Energy Mad Limited. Condensed Interim Report For The Six Months Ended 30 September 2012 (Unaudited)

Transcription

1 Condensed Interim Report For The Six Months Ended 30 September 2012 (Unaudited)

2 2 Results Overview Reporting period Previous reporting period 6 months to 30 September months to 30 September 2011 Amount (000s) Percentage Change Revenue from ordinary activities $NZ 4, % Profit / (loss) from continuing activities attributable to security holders $NZ (451) % Net profit / (loss) attributable to security holders $NZ (454) 36.31% Net tangible asset per security 30 September cents Interim Final Dividend 30 September cents Amount per Security Imputed amount per Security No dividend is proposed Not Applicable Not Applicable Record Date Dividend Payable Date Not Applicable Not Applicable Audit The financial statements have not been audited Australian Ecobulb Downlight issues overshadow United States Growth and result in half yearly forecast shortfall In its half yearly unaudited results, Energy Mad has shown a 47% revenue growth for the last 6 months to 30 September 2012 relative to the prior comparable 2011 period, following its successful market establishment in the United States. However issues in manufacturing halogen replacement Ecobulbs for the Australian market and the consequent reduction in revenue has resulted in Energy Mad falling short of its IPO forecasts. Revenues were $4.8 million compared with the IPO forecast of $9.8 million. Depending on the rate of growth, Energy Mad s FY2013 revenues could vary from $13 million to $20 million, versus the FY2013 IPO forecast of $21.3 million. Energy Mad expects to see continued revenue growth in the United States, Australia and in the New Zealand Direct Installation business. Highlights 47% revenue growth for the six months to 30 September 2012 relative to the prior comparable period (the six months to 30 September 2011). Growth of quarter two revenue to $3.5 million, up from quarter one revenue of $1.3 million. Significant growth in the United States, where: It delivered its first order of $1.6 million worth of energy efficient light bulbs to United States drug store chain Walgreen, with these stocked in 8,200 Walgreens stores across the United States.

3 3 Walgreens placed two further orders with a total value of $0.9 million. These were delivered in October and November 2012, despite Walgreens not stocking the first order of bulbs in their stores until early November. Energy Mad expects Walgreens orders to grow with time as outlined later in this report. Walgreens launched Energy Mad s energy efficient light bulbs on 4 November 2012 as part of a new marketing initiative. Energy Mad is about to commence electricity utility projects with 14 United States utilities that are heavily discounting the Walgreens light bulbs in 800 Walgreens stores for the remainder of Energy Mad commenced an energy efficiency project with Efficiency Vermont (the state government energy efficiency agency) through 40 Champlain Farm convenience stores in November New Zealand Direct Installation monthly contracted sales grew from $100K per month in April 2012 to $320K per month in October Australian spiral sales grew from $89K per month in April 2012 to an average of $383K per month over August to October Development of the new 12V Ecobulb that is dimmable and does not require an electrician to install. 15W Spiral Ecobulb Lowlights Issues in manufacturing halogen replacement Ecobulbs at acceptable quality levels have held back Australian revenues where: Delays due to design changes to improve the 12V Ecobulb, that replaces halogen lamps, meant there was no production and therefore no 12V Ecobulb sales during the six month period. A manufacturing quality issue with the 240V Ecobulb Downlight, that replaces halogen downlights, restricted sales to 18% of that projected for these downlights over the last six months.

4 4 12V Ecobulb 240V Ecobulb Downlight FY2013 Six Month Financial Performance The operating revenues were $4.8 million for the six months ending 30 September 2012, compared to $3.2 million for the September 2011 half year and to the $9.8 million for the IPO forecast. This resulted in a six month loss of $0.5 million, compared to a loss of $0.3 million for the September 2011 half year and to the $1.7 million profit for the IPO forecast. This decrease in six month profit was due to a 91% increase in expenses to $2.5 million as Energy Mad built a deeper organizational structure to allow it to pursue its growth opportunities, and due to Energy Mad investing in its New Zealand Direct Installation operation, which contributed $0.7m to the overall expenses as the operation was being scaled up rapidly.

