ANNUAL Report June 2024 Notes to the Consolidated Financial Statements 19 Notes to the Consolidated Financial Statements 1. SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (a) Going Concern Basis for Preparation of Financial Statements These financial statements have been prepared on the going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the discharge of liabilities in the normal course of business. For the full year ended 30 June 2024, the consolidated entity incurred a total comprehensive loss of $2,129,588 (2023: loss of $3,716,846), incurred cash outflows from operating activities of $12,703,554 (2023: $1,392,628) and had a net working capital deficit of $55,567,286 (2023: $12,598,157 deficit). The deficit in net working capital is predominately due to: • The recognition of $40,226,904 of borrowing as a result of the acquisition of Saloro on 18 January 2024. All borrowings are classified as current due to their renewal extensions falling within 12 months of the reporting date. • The funding of the Company’s growth initiatives via short-term financing facilities such as equipment leases, and trade payables. The ability of the Company to continue to adopt the going concern assumption is based upon: ▪ Continued optimisation of the production processes and recoveries from the Gravity and XRT Sorter Plants at both the Mt Carbine and Barruecopardo operations. ▪ Extension/refinance of the Saloro current borrowing or extension of the letter of credit from Oaktree Capital Management L.P, which currently supports the debt until 28 June 2025; ▪ Continued engagement with strategic partners to secure offtake prepayments; ▪ Continued success with grant applications for companies operating in the critical minerals sector; and ▪ Continued success issuing equity to strategic partners and or existing shareholders. (b) Basis of Preparation These general-purpose financial statements have been prepared in accordance with the requirements of the Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. These financial statements have been prepared on a historical cost basis. The financial report is presented in Australian currency. The consolidated entity operates on a for-profit basis. (c) Statement of Compliance The financial statements have been prepared and comply with Australian Accounting Standards. The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. (d) Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) as at 30 June each year. Control is defined as entities which the Group has power over and the rights to, or is exposed to, variable returns from its involvement with the entity and has the ability to use its power to affect those returns. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. For the year ended 30 June 2024 EQ Resources Limited Annual Report 2024 85
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