BlueNRGY (CBDEF) 20-F/A 2014 FY Annual report (foreign) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

(Mark One)

¨ Registration statement pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934

or

x Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2014

or

¨ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

or

¨ Shell company report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this shell company report

From the transition period from                    to                    

Commission file number 001-36136

BlueNRGY Group Limited

(Exact Name of Registrant as specified in its charter)

Australia	Level 11 32 Martin Place Sydney NSW 2000 Australia
(Jurisdiction of Incorporation or Organization)	(Address of Principal Executive Offices)

Richard Pillinger

Chief Financial Officer

BlueNRGY Group Limited

Level 11

32 Martin Place

Sydney NSW 2000

Tel: +061-2-9037-1149

E-mail: rpillinger@cbdenergy.com.au

(Name, Telephone, E-mail and/or facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Ordinary Shares no par value	NASDAQ Capital Market
(Title of Each Class)	(Name of Exchange On Which Registered)

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of June 30, 2014, 4,718,133 ordinary shares, no par value, were issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ¨     No  x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See the definitions of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨ Accelerated filer  ¨ Non-accelerated  filer  x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing

US GAAP  ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board  x Other  ¨

If “Other” has been checked in the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ¨    No  x

EXPLANATORY NOTE

This Amendment No. 1 to Form 20-F amends our Annual Report on Form 20-F for the fiscal year ended June 30, 2014, filed with the Securities and Exchange Commission on June 1, 2015, to include a revised report of HLB Mann Judd, the Company’s public registered independent accounting firm, to state that our financial statements are presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

In addition, we have revised the cover page to check off the basis of accounting we used to prepare the financial statements included in this filing as IFRS as issued by the IASB and not Australian Accounting Standards.

In addition, we have also revised the following statements to replace the references to the Australian Accounting Standards with references to IFRS as issued by the IASB: (i) one risk factor in Item 3D; and (ii) a statement in Item 8A.

Finally, we have made conforming changes to Notes 2(a), 2(c), 2(d), 2(f), 2(p), 2(x), and 3(a) to our audited financial statements.

Since the rules of the Securities and Exchange Commission require that any Item of Form 20-F which is being amended must be filed in its entirety, this Amendment also includes Items 3, 8, 18, and 19 in their entirety. Except as described above, no change has been made to such Items or to any other portion of the Annual Report on Form 20-F as filed on June 1, 2015. The filing of this Amendment does not, and does not purport to, otherwise amend, update or restate the information in the Annual Report on Form 20-F as filed on June 1, 2015 or reflect any events that have occurred after such date.

PART I

3.A.             Selected Financial Data

The following summary consolidated financial data as of June 30, 2014, 2013 and 2012 and for the three years ended June 30, 2014, 2013 and 2012 are derived from the audited consolidated financial statements of BlueNRGY Group Limited included elsewhere in this Report.

Our historical results are not necessarily indicative of the results that may be expected for any other future period. Unless otherwise specified, all amounts are presented in Australian Dollars (A$).

You should read the selected consolidated financial data set forth below in conjunction with Item 5, “Operating and Financial Review and Prospects” and our audited consolidated financial statements and notes thereto included elsewhere in this Report.

Consolidated Statements of Operations Data:

Amounts in A$(000) except as noted	Consolidated
For the year ended June 30	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
Revenues from continuing operations		14,065			64,130			43,577
Other income		3,793			4,241			4,563
Cost of raw materials, consumables used, and contractors		(5,727	)		(39,201	)		(42,802	)
Employee benefit expenses		(10,557	)		(14,786	)		(15,416	)
Compliance & consultants		(4,793	)		(4,519	)		(8,864	)
Advertising and marketing		(2,468	)		(1,010	)		(2,265	)
Travel costs		(872	)		(931	)		(1,516	)
Occupancy expenses		(915	)		(1,258	)		(1,246	)
Provision for impairment of receivables and bad debts written off		(75	)		(334	)		(1,345	)
Other expenses		(3,255	)		(3,207	)		(3,215	)
Share of net loss of associates		-			-			(108	)
Depreciation and amortisation expenses		(632	)		(808	)		(855	)
Finance costs		(5,061	)		(11,122	)		(2,326	)
Break fee from terminated acquisition		-			-			(2,475	)
Impairment loss on available-for-sale financial assets		(4	)		(560	)		(375	)
Impairment of financial assets and interest in joint ventures		(10,015	)		(18	)		(4,239	)
Impairment of intangible assets		-			-			(11,534	)
Loss from continuing operations before income tax		(26,516	)		(9,383	)		(50,441	)
Income tax benefit/(expense)		-			65			(2,464	)
Net loss for the period from continuing operations		(26,516	)		(9,318	)		(52,905	)
Profit/(loss) from discontinued operations		1,086			911			(1,837	)
Net loss for the period		(25,430	)		(8,407	)		(54,742	)
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets		(800	)		800			-
Exchange differences on translation of foreign operation		(68	)		33			-
Other comprehensive income for the period, net of tax		(868	)		833			-
Total comprehensive loss for the period		(26,298	)		(7,574	)		(54,742	)

	Dollars		Dollars		Dollars
Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company:
Basic earnings per share	(13.57	)	(5.84	)	(34.06	)
Diluted earnings per share	(13.57	)	(5.84	)	(34.06	)
Earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share	(13.02	)	(5.27	)	(35.24	)
Diluted earnings per share	(13.02	)	(5.27	)	(35.24	)
Weighted average number of ordinary shares outstanding
Basic	1,953,691		1,596,246		1,553,483
Diluted	1,953,691		1,596,246		1,553,483

1

Consolidated Balance Sheet Data:

	2014			2013			2012
Amounts in A$(000)				(restated)			(restated)
Current assets		6,812			8,176			24,836
Non-current assets		11,915			24,724			17,434
Total Assets		18,727			32,900			42,270
Current liabilities		38,020			41,949			44,636
Non-current liabilities		378			391			537
Total liabilities		38,398			42,340			45,173
Shareholders’ equity		(19,671	)		(9,440	)		(2,903	)

Exchange Rates

The following tables set forth, for the periods and dates indicated, certain information regarding the rates of exchange of A$1.00 into US$ based on the 4pm market daily rate in Australia for cable transfers in Australian dollars as certified for customs purposes by the Reserve Bank of Australia. The exchange rate in effect on April 30, 2015, was AUD 1.00 = USD$0.8011.

2

A$1.00 =  US$ amount shown
Fiscal Year ended June 30,	At Fiscal Year End		Average Rate (1)		High Rate		Low Rate
2010		0.8523		0.8821		0.9349		0.7745
2011		1.0739		0.9881		1.0939		0.8366
2012		1.0191		1.0319		1.1055		0.9500
2013		0.9275		1.0271		1.0593		0.9202
2014		0.9420		0.9187		0.9672		0.8716

	High Rate		Low Rate
2014 Month
November		0.8809		0.8500
December		0.8500		0.8101
2015 Month
January		0.8212		0.7770
February		0.7875		0.7693
March		0.7874		0.7607
April		0.8011		0.7580

(1)  Averages are calculated using the average of the daily rates during the relevant period

3.B.           Capitalization and Indebtedness

Not applicable.

3.C.           Reason for the Offer and Use of Proceeds

Not Applicable.

3.D. Risk Factors

Our business faces significant risks. You should carefully consider the risks described below, as well as the other information contained in this Report, including our financial statements and related notes. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our ordinary shares could decline, and you may lose part or all of your investment.

3

Risks Related to our Financial Condition

We experienced operating losses in fiscal years 2013, 2014 and, are continuing to experience operating losses that in the current fiscal year that cannot be sustained by our liquidity and there is uncertainty that we can continue as a going concern.

All of our business segments recorded a loss from operations and impairment of asset values for the fiscal years ended June 30, 2013 and June 30, 2014 totaling A$7.6 million and A$25.4, respectively. In November 2014 we filed for Voluntary Administration, or VA, in Australia. Pursuant to a deed of company arrangement, or DOCA, we shed various unprofitable businesses and compromised liabilities of approximately A$37.5 and exited VA on January 27, 2015, referred to as the Emergence Date. Notwithstanding the restructuring of our business through the VA process, several of our operating units, including the monitoring business of BlueNRGY LLC acquired on the Emergence Date (as further described under Item 4B), have experienced operating losses and continue to do so. Moreover, there is no assurance that the losses affecting some of our businesses can be avoided in the future or that cash flow from our profitable businesses will be sufficient to offset such losses. In conjunction with our corporate overhead and our debt service obligations, operating losses have depleted our liquidity to the extent that we cannot continue as a going concern unless we can achieve one or more of the following: higher levels of operating profitably now and in the future, raising additional debt or equity capital, deferring payment to creditors and selling assets. There is no assurance that we will have access to sufficient funds from such initiatives on terms acceptable to our Board of Directors (the “Board”), or on any terms, to meet our future needs.

Some of our businesses are in the development stage and together with requirements to cover our corporate overhead will cause us to consume cash for the foreseeable future, further straining our liquidity.

Our business development and system development expenses for our monitoring business currently exceed our revenues and it is unknown when, if ever, growth in revenues from this line of business will generate cash flow in excess of costs. In addition we have re-launched our small-scale solar business in Australia under our own brand and are making plans to do so in the USA. Together with meeting costs of our corporate overhead, these initiatives are likely to consume substantial cash for the foreseeable future. To the extent that our liquidity permits us to do so, our Board has determined to continue to pursue development of the monitoring and small-scale solar businesses and cash will continue to be used for these purposes. Consequently, our liquidity may be depleted to the extent that we are unable to continue as a going concern.

Our financial results often vary significantly from period-to-period and year-to-year, and results for a particular interim period may not necessarily be indicative of the results for the following period or full year.

Certain of our businesses are subject to irregular revenues or seasonality that have led to, and in the future are likely to result in, significant fluctuations in profitability and cash flow from period to period. Our climate control and large-scale solar businesses are project driven and individual projects in either business segment can represent a meaningful percentage of our revenue, net income and cash flow in any single accounting period. Consequently, delays associated with any single project can lead to significant shortfalls in our expected financial performance. This volatile revenue pattern in our project-related businesses will be exacerbated by any projects that we choose to build, own (typically at least through the project commissioning phase) and transfer (to a third-party), referred to as BOT projects.

In addition, our Australian residential and commercial solar business has historically experienced seasonal peaks and declines that has exacerbated our quarter-to-quarter revenue and net income volatility. As a consequence of these dynamics, it is very difficult to identify trends in overall business activity or profitability for the consolidated company or to anticipate future profitability based on recent results. Moreover, the very short project implementation cycle and short lead time associated with most of our projects make other metrics of business trajectory, such as backlog, difficult to apply. Our current and future expense levels, internal operating plans and revenue forecasts, and operating costs are, to a large extent, fixed. As a result, we may not be able to sufficiently reduce our costs in any period to adequately compensate for an unexpected short-term shortfall in revenues, and even a small shortfall could disproportionately and adversely affect financial results for that period. Consequently, we could confront unanticipated liquidity shortfalls that would jeopardize our ability to continue as a going concern.

4

All of our lines of business are cash intensive, and operations have been, and in the future are likely to be, affected adversely if we fail to maintain sufficient levels of liquidity and working capital.

Our small scale solar business requires investment in marketing and advertising activities to generate the leads to replenish or grow the sales pipeline. Consequently, our success depends heavily on the ability to fund marketing activity. The time taken for a lead generated from marketing and advertising activity to completion of the associated installation can vary from one month to over three months. The large-scale solar and Parmac project businesses require us to utilize our own working capital to fund operations between progress payments and, in the former case, through completion of projects that are being constructed under the BOT model. The monitoring business is a net consumer of cash due largely to the requirement to fund system development expenses necessary to provide a competitive product offering to our customers. Our Remote Area Power Systems, or RAPS, segment involves substantial upfront investment in generating assets with realization of cash flows and profit over time. Our now-discontinued wind business unit typically required us to make significant cash investments over multiple years before realizing revenue or cash flow. We currently lack the capital and liquidity to adequately fund all of these businesses. Additional cash will be needed to fund any growth. Consequently, we have not been able to operate our small-scale solar business above break-even levels for more than two years. Our project activities, particularly in the large-scale solar sector have been constrained, leading to losses that are ongoing and an inability to capitalize on opportunities to generate revenue. We must raise additional capital, further curtail operations in some of our lines of business or divest some of our business units to achieve profitability. Failure to do so increases the likelihood that we will not be able to continue as a going concern and the value of our ordinary shares will decline or become worthless.

Our growth strategy and the future success of our company is based, in part, on pursuing acquisitions of operating companies and renewable energy projects. If we are not successful in completing such acquisitions, or realizing the anticipated benefits from such transactions, then it could have a material adverse effect on our results of operations and financial condition.

One of our growth strategies is to pursue targeted acquisitions of operating companies and renewable energy projects at various stages of development. If we are not successful in implementing such strategy and acquiring targeted companies or projects, it could have a material adverse effect on our results of operations and financial condition. Further, we will have devoted significant time and resources in such pursuits, without receiving any benefit for our efforts. In addition, even if we are able to successfully complete such acquisitions, if we have misjudged the value to our company, or if we fail to successfully integrate any such assets or operations with ours, it could have a material adverse effect on our results of operations and financial condition, and you could lose some or all of your investment in our company.

Applicable accounting rules may result in positive reported earnings when our actual cash flow is negative and we lack the funds to adequately operate the business or to grow.

International Financial Reporting Standards as issued by the International Accounting Standards Board, such as those related to recognizing revenue on a percentage of completion basis or from projects when control and the risks of ownership have been substantially transferred to others, may require us to recognize revenue before payment is received. As a result, although our accounting earnings may be positive, our cash flow may be negative and we may not have sufficient working capital to meet our ongoing requirements or fund new business growth. Our management has not established reliable credit facilities or other mechanisms such as selling receivables that allow us to convert receivables on incomplete projects or long-term assets into cash to overcome this problem. Consequently, our reported earnings and financial statement net worth may not be indicative of our ability to meet contractual obligations or to sustain our company as a going concern. There can be no assurance that we will have access to working capital from credit or equity markets that is sufficient to meet our needs as we grow.

Our indebtedness to lenders and other creditors in our operating subsidiaries that were not included in the VA is significant relative to our liquidity and we may encounter demands for payment that we cannot meet, which could have adverse consequences for our business and future prospects.

Although our convertible notes, installment notes and other liabilities payable by our corporate parent and many of our subsidiaries were extinguished pursuant to the DOCA, as of April 30, 2015, we had total outstanding debt (excluding current trade balances and accruals) at our operating subsidiaries of approximately A$1.1 million. At our corporate parent and operating subsidiaries where there is an excess of current liabilities over current assets the excess is approximately A$2.1 million, including that portion of deferred trade obligations and debt classified as current. While we have negotiated to satisfy this indebtedness in the future, (as further discussed below in Item 5.B.), our ability to meet our obligations when payment is due will also depend on our cash reserves, available additional financing and ongoing operating performance, and there can be no assurance that we will possess or be able to secure the resources to meet these obligations when they become due.

5

Our Convertible Notes outstanding at the end of our fiscal years ending 2012 2013 and 2014 that remained outstanding upon commencement of the VA were extinguished pursuant to the DOCA.

Although we are not currently involved in litigation with any creditors, there can be no assurance that creditors who have agreed to payment terms will continue to forbear if we cannot meet those terms. In such case we may receive demands for immediate payment that exceed our ability to pay. Our failure to satisfy or refinance these obligations when due would have a material adverse impact on the indebted operating subsidiaries and could jeopardize our ability or that of the affected operating subsidiaries to continue in business and could cause us to liquidate, resulting in the total loss of value to our shareholders.

We require additional capital to execute on current and anticipated future business opportunities and may not be able to raise the necessary capital on acceptable terms, if at all, with the result that we may have to curtail some business activities or forego growth.

We do not have sufficient capital to operate all of our businesses in accordance with our business plans or to ensure that we can continue as a going concern. Consequently, we are likely to have to raise additional capital in the future through public or private debt or equity financings by issuing additional ordinary shares or other preferred financing shares, debt or equity securities convertible into ordinary or preferred shares, or rights to acquire these securities. We may need to raise this additional capital in order to (among other things):

· take advantage of expansion or acquisition opportunities;

· acquire, form joint ventures with or make investments in complementary businesses, technologies or products;

· develop new products or services;

· respond to competitive pressures;

· respond to a difficult market climate.

Our management expects us to issue additional debt securities to fund ongoing operations, including solar projects and related working capital. The associated debt agreements may contain restrictive covenants and we will be subject to additional costs related to originating such debt and for interest. Any scheduled principal amortization will place further burdens on our cash flow. Notwithstanding the expectations of our management, there is no assurance that debt can be raised on terms acceptable to our Board, if at all.

Our management also expects us to issue additional equity securities to fund operations of our existing businesses, the acquisition of additional businesses and pursuant to employee benefit plans, although our Board has not considered or approved any changes to our employee benefit plans that are not described in this Report. We may also issue additional equity securities for other purposes. These securities may have the same rights as our ordinary shares or, alternatively, may have dividend, liquidation, or other preferences to our ordinary shares. The issuance of additional equity securities will dilute the holdings of existing shareholders and may reduce the price of our ordinary shares. Because of our recent operating losses and capital deficiencies, it is likely that raising equity capital will be difficult and costly, with the result that dilution to existing shareholders could be high. There is no assurance that equity capital can be raised at a price acceptable to our Board or at all.

6

Notwithstanding write-offs of goodwill and intangibles in our 2012, 2013 and 2014 fiscal years and in conjunction with the effectiveness of the DOCA, we continue to have recorded substantial goodwill and intangibles asset value as the result of prior acquisitions and goodwill and intangibles are subject to periodic reviews of impairment that could result in future reported losses and that may limit our ability to raise capital.

We have previously acquired companies and assets that were retained through the VA process. The excess of the purchase price after allocation of fair values to tangible and identifiable intangible assets for those businesses is allocated to goodwill. We conduct periodic reviews of goodwill and intangible values for impairment. Any impairment would result in a non-cash charge against earnings in the period reviewed, which may or may not create a tax benefit, and would cause a corresponding decrease in shareholders’ equity. For the two fiscal years ended June 30, 2012, we recorded impairments of goodwill and intangibles of A$11.5 million.

Additional impairments of good will were recognized in conjunction with the effectiveness of the DOCA, with the result that our assets were comprised of A$15.9 million of goodwill and intangibles on our unaudited internal financial statements as of the Emergence Date. In keeping with our accounting policies, the value of goodwill and intangibles will again be reviewed as of June 30, 2015, the end of our 2015 fiscal year in light of the circumstances at the time and a further impairment of goodwill and intangibles may be recorded if warranted by the circumstances. In the event that there is a prolonged economic downturn in our served markets, competitive conditions become more challenging or we fail to achieve expected financial performance in our Solar PV business segment or our Monitoring business in particular, we may be required to record further impairments of goodwill in the future. Such impairment could be material and lead to a significant reduction in our stock price or make it more difficult for us to raise needed capital.

Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.

We intend to conduct operations worldwide through subsidiaries in various tax jurisdictions. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices and other inter-company charges be the same as those between unrelated companies dealing at arm’s length and that contemporaneous documentation is maintained to support such transfer prices and charges. On that basis, tax authorities could require us to adjust our transfer prices and intercompany charges and thereby reallocate our income to reflect such revised terms, which may result in a higher tax liability to us or limit our ability to utilize loss carry forwards and similar tax assets that are available to only some of our operating subsidiaries and not others, and, possibly, result in two countries taxing the same income, any of which outcomes could adversely affect our financial condition, results of operations and cash flows.

Risks Related to Our Industry and Business

Our large-scale solar and air conditioning installation businesses often receive payments upon the achievement of contractual milestones, and any delay or cancellation of one or more large projects could interrupt our cash flow and adversely affect our overall business.

We recognize revenue for Parmac and a significant fraction of our large-scale solar business on a “percentage of completion” basis and, as a result, our revenue from these installations is tied to the performance of contractual obligations, which are generally driven by timelines for the installation of solar power and air conditioning systems at customer sites.  This could result in unpredictability of revenue and, in the short term, revenue shortfalls or declines.  As with any project-related business, there is the potential for delays within any particular customer project. Variation of project timelines and estimates may impact the amount of revenue recognized in a particular period.  In addition, certain of our customer contracts may include payment milestones at specified points during a project.  Because we must invest substantial time and incur significant expense in advance of achieving milestones and the receipt of payment, failure to achieve milestones could adversely affect our business and cash flows.

7

Our residential solar business in Australia accepts assignment of small-scale technology certificates, or STCs, in lieu of some cash payments from customers and is exposed to risk of significant changes in market value of STCs between the date the value of STCs is agreed with our customers and the date STCs are assigned to us.

Based on current government policy and the average size of our residential installations, an average of approximately 25% of the revenue from small-scale solar projects we sell is in the form of small-scale technology certificates, or STCs. The secondary market in which we typically sell registered STCs is thin, with few purchasers or market makers. When we quote a customer for the price of a residential installation, we agree to a value for the STC portion of the revenue with the customer. On completion of an installation and completion of STC registration, our practice is generally to assign registered STCs to one of our solar PV equipment suppliers at a negotiated value in lieu of cash payment. The value attributed to the STCs by our suppliers is based on market price at the time of assignment to them. There can be a delay of up to three months between agreeing to a value for STCs with our customers and completion of registration and assignment of STCs to one of our suppliers; during this time we are exposed to changes in the market price of STCs. The magnitude of this financial risk is affected by the volatility of STC prices and can be significant. Our management has determined that it is not cost effective to hedge the financial exposure to STCs that we hold and therefore we do not do so.

If solar projects developed under our BOT or BOO models are not sold to buyers quickly after completion and commissioning, we are exposed to significant risk of illiquidity and we may incur diminished profits or losses due to deterioration in market prices for such projects and the costs of the credit currently available to us to finance these projects.

We typically expect to complete projects initiated under the BOT model within one to three months. However, our limited experience in selling a 5MW portfolio of such projects in Europe in November 2012 demonstrates that closing a sale of commissioned projects can take six months or more. When we complete a project under the BOT model or the build, own, and operate model (the “BOO model”), we are fully exposed to changes in project value from the period between our commitment to undertake such a project and the time we reach an agreement to sell such project at a set price (for BOT projects) or the carrying value of the project is impaired (for BOO projects such as the Chatham Island Project).

Market conditions and value for completed large-scale solar projects are subject to significant fluctuations as a result of factors such as changes in relative currency values, market interest rates, institutional demand for projects generating fixed cash flows and idiosyncratic political and regulatory changes that affect investors’ perceptions of project risk. Moreover, based on our previous experience, the cost of capital for our BOT projects can significantly reduce our expected profitability if holding periods are protracted. The combination of exposures to changes in project values and the cost of financing BOT and BOO projects could cause us to incur significant losses on such projects in the future and the necessity to tie up capital in such projects between commitment and sale (or throughout the holding period for BOO projects) could strain our company’s limited liquidity.

We are highly dependent on our senior management and technical personnel and if we areunable to retain key personnel and attract and train highly qualified personnel, particularly in regions or lines of business where we are expanding, the quality of our services may decline and we may not successfully execute our growth strategies or achieve sustained profitability.

Our success depends in large part upon our ability to continue to attract, train, motivate and retain highly skilled and experienced employees, including technical personnel and members of our executive management. Qualified senior executives and technical employees are generally in great demand and may be unavailable in the time frame required to satisfy our company’s and customers’ requirements. All of our executive managers, including William Morro - Executive Chairman and Managing Director, Richard Pillinger - Chief Financial Officer and Emmanuel Cotrel – Senior Vice President and founder of our monitoring and data analytics business, are at-will employees. The absence of contractual financial incentives to continue their employment with our company increases the chances that they could be successfully recruited for alternative employment. We have no internal successors for any of these executives and, if any of them departed, we would have to undertake a search for a replacement. There is no assurance that a qualified replacement could be timely found or engaged on terms acceptable to our Board. While we currently have available technical expertise sufficient to operate our business as currently configured, expanding into new jurisdictions, significantly increasing our scale and further developing our monitoring technology will necessitate employing additional highly skilled technical personnel. We expect competition for such personnel to increase as the market for solar and other renewable power systems and post-installation monitoring and management expands.

8

There can be no assurance that we will be able to attract and retain sufficient numbers of highly skilled executives or technical employees in the future. The loss of such personnel, and executive management in particular, or our inability to hire or retain sufficient personnel at competitive rates of compensation could impair our ability to secure and complete customer engagements and could harm our business.

We do not generally have long-term agreements or repeat business opportunities with our major project customers and if our management is unable to identify and win new customers and projects we cannot maintain or grow revenue in this line of business.

Our solar PV projects are generally not sold pursuant to long-term agreements with, but instead are sold on a one-time purchase-order basis.  We typically contract to perform large projects with no assurance of repeat business from the same customers in the future.  Our experience is that customers may cancel or reschedule purchase orders for solar PV projects on relatively short notice.  Cancellations or rescheduling of customer orders could result in the delay or loss of anticipated sales without allowing sufficient time to reduce, or delay the incurrence of, our corresponding inventory and operating expenditures.  In addition, changes in forecasts or the timing of orders from these or other customers expose us to the risks of supply shortages or excess purchase commitments for inventory.  This, in addition to the non-repetition of large-scale solar projects and the possibility that we may fail to obtain new large-scale projects could cause our revenues to decline, and, in turn, our operating results to suffer. Our monitoring, operations and maintenance services provided to the renewable energy and climate control markets are generally delivered under annual or multi-year contracts that have the potential to mitigate volatility from our project businesses. However, the scale of our service businesses is not yet sufficient to have a significant impact on our overall revenue or profitability and there is no assurance that we will be successful in expanding these activities or realizing meaningful economic benefits from recurring revenue.

Unlike some of our competitors, we do not have established and reliable sources of financing on which our customers can rely to finance their solar and climate control projects and as a result we are at a competitive disadvantage and our sales and profits may suffer.

We do not have contractual relationships with financing sources in any of the jurisdictions in which we undertake contracts for PV solar or climate control installations that can be relied on to provide debt or equity financing for our prospective customers who require such financing in order to commit to projects or engage our services. In the small-scale solar business in Australia financing is now generally available in the market and to our customers, but we may be at a disadvantage relative to energy distribution companies and other large competitors who can offer prospective financing to a broader range of customers or on better terms than us. The availability of financing for large-scale solar systems and climate control systems in the markets we serve is specific to the particulars of the installation and customer financial strength and varies widely. In any case, the availability of financing for large-scale system installations is generally less than for residential systems because the reliability of the cash flows from owners of large installations is generally perceived by financing sources to not be as high and the project development risk is greater. The consequence is that we are forced to compete for large-scale projects largely on price or from the limited universe of buyers who can self-finance or who have their own sources of financing for such projects. As a result, the growth of our large-scale solar and climate control business focused on the provision of engineering, procurement, and construction, or EPC, services has been slow and irregular in all of the markets we serve, and there is no assurance that this will change or that our large-scale EPC businesses will achieve consistent profitability.

Our large-scale solar, wind and major climate control projects are subject to lengthy sales cycles that adversely affect the predictability of results from sales and marketing efforts and make our financial forecasts unreliable and revenue recognition irregular.

Factors specific to our customers have an impact on our sales cycles.  Our equity fund, commercial, and government customers may have longer sales cycles due to the timing of periodic budgeting requirements typical for projects requiring significant capital expenditures.  Other customers may delay projects because of cyclical conditions in their industries or because of idiosyncratic liquidity or profitability issues. Lengthy and challenging sales cycles may mean that our sales and marketing efforts seldom result in rapid increases in revenue and delays may have adverse effects on our operating results, financial condition, cash flows, and stock price.

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We sometimes act as general contractor for our customers in connection with the installation of solar power and HVAC systems and we are subject to risks associated with construction, bonding, cost overruns, delays, and other contingencies, which could have a material adverse effect on our business and results of operations.

When we act as a general contractor for our customers in connection with the installation of solar power and HVAC systems, costs are estimated at the time of entering into the sales contract for a particular project, and these costs are reflected in the overall price that charged to customers for the project.  These cost estimates may not accurately reflect all costs incurred by subcontractors, suppliers and other parties engaged by us on our projects.  In addition, qualified, licensed subcontractors are often required to install some of the systems.  Shortages of such skilled labor could significantly delay a project or otherwise increase our costs.  Should miscalculations in planning a project or defective or late execution occur, we may not achieve the expected margins necessary to cover our costs.  Also, many systems customers require performance bonds issued by a bonding agency.  Due to the general performance risk inherent in construction activities, it is sometimes difficult for us to secure suitable bonding agencies willing to provide performance bonding. In the event we are unable to obtain the requisite bonding, we will be unable to bid on, or enter into, sales contracts for the projects.  Delays in receiving solar or climate control system components, other construction delays, unexpected performance problems or other events could cause us to fail to meet these performance criteria, resulting in unanticipated and severe revenue and earnings losses and financial penalties.  Such delays are often caused by inclement weather, failure of suppliers to timely meet orders or transportation providers to make timely deliveries. We operate in multiple countries that have unique permitting requirements, which, if not met, may cause delays.  The occurrence of any of these events could have a material adverse effect on our business and results of operations.

A portion of our revenues is generated by construction contracts for new or renovated buildings, and, thus, a decrease in construction activity could reduce our construction contract-related sales and, in turn, adversely affect our revenues.

Some of our solar-related revenues and most of our HVAC project revenues are generated from the design and installation of systems in newly constructed and renovated buildings, plants and residences.  Our ability to generate revenues from such construction contracts depends on the number of new construction starts and renovations, which should correlate with the cyclical nature of the construction industry and be affected by general and local economic conditions, changes in interest rates, lending standards and other factors. 

In our installation and EPC businesses, we are highly dependent upon suppliers for the components used in the systems and products we design and install and any increases in the price of components, including as a result of the imposition of duties or tariffs, or any interruptions to, shortage or decline in the quality of the components we purchase could adversely affect our business.

Key components used in all of our solar, wind and energy efficiency/climate control systems are purchased from third party manufacturers, many of which are located in countries other the system installation area.  Market prices for these purchased components are subject to fluctuation. We cannot ensure that the prices charged by our suppliers will not increase because of changes in market conditions or other factors beyond our control. An increase in the price of components used in our systems could result in an increase in costs to our customers and could, as a result, have a material adverse effect on our revenues and demand for our products and services. Interruptions in our ability to procure needed components for our systems, whether due to discontinuance by suppliers, delays or failures in delivery, shortages caused by inadequate production capacity or unavailability, or for other reasons, would adversely affect or limit our sales and growth. There is no assurance that we will be effective in selecting qualified manufacturers on acceptable terms in the future and, if we are able to do so, there can be no assurance that product quality from those suppliers will continue to be acceptable, which could lead to a loss of sales and revenues. 