5 5 The combined revenue of $4.5 million from New Zealand, the United States and from the sale of spiral Ecobulbs in Australia was $0.9 million ahead of the IPO forecasts for those revenue lines. The six month $5.1 million shortfall of revenue relative to the IPO forecasts was primarily due to issues in manufacturing halogen replacement Ecobulbs at acceptable quality levels, resulting in: No 12V Ecobulb sales in Australia ($3.1 million shortfall); and Reduced sales of 240V Ecobulb Downlights in Australia ($1.3 million shortfall). Energy Mad expects it would have met the six month IPO forecast had the halogen replacement products being available as planned, because there was sufficiently strong customer demand for these Ecobulbs to have meet Energy Mad s sales projections. Twelve Month Financial Performance to 30 September 2012 The operating revenues were $7.7 million for the twelve months ending 30 September 2012, compared to $19.5 million for the IPO forecast. This resulted in a twelve month loss of $1.3 million, compared to the $3.6 million profit for the IPO forecast. The twelve month $11.8 million shortfall of revenue relative to the IPO forecasts was predominantly due to: No 12V Ecobulb sales in Australia ($5.1 million shortfall); EECA energy efficiency lighting projects that did not eventuate in New Zealand ($1.6 million shortfall); Reduced sales of the spiral Ecobulb in Australia prior to the 20,000 hour lifetime accreditation in the Victorian energy efficiency scheme being received earlier this year ($1.3 million shortfall); Later than forecast commencement of large-scale sales in the United States ($1.3 million shortfall); Reduced sales of 240V Ecobulb Downlights in Australia ($1.1 million shortfall); and Projects in Europe which stalled due to the current state of the European economy ($1.0 million shortfall). Product Development and Manufacturing Energy Mad has now developed and extensively tested a new 12V Ecobulb design that is dimmable, has a higher light output and does not require an electrician to install. Energy Mad has submitted the 12V Ecobulb for Australian energy efficiency scheme accreditation. Completion of the 12V Ecobulb tooling to allow mass manufacture is expected in early The quality issues for the 240V Ecobulb Downlight arose from a poor connection of the spiral tube into the downlight fitting, resulting in higher than acceptable premature failures of the Ecobulb downlight. The design of the 240V Ecobulb Downlight has now been revised to eliminate this type of connection. As a result of this 240V Ecobulb Downlight quality issue, Energy Mad s Australian customers for this Ecobulb have lost confidence in the 240V Ecobulb Downlight and so Energy Mad does not now expect to receive the level of orders that were projected for this Ecobulb for the remainder of FY2013. However, the upside is that these same customers have shown a strong interest in ordering the new Dimmable 12V Ecobulb as an alternative. The 12V Ecobulb also significantly increases the size of the Australian market for Energy Mad, because it is dimmable and does not require an electrician to install. Energy Mad s focus is therefore on migrating the projected FY2013 Australian sales volume for the 240V Ecobulb Downlight to the new 12V Ecobulb. The initial production runs of the 240V Ecobulb Dimmable Downlight proved popular with customers.

6 6 240V Ecobulb Dimmable Downlight This downlight uses only 20% of the electricity of the incandescent and halogen downlights it replaces, has a long life, and will be less expensive than competing products. It is also fully dimmable and operates at such low temperatures that it can be fully covered by ceiling insulation. Energy Mad will manufacture larger production runs of the 240V Ecobulb Dimmable Downlight in 2013 once the Chinese factory has completed the redevelopment of this production line that it relocated from South Korea to China. Energy Mad has historically relied on outsourced contractors and its Chinese factory to design, develop and test its new Ecobulbs. However this has contributed to Energy Mad s development delays and quality issues for the halogen replacement Ecobulbs that have impacted Energy Mad s sales over the last year. To overcome this, Energy Mad recruited two key Technical team members to Christchurch earlier this year with strong electrical engineering expertise in developing new energy efficient light bulbs. This is now allowing Energy Mad to more rapidly design, develop and test its new Ecobulbs in Christchurch. This is also yielding more robust Ecobulb designs that can be manufactured reliably at high quality levels. The United States Sales of energy efficient lighting are growing in the United States, primarily being driven by the phasing out of incandescent light bulbs since the start of 2012 and by increased electricity utility funding into energy efficient light bulb projects. There have been 598 United States electricity utility efficient lighting programs in 2012, which is a 43% growth from Energy Mad s ability to enter this electricity utility market had been hampered until now by the lack of a nationwide retail partner in the United States. Energy Mad s relationship with Walgreens now gives it distribution in 8,200 retail locations across all 50 states. Recent Colmar Brunton market research shows that 64% of the main householder shoppers in the United States shop at Walgreens at least once a year. This research also showed that Energy Mad s market potential with Walgreens is significantly higher than previously thought by Energy Mad. Energy Mad is therefore focused on expanding its relationship with Walgreens and the number of electricity utility energy efficiency projects it completes in partnership with Walgreens. Energy Mad is also working with Walgreens to expand the range of energy efficient light bulbs it supplies to Walgreens. As a result, Energy Mad expects to build on its recent initial projects with United States electricity utilities, and to supply larger restocking orders to Walgreens to match the associated sales growth.

