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 ̈Nox



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 ̈Nox



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 ̈Nox



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 ̈Nox



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  filerx
|------------------------ | ------------------ | -----------------------



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 Boardx | 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 18x



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 ̈Nox















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   |        
|                                                                  |  |              |        
|Revenues from continuing operations                               |  |              | 14,065 
|Other income                                                      |  |              | 3,793  
|Cost of raw materials, consumables used, and contractors          |  |              | (5,727 
|Employee benefit expenses                                         |  |              | (10,557
|Compliance & consultants                                          |  |              | (4,793 
|Advertising and marketing                                         |  |              | (2,468 
|Travel costs                                                      |  |              | (872   
|Occupancy expenses                                                |  |              | (915   
|Provision for impairment of receivables and bad debts written off |  |              | (75    
|Other expenses                                                    |  |              | (3,255 
|Share of net loss of associates                                   |  |              | -      
|Depreciation and amortisation expenses                            |  |              | (632   
|Finance costs                                                     |  |              | (5,061 
|Break fee from terminated acquisition                             |  |              | -      
|Impairment loss on available-for-sale financial assets            |  |              | (4     
|Impairment of financial assets and interest in joint ventures     |  |              | (10,015
|Impairment of intangible assets                                   |  |              | -      
|Loss from continuing operations before income tax                 |  |              | (26,516
|Income tax benefit/(expense)                                      |  |              | -      
|Net loss for the period from continuing operations                |  |              | (26,516
|                                                                  |  |              |        
|Profit/(loss) from discontinued operations                        |  |              | 1,086  
|                                                                  |  |              |        
|Net loss for the period                                           |  |              | (25,430
|                                                                  |  |              |        
|Other comprehensive income                                        |  |              |        
|Items that may be reclassified to profit or loss                  |  |              |        
|Changes in the fair value of available-for-sale financial assets  |  |              | (800   
|Exchange differences on translation of foreign operation          |  |              | (68    
|Other comprehensive income for the period, net of tax             |  |              | (868   
|Total comprehensive loss for the period                           |  |              | (26,298



|                                                                                                                     |  |  | 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  |            | 
|Non-current assets      |  |      | 11,915  |   |            |  | 24,724 |            | 
|Total Assets            |  |      | 18,727  |   |            |  | 32,900 |            | 
|                        |  |      |         |   |            |  |        |            | 
|Current liabilities     |  |      | 38,020  |   |            |  | 41,949 |            | 
|Non-current liabilities |  |      | 378     |   |            |  | 391    |            | 
|Total liabilities       |  |      | 38,398  |   |            |  | 42,340 |            | 
|                        |  |      |         |   |            |  |        |            | 
|Shareholders’ equity    |  |      | (19,671 | ) |            |  | (9,440 | )          | 



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,
|2010                      
|2011                      
|2012                      
|2013                      
|2014                      



|           |  | HighRate |        |  | LowRate | 
|---------- |  | -------- | ------ |  | ------- | 
|2014 Month |  |          |        |  |         | 
|November   |  |          | 0.8809 |  |         | 
|December   |  |          | 0.8500 |  |         | 
|           |  |          |        |  |         | 
|2015 Month |  |          |        |  |         | 
|January    |  |          | 0.8212 |  |         | 
|February   |  |          | 0.7875 |  |         | 
|March      |  |          | 0.7874 |  |         | 
|April      |  |          | 0.8011 |  |         | 



(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 are unable 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.



9







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.





10







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 organizingthe
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.



11







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;                                                                                               



12







| | • | 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.



13







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;
| | - | --------------------------------



14









| | · | 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.



15







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.



16









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.



17









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.



18









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.



19







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.





20







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.



21







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.



22









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.







23







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.



24







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.



25







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.



26







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



27







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.



28







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.



29







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.



30







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.



31







(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.



32







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.



33







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.





34







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                          



35







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    | 
|                                                                                                                     |  |      |    |  |              | 
|Revenues from continuing operations                                                                                  |  |      | 6  |  |              | 
|Other income                                                                                                         |  |      | 6  |  |              | 
|Cost of raw materials, consumables used, and contractors                                                             |  |      |    |  |              | 
|Employee benefit expenses                                                                                            |  |      | 7  |  |              | 
|Compliance & consultants                                                                                             |  |      |    |  |              | 
|Advertising and marketing                                                                                            |  |      |    |  |              | 
|Travel costs                                                                                                         |  |      |    |  |              | 
|Occupancy expenses                                                                                                   |  |      | 7  |  |              | 
|Provision for impairment of receivables and bad debts written off                                                    |  |      | 11 |  |              | 
|Other expenses                                                                                                       |  |      | 7  |  |              | 
|Share of net loss of associates                                                                                      |  |      |    |  |              | 
|Depreciation and amortisation expenses                                                                               |  |      | 7  |  |              | 
|Finance costs                                                                                                        |  |      | 7  |  |              | 
|Break fee from terminated acquisition                                                                                |  |      |    |  |              | 
|Impairment loss on available-for-sale financial assets                                                               |  |      |    |  |              | 
|Impairment of financial assets and interest in joint ventures                                                        |  |      | 7  |  |              | 
|Impairment of intangible assets                                                                                      |  |      | 7  |  |              | 
|Loss from continuing operations before income tax                                                                    |  |      |    |  |              | 
|Income tax benefit/(expense)                                                                                         |  |      | 8  |  |              | 
|Net loss for the period from continuing operations                                                                   |  |      |    |  |              | 
|                                                                                                                     |  |      |    |  |              | 
|Profit/(loss) from discontinued operations                                                                           |  |      | 14 |  |              | 
|                                                                                                                     |  |      |    |  |              | 
|Net loss for the period                                                                                              |  |      |    |  |              | 
|                                                                                                                     |  |      |    |  |              | 
|Other comprehensive income                                                                                           |  |      |    |  |              | 
|Items that may be reclassified to profit or loss                                                                     |  |      |    |  |              | 
|Changes in the fair value of available-for-sale financial assets                                                     |  |      |    |  |              | 
|Exchange differences on translation of foreign operation                                                             |  |      |    |  |              | 
|Other comprehensive income for the period, net of tax                                                                |  |      |    |  |              | 
|Total comprehensive loss for the period                                                                              |  |      |    |  |              | 
|                                                                                                                     |  |      |    |  |              | 
|                                                                                                                     |  |      |    |  |              | 
|Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company: |  |      |    |  |              | 
|Basic earnings per share                                                                                             |  |      | 9  |  |              | 
|Diluted earnings per share                                                                                           |  |      | 9  |  |              | 
|Earnings per share for profit attributable to the ordinary equity holders of the company:                            |  |      |    |  |              | 
|Basic earnings per share                                                                                             |  |      | 9  |  |              | 
|Diluted earnings per share                                                                                           |  |      | 9  |  |              | 



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    | 
|ASSETS                                                                  |  |      |    |  |              | 
|Current Assets                                                          |  |      |    |  |              | 
|Cash and cash equivalents                                               |  |      |    |  |              | 
|Trade and other receivables                                             |  |      | 11 |  |              | 
|Inventories                                                             |  |      | 12 |  |              | 
|Other current assets                                                    |  |      | 13 |  |              | 
|Assets classified as held for sale                                      |  |      | 14 |  |              | 
|Total Current Assets                                                    |  |      |    |  |              | 
|                                                                        |  |      |    |  |              | 
|Non-Current Assets                                                      |  |      |    |  |              | 
|Other receivables                                                       |  |      | 11 |  |              | 
|Available-for-sale and other financial assets                           |  |      | 14 |  |              | 
|Plant and equipment                                                     |  |      | 15 |  |              | 
|Goodwill and other intangible assets                                    |  |      | 16 |  |              | 
|Other non-current assets                                                |  |      | 13 |  |              | 
|Total Non-Current Assets                                                |  |      |    |  |              | 
|TOTAL ASSETS                                                            |  |      |    |  |              | 
|                                                                        |  |      |    |  |              | 
|LIABILITIES                                                             |  |      |    |  |              | 
|Current Liabilities                                                     |  |      |    |  |              | 
|Trade and other payables                                                |  |      | 17 |  |              | 
|Interest-bearing loans and borrowings                                   |  |      | 18 |  |              | 
|Provisions                                                              |  |      | 19 |  |              | 
|Liabilities directly associated with assets classified as held for sale |  |      | 14 |  |              | 
|Total Current Liabilities                                               |  |      |    |  |              | 
|                                                                        |  |      |    |  |              | 
|Non-Current Liabilities                                                 |  |      |    |  |              | 
|Interest-bearing loans and borrowings                                   |  |      | 18 |  |              | 
|Deferred tax liabilities                                                |  |      | 8  |  |              | 
|Provisions                                                              |  |      | 19 |  |              | 
|Total Non-Current Liabilities                                           |  |      |    |  |              | 
|TOTAL LIABILITIES                                                       |  |      |    |  |              | 
|NET ASSETS                                                              |  |      |    |  |              | 
|                                                                        |  |      |    |  |              | 
|EQUITY                                                                  |  |      |    |  |              | 
|Contributed equity                                                      |  |      | 20 |  |              | 
|Accumulated losses                                                      |  |      |    |  |              | 
|Reserves                                                                |  |      | 21 |  |              | 
|TOTAL EQUITY                                                            |  |      |    |  |              | 



