expenses are$28.6 million, $27.1 million is denominated in U.S. dollars. Most of our cashUSD and cash equivalents and restricted cash are$1.5 million is denominated in U.S. dollars. Therefore, fluctuations in currency exchange rates should have a minimal impact on our financial stability.
Fluctuations in exchange rates, particularly between the U.S. dollar, Australia dollar and British pound sterling, may result in fluctuations in foreign exchange gains or losses. As of March 31, 2017, we held $5.2 million in accounts receivable, of which $1.6 million were denominated in British pounds sterling, and the remaining $3.6 million were denominated in Australian dollars.AUD.
We have not entered into any hedging transactions to reduce the foreign exchange rate fluctuation risks but may do so in the future when we deem it appropriate to do in light of the significance of such risks. However, if we decide to hedge our foreign exchange exposure in the future, we cannot assure you that we will be able to reduce our foreign currency risk exposure in an effective manner, at reasonable costs, or at all. See “Item 3. Key Information—D. Risk Factors—Risks Relatedrelated to our Businessbusiness and Industry—Fluctuations inoperations — We are exposed to foreign currency exchange rates may negatively affectrisks because certain of our revenue, cost of sales and gross margins and could resultoperations are located in exchange losses.”foreign countries”.
Our financial statements are expressed in U.S. dollars, while some of our subsidiaries use different functional currencies, such as the Australian dollar, and British pound sterling.sterling and Euro. The value of your investment in our common shares will be affected by the foreign exchange rate between the U.S. dollar and other currencies used by our subsidiaries. To the extent we hold assets denominated in currencies other than U.S. dollars, any appreciation of such currencies against the U.S. dollar will likely result in an exchange gain while any depreciation will likely result in an exchange loss when we convert the value of these assets into U.S. dollar equivalent amounts. On the other hand, to the extent we have liabilities denominated in currencies other than U.S. dollars, any appreciation of such currencies against the U.S. dollar will likely result in an exchange loss while any depreciation will likely result in an exchange gain when we convert the value of these liabilities into U.S. dollar equivalent amounts. These and other effects on our financial condition resulting from the unfavorable changes in foreign currency exchange rates could have a material adverse effect on the market price of our common shares, the dividends we may pay in the future, and your investment.
Interest Rate Risk
As a result of the related party loan agreement, the Group is exposed to interest rate volatility. However, the interest rate is fixed for the medium term, therefore, the risk is largely mitigated for the near future. The Group will continue to monitor the movements in the wider global economy.
Credit Risk
Our interest ratecredit risk primarily relates primarily to variable-rateour trade and other receivables, restricted cash, bank balances and borrowings. It is our policyamounts due from related parties. We generally grant credit only to keep our restricted cash, bank balancesclients and borrowings at floating rates of interest so as to minimizerelated parties with good credit ratings and also closely monitor overdue debts. In this regard, we consider that the interest rate risk. Our fair value interest rate risk relates mainly to fixed-rate borrowings. Our management reasonably believes that that a change in interest rate to the relevant financial instruments will not result in material changes to our financial position or results of operations.
Credit Risk
Our maximum exposure to credit risk arisesarising from the carrying amounts of the respective recognized financial assets as stated in our consolidated statements of financial position.balances with counterparties is significantly reduced.
In order to minimize credit risk, we have delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, we review the recoverable amount of each individual debtor at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. We will negotiate with the counterparties of the debts for settlement plans or changes in credit terms, should the need arise. In this regard, we consider that our credit risk is significantly reduced.
Our credit risk primarily relates to our trade and other receivables, restricted cash, bank balances and amounts due from related parties. We generally grant credit only to clients and related parties with good credit ratings and also closely monitors overdue debts. In this regard, we consider that the credit risk arising from our balances with counterparties is significantly reduced.
Liquidity Risk
We have built an appropriateOur liquidity risk management framework for the managementis intended to ensure that we maintain sufficient funds to meet our obligations as they become due, and as part of short-termour framework we continuously monitor our liquidity and long-term fundingcash resources and liquidity. We manage liquidity risk by closely and continuously monitoring our financial position. We aimseek to maintain sufficient cash using cash flows with internally generated fundsby our business activities, debt arrangements and banking facilities.other resources. We alsocontinuously review forecasted cash flows on an on-going basis to ensure that weour businesses have sufficient cash resources and liquidity in each region to meet the working cpital requirements of the business.their obligations.
ITEM12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
ITEM13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
D. American Depositary Shares
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM15. CONTROLS AND PROCEDURES
(a) | Disclosure Controls and Procedures. |
Our chief executive officerChief Executive Officer and chief financial officer,Group Finance Director, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)13a-15 of the Exchange Act) as of March 31, 2017, haveJune 30, 2023, has concluded that, as of such date, our disclosure controls and procedures were effective and ensured that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officerChief Executive Officer and chief financial officer,Group Finance Director, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
(b) | Management’s annual report on internal control over financial reporting. |
This Annual Report does not include a report of management’s assessment regarding
The Company’s management, including the Company’s Chief Executive Officer and Group Finance Director, are responsible for establishing and maintaining adequate internal control over the Company’s financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting or an attestation reportis a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS as issued by the IASB. The Company’s internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that, in reasonable detail accurately and fairly reflect the transactions and disposition of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of the company’s registered public accounting firm due to a transition period established by rulesconsolidated financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with authorization of management and directors of the SEC for newly public companies.Company; and, provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Group Finance Director, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of the end of the period covered by this Annual Report on Form 20-F. Based on that assessment, our management has concluded that as of June 30, 2023, our internal control over financial reporting was effective.
Because of their inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
(c) | Attestation report of the registered public accounting firm. |
Not applicable.
(d) | Changes in internal control over financial reporting. |
There were no changes in our internal control over financial reporting that occurred during the period covered by this Annual Report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
ITEM16A. AUDIT COMMITTEE FINANCIAL EXPERT
See “Item 6.C-Board Practices-Audit Committee.6. Directors, Senior Management and Employees – C. Board Practices - Audit and Risk Committee.” OurThe Audit and Risk Committee consistsis comprised of Kevin Chin,William Langdon (who is Chair of the Audit and Risk Committee), Gemma Godfrey and Peter SermolJeavons. All members have been determined by the Board to be independent under the applicable Nasdaq listing standards. Peter Jeavons and Edward Hyams. Our board of directorsWilliam Langdon joined the committee on June 16, 2020. Gemma Godfrey joined the committee on July 1, 2021.
The Board has determined that Kevin Chin qualifiesWilliam Langdon satisfies Nasdaq’s definition of financial sophistication and also qualified as an “audit committee financial expert” as defined under applicable SEC rules.rules and regulations of the SEC.
We have adopted a Code of Business Conduct and Ethics that is applicable to all of our employees, executive officers and directors. The Code of Business Conduct and Ethics is available on our website at www.vivopower.com.www.vivopower.com. Our board of directorsBoard is responsible for overseeing the Code of Business Conduct and Ethics and approving any waivers of the Code of Business Conduct and Ethics for employees, executive officers and directors. We expect that any amendments to the Code of Business Conduct and Ethics, or any waivers of its requirements, will be disclosed on our website.
VivoPower became certified as a B Corporation in April 2018. VivoPower recertified as a B Corporation in 2022 and was recognized in the Best For The World program as being in the top 5% amongst B Corporations for Governance. Consistent with this certification, the shareholders approved changes to the Articles of Association of the Company at the annual general meeting on August 20, 2018, to include:
(i) | the purposes of the Company are to promote the success of the Company for the benefit of its members as a whole and, through its business and operations, to have a material positive impact on society and the environment, taken as a whole; |
(ii) | in exercising the powers of the Company, a Director shall have regard to, among other matters, stakeholder interests such as: |
a. | the likely consequences of any decision in the long term; |
b. | the interests of the Company's employees; |
c. | the need to foster the Company's business relationships with suppliers, customers and others; |
d. | the impact of the Company's operations on the community and the environment; |
e. | the desirability of the Company maintaining a reputation for high standards of business conduct; and, |
f. | the need to act fairly as between members of the Company. |
As a B Corp, the Company is committed to continuously improve its B Corporation score and deliver on the B Corporation triple bottom line of Planet, People and Profit.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed or incurred by PKF Littlejohn LLP for audit, audit-related, tax and all other services rendered for the yearyears ended March 31, 2017. The costs in the table below also include the costs incurred by Marcum LLP for the auditJune 30, 2023 and audit-related costs for the year ended March 31, 2016.:June 30, 2022.
| Year Ended March 31, | Year Ended June 30 | |||||||||||||||||||
Fees Billed to or Accrued by the Company | 2017 | 2016 | ||||||||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
Audit fees | $ | 246,462 | - | $ | 218 | $ | 193 | $ | 184 | |||||||||||
Audit-related fees | 56,719 | 28 | 18 | 4 | ||||||||||||||||
Tax fees | - | - | 8 | 14 | 32 | |||||||||||||||
All other fees | - | - | ||||||||||||||||||
Total fees | $ | 303,181 | - | |||||||||||||||||
Total | $ | 254 | $ | 225 | $ | 220 | ||||||||||||||
Audit Fees
PKF Littlejohn LLP were appointedre-appointed auditors duringfor the course of the year.Theyear ended June 30, 2023. The audit fees of $242,462 for 2017$218,000 represent $175,000 for the fees of PKF Littlejohn LLP and related firms for the audit of the 2017 financial statements. The remaining $71,462 relates to the audit fees of Marcum LLP for the audit of the 2016June 30, 2023 financial statements.
Audit-Related Fees
Represents costs incurred forThe audit fees of $193,000 represent the reviewfees of Company’s registration statement on Form F-4 by Marcum LLP.
Tax Fees
There were no tax fees incurred by either PKF Littlejohn LLP or, Marcum LLP, when they were appointed auditorsand related firms for audit of the Group.June 30, 2022 financial statements.
All OtherAudit-Related Fees
ConsistThe audit related fees were for audit of aggregate fees billedlocal statutory accounts for products and services provided by the independent registered public accounting firm other than those disclosed above. These fees consisted of an amount paid for the use of an online accounting research tool.some Australian subsidiaries.
All services provided byTax and Capital Raise – Related Fees
For the year ended June 30, 2023, associate firms of PKF Littlejohn to the Company in fiscal 2017 and 2016 were approved by meansLLP charged $7,300 for preparation of specific pre-approvals by the audit committee.corporate tax returns for some Australian subsidiaries.
Pre-Approval Policies for Non-Audit Services
The audit committeeAudit and Risk Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. These policies generally provide that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit and Risk Committee or the engagement is entered into pursuant to the pre-approval procedure described below. All of the services related to our company provided by our independent registered public accounting firm during the last two fiscal years have been approved by the Audit and Risk Committee.
The auditAudit and Risk committee pre-approves all auditing services and the terms of non-audit services, but only to the extent that the non-audit services are not prohibited under applicable law and the committee determines that the non-audit services do not impair the independence of the independent registered public accounting firm. In situations where it is impractical to wait until the next regularly scheduled quarterly meeting, the chairman of the audit committeeAudit and Risk Committee has been delegated authority to approve audit and non-audit services. The chairmanChairman is required to report any approvals to the full committee at its next scheduled meeting.
From time to time, the Audit and Risk Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. Any proposed services exceeding pre-approved amounts will also require separate pre-approval by the Audit and Risk Committee.
ITEM16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The chart below sets forth the shares repurchased by the Company in the last fiscal year
Period |
Total number of shares purchased |
Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum value of shares that may yet be purchased under the program |
3/1/17 through 3/31/17 | 129,805 | $4.50 | 129,805 | $9,415,878 |
Not applicable.
On March 30, 2017, the Company repurchased 129,805 shares at a price of $4.50 for a total sum of $591,915.80, including commission, pursuant to a share buy-back program authorized by the board of directors. The shares are currently held as treasury shares.
ITEM16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On March 1, 2017, the Company provided notice to Marcum LLP (“Marcum”), the Company’s prior independent registered public accounting firm, that the Company had terminated its engagement with Marcum. In replacement of Marcum, the Company retained PKF Littlejohn LLP as the Company’s independent registered public accounting firm. The dismissal of Marcum was approved by the Company’s board of directors and was not based on any disagreement between the Company and Marcum. Since the Company’s inception in February 2016, there have been no disagreements with Marcum of type described in Item 16F of Form 20-F. Marcum’s report on the financial statements of the Company for the fiscal year ended March 31, 2016 did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.Not applicable.
As a U.K. incorporated company, we are subject to applicable to laws of England and Wales including the Companies Act 2006. In addition, as a foreign private issuer listed on theThe Nasdaq Capital Market, we are subject to the Nasdaq corporate governance listing standards.requirements. However, the Nasdaq Capital Market’s listing standards provide that foreign private issuers are permitted to follow home country corporate governance practices in lieu of the Nasdaq rules, with certain exceptions. We currently do not intend to take advantage of any such exemptions.
ITEM16H. MINE SAFETY DISCLOSURE
Not applicable.
See Item 18.
Financial statements are filed as part of this Annual Report, starting on page F-1.
ITEM18. FINANCIAL STATEMENTS
Financial statements are filed as part of this Annual Report, starting on page F-1.
The exhibits listed on the Exhibit Index following the signature page hereof are incorporated herein by reference.
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Date: July 31, 2017
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EXHIBIT INDEX
Exhibit Number |
| Description |
ITEM19. EXHIBITS CONTINUED
Exhibit Number | Description |
12.2 | ||
13.1 | ||
13.2 | ||
15.1 | ||
| 97.1 | Clawback Policy | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Confidential treatment has been requested or granted for certain portions omitted from this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
VIVOPOWER INTERNATIONAL PLC | ||
By: | /s/ Kevin Chin | |
Name: | Kevin Chin | |
Title: | Chief Executive Officer | |
Date: October 2, 2023
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm (PCAOB ID 2814) | ||||
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Independent Auditor’s Report to the Members of
VivoPower International PLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF VIVOPOWER INTERNATIONAL PLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statementstatements of financial position of VivoPower International PLCplc and its subsidiaries (the “Company”) as of March 31, 2017June 30, 2023, 2022 and 2021, and the related consolidated statementstatements of comprehensive income, consolidated statementstatements of cash flow and consolidated statementstatements of changes in equity for each of the year then ended. ended June 30, 2023, 2022 and 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2023, 2022 and 2021, and the results of its operations and its cash flows for the year ended June 30, 2023, 2022 and 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of the financial statementsaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. Wemisstatement, whether due to error or fraud. The Company is not required to have, nor were notwe engaged to perform, an audit of the Company’sits internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, andstatements. Our audits also included evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VivoPower International PLC as of March 31, 2017, and the results of its operations and its cash flows for the year then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (LASB).
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31 July 2017
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of VivoPower International PLC
We have audited the accompanying consolidated statement of financial position of VivoPower International PLC and Subsidiaries (the “Company”) as of March 31, 2016, and the related consolidated statements of loss and comprehensive loss, changes in shareholder’s deficit and cash flows for the period from February 1, 2016 (inception) through March 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
In our opinion,Material uncertainty related to going concern
We draw attention to note 2 in the consolidated financial statements, referredwhich indicates that the group has significant outstanding liabilities and needs to above present fairly,raise funds either through debt or equity in allorder to meet its obligations as they fall due and to support the planned growth of the Group during the going concern period. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in note 2. As stated in note 2, these events or conditions, indicate that a material respects,uncertainty exists that may cast significant doubt on the consolidatedgroup’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial positionstatements, we have concluded that the director’s use of VivoPower International PLCthe going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting included a review of the group and Subsidiaries, as of March 31, 2016,budgets and the consolidated results of its operations and its cash flowsflow forecasts for the period of at least twelve months from February 1, 2016 (inception) through March 31, 2016 in conformity with International Financial Reporting Standards as issuedthe date of approval of the financial statements, including checking the mathematical accuracy of the budgets and discussion of significant assumptions used by the International Accounting Standards Board.management. We have also reviewed the latest available post year end management accounts, bank statements, regulatory announcements and board minutes and assessed subsequent events impacting going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to those charged with governance and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgements. The communication of critical audit matters do not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Critical Audit Matter | How we addressed the matter in our audit |
Revenue recognition | |
Revenue for the year ended June 30, 2023 amounted to $22.5 million and details of the related critical judgements and estimates are disclosed in note 3.1. There is a risk of misstatement of revenue from contracts with customers arising from the following areas which makes this a key focus for our audit: ● identification of performance obligations in customer contracts; ● judging the timing of satisfaction of performance obligations; ● allocation of transaction price; ● measuring the stage of completion for long term contracts (outputs versus inputs method) and ● determining the costs incurred to obtain or fulfil contracts with customers. | Our work in this area included: ● Updating our understanding of the internal control environment in operation for the significant revenue streams, and checking by walkthrough tests our understanding of the internal control environment for the significant income streams; ● Reviewing the work undertaken by component auditors in accordance with the issued component instructions, including regular communication throughout the audit; ● Performing controls testing on the key controls applicable to the contract and revenue cycle; ● Substantively testing a sample of contracts concluded and in progress at the year-end, including contract assets and liabilities and deferred and accrued income, and testing the stage of completion; ● Reviewing post year-end cash receipts and documents to test the completeness, cut-off and accuracy of revenue around the year-end; and ● Ensuring the revenue related disclosures in the financial statements are complete and accurate. |
Recoverability of intangible assets | |
As at June 30, 2023 the carrying value of goodwill and intangible assets was $42.2 million. Details of these assets and the related critical judgements and estimates are disclosed in notes 3.2 and 14. Each year management is required to assess whether goodwill is impaired and consider whether the carrying value exceeds the recoverable amount using discounted cash flows. Intangible assets subject to amortization are assessed for indicators of impairment. Impairment assessments require the use of estimates, judgements and assumptions. The calculation of the recoverable amount is dependent on various significant judgements and estimates, including forecasts and discount rates. The subjectivity of the judgements and estimates and the significant carrying value of the assets makes this a key area of focus for our audit. | Our work in this area included: ● Reviewing and challenging management’s value in use calculations including the rationale behind the key assumptions and cash flow forecasts; ● Checking the mathematical accuracy of the value in use calculations; ● Performing sensitivity analysis on reasonably possible changes in key assumptions and the impact on the headroom; ● Assessing the accuracy of budgets and forecasts used in prior periods to actual results; ● Performing an independent assessment to identify any indicators of impairment; and ● Assessing the appropriateness of group’s disclosures in respect of the judgements and estimates on whether an impairment exists and the sensitivity analysis on the headroom (refer to Note 14). |
We have served as the Company’s auditors since 2017.
New York, NY
August 10, 2016
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PKF Littlejohn LLP | 15 Westferry Circus |
Canary Wharf | |
October 2, 2023 | London E14 4HD |
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2017
(USD in thousands, except per share amounts)Year Ended June 30, 2023
Note | For the year ended 31 March | |||||||||||
2017 | 2016 | |||||||||||
Revenue | $ | 32,250 | $ | - | ||||||||
Cost of sales | (4,977 | ) | - | |||||||||
Gross profit | 27,273 | - | ||||||||||
General and administrative expenses | (9,316 | ) | (279 | ) | ||||||||
Depreciation of property, plant and equipment | 11 | (103 | ) | - | ||||||||
Amortisation of intangible assets | 12 | (548 | ) | - | ||||||||
Operating profit/(loss) | 17,306 | (279 | ) | |||||||||
Transaction related costs | 3 | (5,800 | ) | - | ||||||||
Finance income | 8 | 13 | - | |||||||||
Finance expenses | 9 | (600 | ) | (2 | ) | |||||||
Profit/(loss)before income tax | 10,919 | (281 | ) | |||||||||
Income tax expenses | 10 | (5,338 | ) | - | ||||||||
Profit/(loss)for the year | $ | 5,581 | $ | (281 | ) | |||||||
Other comprehensive income | ||||||||||||
Items that may be reclassified subsequently to profit or loss: | ||||||||||||
Currency translation differences recognised directly in equity | 599 | - | ||||||||||
Total comprehensive income/(loss) for the year | $ | 6,180 | $ | (281 | ) | |||||||
Earnings/(loss) per share | dollars | dollars | ||||||||||
Basic | 24 | $ | 0.73 | $ | (0.05 | ) | ||||||
Diluted | 24 | $ | 0.73 | $ | (0.05 | ) | ||||||
Year Ended June 30 | ||||||||||||||||
(US dollars in thousands, except per share amounts) | Note | 2023 | 2022 (restated) | 2021 | ||||||||||||
Revenue from contracts with customers | 4 | 15,060 | 22,448 | 23,975 | ||||||||||||
Cost of sales | (13,472 | ) | (20,308 | ) | (19,614 | ) | ||||||||||
Cost of sales - non-recurring events | (3,850 | ) | (1,881 | ) | - | |||||||||||
Gross (loss)/profit | (2,262 | ) | 259 | 4,361 | ||||||||||||
General and administrative expenses | (7,620 | ) | (13,811 | ) | (9,651 | ) | ||||||||||
Other gains/(losses) | 5 | 30 | (13 | ) | 769 | |||||||||||
Other income | 6 | 119 | 662 | 960 | ||||||||||||
Depreciation of property, plant and equipment | 13 | (750 | ) | (770 | ) | (638 | ) | |||||||||
Amortization of intangible assets | 14 | (831 | ) | (850 | ) | (815 | ) | |||||||||
Operating loss | 7 | (11,314 | ) | (14,523 | ) | (5,014 | ) | |||||||||
Restructuring and other non-recurring costs | 8 | (2,084 | ) | (443 | ) | (2,877 | ) | |||||||||
Finance income | 10 | 1,156 | 173 | 2,176 | ||||||||||||
Finance expense | 10 | (7,366 | ) | (8,604 | ) | (2,450 | ) | |||||||||
Loss before income tax | (19,608 | ) | (23,397 | ) | (8,165 | ) | ||||||||||
Income tax | 11 | (540 | ) | 1,968 | 138 | |||||||||||
Loss from continuing operations | (20,148 | ) | (21,429 | ) | (8,027 | ) | ||||||||||
(Loss)/profit from discontinued operations | 22 | (4,207 | ) | (625 | ) | 69 | ||||||||||
Loss for the period | (24,355 | ) | (22,054 | ) | (7,958 | ) | ||||||||||
Losses attributable to: | ||||||||||||||||
Equity owners of VivoPower International PLC | (24,355 | ) | (22,054 | ) | (7,571 | ) | ||||||||||
Non-controlling interests | - | - | (387 | ) | ||||||||||||
| (24,355 | ) | (22,054 | ) | (7,958 | ) | |||||||||||
Other comprehensive income | ||||||||||||||||
Items that may be reclassified subsequently to profit or loss: | ||||||||||||||||
Currency translation differences recognized directly in equity | 1,236 | 1,043 | 1,601 | |||||||||||||
Total comprehensive loss for the period attributable to owners of the company | (23,119 | ) | (21,011 | ) | (6,357 | ) | ||||||||||
Earnings per share attributable to owners of the company (dollars) | ||||||||||||||||
Continuing Operations | ||||||||||||||||
Basic | 28 | (0.82 | ) | (1.03 | ) | (0.49 | ) | |||||||||
Discontinued Operations | ||||||||||||||||
Basic | 28 | (0.17 | ) | (0.03 | ) | (0.00 | ) | |||||||||
All results are generated from continued operations.See notes to financial statements
Consolidated Statement of Financial Position
As at 31 March 2017
(USD in thousands)June 30, 2023
Note | As at 31 March | Year Ended June 30 | ||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
(US dollars in thousands) | Note | 2023 | 2022 (restated) | 2021 (restated) | ||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||
Property, plant and equipment | 11 | $ | 2,163 | $ | 3 | 13 | 3,742 | 3,743 | 2,575 | |||||||||||||||||||
Intangible assets | 12 | 46,320 | - | 14 | 42,175 | 39,577 | 46,945 | |||||||||||||||||||||
Deferred tax assets | 10 | 2,312 | - | 11 | 5,136 | 4,668 | 2,495 | |||||||||||||||||||||
Other receivables | 15 | 1,167 | 7,875 | |||||||||||||||||||||||||
Investments | 14 | 18,060 | - | |||||||||||||||||||||||||
Investments accounted for using the equity method | 16 | 66 | - | - | ||||||||||||||||||||||||
Total non-current assets | 70,022 | 7,878 | 51,119 | 47,988 | 52,015 | |||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||
Cash and cash equivalents | 16 | 10,970 | 28 | 17 | 553 | 1,285 | 8,604 | |||||||||||||||||||||
Restricted cash | 18 | 608 | 1,195 | 1,140 | ||||||||||||||||||||||||
Trade and other receivables | 15 | 19,844 | - | 19 | 7,021 | 9,088 | 12,785 | |||||||||||||||||||||
Inventory | 20 | 2,115 | 1,887 | 1,968 | ||||||||||||||||||||||||
Assets classified as held for sale | 21/22 | - | 8,214 | - | ||||||||||||||||||||||||
Total current assets | 30,814 | 28 | 10,297 | 21,669 | 24,497 | |||||||||||||||||||||||
TOTAL ASSETS | 100,836 | 7,906 | 61,416 | 69,657 | 76,512 | |||||||||||||||||||||||
EQUITY AND LIABILITIES | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||
Trade and other payables | 17 | 8,262 | 186 | 23 | 14,597 | 15,457 | 8,917 | |||||||||||||||||||||
Finance lease payable | 21 | 145 | - | |||||||||||||||||||||||||
Provision for income tax | 10 | 2,361 | - | |||||||||||||||||||||||||
Provisions – current | 19 | 1,339 | - | |||||||||||||||||||||||||
Income tax liability | 156 | 132 | 708 | |||||||||||||||||||||||||
Provisions | 24 | 1,778 | 1,104 | 2,802 | ||||||||||||||||||||||||
Loans and borrowings | 18 | 90 | 8,001 | 25 | 2,384 | 5,109 | 1,004 | |||||||||||||||||||||
Liabilities classified as held for sale | 22 | - | 1,497 | - | ||||||||||||||||||||||||
Total current liabilities | 12,197 | 8,187 | 18,915 | 23,299 | 13,431 | |||||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||||||
Other payables | 23 | 6,443 | - | - | ||||||||||||||||||||||||
Provisions | 24 | 76 | 57 | 165 | ||||||||||||||||||||||||
Loans and borrowings | 18 | 19,925 | - | 25 | 30,004 | 23,452 | 22,087 | |||||||||||||||||||||
Provisions | 19 | 237 | - | |||||||||||||||||||||||||
Deferred tax liabilities | 10 | 3,776 | - | 11 | 2,232 | 1,234 | 411 | |||||||||||||||||||||
Finance lease payable | 21 | 95 | - | |||||||||||||||||||||||||
| 24,033 | - | |||||||||||||||||||||||||||
Total non-current liabilities | 38,755 | 24,743 | 22,663 | |||||||||||||||||||||||||
Total liabilities | 36,230 | 8,187 | 57,670 | 48,042 | 36,094 | |||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||
Share capital | 22 | 163 | 72 | 26 | 308 | 256 | 222 | |||||||||||||||||||||
Share premium | 40,215 | - | 26 | 105,018 | 99,418 | 76,229 | ||||||||||||||||||||||
Cumulative translation reserve | 599 | - | 1,203 | (139 | ) | (1,465 | ) | |||||||||||||||||||||
Share subscription receivable | (72 | ) | ||||||||||||||||||||||||||
Other reserves | 23 | 18,329 | - | 27 | (6,492 | ) | (5,984 | ) | 15,314 | |||||||||||||||||||
Retained earnings/(accumulated deficit) | 5,300 | (281 | ) | |||||||||||||||||||||||||
Total Equity | 64,606 | (281 | ) | |||||||||||||||||||||||||
Accumulated deficit | (96,291 | ) | (71,936 | ) | (49,882 | ) | ||||||||||||||||||||||
Equity and reserves attributable to owners | 3,746 | 21,615 | 40,418 | |||||||||||||||||||||||||
Non-controlling interest | - | - | - | |||||||||||||||||||||||||
Total equity | 3,746 | 21,615 | 40,418 | |||||||||||||||||||||||||
TOTAL EQUITY AND LIABILITIES | $ | 100,836 | $ | 7,906 | 61,416 | 69,657 | 76,512 | |||||||||||||||||||||
These financial statements were approved by the Board of Directors on 28 July 2017October 2, 2023, and were signed on its behalf by Philip Comberg.Kevin Chin.