7 7 Australia Australia will continue to provide excellent growth potential for Energy Mad, due to the growing State Government electricity utility energy efficiency scheme targets in Victoria and New South Wales. These energy efficiency schemes have created a $170 million market to replace 12V halogen downlights in Victorian and New South Wales homes with its energy efficient alternatives. They have also created a further large, but currently unsized market, to replace 12V halogen downlights in commercial buildings for these Victorian and New South Wales schemes. This market has remained untapped while Energy Mad has been resolving the issues with its 12V Ecobulb and 240V Ecobulb Downlight. The main sales growth for Energy Mad in Australia will therefore come when production volumes of the new Dimmable 12V Ecobulb becomes available in early 2013 to replace 12V halogen downlights in the Victorian and New South Wales energy efficiency schemes. The new Dimmable 12V Ecobulb has advantages over competing LED products in these Australian schemes, where: The 12V Ecobulb has a materially lower product cost than LEDs. The 12V Ecobulb operates on all 12V transformers and does not require an electrician to install it. In contrast, most LEDs require an electrician to install an LED driver, without which these LEDs do not operate on many 12V transformers. Because of the lower 12V Ecobulb cost and because it does not require an electrician to install, in most cases the consumer will be able to get 12V Ecobulbs and have them installed in their homes and buildings, for free. In contrast, the higher LED cost and the requirement for an electrician install, means LEDs require a significant customer contribution to purchase. As a result of Energy Mad s spiral Ecobulbs receiving 20,000 hour lifetime accreditation in the Victorian energy efficiency scheme earlier this year, Energy Mad s spiral Ecobulb sales in Australia are now running ahead of the IPO forecasts. Energy Mad expects this growth in Spiral sales to continue. New Zealand Direct Installations Direct Installation has seen monthly contracted sales grow from $100K in April 2012 to $320K in October This business sells and installs Ecobulb Downlights and associated insulation in New Zealand homes, which cuts home power bills by up to 25%. In New Zealand, increasing power bills and a high installed base of both incandescent and halogen downlights in homes is providing strong impetus for growth. Energy Mad is now reviewing the systems and cost structure of Direct Installation at this stage in its growth, in order to determine the most profitable scaling of this operation. Personnel Changes Co-founder Tom Mackenzie is moving to Auckland at the end of the year due to his wife s employment relocating. Tom s focus in Auckland will be researching light bulb product developments to keep Energy Mad abreast of what the competition and the market is developing. This will allow Energy Mad to add the most appropriate of these to the company s portfolio of products. Tom will also remain on the Energy Mad board. Maximizing Energy Mad s Growth Energy Mad is focused on maximizing its growth. Energy Mad expects to see continued revenue growth in the United States, Australia and in the New Zealand Direct Installation business. The final financial results for FY2013 will depend on the speed of growth in these initiatives over the remainder of FY2013. Depending on the rate of growth, Energy Mad s revenues could vary from $13 million to $20 million, versus the FY2013 IPO forecast of $21.3 million. This would see Energy Mad s profit vary from $0.1 million to $2.0 million, versus the FY2013 IPO forecast of $4.0 million.

8 8 Energy Mad has been aware there would be a significant shortfall in the FY V Ecobulb revenue relative to the $5.1 million projected in the FY2013 IPO forecasts. However Energy Mad had remained confident until recently that this 12V Ecobulb revenue shortfall would be replaced in FY2013 through greater than IPO forecast 240V Ecobulb downlight and Ecobulb spiral sales in Australia, plus through greater Walgreens United States sales and greater Direct Installation sales. Unfortunately the recent 240V downlight quality issues plus the length of delay in bringing the 12V Ecobulb to market mean that the 12V Ecobulb revenue shortfall can no longer be caught up in FY2013 by increased Walgreens and Direct Installation sales. Energy Mad takes its continuous disclosure requirements seriously and is committed to keeping the market informed over the new few months as Energy Mad gains greater clarity on the progress being made with its key initiatives and therefore its likely final financial performance for FY2013. With the progress being made and the potential Energy Mad has in New Zealand, Australia and the United States, Energy Mad has never been more excited about its long term growth prospects. We would like to thank our team and shareholders for their ongoing efforts and support. Rick Ramsay Chris Mardon Chairman Managing Director