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                               |  | Ordinaryshares
$’000 |         |   | Preferenceshares
$’000 |  |       | Shareoptionsreserve
$’000 |  |  | Available-for-salereserve
$’000 |  |  | Translation
 reserve $’000 |      |   | Accumulated
 losses$’000 |  |     | Total$’000 | 
|-------------------------------------------------------- |  | -------------------- | ------- | - | ---------------------- |  | ----- | ------------------------- |  |  | ------------------------------- |  |  | -------------------------- | ---- | - | ------------------------ |  | --- | ---------- | 
|                                                         |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|At July 1, 2013 (restated)                               |  |                      | 109,620 |   |                        |  | -     |                           |  |  | 3,189                           |  |  |                            | 800  |   |                          |  | 33  |            | 
|Profit/(loss) for period                                 |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Other comprehensive
    income                           |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | (800 | ) |                          |  | (68 | )          | 
|Total comprehensive income for the
    year              |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | (800 | ) |                          |  | (68 | )          | 
|                                                         |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|Transactions with owners in their capacity
    as owners |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|Shares issued                                            |  |                      | 12,597  |   |                        |  | 4,643 |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Share issue costs                                        |  |                      | (1,320  | ) |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Share-based payments
    for convertible notes           |  |                      | -       |   |                        |  | -     |                           |  |  | 147                             |  |  |                            | -    |   |                          |  | -   |            | 
|Balance at June 30, 2014                                 |  |                      | 120,897 |   |                        |  | 4,643 |                           |  |  | 3,336                           |  |  |                            | -    |   |                          |  | (35 | )          | 
|                                                         |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|At July 1, 2012 (restated)                               |  |                      | 109,083 |   |                        |  | -     |                           |  |  | 2,689                           |  |  |                            | -    |   |                          |  | -   |            | 
|Profit/(loss) for period                                 |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Other comprehensive income                               |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | 800  |   |                          |  | 33  |            | 
|Total comprehensive income for the year                  |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | 800  |   |                          |  | 33  |            | 
|                                                         |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|Transactions with owners in their capacity as owners     |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|Shares issued                                            |  |                      | 626     |   |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Share issue costs                                        |  |                      | (89     | ) |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Share-based payments for convertible notes               |  |                      | -       |   |                        |  | -     |                           |  |  | 500                             |  |  |                            | -    |   |                          |  | -   |            | 
|Balance at June 30, 2013                                 |  |                      | 109,620 |   |                        |  | -     |                           |  |  | 3,189                           |  |  |                            | 800  |   |                          |  | 33  |            | 
|                                                         |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|At July 1, 2011 (restated)                               |  |                      | 107,358 |   |                        |  | -     |                           |  |  | 1,205                           |  |  |                            | -    |   |                          |  | -   |            | 
|Loss for period                                          |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Total comprehensive income for the year                  |  |                      | -       |   |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|                                                         |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|Transactions with owners in their capacity as owners     |  |                      |         |   |                        |  |       |                           |  |  |                                 |  |  |                            |      |   |                          |  |     |            | 
|Shares issued                                            |  |                      | 1,725   |   |                        |  | -     |                           |  |  | -                               |  |  |                            | -    |   |                          |  | -   |            | 
|Share-based payments for convertible notes               |  |                      | -       |   |                        |  | -     |                           |  |  | 1,456                           |  |  |                            | -    |   |                          |  | -   |            | 
|Share-based payments                                     |  |                      | -       |   |                        |  |       |                           |  |  | 28                              |  |  |                            | -    |   |                          |  | -   |            | 
|Balance at June 30, 2012                                 |  |                      | 109,083 |   |                        |  | -     |                           |  |  | 2,689                           |  |  |                            | -    |   |                          |  | -   |            | 



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    |        
|Cash flow from operating activities                                   |  |      |  |              |        
|Receipts from customers (inclusive of GST)                            |  |      |  |              | 20,680 
|Payments to suppliers and employees (inclusive of GST)                |  |      |  |              | (39,493
|Payments for development costs                                        |  |      |  |              | -      
|Finance costs                                                         |  |      |  |              | (1,350 
|Interest received                                                     |  |      |  |              | -      
|Net cash flows (used)/provided in operating activities                |  | 10   |  |              | (20,163
|                                                                      |  |      |  |              |        
|Cash flow from investing activities                                   |  |      |  |              |        
|Proceeds from sale of property, plant and equipment                   |  |      |  |              | 188    
|Proceeds from the sale of intangible assets                           |  |      |  |              | -      
|Purchase of property, plant and equipment                             |  |      |  |              | (672   
|Payment for investments                                               |  |      |  |              | -      
|Proceeds from sale of investments                                     |  |      |  |              | 1,789  
|Payment for the purchase of controlled entities, net of cash acquired |  |      |  |              | -      
|Net cash flows provided/(used) in investing activities                |  |      |  |              | 1,305  
|                                                                      |  |      |  |              |        
|Cash flow from financing activities                                   |  |      |  |              |        
|Proceeds from share issues                                            |  |      |  |              | 7,706  
|Proceeds from issue of convertible notes                              |  |      |  |              | 1,013  
|Convertible note issue costs                                          |  |      |  |              | (1,320 
|Proceeds from borrowings                                              |  |      |  |              | 16,282 
|Repayment of borrowings                                               |  |      |  |              | (3,699 
|Payment of finance lease liabilities                                  |  |      |  |              | (212   
|Net cash flows
    provided/(used) in financing activities            |  |      |  |              | 19,770 
|                                                                      |  |      |  |              |        
|Net (decrease) / increase in cash and cash equivalents                |  |      |  |              | 912    
|Cash and cash equivalents at beginning of period                      |  |      |  |              | 469    
|Cash and cash equivalents at end of period                            |  | 10   |  |              | 1,381  



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     |                                 | 
|Loss for the year                                                |  |                                                                         | (25,430 | ) |                                 |  | (8,407  | )                               | 
|Net cash inflow/(outflow) from operating activities for the year |  |                                                                         | (20,163 | ) |                                 |  | 9,821   |                                 | 
|Net current assets/(liabilities)                                 |  |                                                                         | (31,208 | ) |                                 |  | (33,773 | )                               | 



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 |   |                        | 
|                                                                                                                                             |  |                         |        |   |                        | 
|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  |   |                        | 
|Acquisition of BlueNRGY                                                                                                                      |  |                         | 6,011  |   |                        | 
|Exchange of Indebtedness (non-VA companies)                                                                                                  |  |                         | 854    |   |                        | 
|                                                                                                                                             |  |                         |        |   |                        | 
|Total Increase
    in Net Assets/Equity from reorganisation                                                                                  |  |                         | 40,758 |   |                        | 



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



| | · | IFRS
                                         15 Revenue 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 39 Financial 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
37 Provisions, 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 | 
|                                                                        |  |            |          |   |                             | 
|Current Assets                                                          |  |            |          |   |                             | 
|Cash and cash equivalents                                               |  |            | 932      |   |                             | 
|Trade and other receivables                                             |  |            | 5,952    |   |                             | 
|Inventories                                                             |  |            | 1,611    |   |                             | 
|Other current assets                                                    |  |            | 463      |   |                             | 
|Assets Classified as held for sale                                      |  |            |          |   |                             | 
|Total Current assets                                                    |  |            | 8,958    |   |                             | 
|                                                                        |  |            |          |   |                             | 
|Non-Current Assets                                                      |  |            |          |   |                             | 
|Plant and equipment                                                     |  |            | 4,896    |   |                             | 
|Goodwill and other intangible assets                                    |  |            | 15,898   |   |                             | 
|Other non-current assets                                                |  |            | 13,455   |   |                             | 
|Total Non-Current Assets                                                |  |            | 34,249   |   |                             | 
|TOTAL ASSETS                                                            |  |            | 43,207   |   |                             | 
|                                                                        |  |            |          |   |                             | 
|Current Liabilities                                                     |  |            |          |   |                             | 
|Trade and other payables                                                |  |            | 22,113   |   |                             | 
|Interest-bearing loans and borrowings                                   |  |            | 17,633   |   |                             | 
|Current tax liabilities                                                 |  |            | 447      |   |                             | 
|Provisions                                                              |  |            | 1,307    |   |                             | 
|Liabilities directly associated with assets classified as held for sale |  |            | -        |   |                             | 
|Total Current Liabilities                                               |  |            | 41,500   |   |                             | 
|                                                                        |  |            |          |   |                             | 
|Non-Current Liabilities                                                 |  |            |          |   |                             | 
|Interest-bearing loans and borrowings                                   |  |            | 328      |   |                             | 
|Provisions                                                              |  |            | 108      |   |                             | 
|Total Non-Current Liabilities                                           |  |            | 436      |   |                             | 
|TOTAL LIABILITIES                                                       |  |            | 41,936   |   |                             | 
|NET ASSETS                                                              |  |            | 1,270    |   |                             | 
|                                                                        |  |            |          |   |                             | 
|Contributed equity                                                      |  |            | 109,620  |   |                             | 
|Accumulated losses                                                      |  |            | (112,311 | ) |                             | 
|Reserves                                                                |  |            | 3,962    |   |                             | 
|TOTAL EQUITY                                                            |  |            | 1,271    |   |                             | 



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                                                               | ) |  |                                                                      |       |   |                         | 
|Other income                                                         |  |            | 4,664   |   |                                                                      |  |        |                                                                      |  |  |                                                                      |  |  |                                                                      |     |  |                                                                      |  |        |                                                                      |  |  | (2                                                                   | ) |  |                                                                      |       |   |                         | 
|Cost of raw materials, consumables used, and contractors             |  |            | (44,687 | ) |                                                                      |  | (1,416 | )                                                                    |  |  |                                                                      |  |  |                                                                      |     |  |                                                                      |  |        |                                                                      |  |  | 2,563                                                                |   |  |                                                                      | 4,335 |   |                         | 
|Impairment loss on assets                                            |  |            | (3,578  | ) |                                                                      |  |        |                                                                      |  |  | 3,000                                                                |  |  |                                                                      |     |  |                                                                      |  |        |                                                                      |  |  |                                                                      |   |  |                                                                      |       |   |                         | 
|Other expenses and revenue                                           |  |            | (38,204 | ) |                                                                      |  |        |                                                                      |  |  |                                                                      |  |  |                                                                      |     |  |                                                                      |  | (1,454 | )                                                                    |  |  | 1,758                                                                |   |  |                                                                      | (60   | ) |                         | 
|Profit before income tax expense                                     |  |            | (11,877 | ) |                                                                      |  | (1,416 | )                                                                    |  |  | 3,000                                                                |  |  |                                                                      | -   |  |                                                                      |  | (1,454 | )                                                                    |  |  | (911                                                                 | ) |  |                                                                      | 4,275 |   |                         | 
|                                                                     |  |            |         |   |                                                                      |  |        |                                                                      |  |  |                                                                      |  |  |                                                                      |     |  |                                                                      |  |        |                                                                      |  |  |                                                                      |   |  |                                                                      |       |   |                         | 
|Income tax (expense)/benefit                                         |  |            | (382    | ) |                                                                      |  |        |                                                                      |  |  |                                                                      |  |  |                                                                      | 447 |  |                                                                      |  |        |                                                                      |  |  |                                                                      |   |  |                                                                      |       |   |                         | 
|Net profit/(loss) attributable members of
    BlueNRGY Group Limited |  |            | (12,259 | ) |                                                                      |  | (1,416 | )                                                                    |  |  | 3,000                                                                |  |  |                                                                      | 447 |  |                                                                      |  | (1,454 | )                                                                    |  |  | (911                                                                 | ) |  |                                                                      | 4,275 |   |                         | 
|                                                                     |  |            |         |   |                                                                      |  |        |                                                                      |  |  |                                                                      |  |  |                                                                      |     |  |                                                                      |  |        |                                                                      |  |  |                                                                      |   |  |                                                                      |       |   |                         | 
|Profit from discontinued operations                                  |  |            |         |   |                                                                      |  |        |                                                                      |  |  |                                                                      |  |  |                                                                      |     |  |                                                                      |  |        |                                                                      |  |  | 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          |         
|                                                                        |  |                     |         
|Current Assets                                                          |  |                     |         
|Cash and cash equivalents                                               |  |                     | 2,522   
|Trade and other receivables                                             |  |                     | 5,898   
|Inventories                                                             |  |                     | 18,687  
|Other current assets                                                    |  |                     | 1,259   
|Assets classified as held for sale                                      |  |                     |         
|Total Current assets                                                    |  |                     | 28,366  
|                                                                        |  |                     |         
|Non-Current Assets                                                      |  |                     |         
|Available-for-sale and other financial assets                           |  |                     | 636     
|Plant and equipment                                                     |  |                     | 5,377   
|Goodwill and other intangible assets                                    |  |                     | 22,800  
|Other non-current assets                                                |  |                     | 192     
|Total Non-Current Assets                                                |  |                     | 29,005  
|TOTAL ASSETS                                                            |  |                     | 57,371  
|                                                                        |  |                     |         
|Current Liabilities                                                     |  |                     |         
|Trade and other payables                                                |  |                     | 16,728  
|Interest-bearing loans and borrowings                                   |  |                     | 27,230  
|Provisions                                                              |  |                     | 985     
|Liabilities directly associated with assets classified as held for sale |  |                     | -       
|Total Current Liabilities                                               |  |                     | 44,943  
|                                                                        |  |                     |         
|Non-Current Liabilities                                                 |  |                     |         
|Interest-bearing loans and borrowings                                   |  |                     | 344     
|Provisions                                                              |  |                     | 299     
|Deferred tax liability                                                  |  |                     | 65      
|Total Non-Current Liabilities                                           |  |                     | 708     
|TOTAL LIABILITIES                                                       |  |                     | 45,651  
|NET ASSETS                                                              |  |                     | 11,720  
|                                                                        |  |                     |         
|Contributed equity                                                      |  |                     | 109,083 
|Accumulated losses                                                      |  |                     | (100,052
|Reserves                                                                |  |                     | 2,689   
|TOTAL EQUITY                                                            |  |                     | 11,720  



