AML3D Limited Annual Report 2022

Plain-text annual report

AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Annual Report 2022 Contents Chairman’s and Managing Director’s Report Board Directors’ Report Renumeration Report Auditor Independence Declaration Audit Report Financial Statements Directors’ Declaration Additional Shareholder Information Corporate Directory 2 6 8 12 23 24 29 52 53 54 1 AML3D Limited // ASX: AL3 // ABN 55 602 857 9832 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Chairman’s & Managing Director’s Report Board Chairman, Sean Ebert Dear Shareholders, Financial Results It is with great pleasure that we present to you AML3D Limited’s (‘AML3D’ or the ‘Company’) Annual Report for the year ended 30 June 2022. During the year AML3D continued to develop its proprietary technology and leverage its advantages to deliver its multi-phase growth strategy. This strategy is designed to generate shareholder value over the immediate, medium and longer-terms, through the commercialisation Revenue for the financial year was $2.0 million, an increase of over 200% on the prior year. The greatest portion of this revenue was derived through the sale of AML3D’s proprietary ARCEMY® industrial scale 3D metal printing units. In addition, revenue from the printing of parts continued to support our performance and was up 20% on the prior year. This improved performance reflects AML3D’s focus on its immediate and medium-term value drivers. of our proprietary Wire Additive Manufacturing (WAM®) technology. AML3D’s financial result for the year reflects the necessary upfront Our WAM® technology delivers cost savings to our customers of investment needed to establish the foundation for future success. up to 70%, while our production process is 75% faster and reduces We are continuing to invest in innovation to ensure AML3D waste by up to 80% when compared to traditional manufacturing. maintains its market leading position. In addition, our sales and Some of the key milestones achieved during the year include: • Sale and installation of ARCEMY® units at Queensland University and the Royal Melbourne Institute of Technology, in addition to installation of an ARCEMY® unit at the Tonsley marketing teams continue to build strong momentum, which bodes well in terms of progressive revenue growth into the future. Immediate term value drivers – Oil and Gas AML3D identified the Oil and Gas sector as a key driver of Factory of the Future through a joint venture with BAE and immediate term value creation. Flinders University. • Completion of printed parts for global customers across our target markets of Oil and Gas, Marine, Aerospace, and Mining. • Ongoing technology development to further reduce production lead times and improve the commercial applications of our process. During 2022, AML3D initiated validation work to address supply chain issues impacting a global Tier 1 Oil and Gas customer. The validation work will leverage the advantages of AML3D’s advanced WAM® technology to produce industrial scale, 3D metal printed components. The combination of WAM® technology’s fast lead times to manufacture • Orders from ThyssenKrupp and Boeing, alongside validation providing a solution to the supply chain constrains facing this global work with a key Tier 1 Oil and Gas major is supporting Oil and Gas major and its superior ESG profile helping to support this discussions for repeat volume business. customer’s sustainability commitments which helped to secure the • Being approved as a supplier of 3D printed power plant parts for a major Australian Energy company. AML3D is working closely with our customers to support their testing and validation of our metal 3D printing technology. We believe our disruptive technology will transform the metal manufacturing and fabrication landscape forever and is the key to the future of manufacturing. Within the context of a global drive to (net) zero-emissions, our process minimises material waste and significantly lowers emissions and electricity consumption, when compared with traditional casting and forging technology. AML3D’s proprietary 3D-printing solution offers prompt delivery of an array of high-quality, large-scale, custom built components to customers at competitive prices. All of this is achieved with significantly shorter lead times, less raw material input and validation work. The successful printing and testing of the validation components is expected to create the opportunity for AML3D to become integral to this global Tier 1 Oil and Gas customer’s supply chain, using our WAM® technology. This enables the Company to supply a variety of components within this customer’s existing parts library and underpin significant growth in future orders. AML3D also signed a purchase order as part of the Company’s global collaboration agreement to supply an industrial component to AdditiveNow for an additional Tier 1 Oil and Gas end customer. The purchase order followed a site visit by the end customer to inspect AML3D’s facilities and, following testing, this initial component will be used to identify a range of suitable parts within the end customer’s parts library for supply via 3D metal printing. Immediate term value drivers – ARCEMY® sales waste, and greater end product strength. Traditional fabrication AML3D has sold and installed a further two ARCEMY® has served industry well for hundreds of years, however, industrial scale 3D metal printing units, generating revenues today society is rightfully demanding businesses operate of approximately $400,000 each. In total five ARCEMY® units sustainably and with a minimal environmental footprint. have now been sold, commissioned and are operational. 