See notes to consolidated financial statements
Consolidated Statement of Cash Flow
for the Year Ended June 30, 2023
Year Ended June 30 | ||||||||||||||||
(US dollars in thousands) | Note | 2023 | 2022 (restated) | 2021 | ||||||||||||
Cash flows from operating activities | ||||||||||||||||
Loss from continuing operations | (20,148 | ) | (21,429 | ) | (8,027 | ) | ||||||||||
(Loss)/profit from discontinued operations | 22 | (4,207 | ) | (625 | ) | 69 | ||||||||||
Income tax | 561 | (1,926 | ) | (115 | ) | |||||||||||
Finance income | - | - | (2,397 | ) | ||||||||||||
Finance expense | 4,917 | 5,334 | 2,889 | |||||||||||||
Depreciation of property, plant and equipment | 13 | 750 | 770 | 1,089 | ||||||||||||
Amortization of intangible assets | 14 | 831 | 1,172 | 1,167 | ||||||||||||
Other gains/(losses) | (30 | ) | 13 | (769 | ) | |||||||||||
Share-based payments | 147 | 2,010 | 1,078 | |||||||||||||
Decrease/(increase) in trade and other receivables | 5,903 | 3,459 | (813 | ) | ||||||||||||
(Increase)/decrease in inventory | (228 | ) | 81 | - | ||||||||||||
Increase/(decrease) in trade and other payables | 2,278 | 6,583 | (9,453 | ) | ||||||||||||
Increase/(decrease) in provisions | 674 | (572 | ) | (95 | ) | |||||||||||
Corporation tax payments | - | - | - | |||||||||||||
Net cash used in operating activities | (8,552 | ) | (5,130 | ) | (15,377 | ) | ||||||||||
Cash flows from investing activities | ||||||||||||||||
Proceeds on sale of property plant and equipment | 110 | 57 | 36 | |||||||||||||
Purchase of property, plant and equipment | (1,029 | ) | (1,165 | ) | (937 | ) | ||||||||||
Investment in capital projects | 14 | (3,857 | ) | (4,254 | ) | - | ||||||||||
Proceeds on disposal of J.A Martin ex-solar business | 22 | 2,874 | - | - | ||||||||||||
Proceeds on sale of capital projects | 47 | 19 | 366 | |||||||||||||
Acquisitions - consideration | (66 | ) | - | (7,089 | ) | |||||||||||
Acquisitions - cash acquired | - | - | 4,942 | |||||||||||||
Net cash used in investing activities | (1,921 | ) | (5,343 | ) | (2,682 | ) | ||||||||||
Consolidated Statement of Cash Flow
for the Year Ended June 30, 2023 (continued)
for
Year Ended June 30 | ||||||||||||||||
(US dollars in thousands) | Note | 2023 | 2022 | 2021 | ||||||||||||
Cash flows from financing activities | ||||||||||||||||
Other borrowings | 25 | (108 | ) | (85 | ) | 18 | ||||||||||
Lease repayments | 25 | (43 | ) | - | (360 | ) | ||||||||||
Proceeds from investor | 23 | 300 | - | - | ||||||||||||
Capital raise proceeds | 26 | 5,500 | 243 | 34,866 | ||||||||||||
Equity instruments and capital raise costs | 27 | (397 | ) | (47 | ) | (2,819 | ) | |||||||||
Debtor finance borrowings/(repayments) | 25 | 1,297 | (4 | ) | (518 | ) | ||||||||||
Loans from related parties | 25 | 3,572 | 4,231 | - | ||||||||||||
Repayment of loans from related parties | 25 | (370 | ) | - | (2,226 | ) | ||||||||||
Bank loan borrowings | 25 | (138 | ) | (166 | ) | (33 | ) | |||||||||
Chattel mortgage borrowings | 25 | (267 | ) | 74 | 32 | |||||||||||
Finance expense | 10 | (129 | ) | (636 | ) | (5,296 | ) | |||||||||
Transfer from/(to) restricted cash | 18 | 587 | (55 | ) | (127 | ) | ||||||||||
Net cash from financing activities | 9,804 | 3,555 | 23,537 | |||||||||||||
Net (decrease)/increase in cash and cash equivalents | (669 | ) | (6,918 | ) | 5,478 | |||||||||||
Cash and cash equivalents at the beginning of the period | 17 | 1,285 | 8,604 | 2,824 | ||||||||||||
Effect of exchange rate movements on cash held | (63 | ) | (401 | ) | 302 | |||||||||||
Cash and cash equivalents at the end of the period | 17 | 553 | 1,285 | 8,604 | ||||||||||||
Non-cash investing and financing transactions during the year ended 31 March 2017
(USD in thousands)June 30, 2023 comprise:
● | 102,252 shares issued to Incentive Award participants at grant date value: $0.1 million; |
● | Right-of-use assets additions and the related lease liability during the year: $0.2 million and $0.2 million (Refer to Note 25) |
Note | For the year ended31March | |||||||||||
2017 | 2016 | |||||||||||
Cash generated from/(used in) operating activities | 16 | $ | 6,376 | $ | (95 | ) | ||||||
Net cash generatedfrom/(used in) operating activities | 6,376 | (95 | ) | |||||||||
Cash flows from investing activities | ||||||||||||
Interest received | 8 | 13 | - | |||||||||
Purchase of property plant and equipment | 11 | (94 | ) | (3 | ) | |||||||
Investment in capital projects | 14 | (18,060 | ) | - | ||||||||
Cash received from acquisitions | 20 | 1,485 | - | |||||||||
Acquisitions | (10,080 | ) | - | |||||||||
Net cash used in investing activities | (26,736 | ) | (3 | ) | ||||||||
Cash flows from financing activities | ||||||||||||
Financing agreements | 330 | - | ||||||||||
Loans from related parties | 19,818 | 126 | ||||||||||
Funds received from issuing shares | 167 | - | ||||||||||
Costs from listing | (11,469 | ) | - | |||||||||
Funds received from listing | 22,456 | - | ||||||||||
Net cash generated from financing activities | 31,302 | 126 | ||||||||||
Net increase in cash and cash equivalents | 10,942 | 28 | ||||||||||
Cash and cash equivalents at the beginning of the year | 28 | - | ||||||||||
Cash and cash equivalents at the end of the year | $ | 10,970 | $ | 28 | ||||||||
See notes to consolidated financial statements
Consolidated Statement of Changes in Equity
for the year ended 31 March 2017
(USD in thousands)Year Ended June 30, 2023
Share Capital | Share Premium | Share Subscription Receivable | Other Reserves | Cumulative Translation Reserve | Retained Earnings /(Accumulated Deficit) | Total | ||
At 1 February 2016 | - | - | - | - | - | - | - | |
Total comprehensive loss for the year | - | - | - | - | - | (281) | (281) | |
Issue of new shares | 72 | - | (72) | - | - | - | - | |
At 31 March 2016 | 72 | - | (72) | - | - | (281) | (281) | |
Total comprehensive income for the year | - | - | - | 599 | 5,581 | 6,180 | ||
Redenomination of share capital | (4) | - | - | - | - | (4) | ||
Issue of new shares | 95 | 40,215 | 72 | - | - | - | 40,382 | |
Equity instruments | - | - | 25,072 | - | - | 25,072 | ||
Capital raising costs | - | - | (9,722) | - | - | (9,722) | ||
Share option reserve | - | - | 3,713 | - | - | 3,713 | ||
Treasury shares | ||||||||
Purchase of shares | - | - | (592) | - | - | (592) | ||
Other reserves | - | - | (142) | - | - | (142) | ||
At 31 March 2017 | 163 | 40,215 | - | 18,329 | 599 | 5,300 | 64,606 | |
(US dollars in thousands) | Share capital | Share premium | Cumulative translation reserve | Other reserves | Accumulated deficit | Non-controlling interest | Total | |||||||||||||||||||||
At June 30, 2020 | 163 | 40,215 | (3,307 | ) | 21,408 | (40,773 | ) | 184 | 17,890 | |||||||||||||||||||
Loss for the year | - | - | - | - | (7,571 | ) | (387 | ) | (7,958 | ) | ||||||||||||||||||
Other comprehensive income/(expense) | - | - | 1,842 | (241 | ) | - | - | 1,601 | ||||||||||||||||||||
| 163 | 40,215 | (1,465 | ) | 21,167 | (48,344 | ) | (203 | ) | 11,533 | |||||||||||||||||||
Transactions with owners in their capacity as owners | ||||||||||||||||||||||||||||
Equity instruments | - | - | - | (3,141 | ) | - | - | (3,141 | ) | |||||||||||||||||||
Capital raises | 49 | 34,317 | - | (2,804 | ) | - | - | 31,562 | ||||||||||||||||||||
Other share issuances | 1 | 736 | - | (15 | ) | - | - | 722 | ||||||||||||||||||||
Employee share awards | 9 | 961 | - | 107 | - | - | 1,077 | |||||||||||||||||||||
Non-controlling interest | - | - | - | - | (1,538 | ) | 203 | (1,335 | ) | |||||||||||||||||||
| 59 | 36,014 | - | (5,853 | ) | (1,538 | ) | 203 | 28,885 | ||||||||||||||||||||
At June 30, 2021 | 222 | 76,229 | (1,465 | ) | 15,314 | (49,882 | ) | - | 40,418 | |||||||||||||||||||
Loss for the year | - | - | - | - | (21,569 | ) | - | (21,569 | ) | |||||||||||||||||||
| Prior year adjustments | - | - | - | - | (485 | ) | - | (485 | ) | |||||||||||||||||||
| Restated loss for the year | - | - | - | - | (22,054 | ) | - | (22,054 | ) | |||||||||||||||||||
Other comprehensive income/(expense) | - | - | 1,326 | (283 | ) | - | - | 1,043 | ||||||||||||||||||||
| 222 | 76,229 | (139 | ) | 15,031 | (71,936 | ) | - | 19,407 | ||||||||||||||||||||
Transactions with owners in their capacity as owners | ||||||||||||||||||||||||||||
Capital raises | 1 | 243 | - | (122 | ) | - | - | 122 | ||||||||||||||||||||
Other share issuances | 1 | 217 | - | (144 | ) | - | - | 74 | ||||||||||||||||||||
Employee share awards | 8 | 2,287 | - | (283 | ) | - | - | 2,012 | ||||||||||||||||||||
Conversion of Aevitas equity instruments | 24 | 20,442 | - | (20,466 | ) | - | - | - | ||||||||||||||||||||
| 34 | 23,189 | - | (21,015 | ) | - | - | 2,208 | |||||||||||||||||||||
At June 30, 2022 | 256 | 99,418 | (139 | ) | (5,984 | ) | (71,936 | ) | - | 21,615 | ||||||||||||||||||
Loss for the year | - | - | - | - | (24,355 | ) | - | (24,355 | ) | |||||||||||||||||||
Other comprehensive income/(expense) | - | - | 1,342 | (106 | ) | - | - | 1,236 | ||||||||||||||||||||
| 256 | 99,418 | 1,203 | (6,090 | ) | (96,291 | ) | - | (1,504) | ||||||||||||||||||||
Transactions with owners in their capacity as owners | ||||||||||||||||||||||||||||
Equity instruments | - | - | - | 49 | - | - | 49 | |||||||||||||||||||||
Capital raises | 51 | 5,449 | - | (446 | ) | - | - | 5,054 | ||||||||||||||||||||
Employee share awards | 1 | 151 | - | (5 | ) | - | - | 147 | ||||||||||||||||||||
Non-controlling interest | - | - | - | - | - | - | - | |||||||||||||||||||||
| 52 | 5,600 | - | (402 | ) | - | - | 3,746 | |||||||||||||||||||||
At June 30, 2023 | 308 | 105,018 | 1,203 | (6,492 | ) | (96,291 | ) | - | 3,746 | |||||||||||||||||||
For further information on “Other Reserves” please see note 23.Note 27.
Notes to Consolidated Financial Statements
for the Year Ended June 30, 2023
1. | Reporting entity |
VivoPower International PLC (“VivoPower” or the “Company”) is a public company limited by shares and incorporated under the laws of England and Wales and domiciled in the United Kingdom. The address of the Company’s registered office is 91 WimpoleThe Scalpel, 18th Floor, 52 Lime Street, Marylebone, London W1G 0EF. EC3M7AF, United Kingdom.
The consolidated financial statements of the Company as at and for the year ended 31 March 2017 comprise the financial statements of the Company and its subsidiaries (together referred to as the ‘group’"Group" and individually as ‘group entities’"Group entities"). TheSince June 30, 2021, the Company no longer has an ultimate parent companycontrolling party, as AWN Holdings Limited (collectively with its affiliates and subsidiaries, "AWN") holds less than 50% equity interest in the Company, being 39.5% as at June 30, 2023. In prior periods, the ultimate controlling party and the results into which these results isfinancials were consolidated is Arowana International Limited.was AWN, a company registered in Australia.
2. |
|
Summary of significant accounting policies:
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all yearsperiods presented, unless otherwise stated.
2.1 | Basis of preparation |
VivoPower International PLC consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS)("IFRS"), as issued by the International Accounting Standards Board, (IASB), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.convention, except when accounting for acquisitions, whereby fair values have been applied.
The preparation of financial statements with adopted IFRS requires the use of critical accounting estimates. It also requires the management to exercise judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements are disclosed in note Note 3.
The directors believe thatfinancial statements have been prepared on a going concern basis.
As at June 30, 2023, the Company had unrestricted cash totalling $0.6 million, compared to $1.3 million as at June 30, 2022 and $8.6 million as at June 30, 2021. It also has outstanding debt and borrowing totaling $32.4 million, compared to $28.6 million as at June 30, 2022 and $23.1 million as at June 30, 2021. Most of these borrowings do not fall due for repayment until 1April 2025 and are thus classified under long-term liabilities.
Over the next twelve months, the Company expects significant growth in revenues and continued EBITDA generation in critical power systems, a material increase in revenue and costs in scaling up the Electric Vehicles business as the operation scales series production of its EUV23 conversion kits to match the demand from its signed partnerships. The Company will also be investing in further capitalized development costs in electric vehicles in preparation for Tembo series production. In addition, it expects to fund selective development of the U.S. solar portfolio to maximize future sales proceeds, as well as development of microgrid, EV charging and battery energy storage capabilities, as part of the scaling up of the SES business unit. The Company will also be investing in property, plant and equipment, particularly in Tembo.
This expected growth implies sizeable funding requirements over FY2024, which the Company is well placedplanning to manage itsfinance through significant equity capital raises, asset-backed financing, debtor financing, working capital optimization with suppliers and customers, and tax relief on R&D expenditure, either at Group or subsidiary levels depending on what is best suited to the Company’s growth needs and optimizing for cost of capital.
To ensure success of the business, the directors have reviewed additional plans to mitigate any cash flow risk successfully,that may arise during the next twelve months. These include:
● | Regular re-forecasting process and flexing of opex and capex cost growth according to liquidity needs; | |
● | Phased approach to hiring of personnel to sustain growth of the Tembo business; |
● | Staging the timing of property, plant and equipment and software capex to match asset-backed financing inflows; |
● | Obtain Research & Development grants in the U.K., Europe and Australia to help fund investment in electric, solar and battery technologies; |
● | Careful project planning and commercial structuring of SES projects; |
● | Possible sale, spin off, or distribution in specie of Caret, LLC ("Caret"), formerly Innovative Solar Ventures I, LLC ("ISV"); |
● | Purchase order financing, debtor financing facilities; | |
● | Staging the timing of equity raises to minimize dilution; and |
● | Renegotiation of terms on loans and supply chain. |
Based on the foregoing expectations of funding needs, and actions prepared and presented by management to the Board of Directors, the Directors consider that these actions can provide sufficient cash to support business operations and meet funding requirements as they become due, despite some currentfinancial, economic and political uncertainty. The directors therefore have a reasonable expectation thatIf we continue to experience losses and we are not able to raise additional financing to provide the funding to grow the revenue streams of the Company has adequate resourcesto become profit making, or generate cash through sales of assets, we may not have sufficient liquidity to sustain our operations and to continue in operational existence for the foreseeable future. Thus, they have continued to adoptas a going concern, accordingly there is a material uncertainty that may cause significant doubt about the going concern basis in preparing thesenature of the Group. Our consolidated financial statements.statements do not include any adjustments that might result from the outcome of this uncertainty.
All financial information presented in US Dollarsdollars has been rounded to the nearest thousand.
Significant accounting policies
|
2.2 | Basis of consolidation |
The consolidated financial statements include those of VivoPower International PLC and all of its subsidiary undertakings.
Subsidiary undertakings are those entities controlled directly or indirectly by the Company. The Company controls an investee when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of the subsidiaries acquired are included in the consolidatedConsolidated Statement of Comprehensive Income from the date of acquisition using the same accounting policies of those of the group.Group. All business combinations are accounted for using the purchase method. The consideration transferred in a business combination is the fair value at the acquisition date of the assets transferred and the liabilities incurred by the Group and includes the fair value of any contingent consideration arrangement. Acquisition-related costs are recognized in the income statement as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the group.Group.
All intra-group balances and transactions, including any unrealisedunrealized income and expense arising from intra-group transactions, are eliminated in full in preparing the consolidated financial statements. UnrealisedUnrealized gains arising from transactions with equity investedaccounted investees are eliminated against the investment to the extent of the group’sGroup’s interest in the investee. UnrealisedUnrealized losses are eliminated in the same way as unrealisedunrealized gains, but only to the extent that there is no evidence of impairment.
|
2.3 | Business combination |
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
● | fair values of the assets transferred |
● | liabilities incurred to the former owners of the acquired businesses |
● | equity interests issued by the Company |
● | fair value of any asset or liability resulting from a contingent consideration arrangement, and |
● | fair value of any pre-existing equity interest in the subsidiary. |
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expenses as incurred.
The excess of the:
● | consideration transferred |
● | amount of any non-controlling interest in the acquired entity, and |
● | acquisition-date fair value of any previous equity interest in the acquired entity |
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognized in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognized in profit or loss.
|
2.4 | Intangible assets |
All intangible assets, except goodwill, are stated at fair value less accumulated amortisationamortization and any accumulated impairment losses. Goodwill is not amortised amortized and is stated at cost less any accumulated impairment losses. Any gain on a bargain purchase is recognized in profit or loss immediately.
Goodwill
Goodwill arose on the effective acquisition of VivoPower Pty Ltd, Aevitas O Holdings Limited (“Aevitas”) and the Aevitas Group of companies.Tembo e-LV B.V. Goodwill is reviewed annually to test for impairment.
Negative goodwill arose on the acquisition of the remaining 50% share of ISV from Innovative Solar Systems, LC ("ISS"), constituting a bargain purchase. The gain was immediately recognized in the profit and loss during the year ended June 30, 2021.
Other intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and then amortisedamortized over their useful economic lives. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates.
The Group has taken advantageDevelopment expenditure includes the product development project for ruggedized electric vehicles in Tembo, pre-series-production expenditure on developing vehicle specifications and production processes. Capitalized costs include primarily internal payroll costs, external consultants and computer software.
Development expenditure on U.S. solar projects includes securing land rights, completing feasibility studies, negotiating power purchase agreements, and other costs incurred to prepare project sales for Notice to Proceed with construction and hence sale to a partner as a shovel ready project.
For both electric vehicles product development project, and U.S. solar development projects, it is the Company’s intention to complete the projects. It expects to obtain adequate technical, financial and other resources to complete the projects, and management consider that it is probable for the future economic benefits attributable to the development expenditure to flow to the entity; and that the cost of the provisions of IFRS 3 in accounting for the business combinations arising from the acquisitions of Aevitas O Holdings Pty Ltd and VivoPower Pty Ltd.asset can be measured reliably. Accordingly, the financial statements currently recognise the Directors' best estimate of the individual allocation ofdevelopment expenditure is recognized under IAS 38 – Intangible Assets as an intangible asset.
All other expenditure, including expenditure on internally generated goodwill and other separately identifiable assets acquired. The completion of the purchase price allocation exercise will be finalised within 12 months following the date of acquisition.brands, and research costs, are recognized in profit or loss as incurred.