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Problems with product quality and performance on projects we develop or install may damage our market reputation and cause our revenue and operating results to decline, particularly in the small-scale solar market.

Our PV solar and climate control businesses involve the sale of systems that have long lifetimes (up to 20 years or more in the case of key components in PV solar systems). In general, the manufacturers of components in the systems we sell are warranting those components and we offer limited warranties on system design and installation workmanship for such components; for example, up to 5 years on installation workmanship for small-scale solar systems we have sold in Australia. Under real-world operating conditions, which may vary by location and design, as well as installation, air particulate, soiling and weather conditions, a typical system installation may perform in a different way than under standard test conditions or design assumptions. If the systems we have sold perform below expectations or have unexpected reliability problems, we may suffer reputational damage, even if the problems are caused by operating conditions or defects of components produced by other manufacturers. The significance of this would be magnified if those suppliers fail to fully meet their warranty obligations. We could suffer additional reputational damage, even though we bear no direct responsibility for the component performance. In such a situation, if it were to occur, we might be unable to gain new customers and our plans to grow and maintain the small-scale solar business at a profitable scale could be thwarted.

One of our former subsidiaries, divested in our VA process previously sold inverters produced by, or under license from, Oelmaier, a German company that is no longer in business. Our subsidiary discontinued sales of the Oelmaier inverters in 2012 due to problems with product design and licensor support, but many customers made warranty claims prior to our VA and more are likely to continue to do so. Our estimated costs of warranty for all previously sold products, including the Oelmaier products, was A$0.2 million and A$0.4 million for the fiscal years ended June 30, 2014 and 2013, respectively. However, there can be no assurance about when or whether we will be able to overcome the negative market impact associated with the Oelmaier-licensed products and it may continue to dampen sales for the foreseeable future.

While our legal obligations to address future warranty claims was extinguished under the DOCAs that defined our Reorganization Plan (refer to Item 4.A. under the heading “Voluntary Administration and Deed of Company Arrangement”), market pressures may require us to expend resources to address warranty claims from our legacy residential solar customer base if we are going to grow the scale of that business in the Australia. Post VA, we do not have any reserves for addressing Oelmaier warranty claims and it is not possible to estimate the impact that acting or failing to act with respect to such claims may have on the growth or profitability of our Australian residential business. The possibility exists, however, that the adverse impact on our results of operations could be significant and contribute to reducing the value of an investment in our ordinary shares. .

Unanticipated warranty or service claims or the failure of suppliers to meet backstop warranty obligations could expose us to incur incremental expense that could significantly lower our profitability or threaten our viability.

Except for system design and installation workmanship deficiencies, the warranty obligations related to climate control and solar PV systems we sell are contractually borne directly by the system component suppliers.  Our contractual obligations to our customers in the event of a third-party component failure are generally limited to fielding service requests and organizing the repair or replacement of the faulty unit with the original component’s manufacturer for a period of time specified in the contract.In our experience, other than the costs of warranty claims related to Oelmaier inverters that Oelmaier did not meet, the costs of such service obligations have not been material and we expense them as incurred.  

Notwithstanding the limited contractual financial exposure that we have for system component failures, if the responsible component manufacturers fail to fully meet their warranty obligations, we may find it to be practical necessity to incur the expense to correct the problem in order to preserve our market reputation for reliability and service and to maintain system sales.  We have not reserved for such a possibility and may not have the financial or other resources to respond to such a problem if and when it occurs.  The result could be adverse and unexpected profit volatility for our climate control and PV solar businesses or a loss of market acceptance that could threaten the financial viability of this business segment altogether.

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If we fail to effectively manage our planned expansion, we may fail to meet our strategic objectives and our financial performance could be materially and adversely impacted.

The further expansion of our business into new jurisdictions is one of our strategies for growing revenues from solar system installations and renewable system monitoring and operations and maintenance, or O&M, services sales. Such expansion is also expected to mitigate the impact of downturns in renewable energy demand in countries in which we are currently developing solar projects. Undertaking further international expansion of our solar system installation businesses is a complex task that requires, among other things the identification of locations that are environmentally favorable for solar project development and that have suitable regulatory and tax policies, utility cost, tariff and interconnection structures that allow renewable energy to be cost competitive (after taking into account local subsidies) and access to cost-effective financing for project owners, among other considerations. Different but equally complex considerations affect the expansion opportunities for our monitoring and O&M services businesses. Even if we successfully identify suitable countries for expansion, we may be unable to extend our business into these new locations if competitors enter the market first or are already well established. In addition, we may not have the necessary management, local knowledge or financial resources to undertake the successful and timely development or integration of projects in additional countries. Additionally, our ability to generate cash from existing operations may be slower than expected, or may not occur at all, resulting in the requirement for further funding to achieve our expansion plans that exceeds our ability to raise additional capital on acceptable terms. Our expansion plans could also be affected by cost overruns, failures or delays in obtaining government approvals of necessary permits and our inability to establish supply chains to serve new markets and other factors.

There is no assurance that we can effectively manage our planned expansion or achieve any expansion plans at all. If we are unable to do so, we will not be able to take advantage of growth opportunities, execute our business strategy or respond to competitive or market pressure, any of which could materially and adversely affect our business, results of operations, financial condition and share value.

Although we have historically derived most of our revenues from Australia and a few other countries, we currently do business in several international jurisdictions whose political and regulatory environments and compliance regimes differ from those of our home territory (or the United States) and our planned expansion into new markets will subject us to additional business, financial and competitive risks.

A portion of our revenue has been attributable to operations in countries other than Australia and the United States, including Italy, Thailand and the United Kingdom and this is expected to extend to other countries in Europe, Asia and Latin America with the acquisition of BlueNRGY LLC in January 2015 (refer to Item 4.A. under the heading “Recent Acquisitions”. Such activities accounted for approximately 2% and 22% of our consolidated revenue in fiscal years ended June 30, 2014 and June 30, 2013, respectively. Risks associated with our operations in foreign areas include, but are not limited to:

• political, social and economic instability, war and acts of terrorism;

• potential seizure, expropriation or nationalization of assets;

• damage to our equipment or violence directed at our employees, including kidnappings and piracy;

• increased operating costs;

• complications associated with repairing and replacing equipment in remote locations;

• repudiation, modification or renegotiation of contracts, disputes and legal proceedings in international jurisdictions;

• limitations on insurance coverage, such as war risk coverage in certain areas;

• import-export quotas;

• confiscatory taxation;

• work stoppages or strikes;

• unexpected changes in regulatory requirements;

• wage and price controls;

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• imposition of trade barriers;

• imposition or changes in enforcement of local content laws;

• the inability to collect or repatriate currency, income, capital or assets;

• foreign currency fluctuations and devaluation; and

• other forms of government regulation and economic conditions that are beyond our control.

Part of our strategy is to prudently and opportunistically acquire businesses and assets that complement our existing products and services, and to expand our geographic footprint. If we make acquisitions of businesses or assets in other countries, we may increase our exposure to the risks discussed above. Governments in some foreign countries have become increasingly active in regulating and controlling the implementation of renewable energy projects, the sale of power generated from such projects in their countries and the processing of information from or about such generating assets. In some areas of the world, this governmental activity has adversely affected the amount of activity undertaken by renewable energy developers and may continue to do so. Some countries, such as China, restrict the storage or export outside their borders of data related to energy generation. Operations in developing countries can be subject to legal systems that are not as predictable as those in more developed countries, which can lead to greater risk and uncertainty in legal matters and proceedings. In some jurisdictions we are subject to foreign governmental regulations favoring or requiring the awarding of contracts to local contractors or requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These regulations may adversely affect our ability to compete. Additionally, our operations in some jurisdictions may be significantly affected by union activity and general labor unrest. There can be no assurance that we can avoid such factors having a material adverse effect on our results of operations or financial condition.

Our operations are subject to multiple tax regimes, and changes in legislation or regulations in any one of the countries in which we operate could negatively and adversely affect our operating results.

Our operations are carried out in several countries across the world, and our tax filings are therefore subject to the jurisdiction of a significant number of tax authorities and tax regimes, as well as cross-border tax treaties between governments. Furthermore, the nature of our operations means that we routinely have to deal with complex tax issues (such as transfer pricing, permanent establishment or similar issues) as well as competing and developing tax systems where tax treaties may not exist or where the legislative framework is unclear. In addition, our international operations are taxed on different bases that vary from country to country, including net profit, deemed net profit (generally based on turnover) and revenue-based withholding taxes based on turnover.

Our management determines our tax provision based on our interpretation of enacted local tax laws and existing practices and uses assumptions regarding the tax deductibility of items and recognition of revenue. Changes in these assumptions and practices could significantly impact the amount of income taxes that we provide for in any given year and could negatively and adversely affect the result of our operations.

We face common international trade and supply chain risks for our installation businesses, including delay or complete disruption of supply, logistics cost volatility, exchange rate fluctuations and changes in policies and tariffs, that could trigger an unexpected adverse impact on operational and financial performance.

Most of the components in our products are produced in places other than that where the products and systems are used or installed. For example, currently, all the solar modules for our solar PV systems are produced in China and must be shipped to installation sites in Australia, the United States, Europe and other jurisdictions where we operate. Key components for our energy efficiency businesses are manufactured in Europe, the United States or in Asia, even though we sell these systems primarily in Australia. Consequently, order lead times may be long and we and our customers are subject to substantial expense and delays that can accompany long-distance shipping, inventory management and design and specification of customized orders. Currency exchange rates can also shift between the time of ordering and delivery, sometimes resulting in us incurring higher costs. If mistakes in component order fulfillment occur, extended time can be required to remediate the problem and could lead to delays in completing projects, recognizing revenue or receiving cash flow.

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Licenses and permits are required to operate in some jurisdictions, and the loss of or failure to renew any or all of these licenses and permits or failure to comply with applicable laws and regulations could prevent us from either completing current projects or obtaining future projects, and, thus, materially adversely affect our business.

We are subject to various national, state, and local laws and regulations in the various countries in which we operate and we may be required to make significant capital expenditures to comply with laws and the applicable regulations and standards of governmental authorities and organizations. Moreover, the cost of compliance could be higher than anticipated. In addition, we are subject to compliance with the U.S. Securities Act, Exchange Act and Foreign Corrupt Practices Act in addition to certain international conventions and the laws, regulations and standards of other foreign countries in which we operate. It is also possible that existing and proposed governmental conventions, laws, regulations and standards, including those related to climate and emissions of “greenhouse gases,” may in the future add significantly to our operating costs or limit our activities or the activities and levels of capital spending by our customers.

In addition, many aspects of our operations are subject to laws and regulations that relate, directly or indirectly, to the renewable industry or to public health and safety. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and even criminal penalties, the imposition of remedial obligations, and the issuance of injunctions that may limit or prohibit our operations. The application of these requirements, the modification of existing laws or regulations or the adoption of new laws or regulations curtailing production activity could materially limit our future contract opportunities, materially increase our costs or both.

Our international growth strategy may prove to be disruptive and divert management resources with adverse effect on our financial condition or performance.

Our international growth strategy involves complex transactions and presents financial, managerial and operational challenges, including diversion of management attention from existing businesses, difficulty with integrating personnel and financial and other systems, increased expenses, including compensation expenses resulting from newly hired employees, the assumption of unknown liabilities and potential disputes.  We could also experience financial or other setbacks if any growth strategies incur problems of which we are not presently aware.

We may incur significant costs and delays in our attempt to implement our international expansion strategy, particularly when we form joint ventures or make acquisitions.

We currently develop and install large-scale solar PV systems or offer performance monitoring and O&M services for such systems, targeting the markets in North America, the Eurozone, Thailand and various Pacific island nations. However, our company intends to undertake and provide life-cycle services to project developments in other international markets. New geographic markets may have different characteristics from the markets in which we currently sell products, and our success will depend on our management’s ability to properly address these differences. These differences may include:

· differing regulatory requirements, including tax laws, trade laws, labor regulations, tariffs, export quotas, customs duties or other trade restrictions;

· limited or unfavorable intellectual property protection;

· risk of change in international political or economic conditions;

· fluctuations in the value of foreign currencies and interest rates;

· difficulties and increased expenses in complying with a variety of U.S. and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act;

· potentially longer sales cycles;

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· higher volume requirements;

· warranty expectations and statutory obligations; and

· cost, performance and compatibility requirements.

In addition, we have and will continue to pursue acquisitions and joint ventures to facilitate our expansion into new products and services and into new geographic markets. For example, we acquired Green Earth Developers, LLC (“GED”), a Georgia limited liability company, in July 2014 and BlueNRGY LLC, a Florida limited liability company in January 2015 (refer to Item 4.A. under the heading “Recent Acquisitions”). Whether the mechanism we use for expanding our business is through internal development or acquisition, failure to develop and introduce new products successfully, to generate sufficient revenue from these products to offset associated marketing and installation costs, or to otherwise effectively anticipate and manage the risks and challenges associated with expansion into new product and geographic markets, could adversely affect our revenues and our ability to achieve or sustain profitability.

Our company has experienced significant turnover of members of our Board and among members of our top management and we may lack sufficient continuity or experience in these key positions to ensure success of the business.

Subsequent to July 1, 2014 through the date of this Report, we have experienced the following turnover among members of our Board and among members of our top management:

Effective July 18, 2014 Todd Barlow resigned from the Board. Prior to his resignation Mr. Barlow served as a non-executive director.

Effective August 5, 2014, Ms. Luisa Ingargiola was appointed as a non-executive member of the Board and resigned on October 23, 2014 due to concerns that she could not give adequate time to both her role with another publicly-traded company and her role with the Board.

Effective October 4, 2014, Mr. Jeffrey A. Tischler was appointed the Company’s Chief Financial Officer and resigned on November 12, 2014.

As of November 14, 2014, Mr. Gerard McGowan was: suspended as the Company’s Managing Director pursuant to Article 18 of the Company’s Constitution. Following the commencement of our VA process, (refer to Item 4.A. under the heading “Voluntary Administration and Deed of Company Arrangement”) the Administrator terminated the Contractor Agreement pursuant to which we procured the services of Mr. McGowan as our Chief Executive Officer and Mr. McGowan resigned as a member of our Board on December 30, 2014.

In December, 2014 our CEO of International Operations, James Greer, and our Senior Vice President of Wind and Off Grid Solutions, Patrick Lennon, was terminated by the Administrator.

Effective January 27, 2015, the two then-existing members of the Board, William C. Morro and Carlo Botto, by unanimous resolution, appointed John H. Chapple, Yves-Regis Cotrel, and John F. Donohue as members of the Board, subject to receipt of their written consent to serve in such capacity. The appointment of Mr. Cotrel and Mr. Donohue became effective on January 27, 2015 and that of Mr. Chapple on February 2, 2015. With the exception of Mr. Botto, who has been employed by companies serving the power generation and energy trading sectors throughout his career, our directors have limited experience in the renewable energy sector.

We anticipate that additional directors and executive managers with relevant experience and qualifications will be appointed in the future, however, our corporate history and weak financial condition may make it more difficult or impossible for us to attract suitable executives or independent directors. Consequently, there can be no assurance that we will be successful in making appointments to our management and Board that can ensure our success.

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If we fail to retain and attract executives and Board members with the capabilities to meet the significant challenges we face in all of our markets and lines of business, our stock price could decline or become completely illiquid and our shareholders could face a total loss of their investment.

We are subject to litigation that could have an adverse effect on our business and operating results.

In December 2014, a class action securities suit, referred to as the Texas Action, was filed in a federal court in the Eastern District of Texas against the Company and various current and past officers and directors, namely Mr. William Morro, Mr. Carlo Botto, Mr. Richard Pillinger, Mr. Todd Barlow, Mr. Gerard McGowan and Mr. James Greer. Mr. Morro, formerly a non-executive independent director currently serves as Chairman of the Company’s Board and its Managing Director (the Australian entity equivalent of a CEO); Mr. Botto continues as a non-executive member of the Board; and Mr. Pillinger is the Company’s CFO. The other parties to the lawsuit are no longer associated with the Company.

In December 2014, a different lawsuit was filed in New York State Supreme Court, referred to as the New York Action, by one of the holders of Series B Preferred Shares against the Company and Messrs. Morro, Botto, and McGowan. A settlement with Mr. Botto and Mr. Morro was reached pursuant to which the New York Action was withdrawn. However, the settlement imposes no restrictions on the plaintiff with respect to reinstating the New York action against Mr. McGowan or other previously unnamed parties at any time in the future.

We believe that the claims against our Company related to the Texas and New York Actions are extinguished pursuant to the DOCA (refer to Item 4.A. under the heading “Voluntary Administration and Deed of Company Arrangement”), but litigation against our prior and current officers and directors may continue, causing the Company to incur expenses related to these matters. In addition, plaintiffs in the Texas and New York Actions, or other parties bringing a claim against us related to events arising prior to our VA, including, among others, the Administrator of Secured Energy Bonds Plc in the UK, may not recognize or accept the limitations on the Company’s liability imposed by the DOCA. Consequently, the Company may have to incur expenses to enforce the terms of the DOCA and such expenses could be significant. It is also possible that courts in jurisdictions where we do business or have assets, other than Australia, may not recognize or accept the limitations on our liability under the DOCA or may rule in favor of parties who assert claims against our subsidiaries domiciled or operating in such foreign jurisdictions. In such a case, we, or our foreign subsidiaries, could become burdened with liabilities for which we do not have a provision on our balance sheet and we may incur significant unforeseen defense costs.

In addition, the numerous operating hazards inherent in our business increase our exposure to litigation, which may involve, among other things, contract disputes, personal injury, environmental, employment, warranty and product liability claims, tax and securities litigation, patent infringement and other intellectual property claims and litigation that arises in the ordinary course of business.

Our management cannot predict with certainty the outcome or effect of any claim or other litigation matter. Litigation may have an adverse effect on us because of potential negative outcomes such as monetary damages or restrictions on future operations, the costs associated with defending the lawsuits, the diversion of management’s resources and other factors. Given our weak financial condition, a requirement to pay significant monetary damages or to restrict our business could jeopardize our viability as a going concern and could trigger illiquidity or a loss in value of our stock.

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Our internal controls over financial reporting and other matters do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and investor’s willingness to buy or hold our stock.

Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet. As soon as practicable, we intend to address our internal controls over financial reporting and to establish enhanced formal policies, processes and practices related to financial reporting and to the identification of key financial reporting risks and assessment of their potential impact and linkage of those risks to specific areas and activities within our organization that are applicable to our business. Additionally, we will need to further document our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and, when available exemptions as an emerging growth company under the JOBS Act or other applicable exemption is no longer available, a report by our independent registered public accounting firm addressing these assessments. Although we have not yet tested our internal controls in accordance with Section 404, we have material weaknesses in our internal control over financial reporting. The material weaknesses include, but may not be limited to inadequate accounting oversight, policies, procedures, and controls specific to complex debt agreements, taxation computations and the application of accounting estimates for the recognition of impairment allowances for good will and intangibles and investments held by the company. We cannot conclude, in accordance with Section 404, that we do not have other material weaknesses in our internal controls or a combination of other significant weaknesses that could result in the conclusion that we have a material weakness in other aspects of our internal controls.

As a result of these material weaknesses and as a result of the concerns raised by the Company’s previous registered independent public accounting firm as described in the Company’s October 24, 2014 Report of Foreign Private Issuer on Form 6-K (the “October 6-K”), the Company’s financial statements for the fiscal years ended June 30, 2012 and June 30, 2013 have been restated. We have been implementing new accounting policies and procedures and review controls since Mr. Morro became our Managing Director following our emergence from VA. We acknowledge that additional resources, as well as the completion of a comprehensive review of the design and operating effectiveness of our controls relating to financial reporting, will be necessary in the future to fully remedy weaknesses in our financial reporting process. Further, if not fully remediated, these control deficiencies could continue to impact the reliability of our financial statements. As a public entity, we will be required to complete our initial assessment in a timely manner, subject to the exemption from auditor attestation requirements that is accorded to us as an emerging growth company under the JOBS Act. Until we cease to be an emerging growth company or our exemption from auditor attestation expires, we intend to avail ourselves of the exemption.

If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we or our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting when we are required to have them do so. Matters impacting our internal controls may cause us to be unable to prevent fraud or report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the United States Securities and Exchange Commission (the “SEC”) or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements could also suffer if we and our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could materially adversely affect our company and lead to a decline in the price of our registered equity securities.

As a publicly-traded company in the United States, we incur significant costs, and our management is required to devote substantial management time and attention to our public reporting obligations.

As a publicly-traded company in the United States, we incur significant legal, accounting and other expenses. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations thereunder, as well as under the Sarbanes-Oxley Act, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and the rules and regulations of the SEC, and The NASDAQ Stock Market, have resulted in a significant amount of time that our Board and management must devote to our compliance with these rules and regulations. We expect these rules and regulations to continue to divert management time and attention from our product development and other business activities and complying with them will require us to divert some of our limited management and financial resources from the execution of our business development strategy. This could slow our growth and delay our achievement of profitability and adversely impact our stock price.

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We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we are taking advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” (i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (iii) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iv) we will not be required to hold nonbinding advisory votes on executive compensation or shareholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can delay its adoption of any new or revised accounting standards, but we have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may remain an “emerging growth company” until as late as June 30, 2019 (the fiscal year-end following the fifth anniversary of the completion of our initial public offering), though we may cease to be an “emerging growth company” earlier under certain circumstances, including (i) if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of any June 30, in which case we would cease to be an “emerging growth company” or (ii) if our gross revenue exceeds $1 billion in any fiscal year.

The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act, particularly whether or not all of the exemptions will apply to foreign private issuers. In addition, investors may find our ordinary shares less attractive if we rely on the exemptions and relief granted by the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may decline and/or become more volatile.

Deteriorations in global political, economic and market conditions could negatively impact our business.

Our company’s operations are affected by global political, economic and market conditions. The recent economic downturn generally reduced the availability of liquidity and credit to fund business operations worldwide. As regards the renewable energy sector in particular, this currently being acutely felt in Europe, where renewable developments are not growing at historical rates and the situation is likely to worsen if the downturn is prolonged. This dynamic has adversely affected our customers, suppliers and lenders and has caused us to largely withdraw from pursuing solar PV business in Europe, other than the United Kingdom where government policies are still favorable. Because of the large installed base of projects in Europe, however, we still consider this a promising, albeit mature and highly competitive, market for our monitoring and O&M services businesses.

Further, such conditions and uncertainty about future economic conditions may make it challenging for us to obtain equity and debt financing to meet our working capital requirements, forecast our operating results, make business decisions, and identify risks that may affect our business, financial condition and results of operations.

If we are unable to timely and appropriately adapt to changes resulting from the difficult macroeconomic environment, and declining levels of incentives available in countries where we continue to operate, then we are likely to experience a reduction in demand for our products and consequently will experience a material adverse effect on our operations and sales and on our financial condition generally.

The renewable energy sectors we serve depend on the availability of rebates, tax credits and other financial incentives and government policies, the reduction or elimination of which is occurring and is likely to reduce the demand for our services.

Many U.S. states, including California, Nevada, and New Jersey, and other countries such as the United Kingdom, Australia and Italy, offer substantial incentives to offset the cost of solar power or wind generation systems.  These incentives can take many forms, including direct rebates, state tax credits, system performance payments and feed-in tariffs, and Renewable Energy Credits, referred to as RECs.  However, there can be no assurance that these incentives will continue to be available in any or all of the jurisdictions in which we operate and, in many places, government policies have been implemented that will reduce or soon eliminate such incentives. For example, in Australia the number of RECs received per KW installed has been reduced continuously and the number of credits received for 5kW and smaller systems was reduced from a 5 multiplier in 2010 to a 1 multiplier beginning in January 2013. We expect it will ultimately be phased out altogether. In Italy and other European countries, minimum user prices for solar electricity production and feed-in tariffs are subject to reduction annually for new applications and are subject to unannounced change; subsequent, unpredictable decrees will redefine rates for solar power plants commissioned thereafter.  A reduction in or elimination of such incentives could substantially increase the cost or reduce the economic benefit to our customers, resulting in significant reductions in demand for our products and services, which may negatively impact our sales.

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All sectors served by our company are highly competitive, with low barriers to entry and intense price competition, which could negatively impact our results and may prevent us from achieving sustained profitability. In addition, our company does not have significant market share in any sector we serve and we may lose business to larger companies that are better able to achieve cost efficiencies, respond to customer needs or weather a decline in market conditions.

In general, the industries in which our businesses operate are highly competitive and fragmented, subject to rapid change and have low barriers to entry. Most of our businesses have the attributes of general contracting businesses where projects are open to competitive bidding and new customer acquisition is a constant challenge because a low percentage of customers are repeat purchasers of our products and services. Even our services businesses, i.e. system performance monitoring and O&M services are often subject to a competitive bid process initially and then on an annual basis or after a short multi-year period. In particular, contracts for large projects are traditionally awarded on a competitive bid basis, with pricing often being the primary factor in determining which qualified contractor is awarded a job, although each contractor’s technical capability, safety performance record and reputation for quality also can be key factors in the determination. Residential solar projects undertaken in the small-scale solar and energy efficiency segments and the O&M services we offer do not generally require us to utilize proprietary technology and the capital required to undertake individual projects is small and available to many competitors. Many other renewable energy system developers / installers, providers of climate control and energy efficiency solutions and monitoring and O&M services providers are larger than us and have resources that are significantly greater than ours. These competitors may be able to better withstand industry downturns, compete on the basis of price, and acquire new equipment and technologies, all of which could affect our revenues and profitability. These competitors compete with us both for customers and for acquisitions of other businesses.

In particular, with respect to the solar PV segment, we may, in the future, compete for potential customers with solar system installers and servicers, electricians, roofers, utilities and other providers of solar power equipment or electric power.  Also with respect to the performance monitoring business we are competing for potential customers with other data storage and software providers, manufacturers of components such as solar panels, inverters and wind turbines, large system integrators and providers of O&M services and utilities. Some of these competitors have significantly greater financial, technical and marketing resources and greater name recognition than we have.  We believe that our ability to compete depends in part on a number of factors outside of our control, including:

· the ability of competitors to hire, retain and motivate qualified technical personnel;

· the ownership by competitors of proprietary tools to customize systems to the needs of a particular customer;

· the price at which others offer comparable services and equipment;

· the extent of our competitors’ responsiveness to client needs;

· risk of local economy decline; and

· the Evolution of installation or monitoring technology.

Competition in the provision of O&M services to the renewable power industry may increase in the future, partly due to the low barriers to entry, as well as from other alternative energy resources now in existence or developed in the future.  Increased competition could result in price reductions, reduced margins or loss of market share and greater competition for qualified technical personnel.  There can be no assurance that we will be able to compete successfully against current and future competitors.  If we are unable to compete effectively, or if competition results in a deterioration of market conditions, our business and results of operations would be adversely affected.

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Our proprietary monitoring business, which we believe to have great strategic importance for our Company, is in the first stages of commercialization and if it does not function as planned or gain rapid market acceptance, our ability to penetrate this market may be limited or foreclosed by our competitors, our liquidity will be strained and the value of our shares may be severely impaired.

The first commercial version of our monitoring system software was released in February 2015 and has now been deployed to a few institutional customers on a trial basis. Initial trial and feedback has been positive, but it is too early to tell whether customer acceptance will lead to contracts that will generate material near-term revenues. The roll-out of the system to a broad spectrum of users will require that we hire additional personnel to integrate the data feeds from a larger universe of sources than is currently possible. Because of the uncertainties about our ability to win customers and earn revenue, and the expectations that development and marketing costs will accelerate, we are unable to determine when, or if, the monitoring business will become cash positive. This uncertainty is magnified by the competition to provide monitoring services. There are numerous competitors developing or marketing monitoring systems with at least some characteristics similar to ours. A few of these competitors currently offer robust systems with features and capabilities similar to those we expect to provide. Despite the proliferation of renewable power generating systems worldwide, asset ownership is beginning to concentrate and we believe that the market for monitoring services may be largely locked up by a small number of competitors within a few years. Primarily for this reason, we are investing aggressively, within the limitations of our liquidity, to accelerate system development and deployments. If we cannot capture meaningful market share quickly, we may be foreclosed from pursuing much of the available revenue from this sector and we may not realize a return on investment in the development of our monitoring system.

We do not carry business interruption insurance, and any unexpected business interruptions could adversely affect our business.

Our operations are vulnerable to interruption by earthquake, fire, power failure and power shortages, hardware and software failure, floods, computer viruses, and other events beyond our control.  In addition, we do not carry business interruption insurance to compensate us for losses that may occur as a result of these kinds of events, and any such losses or damages incurred by us could disrupt our solar integration projects and other operations without reimbursement. Because of our limited financial resources, such an event could threaten our viability to continue as a going concern and lead to dramatic losses in the value of our ordinary shares.

The renewable energy sectors we serve are notable for the pace of technological change and our operations could be adversely affected if we fail to keep pace with such changes; and changes in technology could make it difficult for us to be competitive with our available technology and prevent us from achieving sustained profitability.

We develop renewable energy projects and are offering services to participants in the renewable energy markets. In part because of the large amounts of capital deployed in the sector and the global growth, the renewable energy sector is becoming increasingly competitive. To meet our clients’ needs, we must continually source, qualify and offer updated technology for the projects and services we provide. We are at a competitive disadvantage in doing so because of our small scale, weak financial condition and unprotected know-how and proprietary technology. In addition, rapid and frequent technology and market demand changes can render the existing technologies known and used by us obsolete, requiring substantial new capital expenditure or negatively impacting our market share. Any failure by us to anticipate or to respond adequately to changing technology, market demands and client requirements could adversely affect our business and financial results.

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Solar and wind energy are, in some jurisdictions, more expensive sources of energy than the wholesale cost of conventional alternatives and a drop or stability in the retail price of conventional energy sources and other factors affecting energy costs may negatively impact demand for renewables and reduce our revenues and profitability.

We believe that an end customer’s decision to purchase or install solar power capabilities is primarily driven by the cost and return on investment resulting from solar power systems. Fluctuations in economic and market conditions that affect the prices of conventional and non-solar alternative energy sources, such as decreases in the prices of oil and other fossil fuels, could cause the demand for solar power systems to decline, which would have a negative impact on our profitability. Other factors that could have a negative effect on our rapidly evolving business include, but are not limited to:

· changes in utility electric rates or net metering policies;

· increases in the installed costs of solar or wind power due to changes in tariffs, taxes and subsidies; and

· adverse customer experience with performance and reliability of renewable power installations as they age.