3 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Three of these units are operating within commercial businesses high pressure piping spool to be successfully tested and verified by and will provide the Company with ongoing revenue from license fees and service support. The ARCEMY® unit at the Adelaide based ‘Factory of the Future’ joint venture with BAE Systems and Flinders University has been profiled to potential Tier 1 clients including, Thales, RheinMetall, BAE and Northrop Grumman. Immediate term value drivers – Contract manufacturing Contract manufacturing is an immediate term value driver for AML3D, while also creating entry points to access potential medium term value opportunities through the development of repeat orders and offering additional services. During Q2 2022, AML3D accessed a new market when it signed its first purchase order with a globally recognised North American space exploration company to supply a bespoke prototype using a high strength corrosion resistant alloy. This order was followed by a purchase contract with a new Defence Aerospace customer to deliver a 500kg, four-part aluminium nozzle. The Company also signed a purchase contract to produce, what is believed to be a world first 3D metal printed, pressure and corrosion resistant titanium plunger for a new Oil and Gas customer. In addition, AML3D is an approved supplier to ThyssenKrupp, the German industrial engineering and steel company, and received and fulfilled multiple orders during FY2022. Our contract manufacturing also completed 3D metal printing of a high value impellor for a major Australian Energy company. The contract demonstrated AML3D’s unique ability to reduce supply chain risk through the dependable and efficient supply of on-demand replacement power plant parts. The Company now supplies components to two energy sector customers creating an important entry point for AML3D into this key target market. Medium term value drivers – Oil and Gas, Marine, Defence, Aerospace and Resource We have also progressed our strategy to create medium term value by expanding into the Marine, Defence, Aerospace and Resource sectors. As part of this initiative, the Company hosted an in-person inspection of AML3D’s facilities by the Tier 1 Defence and Aerospace company, Boeing’s, Director of Global Additive Manufacturing in March 2022. These efforts saw AML3D enter into a $140,000 purchase agreement with Boeing in July 2022. The agreement covers the manufacture of various aluminium test pieces and structural components using AML3D’s WAM® technology. The testing and validation of the components will form the basis of near-term future contracts. The agreement follows an initial purchase contract with Boeing for a mandrel tool artifact signed in June 2021. Lloyd’s register. The 940kg monocoque piping spool demonstrator component showcases AML3D’s capabilities in the subsea Oil and Gas sector and creates an entry point into this new market. Longer term value drivers – Research and Development Leveraging AML3D’s R&D work to create new opportunities, enhanced technology-enabled solutions and branded products is the key to unlocking longer-term value in the business. Significant progress has been made across several AML3D R&D projects. The Optimising of Scandium Containing Aluminium Alloys Project is focussed on developing high strength, commercially viable, aluminium- scandium compounds to create a high strength aluminium welding wire to be used in AML3D’s WAM® process. The optimisation of aluminium- scandium alloys has the potential to allow AML3D’s WAM® process to create higher strength, industrial scale, aluminium components and 3D printed products, while removing the need for age hardening heat treatment. The project also has the potential for AML3D to create and supply a branded specialist aluminium-scandium wire feedstock product. The Optimising of Scandium Containing Aluminium Alloys project is being run in partnership with Deakin University’s, Institute for Frontier Materials (IFM) and the Innovative Manufacturing Cooperative Research Centre (IMCRC) and has met meet all expectations for the delivery of high strength, corrosion resistant structures. Following these excellent initial results the Project has been extended to incorporate final repeatability commercial trials, which is attracting interest from industry buyers. A successful conclusion to the commercial trials is expected to lead to new applications for WAM® across the Automotive, Resources and broader Marine and Transport industries where there is demand for high strength, corrosion resistant aluminium products. AML3D is also working with IFM to complete a series of proof- of-concept projects exploring the incorporation of Boron Nitride Nanotubes (BNNTs) in AML3D’s WAM® technology. BNNT’s are considered the world’s strongest fibres, which have the potential to significantly enhance the ability of WAM® deposited alloys to create much stronger, lighter, and more thermally and radiation- resistant aluminium composites. Initial outcomes have been positive, and the project has started to attract commercial interest in the applications for the BNNT/aluminium composites These R&D projects have the potential to significantly enhance AML3D’s revenue prospects through increased opportunities in both printer sales and contract manufacturing services. They also have the potential to create new commercial applications across the space, aerospace, marine, defence