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         |        
|                                                                           |  |                     |        
|Revenue and other income                                                   |  |                     | 53,678 
|Cost of raw materials, consumables used, and contractors                   |  |                     | (43,073
|Provision for impairment of receivables                                    |  |                     | (2,496 
|Impairment loss on assets                                                  |  |                     | (4,614 
|Impairment of intangible assets                                            |  |                     | (643   
|Other expenses and revenue                                                 |  |                     | (40,136
|(Loss)/profit before income tax expense                                    |  |                     | (37,284
|                                                                           |  |                     |        
|Income tax (expense)/benefit                                               |  |                     | (2,835 
|Net profit/(loss) attributable members of
    BlueNRGY Group Limited       |  |                     | (40,119
|                                                                           |  |                     |        
|Loss from discontinued
                                         operations |  |                     |        



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 12 Income 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 13 Fair 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             |  
|Other income                                                  |  |                | 3,194  |   |              |  | 14     |                                  |  |  | -          |   |  |                 | -     |  |             |  | 589     |                                  |  |  | 3,797              |  
|Total income from continuing operations                       |  |                | 5,434  |   |              |  | 10,202 |                                  |  |  | 329        |   |  |                 | 1,308 |  |             |  | 589     |                                  |  |  | 17,862             |  
|Total income from discontinued operations                     |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Total  income                                                 |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Segment profit/(loss) before tax from continuing operations   |  |                | (1,352 | ) |              |  | (823   | )                                |  |  | 10         |   |  |                 | 707   |  |             |  | (25,058 | )                                |  |  | (26,516            | )
|Income tax (expense)/benefit                                  |  |                | -      |   |              |  | -      |                                  |  |  | -          |   |  |                 | -     |  |             |  |         |                                  |  |  | -                  |  
|Net profit/(loss) after tax from continuing operations        |  |                | (1,352 | ) |              |  | (823   | )                                |  |  | 10         |   |  |                 | 707   |  |             |  | (25,058 | )                                |  |  | (26,516            | )
|Net profit from discontinued operations                       |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Net profit after tax                                          |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|                                                              |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Depreciation, Amortisation                                    |  |                | (183   | ) |              |  | (143   | )                                |  |  | (36        | ) |  |                 | -     |  |             |  | (270    | )                                |  |  | (632               | )
|Impairment of financial assets and interest in joint ventures |  |                | -      |   |              |  | -      |                                  |  |  | -          |   |  |                 | -     |  |             |  | (4      | )                                |  |  | (4                 | )
|Impairment of intangible assets                               |  |                | -      |   |              |  | -      |                                  |  |  | -          |   |  |                 | -     |  |             |  | (10,015 | )                                |  |  | (10,015            | )
|                                                              |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Segment assets of continuing operations                       |  |                | 3,273  |   |              |  | 2,608  |                                  |  |  | 2,294      |   |  |                 | 3     |  |             |  | 22,695  |                                  |  |  | 30,873             |  
|Segment assets of discontinued operations                     |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Total
    Assets                                              |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Segment liabilities of  continuing operations                 |  |                | 18,977 |   |              |  | 2,332  |                                  |  |  | 164        |   |  |                 | -     |  |             |  | 17,244  |                                  |  |  | 38,717             |  
|Segment liabilities of discontinued operations                |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  
|Total
    Liabilities                                         |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |       |  |             |  |         |                                  |  |  |                    |  



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             |  
|Other income                                                  |  |                | 1,599  |   |              |  | 49     |                                  |  |  | -          |   |  |                 | -      |  |             |  | 2,583   |                                  |  |  | 4,231              |  
|Total  income from continuing operations                      |  |                | 29,706 |   |              |  | 17,412 |                                  |  |  | 323        |   |  |                 | 18,557 |  |             |  | 2,583   |                                  |  |  | 68,581             |  
|Total revenue from discontinued operations                    |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Total  income                                                 |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Segment profit/(loss) before tax from continuing operations   |  |                | (8,530 | ) |              |  | (1,287 | )                                |  |  | 586        |   |  |                 | 13,748 |  |             |  | (13,900 | )                                |  |  | (9,383             | )
|Income tax (expense)/benefit                                  |  |                | 12     |   |              |  | -      |                                  |  |  | -          |   |  |                 | -      |  |             |  | 53      |                                  |  |  | 65                 |  
|Net profit/(loss) after tax from continuing operations        |  |                | (8,518 | ) |              |  | (1,287 | )                                |  |  | 586        |   |  |                 | 13,748 |  |             |  | (13,847 | )                                |  |  | (9,318             | )
|Net profit from discontinued operations                       |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Net profit after tax                                          |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|                                                              |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Depreciation, Amortisation                                    |  |                | (229   | ) |              |  | (149   | )                                |  |  | (178       | ) |  |                 | -      |  |             |  | (252    | )                                |  |  | (808               | )
|Impairment of financial assets and interest in joint ventures |  |                | -      |   |              |  | -      |                                  |  |  | (18        | ) |  |                 | -      |  |             |  | (560)   |                                  |  |  | (578               | )
|Impairment of intangible assets                               |  |                | -      |   |              |  | -      |                                  |  |  | -          |   |  |                 | -      |  |             |  | -       |                                  |  |  | -                  |  
|                                                              |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Segment assets of continuing operations                       |  |                | 3,426  |   |              |  | 3,834  |                                  |  |  | 2,610      |   |  |                 | 10,808 |  |             |  | 10,573  |                                  |  |  | 31,191             |  
|Segment assets of discontinued operations                     |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Total Assets                                                  |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Segment liabilities of continuing operations                  |  |                | 12,588 |   |              |  | 4,254  |                                  |  |  | 17         |   |  |                 | 7      |  |             |  | 24,765  |                                  |  |  | 41,631             |  
|Segment liabilities of discontinued operations                |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  
|Total Liabilities                                             |  |                |        |   |              |  |        |                                  |  |  |            |   |  |                 |        |  |             |  |         |                                  |  |  |                    |  



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             |  
|Other income                                                  |  |                | 107     |   |              |  | 4      |                                  |  |  | -          |   |  |                 | -     |   |             |  | 4,452   |                                  |  |  | 4,563              |  
|Total  income from continuing operations                      |  |                | 32,545  |   |              |  | 10,376 |                                  |  |  | 767        |   |  |                 | -     |   |             |  | 4,452   |                                  |  |  | 48,140             |  
|Total revenue from discontinued operations                    |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Total  income                                                 |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Segment profit/(loss) before tax from continuing operations   |  |                | (20,832 | ) |              |  | (576   | )                                |  |  | (178       | ) |  |                 | (7    | ) |             |  | (28,846 | )                                |  |  | (50,441            | )
|Income tax (expense)/benefit                                  |  |                | 1,496   |   |              |  | 67     |                                  |  |  | (119       | ) |  |                 | 2     |   |             |  | (3,977  | )                                |  |  | (2,531             | )
|Net profit/(loss) after tax from continuing operations        |  |                | (19,336 | ) |              |  | (509   | )                                |  |  | (297       | ) |  |                 | (5    | ) |             |  | (32,825 | )                                |  |  | (52,972            | )
|Net profit from discontinued operations                       |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Net profit after tax                                          |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|                                                              |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Depreciation, Amortisation                                    |  |                | (335    | ) |              |  | (127   | )                                |  |  | (130       | ) |  |                 | -     |   |             |  | (263    | )                                |  |  | (855               | )
|Impairment of financial assets and interest in joint ventures |  |                | (308    | ) |              |  | -      |                                  |  |  | -          |   |  |                 | -     |   |             |  | (3,931  | )                                |  |  | (4,239             | )
|Impairment of intangible assets                               |  |                | (471    | ) |              |  | -      |                                  |  |  | -          |   |  |                 | -     |   |             |  | (11,063 | )                                |  |  | (11,534            | )
|                                                              |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Segment assets of continuing operations                       |  |                | 19,890  |   |              |  | 2,320  |                                  |  |  | 4,516      |   |  |                 | 2,523 |   |             |  | 11,644  |                                  |  |  | 40,893             |  
|Segment assets of discontinued operations                     |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Total Assets                                                  |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Segment liabilities of continuing operations                  |  |                | 26,307  |   |              |  | 1,440  |                                  |  |  | -          |   |  |                 | 10    |   |             |  | 18,011  |                                  |  |  | 45,768             |  
|Segment liabilities of discontinued operations                |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  
|Total Liabilities                                             |  |                |         |   |              |  |        |                                  |  |  |            |   |  |                 |       |   |             |  |         |                                  |  |  |                    |  