If demand for solar power products fails to develop sufficiently or declines, we might not be able to generate enough revenue to sustain profitability. In addition, demand for solar power products in the markets and geographic regions we target may not develop or may develop more slowly than we anticipate. 

Overcapacity and financial distress among manufacturers of wind and solar power generation equipment is commonplace and also occurs to a lesser extent among climate control equipment manufacturers; OEM or component suppliers for systems we install fail to meet warranty obligations to our customers, or backstop warranty commitments to us, our business and profitability could be impaired.

Many large and well-known manufacturers of PV solar panels, wind turbines and related equipment necessary to implement functioning systems, such as inverters, have failed in recent years, including two of our significant past suppliers, Solon and Oelmaier. Others have been financially weakened, possibly including some of our current suppliers. The climate control sector is more mature and failures of equipment manufacturers are less common, but they do occur from time to time. Our PV solar, wind and climate-control installations are covered by warranties from these component suppliers, which they may not be able to meet. While, we do not generally have direct warranty obligations related to components produced by these suppliers we could suffer reputational damage if the component manufacturers default on their warranty obligations.

In all of our system installation businesses, if we fail to meet warranty obligations of our suppliers who fail to do so we may face precipitous declines in our sales. We believe this to be particularly the case in the residential solar segment in Australia and, if we re-launch a residential business in the USA where the importance of reputation as a provider of reliable systems is a critical factor in the sustainability the business. However, taking on warranty obligations for suppliers who default could place a financial burden on us that we are unable to meet. Either course of action could render our business non-viable.

Existing regulations, and changes to such regulations, may present technical, regulatory, and economic barriers to the purchase and use of wind and solar power products, which may significantly reduce demand for such systems and could harm our business.

Installations of solar power systems are subject to oversight and regulation in accordance with national and local ordinances, building codes, zoning, environmental protection regulation, utility interconnection requirements for metering, and other rules and regulations.  In the jurisdictions in which we operate, we attempt to keep up-to-date with these requirements on a national, state, and local level, and must design, construct and connect systems to comply with varying standards.  Some jurisdictions have ordinances that prevent or increase the cost of installation of our solar power systems.  In addition, new government regulations or utility policies pertaining to solar and wind power systems are unpredictable and may result in significant additional expenses or delays and, as a result, could cause a significant reduction in demand for solar and wind generation systems and our post-installation services.  For example, there currently exist metering caps in certain jurisdictions such as Queensland that effectively limit the aggregate amount of power that may be sold by solar power generators into the power grid.  Certain jurisdictions have passed ordinances that limit noise or threats to wildlife to levels that would preclude installation of cost-effective wind generation capacity. Moreover, in certain markets, the process for obtaining the permits and rights necessary to construct and interconnect a power system to the grid requires significant lead time and may become prolonged, and the cost associated with acquiring such permits and project rights may be subject to fluctuation.

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Our business benefits from the declining cost of solar panels, and our financial results would be harmed if this trend reversed or did not continue.

The declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the pricing of our solar energy systems and customer adoption of this form of renewable energy. If solar panel and raw materials prices do not continue to decline or increase, our growth could slow and our financial results would suffer. In a the past we have purchased a significant portion of the solar panels used in our solar energy systems from manufacturers based in China, some of whom benefit from favorable foreign regulatory regimes and governmental support, including subsidies. If this support were to decrease or be eliminated, if internal Chinese demand for panels increases to a level that exports are reduced, or if tariffs and import restrictions above current levels were to be imposed by U.S. or European governments it could lead to higher prices for panels (or other components), reducing demand and margins. A similar adverse impact on our results would occur if our access to specialized technology from Chinese manufacturers is restricted or becomes more expensive.

If potential owners of solar PV systems are unable to secure financing on acceptable terms as a result of financial crisis, rising rates or other factors, we could experience a reduction in demand for installation of our solar PV systems and may be unable to sell projects developed under our BOT model or owned or operated under our BOO model.

Many owners of solar PV systems depend on financing to purchase their systems. Moreover, in the case of debt financed projects, even if lenders are willing to finance the purchase of these systems, an increase in interest rates or a change in tax incentives could make it difficult for owners to secure the financing necessary to purchase a solar PV system on favorable terms, or at all. In addition, we believe that a significant percentage of owners purchase solar PV systems as an investment, funding the initial capital expenditure through a combination of upfront cash and financing. Difficulties in obtaining financing for solar PV installations on favorable terms, or increases in interest rates or changes in tax incentives, could lower an investor’s return on investment in a solar PV installation, or make alternative solar PV systems or other investments more attractive relative to solar PV systems based on our product platform. Any of these events could result in reduced demand for our systems, which could have a material adverse effect on our financial condition and results of operations.

Public opposition to development of solar and wind farms, particularly in the USA, Europe and more recently in Australia, is expected to make it more difficult to obtain the necessary permits and authorizations for such projects and will reduce development opportunities available to us.

Over the last few years, public disfavor of solar and wind farms in certain European countries that have historically allowed such projects (e.g., Spain and Italy) has been manifested in changes in government policies. In the opinion of our management, the public opposition in Europe has been triggered by concerns that scarce farm land was being displaced by such solar and wind power installations and that the cost of the power supplied from ground-based systems was unjustified and not economically sustainable. Moreover, the significant displacement of farmland and the costs of power supplied from ground-mount projects appears to have been caused by excessively high feed-in tariff rates set by regulators. Key policy changes observed include reductions of subsidies applicable to ground-based solar installations relative to other types of projects and changes in permitting regulations that make ground-based installations difficult or practically impossible to start. Consequently, the number of economically feasible projects in these high-potential regions has declined and the near-term opportunities for us to pursue large-scale solar projects in these proven markets have diminished rapidly. If this occurs in other jurisdictions such as the USA and Australia where land is plentiful, it could significantly diminish project opportunities and our potential for growth.  

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Regulations applicable to the U.S. market may exacerbate competitive pressures for PV solar development and reduce margins, making it harder for us to grow profitably in the United States.

In certain U.S. jurisdictions government regulations or utility policies pertaining to solar power systems are unpredictable and have the potential to cause significant additional expenses or delays for projects of all sizes. Also, some jurisdictions have imposed regulations that effectively limit the aggregate amount of power that may be sold by solar power generators into the power grid. In addition, the United States has imposed tariffs on Chinese-manufactured solar panels that have disrupted established supply relationships and increased costs. Collectively, these and similar factors may constrain implementation of U.S. solar energy systems and opportunities to sell our monitoring and O&M services relative to expectations. Our management expects these dynamics to increase competitive pressures among system developers and service providers that could lead to reduce pricing and profits. Our solar development and servicing initiatives in the United States may not succeed or be profitable as a result.

In our PV solar and climate control businesses we depend on a small number of suppliers for key components used in our products and systems with the result that we risk disruption in supply and may be constrained in negotiating competitive prices, lead times and other trade terms.

Our businesses focused on system design and installation provide the preponderance of our revenue. Nevertheless, our small scale and weak financial condition have compelled us to obtain key components required by these businesses from a small number of suppliers who would offer us credit terms. We believe that our commercial relationship with our suppliers in each of our business segments is good, but prior to and during the period when we were operating under VA, had difficulty making timely payments on a consistent basis to many of these suppliers. .Our historical inability to make timely payments has led to curtailment of shipments to us by suppliers, even after our emergence from VA and has reduced our recent revenues and increased our supply costs. Because of our continuing weak financial condition and limited liquidity, we may face the same issue in the future. We do not maintain, or expect to be able to maintain, sufficient inventories to allow us to buffer the consequences of supply interruptions. Although alternative suppliers exist for the components we sell in our solar installation and climate control businesses, new suppliers may not be willing to ship to us on customary trade terms, or at all, due to our financial condition. The sudden loss of any of our current primary component supply relationships could cause a delay in order fulfillment and be disruptive to our operations and lead to financial losses.

It is critical to the growth of our revenue that our products be high quality while offered at competitive pricing. Any constraints that we face in being able to negotiate with our suppliers may prevent us from being able to offer systems to customers on competitive terms or to do so profitably.

In addition, we are currently subject to fluctuations in market prices for the components that we purchase. We cannot ensure that the prices charged by our suppliers will not increase because of changes in market conditions or other factors beyond our control. An increase in the price of components used in our systems could result in an increase in costs to our customers and could have a material adverse effect on our revenues and demand for our products.

Interruptions in our ability to procure needed components for our systems, whether due to discontinuance by our suppliers, delays or failures in delivery, shortages caused by inadequate production capacity or unavailability, financial failure, manufacturing quality, or for other reasons, would adversely affect or limit our sales and growth. There is no assurance that we will continue to be able to find qualified sources for components on acceptable terms and, if we do, there can be no assurance that product quality will continue to be satisfactory, which could lead to a loss of sales and revenues.

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The termination of our right to use of the Westinghouse® brand to market solar installations was triggered by our VA and necessitates that we rebrand and re-launch our small-scale solar offerings in Australia and the USA; we have elected to do so under our own BlueNRGY brand and this process, if unsuccessful or more costly than we anticipate, could severely and adversely affect the viability of our solar business and the ability of our Company to continue as a going concern.

We began marketing PV solar systems solely under the Westinghouse® brand in Australia and New Zealand in April 2013 and in the USA in July 2014 and continued to do so until we received notice of termination of the license agreement with Westinghouse Electric Corporation in December 2014. This action forced us to immediately cease marketing and sales efforts for small-scale solar altogether and, following our emergence from VA, to develop a new website, marketing materials and business plans to re-launch this business under an alternative brand at great expense and with much lost time. We have determined apply our own BlueNRGY brand to the small-scale solar business beginning in Australia. Unlike the Westinghouse brand, which has wide consumer recognition in both the USA and Australia, the BlueNRGY brand is substantially unknown. It is therefore unclear whether or not the BlueNRGY brand will gain enough market acceptance to drive sales as we expect at a cost that allows this line of business to be profitable. If not, our revenues and margins could be severely adversely affected to the potential detriment of our overall business. If the brand is accepted by consumers, our failure to effectively execute the roll-out of branded product or satisfy requirements of the initial orders may increase our costs or cause our re-launch to be scaled back or cancelled. Any of these adverse outcomes could create a window of opportunity for the continued growth of competitors utilizing similar technology and could foreclose us from reentering these markets with a small-scale solar offering altogether. Because the BlueNRGY brand is our own, any costs necessary to protect and defend our exclusive rights to the brand must be borne entirely by us and, if significant, could further impair our liquidity.

Risks Related to our Ordinary Shares

We have never paid a dividend on our ordinary shares and do not intend to do so in the foreseeable future, and consequently, investors’ only opportunity to realize a return on their investment in our company is through the appreciation in the price of and sale of our ordinary shares.

We do not anticipate paying cash dividends on our ordinary shares in the foreseeable future and intend to retain all earnings, if any, for our operations. If we decided to pay dividends at some future time, we may not have sufficient funds legally available to do so.  Even if funds are legally available for distribution, we may be unable to pay any dividends to our shareholders because of limitations imposed by our credit agreements or a lack of liquidity.  Accordingly, our shareholders may have to sell some or all of their ordinary shares in order to generate cash flow from their investment.  Our shareholders may not receive a gain on their investment when they sell their ordinary shares and may lose some or all of their investment.  Any determination to pay dividends in the future on our ordinary shares will be made at the discretion of our Board and will depend on our results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable law, capital requirements, and other factors that our Board deems relevant.

We require additional capital to fund our businesses, and the sale of additional shares or other equity securities would result in dilution to our shareholders; such sales, or the perception that such sales may occur, may also depress our share price.

We require additional cash resources to fund our business plan and to continue operating as a going concern. Our company may sell additional equity to obtain needed funds and the use of such funds could include:

· funding losses and paying existing creditors;

· expanding into new product markets and geographies;

· acquiring complementary businesses, products, services or technologies;

· hiring additional technical and other personnel for purposes of business development, research and other activities consistent with our strategy; or

· otherwise pursue strategic plans and respond to competitive pressures.

We may also issue additional equity securities for other purposes including for compensation of employees, directors consultants and for employment benefit plans. These securities may have the same rights as our ordinary shares or, alternatively, may have dividend, liquidation, or other preferences to our ordinary shares. The issuance of additional equity securities will dilute the holdings of existing shareholders and may reduce the price of our ordinary shares.

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There are no assurances that equity financing will be available in amounts or on acceptable terms, if at all.  If financing is not available to us on acceptable terms, if and when needed, we will be unable to fund our operations or expand our business. In any such event, our business, financial condition and results of operations could be materially harmed, and we may be unable to continue as a going.

Our financing needs may require us to obtain additional debt financing to fund losses, future capital expenditures and to meet working capital requirements, which may be obtained on terms that are unfavorable to our company and/or our shareholders.

We will require additional financing in the future in connection with execution of our growth strategy, to fund future capital expenditures, working capital and losses. Additional debt financing may include conditions that would restrict our freedom to operate our business, such as conditions that:

· increase our vulnerability to general adverse economic and industry conditions;

· require us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital, growth and other general corporate purposes; and

· limit our flexibility in planning for, or reacting to, changes in our business and our industry.

The incurrence of additional indebtedness could require acceptance of covenants that, if violated, could further restrict our operations or lead to acceleration of the indebtedness that would necessitate winding up or liquidation of our company. In addition to the foregoing, our ability to obtain additional debt financing may be limited and there can be no assurance that we will be able to obtain any additional financing on terms that are acceptable, or at all.

There has been a trading halt on our ordinary shares since November 13, 2014 and there can be no assurance that we will maintain our listing on the NASDAQ Capital Market.

On November 13, 2014, NASDAQ halted trading in the shares of the Company at a last price of $0.90 pending receipt of additional information requested by NASDAQ.

As previously disclosed in a Report of Foreign Private Issuer on Form 6-K filed on December 2, 2014, the Company received a delisting determination letter from NASDAQ’s Listing Qualifications Department on November 25, 2014. The Company appealed the delisting determination and appeared with counsel at a hearing before an independent NASDAQ Hearings Panel (the “Panel”) on January 8, 2015.

On January 26, 2015, the Company received a letter from the Panel granting the Company’s request for continued listing on the NASDAQ Capital Market. In order to maintain its listing, the Company is required to meet a series of deadlines including filing this Report. There can be no assurance that NASDAQ will allow the Company to maintain its listing on the NASDAQ Capital Market.

If we do not maintain our listing on the NASDAQ Capital Market, our ordinary shares will again trade on the OTCBB. When our ordinary shares were traded on the OTCBB from February 2014 to June 2014, our ordinary shares did not trade on many days and the highest trading volume recorded in a single day was 2,100 shares. There are no assurances that a broader or more active public trading market for our ordinary shares will develop or be sustained. At any time when our shares do not trade on a national exchange, liquidity may be reduced and our stock price could decline.

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As a foreign private issuer, we follow certain home-country corporate governance practices in lieu of certain NASDAQ requirements applicable to U.S. issuers, affording less protection to holders of our ordinary shares.

As a foreign private issuer, we follow certain home-country corporate governance practices in lieu of certain NASDAQ requirements. Australian law does not require us to follow NASDAQ requirements, including with respect to the composition of our Board and nominations committee and executive sessions, having a majority of our board of directors be independent, establishing a nominations committee or holding regular executive sessions where only independent directors are present and the requirement to obtain shareholder approval in all circumstances where we issue shares constituting more than 20% of our outstanding shares. (Refer to Item 16G “Corporate Governance”.)

Such Australian home-country practices may afford less protection to holders of our ordinary shares than would be available to our shareholders if we were incorporated in the United States, governed by U.S. law and subject to all applicable NASDAQ regulations.

In June 2015, we plan to effect a reverse stock split in a range of 1-for80 to 1-for-150 which could adversely affect the market liquidity of our ordinary shares, impair the value of your investment and harm our business.

There are a number of risks associated with the reverse stock split that we plan to effect in June 2015, including that the reverse stock split may not result in a sustained increase in the per share price of our ordinary shares. We cannot predict whether the reverse stock split will increase the market price for our ordinary shares on a sustained basis. The history of similar stock split combinations for companies in like circumstances is varied, and we cannot predict whether:

· the market price per share of our ordinary shares after the reverse stock split will result in a sustained rise in proportion to the reduction in the number of shares of our ordinary shares outstanding before the reverse stock split,i.e., that the post-split market price of our ordinary shares will equal or exceed the pre-split price multiplied by the split ratio;

· the reverse stock split will result in a per share price that will attract brokers and investors who do not trade in lower priced stocks;

· the reverse stock split will result in a per share price that will increase our ability to attract and retain employees and other service providers;

· the market price per share will remain in excess of the US$1.00 minimum bid price as required by NASDAQ; or

· that we will otherwise meet the requirements of NASDAQ for continued inclusion for trading on the NASDAQ Capital Market.

In addition, the split will reduce the number of shares available in the public float and this may impair the liquidity in the market for our ordinary shares on a sustained basis, which may in turn reduce the value of our ordinary shares. We may in the future undergo one or more additional reverse stock splits. If we issue additional shares in the future, it will likely result in the dilution of our existing shareholders.

We are a “foreign private issuer” under the rules and regulations of the SEC and are thus exempt from a number of rules under the Exchange Act and will be permitted to file less information with the SEC than a company incorporated in the United States.

As a “foreign private issuer” under the Exchange Act, we are exempt from certain rules under the Exchange Act, and will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, or to comply with Regulation FD, which restricts the selective disclosure of material nonpublic information. In addition, we are exempt from certain disclosure and procedural requirements applicable to proxy solicitations under Section 14 of the Exchange Act. Our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Accordingly, there may be less publicly available information concerning us than there is for a company domiciled in the United States, and such information may not be provided as promptly as it is currently provided by companies domiciled in the United States. Although not anticipated, if we lose our status as a foreign private issuer, we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements with the SEC as if we were a company incorporated in the United States. The costs incurred in complying with these additional requirements could be substantial.

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Because we are organized under the laws of Australia, U.S. investors may face difficulties in protecting their interests, and their ability to protect their rights through the U.S. federal courts may be limited.

It may be difficult to bring and enforce suits against us because we are organized under the laws of Australia. Some or all of our directors will reside in various jurisdictions outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon our non-U.S. directors, or enforce judgments obtained in the United States courts against us or our non-U.S. directors. In addition, there is some doubt as to whether the courts of Australia and other countries would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the federal or state securities laws of the United States or would hear actions against us or those persons based on those laws. We have been advised by our legal advisors in Australia that the United States and Australia do not currently have a bilateral arrangement providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Consequently, a party seeking to enforce a judgment of a U.S. court must rely on common law principles for recognition and enforcement. Some remedies available under the laws of U.S. jurisdictions, including some remedies available under the U.S. federal securities laws, may not be allowed in Australia courts as contrary to that jurisdiction’s public policy. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not based solely on United States federal or state securities laws, would not automatically be enforceable in Australia. Similarly, those judgments may not be enforceable in countries other than the United States.

A large fraction of our shares are held by a few shareholders, some of whom are members of our Board and management.  As these principal shareholders substantially control our corporate actions, our other shareholders may face difficulty in exerting influence over matters not supported by these principal shareholders.

Our principal shareholders include affiliates of W.H. Soul Pattinson and certain affiliates, referred to as WHSP, Mr. Y-R Cotrel, Mr. Morro, and Mr. Chapple and they collectively control over 50% of our outstanding ordinary shares as of May 29, 2015.

These shareholders, acting individually or as a group, could exert control over matters such as electing directors, amending our certificate of incorporation or bylaws, and approving mergers or other business combinations or transactions.  In addition, because of the percentage of ownership and voting concentration of these principal shareholders and their affiliated entities, elections of our Board may be within the control of these shareholders and their affiliated entities.  While all of our shareholders are entitled to vote on matters submitted to our shareholders for approval, a concentration of shares and voting control presently lies with these principal shareholders and their affiliated entities.  As such, it would be difficult for shareholders to propose and have approved proposals not supported by these principal shareholders and their affiliated entities.  There can be no assurance that matters voted upon by our officers and directors in their capacity as shareholders will be viewed favorably by all shareholders of our company.  The stock ownership of our principal shareholders and their affiliated entities may discourage a potential acquirer from seeking to acquire our ordinary shares, which, in turn, could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.

Our Constitution grants to our Board the authority to issue a preferred stock without further approval by our shareholders, which could adversely affect the rights of the holders of our ordinary shares

Our Board has the power to fix and determine the relative rights and preferences of preferred stock. Our Board also has the power to issue preferred stock without further shareholder approval, subject to the provisions of our Constitution and the Act. As a result, our Board could authorize the issuance of new series of preferred stock that would grant to holders thereof certain preferred rights to (i) our assets upon liquidation: (ii) receive dividend payments ahead of holders of ordinary shares; (iii) and the redemption of the shares, together with a premium, prior to the redemption of our ordinary shares. In addition, our Board could authorize the issuance of new series of preferred stock that is convertible into our ordinary shares, which could decrease the relative voting power of our ordinary shares or result in dilution to our existing shareholders

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Research analysts do not currently publish research about our business, limiting information available to shareholders, and if this continues to be the case, or if analysts do publish unfavorable commentary or downgrade our ordinary shares, it could adversely affect our stock price and trading volume.

The trading market for our ordinary shares will depend, in part, on the research and reports that research analysts publish about us and our business and industry. The price of our ordinary shares could decline if one or more research analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If one or more of the research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our ordinary shares could decrease, which could cause our stock price or trading volume to decline.

We may be classified as a foreign investment company for U.S. federal income tax purposes, which could subject U.S. investors in our ordinary shares to significant adverse U.S. income tax consequences.

Depending upon the value of our assets, which may be determined based, in part, on the market value of our ordinary shares, and the nature of our assets and income over time, we could be classified as a “passive foreign investment company,” or “PFIC,” for U.S. federal income tax purposes. Based upon our current income and assets and projections as to the value of our ordinary shares, we do not presently expect to be a PFIC for the current taxable year or the future taxable years. While we do not expect to become a PFIC, if, among other matters, our market capitalization is less than anticipated or subsequently declines, we may be a PFIC for the current year or future taxable years. The determination of whether we are or will be a PFIC will also depend, in part, on the composition of our income and assets, which will be affected by how, and how quickly, we use our liquid assets. Because PFIC status is a factual determination made annually after the close of each taxable year, including ascertaining the fair market value of our assets on a quarterly basis and the character of each item of income we earn, we can provide no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are classified as a PFIC in any taxable year during which a U.S. holder holds our ordinary shares, 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. corporation that doses not distribute all of its earnings on a current basis. Further, if we are classified as a PFIC for any year during which a U.S. holder holds our ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ordinary shares.

Risks Related to Takeovers

Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares, which could constrain our share price and reduce investor returns.

We are incorporated in Australia and are subject to the takeovers laws of Australia, including the Australian Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations Act prohibits the acquisition of a direct or indirect interest in a company’s issued voting shares if the acquisition of that interest will lead to a person’s voting power in such company increasing from 20% or below to more than 20%, or increasing from a starting point that is above 20% and below 90%. Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares. This may have the ancillary effect of entrenching our Board and may deprive, limit our shareholders’ strategic opportunities to sell their ordinary shares and may restrict the ability of our shareholders to obtain a premium from such transactions.

Our Constitution and applicable Australian laws and regulations may adversely affect our ability to take actions that could be beneficial to our shareholders.

As an Australian company we are subject to different corporate requirements than a corporation organized under the laws of the United States. Our Constitution, as well as the Corporations Act, set forth various rights and obligations that are unique to Australian companies. These requirements operate differently than from many U.S. companies and may limit or otherwise adversely affect our ability to take actions that could be beneficial to our shareholders.

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ITEM 8.    FINANCIAL INFORMATION

8.A.           Consolidated Statements and Other Financial Information

Financial Statements

Our financial statements are stated in Australian Dollars (A$) and are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

See our audited financial statements for the fiscal years ended June 30, 2014, June 30, 2013, and June 30, 2012 included under Item 18 of this annual report.

Legal Proceedings

In December 2014, a class action securities suit was filed in a federal court in the Eastern District of Texas against the Company and various current and past officers and directors, namely Mr. William Morro, Mr. Carlo Botto, Mr. Richard Pillinger, Mr. Todd Barlow, Mr. Gerard McGowan and Mr. James Greer. Mr. Morro, formerly a non-executive independent director currently serves as Chairman of the Company’s Board and its Managing Director (the Australian entity equivalent of a CEO); Mr. Botto continues as a non-executive member of the Board; and Mr. Pillinger is the Company’s CFO. The other parties to the lawsuit are no longer associated with the Company. This lawsuit is still pending with respect to the former officers and directors and we believe that those parties intend to defend themselves vigorously. The DOCA had the effect of extinguishing the claims against the Company in this action, however, the possibility remains that the plaintiffs will endeavor to press their claims in jurisdictions outside Australia. It is impossible to estimate the outcome or the costs to us of such an action if it were to occur.

In December 2014, a different lawsuit was filed in New York State Supreme Court by one of the holders of Series B Preferred Shares against the Company and Messrs. Morro, Botto, and McGowan. This action was withdrawn without prejudice in April 2015, but prior thereto Mr. Morro and Mr. Botto entered into a settlement with respect only to themselves in their capacity as directors that precludes the plaintiff reasserting the suit against them except in the case that plaintiff is itself sued in connection with losses suffered on the investment. The suit can be reasserted again at any time against Mr. McGowan or other competent officers or directors or against us. However, The DOCA had the effect of extinguishing the claims against the us in this action, but the possibility remains that the plaintiffs could endeavor to press their claims in jurisdictions outside Australia. It is impossible to estimate the outcome or cost to us of such an action were it to occur.

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Both of these suits are still pending with regard to the current and former officers/directors and the current officers and directors plan to defend themselves vigorously. The Administration” had the effect of extinguishing the claims against the Company in these actions.

We are not currently a party to any other material legal proceedings. We are from time to time subject to claims and litigation arising in the ordinary course of business. We intend to defend vigorously against any future claims and litigation.

8.B.           Significant Changes

The following material events have occurred subsequent to June 30, 2014 on the dates indicated:

(a) Transactions

On July 3, 2014, BlueNRGY acquired 100% of the share capital of Green Earth Developers, LLC (‘GED’). Consideration paid consisted of a combination of cash, deferred cash payment obligations and 500,000 Company ordinary shares with an approximate value of US$3,175,000.

On January 27, 2015 we acquired 100% of the share capital of BlueNRGY LLC. Refer to the heading“(f) Entry into Material Definitive Agreements” below under this Item 8.B.

(b) Financing

On July 25, 2014, BlueNRGY entered into a securities purchase agreement with certain foreign investors, pursuant to which the Company issued a total of 900 newly authorised Series B Cumulative Convertible Preferred Shares, together with warrants to purchase up to 112,500 ordinary shares of the Company for an aggregate purchase price of $900,000. The exercise price per Ordinary Share under the Warrants is 125% of the 10-day volume weighted average price of the Company’s Ordinary Shares on the Initial Closing Date (which the parties agreed was $3.2916). The Warrants are exercisable immediately and expire on July 25, 2018.

During July and August 2014, the Company sold 2,500 Series B Cumulative Convertible Preferred Shares together with Warrants to purchase up to 416,667 Ordinary Shares for an aggregate purchase price of US$2,500,000.

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On July 24, 2014 the Company issued 465,000 Ordinary Shares and on August 9, 2014 it issued 122,500 Ordinary Shares upon the respective conversions of 186 and 49 Class A Preferred Shares. The Company has committed to redeem all of the remaining 200 Series A Preferred Shares and to accept a contemporaneous subscription for 2,000 Series B Preferred Shares having a Face Value equal to that of the redeemed Series A Preferred Shares.

On September 3, 2014 the Company issued 275,000 ordinary shares in lieu of cash payments as due diligence fees and professional services supplied to the Company.

(c) Other

Listed status and Trading

On October 21, 2013 the Company signed an exclusive, worldwide, long-term license agreement with Westinghouse Electric Corporation to use the WESTINGHOUSE® trademark as the corporate banner for its solar business. This agreement was terminated on January 30, 2015.

On November 13, 2014, NASDAQ halted trading in the shares of the Company as a result of the Company’s failure to lodge its 2014 Annual Report and this halt is still in place.

On November 25, 2014, the Company received a letter from NASDAQ’s Listing Qualifications Department stating that, in light of the commencement of the voluntary administration, trading of the Company’s common stock was to be suspended at the opening of business on Thursday December 4, 2014 and that they would seek the delisting of the Company’s shares. BlueNRGY appealed the delisting determination and appeared with counsel at a hearing before an independent Nasdaq Hearings Panel on January 8, 2015.

On January 26, 2015, the Company received a letter from the Panel granting the Company’s request for continued listing on the Nasdaq Capital Market subject to meeting a series of deadlines including filing its Annual Report on Form 20-F for the year ended June 30, 2014.

On October 23, 2014, the Audit Committee, after discussions with PricewaterhouseCoopers (‘PwC’), the Company’s independent registered public accounting firm at that time, determined that there was sufficient uncertainty about the accuracy of disclosures about related-party transactions involving its Executive Chairman and Managing Director, Mr. McGowan, and therefore that its previously issued audited financial statements for the fiscal years ended June 30, 2013 and 2012 should no longer be relied upon.

Notice of material control weaknesses and investigation of possible contraventions of the Corporations Act

The Audit Committee received notices from PwC that PwC has identified material weaknesses in financial controls and had identified the possibility of misconduct and contraventions of the Australian Corporations Act 2001 (Cth) (the ’Act’) by the Company and involving the Company’s Executive Chairman and Managing Director, Mr. McGowan.

Resignation of Registered Independent Public Accounting Firm

Effective November 10, 2014, PricewaterhouseCoopers (‘PwC’), the registered independent public accounting firm for BlueNRGY Group Limited (the ‘Company’), resigned from its role as auditor of the Company’s financial statements in connection with the Company’s US legal and regulatory requirements, having concluded that it is not independent of BlueNRGY under applicable PCAOB rules due to non-payment of its professional fees by the Company.

Engagement of new independent registered public accounting firm

On January 29, 2015, the Audit Committee of the Company’s Board of Directors appointed HLB Mann Judd (‘HLB’) as the Company’s new independent registered public accounting firm. HLB have audited the Company’s financial statements for the years ended June 30, 2012, June 30, 2013, and June 30, 2014. This appointment was approved by shareholders at the Extraordinary General Meeting held on March 12, 2015 following the removal of PwC as auditor of the company.