AmortisationAmortization is calculated on a straight-line basis to write down the assets over their useful economic lives at the following rates:
Customer relationships – 7 years
Trade names – 14 years
Favourable supply contracts – 5 years
Databases – 5 years
| Development expenditure - 5 to 10 years |
● | Customer relationships – 5 to 10 years |
● | Trade names – 15 to 25 years |
● | Favorable supply contracts – 15 years |
● | Other – 5 years |
2.5 | Property, plant and equipment |
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and the costs directly attributable to bringing the asset into use.
When parts of an item of property, plant and equipment have different useful lives, they are accounted as separate items (major components) of property, plant and equipment.
Depreciation is calculated on a straight-line basis so as to write down the assets to their estimated residual value over their useful economic lives at the following rates:
● | Computer equipment - 3 years |
● | Fixtures and fittings - 3 to 20 years |
● | Motor vehicles -
|
● | Plant and equipment – 3.5 to 10 years |
● | Right-of-use assets – remaining term of lease |
2.6 | Assets classified as held for sale and discontinued operations |
Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying value and fair value less costs to sell. An impairment loss is recognized for any subsequent write-down of the asset to fair value less costs to sell.
A discontinued operation is a component of the Company that has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations. The results of discontinued operations are presented separately in the statement of profit or loss.
|
2.7 |
|
Acquisitions of subsidiaries and businessesInventories are accounted for using the acquisition method. The consideration transferred in a business combination is the fair valuestated at the acquisition datelower of cost and net realizable value, in accordance with IAS 2 – Inventories. The cost includes all direct and indirect variable production expenses, plus fixed expenses based on the assets transferrednormal capacity of each production facility. The net realizable value of inventories intended to be sold corresponds to their selling price, as estimated based on market conditions and any relevant external information sources, less the liabilities incurredestimated costs necessary to complete the sale.
2.8 | Leases |
The Group leases offices, workshops, motor vehicles, and equipment for fixed periods of 2 months to 8 years but may have extension options. Extension options are not recognized by the Group and includes the fair value of any contingent consideration arrangement. Acquisition-related costs are recognised in the income statement as incurred.determination of lease liabilities unless renewals are reasonably certain.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. |
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Leases are classifiedrecognized as finance leases whenevera right-of-use asset and a corresponding liability at the terms ofdate at which the lease transfer substantially allleased asset is available for use by the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.Group.
Assets held under finance leasesand liabilities arising from a lease are initially recognised as property, plant and equipment at an amount equal to the fair value of the leased assets or, if lower, themeasured on a present value of the minimumbasis, with lease payments atdiscounted using the inceptioninterest rate implicit in the lease. If that rate cannot be readily determined, the Group’s incremental borrowing rate is used. The Group presents lease liabilities in loans and borrowings in the Statement of the lease, and then depreciated over their useful economic lives.Financial Position.
Lease payments are apportionedallocated between the repayment of capitalprincipal and interest.finance cost. The capital element of future lease payments is included in the Statement of Financial Position as a liability. Interestfinance cost is charged to the Statement of Comprehensive Income over the lease period so as to achieveproduce a constant periodic rate of interest on the remaining balance of the liability.liability for each period.
Right-of-use assets are presented in property, plant and equipment and depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
F- 12
Rentals payable under operating leases are charged to the Statement
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2.9 | Impairment of non-financial assets |
Goodwill is allocated to cash-generating units for the purposes of impairment testing. The recoverable amount of the cash-generating unit (‘CGU’) to which the goodwill relates is tested annually for impairment or when events or changes to circumstances indicate that it might be impaired.
The carrying values of property, plant and equipment, investments and intangible assets other than goodwill are reviewed for impairment only when events indicate the carrying value may be impaired.
In an impairment test the recoverable amount of the cash-generating unit or asset is estimated in order to determine the existence or extent of any impairment loss. The recoverable amount is the higher of fair value less costs to sell and the value in use to the group.Group. An impairment loss is recognisedrecognized to the extent that the carrying value exceeds the recoverable amount. In determining a cash-generating unit’s or asset’s value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and risks specific to the cash-generating unit or asset that have not already been included in the estimate of future cash flows. All impairment losses are recognisedrecognized in the Statement of Comprehensive Income.
An impairment loss in respect of goodwill is not reversed. In the case of other assets, impairment losses recognisedrecognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. These impairment losses are reversed if there has been any change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent so that the asset’s carrying amount does not exceed the carrying value that would have been determined, net of depreciation or amortisation,amortization, if no impairment loss had been recognised.recognized.
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2.10 | Financial instruments |
Financial assets and liabilities are recognisedrecognized in the group’sGroup’s Statement of Financial Position when the groupGroup becomes a party to the contracted provision of the instrument. The following policies for financial instruments have been applied in the preparation of the consolidated financial statements.
The Company classifies its financial assets in the following measurement categories:
| ● | those to be measured subsequently at fair value through profit or loss; and, |
| ● | those to be measured at amortized cost. |
The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial assets are classified as at amortized cost only if both of the following criteria are met:
| ● | the asset is held within a business model whose objective is to collect contractual cash flows; and, |
| ● | the contractual terms give rise to cash flows that are solely payments of principal and interest. |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
| ● | in the principal market for the asset or liability; or, |
| ● |
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The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorisedcategorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 —
Level 1 - quoted (unadjusted) market prices in active markets for identical assets or liabilities; |
Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and |
Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. |
• Level 2 — valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
• Level 3 — valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
Cash and cash equivalents
For the purpose of preparation of the Statement of Cash Flow, cash and cash equivalents includes cash at bank and in hand.
Restricted cash
Restricted cash are cash and cash equivalents whose availability for use within the Group is subject to certain restrictions by third parties.
Bank borrowings
Interest-bearing bank loans are recorded at the proceeds received. Direct issue costs paid on the establishment of loan facilities are recognisedrecognized over the term of the loan on a straight-line basis. The initial payment is taken to the Statement of Financial Position and then amortisedamortized over the full-length of the facility.
Trade and other receivables
Trade and other receivables are statedrecognized initially at amounts receivablefair value and subsequently measured at amortized cost using the effective interest method, less any allowance for the expected future issue of credit notes and for non-recoverability due to credit risk. The Group applies the IFRS 9 – Financial Instruments simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure expected credit losses, trade receivables and contract assets have been grouped based on shared risk characteristics.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at their amortised cost.amortized cost using the effective interest method.
Share Capitalcapital
Ordinary sharesShares, nominal value $0.012 per share (the "Ordinary Shares") are classified as equity. Incremental costs directly attributable to the issue of ordinary sharesOrdinary Shares are recognisedrecognized as a deduction from equity, net of any tax effects.
Repurchase of share capital (treasury shares)
When share capital recognisedrecognized as equity is repurchased as equity by the Company the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognisedrecognized as a deduction from equity, and excluded from the number of shares in issue when calculating earnings per share.
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2.11 | Taxation |
Income tax expense comprises current and deferred tax.
Current tax is recognisedrecognized based on the amounts expected to be paid or recovered under the tax rates and laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is provided on temporary timing differences that arise between the carrying amounts of assets and liabilities for financial reporting purposes and their corresponding tax values. Liabilities are recorded on all temporary differences except in respect of initial recognition of goodwill and in respect of investments in subsidiaries where the timing of the reversal of the temporary difference is controlled by the groupGroup and it is probable that it will not reverse in the foreseeable future. Deferred tax assets are recognisedrecognized to the extent that it is probable that future taxable profits will be available against which the asset can be offset. Deferred tax is measured on an undiscounted basis using the tax rates and laws that have been enacted or substantively enacted by the end of the accounting period.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, they relate to income taxes levied by the same tax authority and the groupGroup intends to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realisedrealized simultaneously.
Current and deferred tax are recognisedrecognized in the Statement of Comprehensive Income, except when the tax relates to items charged or credited directly to equity, in which case it is also dealt with directly in equity.
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2.12 | Provisions |
Provisions are recognisedrecognized when the groupGroup has a present obligation because of a past event, it is probable that the groupGroup will be required to settle that obligation, and it can be measured reliably.
Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the date of Statement of Financial Position.
Where the time value of money is material, provisions are measured at the present value of expenditures expected to be paid in settlement.
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2.13 | Earnings per share |
The groupGroup presents basic and diluted earnings per share [EPS](“EPS”) data for ordinary shares.Ordinary Shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares,Ordinary Shares, excluding the shares held as treasury shares. Currently there are no diluting effects on EPS for ordinary shares, therefore, diluted EPS is the same as basic EPS.
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2.14 | Foreign currencies |
The Company’s functional and presentational currency is the US Dollar.dollar. Items included in the separate financial statements of each groupGroup entity are measured in the functional currency of that entity. Transactions denominated in foreign currencies are translated into the functional currency of the entity at the rates of exchange prevailing at the dates of the individual transactions. Foreign currency monetary assets and liabilities are translated at the rates of exchange prevailing at the end of the reporting period.
Exchange gains and losses arising are charged to the Statement of Comprehensive Income within finance income or expenses. The Statement of Comprehensive Income and Statement of Financial Position of foreign entities are translated into US dollars on consolidation at the average rates for the period and the rates prevailing at the end of the reporting period respectively. Exchange gains and losses arising on the translation of the group’sGroup’s net investment foreign entities are recognisedrecognized as a separate component of shareholders’ equity.
Foreign currency denominated share capital and related share premium and reserve accounts are recorded at the historical exchange rate at the time the shares were issued, or the equity created.
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2.15 | Revenue |
Revenue comprises the fair value of the consideration received or receivable for the sale of services in the ordinary course of the group’sGroup’s activities. Revenue is shown net of discounts, value-added tax, other sales related taxes, and after the elimination of sales within the group.Group.
Revenue comprises BTOdevelopment revenues, electrical installations, electrical servicing and maintenance, generator sales, vehicle spec conversion and generator sales.
conversion kits. Revenue associated with longer term projects is recognised on a percentage completion basis. Revenue for smaller jobs and projects is recognisedrecognized upon completion.
IFRS 15, is mandatory for adoption from accounting periods beginning on or after 1 January 2017. However, the group has elected to adopt the standard early, with effect from the datesatisfaction of incorporation.contractual performance obligations.
The groupGroup has a number of different revenue streams and the key components in determining the correct recognition are as follows:
BTODevelopment revenue, which is revenue generated from development services relating to the building and construction of solar projects, is recognisedrecognized on a percentage completion basis as the value is accrued by the end user over the life of the contract. The periodic recognition is calculated through weekly project progress reports.
AevitasOn longer-term power services projects such as large-scale equipment provision and installation, the performance obligation of completing the installation is satisfied over time, and revenue is recognised when jobs are completed. On longer term projects revenue is recognisedrecognized on a percentage completion basis. The projects have defined milestones which determinesbasis using an input method. Revenue for stand-alone equipment sales is recognized at the timingpoint of passing control of the billingasset to the customers. The achievementcustomer. Other revenue for small jobs and those completed in a limited timeframe are recognized when the job is complete and accepted by the customer.
Revenue for sale of electric vehicles, kits for electric vehicles and related products is recognized upon delivery to the milestones then also provides an accurate indicationcustomer. Where distribution agreements are agreed with external parties to participate in the assembly of how muchvehicles, revenue recognition will be assessed under IFRS 15 - Revenue from Contracts with Customers, to establish the principal and agent in the relationship between the parties and with the end customer.
Warranties are of short duration and only cover defective workmanship and defective materials. No additional services are committed to which generate a performance obligation.
No adjustment is made for the projecteffects of financing, as the Company expects, at contract inception, that the period between when the goods and services are transferred to the customer and when the customer pays, will be one year or less.
If the revenue recognized for goods and services rendered by the Company exceeds amounts that the Company is complete.entitled to bill the customer, a contract asset is recognized. If amounts billed exceed the revenue recognized for goods and services rendered, a contract liability is recognized.
Incremental costs of obtaining a contract are expensed as incurred.
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2.16 |
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The group determines and presents operating segments based onOther income in relation to government grants, is recognized in the informationperiod that is provided internally to the Board of Directors, which is the group’s chief operating decision maker.
The group considers that it has three reportable segments, USA, UK and Australasia. The secondary segment is based upon product groups and the split is between Aevitas and the core VivoPower business.
An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including any revenues and expenses that relate to the transactions with any of the group’s other components. Operating segments results are reviewed regularly by the Board of Directors to assess its performance and make decisions about resources to be allocated to the segment, andrelated costs, for which discrete financial information is available.the grants are intended to compensate, are expensed.
Segment results that are reported to the Board of Directors include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis.
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2.17 | Employee benefits |
Pension
The employer pension contributions are associated with defined contribution schemes. The costs are therefore recognisedrecognized in the month in which the contribution is incurred, which is consistent with recognition of payroll expenses.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognisedrecognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the groupGroup has a present legal or constructive obligation to pay this amount because of past service provided by the employee and the obligation can be reliably measured.
Short-term compensated absences
A liability for short-term compensated absences, such as holiday,holidays, is recognisedrecognized for the amount the group Group may be required to pay because of the unused entitlement that has accumulated at the end of the reporting period.
Share-based payments
Shares issued to employees and other participants under the Omnibus Incentive Plan 2017 are recognized over the expected vesting period, using the grant date share price, in accordance with IFRS 2 Share-based Payments.
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2.18 | Restructuring and other non-recurring costs |
Restructuring and other non-recurring costs are by nature one-time incurrences and do not represent the normal trading activities of the business and accordingly are disclosed separately on the Consolidated Statement of Comprehensive Income in accordance with IAS 1 – Presentation of Financial Statements in order to draw them to the attention of the reader of the financial statements. Restructuring costs are defined in accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets as being related to sale or termination of a line of business, closure of business locations, changes in management structure, or fundamental reorganizations.
Other non-recurring costs include litigation expenses for former employees, including fees for legal services and provisions under IAS 37 for legal fee dispute resolutions that are probable to result in a quantifiable financial outflow by the Company.
Other non-recurring costs also include legal and professional costs for project review and investigation detailed review and sales campaign for solar projects managed by the ISS joint venture partner.
Other non-recurring costs also include one-off costs resulting from acquisition of Tembo e-LV and subsidiaries and impairment and write-off of nonrecoverable items.
Other non-recurring costs also include provisions in respect of fiscal refunds on prior receivables, which the Company is defending.
2.19 | New standards, amendments and interpretations not yet adopted by the Group |
At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
International Accounting Standards (amendments) | Effective date* |
IAS 1 - Amendments regarding the classification of liabilities | 1January 2023 |
IAS 1, IFRS Practice Statement 2 - Amendments to IAS 1 and IFRS Practice Statement 2 | 1January 2023 |
| IAS 1 - Amendments regarding non-current liabilities with covenants | 1January 2024 |
IAS 8 (amendments) - Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates | 1January 2023 |
IFRS 16 - Amendments regarding lease liability in a sale and leaseback | 1January 2024 |
*Years beginning on or after |
The IASB and IFRIC have issuedDirectors do not expect that the following standards and with an effective date after the dateadoption of the financial statements and have not been applied in preparing these consolidated financial statements.
IFRS 15 –“Revenue from Contracts with Customers” - early adoption
As this is the first period of financial reporting for the group, management took the decision to adopt IFRS 15 early as it represented a major development in the recognition of revenue under International Financial Reporting Standards.
Compared to IAS 18, Revenue and IAS 11, Construction Contracts and related interpretations, there was no material difference adopting IFRS 15 early.
The standard is effective for annual periods beginning on or after 1 January 2017, however, the group took advantage of early application.
IFRS 16 Leases
IFRS 16 specifies how a companystandards listed above will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 will be applicable to annual reporting periods beginning on or after 1 January 2019.
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
Amends IAS 12 Income Taxes, which is effective for annual periods beginning on or after 1 January 2017 to clarify the following aspects:
Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
The carrying amount of an asset does not limit the estimation of probable future taxable profits.
Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.financial statements of the Group or Company in future periods.
3. |
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In preparing the consolidated financial statements, the directors are required to make judgements in applying the group’sGroup’s accounting policies and in making estimates and making assumptions about the future. These estimates could have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the future financial periods. The critical judgements that have been made in arriving at the amounts recognisedrecognized in the consolidated financial statements are discussed below.
3.1 | Revenue from contracts with customers – determining the timing of satisfaction of services |
Critical accounting judgements:
As disclosed in Note 2.15 to the Financial Statements the Group concluded that Solar Development revenue and revenue from other long-term projects is recognized over time as the customer simultaneously receives and consumes the benefits provided. The Group determined that the percentage completion basis is the best method in measuring progress because there is a direct relationship between the Group’s effort and the transfer of services to the customer. The judgement used in applying the percentage completion basis affects the amount and timing of revenue from contracts.
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The objectivecarrying values of property, plant and equipment, investments and intangible assets other than goodwill are reviewed for impairment only when events indicate the carrying value may be impaired. Goodwill is tested annually for impairment or when events or changes to circumstances indicate that it might be impaired.
Impairment assessments require the use of estimates and assumptions. To assess impairment, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the standardtime-value of money and risks specific to the related cash-generating unit. Judgement was applied in making estimates and assumptions about the future cash flows, including the appropriateness of discounts rates applied and operating performance (which includes production and sales volumes), as further disclosed in Note 14. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is to establish principles fora possibility that changes in circumstances will impact these projections, which may impact the presentation and preparationrecoverable amount of consolidated financial statements when an entity controls one assets and/or more other entities. The group has assessed whether it controls project companies in which the group has an interest.CGUs.
The group assessed control by reviewing, first, whether the group had power over the entity, secondly, had exposure, or rights, to variable returns from its involvement with the project, and finally, whether it had the ability to use its power over the investee to affect the amount
3.3 | Operating profit/(loss) |
On assessing the three criteria, all of which must exist, the group concluded that it did not in fact have control and elected not to consolidate the project companies intoIn preparing the consolidated financial statements of the group.Group, judgement was applied with respect to those items which are presented in the Consolidated Statement of Comprehensive Income as included within operating profit/(loss). Those revenues and expenses which are determined to be specifically related to the on-going operating activities of the business are included within operating profit/(loss). Expenses or charges to earnings which are not related to operating activities, are one-time costs determined to be not representative of the normal trading activities of the business, or that arise from revaluation of assets, are reported below operating profit/(loss).
| Litigation provision |
No litigation provision was recorded at June 30, 2023. The provision of $0.5 million for disputed legal success fees related to the Mr. Comberg litigation recorded at June 30, 2021 was estimated by management, making a judgement in conjunction with advice from legal counsel, on the likely outcome of the claim. $0.4 million of this provision was utilized in the year ended June 30, 2022, and the remainder released.
| Capitalization of product development costs |
The transaction relatedGroup capitalizes costs for product development projects in the EV segment. The capitalization of costs is based on management’s judgement that technological and economic feasibility is confirmed, and all other recognition criteria within IAS 38 can be demonstrated. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation, discount rates to be applied and the expected period of benefits. As of June 30, 2023, the carrying amount of capitalized development costs were incurred by$7.8 million (2022: $3.8 million).
3.6 | Contingent consideration on disposals |
Included within the assessment of recoverable value for impairment purposes of assets held for sale related to the sale of the J.A. Martin ex-solar business, in preparation foras at June 30, 2022, were estimates of the entry onto Nasdaq.contingent consideration included within the sale agreement. The costs incurred were recharged costs from Arowana International Limited including legal, accountingcontingent consideration receivable 12 months following sale, is based on a multiple of earnings before interest, tax, depreciation and professional fees in relation to our operations in the United States. The costs by nature are one-off, and therefore, have no bearing on the financial performanceamortization of the business. To enable comparabilityThe fair value of contingent consideration of $4.5 million applied a contracted 4.5x multiple to year 1 forecast EBITDA of AUD$2.7 million, less purchase price paid, discounted at 10% to net present value, less purchase price paid. Final settlement of the contingent consideration was paid in future periodsAugust 2023, and the costs are disclosed separatelyreceivable amount and loss on the face on the Statement of Comprehensive Income.
Critical estimates:disposal adjusted accordingly.
| Income taxes |
In recognisingrecognizing income tax assets and liabilities, management makes estimates of the likely outcome of decisions by tax authorities on transactions and events whose treatment for tax purposes is uncertain. Where the outcome of such matters is different, or expected to be different, from previous assessments made by management, a change to the carrying value of the income tax assets and liabilities will be recorded in the period in which such determination is made. The carrying values of income tax assets and liabilities are disclosed separately in the consolidatedConsolidated Statement of Financial Position.
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As partDeferred tax assets for unused tax losses amounting to $4.3 million at June 30, 2023 ( June 30, 2022: $4.1 million; June 30, 2021: $1.9 million) are recognized to the extent that it is probable that sufficient taxable profit will be available against which the losses can be utilized. Management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Initial Public Offering Listing, VivoPower International issued an amended and restated unit purchase option (UPO) replacingCompany to realize the options issued by Arowana Inc. The options are viewed as a share-based award granted to Early Bird Capital. The cost of the award is recognized directly in equity and is applied against capital raising costs. As the option holder has the right to receive shares in VivoPower international PLC the share-based payment transaction would be equity settled. The fair value of the options were determineddeferred tax assets recorded at the grantreporting date using the Black Scholes Model, and not remeasured subsequently. As the options have no vesting conditions the related expense are recognized immediately.could be impacted.
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As part of the IPO listing process, VivoPower International PLC acquired the Aevitas Group.Aevitas. The instruments previously issued by Aevitas were restructured to become convertibleexchangeable into VivoPower International PLC shares. The companyCompany considered IAS 32 paragraph 16 in determining the accounting treatment. The Company has determined the instruments to be treated as equity under the “fixed-for-fixed” rule meaning that both the amount of consideration received/receivable and the number of equity instruments to be issued must be fixed for the instrument to be classified as equity. Both elements are satisfied within the instruments.
Whilst the majority of the Aevitas exchangeable preference shares and exchangeable notes were converted into Ordinary Shares in VivoPower in July 2021 a minority of investors in the instruments elected to accept new Aevitas Preference Shares. The Company considered IAS 32 paragraph 16 in determining the accounting treatment, and has determined the new Aevitas Preference Shares instruments should be treated as equity.
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The fair values of financial assets and liabilities recorded in the statement of financial position are measured using valuation techniques including discounted cash flow (DCF) models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Changes in assumptions about these factors could affect the reported fair value. When the fair values of non-financial assets/CGUs need to be determined, for example in business operatescombinations and for impairment testing purposes, they are measured using valuation techniques including the DCF model.
4 | Revenue and segmental information |
The Group determines and presents operating segments based on the information that is provided internally to the board of directors of the Company (the "Board"), which is the Group’s chief operating decision maker.
Management analyzes our business in three principal countries or regions:five reportable segments: Critical Power Services, Electric Vehicles, Sustainable Energy Solutions, Solar Development and Corporate Office. Critical Power Services is represented by VivoPower’s wholly owned subsidiary Aevitas. In turn, Aevitas wholly owns Kenshaw Solar Pty Ltd (previously J.A. Martin) (“Aevitas Solar”) and Kenshaw Electrical Pty Limited (“Kenshaw”), both of which operate in Australia with a focus on the design, supply, installation and maintenance of critical power, control and distribution systems, including for solar farms. Electric Vehicles is represented by Tembo e-LV B.V. (“Tembo”), a Netherlands-based specialist battery-electric and off-road vehicle company delivering electric vehicles (“EV”) for mining and other rugged industrial customers globally. Sustainable Energy Solutions (“SES”) is the design, evaluation, sale and implementation of renewable energy infrastructure to customers, both on a standalone basis and in support of Tembo EVs. Solar Development is represented by Caret and comprises 12 solar projects in the United States. Corporate Office is the Company’s corporate functions, including costs to maintain the Nasdaq public company listing, comply with applicable SEC reporting requirements, and related investor relations and is located in the U.K.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including any revenues and expenses that relate to the transactions with any of the Group’s other components. Operating segments results are reviewed regularly by the Board to assess its performance and make decisions about resources to be allocated to the segment, and for which discrete financial information is available.
Segment results that are reported to the Board include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis.