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    |       
|                                                     |  |              |       
|Revenue from sales and services                      |  |              | 14,065
|Total revenue from operating activities              |  |              | 14,065
|                                                     |  |              |       
|Other income                                         |  |              |       
|Gain on financial liabilities measured at fair value |  |              | 73    
|Gain on re-measurement of contingent consideration   |  |              | -     
|Discount received (i)                                |  |              | 3,086 
|Interest income                                      |  |              | -     
|Other income (ii)                                    |  |              | 634   
|                                                     |  |              | 3,793 



(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    |       
|                                                         |  |              |       
|(a) Employee benefits expense                            |  |              |       
|Wages and salaries                                       |  |              | 9,232 
|Defined contribution superannuation expense              |  |              | 457   
|Other employee benefits expense                          |  |              | 868   
|                                                         |  |              | 10,557
|                                                         |  |              |       
|(b) Lease payments and other occupancy expenses          |  |              |       
|Minimum lease payments - operating lease                 |  |              | 780   
|Other                                                    |  |              | 135   
|                                                         |  |              | 915   
|                                                         |  |              |       
|(c) Depreciation, and amortisation of non-current assets |  |              |       
|Depreciation – property, plant & equipment               |  |              | 586   
|Amortisation – leasehold improvements                    |  |              | 46    
|Amortisation – patents                                   |  |              | -     
|                                                         |  |              | 632   



Page 35









Notes to the financial statements



7 Expenses (continued)



|                                                                 |  | Consolidated |       
|---------------------------------------------------------------- |  | ------------ | ------
|                                                                 |  | 2014$’000    |       
|(d) Impairment loss on intangibles                               |  |              |       
|Impairment loss on goodwill                                      |  |              | -     
|Impairment loss on license cost                                  |  |              | -     
|Impairment loss on development costs                             |  |              | -     
|                                                                 |  |              | -     
|                                                                 |  |              |       
|(e) Impairment loss on financial assets and joint venture assets |  |              |       
|Investments in Solar projects                                    |  |              | -     
|Investment in Wind projects                                      |  |              | 10,000
|Investment in Barefoot Power                                     |  |              | 15    
|Investment in eco-Kinetics UK JV                                 |  |              | -     
|Investment in eco-Kinetics Germany JV                            |  |              | -     
|Investment in Bowen                                              |  |              | -     
|Investment in Emerald                                            |  |              | -     
|                                                                 |  |              | 10,015
|                                                                 |  |              |       
|(f) Other expenses                                               |  |              |       
|Communications costs                                             |  |              | 229   
|Bank charges                                                     |  |              | 51    
|Printing, postage & delivery                                     |  |              | 32    
|Development costs                                                |  |              | 350   
|Insurance                                                        |  |              | 436   
|Office supplies                                                  |  |              | 317   
|Training                                                         |  |              | 9     
|Unrealised and realised losses on foreign exchange               |  |              | 474   
|Loss on sale/disposal of assets                                  |  |              | 642   
|Other expenses                                                   |  |              | 715   
|                                                                 |  |              | 3,255 
|                                                                 |  |              |       
|(g) Finance costs                                                |  |              |       
|Interest expense                                                 |  |              | 3,947 
|Finance cost for extinguishment of convertible notes             |  |              | 870   
|Share option expenses                                            |  |              | 148   
|Foreign exchange difference                                      |  |              | 96    
|                                                                 |  |              | 5,061 
|                                                                 |  |              |       
|(h) Cost of sales                                                |  |              | 14,064



Page 36







Notes to the financial statements



8 Income tax



|                                                                                                     |  | Consolidated |        
|---------------------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                                     |  | 2014$’000    |        
|                                                                                                     |  |              |        
|(a) Income tax benefit/(expense)                                                                     |  |              |        
|Current tax expense                                                                                  |  |              | -      
|Deferred tax                                                                                         |  |              |        
|-  Relating to origination and reversal of temporary differences                                     |  |              | -      
|Income tax benefit/(expense)                                                                         |  |              | -      
|                                                                                                     |  |              |        
|Income tax expense is attributable to:                                                               |  |              |        
|Loss from continuing operations                                                                      |  |              | -      
|Profit/(loss) from discontinuing operations                                                          |  |              | -      
|                                                                                                     |  |              | -      
|                                                                                                     |  |              |        
|(b) Numerical reconciliation of income tax expense to prima facie tax payable                        |  |              |        
|Loss before income tax from continuing operations                                                    |  |              | (26,516
|Profit/(loss) before income tax from discontinuing operations                                        |  |              | 1,086  
|                                                                                                     |  |              | (25,430
|Tax at the Australian tax rate of 30%                                                                |  |              | (7,629 
|                                                                                                     |  |              |        
|Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:              |  |              |        
|Expenditure not allowable for income tax purposes                                                    |  |              | 4,095  
|Non-assessable items for income tax purposes                                                         |  |              | -      
|Tax benefit (not recognised) now recognised                                                          |  |              | 3,534  
|Recognition of prior year temporary differences/tax losses brought to account as deferred tax assets |  |              | -      
|                                                                                                     |  |              | -      
|                                                                                                     |  |              |        
|(c) Reconciliation of deferred tax asset/(liability) (net position)                                  |  |              |        
|Opening balance as at 1 July                                                                         |  |              | -      
|Income tax benefit recognised                                                                        |  |              | -      
|Closing balance as at 30 June                                                                        |  |              | -      
|                                                                                                     |  |              |        
|(d) Deferred income tax                                                                              |  |              |        
|Deferred tax liabilities:                                                                            |  |              |        
|Depreciation                                                                                         |  |              | -      
|Other                                                                                                |  |              | -      
|                                                                                                     |  |              | -      



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    |        
|                                                                                              |  |              |        
|(a) Earnings used in calculating earnings per share                                           |  |              |        
|Net loss from continuing operations attributable to ordinary equity holders of the parent     |  |              | (26,516
|Net profit from discontinued operations attributable to ordinary equity holders of the parent |  |              | 1,086  
|Net loss attributable to ordinary equity holders of the parent                                |  |              | (25,430



|                                                                                                             |  | 2014Number ofshares |           |  | 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 |                       | 
|Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share |  |                     | 1,953,691 |  |                       |  | 1,596,246 |                       | 



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



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 atend of the year | 
|------------ |  | ----------- | ----------- |  | --------------- | - | ----- | ---------------------------------------- | 
|2014         |  |             |             |  |                 |   |       |                                          | 
|1-Nov-11     |  |             | 31-Dec-14   |  |                 | $ | 75.00 |                                          | 
|28-May-12    |  |             | 28-May-15   |  |                 | $ | 8.25  | 1                                        | 
|31-May-12    |  |             | 30-May-17   |  |                 | $ | 3.90  |                                          | 
|12-Dec-12    |  |             | 12-Dec-17   |  |                 | $ | 15.90 |                                          | 
|12-Dec-12    |  |             | 12-Dec-17   |  |                 | $ | 3.90  | 2                                        | 
|30-Dec-12    |  |             | 30-Dec-17   |  |                 | $ | 15.90 |                                          | 
|13-Feb-13    |  |             | 30-May-17   |  |                 | $ | 3.90  | 2                                        | 
|18-Jun-14    |  |             | 15-Dec-19   |  |                 | $ | 5.34  |                                          | 
|2013         |  |             |             |  |                 |   |       |                                          | 
|28-Nov-08    |  |             | 27-Nov-13   |  |                 | $ | 60.00 |                                          | 
|21-Dec-10    |  |             | 19-Dec 13   |  |                 | $ | 60.00 |                                          | 
|01-Nov-11    |  |             | 31-Dec-14   |  |                 | $ | 75.00 |                                          | 
|28-May-12    |  |             | 28-May-15   |  |                 | $ | 8.25  | 1                                        | 
|31-May-12    |  |             | 30-May-17   |  |                 | $ | 3.90  | 2                                        | 
|12- Dec -12  |  |             | 12-Dec-17   |  |                 | $ | 15.90 |                                          | 
|12- Dec -12  |  |             | 12-Dec-17   |  |                 | $ | 3.90  |                                          | 
|30- Dec -13  |  |             | 30-Dec-17   |  |                 | $ | 15.90 |                                          | 
|13-Feb-13    |  |             | 30-May-17   |  |                 | $ | 3.90  | 2                                        | 
|             |  |             |             |  |                 |   |       |                                          | 
|2012         |  |             |             |  |                 |   |       |                                          | 
|28-Nov-08    |  |             | 27- Nov -13 |  |                 | $ | 60.00 |                                          | 
|21-Dec-10    |  |             | 19- Dec -13 |  |                 | $ | 60.00 |                                          | 
|27-Jul-11    |  |             | 31- Dec-12  |  |                 | $ | 60.00 |                                          | 
|01-Nov-11    |  |             | 31-Dec-14   |  |                 | $ | 75.00 |                                          | 
|28-May-12    |  |             | 28-May-15   |  |                 | $ | 15.00 |                                          | 
|31-May-12    |  |             | 30-May-17   |  |                 | $ | 15.00 |                                          | 





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    |        
|Cash at bank and in hand                                            |  |              | 1,381  
|Bank overdraft                                                      |  |              | -      
|                                                                    |  |              | 1,381  
|(a) Reconciliation of net loss to net cash flow from operations     |  |              |        
|Loss after tax                                                      |  |              | (25,430
|Adjustment for non-cash items:                                      |  |              |        
|Depreciation and amortisation                                       |  |              | 632    
|Impairment of intangibles                                           |  |              | -      
|Impairment of financial assets and joint venture assets             |  |              | 10,015 
|Share-based payments expense                                        |  |              | 147    
|Write-off of capitalised finance facility costs                     |  |              | -      
|Non-cash items relating to convertible notes                        |  |              | 3,256  
|Non-cash items relating to Taralga project                          |  |              | -      
|Gain on financial liabilities measured at fair value                |  |              | -      
|Loss on sale of property, plant and equipment and intangible assets |  |              | 909    
|Unrealised losses/(gains) on foreign exchange                       |  |              | 474    
|Share of (profit)/loss of associates                                |  |              | -      
|Bad debts written off and provision for impairment of receivable    |  |              | 75     
|Discount on acquisition of controlled entity                        |  |              | -      
|Break fee from terminated acquisition                               |  |              | -      
|Gain on remeasurement of contingent consideration                   |  |              | -      
|Changes in assets and liabilities:                                  |  |              |        
|Trade and other receivables                                         |  |              | 2,862  
|Inventories                                                         |  |              | (1,038 
|Other assets                                                        |  |              | (801   
|Deferred tax assets                                                 |  |              | -      
|Trade and other payables                                            |  |              | (10,735
|Current tax liabilities                                             |  |              | -      
|Deferred tax liabilities                                            |  |              | -      
|Provisions                                                          |  |              | (529   
|Net cash from/(used in) operating activities                        |  |              | (20,163
|                                                                    |  |              |        
|(b) Non-cash financing and investing activities                     |  |              |        
|Share-based payments (options) – borrowings                         |  |              | 147    
|Equity settled – payables and borrowings                            |  |              | 4,891  
|Acquisition of plant and equipment by means of finance leases       |  |              | 167    
|Acquisition of investment by means of re-investment of fees earned  |  |              | -      