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(d) Voluntary Appointment of Administrators

On November 14, 2014, by unanimous resolution of those members of its Board permitted to consider the matter and to vote, it was determined that the Company and three of its Australian subsidiaries (i) were insolvent or likely to become insolvent in the future (ii) should be placed into voluntary administration (‘VA’) under the Australian Corporations Act 2001 (the ‘Act’), and (iii) appoint Said Jahani and Trevor Pogroske from Grant Thornton as joint and several administrators (referred to hereinafter in the singular as ‘Administrator’) pursuant to section 436A of the Act.  The three Australian subsidiaries of the Company that entered VA were CBD Solar Labs Pty, Westinghouse Solar Pty Ltd and KI Solar Pty Ltd, which, together with the Company are referred to as the VA Companies. As a result of the Administrator’s appointment, the powers of the directors of the VA Companies were suspended and the Administrator took control of the affairs of the companies subject to the appointment. The Company’s other subsidiaries continued to operate outside the VA process.

Immediately prior to the commencement of the VA, the Company and Westinghouse Solar Pty Ltd entered into an amendment to the existing finance and security arrangements with the company’s secured creditor, Wind Farm Financing Pty Ltd (WFF), pursuant to which WFF made additional advances totaling A$400,000 to those companies.  A$240,000 was advanced to the trust account of Grant Thornton, Sydney, for the sole and exclusive purpose of enabling the companies to pay Employee Entitlements, of which A$216,603 was agreed to be used immediately to partially pay outstanding Employee Entitlements owed by the Companies.  In addition, A$160,000 was advanced by WFF to the Trust Account for purposes of funding the trading expenses of the VA Companies.  

(e) Exiting Voluntary Administration

Effectiveness of Two Deeds of Company Arrangement

On December 24, 2014, two deeds of company arrangement under the Australian Corporations Act 2001 (collectively, the ’Reorganisation Plans’) were signed. The Reorganisation Plans became effective on January 27, 2015, along with a variation of the Reorganization Plans that removed all references to a draft license agreement and specified that the Administrators of the Deed Funds will hold 38,123,652 shares in trust – 90% under the Company’s Trust Deed and 10% under the Trust Deed of the Company’s subsidiary, Westinghouse Solar Pty Ltd.

The Reorganisation Plans provide, among other things, that: (i) creditor claims and contingent liabilities of the Company were extinguished and creditors received newly issued ordinary shares of the Company; and (ii) investors infused US$1 million into the Company in order to meet the requirements of the Deed Funds set forth in the Reorganisation Plans. The Deed Funds will be used to pay creditor claims. Creditors of the Company will receive $610,000 and creditors of the Company’s subsidiary, Westinghouse Solar Pty Ltd, will receive $390,000.

As a consequence of the effectiveness of the Reorganisation Plans, Said Jahani and Trevor Pogroske from Grant Thornton are no longer joint and several administrators. The Company has now exited voluntary administration and is being managed by its Board of Directors (the ‘Board’).

(f) Entry into Material Definitive Agreements

On November 19, 2014, the Company’s subsidiary, GED, entered into a Loan and Security Agreement with WFF pursuant to which it agreed to lend GED up to $360,000 (the ‘GED Loan’).  The GED Loan bears interest at a rate of 6% per annum and is payable on demand.  All of GED’s obligations under the GED Loan are secured by a first lien on the assets of GED.

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BlueNRGY Acquisition

In connection with effectuating the Reorganisation Plans, the Company, on January 27, 2015, entered into an Amended and Restated Membership Interest Purchase Agreement (the ‘Purchase Agreement’) in order to acquire BlueNRGY, LLC (‘BlueNRGY’). Pursuant to the Purchase Agreement, the Company acquired 100% of the issued and outstanding membership interests of BlueNRGY (the ‘Acquisition’). The purchase price of BlueNRGY was the issuance of an aggregate of 150,162,640 ordinary shares of the Company to BlueNRGY’s previous owners.

(g) Issuance of Shares

In connection with effectuating the Reorganisation Plans, the Company, on January 27, 2015, entered into an Amended and Restated Membership Interest Purchase Agreement (the ‘Purchase Agreement’) in order to acquire BlueNRGY, LLC (‘BlueNRGY’). Pursuant to the Purchase Agreement, the Company acquired 100% the issued and outstanding membership interests of BlueNRGY (the ‘Acquisition’). The purchase price of BlueNRGY was the issuance of an aggregate of 150,162,640 ordinary shares of the Company.

Pursuant to the Reorganisation Plans summarized under the heading ‘Exiting Voluntary Administration’, the Company issued 96,028,937 ordinary shares to Company.

Immediately following the effectiveness of the Reorganisation Plans, certain creditors exchanged $701,513 of indebtedness at the Offering Price and the Company issued 18,534,029 ordinary shares to them.

Since January 27, 2015 the Company has raised the equivalent of $2,336,000 through the issuance of 48,877,148 ordinary shares. Of this, $1,247,000 was paid to the Deed Fund.

(h) Change in Terms of Series B Preferred Shares

As a condition to the Purchase Agreement, the Series B Preferred Share terms were amended by unanimous resolution of the Company’s Board and the holders of the requisite majority of the Series B Preferred shares. The conversion price was reset to 1.325 times the Offering Price and the right of Series B Preferred Shares to receive dividends was eliminated after January 31, 2015.  The rights of Series B shareholders to appoint a member of the Board and to limit future share issues were also eliminated.  This summary of the modifications to the terms of our Series B Preferred Shares is qualified in its entirety by the revised terms set forth in the exhibit to the Securities Purchase Agreement pursuant to which the private placement proceeds were raised to effect the DOCA and which was included as an exhibit to our Form 6-K/A filed on January 29, 2015.

(i) Board and Executive Changes

On July 18, 2014, Todd Barlow resigned as a director of the company.

Effective August 5, 2014, Luisa Ingargiola was appointed as a non-executive member of the Board by the holders of a requisite majority of the Company’s Series B Shares in accordance with the rights of the Series B Shares to appoint one member of the Company’s Board. Upon joining the Board, Ms. Ingargiola was appointed to the Company’s Audit Committee and Compensation Committee. Ms. Ingargiola resigned as a director on October 23, 2014.

Effective as of October 21, 2014, the Company’s Directors appointed William Morro as non-executive Chairman of the Board and Chairman of its Executive Committee.

As of November 14, 2014, Mr. Gerard McGowan was: suspended as the Company’s Managing Director pursuant to Article 18 of the Company’s Constitution; removed as a director of all Company subsidiaries where the applicable constitutional authority permitted such action; and the Administrator terminated the Contractor Agreement entered into as of May 1, 2014 between the Company, TRW Holdings Pty Ltd (‘TRW’) and Mr. McGowan pursuant to which TRW contracted to procure Mr. McGowan’s services as Chief Executive Officer of the Company.  

Effective December 30, 2014, Gerard McGowan resigned as a director of BlueNRGY Group Limited.

Effective January 27, 2015, the Board appointed John H. Chapple, Yves-Regis Cotrel, and John F. Donohue as members of the Board.  The appointment of Mr. Cotrel and Mr. Donohue became effective on January 27, 2015 and that of Mr. Chapple on February 2, 2015.

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On February 9, 2015, Mr. Donohue and Mr. Botto were appointed to the Audit Committee, Mr. Morro resigned as a member of the Audit Committee, and Mr. Donohue was appointed as the Audit Committee Chairman.

On February 9, 2015, Mr. Chapple and Mr. Donohue were appointed to the Compensation Committee and Mr. Morro resigned as a member of the Compensation Committee.

On February 9, 2015, the Board unanimously appointed Mr. Morro as the Company’s Managing Director and Emmanuel Cotrel as Senior Vice President of the Company.   

On February 9, 2015, the Board formed an Executive Committee comprised of Mr. Morro, Mr. Donohue, and Mr. Chapple.

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PART III

ITEM 18.   FINANCIAL STATEMENTS

The following financial statements are filed as part of this Annual Report, together with the report of the independent registered public accounting firms:

· Report of Independent Registered Public Accounting Firm

· Consolidated statements of income/(loss) and comprehensive income/(loss)

· Consolidated balance sheets

· Consolidated statements of changes in equity

· Consolidated statements of cash flows

· Notes to the Consolidated Financial Statements

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BlueNRGY Group Limited

formerly CBD Energy Limited

(A.C.N. 010 966 793)

ANNUAL FINANCIAL REPORT

FOR THE YEARS ENDED:

JUNE 30, 2014

JUNE 30, 2013

JUNE 30, 2012

Table of contents

Report of independent registered accounting firm	3
Consolidated statement of comprehensive income	4
Consolidated statement of financial position	5
Consolidated statement of changes in equity	6
Consolidated statement of cash flows	7
Notes to the financial statements	8

Page 2

Report of Independent Registered Accounting Firm

To the Board of Directors and shareholders of BlueNRGY Group Limited (formerly CBD Energy Limited):

We have audited the accompanying consolidated statements of financial position of BlueNRGY Group Limited (‘the Company’) and its controlled entities (collectively ‘the Group’) as at 30 June, 2014, at 30 June 2013 and at 30 June 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. 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 audits.

We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BlueNRGY Group Limited and its subsidiaries at 30 June, 2014, at 30 June 2013 and June 30, 2012, and the consolidated results of their operations and their consolidated cash flows for each of the years ended 30 June 2014, 30 June 2013 and 30 June 2012 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company appointed Administrators on 14 November 2014, and following two Deeds of Company Arrangement was subsequently released from Administration on 27 January 2015. Note 2 also advises that the ability of the Group to continue as a going concern and meet its debts and commitments as and when they fall due requires that the Group meets or exceeds its operational budgets in the future and raises funds from new loans and securities issuances. These uncertainties raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

HLB Mann Judd

Sydney, Australia

June 1, 2015

Page 3

Statement of comprehensive income

			Consolidated
For the year ended June 30	Note		2014 $’000			Restated 2013 $’000			Restated 2012 $’000
Revenues from continuing operations		6		14,065			64,130			43,577
Other income		6		3,793			4,241			4,563
Cost of raw materials, consumables used, and contractors				(5,727	)		(39,201	)		(42,802	)
Employee benefit expenses		7		(10,557	)		(14,786	)		(15,416	)
Compliance & consultants				(4,793	)		(4,519	)		(8,864	)
Advertising and marketing				(2,468	)		(1,010	)		(2,265	)
Travel costs				(872	)		(931	)		(1,516	)
Occupancy expenses		7		(915	)		(1,258	)		(1,246	)
Provision for impairment of receivables and bad debts written off		11		(75	)		(334	)		(1,345	)
Other expenses		7		(3,255	)		(3,207	)		(3,215	)
Share of net loss of associates				-			-			(108	)
Depreciation and amortisation expenses		7		(632	)		(808	)		(855	)
Finance costs		7		(5,061	)		(11,122	)		(2,326	)
Break fee from terminated acquisition				-			-			(2,475	)
Impairment loss on available-for-sale financial assets				(4	)		(560	)		(375	)
Impairment of financial assets and interest in joint ventures		7		(10,015	)		(18	)		(4,239	)
Impairment of intangible assets		7		-			-			(11,534	)
Loss from continuing operations before income tax				(26,516	)		(9,383	)		(50,441	)
Income tax benefit/(expense)		8		-			65			(2,464	)
Net loss for the period from continuing operations				(26,516	)		(9,318	)		(52,905	)
Profit/(loss) from discontinued operations		14		1,086			911			(1,837	)
Net loss for the period				(25,430	)		(8,407	)		(54,742	)
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets				(800	)		800			-
Exchange differences on translation of foreign operation				(68	)		33			-
Other comprehensive income for the period, net of tax				(868	)		833			-
Total comprehensive loss for the period				(26,298	)		(7,574	)		(54,742	)
				Dollars			Dollars			Dollars
Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company:
Basic earnings per share		9		(13.57	)		(5.84	)		(34.06	)
Diluted earnings per share		9		(13.57	)		(5.84	)		(34.06	)
Earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share		9		(13.02	)		(5.27	)		(35.24	)
Diluted earnings per share		9		(13.02	)		(5.27	)		(35.24	)

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Page 4

Statement of financial position

			Consolidated
As at June 30	Note		2014 $’000			Restated 2013 $’000			Restated 2012 $’000
ASSETS
Current Assets
Cash and cash equivalents				1,381			932			2,522
Trade and other receivables		11		3,095			4,957			4,999
Inventories		12		1,233			195			14,609
Other current assets		13		1,103			383			219
Assets classified as held for sale		14		-			1,709			2,487
Total Current Assets				6,812			8,176			24,836
Non-Current Assets
Other receivables		11		500			1,500			-
Available-for-sale and other financial assets		14		39			10,858			636
Plant and equipment		15		3,532			4,603			5,038
Goodwill and other intangible assets		16		7,666			7,666			11,568
Other non-current assets		13		178			97			192
Total Non-Current Assets				11,915			24,724			17,434
TOTAL ASSETS				18,727			32,900			42,270
LIABILITIES
Current Liabilities
Trade and other payables		17		10,607			21,074			16,102
Interest-bearing loans and borrowings		18		26,865			19,087			27,230
Provisions		19		548			1,079			842
Liabilities directly associated with assets classified as held for sale		14		-			709			462
Total Current Liabilities				38,020			41,949			44,636
Non-Current Liabilities
Interest-bearing loans and borrowings		18		286			301			302
Deferred tax liabilities		8		-			-			65
Provisions		19		92			90			170
Total Non-Current Liabilities				378			391			537
TOTAL LIABILITIES				38,398			42,340			45,173
NET ASSETS				(19,671	)		(9,440	)		(2,903	)
EQUITY
Contributed equity		20		125,540			109,620			109,083
Accumulated losses				(148,512	)		(123,082	)		(114,675	)
Reserves		21		3,301			4,022			2,689
TOTAL EQUITY				(19,671	)		(9,440	)		(2,903	)

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

Page 5

Statement of changes in equity

For the year ended June 30	Ordinary shares $’000			Preference shares $’000		Share options reserve $’000		Available- for-sale reserve $’000			Translation reserve $’000			Accumulated losses $’000			Total $’000
At July 1, 2013 (restated)		109,620			-		3,189		800			33			(123,082	)		(9,440	)
Profit/(loss) for period		-			-		-		-			-			(25,430	)		(25,430	)
Other comprehensive income		-			-		-		(800	)		(68	)		-			(868	)
Total comprehensive income for the year		-			-		-		(800	)		(68	)		(25,430	)		(26,298	)
Transactions with owners in their capacity as owners
Shares issued		12,597			4,643		-		-			-			-			17,240
Share issue costs		(1,320	)		-		-		-			-			-			(1,320	)
Share-based payments for convertible notes		-			-		147		-			-			-			147
Balance at June 30, 2014		120,897			4,643		3,336		-			(35	)		(148,512	)		(19,671	)
At July 1, 2012 (restated)		109,083			-		2,689		-			-			(114,675	)		(2,903	)
Profit/(loss) for period		-			-		-		-			-			(8,407	)		(8,407	)
Other comprehensive income		-			-		-		800			33			-			833
Total comprehensive income for the year		-			-		-		800			33			(8,407	)		(7,574	)
Transactions with owners in their capacity as owners
Shares issued		626			-		-		-			-			-			626
Share issue costs		(89	)		-		-		-			-			-			(89	)
Share-based payments for convertible notes		-			-		500		-			-			-			500
Balance at June 30, 2013		109,620			-		3,189		800			33			(123,082	)		(9,440	)
At July 1, 2011 (restated)		107,358			-		1,205		-			-			(59,933	)		48,630
Loss for period		-			-		-		-			-			(54,742	)		(54,742	)
Total comprehensive income for the year		-			-		-		-			-			(54,742	)		(54,742	)
Transactions with owners in their capacity as owners
Shares issued		1,725			-		-		-			-			-			1,725
Share-based payments for convertible notes		-			-		1,456		-			-			-			1,456
Share-based payments		-					28		-			-			-			28
Balance at June 30, 2012		109,083			-		2,689		-			-			(114,675	)		(2,903	)

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

Page 6

Statement of cash flows

		Consolidated
For the year ended June 30	Note	2014 $’000			2013 $’000			2012 $’000
Cash flow from operating activities
Receipts from customers (inclusive of GST)			20,680			69,635			86,808
Payments to suppliers and employees (inclusive of GST)			(39,493	)		(53,828	)		(90,992	)
Payments for development costs			-			(3,535	)		(12,309	)
Finance costs			(1,350	)		(2,464	)		(2,585	)
Interest received			-			13			64
Net cash flows (used)/provided in operating activities	10		(20,163	)		9,821			(19,014	)
Cash flow from investing activities
Proceeds from sale of property, plant and equipment			188			10			43
Proceeds from the sale of intangible assets			-			1,000			-
Purchase of property, plant and equipment			(672	)		(275	)		(591	)
Payment for investments			-			-			(1,270	)
Proceeds from sale of investments			1,789			-			-
Payment for the purchase of controlled entities, net of cash acquired			-			24			(351	)
Net cash flows provided/(used) in investing activities			1,305			759			(2,169	)
Cash flow from financing activities
Proceeds from share issues			7,706			207			-
Proceeds from issue of convertible notes			1,013			103			7,362
Convertible note issue costs			(1,320	)		-			(187	)
Proceeds from borrowings			16,282			474			16,252
Repayment of borrowings			(3,699	)		(13,255	)		(8,489	)
Payment of finance lease liabilities			(212	)		(162	)		(202	)
Net cash flows provided/(used) in financing activities			19,770			(12,633	)		14,736
Net (decrease) / increase in cash and cash equivalents			912			(2,053	)		(6,447	)
Cash and cash equivalents at beginning of period			469			2,522			8,969
Cash and cash equivalents at end of period	10		1,381			469			2,522

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

Page 7

Notes to the financial statements

Note
1	Corporate information
2	Summary of significant accounting policies
3	Significant accounting judgements, estimates and assumptions
4	Operating Segments
5	Disposal of controlling interests
6	Revenues from continuing operations and other income
7	Expenses
8	Income tax
9	Earnings per share
10	Cash and cash equivalents
11	Trade and other receivables
12	Inventories
13	Other assets
14	Available-for-sale, other financial assets and discontinued operations
15	Non-current assets - plant and equipment
16	Non-current assets – intangible assets and goodwill
17	Trade and other payables
18	Interest-bearing loans and borrowings
19	Provisions
20	Contributed equity
21	Reserves
22	Financial risk management objectives and policies
23	Related party disclosure
24	Key management personnel
25	Share-based payments
26	Commitments
27	Events after the balance sheet date
28	Parent entity Information
29	Auditors' remuneration

Page 8

Notes to the financial statements

1 Corporate information

The consolidated financial statements of BlueNRGY Group Limited (‘BlueNRGY’) (formerly known as CBD Energy Limited) for each of the years ended June 30, 2014; June 30, 2013 and June 30, 2012 were authorised for issue in accordance with a resolution of the Directors on June 1, 2015. The Directors have the power to amend and reissue the financial statements.

BlueNRGY Group Limited (‘the Parent’) is a company limited by shares incorporated in Australia whose shares are publicly listed on the NASDAQ.

2 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of BlueNRGY Group Limited and its subsidiaries. BlueNRGY Group Limited and its subsidiaries together are referred to in this financial report as the ‘Group’ or the ‘Consolidated Entity’.

(a) Basis of preparation

The financial report is a general purpose financial report, which has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and authoritative pronouncements of the International Accounting Standards Board. The financial report has also been prepared on a historical cost basis, modified by the revaluation of available for sale financial assets, financial assets at fair value through profit or loss and liabilities (including derivative instruments). BlueNRGY is a for-profit entity for the purpose of preparing the financial statements.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

(i) Going concern

The financial statements have been prepared on the basis of going concern which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. Key financial data for the Group for the years ended June 30, 2014, 2013, 2012 is disclosed below:

Consolidated	Year ended June 30, 2014 $’000			Year ended June 30, 2013 $’000			Year ended June 30, 2012 $’000
Cash at bank and in hand less overdraft		1,381			469			2,522
Loss for the year		(25,430	)		(8,407	)		(54,742	)
Net cash inflow/(outflow) from operating activities for the year		(20,163	)		9,821			(19,014	)
Net current assets/(liabilities)		(31,208	)		(33,773	)		(19,800	)

The Group incurred net operating cash outflows for the year ended June 30, 2014 and continued operating losses. These losses continued in the period after June 30, 2014 and on November 14, 2014, by unanimous resolution of those members of its Board permitted to consider the matter and to vote, it was determined that the Company and three of its Australian subsidiaries (i) were insolvent or likely to become insolvent in the future (ii) should be placed into voluntary administration (‘VA’) under the Australian Corporations Act 2001 (the ‘Act’), and (iii) appoint Said Jahani and Trevor Pogroske from Grant Thornton as joint and several administrators (referred to hereinafter in the singular as ‘Administrator’) pursuant to section 436A of the Act.  The three Australian subsidiaries of the Company that entered VA were CBD Solar Labs Pty Ltd, Westinghouse Solar Pty Ltd and KI Solar Pty Ltd, which, together with the Company, are referred to as the VA Companies. The Company’s other subsidiaries continued to operate outside the VA process.

On December 24, 2014, two deeds of company arrangement under Australia’s Corporations Act 2001 (collectively, the ‘Reorganisation Plans’) were signed. The Reorganisation Plans became effective on January 27, 2015.

Page 9

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

(i) Going concern (continued)

The Reorganisation Plans provide, among other things, that: (i) creditor claims and contingent liabilities of the Company were extinguished and creditors received newly issued ordinary shares of the Company; and (ii) investors infused US$1 million into the Company in order to meet the requirements of the Deed Funds set forth in the Reorganisation Plans. The Deed Funds will be used to pay creditor claims.

As a consequence of the effectiveness of the Reorganisation Plans, Said Jahani and Trevor Pogroske from Grant Thornton are no longer joint and several administrators. The Company has now exited voluntary administration and is being managed by its Board of Directors (the ‘Board’).

In connection with effectuating the Reorganisation Plans, the Company, on January 27, 2015, entered into an Amended and Restated Membership Interest Purchase Agreement (the ‘Purchase Agreement’) in order to acquire BlueNRGY, LLC. Pursuant to the Purchase Agreement, the Company acquired 100% the issued and outstanding membership interests of BlueNRGY, LLC (the ‘Acquisition’). The purchase price of BlueNRGY, LLC was the issuance of an aggregate of 150,162,640 ordinary shares of the Company.

Pursuant to the Reorganisation Plans, the Company issued 96,028,937 ordinary shares to settle credit claims.

Immediately following the effectiveness of the Reorganisation Plans, certain creditors exchanged $854,000 of indebtedness at the Offering Price and the Company issued 18,534,029 ordinary shares to them.

Since January 27, 2015 the Company has raised the equivalent of $2,336,000 through the issuance of 48,877,148 ordinary shares. Of this, $1,247,000 was paid to the Deed Fund.

As a result of the reorganisation plans and to the date of this report, the following changes were made to the Group’s Net Asset/Equity position (based on unaudited values at November 14, 2014) and to the number of ordinary shares on issue:

	Net Asset Impact $’000			Ordinary Shares Issued
Execution of Deed of Company Arrangement:
Extinguishment of Liabilities
·       Trade and other payables		11,025
·       Provisions		440
·       Loans and Borrowings		26,017
		37,482			96,028,937
Total assets assigned to creditors/relinquished		(4,678	)
Issuance of Equity Post-Execution of Deed of Company Arrangement: (excluding shares issued to creditors)
Cash subscriptions (net of $1.2 million Deed Funding)		1,089			48,877,148
Acquisition of BlueNRGY		6,011			150,162,640
Exchange of Indebtedness (non-VA companies)		854			18,534,029
Total Increase in Net Assets/Equity from reorganisation		40,758			313,602,754

Note: the above does not reflect changes to equity position arising from operating activities post June 30, 2014.

Following the issuance of these ordinary shares, the Company has 319,683,386 ordinary shares on issue.

Page 10

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

(i) Going concern (continued)

Consequently the ability of the Group to continue as a going concern and meet its debts and commitments as and when they fall due requires that it meets or exceeds operational budgets in the future and raises funds from new loans and securities issues. Therefore, there is substantial doubt with regards to the Group’s ability to continue as a going concern and therefore whether the Group will realise its assets and settle its liabilities at amounts stated in the financial statements. In order to reduce or eliminate this doubt and continue operating, the Group is taking steps to:

· Sustain net operating profits: BlueNRGY is continually reviewing costs structures of the businesses and making the appropriate changes to maximize return on revenues generated. New business opportunities are assessed in order to identify opportunities for growth and increased profitability.

· Raise new debt and/or equity capital: BlueNRGY continues to discuss opportunities for further investment with current equity holders.

The Directors note that there is a risk that some or all of the above activities may not be successful, however they believe that the Group has reasonable prospects of achieving the above plans and as a consequence they have no intention to liquidate or cease trading.

The Directors have a responsibility to prepare the financial statements in accordance with accounting standards, which requires entities to prepare financial statements on a going concern basis unless the Directors intend to liquidate the entity, cease trading or have no realistic alternative but to do so. No adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or classification of liabilities that might be necessary should the Group not continue as a going concern.

(b) Critical accounting estimates

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

(c) Compliance with IFRS

The financial report complies with International Financial Reporting Standards (‘IFRS’), as issued by the International Accounting Standards Board (‘IASB’).

(d) New accounting standards and interpretations

(i) Changes in accounting policy and disclosures.

The accounting policies adopted are consistent with those of the previous financial year.

None of the new Standards and amendments to Standards that are mandatory for the first time for the financial years beginning 1 July 2011 affected any of the amounts recognised in the current period (i.e years ended June 30, 2014, 2013 and 2012) or any prior period and are not likely to affect future periods.

The Group has not elected to apply any pronouncements before their operative date in the reporting period from 1 July 2011 to June 30, 2014.

(ii) Accounting Standards and Interpretations issued but not yet effective

A number of new Standards, amendments to Standards and Interpretations are effective for annual periods beginning after 1 July 2014, and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group, except for:

· IFRS 9Financial Instruments which becomes mandatory for the Group’s 2016 consolidated financial statements and could change the classification and measurement of financial instruments.

· IFRS 15Revenue which becomes mandatory for the Group’s 2018 consolidated financial statements and could change the timing of revenue recognition by the Group.

The Group does not plan to adopt these Standards early and the extent of the impact has not been determined.

Page 11

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(e) Basis of consolidation

The consolidated financial statements comprise the financial statements of BlueNRGY Group Limited and its subsidiaries as outlined in Note 23 as at and for the year ended June 30 each year.

Subsidiaries are all those entities controlled by the Group i.e. where the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profits and losses resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which the Group obtains control and cease to be consolidated from the date on which control is transferred out of the Group.

The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 2(f)).

A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.

(f) Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration is accounted for as a provision in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and subsequent changes to the fair value of the contingent consideration is recognised in profit or loss. If the contingent consideration is classified as equity, it will not be re-measured. Subsequent settlement is accounted for within equity.

All transaction costs incurred in relation to a business combination are expensed to profit or loss.

(g) Operating segments

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors who ultimately make strategic decisions. Refer to Note 4 for details of segments in which the Group operates.

Page 12

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(h) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars which is BlueNRGY Group Limited’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

All exchange differences in the consolidated financial statements are taken to profit or loss except when they are deferred in equity when they are attributable to part of the net investment in a foreign operation.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

(i) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The specific recognition criteria described below must also be met before revenue is recognised:

(i) Domestic Solar Installation fees

Installation fees are recognised once installation is completed. Domestic Solar installation revenues are derived from solar PV system sales to third parties. Part of the consideration the Group receives in respect of a solar installation is generally in the form of a Small-scale Technology Certificates (‘STCs’) that our customers assign to the Group. Under the Australian government program known as the Small-Scale Renewable Energy Scheme (‘SRES’), eligible residential solar systems are credited by the responsible government agency with a one-time allocation of STCs. STCs are registered with the government regulator and do not expire. The regulator also establishes, on an annual basis, a purchase obligation for power generators at a level that is expected to approximately equal the supply of STC’s the regulator forecasts will be created from new installations during the year. The annual STC purchase obligation in each year is also adjusted by the regulator to take into account over- or under-creation of STCs in prior years as compared with forecast. As a consequence of the SRES and the mandated purchase obligation of the power producers, STCs have an intrinsic value and an unregulated market for STCs has developed in Australia. As the government agency responsible for balancing STC purchase obligations with supply has gained experience over time, market volatility, liquidity and predictability of pricing have increased, but the market remains thin and the number of market makers is small. STC prices are effectively capped by the right of obligated purchasers to pay a fixed-rate penalty if they are unable to purchase sufficient STCs in the market to meet their obligations. STCs assigned to the Group are initially measured as an inventory asset at cost. When STCs are ultimately sold by the Group, incremental revenue might arise, being the difference between the cost at which the STCs were recorded and the final price at which STCs have been traded by the Group. This incremental revenue is reported as other income. Similarly, when STCs are sold at less than cost, the loss is reported within the cost of raw materials in profit or loss, as it represents, in effect, a write down of the STCs inventory balance to its net realisable value.

(ii) Sale of products, materials and parts

Revenue from the sale of products, material and parts is recognised upon the delivery of goods to customers.

(iii) Services

Revenue from the rendering of service is recognised upon delivery of the service to the customers.

Page 13

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(i) Revenue recognition (continued)

(iv) Construction contracts

Contract revenue and expenses are recognised in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion.

When it is probable that a loss will arise from a construction contract, the excess of expected total costs over expected total revenue is recognised immediately in profit or loss. Where the outcome cannot be measured reliably, revenue is recognised only to the extent that related expenditure is recoverable. The stage of completion of a contract is measured by reference to the recoverable costs incurred to date as a percentage of estimated total costs for the contract.

(v) Project revenue

Revenue from commercial and utility scale solar projects and wind development projects is recognised when the risks and rewards have been transferred, which can vary depending on the specifics of each arrangement that the Group has with its customers, and when revenue can be reliably measured.

(vi) Interest income

Interest income is recognised using the effective interest method.

(vii) Other revenues

Other operating revenues are recognised as they are earned and goods or services provided.

(j) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.

(k) Income tax and other taxes

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Page 14

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(k) Income tax and other taxes (continued)

Deferred income tax liabilities are recognised for all taxable temporary differences except:

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

· in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carried forward unused tax credits and unused tax losses can be utilised, except:

· when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

· in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction of goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or in profit or loss.

(i) Tax consolidation legislation

BlueNRGY Group Limited and its wholly owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2003.

In addition to its own current and deferred tax amounts, BlueNRGY Group Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax-consolidated group.

(ii) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

· when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

· receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows.

