ANNUAL Report June 2023 Notes to the Consolidated Financial Statements 25 Notes to the Consolidated Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 2023, the consolidated entity incurred a total comprehensive loss of $3,716,846 (2022: loss of $6,063,051), incurred cash outflows from operating activities of $1,392,628 (2022: $3,112,770) and had a net working capital deficit of $12,598,157 (2022: $4,090,968 deficit). The deficit in net working capital is predominately due to the Company funding its capital growth initiatives via short-term financing facilities such as equipment leases, offtake advance extension, government grants and trade payables. It should be noted that: - Whilst the offtake advance facility of $4,901,961 is classified as a current liability, due to the Company not having an unconditional right to defer settlement for at least 12 months after reporting date, it is scheduled to be repaid over the life of the joint venture between EQ Resources Limited and Cronimet Australia Pty Ltd rather than within the next 12 months as depicted on the Statement of Financial Position; and - The Convertible Notes are classified as a current liability of $3,494,215 due to their expiry in September 2023 along with the note holders having an option to convert into cash or shares. The Company believes there is a high probability that the holders will convert to shares upon expiry thereby converting this liability into equity. With these two factors taken into consideration the net working capital deficit for the consolidated entity reduces to $4,201,981. The ability of the Company to continue to adopt the going concern assumption is based upon: - The commencement of open-cut mining operations in late June 2023 with increased volume and higher grade material resulting in strong positive cashflows. This assumption is supported by the Mt Carbine Operations achieving daily concentrate production records in-line with he open-cut ramp up scheduled in September 2023; along with - Continued income stream from the Mt Carbine Quarrying operations. Should additional funds be necessary the Directors are confident of securing these funds if and when necessary to meet the Company’s obligations as and when they fall due and consider the adoption of the going concern basis to be appropriate in the preparation of these financial statements. (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. Notes to the Consolidated Financial Statements EQ Resources Limited Annual Report 2023 67
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