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    |      
|Current                                                         |  |              |      
|Trade receivables (a)                                           |  |              | 1,498
|Other receivables (b)                                           |  |              | 1,600
|Allowance for impairment
loss                                   |  |              | (3   
|                                                                |  |              | 3,095
|                                                                |  |              |      
|Non-current                                                     |  |              |      
|Other receivables (b)                                           |  |              | 500  
|                                                                |  |              | 500  
|                                                                |  |              |      
|Movements in the allowance for impairment loss were as follows: |  |              |      
|At July 1                                                       |  |              | 78   
|Charge for the year                                             |  |              | 75   
|Amounts recovered                                               |  |              | -    
|Amounts written off                                             |  |              | (150 
|At June 30                                                      |  |              | 3    



(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              | 
|2013 Consolidated                                                            |  |              | 2,490 |  |                  |  | - |                   |  |  | 2,166            | 
|2012 Consolidated                                                            |  |              | 1,930 |  |                  |  | - |                   |  |  | 399              | 



(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    |      
|Raw materials and stores |  |              | 826  
|Work in progress         |  |              | 392  
|STCs                     |  |              | 15   
|                         |  |              | 1,233



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    |      
|Current      |  |              |      
|Prepayments  |  |              | 347  
|Deposits (i) |  |              | 756  
|             |  |              | 1,103
|             |  |              |      
|Non-current  |  |              |      
|Deposits     |  |              | 178  



(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    |   
|Non-current                  |  |              |   
|Taralga Wind Farm1           |  |              | - 
|Andalay Solar2               |  |              | 39
|Shares in other corporations |  |              | - 
|Investment in solar projects |  |              | - 
|                             |  |              | 39





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    |      
|Current                                                                 |  |              |      
|Revenue                                                                 |  |              | 1,076
|Expenses                                                                |  |              | 10   
|Profit before income tax                                                |  |              | 1,086
|Income tax expense                                                      |  |              | -    
|Profit after income tax of discontinued operation                       |  |              | 1,086
|                                                                        |  |              |      
|Assets classified as held for sale                                      |  |              | -    
|Liabilities directly associated with assets classified as held for sale |  |              | -    
|                                                                        |  |              |      
|Net cash outflow from operating activities                              |  |              | (263 
|Net cash outflow from investing activities                              |  |              | -    
|Net cash outflow from financing activities                              |  |              | (26  
|Net decrease in cash generated by discontinued operation                |  |              | (289 



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    |       
|Computer hardware & software                 |  |              |       
|At cost                                      |  |              | 1,043 
|Accumulated depreciation                     |  |              | (700  
|Total computer hardware & software           |  |              | 343   
|                                             |  |              |       
|Motor vehicles                               |  |              |       
|At cost                                      |  |              | 374   
|Accumulated depreciation                     |  |              | (369  
|Total motor vehicles                         |  |              | 5     
|                                             |  |              |       
|Plant and equipment                          |  |              |       
|At cost                                      |  |              | 3,967 
|Accumulated depreciation                     |  |              | (1,443
|Total plant and equipment                    |  |              | 2,524 
|                                             |  |              |       
|Furniture, fittings & office equipment       |  |              |       
|At cost                                      |  |              | 429   
|Accumulated depreciation                     |  |              | (240  
|Total furniture, fittings & office equipment |  |              | 189   
|                                             |  |              |       
|Leased motor vehicles                        |  |              |       
|At cost                                      |  |              | 644   
|Accumulated amortisation                     |  |              | (287  
|Total leased motor vehicles                  |  |              | 357   
|                                             |  |              |       
|Leasehold improvements                       |  |              |       
|At cost                                      |  |              | 407   
|Accumulated amortisation                     |  |              | (293  
|Total leasehold improvements                 |  |              | 114   
|                                             |  |              |       
|Total property, plant and equipment          |  |              |       
|At cost                                      |  |              | 6,864 
|Accumulated amortisation/depreciation        |  |              | (3,332
|Total property, plant and equipment          |  |              | 3,532 



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



|                                                                    |  | Computerhardware&software$’000 |      |   | Motorvehicles$’000 |  |     | Plant &equipment$’000 |  |  | Furniture,fittings &officeequipment$’000 |   |  | Leasedmotorvehicles$’000 |      |   | Leaseholdimprove-ments$’000 |  |      | Total$’000 | 
|------------------------------------------------------------------- |  | ------------------------------ | ---- | - | ------------------ |  | --- | --------------------- |  |  | ---------------------------------------- | - |  | ------------------------ | ---- | - | --------------------------- |  | ---- | ---------- | 
|Year ended June 30, 2014                                            |  |                                |      |   |                    |  |     |                       |  |  |                                          |   |  |                          |      |   |                             |  |      |            | 
|At July 1, 2013 net of
    accumulated depreciation and impairment  |  |                                | 344  |   |                    |  | 10  |                       |  |  | 3,496                                    |   |  |                          | 214  |   |                             |  | 379  |            | 
|Additions                                                           |  |                                | 21   |   |                    |  | 97  |                       |  |  | 284                                      |   |  |                          | 80   |   |                             |  | 167  |            | 
|Disposals                                                           |  |                                | (10  | ) |                    |  | (97 | )                     |  |  | (867                                     | ) |  |                          | (45  | ) |                             |  | (64  | )          | 
|Transfers                                                           |  |                                | 119  |   |                    |  | 7   |                       |  |  | (119                                     | ) |  |                          | (5   | ) |                             |  | (7   | )          | 
|Depreciation charge
    for the year                                |  |                                | (131 | ) |                    |  | (12 | )                     |  |  | (270                                     | ) |  |                          | (55  | ) |                             |  | (118 | )          | 
|At June 30,
    2014 net of accumulated depreciation and impairment |  |                                | 343  |   |                    |  | 5   |                       |  |  | 2,524                                    |   |  |                          | 189  |   |                             |  | 357  |            | 
|                                                                    |  |                                |      |   |                    |  |     |                       |  |  |                                          |   |  |                          |      |   |                             |  |      |            | 
|Year Ended 30 June 2013                                             |  |                                |      |   |                    |  |     |                       |  |  |                                          |   |  |                          |      |   |                             |  |      |            | 
|At 1 July 2012 net of accumulated depreciation and impairment       |  |                                | 164  |   |                    |  | 154 |                       |  |  | 3,890                                    |   |  |                          | 259  |   |                             |  | 359  |            | 
|Additions                                                           |  |                                | 304  |   |                    |  | 13  |                       |  |  | -                                        |   |  |                          | 134  |   |                             |  | 115  |            | 
|Disposals                                                           |  |                                | (11  | ) |                    |  | (86 | )                     |  |  | (145                                     | ) |  |                          | (118 | ) |                             |  | -    |            | 
|Depreciation charge for the year                                    |  |                                | (113 | ) |                    |  | (71 | )                     |  |  | (249                                     | ) |  |                          | (61  | ) |                             |  | (95  | )          | 
|At 30 June 2013 net of accumulated depreciation and impairment      |  |                                | 344  |   |                    |  | 10  |                       |  |  | 3,496                                    |   |  |                          | 214  |   |                             |  | 379  |            | 



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 |            | 
|Additions                                                      |  |                                    | 136  |   |                      |  | 27  |                         |  |  | 725                                          |   |  |                             | -   |   |                                |  | 197 |            | 
|Disposals                                                      |  |                                    | (2   | ) |                      |  | (18 | )                       |  |  | -                                            |   |  |                             | (74 | ) |                                |  | (48 | )          | 
|Transfers                                                      |  |                                    | -    |   |                      |  | (59 | )                       |  |  | -                                            |   |  |                             | -   |   |                                |  | 59  |            | 
|Depreciation charge for the year                               |  |                                    | (257 | ) |                      |  | (69 | )                       |  |  | (226                                         | ) |  |                             | (52 | ) |                                |  | (64 | )          | 
|At 30 June 2012 net of accumulated depreciation and impairment |  |                                    | 164  |   |                      |  | 154 |                         |  |  | 3,890                                        |   |  |                             | 259 |   |                                |  | 359 |            | 



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  
|Additions                                                           |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | -      
|Disposals                                                           |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | -      
|Impairment                                                          |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | -      
|Amortisation                                                        |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | -      
|At June 30,
    2014 net of accumulated amortisation and impairment |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | 7,666  
|                                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|At June 30, 2014                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|Cost (gross carrying amount)                                        |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | 19,123 
|Accumulated impairment                                              |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | (11,457
|Net carrying
    amount                                             |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | 7,666  
|                                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|Year ended June 30, 2013                                            |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|At July 1, 2012 net of impairment                                   |  |                    | 3,500  |   |                           |  | 402  |                     |  |  | -              |   |  |             | 7,666  
|Disposals                                                           |  |                    | (3,363 | ) |                           |  | (402 | )                   |  |  | -              |   |  |             | -      
|Impairment                                                          |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | -      
|Amortisation                                                        |  |                    | (137   | ) |                           |  | -    |                     |  |  | -              |   |  |             | -      
|At June 30, 2013 net of accumulated amortisation and impairment     |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | 7,666  
|                                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|At June 30, 2013                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|Cost (gross carrying amount)                                        |  |                    | -      |   |                           |  | 255  |                     |  |  | 163            |   |  |             | 18,782 
|Accumulated impairment                                              |  |                    | -      |   |                           |  | (255 | )                   |  |  | (163           | ) |  |             | (11,116
|Net carrying amount                                                 |  |                    | -      |   |                           |  | -    |                     |  |  | -              |   |  |             | 7,666  
|                                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|Year ended June 30, 2012                                            |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|At July 1, 2011 net of impairment                                   |  |                    | 3,582  |   |                           |  | 654  |                     |  |  | 163            |   |  |             | 18,557 
|Additions                                                           |  |                    | -      |   |                           |  | 3    |                     |  |  | -              |   |  |             | 225    
|Impairment                                                          |  |                    | -      |   |                           |  | (255 | )                   |  |  | (163           | ) |  |             | (11,116
|Amortisation                                                        |  |                    | (82    | ) |                           |  | -    |                     |  |  | -              |   |  |             | -      
|At June 30, 2012 net of accumulated amortisation and impairment     |  |                    | 3,500  |   |                           |  | 402  |                     |  |  | -              |   |  |             | 7,666  
|                                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|At June 30, 2012                                                    |  |                    |        |   |                           |  |      |                     |  |  |                |   |  |             |        
|Cost (gross carrying amount)                                        |  |                    | 3,582  |   |                           |  | 657  |                     |  |  | 163            |   |  |             | 18,782 
|Accumulated impairment                                              |  |                    | -      |   |                           |  | (255 | )                   |  |  | (163           | ) |  |             | (11,116
|Accumulated amortisation                                            |  |                    | (82    | ) |                           |  | -    |                     |  |  | -              |   |  |             | -      
|Net carrying amount                                                 |  |                    | 3,500  |   |                           |  | 402  |                     |  |  | -              |   |  |             | 7,666  