Page 15

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(k) Income tax and other taxes (continued)

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

(l) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (‘cash generating units’). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(m) Cash and cash equivalents

Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the Statement of Financial Position.

(n) Trade and other receivables

Trade receivables are recognised initially at original invoiced amounts, less an allowance for any uncollectible amounts. Settlement terms for trade receivables vary between the business units and are generally in line with standard industry practice within each industry. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.

Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in profit or loss as a separate expense category. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

(o) Inventories

(i) Raw materials and stores

Inventories, which mainly comprise solar panels and inverters, which are used in the residential solar businesses of the Group, are measured at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.

(ii) Small-scale Technology Certificates (‘STCs’)

As indicated in Note 2(i), STCs are initially recognised at cost following the installation of a solar panel and the assignment of the STCs to the Group. STCs are subsequently measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Page 16

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(o) Inventories (continued)

(iii) Project Work in Progress

Project work in progress comprises commercial solar scale projects and is valued at the lower of cost and net realisable value. Cost comprises staff salary costs and direct expenses including direct material costs and contractor costs together with an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less further costs expected to be incurred to completion.

Project work in progress also comprises wind farm development projects. Costs incurred for developing wind farm projects for which the Group is earning a developer fee are recognised as inventory when it is probable that the project will be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

(iv) Construction Contracts Work in Progress

Construction work in progress is valued at cost, plus profit recognised to date less provision for anticipated future losses and progress billings made under the contract. Cost includes both variable and fixed costs relating to specific contracts, and those costs that are attributable to the contract activity in general and that can be allocated on a reasonable basis.

(p) Investments and other financial assets

Investments and financial assets in the scope of IAS 39Financial Instruments: Recognition and Measurement are categorised as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Designation is re-evaluated at each reporting date, but there are restrictions on reclassifying to other categories.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

(i) Recognition and derecognition

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or when the entity transfers substantially all the risks and rewards of the financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, it derecognises the asset if it has transferred control of the asset.

(ii) Loans and receivables

Loans and receivables including loan notes are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired. These are included in current assets, except for those with maturities greater than 12 months after balance date, which are classified as non-current.

(iii) Available-for-Sale Investments

Available-for-sale investments are those non-derivative financial assets, principally equity securities, that are designated as available-for-sale or are not classified as either financial assets at fair value through profit or loss, loans and receivables, or held-to-maturity investments. After initial recognition available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired. If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss.

Page 17

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(p) Investments and other financial assets (continued)

The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm's length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

(q) Plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows:

Computer hardware and software - 2 to 5 years

Motor vehicles - 5 years

Plant and equipment –1 to 20 years

Furniture, fittings and office equipment –2 to 5 years

Leased motor vehicles –5 years

Leasehold improvements –3 years

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end.

Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the 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 the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value.

An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

For plant and equipment, impairment losses are recognised in profit or loss.

Derecognition

An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

Page 18

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(r) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term.

(s) Goodwill and other intangibles

Goodwill

Goodwill acquired in a business combination is initially measured at cost of the business combination, being the excess of the consideration transferred over the fair value of the net identifiable assets acquired and liabilities assumed.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit or group of cash-generating units, to which the goodwill relates.

BlueNRGY Group Limited performs its impairment testing as at 30 June each year or more frequently where there are indicators of impairment. Further details on the methodology and assumptions used are outlined in Note 16.

When the recoverable amount of the cash-generating unit or group of cash-generating units is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit or group of cash-generating units and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment losses recognised for goodwill are not subsequently reversed.

Intangibles other than Goodwill

Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets other than goodwill are assessed to be finite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired.

Page 19

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(s) Goodwill and other intangibles (continued)

The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least once each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

Licences

Licences are recognised at cost of acquisition. Licences have a finite life and are amortised on a systematic basis, matched to the future economic benefits over the life of the asset, less any impairment losses. Licences are reviewed for impairment at the end of the financial year and more frequently when an indication of impairment exists. Any impairment charge is recorded separately.

Patents

Patents are initially recognised at cost. Patents have a finite life and are amortised on a systematic basis matched to the future economic benefits over the life of the asset, less any impairment losses. Amortisation of the patents commences on commercialisation of this technology and is matched to the timing of economic benefits flowing to the company from the application of this technology. Patents are reviewed for impairment at the end of the financial year and more frequently when an indication of impairment exists.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

(t) Pensions and other post-employment benefits

The company contributes to superannuation funds on behalf of employees at the required statutory rates.

(u) Trade and other payables

Trade and other payables are carried at amortised cost. Due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within terms negotiated with suppliers.

(v) Interest-bearing loans and borrowings

All interest bearing loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings.

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

(w) Convertible notes

On issuance of the convertible notes, an assessment is made to determine whether the convertible notes contain an equity instrument or whether the whole instrument should be classified as a financial liability.

When it is determined that the whole instrument is a financial liability and no equity instrument is identified (for example for foreign-currency-denominated convertibles notes), the conversion option is separated from the host debt and classified as a derivative liability.  The carrying value of the host contract (a contract denominated in a foreign currency) at initial recognition is determined as the difference between the consideration received and the fair value of the embedded derivative.  The host contract is subsequently measured at amortised cost using the effective interest rate method. The embedded derivative is subsequently measured at fair value at the end of each reporting period through profit or loss.  The convertible note and the derivative are presented as a single number on the Statement of Financial Position within interest-bearing loans and borrowings.

Page 20

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(w) Convertible notes (continued)

When it is determined that the instrument contains an equity component based on the terms of the contract, on issuance of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity.  Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not re-measured in subsequent years.

(x) Provisions and employee benefits

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Warranty provisions

Provision is made for the estimated liability on all products and services still under warranty at balance date. This provision is estimated having regard to prior service warranty experience. In calculating the liability at balance date, amounts were not discounted to their present value as the effect of discounting was not material. In determining the level of provision required for warranties, the Group has made judgments in respect of the expected performance and the costs of fulfilling the warranty. Historical experience and current knowledge have been used in determining this provision. The initial estimate of warranty-related costs is revised annually.

Deferred consideration

Deferred consideration acquired in a business combination is initially measured at fair value at the date of acquisition. Subsequently, it is measured in accordance with IAS 37Provisions, Contingent Liabilities and Contingent Assets.

Expected losses on contracts

Where the outcome for a services contract is expected to result in an overall loss over the life of the contract, this loss is provided for when it first becomes known that a loss will be incurred.

Employee Entitlements

(i) Wages, salaries, and annual leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date, are recognised in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

Page 21

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(y) Share-based payment transactions

The Group provides benefits to its employees (including senior executives) in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes or Binomial model, further details of which are given in Note 25.

In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of BlueNRGY Group Limited (‘market conditions’) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to profit or loss is the product of:

(i) the grant date fair value of the award;

(ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and

(iii) the expired portion of the vesting period.

The charge to profit or loss for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised at that date. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (see Note 9).

(z) Contributed equity

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

(aa) Earnings per share

Basic earnings per share is calculated as net profit or loss attributable to shareholders, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares.

Diluted earnings per share adjusts the figure used in the determination of basic earnings per share to take into account:

· the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

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

Page 22

Notes to the financial statements

2 Summary of significant accounting policies (continued)

(ab) Parent entity financial information

The financial information for the parent entity, BlueNRGY Group Limited, disclosed in Note 28 has been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in subsidiaries

Investments in subsidiaries are accounted for at cost less any impairment charge.

(ii) Tax consolidation legislation

BlueNRGY Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate BlueNRGY Group Limited for any current tax payable assumed and are compensated by BlueNRGY Group Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to BlueNRGY Group Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the group.

(ac) Rounding of amounts

The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or, in certain cases, the nearest dollar.

(ad) Correction of prior period errors

As set out in Note 27, Events after the balance sheet date, the withdrawal of the previously issued audited financial statements for the years ended June 30, 2013 and 2012 by the Company’s former independent registered public accounting firm, PricewaterhouseCoopers (‘PwC’), and their subsequent removal as auditors has resulted in the appointment of independent registered public accounting firm HLB Mann Judd (‘HLB’) as the Company’s new auditors. HLB reaudited the Company’s financial statements for the years ended June 30, 2012 and June 30, 2013, and performed the audit for the year ended June 30, 2014.

As a result of this reaudit, and with the benefit of time having passed, certain balances which are impacted by critical accounting estimates, assumptions and management judgement have been adjusted to represent a restated view of the Group based on actual events which have occurred since the release of the previously issued audited financial statements for the years ended June 30, 2013 and 2012. These changes are highlighted hereunder:

Financial year ended June 30, 2013

¹ As with 2012, the existence of inventories as at financial year ended June 30, 2013 could not be supported and accordingly finished goods and work-in-progress of some of the subsidiaries were written off to $Nil. The impact of this entry was $1,416,000.

² As a result of the impairment raised against the Solar goodwill in 2012 of $10,891,000, the 2013 impairment of $3,000,000 was reversed. The net impact is $7,891,000.

³ A previously recognised tax liability of $447,000 was reversed upon determination that it related to a pre-acquisition liability of eco-Kinetics.

⁴ An amendment of $1,454,000 was made to the fair value adjustment of convertible notes triggered by the impact of the defaults on the fair value calculation.

Page 23

Notes to the financial statements

2 Summary of significant accounting policies (continued)

⁵ As per Note 5(i), disposals of controlling interests, the company disposed of its wholly owned subsidiary Capacitor Technologies Pty Ltd (‘Captech’) in August 2013. Accordingly the associated assets and liabilities of the subsidiary have been reclassified as held for sale in the Statement of financial position and as a discontinued operation in the Statement of comprehensive income.

⁶Adjustments reflected in this column are the roll forward effect of the previous financial year’s adjustments and their impact on the Statement of financial position balances.

⁷Write off of provision for contingent consideration associated with the sale of Larkden.

⁸ Reclassification of Statement of comprehensive income line items.

Page 24

As a result of the errors noted above, the following adjustments were made to the financial statements:

Statement of Financial Position (extract):

				Consolidated Entity
June 30, 2013	2013 $’000			Correction of errors1 $’000			Correction of errors2 $’000			Correction of errors3 $’000			Correction of errors4 $’000			Correction of errors5 $’000			Correction of errors6 $’000			Correction of errors7 $’000			Restated 2013 $’000
Current Assets
Cash and cash equivalents		932																								932
Trade and other receivables		5,952															(995	)								4,957
Inventories		1,611			(1,416	)																				195
Other current assets		463															(80	)								383
Assets Classified as held for sale																	1,709									1,709
Total Current assets		8,958			(1,416	)											634									8,176
Non-Current Assets
Plant and equipment		4,896															(293	)								4,603
Goodwill and other intangible assets		15,898						(7,891	)								(341	)								7,666
Other non-current assets		13,455																					(1,000	)		12,455
Total Non-Current Assets		34,249			-			(7,891	)		-			-			(634	)					(1,000	)		24,724
TOTAL ASSETS		43,207			(1,416	)		(7,891	)		-			-			-						(1,000	)		32,900
Current Liabilities
Trade and other payables		22,113															(436	)		(603	)					21,074
Interest-bearing loans and borrowings		17,633												1,454												19,087
Current tax liabilities		447									(447	)														-
Provisions		1,307															(228	)								1,079
Liabilities directly associated with assets classified as held for sale		-															709									709
Total Current Liabilities		41,500			-			-			(447	)		1,454			45			(603	)		-			41,949
Non-Current Liabilities
Interest-bearing loans and borrowings		328															(27	)								301
Provisions		108															(18	)								90
Total Non-Current Liabilities		436															(45	)					-			391
TOTAL LIABILITIES		41,936									(447	)		1,454			-			(603	)		-			42,340
NET ASSETS		1,270			(1,416	)		(7,891	)		447			(1,454	)		-			603			(1,000	)		(9,440	)
Contributed equity		109,620																								109,620
Accumulated losses		(112,311	)		(1,416	)		(7,891	)		447			(1,454	)		-			543			(1,000	)		(123,082	)
Reserves		3,962																		60						4,022
TOTAL EQUITY		1,271			(1,416	)		(7,891	)		447			(1,454	)		-			603			(1,000	)		(9,440	)

Page 25

Notes to the financial statements

2 Summary of significant accounting policies (continued)

Statement of Comprehensive Income (extract):

June 30, 2013	2013 $’000			Correction of errors1 $’000			Correction of errors2 $’000		Correction of errors3 $’000		Correction of errors4 $’000			Correction of errors5 $’000			Correction of errors6 $’000			Correction of errors7 $’000			Correction of errors8 $’000			Restated 2013 $’000
Revenue and other income		69,928													(5,230	)								(568	)		64,130
Other income		4,664													(2	)					(989	)		568			4,241
Cost of raw materials, consumables used, and contractors		(44,687	)		(1,416	)									2,563			4,335			4	)					(39,201	)
Impairment loss on assets		(3,578	)					3,000																			(578	)
Other expenses and revenue		(38,204	)									(1,454	)		1,758			(60	)		(15	)					(37,975	)
Profit before income tax expense		(11,877	)		(1,416	)		3,000		-		(1,454	)		(911	)		4,275			(1,000	)		-			(9,383	)
Income tax (expense)/benefit		(382	)							447																	65
Net profit/(loss) attributable members of BlueNRGY Group Limited		(12,259	)		(1,416	)		3,000		447		(1,454	)		(911	)		4,275			(1,000	)		-			(9,318	)
Profit from discontinued operations															911												911

Financial year ended June 30, 2012

¹ A previously considered provision for doubtful debts raised against a trade debtor for $895,000 was reversed as funds were received in the subsequent financial year for the amount outstanding.

² Deferred project setup costs of $1,027,000, relating to a pipeline of overseas solar PV projects which did not eventuate were expensed in the year incurred (2012) instead of 2013 when the decision not to pursue the projects was taken.

³ The existence of inventories as at financial year ended June 30, 2012 could not be supported and accordingly finished goods and work-in-progress of some of the subsidiaries were written off to $Nil. The impact of this entry was $3,817,000.

⁴ As part of the purchase agreement of eco-Kinetics in January 2010, a contingent consideration was raised in trade and other payables based on the acquisition values. This liability was reassessed upon the subsequent restatement of the financial accounts and deemed no longer applicable resulting in a write-off of $603,000.

⁵ An amount of $261,000 was written off against inventory relating to the overstatement of the value of STC’s.

⁶ An amount of $125,000 was recognised against understated trade payables relating to the receipt of invoices subsequent to the balance sheet date.

⁷ An impairment to the goodwill of the Solar cash-generating unit was made totalling $10,891,000. Refer Note 16, Non-current assets – intangible assets and goodwill, for full details thereon.

⁸ As per Note 5(i), Disposals of controlling interests, the company disposed of its wholly owned subsidiary Capacitor Technologies Pty Ltd (‘Captech’) in August 2013. Accordingly the associated assets and liabilities of the subsidiary have been reclassified as held for sale in the Statement of financial position and as a discontinued operation in the Statement of comprehensive income.

As a result of the errors noted above, the following adjustments were made to the financial statements:

Page 26

Statement of Financial Position (extract):

	Consolidated Entity
June 30, 2012	2012 $’000			Correction of errors1 $’000		Correction of errors2 $’000			Correction of errors3 $’000			Correction of errors4 $’000			Correction of errors5 $’000			Correction of errors6 $’000			Correction of errors7 $’000			Correction of errors8 $’000			Restated 2012 $’000
Current Assets
Cash and cash equivalents		2,522																										2,522
Trade and other receivables		5,898			895																				(1,794	)		4,999
Inventories		18,687								(3,817	)					(261	)											14,609
Other current assets		1,259					(1,027	)																	(13	)		219
Assets classified as held for sale																									2,487			2,487
Total Current assets		28,366			895		(1,027	)		(3,817	)		-			(261	)		-			-			680			24,836
Non-Current Assets
Available-for-sale and other financial assets		636																										636
Plant and equipment		5,377																							(339	)		5,038
Goodwill and other intangible assets		22,800																				(10,891	)		(341	)		11,568
Other non-current assets		192																										192
Total Non-Current Assets		29,005			-		-			-			-			-			-			(10,891	)		(680	)		17,434
TOTAL ASSETS		57,371			895		(1,027	)		(3,817	)		-			(261	)		-			(10,891	)		-			42,270
Current Liabilities
Trade and other payables		16,728											(603	)					125						(148	)		16,102
Interest-bearing loans and borrowings		27,230																										27,230
Provisions		985																							(143	)		842
Liabilities directly associated with assets classified as held for sale		-																							462			462
Total Current Liabilities		44,943			-		-			-			(603	)		-			125			-			171			44,636
Non-Current Liabilities
Interest-bearing loans and borrowings		344																							(42	)		302
Provisions		299																							(129	)		170
Deferred tax liability		65																										65
Total Non-Current Liabilities		708			-		-			-			-			-			-			-			(171	)		537
TOTAL LIABILITIES		45,651			-		-			-			(603	)		-			125						-			45,173
NET ASSETS		11,720			895		(1,027	)		(3,817	)		603			(261	)		(125	)		(10,891	)		-			(2,903	)
Contributed equity		109,083																										109,083
Accumulated losses		(100,052	)		895		(1,027	)		(3,817	)		603			(261	)		(125	)		(10,891	)		-			(114,675	)
Reserves		2,689																										2,689
TOTAL EQUITY		11,720			895		(1,027	)		(3,817	)		603			(261	)		(125	)		(10,891	)		-			(2,903	)

Page 27

Notes to the financial statements

2 Summary of significant accounting policies (continued)

Statement of Comprehensive Income (extract):

	Consolidated Entity
June 30, 2012	2012 $’000			Correction of errors1 $’000		Correction of errors2 $’000			Correction of errors3 $’000			Correction of errors4 $’000		Correction of errors5 $’000			Correction of errors6 $’000			Correction of errors7 $’000			Correction of errors8 $’000			Restated 2012 $’000
Revenue and other income		53,678											603											(6,141	)		48,140
Cost of raw materials, consumables used, and contractors		(43,073	)				(1,027	)		(3,817	)				(261	)		(125	)					5,501			(42,802	)
Provision for impairment of receivables		(2,496	)		895																			256			(1,345	)
Impairment loss on assets		(4,614	)																								(4,614	)
Impairment of intangible assets		(643	)																		(10,891	)					(11,534	)
Other expenses and revenue		(40,136	)																					1,850			(38,286	)
(Loss)/profit before income tax expense		(37,284	)		895		(1,027	)		(3,817	)		603		(261	)		(125	)		(10,891	)		1,466			(50,441	)
Income tax (expense)/benefit		(2,835	)		-		-			-			-		-			-			-			371			(2,464	)
Net profit/(loss) attributable members of BlueNRGY Group Limited		(40,119	)		895		(1,027	)		(3,817	)		603		(261	)		(125	)		(10,891	)		1,837			(52,905	)
Loss from discontinued operations																								(1,837	)		(1,837	)

The effect on earnings per share related to the restatement in 2012 was an increase in basic loss per share by $1.18 to $35.24 per share. The impact on 2013 was a decrease in basic loss per share of $0.57 to $5.27 per share.

Page 28

Notes to the financial statements

3 Significant accounting judgements, estimates and assumptions

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Critical accounting estimates and assumptions

(i) Recovery of deferred tax assets

During the year ended June 30, 2013, pursuant to IAS 12Income Taxes, the Company reassessed its estimate of the probability that future taxable profits will be available against which the Group can utilise its unused tax losses and deductible temporary differences in future periods and deferred tax assets recognised at that date were derecognised.

(ii) Impairment of goodwill and other intangibles other than Patents

The Group determines whether goodwill and other intangiblesother than patents are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating unit(s) to which the goodwill or other intangible assets are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and other intangibles including a sensitivity analysis are shown in Note 16.

(iii) Project work in progress

Project work in progress is capitalised in accordance with the accounting policy in Note 2(o)(iii). Initial capitalisation of costs is based on management’s judgment that technological and economical feasibility is confirmed, usually when a project has reached a defined milestone. Determination of the amounts to be capitalised is made on a case-by-case basis giving regard to previous experience of the Group in similar projects and contractual arrangements. At June 30, 2014, the carrying amount of capitalised project work in progress was $392,000 (2013: nil; 2012: $12,762,000).

(iv) Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes or Binominal model, with the assumptions detailed in Note 25.

The Group measures the cost of equity-settled transactions with regards to warrants issued to lenders using an un-modified binominal lattice model giving consideration to the dilution impact of the shares issued upon conversion of the warrants as well as other options on issue.

(v) Patents

At 30 June 2012, prior to its sale, the Group measured the carrying value of the Larkden controlled storage technology patents at cost less impairment and amortisation. The recoverable amount is the higher of the patents value in use or fair value less cost to sell. The fair value was determined by an external valuer in accordance with the definition of fair value in IFRS 13Fair Value Measurement. The valuation was determined using a discounted cash flow methodology and considering the Patents as a group and as a type of start-up / early stage commercialisation technology. The external valuer constructed various alternative scenarios as to possible likely future outcomes projecting various associated cash flows for each alternative scenario; applying a range of discount rates to the various projected cash flows to determine a range of indicated net present values.

Page 29

Notes to the financial statements

3 Significant accounting judgements, estimates and assumptions

(a) Critical accounting estimates and assumptions (continued)

(vi) Wind development projects

Part of BlueNRGY’s business is the development of large-scale wind projects in Australia whereby BlueNRGY earns a developer fee. In respect of the Taralga Wind project, costs incurred for developing the project were initially recognised as inventory as it was probable that the project would be completed and generate future economic benefits (refer Note 2(o)(iii). On 9 October 2012, BlueNRGY sold the Taralga Wind project it had developed in return for cash of $6,993,000 plus a 10% interest in the project’s vehicle established for the transaction. The accounting treatment was to:

· recognise revenue which includes the fair value of the 10% ownership interest in two entities (Taralga Holding Nominees 1 Pty Ltd and Taralga Holding Nominees 2 Pty Ltd) valued at $10,000,000

· recognised revenue of $6,993,000 which was received in cash during the period, and

· expense development costs of $3,099,000 carried in inventory as Cost of Goods sold.

resulting in a profit on the sale of $13,894,000 in the 2013 year.

The investment of 10% of the Taralga Wind Farm project is by way of investment in two trustee companies, Taralga Holding Nominees 1 Pty Ltd and Taralga Holding Nominees 2 Pty Ltd and two trusts, the Taralga HoldCo Land Trust and the Taralga HoldCo Operating Trust. This investment was funded by BlueNRGY from the re-investment of part of its development fee generated on equity close of the project. This investment is classified as an ‘Available-for-sale financial asset’. The investment in Taralga was initially recognised at fair value at the date of the equity transaction on 9 October 2012. The fair value was determined based on discounting the cash flows which will be received on exit based on several scenarios of the financial model for the project and the contractually defined distributions from any sales profits due to BlueNRGY on exit. Due to the requirement for judgement over variables within the financial model to determine future returns and profit achievable on exit, the fair value calculations were based on a net present value of a risk adjusted, probability weighted average return from different sales Internal Rate of Return (‘IRR’) expectations.

The range of IRR assumptions used in these calculations was from 9.0% to 13.0% which were considered the high and low points between which arm’s length sales transactions of wind farm projects may occur in Australia. A discount rate of 17.0% was applied to the calculated amount to reflect the risk to deliver the project as per the model associated with construction risk and the time value of money based on return premiums specific to the project. The range of outcomes of the fair value calculations was from $9,500,000 to $10,900,000 and the adopted value was $10,000,000. Variances between actual results and the estimated results from the valuation methodology may result in higher or lower profits being achieved. After initial recognition the investment in the Taralga Wind Farm project was accounted for as an available-for-sale investment which was measured at fair value with gains recognised in other comprehensive income and in an available-for-sale reserve until the investment is derecognised or until the investment is determined to be impaired. At 30 June 2013 this available-for-sale asset was revalued to $10,800,000. This revaluation was based on an indicative offer to acquire the asset which was received by the Group during the year.

At 30 June 2014, the fair value calculations were re-performed using the same methodology as on initial recognition. Based on actual events and expected changes to future outcomes arising from events during the 2014 financial year, the investment was fully impaired at 30 June 2014. This impairment resulted in the recognition of a charge to profit or loss of $10,000,000.

(vii) Contingent consideration

On 16 April 2013, the Group’s interests in Larkden Pty Ltd were sold, including the energy storage patents held by Larkden. The sale price was $4,500,000, of which $250,000 was received in cash at the time of sale. If certain targets of installed capacity of the storage technology are not met within 3 years of the date of sale, the purchase price shall be reduced by $1,000,000. This contingent consideration of $1,000,000 will be recognised as revenue on receipt. The balance of the payments is to be received in three tranches on the anniversaries of the sale from 2015 to 2017 and is recorded in other non-current receivables. Interest on the deferred purchase price accrues at market rate. A loss on sale of $265,000 has been included in Other Expenses, refer Note 7(f). Subsequent to June 30, 2014, $1,000,000 due to be received in May 2015 was received.

Page 30

Notes to the financial statements

3 Significant accounting judgements, estimates and assumptions

(b) Critical judgements in applying the entity’s accounting policies

(i) Net realisable value for STCs inventories

STCs are measured at lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Judgement is applied when determining the net realisable value. This includes consideration of the number of STCs that the Group has at balance date, the estimated period it will take to sell the STCs, the ability of the Group to sell the STCs in the ordinary course of business, potential forward sale contracts that the Group has at balance date and observed STC market prices.

(ii) Impairment of available-for-sale financial assets

The Group has determined that its investment in Andalay Solar Inc, a US listed company, has been subject to a significant and prolonged decrease in market price. As a result, in accordance with the Group’s accounting policy regarding available-for-sale financial assets (refer to Note 2(p)) the Company has recognised an impairment to the carrying value of the asset through profit or loss for the year ended June 30, 2014 of $4,000 (2013: $560,000; 2012: $375,000).

4 Operating segments

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

The consolidated entity’s operating companies are organised and managed separately according to the nature of the products and services they provide, with each segment offering different products and serving different markets.

The principal activities of segments within the consolidated entity were:

· Solar PVprovides engineering design, supply and installation services to retail, commercial and utility-scale domestic and international customers with professional engineering solutions to make effective use of solar power. Domestic products and services are generally small-scale solar power solutions suited to residential and small to medium enterprise applications. International products and services are generally focused on utility-scale solar generation system projects.

· Parmacprovides a full range of mechanical services and air-conditioning services in support of developers, builders and commercial tenants at the mid-tier level. Their specialty is working within existing mechanical services infrastructure and tight deadlines to deliver high-quality commercial grade air-conditioning solutions.

· RAPS / Technology Solutionsincludes operating remote area power systems (‘RAPS’) as well as the inclusion of other operations that utilise the Groups patents relating to carbon block energy storage technology and other intellectual property. The Chatham Island wind project is included in the RAPS segment.

· Winddevelopment of large scale wind projects, including expenditure on early stage projects. At 30 June 2014 this segment is predominately the Taralga wind farm project.

· Corporateprovides administrative and other services required to support the BlueNRGY group. This includes the Corporate Executive Team, Finance, Human Resources and Legal departments.

· CapTech (discontinued operation)manufacture energy saving products (power factor correction equipment) and energy quality products (reactors and filters), and also supply components (capacitors) and energy consulting services. In general, their power correction equipment can reduce energy consumption by 25% and their other products provide for improvement in quality and thereby efficiency of power use. Captech was disposed on August 30, 2013 and is no longer an operating segment.

Page 31

Notes to the financial statements

4 Operating segments (continued)

Primary reporting – business segments

2014	Solar PV $’000			Parmac $’000			RAPS/ Technology Solutions $’000			Wind $’000		Corporate $’000			Total $’000			Adjustments & Eliminations $’000			Consolidated $’000
Revenue outside the economic entity		2,240			10,188			329			1,308		-			14,065			-			14,065
Other income		3,194			14			-			-		589			3,797			(4	)		3,793
Total income from continuing operations		5,434			10,202			329			1,308		589			17,862			(4	)		17,858
Total income from discontinued operations																						1,076
Total income																						18,934
Segment profit/(loss) before tax from continuing operations		(1,352	)		(823	)		10			707		(25,058	)		(26,516	)		-			(26,516	)
Income tax (expense)/benefit		-			-			-			-					-			-			-
Net profit/(loss) after tax from continuing operations		(1,352	)		(823	)		10			707		(25,058	)		(26,516	)		-			(26,516	)
Net profit from discontinued operations																						1,086
Net profit after tax																						(25,430	)
Depreciation, Amortisation		(183	)		(143	)		(36	)		-		(270	)		(632	)		-			(632	)
Impairment of financial assets and interest in joint ventures		-			-			-			-		(4	)		(4	)		-			(4	)
Impairment of intangible assets		-			-			-			-		(10,015	)		(10,015	)		-			(10,015	)
Segment assets of continuing operations		3,273			2,608			2,294			3		22,695			30,873			(12,146	)		18,727
Segment assets of discontinued operations																						-
Total Assets																						18,727
Segment liabilities of continuing operations		18,977			2,332			164			-		17,244			38,717			(319	)		38,398
Segment liabilities of discontinued operations																						-
Total Liabilities																						38,398

Page 32

Notes to the financial statements

4 Operating segments (continued)

Primary reporting – business segments (continued)

2013 (restated)	Solar PV $’000			Parmac $’000			RAPS/ Technology Solutions $’000			Wind $’000		Corporate $’000			Total $’000			Adjustments & Eliminations $’000			Consolidated $’000
Revenue outside the economic entity		28,107			17,363			323			18,557		-			64,350			(220	)		64,130
Other income		1,599			49			-			-		2,583			4,231			-			4,231
Total income from continuing operations		29,706			17,412			323			18,557		2,583			68,581			(220	)		68,361
Total revenue from discontinued operations																						5,327
Total income																						73,688
Segment profit/(loss) before tax from continuing operations		(8,530	)		(1,287	)		586			13,748		(13,900	)		(9,383	)		-			(9,383	)
Income tax (expense)/benefit		12			-			-			-		53			65			-			65
Net profit/(loss) after tax from continuing operations		(8,518	)		(1,287	)		586			13,748		(13,847	)		(9,318	)		-			(9,318	)
Net profit from discontinued operations																						911
Net profit after tax																						(8,407	)
Depreciation, Amortisation		(229	)		(149	)		(178	)		-		(252	)		(808	)		-			(808	)
Impairment of financial assets and interest in joint ventures		-			-			(18	)		-		(560)			(578	)		-			(578	)
Impairment of intangible assets		-			-			-			-		-			-			-			-
Segment assets of continuing operations		3,426			3,834			2,610			10,808		10,573			31,191			-			31,191
Segment assets of discontinued operations																						1,709
Total Assets																						32,900
Segment liabilities of continuing operations		12,588			4,254			17			7		24,765			41,631			-			41,631
Segment liabilities of discontinued operations																						709
Total Liabilities																						42,340

Page 33

Notes to the financial statements

4 Operating segments (continued)

Primary reporting – business segments (continued)

2012 (restated)	Solar PV $’000			Parmac $’000			RAPS/ Technology Solutions $’000			Wind $’000			Corporate $’000			Total $’000			Adjustments & Eliminations $’000			Consolidated $’000
Revenue outside the economic entity		32,438			10,372			767			-			-			43,577			-			43,577
Other income		107			4			-			-			4,452			4,563			-			4,563
Total income from continuing operations		32,545			10,376			767			-			4,452			48,140			-			48,140
Total revenue from discontinued operations																							6,326
Total income																							54,466
Segment profit/(loss) before tax from continuing operations		(20,832	)		(576	)		(178	)		(7	)		(28,846	)		(50,441	)		-			(50,441	)
Income tax (expense)/benefit		1,496			67			(119	)		2			(3,977	)		(2,531	)		67			(2,464	)
Net profit/(loss) after tax from continuing operations		(19,336	)		(509	)		(297	)		(5	)		(32,825	)		(52,972	)		67			(52,905	)
Net profit from discontinued operations																							(1,837	)
Net profit after tax																							(54,742	)
Depreciation, Amortisation		(335	)		(127	)		(130	)		-			(263	)		(855	)		-			(855	)
Impairment of financial assets and interest in joint ventures		(308	)		-			-			-			(3,931	)		(4,239	)		-			(4,239	)
Impairment of intangible assets		(471	)		-			-			-			(11,063	)		(11,534	)		-			(11,534	)
Segment assets of continuing operations		19,890			2,320			4,516			2,523			11,644			40,893			(1,110	)		39,783
Segment assets of discontinued operations																							2,487
Total Assets																							42,270
Segment liabilities of continuing operations		26,307			1,440			-			10			18,011			45,768			(1,057	)		44,711
Segment liabilities of discontinued operations																							462
Total Liabilities																							45,173

Page 34

Notes to the financial statements

5 Disposals of controlling interests

(i) Disposal of subsidiary

On August 30, 2013 BlueNRGY’s 100% owned subsidiary Capacitor Technologies Pty Ltd (‘Captech’) was disposed of for $1,788,000 resulting in a loss on sale of $8,000. (Refer Note 14).