and transport industries, which could be rolled out in AML3D’s current target markets of Asia Pacific (incl. Japan, South Korea), Europe (Germany, France & UK), and North America. Our medium-term value drivers also include expanding the products and services we offer to our existing customers. AML3D is using 3D scanning capabilities in conjunction with its WAM® technology to generate a digital virtual inventory library for our major Australian Energy customer. This library will be used to reduce the customers inventory overheads by allowing the on-demand manufacturing of replacement components and also embed AML3D as a primary provider of a range of spare parts, underpinning a future orders stream. In line with the strategic objective of generating value over the AML3D’s internal R&D focus remains firmly on our ‘Next Generation’ high productivity ARCEMY® solution. The high productivity ARCEMY® units are designed to print at a rate of up to 30 kilograms and hour, that’s up to 5 times faster than our current Arcemy Units, by making use of twin wire feeds. The high productivity ARCEMY® solution is expected to reduce production lead times and improve the commercial applications of our process. The technology builds on AML3D’s Next- Generation Hybrid Printing project with the CSIRO, which developed a material strength prediction tool, to support the medium term, AML3D printed the world’s largest metal Oil & Gas creation of a higher quality, one stop production process. 4 AML3D Limited // ASX: AL3 // ABN 55 602 857 983AML3D is currently the only wire feedstock based Additive Manufacturing company accredited to produce Class certified components made of “Steel for hull structure and equipment; copper alloys for valves, fittings and general applications as per DNV’s rules” Capital Management The Company remains debt free and finished the financial year with cash balance of $2.9 million. Immediately following the end of the financial year, AML3D successfully completed an equity issue to raise an additional $2.7 million (before costs), from the placement of 37,605,038 new shares. This provides the Company with the necessary funding to: • Accelerate our growth initiatives, following recent contract wins; • Build on the existing business development team to bolster the sales and marketing pipeline; • Continue the enhancement of AML3D’s disruptive technology and remain a market leader; and • Meet the working capital demands of an upscaling business. Events subsequent to FY2022 As announced on the 3rd of August 2022, AML3D has been awarded the first Additive Manufacturing Facility accreditation with wire-feedstock, from DNV, the world’s leading Marine & Industrial Classification Society. The accreditation encompasses an “Approval of Manufacturer” (AoM) certificate and demonstrates that AML3D’s WAM® technology meets the enhanced ‘Class certification’ standards for Integrity and Quality that are applied to critical components in the Oil & Gas and Marine industries. The DNV facility accreditation follows the receipt of a DNV verification certificate for the world’s largest 3D printed shipboard fitting, a Panama Chook, manufactured by AML3D. AML3D is currently the only wire feedstock based Additive Manufacturing company accredited to produce Class certified components made of “Steel for hull structure and equipment; copper alloys for valves, fittings and general applications as per DNV’s rules”, which operate in extreme load, pressure or corrosive environments. Benefits of DNV Accreditation include: • Advantages and differentiates AML3D when engaging in high value parts tenders • Extends the range of contracts and customers AML3D can target in the Maritime, Oil & Gas and Navy/Defence Marine organisations Managing Director, Andy Sales AS9100D standard will enhance our prospects of becoming a preferred supplier to the aviation, space, and defence industries. The combination of DNV and Lloyd’s register accreditation with AS9100D certification closely aligns with AML3D’s growth strategy to increase sales of existing products, access new markets and sales and expand our potential customer base. Board and Governance In November 2021, the Board announced the retirements of its former Chairman, Mr Stephen Gerlach and non-executive director Mr Kevin Reid. The Board thanks Mr Gerlach and Mr Reid for their contributions to the Company over the past few years, and in particular guiding the Company through its early growth phase and IPO. Following their retirements, the directors initiated a review of the composition of the Board to ensure the Company’s leadership and governance has the appropriate mix and depth of skills and experience to achieve its strategy and growth ambitions. The Company advises that this process is well advanced, with the Board having progressed discussions with a number of very high-quality candidates. Outlook AML3D’s current order book will require our manufacturing facility to operate at high capacity over the coming months. The key production contract with Boeing, the ongoing customer support being provided to Rowlands Metalworks and ST Engineering in Singapore across a range of projects and work to allow a key Tier 1 Oil and Gas customer to validate our WAM® technology’s ability to create superior parts that address the customers supply chain issues all require completion prior to the end of Q2FY23. We would like to thank our very capable team that continues to work tirelessly through these challenging times to ensure AML3D remains on its path to further success and growth. They have