9 9 Statement of Comprehensive Income For The Six Months Ended 30 September Months 6 Months 12 Months Notes NZ$ NZ$ NZ$ Revenue 5 4,756,733 3,225,603 6,208,633 Cost of sales 2,826,262 2,115,869 3,804,964 Gross profit 1,930,471 1,109,734 2,403,669 Administration and general expenses 6 2,487,933 1,303,325 3,503,362 Results from continuing activities (557,462) (193,591) (1,099,693) Finance income 2,962 1,988 15,517 Finance expenses 9,578 56,177 82,215 Total finance costs (6,616) (54,189) (66,698) Profit / (loss) before taxation from continuing activities (564,077) (247,780) (1,166,391) Income tax expense 8 (113,226) (73,355) 205,349 Profit / (loss) for the year from continuing operations (450,852) (174,425) (961,042) Loss for the year from discontinued operations 15 (3,259) (158,716) (186,691) Profit / (loss) for the period (454,111) (333,141) (1,147,733) Other comprehensive income / (loss) Exchange gain / (loss) on translating foreign operations 3,515 12,354 51,776 Total other comprehensive income / (loss) for the period 3,515 12,354 51,776 Total comprehensive income / (loss) for the period (450,596) (320,787) (1,095,957) Earnings per share: Basic earnings per share 17 Profit / (loss) from continuing operations (0.01) (0.00) (0.03) Loss from discontinued operations (0.00) (0.00) (0.01) Total (0.01) (0.01) (0.03) Diluted earnings per share 17 Profit / (loss) from continuing operations (0.01) (0.00) (0.03) Loss from discontinued operations (0.00) (0.00) (0.01) Total (0.01) (0.01) (0.03) The accompanying notes form part of these financial statements

10 10 Statement of Changes in Equity For The Six Months Ended 30 September 2012 Group (Unaudited) Foreign exchange Share Accumulated Total translation reserve capital losses equity Notes NZ$ NZ$ NZ$ NZ$ Balance at 1 April ,392 15,593,585 (8,329,214) 7,400,763 Issue of share capital Transaction costs Transactions with owners Total comprehensive income / (loss) for the period - - (454,111) (454,111) Other comprehensive income / (loss) 3, ,515 Balance at 30 September ,907 15,593,585 (8,783,325) 6,950,167 Group (Unaudited) Foreign exchange Share Accumulated Total translation reserve capital losses equity Notes NZ$ NZ$ NZ$ NZ$ Balance at 1 April ,616 11,339,767 (7,181,480) 4,242,903 Issue of share capital Transaction costs 16 - (356,233) - (356,233) Transactions with owners - (356,233) - (356,233) Total comprehensive income / (loss) for the period - - (333,141) (333,141) Other comprehensive income 12, ,354 Balance at 30 September ,970 10,983,535 (7,514,621) 3,565,884 Group (Audited) Foreign exchange Share Accumulated Total translation reserve capital losses equity NZ$ NZ$ NZ$ NZ$ Balance at 1 April ,616 11,339,767 (7,181,480) 4,242,903 Issue of share capital 16-5,076,500-5,076,500 Transaction costs 16 - (822,682) - (822,682) Transactions with owners - 4,253,818-4,253,818 Total comprehensive income / (loss) for the period - - (1,147,733) (1,147,733) Other comprehensive income 51, ,776 Balance at 31 March ,392 15,593,585 (8,329,214) 7,400,763 The accompanying notes form part of these financial statements

11 11 Statement of Financial Position As at 30 September months 6 months 12 months Notes NZ$ NZ$ NZ$ Current assets Cash and cash equivalents (277,089) 362, ,569 Income tax refund 22,696 18,225 21,893 Inventories 1,184,847 1,448,592 1,710,977 Trade and other receivables 9 3,209,094 1,243,123 1,296,647 Total current assets 4,139,548 3,072,310 3,613,086 Non current assets Intangible assets 11 1,725,347 1,380,038 1,519,403 Property, plant and equipment 95,290 67,505 96,505 Other financial assets 10 1,353,424 1,353,424 1,353,424 Deferred tax 12 2,629,339 2,384,119 2,516,113 Total non current assets 5,803,400 5,185,086 5,485,445 Assets and disposal group classified as discontinued 15 15,921 54,997 18,533 Total assets 9,958,870 8,312,393 9,117,064 Current liabilities Trade and other payables 13 2,639,522 2,833,816 1,452,062 Revenue received in advance 265,314 89,247 97,773 Employee entitlements 103, , ,583 Convertible loans (unsecured) ,459 - Total current liabilities 3,008,702 3,916,139 1,704,418 Total liabilities 3,008,702 3,916,139 1,704,418 Liabilities classified as discontinued ,370 11,882 Equity Share capital 16 15,593,585 10,983,535 15,593,585 Other components of equity 139,907 96, ,392 (Accumulated deficit)/retained earnings (8,783,324) (7,514,621) (8,329,213) Total equity 6,950,168 3,565,884 7,400,763 Total equity and liabilities 9,958,870 8,312,393 9,117,064 The accompanying notes form part of these financial statements