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    |      
|         |  |              |      
|Solar PV |  |              | 6,500
|Parmac   |  |              | 1,166
|         |  |              | 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 | % |        | 
|Perpetuity growth rate |  |       | 2    | % |        | 



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                 |      
|EBITDA        |  | 25% shortfall in EBITDA achievement  |  |                            | 4,250
|Growth rate   |  | Long term growth rate of 0%          |  |                            | 6,170
|Discount rate |  | 3% increase to discount rate applied |  |                            | 5,696



17 Trade and other payables



|                            |  | Consolidated |       
|--------------------------- |  | ------------ | ------
|                            |  | 2014$’000    |       
|Current                     |  |              |       
|Trade payables              |  |              | 7,877 
|Accruals and other payables |  |              | 2,730 
|                            |  |              | 10,607



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    |       
|Current - secured          |  |              |       
|Trade finance (a)          |  |              | -     
|Bank overdraft (a)         |  |              | -     
|Other loans (b) (i)        |  |              | 7,878 
|Energy bonds (c)(ii)       |  |              | 12,743
|Convertible notes (d) (i)  |  |              | 4,489 
|Finance leases             |  |              | 100   
|Current – unsecured        |  |              |       
|Other loans (b) (ii)       |  |              | 116   
|Energy bonds (c)(i)        |  |              | 1,539 
|Convertible notes (d) (ii) |  |              | -     
|                           |  |              | 26,865
|Non-current – secured      |  |              |       
|Finance leases             |  |              | 286   
|                           |  |              | 286   



(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    |      
|                                                                                            |  |              |      
|Face value of convertible note (equivalent to cash redemption amount)                       |  |              | 4,460
|Derivative on convertible note (Conversion options and associated warrants) – at fair value |  |              | 52   
|Borrowing costs - amortised balance                                                         |  |              | (23  
|Carrying Value                                                                              |  |              | 4,489



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     |                | 
|Conversion price |  | $             | 15.90    |   |                | $ | 15.90    |                | 
|Dividend yield   |  |               | 0.0      | % |                |   | 0.0      | %              | 
|Risk free rate   |  |               | 3.0      | % |                |   | 3.0      | %              | 
|Volatility       |  |               | 70% - 90 | % |                |   | 70% - 90 | %              | 





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     |                | 
|Conversion price |  | $              | 15.90    |   |                | $ | 15.90    |                | 
|Dividend yield   |  |                | 0.0      | % |                |   | 0.0      | %              | 
|Risk free rate   |  |                | 3.0      | % |                |   | 3.0      | %              | 
|Volatility       |  |                | 70% - 90 | % |                |   | 70% - 90 | %              | 





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      |   |               |  
|Consideration for options granted |  |              | Nil          |   |               |  
|Grant date:                       |  |              | Feb 13, 2013 |   |               |  
|Expiry date:                      |  |              | May 30, 2017 |   |               |  
|Share price at grant date         |  | $            | 6.00         |   |               | $
|Exercise price                    |  |              | $ 3.90       | 1 |               |  
|Expected dividend yield           |  |              | 0            | % |               |  
|Risk-free interest rate           |  |              | 3.0          | % |               |  
|Volatility                        |  |              | 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    |    
|                                  |  |              |    
|Current                           |  |              |    
|Employee entitlements             |  |              | 395
|Provision for warranty claims (a) |  |              | 153
|                                  |  |              | 548
|Non-current                       |  |              |    
|Employee entitlements             |  |              | 92 



(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    |        
|                                                |  |              |        
|Ordinary share capital, issued and fully paid   |  |              | 120,323
|Class A Preferred shares, issued and fully paid |  |              | 4,643  
|Value of conversion rights – convertible notes  |  |              | 574    
|                                                |  |              | 125,540



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 | 
|Movement in shares on issue                  |  |                   |           |   |       |  |         |                  | 
|Balance at the beginning of the year         |  |                   | 1,742,825 |   |       |  | 109,046 |                  | 
|Issue of shares during the year              |  |                   | 2,976,489 |   |       |  | 12,597  |                  | 
|Issue from exercise of share options         |  |                   | -         |   |       |  | -       |                  | 
|Forfeiture on consolidation                  |  |                   | (1,181    | ) |       |  | -       |                  | 
|Transaction costs                            |  |                   | -         |   |       |  | (1,320  | )                | 
|Balance at the end of the year               |  |                   | 4,718,133 |   |       |  | 120,323 |                  | 
|                                             |  |                   |           |   |       |  |         |                  | 
|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 purchase fully
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  |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|21/12/10                          |  | 19/12/13    |  | $                  | 60.00 |  |                                      |  | 40,000  |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|01/11/11                          |  | 31/12/14    |  | $                  | 75.00 |  |                                      |  | 1,167   |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|28/05/12                          |  | 28/05/15    |  | $                  | 8.25  |  |                                      |  | 66,667  |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|31/05/12                          |  | 30/05/17    |  | $                  | 3.90  |  |                                      |  | 117,705 |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|12/12/12                          |  | 12/12/17    |  | $                  | 15.90 |  |                                      |  | 3,930   |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|12/12/12                          |  | 12/12/17    |  | $                  | 3.90  |  |                                      |  | 11,792  |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|30/12/12                          |  | 30/12/17    |  | $                  | 15.90 |  |                                      |  | 43,164  |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|13/02/13                          |  | 30/05/17    |  | $                  | 3.90  |  |                                      |  | 153,939 |                             |      |  | -                             |  |  |                               | - |  |                                               | 
|18/06/14                          |  | 15/12/19    |  | $                  | 5.34  |  |                                      |  | -       |                             |      |  | 72,400                        |  |  |                               | - |  |                                               | 
|Total                             |  |             |  |                    |       |  |                                      |  | 469,031 |                             |      |  | 72,400                        |  |  |                               | - |  |                                               | 
|Weighted average exercise price $ |  |             |  |                    |       |  | 14.35                                |  |         |                             | 5.34 |  |                               |  |  |                               |   |  | 60.00                                         | 



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  |                              |      |  | -                             |  |  |                               | - |  |                                               | 
|21/12/10                          |  | 19/12/13    |  | $                  | 60.00 |   |                                      |  | 40,000  |                              |      |  | -                             |  |  |                               | - |  |                                               | 
|27/07/11                          |  | 31/12/12    |  | $                  | 60.00 |   |                                      |  | 1,917   |                              |      |  | -                             |  |  |                               | - |  |                                               | 
|01/11/11                          |  | 31/12/14    |  | $                  | 75.00 |   |                                      |  | 1,167   |                              |      |  | -                             |  |  |                               | - |  |                                               | 
|28/05/12                          |  | 28/05/15    |  | $                  | 8.25  | 1 |                                      |  | 66,667  |                              |      |  | -                             |  |  |                               | - |  |                                               | 
|31/05/12                          |  | 30/05/17    |  | $                  | 3.90  | 2 |                                      |  | 117,705 |                              |      |  | -                             |  |  |                               | - |  |                                               | 
|12/12/12                          |  | 12/12/17    |  | $                  | 15.90 |   |                                      |  | -       |                              |      |  | 3,930                         |  |  |                               | - |  |                                               | 
|12/12/12                          |  | 12/12/17    |  | $                  | 3.90  |   |                                      |  | -       |                              |      |  | 11,792                        |  |  |                               | - |  |                                               | 
|30/12/12                          |  | 30/12/17    |  | $                  | 15.90 |   |                                      |  | -       |                              |      |  | 43,164                        |  |  |                               | - |  |                                               | 
|13/02/13                          |  | 30/05/17    |  | $                  | 3.90  | 2 |                                      |  | -       |                              |      |  | 153,939                       |  |  |                               | - |  |                                               | 
|Total                             |  |             |  |                    |       |   |                                      |  | 258,123 |                              |      |  | 212,825                       |  |  |                               | - |  |                                               | 
|Weighted average exercise price $ |  |             |  |                    |       |   | 21.12                                |  |         |                              | 6.56 |  |                               |  |  |                               |   |  | 60.00                                         | 



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                           |  |  |                                 | - |  |                                               | 
|21/12/10                          |  | 19/12/13    |  | $                  | 60.00 |  |                                      |  | 40,000 |                               |       |  | -                             |  |  |                                 | - |  |                                               | 
|09/02/11                          |  | 09/02/13    |  | $                  | 60.00 |  |                                      |  | 16,667 |                               |       |  | -                             |  |  |                                 | - |  |                                               | 
|27/07/11                          |  | 31/12/12    |  | $                  | 60.00 |  |                                      |  | -      |                               |       |  | 1,917                         |  |  |                                 | - |  |                                               | 
|01/11/11                          |  | 31/12/14    |  | $                  | 75.00 |  |                                      |  | -      |                               |       |  | 1,167                         |  |  |                                 | - |  |                                               | 
|28/05/12                          |  | 28/05/15    |  | $                  | 15.00 |  |                                      |  | -      |                               |       |  | 66,667                        |  |  |                                 | - |  |                                               | 
|31/05/12                          |  | 30/05/17    |  | $                  | 15.00 |  |                                      |  | -      |                               |       |  | 117,705                       |  |  |                                 | - |  |                                               | 
|Total                             |  |             |  |                    |       |  |                                      |  | 87,334 |                               |       |  | 187,789                       |  |  |                                 | - |  |                                               | 
|Weighted average exercise price $ |  |             |  |                    |       |  | 60.00                                |  |        |                               | 15.91 |  |                               |  |  |                                 |   |  | 60.00                                         | 



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 |      
|At July 1, 2013                                                |  |                             | 3,189
|Share based payments
    - borrowing & underwriting agreements |  |                             | 147  
|Impairment of available
    for sale asset                     |  |                             |      
|Translation
    reserve                                        |  |                             | -    
|At June 30,
    2014                                           |  |                             | 3,336
|                                                               |  |                             |      
|At July 1, 2012 (restated)                                     |  |                             | 2,689
|Share based payments - borrowing agreements                    |  |                             | 500  
|Revaluation reserve                                            |  |                             | -    
|Translation reserve                                            |  |                             | -    
|At June 30, 2013                                               |  |                             | 3,189
|                                                               |  |                             |      
|At July 1, 2011 (restated)                                     |  |                             | 1,205
|Share based payments – remuneration                            |  |                             | 28   
|Share based payments - borrowing agreements                    |  |                             | 1,456
|At June 30, 2012                                               |  |                             | 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    |      
|Financial Assets          |  |              |      
|Cash and cash equivalents |  |              | 1,381
|                          |  |              |      
|Financial Liabilities     |  |              |      
|Bank overdraft            |  |              | -    
|Trade finance             |  |              | -    
|                          |  |              |      
|Net exposure              |  |              | 1,381