demonstrated resilience and dedication throughout this growth phase. We operate as one team and have not wavered from our overarching goal of becoming a leading diversified large-scale metal fabrication company globally. • Ability to produce high quality parts for use in critical operations within the Marine and Oil & Gas industries and issue ‘Class Certification’ for critical components. Finally, to our shareholders, thank you for supporting AML3D. Your Board and management team are committed to pursuing profitable and sustainable growth for the benefit of all stakeholders, • Extends AML3D’s track record of delivering best in class, high as we build upon the foundation created to date. quality and integrity components AML3D’s DNV accreditation builds on AML3D’s previous world first wire-arc Additive Manufacturing facility certification by Lloyd’s Register. AML3D remains committed to demonstrating the quality of its products and services and is now focused on obtaining AS9100D certification of our WAM® technology during FY23. Achieving the Sean Ebert Chairman Andy Sales Managing Director 5 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Board 6 Sean Ebert // BEng Hons(Electrical), MAICD Chairman Member of Audit & Risk Committee Appointed as Director 30 August 2019 Appointed as Chairman 18 November 2021 Sean has 25 years of executive experience in both public and private sectors across high growth companies within the engineering, FMCG and emerging technologies sectors in Australia, China, US and Europe. Sean is currently a Non-Executive Director of listed company Mighty Craft (ASX:MCL, appointed 19 July 2021), as well as Non-Executive Director on a range of privately owned Australian growth companies and Executive Director of Venture Corporate Advisory. Sean was previously the Chief Executive Officer (CEO) of Beston Global Food (ASX:BFC), Global Director M&A of Worley, CEO of Camms Pty Ltd and CEO of Profit Impact Pty Ltd. Sean brings listed company and international experience to AML3D, is a Member of the Institute of Company Directors and holds a Bachelor Degree in Engineering with honours. The Board considers that Mr Ebert is an independent Director. Andrew Sales // MEng, MSc, CEng, CMatP Managing Director Appointed 14 November 2014 Andrew is a Chartered Engineer with a Master of Engineering and Master of Science and is a renowned expert in welding technology with over 28 years of global experience (Australia, Europe, South America, Africa and Asia). Andrew has held varying roles across upper management and senior leadership within the oil and gas, resources and mining sectors as well as advanced manufacturing, heavy engineering and fabrication. He is also the author of numerous technical papers in the field of welding high strength corrosion resistant alloys. In addition to Science and Engineering qualifications at Masters level, he also holds a Diploma in Quality Management and Auditing. He is a Chartered Engineer through ECUK and TWI (UK), a professional member of Materials Australia holding a CMatP, and also sits on two Standards Australia committees including the newly established committee for Additive Manufacturing. Andrew founded AML Technologies in 2014 and has been Managing Director since that time. The Board considers that Mr Sales is not an independent Director. AML3D Limited // ASX: AL3 // ABN 55 602 857 983Leonard Piro // BEc, DipCorpMgmt Non-Executive Director Chairman of Audit & Risk Committee Appointed 30 August 2019 Len has extensive experience with major manufacturing projects in Australia, including the establishment of the Tonsley site as a leading national and international Innovation Precinct. He is the former Deputy Chief Executive of the SA Department of Trade and Economic Development, Executive Director Manufacturing and Chief Executive Automotive Industry Transformation Taskforce and Group Executive Director and Chairman of the Tonsley Re- development. As Director of Len Piro Advisory, Len has consulted widely to an extensive range of companies and organisations in SA, from start-ups to global companies, particularly around business strategies and business planning and has had extensive exposure to global manufacturing trends. He is also a member of the Advisory Board of Supashock and Flinders University Institute for NanoScale Science and Technology. The Board considers that Mr Piro is an independent Director. Christine Manuel // BMus, GradDipACG, DipCD, DipInvRel, FGIA, FCG (CS, CGP), MAICD, MAITD, AAIPM Company Secretary Appointed 17 April 2019 Christine is an experienced Company Secretary and corporate governance professional and has held Company Secretary, non-executive director, CEO and senior executive roles in a range of listed and unlisted entities over more than 25 years. She is Company Secretary of several companies including Angel Seafood Holdings Ltd (ASX:AS1 2017-2022) and was formerly Company Secretary of Santos Group companies and People’s Choice Credit Union. Christine holds postgraduate qualifications in Applied Corporate Governance and is a Chartered Secretary and Chartered Governance Professional. She is a non- executive director of the Governance Institute of Australia, and past SA/NT State Council Chair. She regularly facilitates Governance Institute training courses. 