6 Revenues from continuing operations and other income

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Revenue from sales and services		14,065		64,130		43,577
Total revenue from operating activities		14,065		64,130		43,577
Other income
Gain on financial liabilities measured at fair value		73		2,555		-
Gain on re-measurement of contingent consideration		-		-		4,132
Discount received (i)		3,086		-		-
Interest income		-		39		64
Other income (ii)		634		1,647		367
		3,793		4,241		4,563

(i) Discount received in 2014 includes a discount received from trade suppliers on amounts previously recorded as trade payables.

(ii) Other income in 2013 includes $489,000 gain on sale of STCs and $396,000 recovery from a previously written off bad debt.

7 Expenses

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
(a) Employee benefits expense
Wages and salaries		9,232		12,327		12,663
Defined contribution superannuation expense		457		636		819
Other employee benefits expense		868		1,823		1,934
		10,557		14,786		15,416
(b) Lease payments and other occupancy expenses
Minimum lease payments - operating lease		780		1,131		1,246
Other		135		126		-
		915		1,257		1,246
(c) Depreciation, and amortisation of non-current assets
Depreciation – property, plant & equipment		586		589		674
Amortisation – leasehold improvements		46		82		99
Amortisation – patents		-		137		82
		632		808		855

Page 35

Notes to the financial statements

7 Expenses (continued)

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
(d) Impairment loss on intangibles
Impairment loss on goodwill		-		-		11,116
Impairment loss on license cost		-		-		163
Impairment loss on development costs		-		-		255
		-		-		11,534
(e) Impairment loss on financial assets and joint venture assets
Investments in Solar projects		-		18		44
Investment in Wind projects		10,000		-		-
Investment in Barefoot Power		15		-		-
Investment in eco-Kinetics UK JV		-		-		129
Investment in eco-Kinetics Germany JV		-		-		179
Investment in Bowen		-		-		1,898
Investment in Emerald		-		-		1,989
		10,015		18		4,239
(f) Other expenses
Communications costs		229		406		481
Bank charges		51		177		474
Printing, postage & delivery		32		47		50
Development costs		350		-		-
Insurance		436		569		340
Office supplies		317		187		494
Training		9		19		59
Unrealised and realised losses on foreign exchange		474		706		392
Loss on sale/disposal of assets		642		468		31
Other expenses		715		628		894
		3,255		3,207		3,215
(g) Finance costs
Interest expense		3,947		7,356		1,980
Finance cost for extinguishment of convertible notes		870		2,278		-
Share option expenses		148		267		526
Foreign exchange difference		96		1,221		(180	)
		5,061		11,122		2,326
(h) Cost of sales		14,064		46,745		52,431

Page 36

Notes to the financial statements

8 Income tax

	Consolidated
	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
(a) Income tax benefit/(expense)
Current tax expense		-			-			-
Deferred tax
-  Relating to origination and reversal of temporary differences		-			65			(2,835	)
Income tax benefit/(expense)		-			65			(2,835	)
Income tax expense is attributable to:
Loss from continuing operations		-			65			(2,464	)
Profit/(loss) from discontinuing operations		-			-			(371	)
		-			65			(2,835	)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss before income tax from continuing operations		(26,516	)		(9,382	)		(50,441	)
Profit/(loss) before income tax from discontinuing operations		1,086			911			(1,466	)
		(25,430	)		(8,471	)		(57,907	)
Tax at the Australian tax rate of 30%		(7,629	)		(2,541	)		(15,572	)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Expenditure not allowable for income tax purposes		4,095			1,377			1,725
Non-assessable items for income tax purposes		-			(767	)		(1,060	)
Tax benefit (not recognised) now recognised		3,534			1,996			9,222
Recognition of prior year temporary differences/tax losses brought to account as deferred tax assets		-			-			3,221
		-			65			(2,464	)
(c) Reconciliation of deferred tax asset/(liability) (net position)
Opening balance as at 1 July		-			(65	)		2,770
Income tax benefit recognised		-			65			(2,835	)
Closing balance as at 30 June		-			-			(65	)
(d) Deferred income tax
Deferred tax liabilities:
Depreciation		-			-			12
Other		-			-			53
		-			-			65

The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

(d) Tax losses 

The Group generated revenue tax losses totalling $11,780,000 (deferred tax asset of $3,534,000). Deferred tax assets relating to tax losses totalling $19,921,000 (2013: $16,387,000; 2012: $14,521,000) are available to the Group for offset against future taxable income. In addition, the Group has carried forward capital tax losses totalling $4,867,000 (2013: $4,855,000; 2012: $4,672,000)

(e) Unrecognised temporary differences 

The temporary differences not recognised at June 30, 2014 2013 and 2012 relate primarily to tax losses referred to in (d). There are no other material temporary differences.

(f) Franking credits 

At June 30, 2014 the Group has $834,000 of available franking credits (2013: $834,000; 2012: $834,000).

Page 37

Notes to the financial statements

9 Earnings per share

The following reflects the income used in the basic and diluted earnings per share computations:

	Consolidated
	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
(a) Earnings used in calculating earnings per share
Net loss from continuing operations attributable to ordinary equity holders of the parent		(26,516	)		(9,318	)		(52,905	)
Net profit from discontinued operations attributable to ordinary equity holders of the parent		1,086			911			(1,837	)
Net loss attributable to ordinary equity holders of the parent		(25,430	)		(8,407	)		(54,742	)

	2014 Number of shares		2013 Number of shares		2012 Number of shares
(b) Weighted average number of shares
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share		1,953,691		1,596,246		1,553,483
Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share		1,953,691		1,596,246		1,553,483

	2014 $			2013 $			2012 $
(c) Earnings per share
Basic earnings per share from continuing operations		(13.57	)		(5.84	)		(34.06	)
Basic earnings per share from discontinued operations		0.55			0.57			(1.18	)
Basic earnings per share		(13.02	)		(5.27	)		(35.24	)
Diluted earnings per share from continuing operations		(13.57	)		(5.84	)		(34.06	)
Diluted earnings per share from discontinued operations		0.55			0.57			(1.18	)
Diluted earnings per share		(13.02	)		(5.27	)		(35.24	)

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

Page 38

Notes to the financial statements

9 Earnings per share(continued)

The following anti-dilutive share options have been excluded from the calculation of diluted earnings per share that could potentially dilute earnings per share in the future if they become dilutive:

Date granted	Expiry date		Exercise price $			Vested and exercisable at end of the year
2014
1-Nov-11		31-Dec-14	$	75.00			1,167
28-May-12		28-May-15	$	8.25	1		66,667
31-May-12		30-May-17	$	3.90			117,705
12-Dec-12		12-Dec-17	$	15.90			3,930
12-Dec-12		12-Dec-17	$	3.90	2		11,792
30-Dec-12		30-Dec-17	$	15.90			43,164
13-Feb-13		30-May-17	$	3.90	2		153,939
18-Jun-14		15-Dec-19	$	5.34			72,400
2013
28-Nov-08		27-Nov-13	$	60.00			30,667
21-Dec-10		19-Dec 13	$	60.00			40,000
01-Nov-11		31-Dec-14	$	75.00			1,167
28-May-12		28-May-15	$	8.25	1		66,667
31-May-12		30-May-17	$	3.90	2		117,705
12- Dec -12		12-Dec-17	$	15.90			3,930
12- Dec -12		12-Dec-17	$	3.90			11,792
30- Dec -13		30-Dec-17	$	15.90			43,164
13-Feb-13		30-May-17	$	3.90	2		153,939
2012
28-Nov-08		27- Nov -13	$	60.00			30,667
21-Dec-10		19- Dec -13	$	60.00			40,000
27-Jul-11		31- Dec-12	$	60.00			1,917
01-Nov-11		31-Dec-14	$	75.00			1,167
28-May-12		28-May-15	$	15.00			66,667
31-May-12		30-May-17	$	15.00			117,705

¹ These options were repriced down from $15.90 to $8.25 following the restructuring of the series 1 convertible notes.

² These options contain a feature whereby their exercise price is reduced to match the price of any subsequent equity issues at a lower price than their exercise price. During the year, 117,705 options were repriced down from $15.90 to $8.25 and subsequently from $8.25 to $3.90. 153,939 options were repriced down from $8.25 to $3.90.

All the convertible notes issued were anti-dilutive for all three financial years. Refer to Note 18(b) for details of convertible notes issued.

Page 39

Notes to the financial statements

10 Cash and cash equivalents

	Consolidated
	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
Cash at bank and in hand		1,381			932			2,522
Bank overdraft		-			(463	)		-
		1,381			469			2,522
(a) Reconciliation of net loss to net cash flow from operations
Loss after tax		(25,430	)		(8,407	)		(54,742	)
Adjustment for non-cash items:
Depreciation and amortisation		632			895			939
Impairment of intangibles		-			-			11,534
Impairment of financial assets and joint venture assets		10,015			578			4,614
Share-based payments expense		147			436			707
Write-off of capitalised finance facility costs		-			978			-
Non-cash items relating to convertible notes		3,256			6,063			-
Non-cash items relating to Taralga project		-			(10,000	)		-
Gain on financial liabilities measured at fair value		-			(2,555	)		-
Loss on sale of property, plant and equipment and intangible assets		909			454			25
Unrealised losses/(gains) on foreign exchange		474			566			214
Share of (profit)/loss of associates		-			-			108
Bad debts written off and provision for impairment of receivable		75			188			2,496
Discount on acquisition of controlled entity		-			(67	)		-
Break fee from terminated acquisition		-			-			2,475
Gain on remeasurement of contingent consideration		-			-			(3,529	)
Changes in assets and liabilities:
Trade and other receivables		2,862			1,855			13,024
Inventories		(1,038	)		14,640			14,718
Other assets		(801	)		20			822
Deferred tax assets		-			-			3,219
Trade and other payables		(10,735	)		4,110			(12,054	)
Current tax liabilities		-			(65	)		-
Deferred tax liabilities		-			-			(386	)
Provisions		(529	)		132			(3,198	)
Net cash from/(used in) operating activities		(20,163	)		9,821			(19,014	)
(b) Non-cash financing and investing activities
Share-based payments (options) – borrowings		147			267			527
Equity settled – payables and borrowings		4,891			419			-
Acquisition of plant and equipment by means of finance leases		167			115			197
Acquisition of investment by means of re-investment of fees earned		-			10,000			-

The Group’s exposure to interest rate risk is discussed in Note 22. The maximum exposure to credit risk at the end of the reporting period is the carrying amount.

Page 40

Notes to the financial statements

11 Trade and other receivables

	Consolidated
	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
Current
Trade receivables(a)		1,498			3,128			4,948
Other receivables(b)		1,600			1,907			1,118
Allowance for impairment loss		(3	)		(78	)		(1,067	)
		3,095			4,957			4,999
Non-current
Other receivables(b)		500			1,500			-
		500			1,500			-
Movements in the allowance for impairment loss were as follows:
At July 1		78			1,067			311
Charge for the year		75			334			1,345
Amounts recovered		-			-			-
Amounts written off		(150	)		(1,323	)		(589	)
At June 30		3			78			1,067

(a) Past due but not impaired 

As at June 30, 2014, trade receivables past due but not considered impaired are: $234,000 (2013: $2,490,000; 2012: $1,930,000).

Payment terms on these amounts have not been re-negotiated. Direct contact with the relevant debtor has been made and the Group is satisfied that payment will be received in full. Since balance date $207,000 of these past due amounts have been received.

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

	Total $’000		0-30 Days $’000		30-60 Days $’000		> 60 Days $’000
At June 30, the ageing analysis of trade receivables past due is as follows:
2014 Consolidated		234		-		177		57
2013 Consolidated		2,490		-		2,166		324
2012 Consolidated		1,930		-		399		1,531

(b) Other receivables 

These amounts generally arise from transactions outside of the usual operating activities of the Group. The balance relates primarily to the receivable from the sale of Larkden Pty Ltd, of which $1,000,000 has been received by the date of this report.

Page 41

Notes to the financial statements

12 Inventories

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Raw materials and stores		826		-		-
Work in progress		392		-		12,762
STCs		15		195		1,847
		1,233		195		14,609

Work in progress at June 30, 2012 was made up of costs incurred in constructing a 5MW solar project in Italy and development expenditure on the Taralga wind farm project. Since 30 June 2012 the Italian Solar project has been sold and development costs for Taralga have been reimbursed with the respective work-in-progress amounts transferred to profit or loss in the year ended 30 June 2013.

13 Other assets

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Current
Prepayments		347		379		217
Deposits (i)		756		4		2
		1,103		383		219
Non-current
Deposits		178		97		192

(i) For 2014, this amount includes $676,000 relating to a payment initiated by a Director, Mr Gerry McGowan, (no longer a director) outside of the customary approval processes of the Company. The Company has been unable to determine the nature of this payment. Refer to Note 24(g).

Page 42

Notes to the financial statements

14 Available-for-sale, other financial assets and discontinued operations

Available-for-sale and other financial assets

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Non-current
Taralga Wind Farm1		-		10,800		-
Andalay Solar2		39		43		603
Shares in other corporations		-		15		15
Investment in solar projects		-		-		18
		39		10,858		636

¹ During the year ended June 30, 2013 the Group made an investment in two trustee companies Taralga Holding Nominees 1 Pty Ltd, and Taralga Holding Nominees 2 Pty Ltd, and two trusts, the Taralga HoldCo Land Trust, and the Taralga HoldCo Operating Trust. See Note 3(vi) for details of the investment. At 30 June 2014, this investment was fully impaired to $Nil.

² On January 4, 2012, BlueNRGY invested US$1,000,000 into Andalay Solar (previously Westinghouse Solar Inc.) to acquire 1,666,667 common stock in this US listed company. This represented an ownership interest of approximately 9% of the common stock of Andalay Solar. BlueNRGY does not have a controlling interest in Andalay Solar and as such this investment is valued on a mark to market basis. Impairment losses of $4,000 (2013: $560,000; 2012: $375,000) have been recognised as it was deemed that the decline in value was significant compared to the original cost of the investment.

Discontinued operations

On August 30, 2013 BlueNRGY’s 100% owned subsidiary Capacitor Technologies Pty Ltd (‘Captech’) was disposed of for $1,788,000 resulting in a loss on sale of $8,000. Financial information relating to the discontinued operation for the period to the date of disposal is set out below:

	Consolidated
	2014 $’000			2013 $’000			2012 $’000
Current
Revenue		1,076			5,237			6,326
Expenses		10			(4,326	)		(8,163	)
Profit before income tax		1,086			911			(1,837	)
Income tax expense		-			-			-
Profit after income tax of discontinued operation		1,086			911			(1,837	)
Assets classified as held for sale		-			1,709			2,487
Liabilities directly associated with assets classified as held for sale		-			709			462
Net cash outflow from operating activities		(263	)		(10	)		(91	)
Net cash outflow from investing activities		-			(47	)		(52	)
Net cash outflow from financing activities		(26	)		(16	)		-
Net decrease in cash generated by discontinued operation		(289	)		(73	)		(143	)

Page 43

Notes to the financial statements

14 Available-for-sale, other financial assets and discontinued operations (continued)

Details of the sale of Captech are as follows:

	2014 $’000
Details of sale:
Consideration received
Cash received		1,788
Total disposal consideration		1,788
Carry amount of net assets sold		1,796
Loss on sale before income tax		(8	)
Income tax expense		-
Loss on sale of discontinued operation after income tax		(8	)
Carrying amounts of assets and liabilities at the date of sale
Receivables		937
Inventories and work in progress		935
Fixed assets		162
Goodwill		341
Total assets		2,375
Trade payables & other payables		297
Provisions		257
Finance leases		25
Total liabilities		579
Net assets		1,796

Page 44

Notes to the financial statements

15 Non-current assets - plant and equipment

	Consolidated
	2014 $’000			2013 $’000			2012 $’000
Computer hardware & software
At cost		1,043			925			619
Accumulated depreciation		(700	)		(581	)		(455	)
Total computer hardware & software		343			344			164
Motor vehicles
At cost		374			362			328
Accumulated depreciation		(369	)		(352	)		(174	)
Total motor vehicles		5			10			154
Plant and equipment
At cost		3,967			4,232			4,477
Accumulated depreciation		(1,443	)		(736	)		(587	)
Total plant and equipment		2,524			3,496			3,890
Furniture, fittings & office equipment
At cost		429			426			415
Accumulated depreciation		(240	)		(212	)		(156	)
Total furniture, fittings & office equipment		189			214			259
Leased motor vehicles
At cost		644			635			769
Accumulated amortisation		(287	)		(256	)		(410	)
Total leased motor vehicles		357			379			359
Leasehold improvements
At cost		407			425			512
Accumulated amortisation		(293	)		(265	)		(300	)
Total leasehold improvements		114			160			212
Total property, plant and equipment
At cost		6,864			7,005			7,120
Accumulated amortisation/depreciation		(3,332	)		(2,402	)		(2,082	)
Total property, plant and equipment		3,532			4,603			5,038

Page 45

Notes to the financial statements

15 Non-current assets - plant and equipment (continued)

Reconciliation of carrying amounts at the beginning and end of the year

	Computer hardware & software $’000			Motor vehicles $’000			Plant & equipment $’000			Furniture, fittings & office equipment $’000			Leased motor vehicles $’000			Leasehold improve- ments $’000			Total $’000
Year ended June 30, 2014
At July 1, 2013 net of accumulated depreciation and impairment		344			10			3,496			214			379			160			4,603
Additions		21			97			284			80			167			23			672
Disposals		(10	)		(97	)		(867	)		(45	)		(64	)		(28	)		(1,111	)
Transfers		119			7			(119	)		(5	)		(7	)		5			-
Depreciation charge for the year		(131	)		(12	)		(270	)		(55	)		(118	)		(46	)		(632	)
At June 30, 2014 net of accumulated depreciation and impairment		343			5			2,524			189			357			114			3,532
Year Ended 30 June 2013
At 1 July 2012 net of accumulated depreciation and impairment		164			154			3,890			259			359			212			5,038
Additions		304			13			-			134			115			122			688
Disposals		(11	)		(86	)		(145	)		(118	)		-			(92	)		(452	)
Depreciation charge for the year		(113	)		(71	)		(249	)		(61	)		(95	)		(82	)		(671	)
At 30 June 2013 net of accumulated depreciation and impairment		344			10			3,496			214			379			160			4,603

Page 46

Notes to the financial statements

15 Non-current assets - plant and equipment (continued)

Reconciliation of carrying amounts at the beginning and end of the year

	Computer hardware & software $’000			Motor vehicles $’000			Plant & equipment $’000			Furniture, fittings & office equipment $’000			Leased motor vehicles $’000			Leasehold improve- ments $’000			Total $’000
Year Ended 30 June 2012
At 1 July 2011 net of accumulated depreciation and impairment		287			273			3,391			385			215			310			4,861
Additions		136			27			725			-			197			7			1,092
Disposals		(2	)		(18	)		-			(74	)		(48	)		-			(142	)
Transfers		-			(59	)		-			-			59			-			-
Depreciation charge for the year		(257	)		(69	)		(226	)		(52	)		(64	)		(105	)		(773	)
At 30 June 2012 net of accumulated depreciation and impairment		164			154			3,890			259			359			212			5,038

Page 47

Notes to the financial statements

16 Non-current assets – goodwill and intangible assets

Reconciliation of carrying amounts at the beginning and end of the year

	Patent Costs $’000			Develop- ment Costs $’000			License Costs $’000			Goodwill $’000			Total $’000
Year ended June 30, 2014
At July 1, 2013 net of impairment		-			-			-			7,666			7,666
Additions		-			-			-			-			-
Disposals		-			-			-			-			-
Impairment		-			-			-			-			-
Amortisation		-			-			-			-			-
At June 30, 2014 net of accumulated amortisation and impairment		-			-			-			7,666			7,666
At June 30, 2014
Cost (gross carrying amount)		-			-			-			19,123			19,123
Accumulated impairment		-			-			-			(11,457	)		(11,457	)
Net carrying amount		-			-			-			7,666			7,666
Year ended June 30, 2013
At July 1, 2012 net of impairment		3,500			402			-			7,666			11,568
Disposals		(3,363	)		(402	)		-			-			(3,765	)
Impairment		-			-			-			-			-
Amortisation		(137	)		-			-			-			(137	)
At June 30, 2013 net of accumulated amortisation and impairment		-			-			-			7,666			7,666
At June 30, 2013
Cost (gross carrying amount)		-			255			163			18,782			19,200
Accumulated impairment		-			(255	)		(163	)		(11,116	)		(11,534	)
Net carrying amount		-			-			-			7,666			7,666
Year ended June 30, 2012
At July 1, 2011 net of impairment		3,582			654			163			18,557			22,956
Additions		-			3			-			225			228
Impairment		-			(255	)		(163	)		(11,116	)		(11,534	)
Amortisation		(82	)		-			-			-			(82	)
At June 30, 2012 net of accumulated amortisation and impairment		3,500			402			-			7,666			11,568
At June 30, 2012
Cost (gross carrying amount)		3,582			657			163			18,782			23,184
Accumulated impairment		-			(255	)		(163	)		(11,116	)		(11,534	)
Accumulated amortisation		(82	)		-			-			-			(82	)
Net carrying amount		3,500			402			-			7,666			11,568

Page 48

Notes to the financial statements

16 Non-current assets – goodwill and intangible assets (continued)

Patents

(i) Description of the asset

Patents have been acquired through business combinations (Larkden Pty Ltd) and are carried at cost less accumulated amortisation and accumulated impairment losses. Whilst the technology and know-how associated with the patents have an infinite economic life expectancy, the patents expire in 2025. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.

(ii) Impairment consideration

The Group obtained an independent valuation of the Larkden patents as at June 30, 2012 in order to determine the recoverable amount of the asset. The valuation indicated that the carrying value of the patents was $3,500,000.

(iii) Key assumptions used by the independent valuer

The recoverable amount of the patents was determined based on an independent assessment of their fair value. The independent valuation considered a range of possible scenarios and resulting cash flows. The pre-tax discount rate applied to these range of cash flows is between 70% and 80%. In determining the recoverable amount of the asset the Company considered the range of valuations provided by the different scenarios and adopted the value recommended by the independent valuer.

The Group’s interests in Larken Pty Ltd were sold during the year ended 2013. The sale included the energy storage patents held by Larken.

License costs and development costs

During the year ended June 30, 2010 the Group acquired a licence to act as exclusive retailer of Climate Well products with a fair value of $163,000. During the year ended June 30, 2012 the Group assessed the recoverability of the $163,000 Climate Well license agreement and determined that the license was impaired as the Company has decided not to pursue product sales within its licensed geography any further. The full amount of $163,000 was impaired during the year ended June 30, 2012.

During the year ended June 30, 2012, the Group assessed the recoverability of capitalised development costs and determined that the carrying value required impairment and accordingly an impairment loss of $255,000 was recognised in profit or loss in the 2012 financial year. The remaining carrying amount of development costs of $402,000 at 30 June 2012 represented development costs associated with linking solar and wind generating assets with energy storage technology for a remote area renewable energy project. As part of the sale of the patent asset, the licence for use of the storage technology in this project was terminated and the development costs were fully impaired.

Goodwill

Goodwill is allocated to the Group’s cash-generating units (‘CGUs’) identified to the operating segments. A segment-level summary of the goodwill is presented below:

	Consolidated
	2014 $’000		2013 $’000		2012 $’000
Solar PV		6,500		6,500		6,500
Parmac		1,166		1,166		1,166
		7,666		7,666		7,666

Page 49

Notes to the financial statements

16 Non-current assets – goodwill and intangible assets (continued)

The Group performs its impairment testing as at 30 June each year or more frequently where there are indicators of impairment. The Directors retrospectively tested goodwill for impairment as part of the preparation of this financial report as at June 30 for each of the three years covered by this report. The assumptions used to assess goodwill at each prior balance date were reviewed in conjunction with the actual performance of the CGU under review. As a result of this review as explained below the Solar PV goodwill was considered impaired to the value of $6,500,000 at June 30, 2012. No retrospective goodwill adjustments were required to the Parmac or Captech goodwill.

In conducting this review of goodwill, the Group has considered the results of two valuation approaches: 1) value-in-use calculations; and 2) the relationship between the Company’s market capitalisation (based on the implied capitalisation from the most recent equity issues from January 2015 to the date of this report) and its book value.

The Captech CGU was disposed of in August 2013 for a sale price not materially different from its net assets plus goodwill value.

Key assumptions used in value in use calculations

The recoverable amount of the CGUs based on a value in use calculation uses cash flow projections as at 30 June of the reporting period based on financial budgets.

The calculation of value-in-use relies upon the following assumptions:

	Solar			Parmac
Pre-tax discount rate		25.5	%		25.5	%
Perpetuity growth rate		2	%		3	%

The calculation of value in use is most sensitive to the following assumptions:

· earnings before interest, tax, depreciation & amortisation (EBITDA);

· discount rates; and

· growth rate used to extrapolate cash flows beyond the budget period.

Earnings before interest, tax, depreciation & amortisation (EBITDA) – EBITDA forecasts are based on projections for the forthcoming 2 year period, then extrapolated for a further 3 years. The basis for these projections is the recent historical performance of the CGU’s adjusted for any non-recurring revenue or cost items. This is then overlaid with the impact of changes to revenue streams, gross margins and cost structures which have either now been put in place or are underway.

Discount rates - discount rates reflect an estimate of the Group’s time value of money. This is the benchmark used by the Group to assess operating performance and to evaluate future investment proposals. In determining appropriate discount rates, regard has been given to the weighted average cost of capital of the entity as a whole. The business risks specific to each unit are reflected in their individual cash flow estimates rather than the discount rate.

Growth rate estimates - these are based on published industry research such as IbisWorld for Electricity Generation in the case of the Solar CGU and Industrial Building Construction for Parmac.

Page 50

Notes to the financial statements

16 Non-current assets – goodwill and intangible assets (continued)

(i) Sensitivity to changes in value-in-use assumptions

The implications of the key assumptions on the recoverable amount are discussed below:

Input	Sensitivity Applied	Revised Goodwill Valuation
		Solar $000		Parmac $000
EBITDA	25% shortfall in EBITDA achievement		4,250		1,105
Growth rate	Long term growth rate of 0%		6,170		1,483
Discount rate	3% increase to discount rate applied		5,696		1,429

17 Trade and other payables

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Current
Trade payables		7,877		13,821		12,626
Accruals and other payables		2,730		7,253		3,476
		10,607		21,074		16,102

Fair value

Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.

Page 51

Notes to the financial statements

18 Interest-bearing loans and borrowings

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Current - secured
Trade finance (a)		-		-		2,500
Bank overdraft (a)		-		463		-
Other loans (b) (i)		7,878		6,500		17,263
Energy bonds (c)(ii)		12,743		-		-
Convertible notes (d) (i)		4,489		8,138		4,965
Finance leases		100		197		157
Current – unsecured
Other loans (b) (ii)		116		1,039		-
Energy bonds (c)(i)		1,539		-		-
Convertible notes (d) (ii)		-		2,750		2,345
		26,865		19,087		27,230
Non-current – secured
Finance leases		286		301		302
		286		301		302

(a) Trade Finance and Bank overdraft

The 2012 trade finance facility was secured by purchased stock and by the assets of eco-Kinetics Pty Ltd. The facility was withdrawn by the lender and the balance to be repaid was classified as an overdraft at June 30, 2013. The overdraft was secured by a first-ranking fixed and floating charge on the assets of the eco-Kinetics entities and guaranteed by BlueNRGY Group Limited. The overdraft was fully repaid in the 2014 financial year.

(b) Other loans

(i) Current – Secured

The other loans balance as at 30 June 2012 included a balance of $10,763,000 drawn on the entity’s construction finance facility in relation to the 5MW Italy solar project completed in June 2012. This loan was repaid in full on the sale of the Italy project in December 2012. This construction finance facility is no longer in place.

The other loans balance as at 30 June 2012 also included a loan of $6,500,000 secured by a 2nd ranking fixed and floating charge over all otherwise unencumbered assets of the Group. This loan remained in place at June 30, 2013. During the 2014 financial year, accrued interest of $865,000 was capitalised into the loan balance and further net loan funding of $503,000 was provided by the lender. Interest is payable on this loan at the penalty rate of 15%.