4.1 | Revenue |
Revenue from continuing operations by geographic location is as follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Australia | 13,596 | 20,958 | 22,581 | |||||||||
Netherlands | 1,464 | 1,490 | 1,394 | |||||||||
United Kingdom | - | - | - | |||||||||
United States | - | - | - | |||||||||
Total revenues | 15,060 | 22,448 | 23,975 | |||||||||
Revenue by product and service is as follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Electrical products and related services | 13,596 | 20,958 | 22,396 | |||||||||
Development fees | - | - | 185 | |||||||||
Vehicle spec conversion | - | 789 | 137 | |||||||||
Conversion kits | 1,394 | 301 | 1,219 | |||||||||
Accessories | 70 | 400 | 38 | |||||||||
Total revenues | 15,060 | 22,448 | 23,975 | |||||||||
The Group had one customer representing more than 10% of revenue for the year ended June 30, 2023 (year ended June 30, 2022: none; year ended June 30, 2021: none).
4.2 | Operating segments |
| a) | Segment results of operations |
Results of operations by reportable segment are as follows:
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
Year Ended June 30, 2023 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | Total | Critical Power | |||||||||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Continuing | Services | |||||||||||||||||||||||||
Revenue from contracts with customers | 13,596 | - | 1,464 | - | - | 15,060 | - | 15,060 | ||||||||||||||||||||||||
Costs of sales - other | (11,900 | ) | - | (1,572 | ) | - | - | (13,472 | ) | - | (13,472 | ) | ||||||||||||||||||||
Cost of sales - non-recurring events | (3,850 | ) | - | - | - | - | (3,850 | ) | - | (3,850 | ) | |||||||||||||||||||||
Gross profit | (2,154 | ) | - | (108 | ) | - | - | (2,262 | ) | - | (2,262 | ) | ||||||||||||||||||||
General and administrative expenses | (1,390 | ) | (297 | ) | (1,005 | ) | (367 | ) | (4,561 | ) | (7,620 | ) | - | (7,620 | ) | |||||||||||||||||
Other gains/(losses) | - | - | - | 30 | - | 30 | (4,207 | ) | (4,177 | ) | ||||||||||||||||||||||
Other income | 50 | 69 | - | - | - | 119 | - | 119 | ||||||||||||||||||||||||
Depreciation and amortization | (895 | ) | - | (673 | ) | (3 | ) | (10 | ) | (1,581 | ) | - | (1,581 | ) | ||||||||||||||||||
Operating loss | (4,389 | ) | (228 | ) | (1,786 | ) | (340 | ) | (4,571 | ) | (11,314 | ) | (4,207 | ) | (15,521 | ) | ||||||||||||||||
Restructuring and other non-recurring costs | (1 | ) | - | (214 | ) | - | (1,869 | ) | (2,084 | ) | - | (2,084 | ) | |||||||||||||||||||
Finance expense - net | (6,841 | ) | (34 | ) | 936 | (50 | ) | (221 | ) | (6,210 | ) | - | (6,210 | ) | ||||||||||||||||||
Profit/(loss) before income tax | (11,231 | ) | (262 | ) | (1,064 | ) | (390 | ) | (6,661 | ) | (19,608 | ) | (4,207 | ) | (23,815 | ) | ||||||||||||||||
Income tax | (619 | ) | - | (40 | ) | 119 | - | (540 | ) | - | (540 | ) | ||||||||||||||||||||
Loss for the year | (11,850 | ) | (262 | ) | (1,104 | ) | (271 | ) | (6,661 | ) | (20,148 | ) | (4,207 | ) | (24,355 | ) | ||||||||||||||||
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
Year Ended June 30, 2022 (restated) | Critical Power | Solar | Electric | Sustainable Energy | Corporate | Total | Critical Power | |||||||||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Continuing | Services | |||||||||||||||||||||||||
Revenue from contracts with customers | 20,958 | - | 1,490 | - | - | 22,448 | 15,168 | 37,616 | ||||||||||||||||||||||||
Costs of sales - other | (18,804 | ) | - | (1,504 | ) | - | - | (20,308 | ) | (13,842 | ) | (34,150 | ) | |||||||||||||||||||
Cost of sales - non-recurring events | (1,881 | ) | - | - | - | - | (1,881 | ) | - | (1,881 | ) | |||||||||||||||||||||
Gross profit | 273 | - | (14 | ) | - | - | 259 | 1,326 | 1,585 | |||||||||||||||||||||||
General and administrative expenses | (1,568 | ) | (80 | ) | (2,901 | ) | (1,660 | ) | (7,602 | ) | (13,811 | ) | (1,485 | ) | (15,296 | ) | ||||||||||||||||
Other gains/(losses) | 103 | (139 | ) | - | 23 | - | (13 | ) | - | (13 | ) | |||||||||||||||||||||
Other income | 662 | - | - | - | - | 662 | 324 | 986 | ||||||||||||||||||||||||
Depreciation and amortization | (1,165 | ) | - | (443 | ) | (3 | ) | (9 | ) | (1,620 | ) | (767 | ) | (2,387 | ) | |||||||||||||||||
Operating loss | (1,695 | ) | (219 | ) | (3,358 | ) | (1,640 | ) | (7,611 | ) | (14,523 | ) | (602 | ) | (15,125 | ) | ||||||||||||||||
Restructuring and other non-recurring costs | 45 | - | (429 | ) | - | (59 | ) | (443 | ) | - | (443 | ) | ||||||||||||||||||||
Finance expense - net | (7,470 | ) | - | (974 | ) | 23 | (10 | ) | (8,431 | ) | (172 | ) | (8,603 | ) | ||||||||||||||||||
Profit/(loss) before income tax | (9,120 | ) | (219 | ) | (4,761 | ) | (1,617 | ) | (7,680 | ) | (23,397 | ) | (774 | ) | (24,171 | ) | ||||||||||||||||
Income tax | 1,349 | - | 575 | 192 | (148 | ) | 1,968 | 149 | 2,117 | |||||||||||||||||||||||
Loss for the year | (7,771 | ) | (219 | ) | (4,186 | ) | (1,425 | ) | (7,828 | ) | (21,429 | ) | (625 | ) | (22,054 | ) | ||||||||||||||||
Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||
Year Ended June 30, 2021 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | Total | Critical Power | |||||||||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Continuing | Services | |||||||||||||||||||||||||
Revenue | 22,396 | 185 | 1,394 | - | - | 23,975 | 16,436 | 40,411 | ||||||||||||||||||||||||
Costs of sales - other | (18,322 | ) | - | (1,292 | ) | - | - | (19,614 | ) | (14,470 | ) | (34,084 | ) | |||||||||||||||||||
Cost of sales - non-recurring events | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Gross profit | 4,074 | 185 | 102 | - | - | 4,361 | 1,966 | 6,327 | ||||||||||||||||||||||||
General and administrative expenses | (1,522 | ) | (1,309 | ) | (1,923 | ) | - | (4,897 | ) | (9,651 | ) | (1,482 | ) | (11,133 | ) | |||||||||||||||||
Other gains/(losses) | 36 | 733 | - | - | - | 769 | - | 769 | ||||||||||||||||||||||||
Other income | 960 | - | - | - | - | 960 | 552 | 1,512 | ||||||||||||||||||||||||
Depreciation and amortization | (1,099 | ) | (4 | ) | (346 | ) | - | (4 | ) | (1,453 | ) | (803 | ) | (2,256 | ) | |||||||||||||||||
Operating profit/(loss) | 2,449 | (395 | ) | (2,167 | ) | - | (4,901 | ) | (5,014 | ) | 233 | (4,781 | ) | |||||||||||||||||||
Restructuring and other non-recurring costs | (24 | ) | - | (631 | ) | - | (2,222 | ) | (2,877 | ) | (3 | ) | (2,880 | ) | ||||||||||||||||||
Finance expense - net | 1,824 | (24 | ) | (1 | ) | - | (2,073 | ) | (274 | ) | (137 | ) | (411 | ) | ||||||||||||||||||
Profit/(loss) before income tax | 4,249 | (419 | ) | (2,799 | ) | - | (9,196 | ) | (8,165 | ) | 93 | (8,072 | ) | |||||||||||||||||||
Income tax | (691 | ) | 96 | 733 | - | - | 138 | (24 | ) | 114 | ||||||||||||||||||||||
Loss for the year | 3,558 | (323 | ) | (2,066 | ) | - | (9,196 | ) | (8,027 | ) | 69 | (7,958 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
From continuing operationsNet assets by reportable segment are as follows:
| (US dollars in thousands) | United States | Australasia | United Kingdom | Total | ||||||||||||
Revenue | 24,945 | 5,705 | 1,600 | 32,250 | ||||||||||||
Costs of sales | - | (4,977 | ) | - | (4,977 | ) | ||||||||||
Gross profit | 24,945 | 728 | 1,600 | 27,273 | ||||||||||||
Administrative expenses | (4,120 | ) | (879 | ) | (4,317 | ) | (9,316 | ) | ||||||||
Depreciation and amortisation | (3 | ) | (647 | ) | (1 | ) | (651 | ) | ||||||||
Operating Profit | 20,822 | (798 | ) | (2,718 | ) | 17,306 | ||||||||||
Transaction related costs | (5,800 | ) | - | - | (5,800 | ) | ||||||||||
Finance income | 1 | 7 | 5 | 13 | ||||||||||||
Finance expense | (172 | ) | (372 | ) | (56 | ) | (600 | ) | ||||||||
Profit before taxation | 14,851 | (1,163 | ) | (2,769 | ) | 10,919 | ||||||||||
Income tax expense | (6,116 | ) | 332 | 446 | (5,338 | ) | ||||||||||
Profit for the year | 8,735 | (831 | ) | (2,323 | ) | 5,581 | ||||||||||
As at June 30, 2023 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | |||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Total | ||||||||||||||||||
Assets | 18,034 | 12,726 | 17,493 | 10,343 | 2,819 | 61,416 | ||||||||||||||||||
Liabilities | (15,539 | ) | - | (7,564 | ) | (645 | ) | (33,921 | ) | (57,670 | ) | |||||||||||||
Net assets/(liabilities) | 2,495 | 12,726 | 9,929 | 9,698 | (31,102 | ) | 3,746 | |||||||||||||||||
As at June 30, 2022 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | |||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Total | ||||||||||||||||||
Assets | 30,878 | 22,505 | 14,202 | 1,170 | 903 | 69,657 | ||||||||||||||||||
Liabilities | (13,452 | ) | (377 | ) | (4,528 | ) | (485 | ) | (29,200 | ) | (48,042 | ) | ||||||||||||
Net assets/(liabilities) | 17,426 | 22,128 | 9,673 | 685 | (28,297 | ) | 21,615 | |||||||||||||||||
As at June 30, 2021 | Critical Power | Solar | Electric | Sustainable Energy | Corporate | |||||||||||||||||||
(US dollars in thousands) | Services | Development | Vehicles | Solutions | Office | Total | ||||||||||||||||||
Assets | 35,604 | 24,693 | 9,027 | - | 7,188 | 76,512 | ||||||||||||||||||
Liabilities | (9,442 | ) | (767 | ) | (2,093 | ) | - | (23,792 | ) | (36,094 | ) | |||||||||||||
Net assets/(liabilities) | 26,162 | 23,926 | 6,934 | - | (16,604 | ) | 40,418 | |||||||||||||||||
|
|
| (US dollars in thousands) | 2017 | 2016 | ||||||
BTO revenue | 25,036 | - | ||||||
Other revenue | 7,214 | - | ||||||
Total | 32,250 | - | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Australia solar projects | 30 | 23 | (165 | ) | ||||||||
ISS Joint Venture - 50% share of discontinued projects | - | - | (6,950 | ) | ||||||||
Gain on acquisition of remaining 50% ISV from ISS | - | - | 7,848 | |||||||||
Other gains/(losses) | - | (36 | ) | 36 | ||||||||
Total other gains/(losses) | 30 | (13 | ) | 769 | ||||||||
More than 10%The Company recorded a net loss for solar projects in Australia, related primarily to the sale of its 50% interest in the Yoogali Solar Farm on June 1, 2021. The loss on sale of $0.2 million comprised disposal of $0.2 million net book value of intangible assets. Additionally, the Company recognized $0.1 million gain on the disposal of Daisy Hill.
The Company recorded a loss of $7.0 million in respect of its share of discontinued Solar Development projects in the joint venture, Caret, prior to acquisition of the revenue relates to one customer. remaining 50% interest by the Company on June 30, 2021.
On June 30, 2021, the Company completed its acquisition of the remaining 50% share in Caret. As detailed in Note 12.b, the difference between consideration of $5.4 million, being the fair value of pre-acquisition equity interest held by VivoPower, and fair value of acquired net assets of $13.2 million, resulted in a gain of $7.8 million. Results of operations for the portfolio are reported within the Solar Development segment.
|
|
| (US dollars in thousands) | United States | Australia | United Kingdom | Total | ||||||||||||
Tangible assets | 53 | 2,097 | 13 | 2,163 | ||||||||||||
Goodwill | - | 30,393 | - | 30,393 | ||||||||||||
Other intangible assets | - | 15,927 | - | 15,927 | ||||||||||||
The Australian government’s Jobkeeper allowance helped keep Australian citizens in jobs and supported businesses affected by the significant economic impact of the COVID-19 pandemic. The allowance is included in other income and recognized in the period that the related costs, for which it is intended to compensate, are expensed. There are no unfulfilled conditions or other contingencies attaching to these grants. The Group did not benefit directly from any other forms of government assistance. This also includes a previous year deposit which was refunded in March 2023.
7. | Operating profit/(loss) |
GoodwillOperating profit/(loss) from continuing operations is stated after charging/(crediting):
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Amortization of intangible assets | 831 | 850 | 815 | |||||||||
Depreciation of property, plant and equipment | 750 | 770 | 638 | |||||||||
Auditors' remuneration - audit fees | 218 | 177 | 163 | |||||||||
Auditors' remuneration - tax services | 8 | 12 | 12 | |||||||||
Directors' emoluments | 719 | 693 | 676 | |||||||||
(Gain)/loss on disposal of assets | (30 | ) | 13 | (769 | ) | |||||||
8. | Restructuring and other non-recurring costs |
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Corporate restructuring - professional fees | 200 | 189 | 179 | |||||||||
Corporate restructuring - litigation provision | - | (128 | ) | 2,039 | ||||||||
| Fiscal refunds provision | 1,768 | - | - | |||||||||
Impairment and write-off | 422 | - | - | |||||||||
Remediation | (361 | ) | 382 | - | ||||||||
Relocation | - | - | 27 | |||||||||
Acquisition related and other costs | 55 | - | 632 | |||||||||
Total | 2,084 | 443 | 2,877 | |||||||||
In the year ended June 30, 2023, the Company incurred non-recurring costs related to a provision in respect of fiscal refunds on prior receivables, which the Company is defending of $1.8 million, restructuring activities of $0.2 million and intangible assets are categorised dependent whereprovision for inventory obsolescence and write-off of bad debts of $0.4 million, offset by $0.4 million release of remediation provision.
In the assets reside. The valueyear ended June 30, 2022, the Company incurred non-recurring costs related to restructuring activities of goodwill was generated on$0.2 million and one-off remediation expenses of $0.4 million, offset by $0.1 million release of unutilized provision related to the Comberg Claims.
In the year ended June 30, 2021, the Company also incurred non-recurring costs for legal, accounting, tax advisory and due diligence costs of $0.6 million related to the acquisition of VivoPower Pty Limited and Aevitas Group Limited, two Australian entities.Tembo e-LV in November 2020.
5. Operating Profit
| (US dollars in thousands) | 2017 | 2016 | ||||||
Operating profit is stated after charging: | ||||||||
Amortisation of intangible assets | 548 | - | ||||||
Depreciation of property, plant and equipment | 103 | - | ||||||
Operating lease costs – land and buildings | 174 | - | ||||||
6. Auditor’s remuneration
| (US dollars in thousands) | 2017 | 2016 | ||||||
Audit of these financial statements | 175 | - | ||||||
Amounts receivable by auditors and their associates in respect of: | ||||||||
Audit of financial statements of subsidiaries pursuant to legislation | - | - | ||||||
Additional services in respect of the prior year | 71 | - | ||||||
Other services relating to taxation | - | |||||||
All other services | 57 | - | ||||||
Total | 303 | - | ||||||
Additional services relatingRestructuring and other non-recurring costs by nature are one-time incurrences, and therefore, do not represent normal trading activities of the business. These costs are disclosed separately in order to prior year are fees incurred with Marcum LLP, our previous auditor: draw them to the attention of the reader of the financial information and enable comparability in future periods.
7. Staff numbersIn FY 2021, the Board undertook a strategic restructuring of the business to align operations, personnel, and business development activities to focus on a fewer number of areas of activity. Associated with this restructuring was the departure of a number of employees and contractors from the business. The workforce reduction cost represents the total salary, benefit, severance, and contract costs paid in the year or accruing to these individuals in the future for which no services will be rendered to the Company. Professional fees represent legal fees incurred to resolve certain disputes related to some of these separations in both the current and prior year.
9. | Staff numbers and costs |
The average number of employees (including directors) during the yearperiod was:
Year Ended June 30 | ||||||||||||||||||||
2017 | 2016 | 2023 | 2022 | 2021 | ||||||||||||||||
Sales and Business Development | 5 | - | 11 | 13 | 13 | |||||||||||||||
Central Services & Management | 12 | 1 | ||||||||||||||||||
Central Services and Management | 18 | 29 | 35 | |||||||||||||||||
Production | 26 | - | 64 | 212 | 164 | |||||||||||||||
Total | 43 | 1 | 93 | 254 | 212 | |||||||||||||||
Their aggregate remuneration costs comprised:
Year Ended June 30 | ||||||||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | 2023 | 2022 (restated) | 2021 | |||||||||||||||
Salaries, wages and incentives | 5,605 | 102 | 5,465 | 15,372 | 14,550 | |||||||||||||||
Social security costs | 398 | - | 430 | 730 | 795 | |||||||||||||||
Pension contributions | 196 | - | 369 | 844 | 850 | |||||||||||||||
Short-term compensated absences | 403 | - | 366 | 1,277 | 1,200 | |||||||||||||||
Total | 6,602 | 102 | 6,630 | 18,223 | 17,395 | |||||||||||||||
Directors’ emoluments for the year ended June 30, 2023were US$1,704,809 (2016: nil)$347,179 (year ended June 30, 2022: $376,043; year ended June 30, 2021: $675,807) of which the highest paid director received US$1,297,504 (2016: nil)$81,819 (year ended June 30, 2022: $91,029; year ended June 30, 2021: $92,119). Director emoluments include employer social security costs.
Key Management Personnel:
Year Ended June 30 | ||||||||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | 2023 | 2022 | 2021 | |||||||||||||||
Salaries, wages and incentives | 3,014 | - | 1,120 | 1,578 | 1,949 | |||||||||||||||
Social security costs | 194 | - | 38 | 151 | 101 | |||||||||||||||
Pension contributions | 39 | - | 60 | 114 | 64 | |||||||||||||||
Equity incentives | - | 392 | 244 | |||||||||||||||||
Short-term compensated absences | 101 | - | - | - | 2 | |||||||||||||||
Total | 3,348 | - | 1,218 | 2,235 | 2,361 | |||||||||||||||
Key management personnel are those below the Board level that have a significant impact on the global operations of the business. The number of key management personnel, including directors for the year ended 31 March 2017June 30, 2023 was 11 (2016: nil) 10 (year ended June 30, 2022: 10; year ended June 30, 2021: 10).
8. Finance income
10. | Finance income and expense |
Year Ended June 30 | ||||||||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | 2023 | 2022 | 2021 | |||||||||||||||
Foreign exchange gains | 13 | - | ||||||||||||||||||
Finance income | ||||||||||||||||||||
Foreign exchange gain | 1,150 | 173 | 2,176 | |||||||||||||||||
Interest income | 6 | - | - | |||||||||||||||||
Total finance income | 1,156 | 173 | 2,176 | |||||||||||||||||
9. Finance expense
Year Ended June 30 | ||||||||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | 2023 | 2022 | 2021 | |||||||||||||||
Finance expense | ||||||||||||||||||||
Related party loan interest payable | 3,801 | 3,351 | 1,986 | |||||||||||||||||
Convertible loan notes and preference shares interest payable | 254 | 217 | 1,228 | |||||||||||||||||
Waived dividends on convertible preference shares | - | - | (327 | ) | ||||||||||||||||
Waived dividends on convertible loan notes | - | - | (668 | ) | ||||||||||||||||
Debtor invoice finance interest payable | 100 | 24 | 7 | |||||||||||||||||
Lease liability interest payable | 171 | 133 | 42 | |||||||||||||||||
Bank interest payable | 10 | - | 47 | 3 | - | |||||||||||||||
Finance lease interest payable | - | - | ||||||||||||||||||
Related party interest payable | 570 | 1 | ||||||||||||||||||
Foreign exchange losses | 20 | 1 | 2,704 | 4,709 | 92 | |||||||||||||||
Total | 600 | 2 | ||||||||||||||||||
Other finance costs | 289 | 167 | 90 | |||||||||||||||||
Total finance expense | 7,366 | 8,604 | 2,450 | |||||||||||||||||
F- 22
11. | Taxation |
10. Income tax expenses
The tax charge comprises:
(a) | Tax (charge)/credit |
Year Ended June 30 | ||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | Continuing | Discontinued | Total | Continuing | Discontinued | Total | Continuing | Discontinued | Total | |||||||||||||||||||||||||||||||||
Current tax | ||||||||||||||||||||||||||||||||||||||||||||
UK Corporation tax | - | - | ||||||||||||||||||||||||||||||||||||||||||
UK corporation tax | - | - | - | (52 | ) | - | (52 | ) | - | - | - | |||||||||||||||||||||||||||||||||
Foreign tax | 2,361 | (924 | ) | - | (924 | ) | 818 | - | 818 | (825 | ) | (24 | ) | (849 | ) | |||||||||||||||||||||||||||||
Total current tax | 2,361 | - | (924 | ) | - | (924 | ) | 766 | - | 766 | (825 | ) | (24 | ) | (849 | ) | ||||||||||||||||||||||||||||
Deferred tax | ||||||||||||||||||||||||||||||||||||||||||||
Origination and reversal of timing differences | 2,977 | - | ||||||||||||||||||||||||||||||||||||||||||
Current year | ||||||||||||||||||||||||||||||||||||||||||||
UK tax | (451 | ) | - | - | - | - | (96 | ) | - | (96 | ) | (51 | ) | - | (51 | ) | ||||||||||||||||||||||||||||
Foreign tax | 3,428 | - | 382 | - | 382 | 1,297 | 149 | 1,446 | 1,014 | - | 1,014 | |||||||||||||||||||||||||||||||||
Total deferred tax | 382 | - | 382 | 1,201 | 149 | 1,350 | 963 | - | 963 | |||||||||||||||||||||||||||||||||||
Total deferred tax | 2,977 | - | ||||||||||||||||||||||||||||||||||||||||||
Total tax on profit on ordinary activities | 5,338 | - | ||||||||||||||||||||||||||||||||||||||||||
Total income tax | (541 | ) | - | (541 | ) | 1,968 | 149 | 2,117 | 138 | (24 | ) | 114 | ||||||||||||||||||||||||||||||||
The difference between the total tax charge and the amount calculated by applying the standard rateweighted average corporation tax rates applicable to each of UK corporationthe tax jurisdictions in which the Group operates to the profit before tax is shown below.
| (US dollars in thousands) | 2017 | 2016 | ||||||
Group profit on ordinary activities before tax | 10,919 | - | ||||||
Tax on group profit on ordinary activities at the standard corporation tax rate of 20% | (2,184 | ) | - | |||||
Effects of: | ||||||||
Expenses that are not deductible in determining taxable profits | (20 | ) | - | |||||
Tax rates of subsidiaries operating in other jurisdictions | (3,108 | ) | - | |||||
Change in tax rates | (26 | ) | - | |||||
Total tax charge for the year recognised in the Consolidated statement of Comprehensive Income | (5,338 | ) | - | |||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Loss before income tax before continuing operations | (17,604 | ) | (23,397 | ) | (8,165 | ) | ||||||
Group weighted average corporation tax rate | 29.1 | % | 26.6 | % | 22.2 | % | ||||||
Tax at standard rate | 5,118 | 6,224 | 1,813 | |||||||||
Effects of: | ||||||||||||
Expenses that are not deductible for tax purposes | (833 | ) | ||||||||||
Adjustment to prior year tax provisions | 137 | |||||||||||
Deferred tax assets not recognized on tax losses | (5,660 | ) | (4,256 | ) | (979 | ) | ||||||
Total income tax from continuing operation for the period recognized in the | ||||||||||||
Consolidated Statement of Comprehensive Income | (541 | ) | 1,968 | 138 | ||||||||
(b) | Deferred tax | ||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Deferred tax assets | 5,136 | 4,668 | 2,495 | |||||||||
Deferred tax liabilities | (2,232 | ) | (1,234 | ) | (411 | ) | ||||||
Net deferred tax asset | 2,904 | 3,434 | 2,084 | |||||||||
The UK standard corporation tax rate for the year to 31 March 2017 was 20%. The rate of corporation tax will reduce to 19% with effect from 1 April 2017. A further reduction to 17% will take effect from 1 April 2020. This was substantively enacted on 6 September 2016, and therefore, all UK deferred tax assets are recognised at a rate of 17%.