12 12 Statement of Cash Flows For The Six Months Ended 30 September months 6 months 12 months Notes NZ$ NZ$ NZ$ Operating activities Cash was received from: Receipts from customers 3,465,299 2,237,149 5,175,182 Interest received 3,181 1,988 15,517 3,468,480 2,239,137 5,190,699 Cash was applied to: Interest paid 7,337 56,177 82,215 Payments to suppliers and employees 3,922,464 1,725,589 7,364,673 Taxation paid 1, ,130 3,930,823 1,782,228 7,451,018 Net cash inflow (outflow) from operating activities 18 (462,342) 456,909 (2,260,319) Investing activities Cash was provided from: Equity sale (Fujian Ecobulb) - 473, , , ,234 Cash was applied to: Purchase of fixed and intangible assets 389, , ,211 Net cash inflow (outflow) from investing activities (389,301) 199,609 (157,977) Financing activities Cash was provided from: Issue of ordinary shares - 650,000 5,726,500 Loan funds advanced - 150, , ,000 5,876,500 Cash was applied to: Listing expenses - 356, ,682 Loan funds repaid - 150, ,000 Convertible loans (unsecured) - 113, ,437 Convertible loans (secured) - 336, , ,689 1,966,599 Net cash inflow (outflow) from financing activities - (156,689) 3,909,901 Net change in cash and cash equivalents from continuing operations (851,643) 499,829 1,491,605 Net cash flows from discontinued operations 15 (12,530) (243,919) (1,053,918) Net increase/(decrease) in cash and cash equivalents (864,173) 255, ,687 Cash and cash equivalents, beginning of period 583,569 94,106 94,106 Effect of foreign exchange rates 3,515 12,354 51,776 Cash and cash equivalents, end of period (277,089) 362, ,569 Cash and cash equivalents Cash at bank (277,089) 362, ,569 Ending cash and cash equivalents carried forward (277,089) 362, ,569 The accompanying notes form part of the financial statements

13 Notes to the Condensed Financial Statements For The Six Months Ended 30 September General information The reporting entity is Energy Mad Limited (the Company ). It is profit-oriented and incorporated and domiciled in New Zealand. The Group comprising the Company and its subsidiaries is a reporting entity for the purposes of the Financial Reporting Act 1993 and its financial statements comply with that Act. The Company changed its name from Energy Mad Holdings Limited to Energy Mad Limited on 1 July The Group s primary activity is the import and distribution of energy efficient light bulbs and installation of energy efficient products. The operations of the Company during the period of these financial statements, and in general are not influenced by seasonal cycles. 2 Statement of compliance These general purpose financial statements for the six months ended 30 September 2012 have been prepared in accordance with NZ IAS 34, Interim Financial Reporting. In complying with NZ IAS 34, these consolidated financial statements also comply with IAS 34. These consolidated financial statements do not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the audited financial statements of Energy Mad Limited for the year ended 31 March 2012 which have been prepared in accordance with the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS). 3 Summary of accounting policies The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarised below. All significant accounting policies have been applied on a consistent basis with those used in the audited financial statements of Energy Mad Limited for the year Ended 31 March Basis of preparation The financial statements have been prepared on the basis of historical cost. 3.2 Presentation of financial statements The consolidated financial statements are presented in accordance with NZ IAS 34, Interim Financial Reporting. The Group has elected to present the Statement of Comprehensive Income in one statement. The Statement of Comprehensive Income discloses the analysis of expenses under the function method. 3.3 Basis of consolidation The consolidated financial statements of the Group comprises of the Company and its subsidiaries. The subsidiaries are fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date that control ceases. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 31 March. In preparing the consolidated financial statements, all inter-entity balances and transactions, and unrealised profits and losses arising within the consolidated entity are eliminated in full. The Group uses the acquisition method of accounting for business combinations. On initial recognition, the assets and liabilities of the acquired subsidiary are included in the consolidated statement of financial position at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group's accounting policies. Acquisition costs are expensed as incurred. 3.4 Investment in associates and joint ventures (equity accounted investees) Associates are those entities which the Group has significant influence, but not control, over the financial and operating policies. Joint ventures are those entities over whose activities the Group has joint control established by contractual agreement and requiring unanimous consent for strategic, financial and operating decisions. Associates and joint ventures are accounted for using the equity method (equity accounted investees). Significant influence generally accompanies a shareholding of between 20% and 50%. The Group s share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Unrealised gains on transaction between the Group and its associates are eliminated to the extent of the Group s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