On execution of the Deed of Company Arrangement on December 24, 2014 the loan balance was fully extinguished.

(ii) Current - unsecured

In December 2012, the Group issued $750,000 of instalment loan notes to a professional advisor of the Group in lieu of cash payments for services received. The instalment notes do not bear interest and are payable in 18 equal monthly instalments, commencing in January 2013, in cash or, at BlueNRGY’s discretion, common shares in the Company. The balance on these notes at June 30, 2014 is $Nil (2013: $500,000).

In January 2013, BlueNRGY entered into an agreement with a consortium of lenders to establish an unsecured financing facility for the purpose of financing purchases of inventory for the Solar PV division. As of June 30, 2014, the facility has been fully repaid to $Nil (2013: $539,000).

(c) Energy Bonds

(i) Energy Bonds 1 – unsecured

In July 2013, £994,500 ($1,800,400) was raised by a subsidiary company (‘the issuer’) Energy Bonds PLC through the issue of an unsecured Clean Energy Bond offering in the United Kingdom (‘Energy Bonds 1’). Energy Bonds 1 bear interest at a rate of 7.5% per annum. Interest is payable quarterly in cash. Energy Bonds 1 are redeemable by the holder on or after the fourth anniversary of their issuance. The issuer has the right to prepay Energy Bonds 1 in whole or in part at any time. Energy Bonds 1 are unsecured and are not subject to any operating covenants or restrictions as a result of their issuance. On execution of the Deed of Company Arrangement on December 24, 2014 the parent company guarantee provided to the issuer was extinguished.

Page 52

Notes to the financial statements

18 Interest-bearing loans and borrowings (continued)

(c) Energy Bonds (continued)

(ii) Energy Bonds 2 – secured

In December 2013, £7.5 million ($13.6 million) was raised by a subsidiary company (‘the issuer’) Secured Energy Bonds PLC through a secured Clean Energy Bond offering in the United Kingdom (‘Energy Bonds 2’). Energy Bonds 2 bear interest at a rate of 6.5% per annum. Interest is payable quarterly in cash. Energy Bonds 2 are redeemable by the holder on the later of the third anniversary of their issue. The issuer has the right to prepay the Energy Bonds 2 in whole or in part at any time. Energy Bonds 2 are secured over the assets of the issuer and are not subject to any operating covenants or restrictions. On execution of the Deed of Company Arrangement on December 24, 2014 the parent company guarantee provided to the issuer was extinguished. Secured Energy Bonds PLC entered voluntary administration on January 22, 2015.

(d) Convertible notes

(i) Convertible notes secured – Series 1

BlueNRGY issued 635 9.75% convertible notes for US$6,350,000 ($6,756,000) in May 30, 2012 and August 2012, referred to as the Series 1 notes. The maturity date of these notes was 36 months after the date of issue. The notes are transferable by the note holders and are convertible into ordinary shares of the Company at the option of the holder. The conversion price when issued was A$15.90. The notes are secured by a first ranking fixed and floating charge over the assets of BlueNRGY, subject to the priority liens previously granted under the trade finance facility.

In February 2013, the Company entered into an amended and restated agreement with the secured convertible note holders. From an accounting point of view, this renegotiation amounted to an extinguishment of the previously issued notes and the recognition of a new debt which has resulted in an additional expense of $1,168,000 that has been recognised in profit or loss at June 30, 2013.

As a result of a default event at June 30, 2013, at maturity the notes are subject to a redemption premium equal to 20% of the principal which is reflected in the carrying value of the notes at June 30, 2013.

On September 30, 2013 BlueNRGY issued 95 additional Series 1 convertible notes with a total face value of US$950,000 ($1,010,000).

During the 2014 financial year a total of $6,190,000 reductions were made to the Series 1 convertible note balances as follows:

· cash repayment of $1,840,000 from the proceeds of the sale of Captech

· exchange of $2,135,000 of notes into Series A Preference Shares

· exchange of notes with a face value and accrued interest and fees of $2,215,000 into ordinary shares of the Company

On execution of the Deed of Company Arrangement on December 24, 2014 the Series 1 convertible notes were fully extinguished.

(ii) Convertible notes – Series 2 unsecured

In December 2011, BlueNRGY issued 12-month term convertible notes to an investor consortium for US$2,000,000 ($2,128,000) and in March 2012 issued an additional US$400,000 ($425,600) of these notes. In December 2012, prior to maturity of these notes, BlueNRGY issued replacement notes to the note holders, referred to as the ‘Series 2 Notes’ with a face value equal to US$2,750,000 ($2,926,000), which includes accrued interest from the issue date of the original notes through to the issue date of the Series 2 Notes. At June 30, 2014 these notes including all accrued and unpaid interest have a $nil balance after being settled during the year in full by the issue of $606,000 BlueNRGY ordinary shares and $2,508,000 Series A Preference Shares.

Convertible notes – Series 3 unsecured

In December 2012, BlueNRGY issued convertible notes for US$250,000 ($266,000), referred to as the ‘Series 3 Notes’. The Series 3 Notes mature on December 12, 2015 and were convertible at any time in whole or in part at a conversion price of A$15.90 per share. The Series 3 Notes bear interest at an annual rate of 9.75% per annum. At June 30, 2014 these notes including all accrued and unpaid interest have a $Nil balance after being settled during the year in full by the issue of $313,000 BlueNRGY ordinary shares.

(iv) Summary of convertible notes

The convertible notes are presented on the balance sheet as follows:

	Consolidated
	2014 $’000			2013 $’000			2012 $’000
Face value of convertible note (equivalent to cash redemption amount)		4,460			11,712			8,696
Derivative on convertible note (Conversion options and associated warrants) – at fair value		52			296			2,555
Borrowing costs - amortised balance		(23	)		(1,120	)		(3,941	)
Carrying Value		4,489			10,888			7,310

Page 53

Notes to the financial statements

18 Interest-bearing loans and borrowings (continued)

(e) Derivatives on convertible note

(i) Conversion option

The convertible notes on issue at June 30, 2013 and 2012 are denominated in USD and are convertible at the option of the holder at any time before maturity at a strike price multiplied by a USD exchange rate. These convertible notes are classified as a financial liability (refer to Note 2(w)).

(ii) Performance warrants

The performance warrants which have been issued to Series 1 noteholders as a result of the restructure of these notes are also considered to be derivative instruments due to the re-pricing mechanism for these warrants and are classified as financial liabilities.

The group engaged an independent valuer to assess the fair value of the derivative on the convertible notes as at June 30, 2013 and 2012.

The embedded conversion option was valued using a modified binominal lattice model giving consideration to the dilution impact of shares issued upon conversion. In order to account for the specific terms of the potential warrants two components of the commonly used (unmodified) binomial model in relation to the share prices have been modified. In this regard, the share price at each node where new shares are issued has been modified to account for the effect of dilution. The following key inputs were applied to determine a fair value.

	June 30, 2014			June 30, 2013			June 30, 2012
Share price	$	3.60		$	2.40		$	13.50
Conversion price	$	15.90		$	15.90		$	15.90
Dividend yield		0.0	%		0.0	%		0.0	%
Risk free rate		3.0	%		3.0	%		3.0	%
Volatility		70% - 90	%		70% - 90	%		60% - 80	%

The additional warrants were valued using an un-modified binominal lattice model giving consideration to the dilution impact of the shares issued upon conversion of the warrants as well as other options on issue. The following key inputs were applied to determine a fair value.

	June 30, 2014			June 30, 2013			June 30, 2012
Share price	$	3.60		$	2.40		$	13.50
Conversion price	$	15.90		$	15.90		$	15.90
Dividend yield		0.0	%		0.0	%		0.0	%
Risk free rate		3.0	%		3.0	%		3.0	%
Volatility		70% - 90	%		70% - 90	%		60% - 80	%

Page 54

Notes to the financial statements

18 Interest-bearing loans and borrowings (continued)

(e) Derivatives on convertible note (continued)

(ii) Performance warrants (continued)

The performance warrants were valued using a multi-step binomial model. The following key inputs were applied to determine a fair value.

	June 30 2014			June 30, 2013
Number of options granted		153,939			153,939
Consideration for options granted		Nil			Nil
Grant date:		Feb 13, 2013			Feb 13, 2013
Expiry date:		May 30, 2017			May 30, 2017
Share price at grant date	$	6.00		$	6.00
Exercise price		$ 3.90	1		$ 3.90	1
Expected dividend yield		0	%		0	%
Risk-free interest rate		3.0	%		3.0	%
Volatility		70	%		70	%

¹ These options contain a feature whereby their exercise price is reduced to match the price of any subsequent equity issues at a lower price than their exercise price. These options were repriced down from $8.25 to $3.90.

(d) Fair values

With the exception of the convertible notes, the carrying amount of the Group’s current and non-current borrowings approximates their fair values.

(e) Risk exposures

Details of the Group’s exposure to risks arising from the current and non-current borrowings relating to interest rate and foreign exchange risk are set out in Note 22.

(f) Assets pledged as security

All assets of the Group have been pledged as security for current and non-current interest bearing liabilities.

19 Provisions

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Current
Employee entitlements		395		646		569
Provision for warranty claims (a)		153		433		273
		548		1,079		842
Non-current
Employee entitlements		92		90		170

(a) This amount includes predominantly provision for estimated claims by customers for product faults in domestic Solar PV systems as well as provision for claimable warranty for other goods and services sold by the Group.

Page 55

Notes to the financial statements

20 Contributed equity

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Ordinary share capital, issued and fully paid		120,323		109,046		108,509
Class A Preferred shares, issued and fully paid		4,643		-		-
Value of conversion rights – convertible notes		574		574		574
		125,540		109,620		109,083

On February 6, 2014 the Company effected a 300:1 consolidation of its ordinary shares (the ‘Reverse Stock Split’) in accordance with the authorization of shareholders granted at its Extraordinary General Meeting held on November 26, 2013. Following the Reverse Stock Split, the Company’s issued and outstanding ordinary shares as of February 6, 2014 totaled 2,032,013. All common share, per common share, stock unit per stock unit data, stock option and warrant exercise prices per ordinary share and all convertible note conversion prices per share, for all periods presented, have been adjusted to reflect the Reverse Stock Split.

	2014						2013					2012
	Number of shares			$’000			Number of shares		$’000			Number of shares		$’000
Movement in shares on issue
Balance at the beginning of the year		1,742,825			109,046			1,575,014		108,509			1,511,122		106,784
Issue of shares during the year		2,976,489			12,597			114,734		419			63,892		1,725
Issue from exercise of share options		-			-			53,077		207			-		-
Forfeiture on consolidation		(1,181	)		-			-		-			-		-
Transaction costs		-			(1,320	)		-		(89	)		-		-
Balance at the end of the year		4,718,133			120,323			1,742,825		109,046			1,575,014		108,509
Movement in preference shares on issue
Balance at the beginning of the year		-			-			-		-			-		-
Issue of preference A shares during the year		435			4,643			-		-			-		-
Balance at the beginning of the year		435			4,643			-		-			-		-

Terms and conditions of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Covenants contained within the Preferred Shares on issue prevent BlueNRGY Group Limited from making dividend payments without the prior approval of the Preference Shareholders.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

The Class A Preferred Shares have a liquidation preference over the Company’s ordinary shares, are non-voting (except with respect to any Class A Preferred Stock matters) and are convertible at any time into Ordinary shares, in whole or in part, at each holder’s option. The number of Ordinary shares into which each Class A Preferred Share is convertible is determined by dividing the face value each Class A Preferred Share by US$4.00. There are no dividend rights attached to the Class A Preferred Shares. The Class A Preferred Shares are redeemable by the Company, in whole or in part, at the Company’s sole election.

Page 56

Notes to the financial statements

20 Contributed equity (continued)

Other equity

The amount shown for other equity is the value of the conversion rights relating to the 12.5% convertible notes issued on July 29, 2009.

Share options

Options over ordinary shares: The following options (including conversion rights on convertible notes) to purchasefully paid ordinary shares in the Company were outstanding at June 30, 2014:

Grant Date	Expiry Date	Exercise Price ($)		Balance at beginning of the year No.		Granted during the year No.		Exercised during the year No.		Forfeited during the year No.			Vested and exercisable at end of the year No.
28/11/08	27/11/13	$	60.00		30,667		-		-		(30,667	)		-
21/12/10	19/12/13	$	60.00		40,000		-		-		(40,000	)		-
01/11/11	31/12/14	$	75.00		1,167		-		-		-			1,167
28/05/12	28/05/15	$	8.25		66,667		-		-		-			66,667
31/05/12	30/05/17	$	3.90		117,705		-		-		-			117,705
12/12/12	12/12/17	$	15.90		3,930		-		-		-			3,930
12/12/12	12/12/17	$	3.90		11,792		-		-		-			11,792
30/12/12	30/12/17	$	15.90		43,164		-		-		-			43,164
13/02/13	30/05/17	$	3.90		153,939		-		-		-			153,939
18/06/14	15/12/19	$	5.34		-		72,400		-		-			72,400
Total					469,031		72,400		-		(70,667	)		470,764
Weighted average exercise price $					14.35		5.34				60.00			6.11

Page 57

Notes to the financial statements

20 Contributed equity (continued)

The following options (including conversion rights on convertible notes) to purchase fully paid ordinary shares in the Company were outstanding at June 30, 2013:

Grant Date	Expiry Date	Exercise Price ($)			Balance at beginning of the year No.		Granted during the year No.		Exercised during the year No.		Forfeited during the year No.			Vested and exercisable at end of the year No.
28/11/08	27/11/13	$	60.00			30,667		-		-		-			30,667
21/12/10	19/12/13	$	60.00			40,000		-		-		-			40,000
27/07/11	31/12/12	$	60.00			1,917		-		-		(1,917	)		-
01/11/11	31/12/14	$	75.00			1,167		-		-		-			1,167
28/05/12	28/05/15	$	8.25	1		66,667		-		-		-			66,667
31/05/12	30/05/17	$	3.90	2		117,705		-		-		-			117,705
12/12/12	12/12/17	$	15.90			-		3,930		-		-			3,930
12/12/12	12/12/17	$	3.90			-		11,792		-		-			11,792
30/12/12	30/12/17	$	15.90			-		43,164		-		-			43,164
13/02/13	30/05/17	$	3.90	2		-		153,939		-		-			153,939
Total						258,123		212,825		-		(1,917	)		469,031
Weighted average exercise price $						21.12		6.56				60.00			14.35

¹ These options were repriced down from $15.90 to $8.25 following the restructuring of the Series 1 convertible notes.

² These options contain a feature whereby their exercise price is reduced to match the price of any subsequent equity issues at a lower price than their exercise price. During the year, 117,705 options were repriced down from $15.90 to $8.25 and subsequently from $8.25 to $3.90 and 153,939 options were repriced down from $8.25 to $3.90.

The following options (including conversion rights on convertible notes) to purchase fully paid ordinary shares in the Company were outstanding at June 30, 2012:

Grant Date	Expiry Date	Exercise Price ($)		Balance at beginning of the year No.		Granted during the year No.		Exercised during the year No.		Forfeited during the year No.			Vested and exercisable at end of the year No.
28/11/08	27/11/13	$	60.00		30,667		333		-		(333	)		30,667
21/12/10	19/12/13	$	60.00		40,000		-		-		-			40,000
09/02/11	09/02/13	$	60.00		16,667		-		-		(16,667	)3		-
27/07/11	31/12/12	$	60.00		-		1,917		-		-			1,917
01/11/11	31/12/14	$	75.00		-		1,167		-		-			1,167
28/05/12	28/05/15	$	15.00		-		66,667		-		-			66,667
31/05/12	30/05/17	$	15.00		-		117,705		-		-			117,705
Total					87,334		187,789		-		(17,000	)		258,123
Weighted average exercise price $					60.00		15.91				60.00			21.12

^3.Includes 16,667 options cancelled and re-issued on 28 May 2012 to a loan provider under the terms of the loan agreement.

(e) Capital management

When managing capital, management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.

Page 58

Notes to the financial statements

20 Contributed equity (continued)

Management adjusts the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

As at June 30, 2014, 2013 and 2012, the company had negative net equity.

21 Reserves

	Consolidated
	Share options reserve $’000		Available-for- sale reserve $’000			Translation reserve $’000			Total $’000
At July 1, 2013		3,189		800			33			4,022
Share based payments - borrowing & underwriting agreements		147		-			-			147
Impairment of available for sale asset				(800	)					(800	)
Translation reserve		-		-			(68	)		(68	)
At June 30, 2014		3,336		-			(35	)		3,301
At July 1, 2012 (restated)		2,689		-			-			2,689
Share based payments - borrowing agreements		500		-			-			500
Revaluation reserve		-		800			-			800
Translation reserve		-		-			33			33
At June 30, 2013		3,189		800			33			4,022
At July 1, 2011 (restated)		1,205		-			-			1,205
Share based payments – remuneration		28		-			-			28
Share based payments - borrowing agreements		1,456		-			-			1,456
At June 30, 2012		2,689		-			-			2,689

Nature and purpose of reserves

(i) Share options reserve

The share options reserve is used to record the value of share based payments provided to employees and directors as part of their remuneration and options granted as part of borrowing agreements. 72,400 options in total were granted during 2014 as part of remuneration to underwriters. For the year ended June 30, 2013, 58,887 options were granted as part of borrowing agreements and 150,055 in the year ended June 30, 2012. The reserve also records the re-pricing of options previously issued.

(ii) Available-for-sale reserve

Changes in the fair value and exchange differences arising on translation of investments, such as equities, classified as available for sale financial assets, are recognised in other comprehensive income, and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired.

(iii) Translation reserve

Exchange differences arising on translation of a foreign controlled entity are recognised in other comprehensive income as described in Note 2(h) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

Page 59

Notes to the financial statements

22 Financial risk management objectives and policies

The Group's principal financial instruments comprise receivables, payables, bank overdraft, trade finance, loans, convertible notes, finance leases, available-for-sale investments and cash and short-term deposits.

Risk exposures and responses

The Group manages its exposure to key financial risks in accordance with the Group's financial risk management policy. The objective of the policy is to support the delivery of the Group's financial targets whilst protecting future financial security.

The main risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk, price risk, and liquidity risk. Primary responsibility for identification and control of financial risks rests with the Audit Committee under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below.

(a) Interest rate risk

The Group’s main interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk only if the borrowings are carried at fair value, which is not the Group’s policy.

During 2013 and 2012, the Group’s borrowings at variable rate were denominated in Australian Dollars. There were no variable rate borrowings in 2014.

The Group's exposure to market interest rates relates primarily to the Group's previous bank overdraft. The level of debt is disclosed in Note 18.

At reporting date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk.

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Financial Assets
Cash and cash equivalents		1,381		932		2,522
Financial Liabilities
Bank overdraft		-		463		-
Trade finance		-		-		2,500
Net exposure		1,381		469		22

Page 60

Notes to the financial statements

22 Financial risk management objectives and policies (continued)

(a) Interest rate risk (continued)

The Group's policy is to manage its finance costs using a mix of fixed and variable rate debt. At June 30, 2014, the Group had borrowings of $27,151,000 (2013: $19,388,000; 2012: $27,532,000) with 100% being fixed interest rate debt (2013: 97.6%; 2012: 90.9%).

The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing, and the mix of fixed and variable interest rates.

The Group’s fixed rate borrowings comprising the other loans and the convertible notes are carried at amortised cost.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date.

At June 30, 2014, 2013 and 2012, if interest rates had moved as illustrated in the table below, with all other variables held constant, post tax profit / (losses) and equity would have been affected as follows:

	Post Tax Profit Higher/(lower)									Equity Higher/(lower)
Judgments of reasonably possible movements:	2014 $’000			2013 $’000			2012 $’000			2014 $’000			2013 $’000			2012 $’000
Consolidated
+1% (100 basis points)		4			4			152			4			4			152
-1% (100 basis points)		(4	)		(4	)		(152	)		(4	)		(4	)		(152	)

(b) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities, borrowings, and financial assets.

The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars was as follows:

	USD $’000			EUR $’000			GBP $’000			FJD $’000		AUD $’000			Total $’000
2014
Cash and cash equivalents		1,134			2			82			-		163			1,381
Trade and other receivables		-			-			16			-		3,579			3,595
Financial assets		-			39			-			-		-			39
Trade and other payables		(266	)		(1,504	)		(1,368	)		-		(7,469	)		(10,607	)
Borrowings		-			-			(14,399	)		-		(12,752	)		(27,151	)
2013
Cash and cash equivalents		1			6			246			-		679			932
Trade and other receivables		-			-			102			-		6,355			6,457
Financial assets		43			-			-			-		10,815			10,858
Trade and other payables		(1,028	)		(1,678	)		(152	)		-		(18,216	)		(21,074	)
Borrowings		(10,473	)		-			-			-		(8,915	)		(19,388	)

Page 61

Notes to the financial statements

22 Financial risk management objectives and policies (continued)

(b) Foreign currency risk (continued)

	USD $’000			EUR $’000			GBP $’000		FJD $’000		AUD $’000			Total $’000
2012
Cash and cash equivalents		5			1,512			-		31		974			2,522
Trade and other receivables		1,018			426			-		-		3,555			4,999
Financial assets		603			-			-		-		33			636
Trade and other payables		(3,740	)		(2,799	)		-		-		(9,563	)		(16,102	)
Borrowings		(18,073	)		-			-		-		(9,459	)		(27,532	)

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar and AUD exchange rate, and the Euro and the AUD exchange rate, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. The Group’s exposure to foreign currency changes for all other currencies is not material.

				USD						EUR						GBP
	Change in rate			Effect on profit before tax			Effect on equity			Effect on profit before tax			Effect on equity			Effect on profit before tax			Effect on equity
				$’000			$’000			$’000			$’000			$’000			$’000
2014		+10	%		(37	)		(26	)		(29	)		(21	)		(141	)		(99	)
		-10	%		30			21			24			17			115			81
2013		+10	%		(1,215	)		(850	)		(186	)		(130	)		(18	)		(12	)
		-10	%		993			695			152			106			21			15
2012		+10	%		(2,243	)		(1,570	)		(96	)		(67	)		-			-
		-10	%		1,835			1,285			78			55			-			-

The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates. The eco-Kinetics operations use US dollar denominated borrowings to fund Euro based projects. In order to protect against exchange rate movements, the Group has entered into forward exchange contracts to purchase US dollars and sell Euros. These contracts are hedging highly probable repayment of borrowings and interest for the ensuing financial year. The contracts are timed to mature when repayments of borrowings are scheduled to be made.

The Group does not apply hedge accounting. At June 30, 2014 and 2013 no forward contracts were in place. The fair value of forward contracts at June 30, 2012 was $17,000.

(c) Price risk

The Group has no significant exposure to price risk.

Page 62

Notes to the financial statements

22 Financial risk management objectives and policies (continued)

(d) Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, and trade and other receivables. The Group's exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.

The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group's policy to securitise its trade and other receivables.

It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation.

In addition, receivable balances are monitored on an ongoing basis.

There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst a number of organisations to minimise the risk of default of counterparties.

(e) Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of a variety of equity and debt instruments.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivatives financial liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows.

The remaining contractual maturities of the Group’s financial liabilities are:

	Consolidated
	2014 $’000		2013 $’000		2012 $’000
3 months or less		38,606		40,405		41,012
3-6 months		487		435		417
6 months – 1 year		926		823		7,537
1-5 years		400		400		403
Over 5 years		-		-		-
Total contractual cash flows		40,419		42,063		49,369

Fair value

The methods for estimating fair value are outlined in the relevant notes to the financial statements.

The Group uses various methods in estimating the fair value of financial instruments. The methods comprise:

Level 1 – the fair value is calculated using quoted prices in active markets.

Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.

Page 63

Notes to the financial statements

22 Financial risk management objectives and policies (continued)

(e) Liquidity risk (continued)

The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below.

	2014								2013								2012
Consolidated	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	$’000		$’000		$’000		$’000		$’000		$’000		$’000		$’000		$’000		$’000		$’000		$’000
Financial assets
Available-for-sale investments		39		-		-		39		43		-		10,815		10,858		603		-		33		636
Total assets		39		-		-		39		43		-		10,815		10,858		603		-		33		636
Financial liabilities
Derivatives on convertible notes		-		-		52		52		-		-		296		296		-		-		2,011		2,011
Total liabilities		-		-		52		52		-		-		296		296		-		-		2,011		2,011

Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.This is the case for the embedded derivatives for the convertible notes which are valued based on a valuation techniques which are disclosed in Note 18(d) and for available for sale financial assets disclosed in Note 14.

The following table presents the changes in level 3 instruments for the years ended June 30, 2014 and June 30, 2013:

	Unlisted equity securities (asset)			Embedded derivatives on convertible notes (liabilities)
Opening balance July 1, 2011		117			-
Additions		-			(2,011	)
Losses recognised in profit or loss		(84	)		-
Closing balance June 30, 2012		33			(2,011	)
Other decrease (extinguishment)		-			710
Other increases		10,000			(1,007	)
Gains recognised in other comprehensive income		800			-
(Losses)/gains recognised in profit or loss		(18	)		2,012
Closing balance June 30, 2013		10,815			(296	)
Impairment of available-for-sale investment in profit or loss		(10,000	)		-
Impairment of available for sale investment in other comprehensive income		(800	)		-
Gains recognised in profit or loss		24			244
Closing balance June 30, 2014		39			(52	)

Page 64

Notes to the financial statements

23 Related party disclosure

(a) Subsidiaries

The consolidated financial statements include the financial statements of BlueNRGY Group Limited and the material subsidiaries listed in the following table.

			% Equity Interest
Name	Country of Incorporation	Principal Activity	2014		2013		2012
BlueNRGY Group Limited Ltd	Australia	Holding company		100		100		100
Capacitor Technologies Pty Limited	Australia	Energy efficiency		-		100		100
Parmac Air Conditioning & Mechanical Services Pty Ltd	Australia	Energy efficiency		100		100		100
Remote Area Power Systems Pty Ltd	Australia	Energy storage		100		100		100
Larkden Pty Ltd	Australia	Energy storage		-		-		100
KI Solar Pty Ltd	Australia	Solar		100		100		100
eco-Kinetics Group Pty Ltd	Australia	Solar		100		100		100
Eco-Kinetics Europe Limited	United Kingdom	Solar		100		100		100
eco-Kinetics Pty Ltd	Australia	Solar		100		100		100
Westinghouse Solar Limited	United Kingdom	Solar		100		100		50
CBD Energy USA Limited	USA	Solar		100		100		100
CBD Acquisition Holdings Inc	USA	Solar		100		-		-
Westinghouse Solar Inc	USA	Solar		100		-		-
CBD Solar Labs Pty Ltd	Australia	PV Plant		100		100		100
CBD Solar Pty Ltd	Australia	Solar		100		100		100
Westinghouse Solar Pty Ltd	Australia	Solar		100		100		-
Chatham Island Wind Ltd	New Zealand	Special purpose vehicle		100		100		100
Energy Bonds Plc	United Kingdom	Special purpose vehicle		100		100		-
Secured Energy Bonds Plc	United Kingdom	Special purpose vehicle		100		100		-

Transactions between the Company and its subsidiaries principally arise from the granting of loans and the provision of management and administration services. All transactions undertaken during the financial year with subsidiaries are eliminated in the consolidated financial statements.

(b) Ultimate parent

BlueNRGY Group Limited is the ultimate Australian parent entity and the ultimate parent of the Group.

(c) Key management personnel

Details relating to key management personnel, including transactions with key management personnel and remuneration paid, are included in Note 24.

Page 65

Notes to the financial statements

23 Related party disclosure (continued)

(d) Terms and conditions of transactions with related parties

Sales to and purchases from related parties are made in arm's length transactions both at normal market prices and on normal commercial terms unless otherwise stated.

24 Key management personnel

(a) Compensation for key management personnel

	Consolidated
	2014 $		Restated 2013 $		Restated 2012 $
Short-term employee benefits		1,823,534		2,090,045		2,615,918
Post-employment benefits		75,355		139,714		170,547
Share-based payment		-		-		23,296
Total compensation		1,898,889		2,229,759		2,809,761

(b) Option holdings of key management personnel

												Vested at June 30
	Balance at July 1		Granted as remune- ration		Options exercised		Net other change			Balance at June 30		Total		Exercisable		Not exercisable
2014
Directors
G. McGowan		20,000		-		-		(20,000	)		-		-		-		-
Sub-total		20,000		-		-		(20,000	)		-		-		-		-
Executives
Y. Brodsky1		667		-		-		(667	)		-		-		-		-
J. Greer		-		1,000		-		-			1,000		1,000		1,000		-
Sub-total		667		1,000		-		(667	)		1,000		1,000		1,000		-
Total		20,667		1,000		-		(20,667	)		1,000		1,000		1,000		-
2013
Directors
M. Vaile2		20,000		-		-		(20,000	)		-		-		-		-
G. McGowan		20,000		-		-		-			20,000		20,000		20,000		-
Sub-total		40,000		-		-		(20,000	)		20,000		20,000		20,000		-
Executives
Y. Brodsky		667		-		-		-			667		667		667		-
A. McClaren2		333		-		-		(333	)		-		-		-		-
E. Cywinski2		20,000		-		-		(20,000	)		-		-		-		-
Sub-total		21,000		-		-		(20,333	)		667		667		667		-
Total		61,000		-		-		(40,333	)		20,667		20,667		20,667		-

Page 66

Notes to the financial statements

24 Key management personnel (continued)

(b) Option holdings of key management personnel (continued)

												Vested at June 30
	Balance at July 1		Granted as remune- ration		Options exercised		Net other change			Balance at June 30		Total		Exercisable		Not exercisable
2012
Directors
M. Vaile		20,000		-		-		-			20,000		20,000		20,000		-
G. McGowan		20,000		-		-		-			20,000		20,000		20,000		-
J. Anderson3		10,000		-		-		(10,000	)		-		-		-		-
Sub-total		50,000		-		-		(10,000	)		40,000		40,000		40,000		-
Executives
Y. Brodsky		333		334		-		-			667		667		667		-
A. McClaren		333		-		-		-			333		333		333		-
E. Cywinski		20,000		-		-		-			20,000		6,667		6,667		-
Sub-total		20,666		334		-		-			21,000		7,667		7,667		-
Total		70,666		334		-		(10,000	)		61,000		47,667		47,667		-

¹Changes for Y. Brodsky in 2014 are in relation to the disposal of Captech.

²Changes for M. Vaile, A. McClaren and E. Cywinski in 2013 relate to resignations.