10.1 Deferred tax
| (US dollars in thousands) | 2017 | 2016 | ||||||
Deferred tax assets | 2,312 | - | ||||||
Deferred tax liabilities | (3,776 | ) | - | |||||
Net deferred tax liability | (1,464 | ) | - | |||||
These assets and liabilities are analysedanalyzed as follows:
Deferred tax assets | Tax losses | Total | ||||||
1 April 2016 | - | - | ||||||
Credit/(charged) to statement of comprehensive income | 739 | 739 | ||||||
Acquisition | 1,573 | 1,573 | ||||||
Credited to equity | - | - | ||||||
31 March 2017 | 2,312 | 2,312 | ||||||
Deferred tax assets | Tax losses | Other timing differences | Total | |||||||||
June 30, 2020 | 814 | 533 | 1,347 | |||||||||
Credit to comprehensive income | 776 | 109 | 885 | |||||||||
Acquisitions | 263 | - | 263 | |||||||||
June 30, 2021 | 1,853 | 642 | 2,495 | |||||||||
Credit/(charged) to comprehensive income | 2,227 | (54 | ) | 2,173 | ||||||||
June 30, 2022 | 4,080 | 588 | 4,668 | |||||||||
Credit to comprehensive income | 196 | 272 | 468 | |||||||||
June 30, 2023 | 4,276 | 860 | 5,136 | |||||||||
Deferred tax liabilities | Accelerated allowances | Other timing differences | Total | |||||||||
US$000 | ||||||||||||
1 April 2016 | - | - | - | |||||||||
Credit/(charged) to statement of comprehensive income | (13 | ) | (3,763 | ) | (3,776 | ) | ||||||
Credited to equity | - | - | - | |||||||||
31 March 2017 | (13 | ) | (3,763 | ) | (3,776 | ) | ||||||
The deferred tax liabilities are analyzed as follows:
Deferred tax liabilities | Accelerated allowances | Other timing differences | Total | |||||||||
June 30, 2020 | - | - | - | |||||||||
Charged to comprehensive income | - | 78 | 78 | |||||||||
Acquisition of subsidiary | - | (489 | ) | (489 | ) | |||||||
June 30, 2021 | - | (411 | ) | (411 | ) | |||||||
Charged to comprehensive income | - | (823 | ) | (823 | ) | |||||||
June 30, 2022 | - | (1,234 | ) | (1,234 | ) | |||||||
Charged to comprehensive income | (998 | ) | (998 | ) | ||||||||
June 30, 2023 | - | (2,232 | ) | (2,232 | ) | |||||||
Deferred tax has been recognisedrecognized in the current period using the tax rates applicable to each of the tax jurisdictions in which the CompanyGroup operates. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities.
12. | Business Combination |
11. Property, plant and equipment(a) Tembo e-LV
| (US dollars in thousands) | Computer Equipment | Motor Vehicles | Plant & Equipment | Leasehold improvement | Fixtures and Fittings | Total | ||||||||||||||||||
Cost | ||||||||||||||||||||||||
At 1 April 2016 | 3 | - | - | - | - | 3 | ||||||||||||||||||
Additions | 34 | 44 | 16 | - | - | 94 | ||||||||||||||||||
Acquisition | 488 | 1,588 | 1,876 | 156 | 11 | 4,119 | ||||||||||||||||||
At 31 March 2017 | 525 | 1,632 | 1,892 | 156 | 11 | 4,216 | ||||||||||||||||||
Depreciation | ||||||||||||||||||||||||
At 1 April 2016 | - | - | - | - | - | - | ||||||||||||||||||
Depreciation | 24 | 45 | 31 | 3 | - | 103 | ||||||||||||||||||
Acquisition | 303 | 982 | 619 | 38 | 8 | 1,950 | ||||||||||||||||||
At 31 March 2017 | 327 | 1,027 | 650 | 41 | 8 | 2,053 | ||||||||||||||||||
Net book value | ||||||||||||||||||||||||
At 31 March 2017 | 198 | 605 | 1,242 | 115 | 3 | 2,163 | ||||||||||||||||||
On November 5, 2020, VivoPower International PLC acquired 51% of the ordinary issued share capital of Tembo e-LV B.V. a specialist battery-electric and off-road vehicle company located in the Netherlands. The non-controlling interest representing 49% of the ordinary issued share capital was acquired on February 2, 2021.
Purchase consideration | ||||||||
(Amounts in thousands) | EUR | USD | ||||||
Cash consideration for 51% acquisition | 4,000 | 4,916 | ||||||
The group has $326,938 of assets held under finance lease. Detailsfair value of the identifiable assets and liabilities recognized, as a result of the acquisition, are shownas follows:
(Amounts in thousands) | EUR | USD | ||||||
Cash and cash equivalents | 4,021 | 4,942 | ||||||
Trade and other receivables | 100 | 123 | ||||||
Inventory | 594 | 730 | ||||||
Property, plant and equipment (Note 13) | 167 | 206 | ||||||
Deferred tax asset (Note 11) | 214 | 263 | ||||||
Trade and other payables | (541 | ) | (665 | ) | ||||
Related party payable | (1,024 | ) | (1,259 | ) | ||||
Other non-current liabilities | (181 | ) | (222 | ) | ||||
Deferred income | (578 | ) | (711 | ) | ||||
Deferred tax liability (Note 11) | (398 | ) | (489 | ) | ||||
Remediation provision | (282 | ) | (336 | ) | ||||
Fair value of identifiable net assets acquired | 2,092 | 2,582 | ||||||
Non -controlling interests (49%) | (1,025 | ) | (1,260 | ) | ||||
Net assets acquired | 1,067 | 1,322 | ||||||
Cash consideration for 51% acquisition | 4,000 | 4,916 | ||||||
Surplus on acquisition: | 2,933 | 3,594 | ||||||
Allocated of surplus: | ||||||||
Goodwill (Note 14a) | 1,340 | 1,698 | ||||||
Other intangible assets (Note 14b) | 1,593 | 1,896 | ||||||
| 2,933 | 3,594 | |||||||
Acquisition of Non-controlling interest: | EUR | USD | ||||||
Cash paid | 1,800 | 2,173 | ||||||
Ordinary Shares issued | 197 | 237 | ||||||
Total consideration for non-controlling interest | 1,997 | 2,410 | ||||||
Non-controlling interest acquired: | ||||||||
At acquisition | (1,025 | ) | (1,259 | ) | ||||
Loss attributable to non-controlling interest | 319 | 387 | ||||||
At date of acquisition of non-controlling interest | (706 | ) | (873 | ) | ||||
Surplus on acquisition of non-controlling interests | 1,291 | 1,538 | ||||||
Purchase consideration - cash outflow | ||||||||
(Amounts in thousands) | EUR | USD | ||||||
Outflow of cash to acquire subsidiary, net of cash acquired | ||||||||
Cash consideration - 51% | 4,000 | 4,916 | ||||||
Cash consideration - 49% | 1,800 | 2,173 | ||||||
Less: Balances acquired | ||||||||
Cash | 4,021 | 4,942 | ||||||
Net outflow of cash - investing activities | 1,779 | 2,147 | ||||||
Acquisition-related costs of $0.6 million that were not directly attributable to the issue of shares are included within restructuring and other non-recurring costs in note 21.the income statement, and in operating activities in the cash flow statement.
Held within Plant & EquipmentGoodwill represents the value of gaining immediate access to an established business in the Electric Vehicles market, including the skilled workforce, which arenot separately recognized and do not meet the criteria for recognition as an intangible asset under IAS 38.None of the goodwill recognized is expected to be deductible for income tax purposes. Separately recognized intangible assets acquired comprise $1.5 million of customers contracts and $0.4 million of trade names, based on a purchase price allocation performed by management.
Customer contracts are valued in years 1-5 include revenue from acquired customer relationships representing 25% of total revenue, average attrition rate 25% per annum, average EBIT 3.7%, weighted average cost of capital 13.0%. Trade names are valued using a relief from royalty method of the income valuation approach over a 6-year life based on a 5% industry average royalty rate.
The Company recognizes non-controlling interests in an acquired entity at the non-controlling interests' proportionate share of the acquired entity's identifiable net assets.
The non-controlling interest representing 49% of the ordinary issued share capital, comprising $1.3 million at acquisition, less $0.4 million loss recorded in the profit and loss account between November 5, 2020 and February 2, 2021, total $0.9 million, was acquired by the Company on February 2, 2021, for $2.2 million cash and 15,793 shares in the Company ($0.2 million). The $1.5 million difference between consideration and acquired non-controlling interest was debited directly to equity.
The remediation provision recognized was a present obligation of Solar Panel systems relatingTembo e-LV immediately prior to our Australian Amaroo Project.the business combination. The execution of the remediation was not conditional upon it being acquired by the Company.
From the date of acquisition to June 30, 2021, Tembo contributed $1.4 million of revenue and $2.8 million of loss before tax from continuing operations. If the acquisition had taken place at the beginning of the fiscal year 2021, Group revenue from continuing operations would have been $41.1 million and loss before tax from continuing operations would have been $8.3 million.
(b) | ISS Joint Venture |
On June 30, 2021, the Company purchased the remaining 50% share of ISV from ISS for a consideration of $1, as part of the litigation settlement with the other 50% joint venture owners, plus the $5.4 million fair value of pre-acquisition equity interest held by the Company.
Fair value of net assets acquired included capitalized project expenses and were recorded at fair value.
The acquisition resulted in a bargain purchase of $7.8 million as a result of the litigation settlement and is recognized in the Statement of Comprehensive Income within gain/(loss) on Solar Development as set out in Note 5.
(US dollars in thousands) | ||||||||
Purchase consideration | ||||||||
Cash | - | |||||||
Fair value of pre-acquisition equity interest | 5,393 | |||||||
Total consideration | 5,393 | |||||||
Less: Fair value of acquired net assets: | ||||||||
Cash | 2 | |||||||
Deposits | 991 | |||||||
Capitalized project development expenses (Note 14b) | 12,248 | |||||||
| 13,241 | ||||||||
Gain on bargain purchase - included in gain/(loss) on SES development (Note 5) | 7,848 |
No revenue or profit or loss has been recognized since the acquisition date.
The net cash flow resulting from the acquisition was $ nil.
| 13. | Property, plant and equipment |
(US dollars in thousands) | Computer Equipment | Motor Vehicles | Plant & Equipment | Fixtures & Fittings | Right-of-Use Assets | Total | ||||||||||||||||||
Cost | ||||||||||||||||||||||||
At June 30, 2020 | 476 | 1,363 | 1,232 | 195 | 2,283 | 5,549 | ||||||||||||||||||
Foreign exchange | 41 | 145 | 26 | 18 | 196 | 426 | ||||||||||||||||||
Additions | 125 | 230 | 395 | 6 | 182 | 938 | ||||||||||||||||||
Acquisition | - | 4 | 114 | - | 88 | 206 | ||||||||||||||||||
Disposals | (80 | ) | (174 | ) | (156 | ) | (97 | ) | (58 | ) | (565 | ) | ||||||||||||
At June 30, 2021 | 562 | 1,568 | 1,611 | 122 | 2,691 | 6,554 | ||||||||||||||||||
Foreign exchange | (41 | ) | (154 | ) | (146 | ) | (10 | ) | (214 | ) | (565 | ) | ||||||||||||
Additions | 28 | 184 | 343 | 209 | 2,470 | 3,234 | ||||||||||||||||||
Disposals | - | (150 | ) | (48 | ) | - | (53 | ) | (251 | ) | ||||||||||||||
Reclass to assets held for sale | (231 | ) | (1,015 | ) | (320 | ) | (74 | ) | (1,295 | ) | (2,935 | ) | ||||||||||||
At June 30, 2022 | 318 | 433 | 1,440 | 247 | 3,599 | 6,037 | ||||||||||||||||||
Reclassifications/corrections | - | - | - | - | (707 | ) | (707 | ) | ||||||||||||||||
Foreign exchange | (10 | ) | (23 | ) | (32 | ) | (9 | ) | (43 | ) | (117 | ) | ||||||||||||
Additions | 36 | 92 | 558 | 10 | 239 | 935 | ||||||||||||||||||
Disposals | (37 | ) | (39 | ) | (250 | ) | - | (54 | ) | (380 | ) | |||||||||||||
At June 30, 2023 | 307 | 463 | 1,716 | 248 | 3,034 | 5,768 | ||||||||||||||||||
(US dollars in thousands) | Computer Equipment | Motor Vehicles | Plant & Equipment | Fixtures & Fittings | Right-of-Use Assets | Total | ||||||||||||||||||
Depreciation | ||||||||||||||||||||||||
At June 30, 2020 | 373 | 836 | 747 | 86 | 1,021 | 3,063 | ||||||||||||||||||
Foreign exchange | 31 | 85 | 70 | 8 | 77 | 271 | ||||||||||||||||||
Charge for the year | 66 | 206 | 167 | 8 | 642 | 1,089 | ||||||||||||||||||
Disposals | (71 | ) | (157 | ) | (112 | ) | (46 | ) | (58 | ) | (444 | ) | ||||||||||||
At June 30, 2021 | 399 | 970 | 872 | 56 | 1,682 | 3,979 | ||||||||||||||||||
Foreign exchange | (33 | ) | (95 | ) | (93 | ) | (6 | ) | (167 | ) | (394 | ) | ||||||||||||
Charge for the year (including discontinued operations) | 69 | 186 | 179 | 22 | 752 | 1,208 | ||||||||||||||||||
Disposals | - | (131 | ) | (9 | ) | - | (53 | ) | (193 | ) | ||||||||||||||
Reclass to assets held for sale | (197 | ) | (719 | ) | (232 | ) | (43 | ) | (1,115 | ) | (2,306 | ) | ||||||||||||
At June 30, 2022 | 238 | 211 | 717 | 29 | 1,099 | 2,294 | ||||||||||||||||||
Reclassifications/corrections | - | - | - | - | (685 | ) | (685 | ) | ||||||||||||||||
Foreign exchange | (5 | ) | (10 | ) | (18 | ) | (1 | ) | (29 | ) | (63 | ) | ||||||||||||
Charge for the year | 48 | 90 | 179 | 22 | 411 | 750 | ||||||||||||||||||
Disposals | (26 | ) | (28 | ) | (171 | ) | - | (45 | ) | (270 | ) | |||||||||||||
At June 30, 2023 | 255 | 263 | 707 | 50 | 751 | 2,026 | ||||||||||||||||||
The non-solar segment of Kenshaw Solar Pty Ltd was sold on July 1, 2022 and was reported in the prior period as a discontinued operation. Revenues relating to the discontinued operation in the year ended June 30, 2022 amounted to $15.2 million ( June 30, 2021: $15.2 million). The total expenses in the year ended June 30, 2022 amounted to $14.4 million ( June 30, 2021: $17.6 million).
12. Intangible Assets
14. | Intangible assets |
| (US dollars in thousands) | 2017 | 2016 | ||||||
| - | - | |||||||
Goodwill | 30,393 | - | ||||||
Other intangible assets | 15,927 | - | ||||||
Carrying value at 31 March | 46,320 | - | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 (restated) | 2021 (restated) | |||||||||
Goodwill | 17,697 | 18,269 | 25,794 | |||||||||
Other intangible assets | 24,478 | 21,308 | 21,151 | |||||||||
Total | 42,175 | 39,577 | 46,945 | |||||||||
| Goodwill |
Goodwill arose on the purchase of Aevitas O Holdings Limited and VivoPower Pty Limited on 28 December 2016.
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
As at July 1 | 18,269 | 25,794 | 21,919 | |||||||||
Reclassification to held for sale assets | - | (5,289 | ) | - | ||||||||
Goodwill on acquisition of Tembo | - | - | 1,698 | |||||||||
Foreign exchange | (572 | ) | (2,236 | ) | 2,177 | |||||||
Carrying value | 17,697 | 18,269 | 25,794 | |||||||||
| (US dollars in thousands) | 2017 | 2016 | ||||||
As at 1 April | - | - | ||||||
Additions | 30,024 | - | ||||||
Foreign exchange on translation | 369 | - | ||||||
Carrying value at 31 March | 30,393 | - | ||||||
b) |
The carrying amounts of goodwill by CGUCash Generating Unit (“CGU”) are as follows:
| (US dollars in thousands) | 2017 | 2016 | ||||||
Aevitas O Holdings Limited | 9,781 | - | ||||||
VivoPower Pty Limited | 20,243 | - | ||||||
Foreign exchange on translation | 369 | |||||||
Total | 30,393 | - | ||||||
Goodwill impairment tests
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Aevitas O Holdings Limited (allocated to the Critical Power Services segment) | 6,946 | 7,222 | 13,658 | |||||||||
VivoPower Pty Ltd (allocated to the Solar Development segment) | 9,091 | 9,451 | 10,319 | |||||||||
Tembo (allocated to the Electric Vehicle segment) | 1,660 | 1,595 | 1,817 | |||||||||
Total | 17,697 | 18,269 | 25,794 | |||||||||
The groupGroup conducts impairment tests on the carrying value of goodwill and intangibles annually, or more frequently if there are any indications that goodwill might be impaired. The recoverable amount of the Cash Generating Units (CGUs)Unit (“CGU”) to which goodwill has been allocated areis determined from value in use calculations. The key assumptions in the calculations are the discount rates applied, expected operating margin levels and long-term growth rates. Management estimates discount rates that reflect the current market assessments while margins and growth rates are based upon approved budgets and related projections.
The groupGroup prepares cash flow forecasts using the approved budgets for the coming financialfiscal year and management projections for the following two years. Cash flows are also projected for subsequent years as management believe that the investment is held for the long term. These budgets and projections reflect management’s view of the expected market conditions and the position of the CGUsCGU’s products and services within those markets.
EachThe CGU represented by Aevitas O Holdings Limited (being Critical Power Services) was assessed to have a value in excess of its respective carrying value and hence no additional adjustments to goodwill were considered necessary. Key assumptions used in the assessment of impairment were discount rate based on the weighted average cost of capital of 12% ( June 30, 2022: 11%;June 30, 2021: 10%) and annual growth rate of 3% per annum.
The Sustainable Energy Solution ("SES") element of the CGU represented by VivoPower Pty Ltd goodwill was assessed to have a value in excess of its carrying value and hence no additional adjustments to goodwill were considered necessary. Key assumptions:assumptions used in the assessment of impairment were weighted average cost of capital of 12.1% ( June 30, 2022: 11.3%;June 30, 2021: 10.7%), a rapid growth phase of the business in years 1 through 5 in tandem with the growth of Tembo, with an average of 50% of electric light vehicles sold by the Company in fleet sizes over 50 vehicles will be sold with an additional sustainable energy solution and with additional training services provided to partners and end-users.
The CGU represented by Tembo e-LV and subsidiaries was assessed to have a value in excess of its carrying value. Key assumptions used in the assessment of impairment were discount rate based on the weighted average cost of capital of 12% and average annual growth rate of 31% per annum in years 2-5. Growth rates reflect commencement of planned series production at volume during the 5 year period, as the product development project is completed for the current variant, to meet customer demand per sales agreements of over 15,000 units with international distribution partners, including Acces, Bodiz, GHH, ETC, Ulti-Mech, Petrosea and Fourche Maline. No sensitivity analysis is provided as the Company expects no foreseeable changes in the assumptions that would result in impairment of the goodwill.
The CGU represented by Caret solar projects was assessed to have a value in excess of its carrying value and hence no adjustments to capitalized development costs were considered necessary. Key assumptions used in the assessment of impairment were weighted average cost of capital of 12.9%, $4 million free cash flow from project sales in years 1-4, $14.4 million development fees from power-to-x partnerships.
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(US dollars in thousands) | Customer Relationships | Trade Names | Favorable Supply Contracts | Solar Projects | Product Development | Other Intangible Assets | Total Intangible Assets | |||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||
At June 30, 2020 | 4,382 | 2,399 | 4,099 | - | - | 156 | 11,036 | |||||||||||||||||||||
Foreign exchange | 411 | 225 | 385 | - | - | 13 | 1,034 | |||||||||||||||||||||
Additions | 46 | - | - | - | 513 | - | 559 | |||||||||||||||||||||
Acquisitions | 1,492 | 404 | - | 12,248 | - | - | 14,144 | |||||||||||||||||||||
Disposals | (550 | ) | - | - | - | - | - | (550 | ) | |||||||||||||||||||
| Prior year restatement | - | - | - | (504 | ) | - | - | (504 | ) | |||||||||||||||||||
At June 30, 2021 restated | 5,781 | 3,028 | 4,484 | 11,744 | 513 | 169 | 25,719 | |||||||||||||||||||||
Foreign exchange | (542 | ) | (271 | ) | (376 | ) | - | (63 | ) | (13 | ) | (1,265 | ) | |||||||||||||||
Additions | - | - | - | 878 | 3,355 | 19 | 4,252 | |||||||||||||||||||||
Acquisitions | - | - | - | - | - | - | - | |||||||||||||||||||||
Disposals | - | (9 | ) | - | - | - | - | (9 | ) | |||||||||||||||||||
Reclass to Assets held for sale | (2,687 | ) | (1,385 | ) | - | - | - | - | (4,072 | ) | ||||||||||||||||||
At June 30, 2022 restated | 2,552 | 1,363 | 4,108 | 12,622 | 3,805 | 175 | 24,625 | |||||||||||||||||||||
Foreign exchange | 4 | (25 | ) | (157 | ) | - | 302 | (1 | ) | 123 | ||||||||||||||||||
Additions | - | - | - | 103 | 3,725 | 29 | 3,857 | |||||||||||||||||||||
Acquisitions | - | - | - | - | - | - | - | |||||||||||||||||||||
Disposals | - | - | - | (47 | ) | - | - | (47 | ) | |||||||||||||||||||
At June 30, 2023 | 2,556 | 1,338 | 3,951 | 12,678 | 7,832 | 203 | 28,558 | |||||||||||||||||||||
Amortization | Customer Relationships | Trade Names | Favorable Supply Contracts | Solar Projects | Product Development | Other | Total | |||||||||||||||||||||
At June 30, 2020 | 1,405 | 572 | 978 | - | - | 151 | 3,106 | |||||||||||||||||||||
Foreign exchange | 131 | 54 | 92 | - | - | 18 | 295 | |||||||||||||||||||||
Amortization | 622 | 229 | 298 | - | 18 | - | 1,167 | |||||||||||||||||||||
At June 30, 2021 | 2,158 | 855 | 1,368 | - | 18 | 169 | 4,568 | |||||||||||||||||||||
Foreign exchange | (208 | ) | (79 | ) | (115 | ) | - | (2 | ) | (13 | ) | (417 | ) | |||||||||||||||
Amortization | 405 | 181 | 274 | - | - | - | 860 | |||||||||||||||||||||
Disposals | - | - | - | - | - | - | - | |||||||||||||||||||||
Reclass to Assets held for sale | (1,232 | ) | (462 | ) | - | - | - | - | (1,694 | ) | ||||||||||||||||||
At June 30, 2022 | 1,123 | 495 | 1,527 | - | 16 | 156 | 3,317 | |||||||||||||||||||||
Foreign exchange | (1 | ) | (8 | ) | (61 | ) | - | 2 | - | (68 | ) | |||||||||||||||||
Amortization | 385 | 137 | 266 | - | 43 | - | 831 | |||||||||||||||||||||
Disposals | - | - | - | - | - | - | - | |||||||||||||||||||||
At June 30, 2023 | 1,507 | 624 | 1,732 | - | 61 | 156 | 4,080 | |||||||||||||||||||||
Net book value | Customer Relationships | Trade Names | Favorable Supply Contracts | Solar Projects | Product Development | Other | Total | |||||||||||||||||||||
At June 30, 2021 restated | 3,623 | 2,173 | 3,116 | 11,744 | 495 | - | 21,151 | |||||||||||||||||||||
At June 30, 2022 restated | 1,429 | 868 | 2,581 | 12,622 | 3,789 | 19 | 21,308 | |||||||||||||||||||||
At June 30, 2023 | 1,049 | 714 | 2,219 | 12,678 | 7,771 | 47 | 24,478 | |||||||||||||||||||||
Customer relationships, trade names and favorable supply contracts have an average remaining period of amortization of 7 years, 10 years and 10 years respectively. Solar projects and electric vehicle product development costs are incomplete and not generating revenue and therefore are not amortized in FY2023.