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            | 
|Consolidated                                |  |                                 |    |   |                        | 
|+1% (100 basis points)                      |  |                                 | 4  |   |                        | 
|-1% (100 basis points)                      |  |                                 | (4 | ) |                        | 



(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         |   |  |            | - |  |              | 
|Trade and other receivables |  |            | -       |   |            |  | -      |            |  |  | 16         |   |  |            | - |  |              | 
|Financial assets            |  |            | -       |   |            |  | 39     |            |  |  | -          |   |  |            | - |  |              | 
|Trade and other payables    |  |            | (266    | ) |            |  | (1,504 | )          |  |  | (1,368     | ) |  |            | - |  |              | 
|Borrowings                  |  |            | -       |   |            |  | -      |            |  |  | (14,399    | ) |  |            | - |  |              | 
|                            |  |            |         |   |            |  |        |            |  |  |            |   |  |            |   |  |              | 
|2013                        |  |            |         |   |            |  |        |            |  |  |            |   |  |            |   |  |              | 
|Cash and cash equivalents   |  |            | 1       |   |            |  | 6      |            |  |  | 246        |   |  |            | - |  |              | 
|Trade and other receivables |  |            | -       |   |            |  | -      |            |  |  | 102        |   |  |            | - |  |              | 
|Financial assets            |  |            | 43      |   |            |  | -      |            |  |  | -          |   |  |            | - |  |              | 
|Trade and other payables    |  |            | (1,028  | ) |            |  | (1,678 | )          |  |  | (152       | ) |  |            | - |  |              | 
|Borrowings                  |  |            | (10,473 | ) |            |  | -      |            |  |  | -          |   |  |            | - |  |              | 



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 |  |              | 
|Trade and other receivables |  |            | 1,018   |   |            |  | 426    |            |  |  | -          |  |  |            | -  |  |              | 
|Financial assets            |  |            | 603     |   |            |  | -      |            |  |  | -          |  |  |            | -  |  |              | 
|Trade and other payables    |  |            | (3,740  | ) |            |  | (2,799 | )          |  |  | -          |  |  |            | -  |  |              | 
|Borrowings                  |  |            | (18,073 | ) |            |  | -      |            |  |  | -          |  |  |            | -  |  |              | 



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 |     | 
|     |  |                |     |   | $’000                       |     |        | $’000            |     |  | $’000                       |     | 
|2014 |  |                | +10 | % |                             |     | (37    | )                |     |  | (26                         | )   | 
|     |  |                | -10 | % |                             |     | 30     |                  |     |  | 21                          |     | 
|     |  |                |     |   |                             |     |        |                  |     |  |                             |     | 
|2013 |  |                | +10 | % |                             |     | (1,215 | )                |     |  | (850                        | )   | 
|     |  |                | -10 | % |                             |     | 993    |                  |     |  | 695                         |     | 
|     |  |                |     |   |                             |     |        |                  |     |  |                             |     | 
|2012 |  |                | +10 | % |                             |     | (2,243 | )                |     |  | (1,570                      | )   | 
|     |  |                | -10 | % |                             |     | 1,835  |                  |     |  | 1,285                       |     | 





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    |       
|                             |  |              |       
|3 months or less             |  |              | 38,606
|3-6 months                   |  |              | 487   
|6 months – 1 year            |  |              | 926   
|1-5 years                    |  |              | 400   
|Over 5 years                 |  |              | -     
|Total contractual cash flows |  |              | 40,419



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 | 
|                                 |  | $’000   |    |  | $’000   |  |   | $’000   | 
|Financial assets                 |  |         |    |  |         |  |   |         | 
|Available-for-sale investments   |  |         | 39 |  |         |  | - |         | 
|Total assets                     |  |         | 39 |  |         |  | - |         | 
|                                 |  |         |    |  |         |  |   |         | 
|Financial liabilities            |  |         |    |  |         |  |   |         | 
|Derivatives on convertible notes |  |         | -  |  |         |  | - |         | 
|Total liabilities                |  |         | -  |  |         |  | - |         | 





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:



|                                                                          |  | Unlistedequitysecurities(asset) |         |   | Embeddedderivativesonconvertiblenotes(liabilities) | 
|------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | -------------------------------------------------- | 
|                                                                          |  |                                 |         |   |                                                    | 
|Opening balance July 1, 2011                                              |  |                                 | 117     |   |                                                    | 
|Additions                                                                 |  |                                 | -       |   |                                                    | 
|Losses recognised in profit or loss                                       |  |                                 | (84     | ) |                                                    | 
|Closing balance June 30, 2012                                             |  |                                 | 33      |   |                                                    | 
|Other decrease (extinguishment)                                           |  |                                 | -       |   |                                                    | 
|Other increases                                                           |  |                                 | 10,000  |   |                                                    | 
|Gains recognised in other comprehensive income                            |  |                                 | 800     |   |                                                    | 
|(Losses)/gains recognised in profit or loss                               |  |                                 | (18     | ) |                                                    | 
|Closing balance June 30, 2013                                             |  |                                 | 10,815  |   |                                                    | 
|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      |   |                                                    | 
|Closing balance June 30, 2014                                             |  |                                 | 39      |   |                                                    | 



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 ofIncorporation |  | Principal Activity      |  | 2014              |    
|                                                      |  |                         |  |                         |  |                   |    
|BlueNRGY Group Limited Ltd                            |  | Australia               |  | Holding company         |  |                   | 100
|Capacitor Technologies Pty Limited                    |  | Australia               |  | Energy efficiency       |  |                   | -  
|Parmac Air Conditioning & Mechanical Services Pty Ltd |  | Australia               |  | Energy efficiency       |  |                   | 100
|Remote Area Power Systems Pty Ltd                     |  | Australia               |  | Energy storage          |  |                   | 100
|Larkden Pty Ltd                                       |  | Australia               |  | Energy storage          |  |                   | -  
|KI Solar Pty Ltd                                      |  | Australia               |  | Solar                   |  |                   | 100
|eco-Kinetics Group Pty Ltd                            |  | Australia               |  | Solar                   |  |                   | 100
|Eco-Kinetics Europe Limited                           |  | United Kingdom          |  | Solar                   |  |                   | 100
|eco-Kinetics Pty Ltd                                  |  | Australia               |  | Solar                   |  |                   | 100
|Westinghouse Solar Limited                            |  | United Kingdom          |  | Solar                   |  |                   | 100
|CBD Energy USA Limited                                |  | USA                     |  | Solar                   |  |                   | 100
|CBD Acquisition Holdings Inc                          |  | USA                     |  | Solar                   |  |                   | 100
|Westinghouse Solar Inc                                |  | USA                     |  | Solar                   |  |                   | 100
|CBD Solar Labs Pty Ltd                                |  | Australia               |  | PV Plant                |  |                   | 100
|CBD Solar Pty Ltd                                     |  | Australia               |  | Solar                   |  |                   | 100
|Westinghouse Solar Pty Ltd                            |  | Australia               |  | Solar                   |  |                   | 100
|Chatham Island Wind Ltd                               |  | New Zealand             |  | Special purpose vehicle |  |                   | 100
|Energy Bonds Plc                                      |  | United Kingdom          |  | Special purpose vehicle |  |                   | 100
|Secured Energy Bonds Plc                              |  | United Kingdom          |  | Special purpose vehicle |  |                   | 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$        |          
|                             |  |              |          
|Short-term employee benefits |  |              | 1,823,534
|Post-employment benefits     |  |              | 75,355   
|Share-based payment          |  |              | -        
|Total compensation           |  |              | 1,898,889



(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             | 
|2014           |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Directors      |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|G.
    McGowan |  |                   | 20,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (20,000 | ) |                   | 
|Sub-total      |  |                   | 20,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (20,000 | ) |                   | 
|               |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Executives     |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Y. Brodsky1    |  |                   | 667    |  |                           |  | -     |                   |  |  | -                |  |  |                    | (667    | ) |                   | 
|J.
    Greer   |  |                   | -      |  |                           |  | 1,000 |                   |  |  | -                |  |  |                    | -       |   |                   | 
|Sub-total      |  |                   | 667    |  |                           |  | 1,000 |                   |  |  | -                |  |  |                    | (667    | ) |                   | 
|               |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Total          |  |                   | 20,667 |  |                           |  | 1,000 |                   |  |  | -                |  |  |                    | (20,667 | ) |                   | 
|               |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|2013           |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Directors      |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|M. Vaile2      |  |                   | 20,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (20,000 | ) |                   | 
|G. McGowan     |  |                   | 20,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | -       |   |                   | 
|Sub-total      |  |                   | 40,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (20,000 | ) |                   | 
|               |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Executives     |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Y. Brodsky     |  |                   | 667    |  |                           |  | -     |                   |  |  | -                |  |  |                    | -       |   |                   | 
|A. McClaren2   |  |                   | 333    |  |                           |  | -     |                   |  |  | -                |  |  |                    | (333    | ) |                   | 
|E. Cywinski2   |  |                   | 20,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (20,000 | ) |                   | 
|Sub-total      |  |                   | 21,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (20,333 | ) |                   | 
|               |  |                   |        |  |                           |  |       |                   |  |  |                  |  |  |                    |         |   |                   | 
|Total          |  |                   | 61,000 |  |                           |  | -     |                   |  |  | -                |  |  |                    | (40,333 | ) |                   | 



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             | 
|2012         |  |                   |        |  |                           |  |     |                   |  |  |                  |  |  |                    |         |   |                   | 
|Directors    |  |                   |        |  |                           |  |     |                   |  |  |                  |  |  |                    |         |   |                   | 
|M. Vaile     |  |                   | 20,000 |  |                           |  | -   |                   |  |  | -                |  |  |                    | -       |   |                   | 
|G. McGowan   |  |                   | 20,000 |  |                           |  | -   |                   |  |  | -                |  |  |                    | -       |   |                   | 
|J. Anderson3 |  |                   | 10,000 |  |                           |  | -   |                   |  |  | -                |  |  |                    | (10,000 | ) |                   | 
|Sub-total    |  |                   | 50,000 |  |                           |  | -   |                   |  |  | -                |  |  |                    | (10,000 | ) |                   | 
|             |  |                   |        |  |                           |  |     |                   |  |  |                  |  |  |                    |         |   |                   | 
|Executives   |  |                   |        |  |                           |  |     |                   |  |  |                  |  |  |                    |         |   |                   | 
|Y. Brodsky   |  |                   | 333    |  |                           |  | 334 |                   |  |  | -                |  |  |                    | -       |   |                   | 
|A. McClaren  |  |                   | 333    |  |                           |  | -   |                   |  |  | -                |  |  |                    | -       |   |                   | 
|E. Cywinski  |  |                   | 20,000 |  |                           |  | -   |                   |  |  | -                |  |  |                    | -       |   |                   | 
|Sub-total    |  |                   | 20,666 |  |                           |  | 334 |                   |  |  | -                |  |  |                    | -       |   |                   | 
|             |  |                   |        |  |                           |  |     |                   |  |  |                  |  |  |                    |         |   |                   | 
|Total        |  |                   | 70,666 |  |                           |  | 334 |                   |  |  | -                |  |  |                    | (10,000 | ) |                   | 