14 Foreign currency translation The financial statements are presented in New Zealand dollars, which is the Company s functional currency and the Group s presentation currency. All financial information presented in New Zealand dollars has been rounded to the nearest dollar. 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 New Zealand Dollars, which is the Group s presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, All other foreign exchange gains and losses are presented in the statement of comprehensive income within other (losses)/gains. The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (a) (b) (c) assets and liabilities for each statement of financial position are presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the statement of comprehensive income as part of the gain or loss on sale. 3.6 Segment reporting In identifying its operating segments, the Managing Director generally follows four reporting segments based on the geographical locations of the operations and revenue streams. These segments have been determined based on the reports reviewed by the Managing Director to make strategic decisions. The geographical areas as follows: Segment New Zealand Australia United States Rest of World Activity Sale of energy efficient products within New Zealand Sale of energy efficient products within Australia Sale of energy efficient products within the United States Sale of energy efficient products to all other countries Each of these operating segments is managed separately as each of these service lines requires different resources and marketing approaches. The measurement policies the Group uses for segment reporting under NZ IFRS 8 are the same as those used in its financial statements. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss. No asymmetrical allocations have been applied between segments. 3.7 Revenue 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. Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. Sale of goods (wholesale) The Group sells a range of ecobulbs in the wholesale market. Sales of goods are recognised when a Group entity has delivered products to the customer. Delivery does not occur until the products have been shipped to the specific location, and the risks of obsolescence and loss have been transferred to the customer. The ecobulb products are often sold with volume discounts. Sales are recorded based on the price specified in the sales contracts, net of estimated volume discounts and returns at the time of sale. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice.

15 15 Sale of services The Group sells installation services to customers. These services are provided on a time and material basis or as a fixed-price contract. If circumstances arise that may change the original estimates of revenues, costs or extent of progress towards completion, estimates are revised. These revisions may result in increase or decreases in estimated revenue or costs and are reflected in in income in the period in which the circumstances that give rise to the revision become known by management. Project funder income Project funder income comprises the fair value consideration received or receivable for the contribution or revenue from project partners who are involved in an initiative to assist with the sales and distribution of energy efficient projects. The project funder income received contributes towards the direct marketing and bulb subsidy of a project. Government grants (NZTE, FRST, MSI and R&D) Grants from the government are recognised at fair value where there is a reasonable assurance that the grant will be received and the Group will comply with the attached conditions. Government grants relating to costs are recognised as revenue in the period necessary to match them with the costs that they are intended to compensate. Grants are received from the New Zealand Government to assist with funding to undertake focused research and development projects and the development of overseas expansion and growth including marketing and travel expenditure. There are no unfulfilled conditions or other contingencies attached to the government grants recognised in the financial statements. 3.8 Finance income and expenses Finance income Interest income is recognised as it accrues, using the effective interest method. Finance expenses All borrowing costs are recognised in profit and loss using the effective interest method. 3.9 Statement of cash flows The statement of cash flows has been prepared using the direct method. Definitions are: (1) Operating Activities Are the principal revenue-producing activities of the Group and other activities that are not investing or financing activities. (2) Investing Activities All transactions relating to the acquisition and disposal of long term assets and other investments not included in cash equivalents. (3) Financing Activities Are activities that result in changes of the equity and debt capital structure of the reporting entity and the cost of servicing the equity capital Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, investments in term deposits with maturities of less than 3 months, bank overdrafts and other highly liquid investments that are readily convertible to known amounts of cash as part of its day to day cash management and which are subject to an insignificant risk of changes in value Inventories Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of the business, less the estimated costs of completion and selling expenses. Cost is based on the first-in first-out principle and includes expenditure in acquiring the inventories and bringing them to their existing location and condition Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and other financial assets except to the extent that the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. The amount of deferred tax provided is determined by using tax rates and laws enacted or substantively enacted at reporting and expected to apply when the related deferred tax asset or liability is realised or settled.