Additions for the year comprise $3.7 million electric vehicle product development costs in Tembo and $0.4 million of solar project development costs in Caret. $2.1 million net book value of customer relationship and trade name intangible assets of Aevitas Solar ex-solar business sold to ARA in July 2022, was reclassified out of intangible assets into assets held for sale as at June 30, 2022. The prior year restatement in the year 30June 2021 relates to the reclassification of deposits originally reported within intangible assets.
|
|
| (US dollars in thousands) | Customer Relationships | Trade names | Favourable supply contracts | Data bases | Other | Total | ||||||||||||||||||
Cost | ||||||||||||||||||||||||
At 1 April 2016 | - | - | - | - | - | |||||||||||||||||||
Additions | 9,953 | 2,488 | 2,488 | 734 | 812 | 16,475 | ||||||||||||||||||
At 31 March 2017 | 9,953 | 2,488 | 2,488 | 734 | 812 | 16,475 | ||||||||||||||||||
Amortisation | ||||||||||||||||||||||||
At 1 April 2016 | - | - | - | - | - | |||||||||||||||||||
Amortisation | 347 | 43 | 122 | 36 | - | 548 | ||||||||||||||||||
At 31 March 2017 | 347 | 43 | 122 | 36 | - | 548 | ||||||||||||||||||
Net book value | ||||||||||||||||||||||||
At 31 March 2017 | 9,606 | 2,445 | 2,366 | 698 | 812 | 15,927 | ||||||||||||||||||
13. Investment in subsidiaries
The principal operating undertakings in which the group’sGroup’s interest at the year-endJune 30, 2023 is 20% or more than 20%.are as follows:
Subsidiary | Percentage of
shares held | Registered address | |||
VivoPower International Services Limited |
| 100 | % |
| |
VivoPower | 100 | % | |||
| 100 | % | |||
| 100 | % | 251 Little Falls Drive, Wilmington, DE, | ||
VivoPower (USA) Development, LLC | 100 | % | USA 19808 | ||
Caret, LLC (formerly Innovative Solar Ventures I, LLC) | 100 | % | |||
Caret Decimal, LLC | 100 | % | |||
VivoPower Pty Ltd | 100 | % | |||
Aevitas O Holdings Pty Ltd | 100 | % | |||
Aevitas Group Limited | 100 | % | |||
| 100 | % | 153 Walker St, North Sydney NSW, Australia 2060 | ||
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Electrical Engineering Group Pty Limited |
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Kenshaw Electrical Pty Limited | 100 | % | |||
| 100 | % | |||
VivoPower |
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Associate undertakings
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| 64 | % | Unit 10A, Net Lima Building, 5th Avenue cor. 26th Street, | ||
VivoPower RE Solutions Inc. | 64 | % | E-Square Zone, Crescent Park West, Bonifacio Global City, | ||
| 40 | % | Taguig, Metro Manila | ||
| 100 | % | |||
Tembo 4x4 e-LV B.V. | 100 | % | Marinus van Meelweg 20, 5657 EN, Eindhoven, NL | ||
FD 4x4 Centre B.V. | 100 | % | |||
| VivoPower International IMEA DMCC | 100 | % | Unit 4522, DMCC Business Centre, Level No 1, Gemplex 3, Dubai, UAE | ||
| * V.V.P. Holdings Inc. is controlled by VivoPower Pty Ltd, notwithstanding only owning 40% of the ordinary share capital. |
16. | Investments accounted for using the equity method |
The Philippine entities above, listed as Associates, are under In April 2017, the controlCompany entered into a 50% joint venture with an early-stage solar development company, ISS, to develop a diversified portfolio of VivoPower Singapore Pte Limited, and therefore are consolidated into the consolidated financials38 utility-scale solar projects in 9 different states, representing a total electricity generating capacity of VivoPower International PLC. This is in line with IFRS 10 [7] where it satisfies all three criteria to determine whether control exists.approximately 1.8 gigawatts, through an investment entity called Caret, LLC (the “ISS Joint Venture”).
Under the terms of the ISS Joint Venture, the Company committed to invest $14.1 million in the ISS Joint Venture for its 50% equity interest, after reducing the commitment by $0.8 million in potential brokerage commissions that have not been required and which have been credited towards the Company’s commitment. The Philippine entities are closely managed by$14.1 million commitment was allocated to each of the Directorprojects based on monthly capital contributions determined with reference to completion of VivoPower Singapore Pte Limited, all controls are carefully monitoredspecific project development milestones under an approved development budget for the ISS Joint Venture. To June 29, 2021, the Company contributed $13.1 million of the $14.1 million commitment to minimize risk.the ISS Joint Venture, leaving a remaining capital commitment at June 30, 2021, of $1.1 million, which was recorded in trade and other payables. 20 projects within the portfolio were discontinued in the year ended June 30, 2021, resulting in a write off of capitalized costs of $7.0 million related to those projects.
F- 29
The joint venture was accounted for as an investment under the equity method at March 31, 2018. During the year ended March 31, 2019, the Company made the decision to sell its portfolio of solar projects held within the ISS Joint Venture, and the Joint Venture assets were reclassified as assets held for sale. In the year ended June 30, 2020, sale of the entire portfolio was not successful, and the Company commenced a process to take control of the portfolio from the Joint Venture partner, which was expected to result in a slower project realization timeframe. Accordingly, the portion of the investment that was expected to be realized in near term sales within 12 months remained in assets held for sale, whereas the remainder of the portfolio was reclassified back to investments accounted for under the equity method.
14.Investments
| (US dollars in thousands) | 2017 | 2016 | ||||||
Project investments | 18,060 | - | ||||||
Total | 18,060 | - | ||||||
TheOn June 30, 2021, the Company acquired the remaining 50% of Caret from ISS, for a consideration of $1. Accordingly, the book value of $8.1 million of the investments carried as at 31 March 2017 representsaccounted for using the equity method have been derecognized upon acquisition, and the fair value of 100% of the consolidated capitalized project investment. The investments relate todevelopment costs recorded as an intangible asset upon acquisition, as detailed in Note 12b.
Reconciliation of the two North Carolina projects, oneISS Joint Venture investment is as follows:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Capital commitment | - | - | - | |||||||||
Commission credit | - | - | - | |||||||||
Discontinued projects | - | - | - | |||||||||
Acquisition costs | - | - | - | |||||||||
Total | - | - | - | |||||||||
Allocation of which was fully operational as at 31 March 2017, and second was fully operational in May 2017. The group will monitor the carryingnet book value of thesethe equity accounted investment in the ISS Joint Venture, between current assets held for sale, and non-current investments to assess for impairment(as disclosed in Note 16), until acquisition and consolidation on a quarterly basis.June 30, 2021, was as follows:
15. Trade and other receivables
| (US dollars in thousands) | 2017 | 2016 | ||||||
Current receivables | ||||||||
Trade receivables | 5,248 | - | ||||||
Accrued income | 13,183 | - | ||||||
Prepayments | 563 | - | ||||||
Other receivables | 722 | - | ||||||
Related party receivable | 128 | - | ||||||
Total | 19,844 | - | ||||||
Non-current receivables | ||||||||
Loan due from Associate | 549 | - | ||||||
Other receivables | 618 | - | ||||||
Total | 1,167 | - | ||||||
Analysis of trade receivables:
| (US dollars in thousands) | 2017 | 2016 | ||||||
Trade and other receivables | 5,250 | - | ||||||
Less: credit note provision | (2 | ) | - | |||||
Total | 5,248 | - | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Assets classified as held for sale | - | - | - | |||||||||
Investments accounted for using the equity method | - | - | - | |||||||||
Total | - | - | - | |||||||||
The maximum exposuretable below provides summarized financial information for the ISS Joint Venture. The information disclosed reflects the amounts presented in the financial statements of ISS Joint Venture, amended to credit riskreflect adjustments made by the Company when using the equity method, including fair value adjustments and modifications for trade receivables by geographic region was:differences in accounting policy. The summarized financial information for the ISS Joint Venture does not represent the Company’s share of those amounts.
| (US dollars in thousands) | 2017 | 2016 | ||||||
United Kingdom | 1,600 | - | ||||||
Australia | 3,648 | - | ||||||
Total | 5,248 | - | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Current assets | - | - | - | |||||||||
Non-current assets | - | - | - | |||||||||
Total | - | - | - | |||||||||
Reconciliation to carrying amounts of the ISS Joint Venture:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Opening net assets | - | - | 24,390 | |||||||||
Commission credit | - | - | - | |||||||||
Commission credit on abandonments | - | - | - | |||||||||
Sundry income | - | - | - | |||||||||
Project swaps | - | - | - | |||||||||
Abandoned projects | - | - | (13,900 | ) | ||||||||
Acquisition of controlling interest | - | - | (10,490 | ) | ||||||||
Net assets | - | - | - | |||||||||
VivoPower share in % | N/A | N/A | 50 | % | ||||||||
VivoPower share in $ (excluding funding obligation) | - | - | - | |||||||||
Commission credit | - | - | - | |||||||||
Acquisition costs | - | - | - | |||||||||
Net Assets | - | - | - | |||||||||
17. | Cash and cash equivalents |
The aging of the trade receivables, net of provisions is:
| (US dollars in thousands) | 2017 | 2016 | ||||||
0-90 days | 5,092 | - | ||||||
Greater than 90 days | 156 | - | ||||||
Total | 5,248 | - | ||||||
16. Cash and cash equivalents
| (US dollars in thousands) | 2017 | 2016 | ||||||
Cash at bank and in hand | 10,970 | 28 | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Cash at bank and in hand | 553 | 1,285 | 8,604 | |||||||||
The credit ratings of the counterparties with which cash was held are detailed in the table below.
| (US dollars in thousands) | 2017 | 2016 | ||||||
A-1+ | 2,341 | - | ||||||
A-1 | 8,161 | - | ||||||
A-2 | 468 | - | ||||||
Total | 10,970 | - | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
A+ | (12 | ) | 171 | 5,423 | ||||||||
A | - | - | - | |||||||||
A- | 2 | 2 | 2 | |||||||||
AA- | 563 | 1,112 | 3,179 | |||||||||
Total | 553 | 1,285 | 8,604 | |||||||||
18. | Restricted cash |
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Bank guarantee security deposit | 608 | 1,195 | 1,140 | |||||||||
Cash flow from operating activities:At June 30, 2023, there is a total of $0.6 million ( June 30, 2022, $1.2 million ; June 30, 2021$1.1 million) of cash which is subject to restriction as security for bank guarantees provided to customers in support of performance obligations under power services contracts.
| (US dollars in thousands) | 2017 | 2016 | ||||||
Profit/(loss) for the year | 5,581 | (281 | ) | |||||
Adjustments for: | ||||||||
Income tax expense | 5,338 | 0 | ||||||
Transaction related costs | 5,800 | |||||||
Finance expenses | 600 | 0 | ||||||
Depreciation of property, plant and equipment | 103 | 0 | ||||||
Amortisation of intangible assets | 548 | 0 | ||||||
Operating cash flows before movements in working capital and provisions | 17,970 | (281 | ) | |||||
Increase in trade and other receivables | (21,007 | ) | - | |||||
Increase in trade and other payables | 8,074 | 186 | ||||||
Increase in provisions | 1,339 | 0 | ||||||
Cash generated from/(used in) operating activities | 6,376 | (95 | ) | |||||
19. | Trade and other receivables |
17. Trade and other payables
| (US dollars in thousands) | 2017 | 2016 | ||||||
Trade payables | 2,158 | 185 | ||||||
Accruals | 1,297 | 1 | ||||||
Related party payable | 1,445 | - | ||||||
Treasury shares | 592 | - | ||||||
Payroll liabilities | 1,972 | - | ||||||
Sales tax payable | 412 | - | ||||||
Deferred income | 305 | - | ||||||
Other creditors | 81 | - | ||||||
Total | 8,262 | 186 | ||||||
18. Loans and borrowings
| (US dollars in thousands) | 2017 | 2016 | ||||||
Current liabilities | ||||||||
Bank loan | 90 | - | ||||||
| Related Party Loan | - | 8,001 | ||||||
Non-current liabilities | ||||||||
Bank loan | 933 | - | ||||||
Related party loan | 18,992 | - | ||||||
Total | 20,015 | 8,001 | ||||||
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 (restated) | 2021 (restated) | |||||||||
Current receivables | ||||||||||||
Trade receivables | 1,649 | 3,866 | 4,959 | |||||||||
Contract assets | 893 | 694 | 2,723 | |||||||||
Prepayments | 277 | 787 | 2,837 | |||||||||
Other receivables | 4,027 | 3,055 | 1,580 | |||||||||
Deposits | - | 504 | 504 | |||||||||
Current tax receivable | 175 | 182 | 182 | |||||||||
Total | 7,021 | 9,088 | 12,785 | |||||||||
The bank loanprior year restatements in the years ending 30June 2021 and 2022 relate to $0.5 million of deposits that were originally reported within intangible assets and have been reclassified to current assets and $0.4 million of inventory that was originally reported within other receivables.
In accordance with ANZ Bank is repayable over an 11.5 year period atIFRS 15, contract assets are presented as a monthly repayment amountseparate line item. The Company has not recognized any loss allowance for contract assets.
Analysis of trade receivables:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Trade and other receivables | 1,649 | 3,866 | 4,959 | |||||||||
Less: credit note provision | - | - | - | |||||||||
Total | 1,649 | 3,866 | 4,959 | |||||||||
The maximum exposure to credit risk for 138 months. trade receivables by geographic region was:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
United States | - | - | - | |||||||||
United Kingdom | - | - | - | |||||||||
Australia | 1,451 | 2,684 | 4,349 | |||||||||
Netherlands | 198 | 1,181 | 610 | |||||||||
Total | 1,649 | 3,866 | 4,959 | |||||||||
The related party loan is with Arowana International Limited. Repaymentsaging of the loan will commence from April 2018 and is therefore non-current in nature.trade receivables, net of provisions is:
19. Provisions
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
0-90 days | 1,410 | 3,306 | 4,918 | |||||||||
Greater than 90 days | 239 | 560 | 41 | |||||||||
Total | 1,649 | 3,866 | 4,959 | |||||||||
| (US dollars in thousands) | 2017 | 2016 | ||||||
Current provisions | ||||||||
Employee entitlements | 1,339 | - | ||||||
Non-current provisions | ||||||||
Employee entitlements | 237 | - | ||||||
Total | 1,576 | - | ||||||
20. | Inventory |
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 (restated) | 2021 (restated) | |||||||||
Raw materials | 2,115 | 1,887 | 1,968 | |||||||||
Total | 2,115 | 1,887 | 1,968 | |||||||||
Employee entitlements include long term leave The prior year restatements in the years ending 30June 2021 and vacation provisions.2022 relate to $0.4 million of inventory that was originally reported within other receivables.
21. | Assets classified as held for sale |
Year Ended June 30 | ||||||||||||||||
(US dollars in thousands) | % Owned | 2023 | 2022 | 2021 | ||||||||||||
Kenshaw Solar Pty Ltd (formerly J.A. Martin Electrical Pty Limited) - ex solar | 100 | % | - | 8,214 | - | |||||||||||
Total | - | 8,214 | - | |||||||||||||
20. Business combinations
Aevitas Group of Companies
On December 28, 2016, VivoPower acquired 99.9% of Aevitas Group Limited for a consideration of $9.5 million.
Aevitas provides energy and power generation solutions including design, supply, installation and maintenance of power systems, control systems, with an increasing focus on solar and renewable energy and energy efficiency. Since acquiring Aevitas in December 2016, VivoPower has introduced a focused origination strategy to identify attractive solar projects across Aevitas’ existing customer base.
Aevitas operates via J.A. Martin Electrical Pty Limited (“JA Martin”) and Electrical Engineering Group Pty Limited, encompassing theThe ex-solar operations of Kenshaw ElectricalSolar Pty Limited (“Kenshaw”).Ltd were sold to ARA on July 1, 2022. As disclosed in note 22, the assets and liabilities of the disposed operation met the definition of discontinued operation under IFRS 5 at June 30, 2022. Accordingly, assets and liabilities of the discontinued operation were reclassified to assets and liabilities held for sale as at June 30, 2022. As detailed in note 22, assets held for sale of $8.2 million as at June 30, 2022 comprised goodwill $5.3 million, intangible assets $2.1 million, property, plant and equipment $0.6 million and trade and other receivables $0.2 million. Following sale completion, the assets held for sale were disposed of, as detailed in note 22.
JA Martin is based
| 22. | Discontinued operation |
On July 1, 2022, the ex-solar operations of Kenshaw Solar Pty Ltd were sold to ARA. As the intention to sell and process to locate a buyer for the business was initiated prior to June 30, 2022, but the sale only became definitive on July 1, 2022, the results of the non-solar segment business of Aevitas Solar and adjustments to anticipated net realisable value of disposal assets and liabilities held for sale, were reported in Tomago (Newcastle, New South Wales), Mount Thorley (Hunter Valley, New South Wales) and Gunnedah (Liverpool Plains, New South Wales) and has been operating primarilydiscontinued operations in the Newcastle region, Hunter Valleyyear ended June 30, 2022. The associated assets and western New South Walesliabilities of the discontinued operation were presented as held for over 40 years. JA Martin primarily provides productssale within current assets (see Note 21) and services through its switchboards control rooms, electrical maintenancecurrent liabilities as at June 30, 2022. Loss on disposal, including finalisation of sale price, including working capital adjustments on completion, and service and electrical contracting projects divisions.finalisation of the deferred consideration, are recorded in discontinued operations in the year ended June 30, 2023.
Kenshaw has been operating from its base in Cardiff (Newcastle, New South Wales)Financial information relating to the discontinued operation for over 20 years. Kenshaw provides power generator sales & service, electrical motors installation and service, and motor management services and non-destructive preventative maintenance testing. Customers include hospitals, data centres, and a rangethe period to the date of government departments and industrial businesses.disposal is set out below:
Aevitas’ mission is to be its customers’ trusted integrated power expert. Aevitas has long standing client relationshipsFinancial performance and operates in a region that has amongst the highest cost of power across Australia and has been demonstrating increasing appetite for solar power solutions. This client base provides a natural pipeline of new solar projects which will help accelerate the growth of VivoPower’s BTO business model in Australia.cash flow information
The financial performance and cash flow information presented are for the years ended June 30, 2023, 2022 and 2021:
Year Ended June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Revenues | - | 15,168 | 16,436 | |||||||||
Other income | - | 324 | 552 | |||||||||
| Loss on disposal of business | (4,207 | ) | - | - | ||||||||
Expenses | - | (16,266 | ) | (16,895 | ) | |||||||
(Loss)/profit before income tax | (4,207 | ) | (774 | ) | 92 | |||||||
Income tax expense | - | 149 | (23 | ) | ||||||||
(Loss)/gain from discontinued operations | (4,207 | ) | (625 | ) | 69 | |||||||
Net cash (outflow)/inflow from operating activities | (4,207 | ) | (625 | ) | 69 | |||||||
Net cash inflow/(outflow) from investing activities | - | - | - | |||||||||
Net cash inflow/(outflow) from financing activities | - | - | - | |||||||||
Net (decrease)/increase in cash generated by subsidiary | (4,207 | ) | (625 | ) | 69 | |||||||
Assets and liabilities of disposal group as held for sale
The following table provides the book values of the identifiable assets and liabilities acquired and their fair valuewere reclassified as held for sale in relation to the group.discontinued operations as at June 30, 2022 and subsequently disposed of in the year ended June 30, 2023:
Year Ended June 30 | ||||||||
(US dollars in thousands) | ||||||||
| 2022 | |||||||
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(1)Borrowings relate to convertible preference shares and loan notes that are categorised as equity within the financials of VivoPower International PLC.
The revenue and operating loss since the acquisition date to 31st March 2017 was $5.6 million and $0.5 million respectively.
VivoPower Pty Limited
On December 28, 2016, VivoPower acquired 100% of VivoPower Pty Limited for a consideration of $23.1 million.
VivoPower Australia is a next generation renewable energy company that is involved in the origination, financing, construction, transfer, operation and optimisation of solar electricity generation facilities globally. VivoPower Australia operates a BTO model involving the design, installation, transfer and maintenance of solar power plants through on site generation facilities and large scale grid feed projects. As of 31 March 2017, VivoPower Australia had 2 employees located at 2 offices.
The business is organized primarily into a single pillar, being the provision of solar services. Within this, there are two key target submarkets, the Commercial, Industrial and Government (CIG) sectors and Utility-Scale projects.
The CIG sub market focuses on solar facilities which are situated behind-the-meter for CIG clients. VivoPower Australia constructs solar generation facilities on customer’s sites and feed energy directly to the client. In this fashion, VivoPower Australia disintermediates the wholesale electricity market, the electricity grid and the electricity retailer sharing in the savings with the client.
The Utility Scale sub market focuses on wholesale electricity generation through large or Utility Scale sized installations. These are generally situated on large tracts of land and are directly connected to the distribution (low voltage) or transmission (high voltage) grids. These large projects sell electricity directly to the spot market or to electricity retailers/traders.
The revenue and operating loss since the acquisition date to 31 March 2017 was $0.1m and ($0.2m) respectively.
The following table provides the book values of the identifiable assets and liabilities acquired and their fair value to the group:
| ||||||||
Trade and other receivables | ||||||||
| 239 | |||||||
Property, plant and equipment | 629 | |||||||
| 5,289 | |||||||
Intangible assets | 2,056 | |||||||
| 8,214 | |||||||
Liabilities directly associated with assets classified as held for sale | ||||||||
Trade and other payables | ||||||||
| ||||||||
| - | 1,126 | ||||||
| ||||||||
| - | 157 | |||||||
| ||||||||
| ||||||||
| - | 74 | |||||||
| - | 49 | ||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| - | ||||||||
| 1,497 | |||||||
| ||||||||
| ||||||||
F- 33
USD 000 | AUD 000 | |||||||
Consideration received or receivable | ||||||||
Cash | 2,874 | 4,336 | ||||||
Fair value of contingent consideration | 624 | 941 | ||||||
Less costs to sell | (362 | ) | (525 | ) | ||||
Total disposal consideration | 3,136 | 4,752 | ||||||
Estimated carrying amount of net assets sold | 6,989 | 10,143 | ||||||
Loss on sale | (3,854 | ) | (5,391 | ) | ||||
21. Obligations under finance leasesDisposal consideration comprised cash purchase price including completion working capital adjustments of $2.9 million (A$4.3 million). Initial estimate of fair value of deferred contingent consideration of $4.5 million, as recorded in July 2022, payable 12 months after completion, applied a contracted 4.5x multiple to year 1 forecast EBITDA of AUD$2.7 million, discounted at 10% to net present value, less purchase price paid. The final deferred consideration of $0.6 million (A$ 0.9 million) was received in August 2023. Costs to sell comprised advisory fees of $0.4 million (A$0.5 million). Net book value of net assets sold was $7.0 million (A$10.1 million), resulting in a loss on disposal of $3.9 million (A$5.4 million).
| (US dollars in thousands) | Minimum lease payments: | Present value of minimum lease payments | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Amounts payable under finance leases: | - | - | ||||||||||||||
Less than one year | 165 | - | 145 | - | ||||||||||||
Later than one year but not more than five | 107 | - | 95 | - | ||||||||||||
| 272 | 240 | - | ||||||||||||||
Future finance charges | (32 | ) | - | - | - | |||||||||||
Total obligations under finance lease | 240 | - | - | - | ||||||||||||
Reconciliation of adjusted loss on sale | USD 000 | AUD 000 | ||||||
Gain on sale - as estimated at June 30, 2022 | 34 | 50 | ||||||
Cash consideration adjustment | 378 | 529 | ||||||
Fair value of contingent consideration adjustment | (3,965 | ) | (5,548 | ) | ||||
Cost to sell adjustment | (18 | ) | (25 | ) | ||||
Carrying amount of net assets sold adjustment | (283 | ) | (397 | ) | ||||
Loss on sale | (3,854 | ) | (5,391 | ) |
23. | Trade and other payables |
Year Ended June 30 | ||||||
(US dollars in thousands) | 2023 | 2022 (restated) | 2021 | |||
Current trade and other payables | ||||||
Trade payables | 7,725 | 5,692 | 4,324 | |||
Shares to be issued | 2,500 | - | - | |||
Accruals | 1,321 | 4,322 | 648 | |||
Related party payable | - | 477 | - | |||
Payroll liabilities | 2,077 | 2,210 | 1,413 | |||
Sales tax payable | 116 | 949 | 624 | |||
Deferred income | 318 | 974 | 1,129 | |||
Other creditors | 540 | 833 | 778 | |||
Total current trade and other payables | 14,597 | 15,457 | 8,917 | |||
Non-current other payables | ||||||
Non-current accrued interest | 6,129 | - | - | |||
Non-current accrued loan and other fees | 314 | - | - | |||
Total non-current other payables | 6,443 | - | - | |||
22. Called up share capitalIn accordance with IFRS 15 – Revenue from Contracts with Customers, deferred income is presented as a separate line item. Deferred income relates to the Company’s obligation to transfer goods or services to customers for which the Company has received consideration (or the amount is due) from customers. Deferred income is recorded as revenue when the Company fulfils its performance obligations under the contract.