³Changes for J. Anderson in 2012 relate to resignation.

c) Shareholdings of key management personnel

Shares held in BlueNRGY Group Limited (number)

	Balance at July 1		Granted as remuneration		On exercise of Options		Net other change			Balance at June 30
2014
Directors
G. McGowan		59,665		-		-		215,712			275,377
C. Botto		1,667		-		-		13,280			14,947
W. Morro		-		-		-		30,448			30,448
T. Barlow2		-		-		-		15,107			15,107
Executives
Y. Brodsky1		707		-		-		(707	)		-
J. Greer2		-		-		-		18,508			18,508
Total		62,039		-				292,348			354,387

Page 67

Notes to the financial statements

24 Key management personnel (continued)

c) Shareholdings of key management personnel

Shares held in BlueNRGY Group Limited (number)

	Balance at July 1		Granted as remuneration		On exercise of Options		Net other change			Balance at June 30
2013
Directors
M. Vaile3		671		-		-		(671	)		-
G. McGowan		59,665		-		-		-			59,665
C. Botto		1,667		-		-		-			1,667
Executives
Y. Brodsky		707		-		-		-			707
A. McClaren3		1,664		-		-		(1,664	)		-
E. Cywinski3		61,572		-		-		(61,572	)		-
		125,946		-		-		(63,907	)		62,039
2012
Directors
M. Vaile		671		-		-		-			671
G. McGowan		59,665		-		-		-			59,665
J. Anderson4		3,333		-		-		(3,333	)		-
Executives
Y. Brodsky		707		-		-		-			707
A. McClaren		997		667		-		-			1,664
C. Botto4		-		-		-		1,667			1,667
E. Cywinski5		25,044		-		-		36,528			61,572
		90,417		667		-		34,862			125,946

¹ Changes for Mr. Brodsky is in relation to disposal of Captech

² Changes for Mr. Barlow and Mr. Greer relate to the issue of 15,107 and 18,508 ordinary shares in BlueNRGY in lieu of outstanding director’s fees and services rendered respectively.

³ Changes for Mr. Vaile, Mr. McClaren and Mr. Cywinski relate to resignations.

⁴ Changes for Mr. Anderson and Mr. Botto relate to resignation and appointment respectively.

⁵ Net change for Mr. Cywinksi of 36,528 shares were ordinary shares issued to the executive as part of an earn-out agreement in relation to the Company’s acquisition of eco-Kinetics.

(d) Loans to key management personnel

There were no loans to directors or key management personnel during the year ending June 30, 2014 (2013: none; 2012: none).

(e) Loans from key management personnel

On May 12, 2014, TRW Pty Limited, an entity in which a Director, Mr. Gerry McGowan, has a direct interest, loaned $500,000 to the Company. The loan was repaid to TRW Pty Ltd on June 23, 2014. TRW Pty Ltd was paid a $25,000 transaction fee for the provision of this loan. No interest was charged on the loan.

There were no loans from directors or key management personnel during the years ending June 30, 2013 or 2012.

Page 68

Notes to the financial statements

24 Key management personnel (continued)

(f) Transactions with Sligo Investments Limited

During the years ended June 30, 2014, 2013 and 2012 the Company entered into a series of transactions with Sligo Investments Limited. These transactions were all conducted with Mr McGowan acting as the sole intermediary between the Company and Sligo. The Company and its Board of Directors have been unable to determine the identity of the parties who either own or control Sligo and have also been unable to determine the incorporation status of Sligo. Despite attempts to determine the facts surrounding Sligo, the Company cannot be assured that it is not a related entity to Mr McGowan.

During the year ended June 30, 2012 the Company issued Series 1 Convertible Notes with a face value of US$1,000,000 to Sligo. On subscription to the Series 1 Convertible Notes 15,723 warrants were issued to Sligo with an exercise price of US$15.90($16.92) and an expiry date of May 31, 2017. A further 24,245 warrants with an exercise price of US$15.90($16.92) and an expiry date of May 31, 2017 were issued to Sligo during the 2013 financial year following an amendment to the Series 1 Convertible Notes. Interest and fees were incurred on these notes in the year ended June 30, 2014 of US$235,005($250,000) (2013: US$348,676($371,000); 2012: $Nil). These charges were incurred on the same terms as for all Series 1 Noteholders. In June 2014 the Series 1 Notes held by Sligo and all accrued interest and charges totalling US$1,561,093($1,661,000) were exchanged for 390,273 ordinary shares in the Company. At June 30, 2014 the balance on the Series 1 notes issued to Sligo was $Nil.

In October 2013, Sligo loaned the Company $900,000 for working capital purposes under a loan agreement between Sligo and the Company. An arrangement fee of $70,000 and interest of $6,410 was charged on the loan prior to its repayment in December 2013. Under the sole direction of Mr McGowan, the repayment was made to TRW Pty Limited in satisfaction of this loan, as confirmed by documentation received from Sligo subsequent to the repayment.

(g) Transactions with Solon AG

An amount of $676,000 was paid to Solon AG in December 2013 which was solely initiated by a Director, Mr Gerry McGowan (no longer a director) outside of the customary approval processes of the Company. Mr McGowan represented to the Company that the payment was a deposit for a future order of Solar PV panels from Solon, however the Company has been unable to confirm that such an order was placed or accepted.  Despite attempts to independently verify the nature of this transaction and the validity of the supporting documentation, the Company has been unable to do so and cannot be assured that it was not made for the personal benefit of Mr McGowan.  A payment was received by the Company in October 2014 for $680,000 from a third party. Documentation was provided to the Company in relation to this transaction which stated that this payment was consideration for the assignment of the alleged deposit by Solon to the party remitting the payment.  In absence of definitive information to the contrary the amount of $676,000 is recorded within Other Assets in the Statement of Financial Position at June 30, 2014. The funds received in October 2014 will be credited against Other Assets unless additional information is obtained by the Company to contradict this accounting treatment.

(h) Convertible note holdings of key management personnel

Aside from the above, there were no convertible notes held by key management personnel at June 30, 2014 (2013: none; 2012: none).

(i) Other transactions and balances with key management personnel and their related parties

Directors

During the current and previous financial year, the Group transacted with related entities of directors, other than in their capacity as director, as follows:

(i) During the financial year ending June 30, 2014, TRW Holdings Pty Ltd, an entity in which a Director, Gerry McGowan has a direct interest, received payments for executive services provided by Mr. McGowan and for reimbursement of travel expenses and other operating disbursements incurred on behalf of the company. The total amount paid or payable to TRW Holdings Pty Ltd including GST for services other than the services of Mr. McGowan acting as Managing Director was $560,920 (2013: $91,915; 2012: $4,596). Of the payments made in 2014, $346,965 (2013: $Nil; 2012: $Nil) was made outside of the Company’s customary approval processes and was purported by Mr McGowan to be for reimbursement of costs incurred on behalf of the company paid by TRW Holdings Pty Ltd. The Company has not been provided with adequate documentation by Mr McGowan or TRW Holdings Pty Limited to determine whether or not these costs represent bona fide costs incurred on behalf of the Company. These payments have been recognised as an expense in profit or loss for the year ended June 30, 2014.

Page 69

Notes to the financial statements

24 Key management personnel (continued)

(i) Other transactions and balances with key management personnel and their related parties (continued)

(ii) During the year ended June 30, 2014, a series of payments were made to Mr McGowan from the Company and its subsidiaries totalling $134,100 (2013: $Nil; 2012: $Nil) outside of the Company’s customary approval processes and were purported by Mr McGowan to be for reimbursement of costs incurred on behalf of the company paid by himself. The Company has not been provided with adequate documentation by Mr McGowan to determine whether or not these costs represent bona fide costs incurred on behalf of the Company. These payments have been recognised as an expense in profit or loss for the year ended June 30, 2014.

(iii) During the year ended June 30, 2014, a payment deferral and debt forgiveness agreement required that a creditor balance be assigned to TRW Holdings Pty Ltd, under the tri-party arrangement with the creditor and TRW Holdings. TRW Holdings neither gained nor lost from the transaction and the Company made all payments that were obligated to be made under that agreement to satisfy the original creditor claim in full. The Company received a Deed of Release and Forgiveness for the full amount of this debt from TRW Holdings Pty Ltd dated as of December 20, 2013.

(iv) During the year ended June 30, 2014, the Company paid Pitt Capital Partners Limited, an entity in which a former director, Todd Barlow has a direct interest, fees for corporate services of $180,290 (2013: $Nil; 2012 $126,066). Pitt Capital Partners Limited is an affiliate of Washington H Soul Pattinson & Co Limited (‘WHSP’), CBD’s largest shareholder.

(v) During the year ended June 30, 2012, Corporate and Administrative Services Pty Ltd, a company wholly owned by Pitt Capital Partners Limited, received payments for consulting, corporate services, reimbursement of travel expenses and other operating disbursements. The total amount payable to Corporate and Administrative Services Pty Ltd was $22,085 (2014: $Nil; 2013: $Nil).

(vi) During the year ended June 30, 2012, the Company received from Vaile & Associates, an entity in which a former Director, Mark Vaile has a direct interest, total payment of $246 (2013: $Nil) for rental of office space and reimbursement of expenses.

Key management personnel (‘KMP’)

(i) During the year ended June 30, 2014, CapTech paid Brodpower Pty Ltd, A$58,025 (2013: $409,660; 2012: $375,904) for contract maintenance and repair services. Yuri Brodsky was the Managing Director of CapTech prior to its sale and had an ownership interest in Brodpower Pty Ltd.

(ii) As part of the purchase of eco-Kinetics the Company agreed to contingent consideration to be paid to Edwin Cywinski on achievement of certain performance targets. Mr. Cywinksi may be entitled to cash and share payments relating to the earn-out. During the year ended June 30, 2012 the Company paid Mr. Cywinski $1,286,000 in relation to this earn-out agreement (2014 & 2013: $Nil).Mr. Cywinski is no longer an employee of the Group.

Page 70

Notes to the financial statements

25 Share-based payments

(a) Recognised share-based payment expenses

The expense recognised for employee services received during the year and the expense relating to options granted as part of borrowing agreements is shown in the table below:

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Expense arising from equity-settled share-based payment transactions for employees		-		-		180
Expense arising from equity-settled share-based payment financing transactions		147		267		527
		147		267		707

(b) Types of share-based payments

The options issued during the year ended June 30, 2014 relate to options/warrants that have been issued as part of the remuneration to underwriters during the Group’s first capital raise on Nasdaq. 72,400 options with an exercise price of $US5.00 were issued. The weighted average remaining contractual life of issued options outstanding at year-end was 3.2 years.

The options issued during the year ended June 30, 2013 relate to options / warrants that were issued as part of borrowing agreements. 58,887 unlisted options with an exercise price of $15.90, with exercise dates in December 2017 were granted in accordance with loan agreement and convertible note facilities issued during the year ended 30 June 2013. The weighted average remaining contractual life of issued options outstanding at year-end was 2.8 years.

(c) Summaries of options granted as share based payments

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options issued during the year:

	2014			2014		2013			2013		2012			2012
	No.			WAEP		No.			WAEP		No.			WAEP
Outstanding at the beginning of the year		315,091		$	19.46		258,122		$	21.12		87,334		$	60.00
Granted during the year		72,400		$	5.34		58,887	1	$	13.50		187,788		$	15.91
Expired during the year		(70,667	)	$	60.00		(1,917	)	$	60.00		(17,000	)	$	60.00
Outstanding at the end of the year		316,824		$	7.19		315,091		$	19.46		258,122		$	21.12

¹ Options granted during the year ended June 30, 2013 exclude 153,939 options relating to the performance options which are considered derivative instruments.

(d) Option pricing model

The fair value of the equity-settled share options granted for the years ended June 30, 2014, 2013 and 2012 were estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted. The fair value is derived from the binomial model using the closing share price of BlueNRGY Group Limited ordinary shares on grant date, Australian Government Long-term bond interest rates as published by the Reserve Bank of Australia as a proxy for the risk-free interest rate, having regard for the bond maturity that is most closely aligned to the period of time remaining until the options expiry date, and the option exercise prices and quantities as noted above.

Page 71

Notes to the financial statements

25 Share-based payments (continued)

The model inputs for options granted during the years ended June 30, 2014 included:

	As part of remuneration to underwriters
Number of options granted		72,400
Consideration for options granted		Nil
Exercise price	$	5.34
Grant date		Dec 18 2014
Expiry date		Dec 15 2019
Share price at grant date	$	3.83
Expected price volatility of the Company’s shares		70	%
Expected dividend yield		0	%
Risk-free interest rate		3.0	%

The expected price volatility is based on the historical five-year volatility of the Company’s share price.

The model inputs for options granted during that year were:

	Unsecured loan, refer Note 18(b)(ii)			Convertible notes, refer Note 18(d)(ii)			Convertible notes, refer Note 18(b)(ii)
Number of options granted		11,793			43,164			3,931
Consideration for options granted		Nil			Nil			Nil
Exercise price	$	15.90		$	15.90		$	15.90
Grant date		24 Dec 2012			30 Dec 12			24 Dec 2012
Expiry date		12 Dec 2017			30 Dec 17			12 Dec 2017
Share price at grant date	$	6.00		$	6.00		$	6.00
Expected price volatility of the Company’s shares		131	%		131	%		131	%
Expected dividend yield		0	%		0	%		0	%
Risk-free interest rate		3.0	%		3.0	%		3.0	%

The expected price volatility is based on the historical five-year volatility of the Company’s share price.

Page 72

Notes to the financial statements

26 Commitments

Operating lease commitments – Group as lessee

Operating leases are entered into as a means of acquiring access to office premises and office equipment. Rental payments are generally fixed, but with inflation escalation clauses on which contingent rentals are determined. No purchase options exist in relation to operating leases and no operating leases contain restrictions on financing or other leasing activities. A renewal option in connection with the office leases exists.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Within one year		535		439		1,121
After one year but not more than five years		606		815		912
Total minimum lease payments		1,141		1,254		2,033

Finance lease commitments - Group as lessee

The finance leases relate to the leasing of motor vehicles and office equipment.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

	Consolidated
	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
Within one year		130			236			191
After one year but not more than five years		327			357			365
Total minimum lease payments		457			593			556
Less amounts representing finance charges		(71	)		(95	)		(97	)
Present value of minimum lease payments		386			498			459
Current liability		100			197			157
Non-current liability		286			301			302
Total		386			498			459

27 Events after the balance sheet date

(a) Transactions

On July 3, 2014, BlueNRGY acquired 100% of the share capital of Green Earth Developers, LLC (‘GED’). Consideration paid consisted of a combination of cash, deferred cash payment obligations and 500,000 Company ordinary shares with an approximate value of US$3,175,000($3,378,000).

(b) Financing

On July 25, 2014, BlueNRGY entered into a securities purchase agreement with certain foreign investors, pursuant to which the Company issued a total of 900 newly authorised Series B Cumulative Convertible Preferred Shares, together with warrants to purchase up to 112,500 ordinary shares of the Company for an aggregate purchase price of $900,000. The exercise price per Ordinary Share under the Warrants is 125% of the 10-day volume weighted average price of the Company’s Ordinary Shares on the Initial Closing Date (which the parties agreed was $3.2916). The Warrants are exercisable immediately and expire on July 25, 2018.

Page 73

Notes to the financial statements

27 Events after the balance sheet date (continued)

(b) Financing (continued)

During July and August 2014, the Company sold 2,500 Series B Cumulative Convertible Preferred Shares together with Warrants to purchase up to 416,667 Ordinary Shares for an aggregate purchase price of US$2,500,000 ($2,660,000).

On July 24, 2014 the Company issued 465,000 Ordinary Shares and on August 9, 2014 it issued 122,500 Ordinary Shares upon the respective conversions of 186 and 49 Class A Preferred Shares. The Company has committed to redeem all of the remaining 200 Series A Preferred Shares and to accept a contemporaneous subscription for 2,000 Series B Preferred Shares having a Face Value equal to that of the redeemed Series A Preferred Shares.

On September 3, 2014 the Company issued 275,000 ordinary shares in lieu of cash payments as due diligence fees and professional services supplied to the Company.

(c) Other

Listed status and Trading

On October 21, 2013 the Company signed an exclusive, worldwide, long-term license agreement with Westinghouse Electric Corporation to use the WESTINGHOUSE® trademark as the corporate banner for its solar business. This agreement was terminated on January 30, 2015.

On November 13, 2014, NASDAQ halted trading in the shares of the Company as a result of the Company’s failure to lodge its 2014 Annual Report and this halt is still in place.

On November 25, 2014, the Company received a letter from NASDAQ’s Listing Qualifications Department stating that, in light of the commencement of the voluntary administration, trading of the Company’s common stock was to be suspended at the opening of business on Thursday December 4, 2014 and that they would seek the delisting of the Company’s shares. BlueNRGY appealed the delisting determination and appeared with counsel at a hearing before an independent Nasdaq Hearings Panel on January 8, 2015.

On January 26, 2015, the Company received a letter from the Panel granting the Company’s request for continued listing on the Nasdaq Capital Market subject to meeting a series of deadlines including filing its Annual Report on Form 20-F for the year ended June 30, 2014.

Non-Reliance on previously issued financial statements or a related audit report or completed interim review

On October 23, 2014, the Audit Committee, after discussions with PricewaterhouseCoopers (‘PwC’), the Company’s independent registered public accounting firm at that time, determined that there was sufficient uncertainty about the accuracy of disclosures about related-party transactions involving its Executive Chairman and Managing Director, Mr. McGowan, and therefore that its previously issued audited financial statements for the fiscal years ended June 30, 2013 and 2012 should no longer be relied upon.

Notice of material control weaknesses and investigation of possible contraventions of the Corporations Act

The Audit Committee received notices from PwC that PwC has identified material weaknesses in financial controls and had identified the possibility of misconduct and contraventions of the Australian Corporations Act 2001 (Cth) (the ’Act’) by the Company and involving the Company’s Executive Chairman and Managing Director, Mr. McGowan.

Resignation of Registered Independent Public Accounting Firm

Effective November 10, 2014, PricewaterhouseCoopers (‘PwC’), the registered independent public accounting firm for BlueNRGY Group Limited (the ‘Company’), resigned from its role as auditor of the Company’s financial statements in connection with the Company’s US legal and regulatory requirements, having concluded that it is not independent of BlueNRGY under applicable PCAOB rules due to non-payment of its professional fees by the Company.

Engagement of new independent registered public accounting firm

On January 29, 2015, the Company’s Board of Directors appointed HLB Mann Judd (‘HLB’) as the Company’s new independent registered public accounting firm. HLB have audited the Company’s financial statements for the years ended June 30, 2012, June 30, 2013, and June 30, 2014. This appointment was approved by shareholders at the Extraordinary General Meeting held on March 12, 2015 following the removal of PwC as auditor of the company.

Page 74

Notes to the financial statements

27 Events after the balance sheet date (continued)

(d) Voluntary Appointment of Administrators

On November 14, 2014, by unanimous resolution of those members of its Board permitted to consider the matter and to vote, it was determined that the Company and three of its Australian subsidiaries (i) were insolvent or likely to become insolvent in the future (ii) should be placed into voluntary administration (‘VA’) under the Australian Corporations Act 2001 (the ‘Act’), and (iii) appoint Said Jahani and Trevor Pogroske from Grant Thornton as joint and several administrators (referred to hereinafter in the singular as ‘Administrator’) pursuant to section 436A of the Act.  The three Australian subsidiaries of the Company that entered VA were CBD Solar Labs Pty, Westinghouse Solar Pty Ltd and KI Solar Pty Ltd, which, together with the Company are referred to as the VA Companies. As a result of the Administrator’s appointment, the powers of the directors of the VA Companies were suspended and the Administrator took control of the affairs of the companies subject to the appointment. The Company’s other subsidiaries continued to operate outside the VA process.

Immediately prior to the commencement of the VA, the Company and Westinghouse Solar Pty Ltd entered into an amendment to the existing finance and security arrangements with the company’s secured creditor, Wind Farm Financing Pty Ltd (‘WFF’), pursuant to which WFF made additional advances totalling $400,000 to those companies.  $240,000 was advanced to the trust account of Grant Thornton, Sydney, for the sole and exclusive purpose of enabling the companies to pay Employee Entitlements, of which $216,603 was agreed to be used immediately to partially pay outstanding Employee Entitlements owed by the Companies.  In addition, $160,000 was advanced by WFF to the Trust Account for purposes of funding the trading expenses of the VA Companies.  

(e) Exiting Voluntary Administration

Effectiveness of Two Deeds of Company Arrangement

On December 24, 2014, two deeds of company arrangement under the Australian Corporations Act 2001 (collectively, the ’Reorganisation Plans’) were signed. The Reorganisation Plans became effective on January 27, 2015, along with a variation of the Reorganisation Plans that removed all references to a draft license agreement and specified that the Administrators of the Deed Funds will hold 38,123,652 shares in trust – 90% under the Company’s Trust Deed and 10% under the Trust Deed of the Company’s subsidiary, Westinghouse Solar Pty Ltd.

The Reorganisation Plans provide, among other things, that: (i) creditor claims and contingent liabilities of the Company were extinguished and creditors received newly issued ordinary shares of the Company; and (ii) investors infused US$1 million ($1,064,000) into the Company in order to meet the requirements of the Deed Funds set forth in the Reorganisation Plans. The Deed Funds will be used to pay creditor claims. Creditors of the Company will receive US$610,000 ($649,000) and creditors of the Company’s subsidiary, Westinghouse Solar Pty Ltd, will receive US$390,000 ($415,000).

As a consequence of the effectiveness of the Reorganisation Plans, Said Jahani and Trevor Pogroske from Grant Thornton are no longer joint and several administrators. The Company has now exited voluntary administration and is being managed by its Board of Directors (the ‘Board’).

(f) Entry into Material Definitive Agreements

On November 19, 2014, the Company’s subsidiary, GED, entered into a Loan and Security Agreement with WFF pursuant to which it agreed to lend GED up to $360,000 (the ‘GED Loan’).  The GED Loan bears interest at a rate of 6% per annum and is payable on demand.  All of GED’s obligations under the GED Loan are secured by a first lien on the assets of GED.

Page 75

Notes to the financial statements

27 Events after the balance sheet date (continued)

(g)BlueNRGY Acquisition

In connection with effectuating the Reorganisation Plans, the Company, on January 27, 2015, entered into an Amended and Restated Membership Interest Purchase Agreement (the ‘Purchase Agreement’) in order to acquire BlueNRGY, LLC. Pursuant to the Purchase Agreement, the Company acquired 100% of the issued and outstanding membership interests of BlueNRGY, LLC (the ‘Acquisition’). The purchase price of BlueNRGY, LLC was the issuance of an aggregate of 150,162,640 ordinary shares of the Company.

Pursuant to the Reorganisation Plans, the Company issued 96,028,937 ordinary shares to settle credit claims.

Immediately following the effectiveness of the Reorganisation Plans, certain creditors exchanged $701,513 of indebtedness at the Offering Price and the Company issued 18,534,029 ordinary shares to them.

Since January 27, 2015 the Company has raised the equivalent of $2,336,000 through the issuance of 48,877,148 ordinary shares. Of this, $1,247,000 was paid to the Deed Fund.

(h) Change in Terms of Series B Preferred Shares

As a condition to the Purchase Agreement, the Series B Preferred Share terms were amended by unanimous resolution of the Company’s Board and the holders of the requisite majority of the Series B Preferred share. The conversion price was reset to 1.325 times the Offering Price and the right of Series B Preferred Shares to receive dividends was eliminated after January 31, 2015.  The rights of Series B shareholders to appoint a member of the Board and to limit future share issues were also eliminated.

(i) Board and Executive Changes

On July 18, 2014, Todd Barlow resigned as a director of the company.

Effective August 5, 2014, Luisa Ingargiola was appointed as a non-executive member of the Board by the holders of a requisite majority of the Company’s Series B Shares in accordance with the rights of the Series B Shares to appoint one member of the Company’s Board. Upon joining the Board, Ms. Ingargiola was appointed to the Company’s Audit Committee and Compensation Committee. Ms. Ingargiola resigned as a director on October 23, 2014.

Effective as of October 21, 2014, the Company’s Directors appointed William Morro as non-executive Chairman of the Board and Chairman of its Executive Committee.

As of November 14, 2014, Mr. Gerard McGowan was: suspended as the Company’s Managing Director pursuant to Article 18 of the Company’s Constitution; removed as a director of all Company subsidiaries where the applicable constitutional authority permitted such action; and the Administrator terminated the Contractor Agreement entered into as of May 1, 2014 between the Company, TRW Holdings Pty Ltd (‘TRW’) and Mr. McGowan pursuant to which TRW contracted to procure Mr. McGowan’s services as Chief Executive Officer of the Company.  

Effective December 30, 2014, Gerard McGowan resigned as a director of BlueNRGY Group Limited.

Effective January 27, 2015, the Board appointed John H. Chapple, Yves-Regis Cotrel, and John F. Donohue as members of the Board.  The appointment of Mr. Cotrel and Mr. Donohue became effective on January 27, 2015 and that of Mr. Chapple on February 2, 2015.

On February 9, 2015, Mr. Donohue and Mr. Botto were appointed to the Audit Committee, Mr. Morro resigned as a member of the Audit Committee, and Mr. Donohue was appointed as the Audit Committee Chairman.

On February 9, 2015, Mr. Chapple and Mr. Donohue were appointed to the Compensation Committee and Mr. Morro resigned as a member of the Compensation Committee.

On February 9, 2015, the Board unanimously appointed Mr. Morro as the Company’s Managing Director and Emmanuel Cotrel as Senior Vice President of the Company.   

On February 9, 2015, the Board formed an Executive Committee comprised of Mr. Morro, Mr. Donohue, and Mr. Chapple.

Page 76

Notes to the financial statements

28 Parent entity information

(a) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

	2014 $’000			Restated 2013 $’000			Restated 2012 $’000
Current assets		1,317			452			3,986
Total assets		4,623			15,394			7,239
Current liabilities		(17,775	)		(24,656	)		(18,153	)
Total liabilities		(27,030	)		(26,809	)		(18,342	)
Net assets/(liabilities)		(22,407	)		(11,415	)		(11,103	)
Issued capital		125,540			109,619			109,083
Accumulated losses		(151,283	)		(125,022	)		(122,875	)
Reserves		3,336			3,988			2,689
Total shareholders’ equity		(22,407	)		(11,415	)		(11,103	)
Loss of the parent entity		(26,262	)		(2,147	)		(46,706	)

(b) Guarantees entered into by the parent entity

The parent entity provided a financial guarantee to bond holders of Energy Bonds and Secured Energy Bonds for any amounts that remain outstanding on due payment dates. This guarantee was extinguished on execution of the Deed of Company Arrangement on December 24, 2014.

For the year ended June 30, 2013, the parent entity provided a financial guarantee in respect of an overdraft facility of $463,000 for its subsidiary eco-Kinetics Pty Ltd. This overdraft was fully repaid in the 2014 financial year.

(c) Contractual commitments for the acquisition of property, plant or equipment

As at June 30, 2014, the parent entity had no contractual commitments for the acquisition of property, plant or equipment (2013: Nil; 2012: Nil).

Page 77

Notes to the financial statements

29 Auditors' remuneration

The auditor of BlueNRGY Group Limited is HLB Mann Judd.

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Amounts paid or payable to the Company’s auditors
- an audit or review of the financial statements of the entity for the years ended June 30, 2014, 2013 and 2012		340,000		-		-

The following amounts were paid to the previous auditor of BlueNRGY Group Limited, PricewaterhouseCoopers.

	Consolidated
	2014 $’000		Restated 2013 $’000		Restated 2012 $’000
Amounts paid or payable to the Company’s auditors
- an audit or review of the financial statements of the entity		1,256,512		958,000		685,000
- other consulting and advisory services		-		2,000		29,954
- tax compliance		-		62,687		47,240
		1,256,512		1,022,687		762,194

Page 78

ITEM 19.   EXHIBITS

Exhibit		Incorporated by Reference			Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith
1.1	Constitution, as amended, dated December 20, 2000	20-F	1.1	1/30/2014
1.2	Certificate of Registration dated March 11, 2010.	20-F	1.2	1/30/2014
1.3	Certificate of Registration on Change of Name dated March 20, 2015.	20-F	1.3	6/1/2015
4.1	CBD Energy Limited 2014 Equity Plan	F-1/A	10.25	05/09/2014
4.2	Form of Securities Purchase Agreement, dated as of July 25, 2014	6-K	99.1	7/30/2014
4.3	Form of Warrant, dated as of July 25, 2014	6-K	99.2	7/30/2014
4.4	First Amendment to Securities Purchase Agreement, made as of August 19, 2014.	6-K	99.1	8/30/2014
4.5	Deed of Company Arrangement of CBD Energy Limited, dated December 24, 2014.	6-K/A	10.1	1/29/2015
4.6	Deed of Variation of the Deed of Company Arrangement of CBD Energy Limited, dated January 27, 2015.	6-K/A	10.2	1/29/2015
4.7	Deed of Company Arrangement of Westinghouse Solar Pty Limited, dated December 24, 2014.	6-K/A	10.3	1/29/2015
4.8	Deed of Variation of the Deed of Company Arrangement of Westinghouse Solar Pty Limited, dated January 27, 2015.	6-K/A	10.4	1/29/2015
4.9	Amended and Restated Membership Interest Purchase Agreement, dated January 27, 2015	6-K/A	10.5	1/29/2015
4.10	Form of Subscription Agreement, dated January 27, 2015	6-K/A	10.6	1/29/2015
4.11	Rights and Preferences of CBD Series B Preferred Shares as amended January 27, 2015	6-K/A	10.7	1/29/2015
8.1	For a list of all of our subsidiaries, see Item 4.C., Organization Structure.	20-F	8.1	6/1/2015
11.1	Code of Conduct and Ethics.	20-F	11.1	6/1/2015
12.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a).				X
12.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a).				X
13.1*	Certification of Principal Executive Officer pursuant to 18 U. S. C. Section 1350.				X
13.2*	Certification of Principal Financial Officer pursuant to 18 U. S. C. Section 1350.				X

* In accordance with SEC Release 33-8238, Exhibits 13.1 and 13.2 are being furnished and not filed.

120

SIGNATURES

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 signthis Amendment No.1 to its annual report on its behalf.

	BlueNRGY Group Limited
By:	/s/ William Morro
	Name: William Morro
	Title: Managing Director
	(Principal Executive Officer)
By:	/s/ Richard Pillinger
	Name: Richard Pillinger
	Title: Chief Financial Officer
	(Principal Financial Officer)

Date: July 10, 2015

121