16 16 A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Property plant and equipment is subject to impairment testing as described in note Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other expenses in the statement of comprehensive income. Depreciation is provided on leasehold improvements, computers, office furniture and equipment and motor vehicles. Depreciation is recognised in the Statement of Comprehensive Income to write off the cost of an item of property, plant and equipment, less any residual value, over its expected useful life, at the following rates: Computer equipment: 14.4% - 60% Diminishing value Office equipment: 15.6% - 48% Diminishing value Motor vehicles: 30% % Diminishing value Lab Equipment 40% Diminishing value Depreciation methods, useful lives and residual values are reviewed at each reporting date Intangible assets Other intangible assets include acquired and internally developed software used in administration, trademarks and patents acquired and internally developed products that qualify for recognition as an intangible asset in a business combination. They are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described in note The following useful lives are applied: Software: 4 years Trademarks: 7 11 years Patents: 2.5 years Designs 1-20 years Research and development: 5 years Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss when incurred. Research and Development Expenditure Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Costs that are directly attributable to the development phase of new ecobulbs and energy efficient products are recognised as intangible assets provided they meet the following recognition requirements: completion of the intangible asset is technically feasible so that it will be available for use or sale; the Group intends to complete the intangible asset and use or sell it; the Group has the ability to use or sell the intangible asset; the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;

17 17 there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the expenditure attributable to the intangible asset during its development can be measured reliably. Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include employee costs incurred on product development, along with directly attributable overheads. Internally generated product development recognised as intangible assets are subject to the same subsequent measurement method as external product development costs. However, until completion of the development project, the assets are subject to impairment testing only as described below in note The gain or loss arising on the disposal of an intangible asset is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in statement of comprehensive income within 'other income' or 'other expenses' Short-term employee benefits Short-term employee benefits, including holiday entitlement and sick leave, are current liabilities included in trade and other payables, measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement. Liabilities for accumulating short-term compensated absences (e.g., sick leave) are measured as the amount of unused entitlement accumulated at the pay period ending immediately prior to the reporting date, that the entity anticipates employees will use in future periods, in excess of the days that they will be entitled to in each of those periods Equity, reserves and dividend payments Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds. Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Retained earnings include all current and prior period retained profits. All transactions with owners of the Company are recorded separately within equity Leased assets Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charted to the statement of comprehensive income on a straight-line basis over the period of a lease Impairment testing of other intangible assets and property, plant and equipment The carrying amounts of the Group s intangible assets and property plant and equipment are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. For intangible assets that have indefinite lives or that are not yet available for use, regardless of whether or not there are indications of impairment, the assets are tested for impairment annually. Their recoverable amount is estimated at each reporting date. Impairment losses recognised in respect of goodwill are not reversed. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. 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. An impairment loss in respect of other assets is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised Goods and services tax The financial statements are prepared exclusive of GST with the exception of receivables and payables that are shown inclusive of GST. Where GST is not recoverable as an input tax it is recognised as part of the related asset or expense. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows Prospective financial information The Company issued a prospectus which included prospective financial information. FRS 42 is applicable for the twelve month period ended 30 September 2012 (refer note 21).