2017 | 2016 | |||||||
Allotted, called up and fully paid | ||||||||
Ordinary shares of $0.012 each as at 31 March | $ | 162,689 | $ | 72,125 | ||||
Number allotted | ||||||||
Ordinary shares of $0.012 each | 13,557,376 | 5,514,375 | ||||||
Of the $1.0 million deferred income balance at June 30, 2022, $0.9 million was recognized as revenue in the year ended June 30, 2023. $0.9 million of the $1.1 million deferred income balance at June 30, 2021 was recognized as revenue in the year ended June 30, 2022. It is expected that the total $0.3 million deferred income balance will be included in revenue in the year ending June 30, 2024.
Non-current accrued interest relates to interest on AWN related party loans, where pursuant to amendments to loan terms agreed on June 30, 2023, obligations to pay accrued interest on all loans except bridging loans issued after December 31, 2022 are deferred until April 30, 2025.
The restatement in the year ended 30June 2022 relates to $0.4m of expenses reclassified from the year ended 30June 2023 that had not been accrued for in the year ended 30June 2022.
24. |
| |||
| ||||
| ||||
|
As at June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Current provisions | ||||||||||||
Employee entitlements | 502 | 635 | 1,802 | |||||||||
| Fiscal | 1,174 | |||||||||||
Litigation | - | - | 485 | |||||||||
Warranty | 102 | 116 | 209 | |||||||||
Remediation | - | 353 | 306 | |||||||||
Total current provisions | 1,778 | 1,104 | 2,802 | |||||||||
Non-current provisions | ||||||||||||
Employee entitlements | 76 | 57 | 165 | |||||||||
Total non-current provisions | 76 | 57 | 165 | |||||||||
Total provisions | 1,854 | 1,161 | 2,967 | |||||||||
23. Other reserves
Employee entitlements include long term leave and vacation provisions. $1.13 million provisions and $0.07 million long-term provisions relating to discontinued ex-solar J.A. Martin operations were reclassified to liabilities held for sale in current liabilities, as at June 30, 2022.
| (US dollars in thousands) | 2017 | 2016 | ||||||
Equity instruments | 25,072 | - | ||||||
Capital raising costs | (9,722 | ) | - | |||||
Share option reserve | 3,713 | - | ||||||
Treasury shares (see note 25) | (592 | ) | - | |||||
Other reserves | (142 | ) | - | |||||
Total | 18,329 | - | ||||||
The fiscal provision comprises a provision in respect of fiscal refunds on prior receivables, which the Company is defending.
Equity instrumentsThe remediation provision comprised additional work required on electric vehicles, comprising a combination of remediation, testing or conversion of drivetrains to 72kwH.No further remediation work is anticipated that is separately identifiable from ongoing capitalized development activities, accordingly the provision has been released in FY2023.
Of the $0.5 million provision for disputed legal success fees recorded at June 30, 2021 in relation to litigation of the Company’s former Chief Executive Officer, Mr. Comberg, for alleged breach of contract, $0.4 million was utilized in the year ended June 30, 2022, whilst $0.1 million remained unused and was reversed in the year ended June 30, 2022.
Warranty provisions in Australia relate to the servicing of generators and is based on a percentage of revenue generated.
(US dollars in thousands) | Employee Entitlements | Remediation | Fiscal | Litigation | Warranty | Total | ||||||||||||||||||
At June 30, 2021 | 1,967 | 306 | - | 485 | 210 | 2,967 | ||||||||||||||||||
Foreign exchange | (165 | ) | (37 | ) | - | - | (18 | ) | (221 | ) | ||||||||||||||
Charged/(credited) to profit or loss: | - | |||||||||||||||||||||||
Additional provisions | 1,312 | 84 | - | 103 | 1,500 | |||||||||||||||||||
Reverse unused provisions | (35 | ) | - | - | (100 | ) | (142 | ) | (277 | ) | ||||||||||||||
Disposals and transfers to AHFS | (1,200 | ) | (1,200 | ) | ||||||||||||||||||||
Unwinding of discount | 6 | - | - | - | - | 6 | ||||||||||||||||||
Provisions utilized | (1,192 | ) | - | - | (385 | ) | (37 | ) | (1,614 | ) | ||||||||||||||
At June 30, 2022 | 692 | 353 | - | - | 116 | 1,161 | ||||||||||||||||||
Foreign exchange | (27 | ) | 8 | - | - | (4 | ) | (23 | ) | |||||||||||||||
Charged/(credited) to profit or loss: | - | - | 1,174 | - | - | 1,174 | ||||||||||||||||||
Reverse unused provisions | (1 | ) | (361 | ) | - | - | (10 | ) | (372 | ) | ||||||||||||||
Provisions utilized | (86 | ) | - | - | - | - | (86 | ) | ||||||||||||||||
At June 30, 2023 | 578 | - | 1,174 | - | 102 | 1,854 | ||||||||||||||||||
25. | Loans and borrowings |
As at June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Current liabilities | ||||||||||||
Debtor invoice financing | 1,329 | 32 | 36 | |||||||||
Lease liabilities | 462 | 505 | 669 | |||||||||
Shareholder loans | 497 | 4,285 | - | |||||||||
Chattel mortgage | 89 | 142 | 88 | |||||||||
Financing agreement | - | - | 59 | |||||||||
Bank loan | 7 | 145 | 152 | |||||||||
Total | 2,384 | 5,109 | 1,004 | |||||||||
Non-current liabilities | ||||||||||||
Lease liabilities | 1,843 | 1,959 | 326 | |||||||||
Shareholder loan | 28,111 | 21,121 | 21,175 | |||||||||
Chattel mortgage | 50 | 264 | 244 | |||||||||
Financing agreement | - | 108 | 183 | |||||||||
Bank loan | - | - | 159 | |||||||||
Total | 30,004 | 23,452 | 22,087 | |||||||||
Total | 32,388 | 28,561 | 23,091 | |||||||||
On June 30, 2021, the Company agreed a refinancing of its existing $21.1 million shareholder loan with AWN, with repayment of principal from January 1, 2023 in sixty monthly instalments of $0.35 million to loan maturity on December 31, 2027. The interest rate and line fee was agreed at 8% and 0.8% respectively, but no interest or line fee settlements were required until after a corporate liquidity event had occurred. In addition, the Company agreed to a refinancing fee of $0.34 million in two tranches ong June 30, 2022 and December 31, 2022. Security granted to AWN comprised of the Specific Security Deed and the General Security.
On June 30, 2022 further amendments to the loan were agreed with AWN:
(i) to defer repayment of principal to commence on October 1, 2023, with repayments over 60 months to September 30, 2028,
(ii) to defer interest payments from October 1, 2021, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2023.
(iii) to increase the interest rate and line fee to 10.00% and 2.00% per annum respectively during the period from October 1, 2021 to the earlier of a) September 30, 2023 or b) the date a minimum prepayment of $1,000,000 is made.
(iv) the initial refinancing fee of $0.34 million is to be amended to accrue incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) October 1, 2023.
(v) a new fixed facility extension fee of $0.355 million is payable in return for this amendment, to accrue immediately but becoming payable on October 1, 2023.
On January 11, 2023, further amendments to the loan were agreed with AWN:
(i) to defer repayment of principal to commence on April 1, 2025, with repayments over 60 months to March 31, 2030.
(ii) to defer interest payments from October 1, 2023, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2024.
(iii) to extend the increased interest rate and line fee of 10.00% and 2.00% per annum respectively commenced on October 1, 2021 to the earlier of a) March 31, 2025 or b) the date a minimum Prepayment of $1,000,000 is made.
(iv) to extend the initial refinancing fee accruing incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) April 1, 2025.
(v) to defer the repayment date of the previous fixed facility extension fee of $0.355 million, becoming payable on April 1, 2025.
(vi) In addition to previously agreed refinancing fees, an additional $0.855 million fixed refinancing fee will accrue immediately and become payable on April 1, 2025.
On June 30, 2023, further amendments to the loan were agreed with AWN:
(i) to defer interest payments from October 1, 2024 to April 1, 2025, and to replace the conditional requirement to repay accrued interest upon completion by VivoPower of a debt or equity raise of at least $25 million, with the conditional requirement to make repayments of interest and/or principal to meet the mandatory repayment schedule described in sections (ii) and (iii) below following a qualifying liquidity event.
(ii) upon completion by VivoPower International PLC of a qualifying liquidity event of at least $5.0 million, Aevitas is required to make mandatory prepayment of principal and interest to AWN in accordance with the following schedule:
a) proceeds $5 million to $7.5 million - pay 25% of amounts raised;
b) proceeds $7.5 million to $12.5 million - pay $1.875 million plus 45% of amounts raised;
c) proceeds $12.5 million and above - pay $4.125 million plus 50% of amounts raised.
(iii) for the purposes of the mandatory prepayment requirement, a ‘qualifying liquidity event’ excludes direct investments into VivoPower’s subsidiary, Tembo, and debt raised in respect of working capital finance facilities, but includes:
a) equity or debt raise;
b) trade sale of underlying subsidiary or business unit (including, for example, Aevitas and Caret); and
c) loan repayment from Tembo to VivoPower..
(iv) as consideration for the concessions agreed with AWN, VivoPower International PLC committed to issue AWN with 500,000 warrants, with a duration of 12 months, at an exercise price of $0.67 per share.
In December 2021, a short term loan of $1.1 million (A$1.5 million) was provided from AWN to Aevitas O Holdings Pty Limited at an interest rate of 10.0%, increasing to 12.5% from January 1, 2022. The loan is set to expire on April 1, 2025 (initially set as April 30, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower International PLC of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $29,000 (A$40,000) and $43,500 (A$60,000) are payable upon maturity, relating to the two extensions respectively.
On February 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas, with interest rate of 10.00% per annum payable on the principal sum upon maturity. The loan is set to expire on April 1, 2025 (initially set as May 13, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $85,000 and $110,000 are payable upon maturity, relating to the two extensions respectively.
On December 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas, with interest rate of BBSY bid floating rate (on average 3.60% for the period from inception to June 30, 2023) plus fixed margin of 15.0% per annum payable on the principal sum upon maturity. A 1% facility establishment fee of $30,000 was deducted upon initial loan drawdown, and a further 3% exit fee of $90,000 is payable on expiry. The loan is set to expire on April 1, 2025 (initially set as October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was agreed on January 11, 2023, then dropped on June 30, 2023. A facility extension fee of $115,000 is payable upon maturity.
In February and March 2023, further short term loans of A$0.5 million and A$0.25 million were established between AWN and Aevitas, drawn down between February and May 2023. The loans have interest rate of BBSY bid floating rate plus fixed margin of 15.0% per annum payable on the principal sum upon maturity, with expiry dates of June 30, 2023. 1% facility establishment fees of total A$7,500 were deducted upon loan drawdowns, and further 3% exit fees of total A$22,500 are payable on expiry. On June 30, 2023, the expiry of the loans was amended to August 31, 2023.
Following the sale of ex-solar J.A. Martin operations on July 1, 2022, the J.A. Martin debtor finance facility was cancelled, but a new facility with a limit of A$2.5 million and variable interest rate (initial rate 7.75%) was opened by Kenshaw, as well as a trade finance facility of $0.5 million. The debtor finance facility was partially drawn down at June 30, 2023, with an outstanding balance of $1.3 million (A$2.0 million), due to timing of operating activities (nil:June 30, 2022).
Lease liabilities have decreased by $0.2 million in the year to $2.3 million, following $0.2 million capitalization of a new right-of-use asset in June 2023 in Kenshaw Electrical Pty Ltd, on entry into a new lease of an additional workshop facility in Newcastle, New South Wales, offset by $0.3 million lease payments in the year. Depreciation expense on right-of-use assets and interest expense on associated lease liabilities for the year ended June 30, 2023 amounting to $0.4 million and $0.2 million respectively, are recognized in the Consolidated Statement of Comprehensive Income. Total lease payments for the year ended June 30, 2023 amounted to $0.5 million ( June 30, 2022: $0.4 million)
The obligations under lease liabilities are as follows:
Minimum Lease Payments | Present Value of Minimum Lease Payments | |||||||||||||||||||||||
As at June 30 | As at June 30 | |||||||||||||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||
Amounts payable under lease liabilities: | ||||||||||||||||||||||||
Less than one year | 576 | 546 | 683 | 462 | 444 | 669 | ||||||||||||||||||
Later than one year but not more than five | 2,223 | 2,545 | 379 | 1,843 | 2,020 | 326 | ||||||||||||||||||
| 2,799 | 3,091 | 1,062 | 2,305 | 2,464 | 995 | |||||||||||||||||||
Future finance charges | (494 | ) | (627 | ) | (67 | ) | - | - | - | |||||||||||||||
Total lease obligations | 2,305 | 2,464 | 995 | 2,305 | 2,464 | 995 | ||||||||||||||||||
26. | Called up share capital |
As at June 30 | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Allotted, called up and fully paid | ||||||||||||
Ordinary shares of $0.012 each | $ | 307,815 | $ | 255,819 | $ | 222,074 | ||||||
Number allotted | 25,651,140 | 21,318,118 | 18,506,064 | |||||||||
Ordinary shares of $0.012 each | $ | 307,815 | $ | 255,819 | $ | 222,074 | ||||||
At the Company’s last Annual General Meeting on November 10, 2022, the Directors were given a new authority to allot shares up to an aggregate nominal amount of $180,000.00.
Movements in Ordinary Shares:
Shares No. | Par value USD 000 | Share premium USD 000 | Total USD 000 | |||||||||||||
At June 30, 2021 | 18,506,064 | 222 | 76,229 | 76,451 | ||||||||||||
Conversion of Aevitas equity instruments 3 | 2,005,190 | 24 | 20,442 | 20,466 | ||||||||||||
Capital raises 1 | 82,644 | 1 | 243 | 244 | ||||||||||||
Other share issuance 4 | 42,000 | 1 | 217 | 218 | ||||||||||||
Employee share scheme issues 2 | 682,220 | 8 | 2,287 | 2,295 | ||||||||||||
At June 30, 2022 | 21,318,118 | 256 | 99,418 | 99,674 | ||||||||||||
Capital raises 1 | 4,230,770 | 51 | 5,449 | 5,500 | ||||||||||||
Employee share scheme issues 2 | 102,252 | 1 | 151 | 152 | ||||||||||||
At June 30, 2023 | 25,651,140 | 308 | 105,018 | 105,326 | ||||||||||||
1 On July 29, 2022, the Company entered into a Securities Purchase Agreement to issue and sell, in a registered direct offering directly to an investor, (i) an aggregate of 2,300,000 Ordinary Shares (the “Shares”), nominal value $0.012 per share, at an offering price of $1.30 per share and (ii) an aggregate of 1,930,770 pre-funded warrants exercisable for Ordinary Shares at an offering price of $1.2999 per pre-funded warrant, for gross proceeds of approximately $5.5 million before deducting the placement agent fee and related offering expenses. The pre-funded warrants were sold to the Investor whose purchase of Ordinary Shares in the Registered Offering would otherwise result in the Investor, together with its affiliates and certain related parties, beneficially owning more than 4.99% of the Company’s outstanding Ordinary Shares immediately following the consummation of the Registered Offering, in lieu of Ordinary Shares. Each pre-funded warrant represents the right to purchase one Ordinary Share at an exercise price of $0.0001 per share. The pre-funded warrants were exercised on November 22, 2022.
In a concurrent private placement, the Company agreed to issue to the investor, Series A Warrants exercisable for an aggregate of 4,230,770 Ordinary Shares at an exercise price of $1.30 per share. Each Series A Warrant will be exercisable on February 2, 2023 and will expire on February 2, 2028. The Series A Warrants and the Ordinary Shares issuable upon the exercise of the Series A Warrants were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) promulgated thereunder.
During the year ended June 30, 2021, the Company completed a series of capital raises on Nasdaq. A total of 4,091,019 Ordinary Shares were issued, comprising 3,382,350 Ordinary Shares issued on October 19, 2020 as an underwritten public offering pursuant to an F-1 registration statement filed with the SEC on October 14, 2020, and 708,669 Ordinary Shares issued during June 2021, at the market price (an ATM offering), pursuant to an F-3 registration statement filed with the SEC on December 21, 2020. In the year ended June 30, 2022, a further 82,644 Ordinary Shares were issued under the same registration statement.
2 During the year ended June 30, 2023, 102,252 shares (year ended June 30, 2022: 682,220; year ended June 30, 2021: 792,126) were issued to employees and directors of the Company and consultants to the Company under the Omnibus Incentive Plan.
3 On June 30, 2021, holders of convertible preference shares and convertible loan notes that are exchangeable for sharesin Aevitas Group Limited ("Aevitas Group"), exercised their right to convert the debt instruments into Ordinary Shares in VivoPower International PLC. A total of 2,005,190 restricted Ordinary Shares were issued at a contracted price of $10.20 on July 21, 2021. Of the 2,005,190 Ordinary Shares issued, 1,959,339 were issued to entities owned by AWN, the Company’s largest individual shareholder.
4 During the year ended June 30, 2022, 21,000 restricted shares were issued to Corporate Profile LLC and 21,000 restricted shares were issued to FON Consulting Ltd in exchange for investor relations services.
Each share has the same right to receive dividends and repayment of capital and represents one vote at shareholders’ meetings. Proceeds received in addition to the nominal value of the shares issued during the year have been included in share premium. The costs associated with the issuance of new shares are included within other reserves (see Note 27). Share premium has also been recorded in respect of the share capital related to employee share awards.
27. | Other reserves |
(US dollars in thousands) | Equity instruments 1 | Preference shares 1 | Shares pending issue 2 | Capital raising costs 3 | Equity incentive costs 4 | Share awards issuance 4 | Foreign exchange | Total | ||||||||||||||||||||||||
At June 30, 2021 | - | 3,270 | 20,466 | (8,828 | ) | 1,422 | (971 | ) | (45 | ) | 15,314 | |||||||||||||||||||||
Issuance of shares | - | - | (20,466 | ) | - | - | - | - | (20,466 | ) | ||||||||||||||||||||||
Share issuance costs | - | - | - | - | - | (1,879 | ) | - | (1,879 | ) | ||||||||||||||||||||||
Capital raising costs | - | - | - | (122 | ) | - | - | (122 | ) | |||||||||||||||||||||||
Equity incentives cost less shares issued | - | - | - | - | 1,452 | - | - | 1,452 | ||||||||||||||||||||||||
Other movements | - | - | - | - | - | - | (283 | ) | (283 | ) | ||||||||||||||||||||||
At June 30, 2022 | - | 3,270 | - | (8,950 | ) | 2,874 | (2,850 | ) | (328 | ) | (5,984 | ) | ||||||||||||||||||||
Interest on equity instruments | - | 198 | - | - | - | - | - | 198 | ||||||||||||||||||||||||
Equity instruments payments | - | (149 | ) | - | - | - | - | (149 | ) | |||||||||||||||||||||||
Capital raising costs | - | - | - | (446 | ) | - | - | - | (446 | ) | ||||||||||||||||||||||
Equity incentives cost less shares issued | - | - | - | - | 147 | (154 | ) | - | (7 | ) | ||||||||||||||||||||||
Other movements | - | - | - | - | - | (104 | ) | (104 | ) | |||||||||||||||||||||||
At June 30, 2023 | - | 3,319 | - | (9,396 | ) | 3,021 | (3,004 | ) | (432 | ) | (6,492 | ) | ||||||||||||||||||||
1 Equity instruments held at June 30, 2020 were convertible preference shares and convertible loan notes in Aevitas Group which must convert to shares of VivoPower at $10.20 per share no later than June 30, 2021. The Company classified these instruments as equity under the “fixed-for-fixed” rule meaning that both the amount of consideration received/receivable and the number of equity instruments to be issued is fixed.
There arewere 2,473,367 convertible preference shares outstanding with a face value of AU$3.00 per share and a value held in reserves of AU$11,059,348at an issue priceJune 30, 2020, representing their face value plus dividends accrued. Convertible preference shares were subordinated to all creditors of $3.00 per share. Aevitas Group, ranked equally amongst themselves, and ranked in priority to Ordinary Shares of Aevitas Group.
There arewere 2,473,367 convertible loan notes at an issue priceoutstanding with a face value of $7.00AU$7.00 per share. Theshare and a value held in reserves representsof AU$25,075,203, representing their face value plus the accrueddividends accrued. The convertible loan notes ranked equally with the unsecured creditors of Aevitas Group.
Dividends or interest to 31 December 2016. Interest iswere payable quarterly in arrears at a rate of 7% on both instruments.the capitalized value to December 29, 2016, the date at which they became convertible to VivoPower shares. At maturity, or if a trigger event such as a change of control of Aevitas Group or VivoPower, a listing event, or a disposal of substantially all of the assets of Aevitas Group had occurred, the convertible preference shares and convertible loan notes in Aevitas Group convert to VivoPower Ordinary Shares at a price of $10.20 per share
On August 7, 2020, the Company offered one new Aevitas Preference Share, option reserve relateswith an issue price of $10, in exchange for each combined convertible note and convertible preference share, with an issue price of $7 and $3 respectively. Dividends are payable quarterly, in arrears, at a rate of 7%. Of the 2,473,367 holders of combined convertible note and convertible preference shares, 426,528 holders accepted the terms of the new Aevitas Preference Shares and received 426,528 Aevitas Preference Shares (A$4,265,280) on August 31, 2020, in exchange for the combined convertible notes and convertible preference shares previously held. The new Aevitas Preference Shares are subordinated to share options wherebyall creditors of Aevitas Group, rank equally amongst themselves, and rank in priority to Aevitas Group Limited Ordinary Shares for the holder can buypayment of dividends.
The 426,528 holders which exchanged on August 31, 2020, had earned $26,708 interest on the convertible loan note in the year ended June 20, 2021, up until exchange, and this was paid in full along with $11,447 dividends that accrued over the same pre-exchange period on the convertible preference shares. Post-exchange, $185,480 dividends of the Aevitas Preference Shares were earned in the year ended June 20, 2021, with $121,905 of those paid by June 30, 2021. And the 426,528 Aevitas Preference Shares have a face value of $3,208,922 (A$10 per share), recognized together with the dividends payable.