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
|C. Botto    |  |                   | 1,667  |  |                         |  | - |                        |  |  | -                |  |  |                    | 13,280 
|W. Morro    |  |                   | -      |  |                         |  | - |                        |  |  | -                |  |  |                    | 30,448 
|T. Barlow2  |  |                   | -      |  |                         |  | - |                        |  |  | -                |  |  |                    | 15,107 
|            |  |                   |        |  |                         |  |   |                        |  |  |                  |  |  |                    |        
|Executives  |  |                   |        |  |                         |  |   |                        |  |  |                  |  |  |                    |        
|Y. Brodsky1 |  |                   | 707    |  |                         |  | - |                        |  |  | -                |  |  |                    | (707   
|J. Greer2   |  |                   | -      |  |                         |  | - |                        |  |  | -                |  |  |                    | 18,508 
|Total       |  |                   | 62,039 |  |                         |  | - |                        |  |  |                  |  |  |                    | 292,348



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  |  |                         |  | -   |                        |  |  | -                |  |  |                    | -      
|C. Botto     |  |                   | 1,667   |  |                         |  | -   |                        |  |  | -                |  |  |                    | -      
|             |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|Executives   |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|Y. Brodsky   |  |                   | 707     |  |                         |  | -   |                        |  |  | -                |  |  |                    | -      
|A. McClaren3 |  |                   | 1,664   |  |                         |  | -   |                        |  |  | -                |  |  |                    | (1,664 
|E. Cywinski3 |  |                   | 61,572  |  |                         |  | -   |                        |  |  | -                |  |  |                    | (61,572
|             |  |                   | 125,946 |  |                         |  | -   |                        |  |  | -                |  |  |                    | (63,907
|             |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|2012         |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|Directors    |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|M. Vaile     |  |                   | 671     |  |                         |  | -   |                        |  |  | -                |  |  |                    | -      
|G. McGowan   |  |                   | 59,665  |  |                         |  | -   |                        |  |  | -                |  |  |                    | -      
|J. Anderson4 |  |                   | 3,333   |  |                         |  | -   |                        |  |  | -                |  |  |                    | (3,333 
|             |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|Executives   |  |                   |         |  |                         |  |     |                        |  |  |                  |  |  |                    |        
|Y. Brodsky   |  |                   | 707     |  |                         |  | -   |                        |  |  | -                |  |  |                    | -      
|A. McClaren  |  |                   | 997     |  |                         |  | 667 |                        |  |  | -                |  |  |                    | -      
|C. Botto4    |  |                   | -       |  |                         |  | -   |                        |  |  | -                |  |  |                    | 1,667  
|E. Cywinski5 |  |                   | 25,044  |  |                         |  | -   |                        |  |  | -                |  |  |                    | 36,528 
|             |  |                   | 90,417  |  |                         |  | 667 |                        |  |  | -                |  |  |                    | 34,862 





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    |    
|                                                                                   |  |              |    
|Expense arising from equity-settled share-based payment transactions for employees |  |              | -  
|Expense arising from equity-settled share-based payment financing transactions     |  |              | 147
|                                                                                   |  |              | 147



(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 |  |      | 
|Granted during the year                  |  |      | 72,400  |   |      | $ | 5.34  |      |  |  | 58,887  | 1 |  | $    | 13.50 |  |      | 
|Expired during the year                  |  |      | (70,667 | ) |      | $ | 60.00 |      |  |  | (1,917  | ) |  | $    | 60.00 |  |      | 
|Outstanding at the end of the year       |  |      | 316,824 |   |      | $ | 7.19  |      |  |  | 315,091 |   |  | $    | 19.46 |  |      | 



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 ofremunerationtounderwriters |            
|------------------------------------------------- |  | ------------------------------------ | -----------
|                                                  |  |                                      |            
|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:



|                                                  |  | Unsecuredloan, referNote 18(b)(ii) |             |   | Convertiblenotes, referNote18(d)(ii) |   |           | Convertiblenotes, referNote 18(b)(ii) | 
|------------------------------------------------- |  | ---------------------------------- | ----------- | - | ------------------------------------ | - | --------- | ------------------------------------- | 
|                                                  |  |                                    |             |   |                                      |   |           |                                       | 
|Number of options granted                         |  |                                    | 11,793      |   |                                      |   | 43,164    |                                       | 
|Consideration for options granted                 |  |                                    | Nil         |   |                                      |   | Nil       |                                       | 
|Exercise price                                    |  | $                                  | 15.90       |   |                                      | $ | 15.90     |                                       | 
|Grant date                                        |  |                                    | 24 Dec 2012 |   |                                      |   | 30 Dec 12 |                                       | 
|Expiry date                                       |  |                                    | 12 Dec 2017 |   |                                      |   | 30 Dec 17 |                                       | 
|Share price at grant date                         |  | $                                  | 6.00        |   |                                      | $ | 6.00      |                                       | 
|Expected price volatility of the Company’s shares |  |                                    | 131         | % |                                      |   | 131       | %                                     | 
|Expected dividend yield                           |  |                                    | 0           | % |                                      |   | 0         | %                                     | 
|Risk-free interest rate                           |  |                                    | 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    |      
|                                            |  |              |      
|Within one year                             |  |              | 535  
|After one year but not more than five years |  |              | 606  
|Total minimum lease payments                |  |              | 1,141



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    |    
|                                            |  |              |    
|Within one year                             |  |              | 130
|After one year but not more than five years |  |              | 327
|Total minimum lease payments                |  |              | 457
|Less amounts representing finance charges   |  |              | (71
|Present value of minimum lease payments     |  |              | 386
|                                            |  |              |    
|Current liability                           |  |              | 100
|Non-current liability                       |  |              | 286
|Total                                       |  |              | 386



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      |                     | 
|Total assets               |  |           | 4,623    |   |                     |  | 15,394   |                     | 
|Current liabilities        |  |           | (17,775  | ) |                     |  | (24,656  | )                   | 
|Total liabilities          |  |           | (27,030  | ) |                     |  | (26,809  | )                   | 
|Net assets/(liabilities)   |  |           | (22,407  | ) |                     |  | (11,415  | )                   | 
|                           |  |           |          |   |                     |  |          |                     | 
|Issued capital             |  |           | 125,540  |   |                     |  | 109,619  |                     | 
|Accumulated losses         |  |           | (151,283 | ) |                     |  | (125,022 | )                   | 
|Reserves                   |  |           | 3,336    |   |                     |  | 3,988    |                     | 
|Total shareholders’ equity |  |           | (22,407  | ) |                     |  | (11,415  | )                   | 
|                           |  |           |          |   |                     |  |          |                     | 
|Loss of the parent entity  |  |           | (26,262  | ) |                     |  | (2,147   | )                   | 





(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    |        
|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    |          
|Amounts paid or payable to the Company’s auditors              |  |              |          
|- an audit or review of the financial statements of the entity |  |              | 1,256,512
|- other consulting and advisory services                       |  |              | -        
|- tax compliance                                               |  |              | -        
|                                                               |  |              | 1,256,512



Page 78







ITEM 19.   EXHIBITS





|Exhibit |  |                                                                                                                 |  | Incorporated by Reference |  | Filed orFurnished | 
|------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------- | 
|Number  |  | Exhibit Description                                                                                             |  | Form                      |  | Exhibit           | 
|1.1     |  | Constitution, as amended, dated December 20, 2000                                                               |  | 20-F                      |  | 1.1               | 
|1.2     |  | Certificate of Registration dated March 11, 2010.                                                               |  | 20-F                      |  | 1.2               | 
|1.3     |  | Certificate of Registration on Change of Name dated March 20, 2015.                                             |  | 20-F                      |  | 1.3               | 
|4.1     |  | CBD Energy Limited 2014 Equity Plan                                                                             |  | F-1/A                     |  | 10.25             | 
|4.2     |  | Form of Securities Purchase Agreement, dated as of July 25, 2014                                                |  | 6-K                       |  | 99.1              | 
|4.3     |  | Form of Warrant, dated as of July 25, 2014                                                                      |  | 6-K                       |  | 99.2              | 
|4.4     |  | First Amendment to Securities Purchase Agreement, made as of August 19, 2014.                                   |  | 6-K                       |  | 99.1              | 
|4.5     |  | Deed of Company Arrangement of CBD Energy Limited, dated December 24, 2014.                                     |  | 6-K/A                     |  | 10.1              | 
|4.6     |  | Deed of Variation of the Deed of Company Arrangement of CBD Energy Limited, dated January 27, 2015.             |  | 6-K/A                     |  | 10.2              | 
|4.7     |  | Deed of Company Arrangement of Westinghouse Solar Pty Limited, dated December 24, 2014.                         |  | 6-K/A                     |  | 10.3              | 
|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              | 
|4.9     |  | Amended and Restated Membership Interest Purchase Agreement, dated January 27, 2015                             |  | 6-K/A                     |  | 10.5              | 
|4.10    |  | Form of Subscription Agreement, dated January 27, 2015                                                          |  | 6-K/A                     |  | 10.6              | 
|4.11    |  | Rights and Preferences of CBD Series B Preferred Shares as amended January 27, 2015                             |  | 6-K/A                     |  | 10.7              | 
|8.1     |  | For a list of all of our subsidiaries, see Item 4.C., Organization Structure.                                   |  | 20-F                      |  | 8.1               | 
|11.1    |  | Code of Conduct and Ethics.                                                                                     |  | 20-F                      |  | 11.1              | 
|12.1    |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a).                                        |  |                           |  |                   | 
|12.2    |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a).                                        |  |                           |  |                   | 
|13.1*   |  | Certification of Principal Executive Officer pursuant to 18 U. S. C. Section 1350.                              |  |                           |  |                   | 
|13.2*   |  | Certification of Principal Financial Officer pursuant to 18 U. S. C. Section 1350.                              |  |                           |  |                   | 





*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 sign this
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