18 18 4 Segment reporting The Group currently derives all revenue from four geographical areas being New Zealand, Australia, USA and the Rest of the World as follows: Group Six Months ended 30 September 2012 New Zealand Australia United States Rest of World Eliminations Total Revenue from External Customers 924,757 1,992,670 1,605, ,523,357 Other Revenues 230,818 2, ,376 Depreciation & Amortisation 191, ,683 Segment net (loss)/profit before tax (1,289,492) 647, ,633 (122,135) - (564,077) Non-Current asset additions 399, ,941 Segment assets 11,265,809 1,427,702 2,386,347 24,979 (5,161,889) 9,942,948 Segment liabilities (4,472,117) (795,547) (2,702,833) (145,432) 5,107,226 (3,008,702) Reconcilation to Profit After Tax: Segment net (loss)/profit before tax (564,077) Loss for the year from discontinued operations (3,259) Income tax expense 113,226 Profit / (loss) after tax for the year (454,111) Group Six Months ended 30 September 2011 New Zealand Australia United States Rest of World Eliminations Total Revenue from External Customers 108,815 2,092, , ,563 3,127,505 Other Revenues 98,098 98,098 Depreciation & Amortisation 181, ,088 Segment net (loss)/profit before tax (816,723) 647,893 84, , ,780 Non-Current asset additions 2,736,242 2,736,242 Segment assets 11,642,954 1,947,916 1,200,531 - (6,534,005) 8,257,396 Segment liabilities (11,203,971) (993,106) (2,121,783) - 10,402,721 (3,916,139) Reconcilation to Profit After Tax: Segment net (loss)/profit before tax (247,780) Loss for the year from discontinued operations (158,716) Income tax expense 73,355 Profit / (loss) after tax for the year (333,141) Group Year Ended 31 March 2012 New Zealand Australia United States Rest of World Eliminations Total Revenue from External Customers 338,734 4,446, , ,219-5,811,468 Other Revenues 397, ,165 Depreciation & Amortisation (370,310) (370,310) Segment net (loss)/profit before tax (2,134,699) 1,439,554 (357,211) (114,035) - (1,166,391) Non-Current asset additions 587, ,606 Segment assets 12,279,118 2,227, ,079 10,980 (5,949,016) 9,098,531 Segment liabilities (6,415,474) (767,816) (380,524) (10,980) 5,870,376 (1,704,418) Reconcilation to Profit After Tax: Segment net (loss)/profit before tax (1,166,391) Loss for the year from discontinued operations (186,691) Income tax expense 205,349 Profit / (loss) after tax for the year (1,147,733) The segment information is reported exclusive of EcoSmartHomes Limited (discontinued operations).

19 19 5 Revenue 6 Months 6 Months 12 Months Sale of eco bulbs and energy efficient products 4,523,357 3,130,681 5,693,158 Project funder income ,309 Grants (NZTE, FRST, R&D) 204,703 67, ,593 Fixed payment (Fujian Ecobulb) ,019 Other income 28,673 27,629 56,553 Total revenue 4,756,733 3,225,603 6,208,633 6 Administration and general expenses 6 Months 6 Months 12 Months Note Audit fees 17,500-30,000 Depreciation and amortisation 7 191, , ,310 Directors fees 75,818 34, ,850 Donations Employment expenses 839, ,208 1,473,511 Exchange (gains) / losses on trading 65,049 48, ,132 Lead Generation Costs - Direct Installation 180, Lease and rental expenses 54,171 48,795 96,998 Marketing expenses 330, , ,061 Office & administration 183,607 90, ,494 Research and development 18,256 32,728 68,117 Other expenses 531,303 60, ,889 Total adminstration and general expenses 2,487,933 1,303,325 3,503,362 7 Depreciation and amortisation expenses 6 Months 6 Months 12 Months. Total depreciation 19,289 13,369 32,608 Amortisation of trademarks, patents, designs and software 16,184 18,931 32,305 Amortisation of research and development 156, , ,397 Total depreciation and amortisation expenses 191, , ,310

20 20 8 Income tax The relationship between the expected tax expense based on the domestic effective tax rate of Energy Mad Limited at 28% (2012: 28%) and the reported tax expense in the Statement of Comprehensive Income can be reconciled as follows, also showing major components of tax expense. All income tax losses have been recognised as a deferred tax asset. 6 Months 6 Months 12 Months Profit / (loss) before tax from continuing operations (564,077) (247,780) (1,166,391) Profit / (loss) before tax from discontinuing operations (3,259) (158,716) (186,691) Profit / (loss) before taxation (567,337) (406,495) (1,353,082) Domestic tax rate for Energy Mad Limited 28% 28% 28% Expected tax expense (158,854) (113,819) (378,863) Adjustment for non-taxable income and expenses 45,628 40, ,709 Adjustment in respect of previous years ,805 Actual tax expense (113,226) (73,355) (205,349) Tax expense comprises: Current tax expense Deferred tax expense (131,762) (73,653) 237,793 Origination and reversal of temporary differences 18, ,361 Adjustment in respect of previous years - - (54,805) Tax (expense) / revenue (113,226) (73,355) 205,349 Taxable profit / (loss) (470,580) (263,046) (849,260) Losses brought forward (8,798,545) (8,145,016) (8,145,016) Adjustment in respect of previous years ,731 Losses to carry forward (9,269,125) (8,408,062) (8,798,545) 9 Trade and other receivables 6 Months 6 Months 12 Months Trade receivables 2,644,219 1,272,098 1,024,629 Goods & services tax refunds - (28,975) - Sundry debtors 8,850-98,665 Prepayments 556, ,353 Total trade and other receivables 3,209,094 1,243,123 1,296,647