On June 30, 2021, the remaining 2,005,190 holders of convertible preference shares and convertible loan notes in Aevitas Group, exercised their right to convert the instruments into Ordinary Shares in VivoPower International PLC. The cumulative balance of face value and accrued unpaid interest and dividends outstanding of the convertible preference shares and convertible loan notes at June 30, 2021 of $20.5 million, was redeemed on that date, and VivoPower International PLC sharesrecognized the requirement to issue 2,005,190 restricted Ordinary Shares, based on a contracted conversion price of $10.20 per share.
2 During the year ended June 30, 2021, $20.5 million was recognized in equity for the 2,005,190 restricted Ordinary Shares pending issuance at US$8.70 at any time beforea contracted conversion price of $10.20 per share. The 2,005,190 restricted Ordinary Shares were issued on July 21, 2021.
3 The $0.4 million of transaction costs incurred in the year ended June 30, April 2020. As at 31 March 2017 there were 828,000 options outstanding.2023 (year ended June 30, 2022: $0.1 million; year ended June 30, 2021: $2.8 million) relate primarily to capital raises on Nasdaq.
F- 39
4 During the year ended June 30, 2023, $0.1 million was expensed towards share incentive awards to employees, directors, and consultants of the Company under the 2017 Omnibus Incentive Plan (year ended June 30, 2022: $1.9 million). Amounts are expensed at the award grant price over the vesting period, adjusted for actual quantities upon vesting. Of the expenses recorded, $0.1 million of shares were delivered to participants (year ended June 30, 2022: $1.9 million).
24. Earnings per shareDuring the years ended June 30, 2022 and June 30, 2023, the following awards under the Incentive Plan have been granted, and have vested or forfeit:
Number of RSUs, PSUs and BSAs (thousands) | Weighted average grant date fair value $000 | |||||||
Outstanding at June 30, 2021 | 460 | $ | 1,186 | |||||
Granted | 706 | 1,838 | ||||||
Vested | (755 | ) | (1,877 | ) | ||||
Forfeit | (132 | ) | (676 | ) | ||||
Outstanding at June 30, 2022 | 279 | $ | 471 | |||||
Granted | 912 | 303 | ||||||
Vested | (356 | ) | (123 | ) | ||||
Forfeit | (178 | ) | (320 | ) | ||||
Outstanding at June 30, 2023 | 657 | $ | 331 | |||||
28. | Earnings / (Loss) per share |
The earnings / (loss) and weighted average numbers of ordinary sharesOrdinary Shares used in the calculation of earnings / (loss) per share are as follows:
As at June 30 | ||||||||||||||||||||
| (US dollars in thousands) | 2017 | 2016 | 2023 | 2022 (restated) | 2021 | |||||||||||||||
Profit/(loss) for the year | 5,581 | (281 | ) | |||||||||||||||||
Loss for the year / period attributable to equity owners | (24,355 | ) | (22,054 | ) | (7,571 | ) | ||||||||||||||
Weighted average number of shares in issue (‘000s) | 7,624 | 5,514 | 24,672 | 20,722 | 16,306 | |||||||||||||||
Basic earnings/(loss) per share (dollars) | 0.73 | (0.05 | ) | (0.99 | ) | (1.06 | ) | (0.49 | ) | |||||||||||
Diluted earnings/(loss) per share (dollars) | 0.73 | (0.05 | ) | (0.99 | ) | (1.06 | ) | (0.49 | ) | |||||||||||
25. Treasury shares
On 30 March 2017, the Company repurchased 129,805 shares at a price of $4.50 for a total sum of $591,915.80, including commission. The shares are being held as treasury shares.
26. Operating lease commitments
| (US dollars in thousands) | 2017 | 2016 | ||||||
Property | Property | |||||||
Commitments under non-cancellable operating leases expiring: | ||||||||
Within one year | 15 | - | ||||||
Later than one year and less than five years | 159 | - | ||||||
29. | Pensions |
The group leases several buildings and office facilities. The terms of the leases vary from location to location. The main leases are in New South Wales, Australia and run for a period for a period of 5 years and 1 year. The leases are due to expire in 2019 and 2017 respectively.
27. Pensions
The group’sCompany’s principal pension plan comprises the compulsory Superannuationsuperannuation scheme in Australia, where the companyCompany contributed 10.5% during the year, and for FY2024, the Company will contribute 11%. A pension scheme is also in place for U.K. employees, where the Company contributes 9.5%.The7% (year ended June 30, 2022: 7%; year ended June 30, 2021: 7%). A pension scheme is also in place for Netherlands employees where the Company contributes 10.3%. The pension charge for the year represents contributions payable by the groupGroup which amounted to US$196,005 (2016: nil) in respect of the Australian scheme. New schemes will be completed for the UK and US during the forthcoming year.$0.4 million (year ended June 30, 2022: $0.9 million; year ended June 30, 2021: $0.8 million).
30. | Financial instruments |
There were no outstanding
As at June 30 | ||||||||||||
(US dollars in thousands) | 2023 | 2022 | 2021 | |||||||||
Financial assets at amortized cost | ||||||||||||
Trade and other receivables | 6,506 | 6,921 | 6,539 | |||||||||
Cash and cash equivalents | 553 | 1,285 | 8,604 | |||||||||
Restricted cash | 608 | 1,195 | 1,140 | |||||||||
Total | 7,667 | 9,401 | 16,283 | |||||||||
Financial liabilities at amortized cost | ||||||||||||
Loans and borrowings | 32,388 | 28,561 | 23,091 | |||||||||
Trade and other payables | 16,029 | 11,324 | 5,750 | |||||||||
Total | 48,417 | 39,885 | 28,841 | |||||||||
The amounts disclosed in the above table for trade and other receivables and trade and other payables do not agree to the amount reported in the Company’s Consolidated Statement of Financial Position as they exclude prepaid expenses, payroll liabilities and sales tax payable, current tax receivables and contract assets and liabilities which do not meet the definition of financial assets or prepaid contributions at either the beginning or end of each financial year.liabilities.
F- 40
28. Financial instruments
(a) Financial risk management
The group’sGroup’s principal financial instruments are bank balances, cash and medium termmedium-term loans. The main purpose of these financial instruments is to manage the group’sGroup’s funding and liquidity requirements. The groupGroup also has other financial instruments such as trade receivables and trade payables which arise directly from its operations.
The groupGroup is exposed through its operations to the following financial risks:
● | Liquidity risk |
● | Credit risk |
● |
|
● |
|
The Board of Directors has overall responsibility for the establishment and oversight of the group’sGroup’s risk management framework. Policy for managing risks is set by the Chief FinancialExecutive Officer and is implemented by the group’sGroup’s finance department. All risks are managed centrally with a tight control of all financial matters.
(b) Liquidity risk
Liquidity risk is the risk that the groupGroup will not be able to meet its financial obligations as they fall due. The groupGroup considers that it has no significant liquidity risk.risk is effectively managed and mitigated. The groupGroup held unrestricted cash resources of $10.9$0.6 million with related party loan of $19.0 million.at June 30, 2023 ( June 30, 2022: $1.3m;June 30, 2021: $8.6m). The ratio of current assets to current liabilities at June 30, 2023is 2.5:1. The group manages its liquidity0.54 ( June 30, 2022: 0.93;June 30, 2021: 1.82).
Following sale of ex-solar J.A. Martin operations on July 1, 2022, the A$2.1 million J.A. Martin debtor finance facility (drawn down at June 30, 2022: nil;June 30, 2021: nil) was cancelled and a new facility with a limit of A$2.5 million and variable interest rate that is currently 7.75% was established by Kenshaw, as well as a whole and ensures that there are sufficient available cash resources for each group company to operate effectively.trade finance facility of $0.5 million.
The Group maintains near-term cash flow forecasts that enable it to identify its borrowings requirement so that remedial action can be taken if necessary.
Contractual maturities of financial liabilities, including interest payments, are as follows:
Year Ended June 30, 2023 | Less than | More than | ||||||||||||||||||
(US dollars in thousands) | Total | 1 year | 1-3 years | 3-5 years | 5 years | |||||||||||||||
Contractual maturity of financial liabilities | ||||||||||||||||||||
Trade and other payables (financial liabilities) | 16,029 | 16,029 | - | - | - | |||||||||||||||
Borrowings | 30,083 | 1,922 | 12,323 | 8,447 | 7,391 | |||||||||||||||
Lease liabilities | 2,305 | 462 | 1,375 | 415 | 53 | |||||||||||||||
Total | 48,417 | 18,413 | 13,698 | 8,862 | 7,444 | |||||||||||||||
Year Ended June 30, 2022 | Less than | More than | ||||||||||||||||||
(US dollars in thousands) | Total | 1 year | 1-3 years | 3-5 years | 5 years | |||||||||||||||
Contractual maturity of financial liabilities | ||||||||||||||||||||
Trade and other payables (financial liabilities) | 10,973 | 10,973 | - | - | - | |||||||||||||||
Borrowings | 26,097 | 4,604 | 11,283 | 10,211 | - | |||||||||||||||
Lease liabilities | 2,464 | 506 | 846 | 1,112.00 | - | |||||||||||||||
Total | 39,534 | 16,083 | 12,129 | 11,323 | - | |||||||||||||||
Year Ended June 30, 2021 | Less than | More than | ||||||||||||||||||
(US dollars in thousands) | Total | 1 year | 1-3 years | 3-5 years | 5 years | |||||||||||||||
Contractual maturity of financial liabilities | ||||||||||||||||||||
Trade and other payables (financial liabilities) | 5,751 | 5,751 | - | - | - | |||||||||||||||
Borrowings | 22,096 | 411 | 11,424 | 10,261 | - | |||||||||||||||
Lease liabilities | 995 | 669 | 326 | - | - | |||||||||||||||
Total | 28,842 | 6,831 | 11,750 | 10,261 | - | |||||||||||||||
(c) Credit risk
The primary risk arises from the group’sGroup’s receivables from customers.customers and contract assets. The majority of the group’sGroup’s customers are long standinglong-standing and have been witha customer of the subsidiary companiesGroup for many years. Losses have occurred infrequently. The groupGroup is mainly exposed to credit risks from credit sales, but the groupGroup has no significant concentrations of credit risk and keeps the credit status of customers under review. Credit risks of customers of new customers are reviewed before entering into contracts. The debtor exposure is monitored by groupGroup finance and the local entities review and report their exposure on a monthly basis.
The groupGroup does not consider the exposure to the above risks to be significant and has therefore not presented a sensitivity analysis on the identified risks.
The credit quality of debtors neither past due nor impaired is good. Refer to note 15Note 19 for further analysis on trade receivables.
(d) Foreign currency risk
The groupGroup operates internationally and is exposed to foreign exchange risk on sales and purchases that are denominated in currencies other than the respective functional currencies of the groupGroup entities to which they relate, primarily with respect to GBP and USD, but also between USD, AUD, EUR and AUD.GBP.
The group’sGroup’s investments in overseas subsidiaries are not hedged as those currency positions are either USD denominated and/or considered to be long-term in nature.
The related party loans areGroup is exposed to foreign exchange risk on the following balances at June 30, 2023:
● | Cash and cash equivalents $0.54 million denominated in AUD, $0.02 million in EUR and ($0.03) million in GBP. |
● | Restricted cash $0.6 million denominated in AUD. |
● | Trade and other receivables $3.4 million denominated in AUD, $1.0 million in EUR and $2.6 million in GBP. |
● | Trade and other payables $5.0 million denominated in AUD, $2.0 million in EUR and $2.7 million in GBP. |
● | Borrowings $2.9 million denominated in AUD and $0.9 million in EUR. |
● | Provisions $0.7 million denominated in AUD and $1.2 million in GBP. |
Of the total shareholder loan of $28.6 million, $27.1 million is denominated in USD and therefore, foreign currency risk$1.5 million is eliminated.denominated in AUD.
(e) Interest rate risk
As a result of the related party loan agreement the groupGroup is exposed to interest rate volatility. However, the interest rate is fixed for the medium term, therefore, the risk is largely mitigated for the near future. The groupGroup will continue to monitor the movements in the wider global economy.
31. | Related party transactions |
29. RelatedAWN is not the ultimate controlling party transactionsof VivoPower but retains a significant influence. As at June 30, 2023, AWN held a 39.5% equity interest in the Company.
Kevin Chin, Chairman and Chief Executive Officer of VivoPower, is also Chief Executive Officer of Arowana International Limited, an Australian registered company, listed on the Australian Stock Exchange (ASX).AWN. During the course of the year,period, a number of services were provided to VivoPower International PLCthe Company from AWN and its subsidiaries from a number of Arowana companies.
Arowana International Limited is a majority shareholder of VivoPower International PLC andsubsidiaries; the extent of the transactions between the two groups is listed below.
Arowana International Limited duringOn January 11, 2023, amendments to the courserelated party loan were agreed with AWN:
(i) to defer repayment of principal to commence on April 1, 2025, with repayments over 60 months to March 31, 2030.
(ii) to defer interest payments from October 1, 2023, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2024.
(iii) to extend the increased interest rate and line fee of 10.00% and 2.00% per annum respectively commenced on October 1, 2021 to the earlier of a) March 31, 2025 or b) the date a minimum Prepayment of $1,000,000 is made.
(iv) to extend the initial refinancing fee accruing incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) April 1, 2025.
(v) to defer the repayment date of the year Arowana has helped fundprevious fixed facility extension fee of $0.355 million, becoming payable on April 1, 2025.
(vi) In addition to previously agreed refinancing fees, an additional $0.855 million fixed refinancing fee will accrue immediately and become payable on April 1, 2025.
On June 30, 2023, further amendments to the loan were agreed with AWN:
(i) to defer interest payments from October 1, 2024 to April 1, 2025, and to replace the conditional requirement to repay accrued interest upon completion by VivoPower of a debt or equity raise of at least $25 million, with the conditional requirement to make repayments of interest and/or principal to meet the mandatory repayment schedule described in sections (ii) and (iii) below following a qualifying liquidity event.
(ii) upon completion by VivoPower International PLC of a qualifying liquidity event of at least $5.0 million, Aevitas is required to make mandatory prepayment of principal and interest to AWN Holdings in accordance with
the following schedule:
a) proceeds $5 million to $7.5 million - pay 25% of amounts raised;
b) proceeds $7.5 million to $12.5 million - pay $1.875 million plus 45% of amounts raised;
c) proceeds $12.5 million and above - pay $4.125 million plus 25% of amounts raised.
(iii) for the purposes of the mandatory prepayment requirement, a ‘qualifying liquidity event’ excludes direct investments into VivoPower’s subsidiary, Tembo, and debt raised in renewable energy projects. Additionally, prior to VivoPower’s Nasdaq listing it was a sourcerespect of working capital funding. Asfinance facilities, but includes:
a) equity or debt raise;
b) trade sale of underlying subsidiary or business unit (including, for example, Aevitas and Caret); and
c) loan repayment from Tembo to VivoPower.
(iv) as consideration for the concessions agreed with AWN, VivoPower International PLC committed to issue AWN with 500,000 warrants, with a duration of 12 months, at 31 March 2017, there was in place an exercise price of $0.67 per share.
In December 2021, a related partyshort-term loan of $18,992,263. $1.1 million (A$1.5 million) was provided from AWN to Aevitas O Holdings Pty Limited at an interest rate of 10.0%, increasing to 12.5% from January 1, 2022. The loan interest is payable monthly in arrears andset to expire on April 1, 2025 (initially set as April 30, 2022, then extended to the first capital repaymentearlier of October 1, 2023, then extended onJanuary 11, 2023 to April 1, 2025). The requirement for the loan is dueto expire upon completion by VivoPower International PLC of a debt or equity raise of at least S$25 million was dropped on 1 April 2018.June 30, 2023. Facility extension fees of A$29,000 (A$40,000) and $43,500 (A$60,000) are payable upon maturity, relating to the two extensions respectively.
There were additionalOn February 22, 2022, a short-term $3.0 million loan was provided from AWN to Aevitas, with an interest rate of 10.00% per annum payable on the principal sum upon maturity. The loan is set to expire on April 1, 2025 (initially set as May 13, 2022, then extended to the earlier of October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower International PLC of a debt or equity raise of at least S$25 million was dropped on June 30, 2023. Facility extension fees of $85,000 and $110,000 are payable upon maturity, relating to the two extensions respectively.
On December 22, 2022, a short-term $3.0 million loan was provided from AWN to Aevitas, with an interest rate of BBSY bid floating rate (on average 3.60% for the period from inception to June 30, 2023) plus fixed margin of 15.0% per annum payable on the principal sum upon maturity. A 1% facility establishment fee of $30,000 was deducted upon initial loan drawdown, and a further 3% exit fee of $90,000 is payable on expiry. The loan is set to expire on April 1, 2025 (initially set as October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower International PLC of a debt or equity raise of at least S$25 million was agreed on January 11, 2023, then dropped on June 30, 2023. A facility extension fee of $115,000 is payable upon maturity.
In February and March 2023, further short term balances outstanding atloans of A$0.5 million and A$0.25 million were established between AWN and Aevitas, drawn down between February and May 2023. The loans have an interest rate of BBSY bid floating rate plus fixed margin of 15.0% per annum payable on the year-end $1,404,919.23 whichprincipal sum upon maturity, with expiry dates of June 30, 2023. 1% facility establishment fees of total A$7,500 were deducted upon loan drawdowns, and further 3% exit fees of total A$22,500 are due for repayment at payable on expiry. On June 30, 2023, the end of May 2017.expiry or the loans was amended to August 31, 2023.
Mr. Hui is paid fees of $50,000 per annum during the year. Mr. Hui elected to receive 100% of his fees in cash. $25,000 remaining accrued and payable as at June 30, 2023. Mr. Hui also receives equity-based remuneration in relation to his involvement in management of Critical Power Services segment, and the hyper-turnaround and hyperscaling program. Of the 17,500 ($13,125) annual retention RSUs granted on April 1, 2020, vesting annually from June 2021 to June 2026, 3,500 RSUs ($2,625) vested in the current year. Of the 52,500 ($39,375) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 6,314 RSUs ($4,736) vested in the current year. A further 20,000 annual retention RSUs ($5,200) were granted to Mr. Hui on January 11, 2023, vesting annually from December 2023 to December 2025.
From time to time, costs incurred by AWN on behalf of VivoPower are recharged to the Company. During the year ended June 30, 2023, $1,138,346 was recharged to the Company (year ended June 30, 2022: $343,806,year ended June 30, 2021: $1,028,096). At June 30, 2023, the Company has a payable to AWN in respect of recharges of $1,392,303 ( June 30, 2022: $313,688,June 30, 2021: $4,345).
Aevitas is indebted to The Panaga Group Trust, of which Mr. Kevin Chin is a beneficiary and one of the directors of the corporate trustee of such trust, with 4,697 Aevitas Preference Shares, of face value A$46,970. The Panaga Group Trust earned A$3,302 ($2,188) dividends on the Aevitas Preference Shares during the year ended June 30, 2023.
Chairman’s fees for Kevin Chin in the amount of £68,000 ($81,819) were charged to the Company by Arowana Partners Group Pty Ltd (“APG”) in the current year. A further $130,863 costs incurred by APG on behalf of the Company were recharged to the Company in the year. At June 30, 2023, the Company had an account payable of $157,036 in respect of these services. Mr. Chin is a shareholder and director of Arowana Partners Group Pty Ltd during the year ended June 30, 2023.
As CEO, Mr. Chin is paid £325,000 base fees, £38,000 annual professional development allowance. Of the base salary, 4 months were paid in cash, whilst for 8 months, Mr. Chin agreed to receive payment in the form of 541,666 cashless warrants in VivoPower shares, exerciseable in the period June 3, 2024 to June 3, 2029 at an exercise price of $0.60. Shares issued following exercising of warrants will remain restricted for 12 months. Mr. Chin has allocated these warrants to a benevolent cause, the ASEAN Foundation.
Mr. Chin receives equity-based remuneration in relation to his involvement in leading the hyper-turnaround and hyperscaling program. Of the 87,200 ($65,400) annual retention RSUs granted on April 1, 2020, vesting annually from June 2021 to June 2026, 17,440 RSUs ($13,080) vested in the current year. Of the 261,600 ($196,200) performance RSUs vesting quarterly from September 2020 to June 2023, dependent on meeting quarterly performance goals, 31,456 RSUs ($23,592) vested in the current year. In December 2021, the Remuneration Committee approved an equity award of RSUs in relation to short-term incentives for the year ended June 30, 2022, vesting in June 2023 deferred from June 2022. The award vested 94,291 RSUs ($275,330), based on Mr. Chin's base salary £325,000x 1.3237 exchange rate x 64% performance measurement / $2.92 VWAP (Volume weighted average price). A further 20,000 annual retention RSUs ($5,200) were granted to Mr. Chin on January 11, 2023, vesting annually from December 2023 to December 2025.
On November 26, 2021, APG provided a loan of $0.37 million to Caret, to provide working capital assistance. The loan incurred interest during the year of $22,895 at 8% plus a 2% facility fee, plus a one-off establishment fee of $7,400. The loan plus interest were repaid in August 2022.
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30. Key management personnel compensationAn extraordinary general meeting of shareholders was held on July 6, 2023, which included a consideration and approval, in accordance with section 618 of the Companies Act 2006, that the Company (acting by its Board) be and is hereby authorised to consolidate, or consolidate and divide, all or such number of its existing Ordinary Shares of $0.012 each into such reduced number of Ordinary Shares of such increased nominal value as the Company’s Board may at any time prior to 23October 2023 determine is appropriate in order to ensure that the Company remains compliant with the applicable rules of Nasdaq concerning the minimum trading price of the Company’s shares. The Ordinary Shares existing after any exercise of this power by the Company shall have the same rights and be subject to the same restrictions (save as to nominal value) as the existing Ordinary Shares of $0.012 each in the capital of the Company as set out in the Company’s articles of association for the time being. This resolution was approved by The Company’s shareholders by no less than 96% of votes cast.
Tembo signed a landmark joint venture agreement with Francisco Motors, the pioneering manufacturer of jeepneys in the Philippines. Under the agreement, Tembo will develop and supply EUV electrification kits for a new generation of electric jeepneys. One of the country’s cultural icons, jeepneys are the most common utility vehicle in the Philippines and the main mode of public transportation, accounting for just over 40% of public transportation in the country. There are more than 200,000 jeepneys on the road in the Philippines, of which more than 90% are at least 15 years old and running on second-hand diesel engines. Under the Public Utility Vehicle Modernization Program, the Philippine Government requires that all jeepneys and other public utility vehicles with at least 15 years of service be replaced with Euro 4-compliant or electric-powered vehicles. This creates a US$10bn+ addressable market for the replacement of the old jeepneys. Francisco Motors and Tembo have already secured their first orders and have commenced work to deliver on those orders. The agreement will also give Tembo access to low-cost assembly in the Philippines.
33. | Key management personnel compensation |
Key management personnel, which are those roles that have a groupGroup management aspect to them, are included in note 7Note 9 to the consolidated financial statements.
34. | Ultimate controlling party |
31. UltimateAs at June 30, 2023, AWN held a 39.5% equity interest in the Company. Since June 30, 2021, the Company no longer has an ultimate controlling partyparty.
The
In prior periods, the ultimate controlling party and the results into which these financials arewere consolidated is Arowana International Limited.was AWN, a company registered in Australia.
Key management personnel, which are those roles that have a Group management aspect to them, are included in Note 9 to the consolidated financial statements.
35. | Prior year adjustments |
F-34For the year ended 30June, 2022, $0.5 million of expenses were erroneously not booked until 2023 that related to services provided in the year end 30June 2022 for which no accruals had been created. These expenses included $0.4 million professional services but also included $0.1 million equity incentives. The impact was a reduction in the profit and loss of $0.5 million, a $0.4 million increase current liabilities and $0.1 million increase in equity accounts.
For the year ended 30June 2021, $0.5 million of deposits had been incorrectly classified as intangible assets for which these deposits were refunded in the year ended 30June 2023. The reclassification resulted in current assets increasing by $0.5 million and an opposite reduction in long term assets with no impact on profit and loss or gross assets.
For the years ended 30June, 2022 and 30June, 2021, it was noted that $0.4 million of inventory had incorrectly been classified within other receivables. This has now been corrected with an increase in inventory in both years of $0.4 million and a reduction in other receivables.