7 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Directors’ Report The Directors of AML3D Limited (AML3D or the as aerospace, marine, defence, oil and gas, mining and general Company) present their report, together with the financial manufacturing which vary from high-end aerospace parts to statements of the Company and its controlled entities (the general engineering, with the value proposition being significant Group) for the financial year ended 30 June 2022. in the case of larger scale industrial grade and complex parts. Directors The following persons were Directors of the Company during the financial year and to the date of this report: Sean Ebert Andrew Sales Leonard Piro Stephen Gerlach Kevin Reid Non-executive Chairman, Appointed as Chairman 18 November 2021 Managing Director Non-executive Chairman Resigned 18 November 2021 Non-executive Director Resigned 18 November 2021 Directors have been in office since the start of the financial period to the date of this report unless otherwise stated. Information Relating to Directors and Company Secretary In conjunction with its WAM ® technology, AML3D has developed its own proprietary software, WAMSoft ®, which combines metallurgical science and engineering design to automate the 3D printing process utilising advanced robotics technology. The WAMSoft ® software enables a highly tailored approach to the needs of each client by enabling different pathways and welding operations for different products and materials. Depending on material type, thickness of part, geometry and final size, the software identifies optimal path Principal Activities The principal activities of AML3D during the financial year were to: a. Design and construct ARCEMY ® 3D printing modules for sale or right to use with an option to buy; b. Design and construct 3D parts using Wire Additive Manufacturing technology and to develop that technology; c. Research and development into the refinement of the companies products, including alternative applications. Non-executive Director models using an extensive library of weld bead geometries. Details of each Director’s experience, qualifications and No significant changes in the nature of the Company’s responsibilities are set out on pages 6 to 7. This includes activity occurred during the financial year. information on other listed company directorships in the last three years. The Company Secretary is Christine Manuel. Details Operating and Financial Review of her experience and qualifications are set out on page 7. Review of Operations Company Overview The Company’s revenue was derived from: AML3D is an Australian public company incorporated on 14 November 2014. The Company was admitted to the Official List of ASX on 16 April 2020 and commenced trading on ASX on 20 April 2020. AML3D is a welding, robotics, metallurgy and software business which uses automated wire- fed 3D printing in a large free-form environment to produce metal components and structures for commercial use. AML3D has commercialised its wire arc additive manufacturing technology (under the trademark WAM ®), an innovative metal additive manufacturing technology for the cost-effective production of large, high performance metal components and structures. AML3D’s proprietary WAM ® process is part of the spectrum of 3D metal printing that focuses on larger industrial a. ARCEMY ® sales with customers acquiring the ARCEMY ® 3D printing module for research and learning purposes, or their own fabrication needs; b. Contract manufacturing, which is fulfilling manufacturing orders for customers using our ARCEMY ® 3D printing module; and c. Service and technical support for customers using our ARCEMY ® 3D printing module. During the year the Company delivered ARCEMY ® 3D printing modules to both Queensland University and the Royal Melbourne Institute of Technology. These units will form part of the Universities’ additive manufacturing curriculum with a significant number of student to be trained applications with flexibility across multiple classes of metals to use our technology, understand its potential uses and including titanium alloys, nickel alloys and steel alloys. potentially drive its adoption across our traget markets. AML3D’s WAM ® technology combines electric arc as a heat source with wire as a feedstock and welds sequential layers of metal to produce near-net shape metal components. WAM ® technology provides an alternative manufacturing and fabrication The ARCEMY ® module delivered to ST Engineering in June 2020, previously under a right-to-use with an option to buy arrangement, was purchased outright during the year. In addition, a highly specialised ARCEMY ® module method for the production of components in industry sectors such for iKAD Engineering was also delivered during FY22. 8 AML3D Limited // ASX: AL3 // ABN 55 602 857 983To date, A total of five proprietary ARCEMY ® industrial scale • Build ARCEMY ® modules for customers looking to 3D metal printing units have now been sold and commissioned. establish in-house 3D printing capability; AML3D continues to work closely with Rowlands Metalworks and ST Engineering to enhance their unit’s capabilities in line with their customer requirements. The Company has continued to develop its technology including the printing of a range of metal pieces for use in a variety of industries such as oil and gas, marine and aerospace. Approximately 50% of revenue from contract manufacture was obtained through local customers, with the remainder generated through the South East Asia and the United States of America regions. • Grow recurring revenue through annual software licensing, service and maintenance agreements and sale of wire feedstock; • Continue with our research and development activities to refine and broaden our range of products and processes, further developing our environmental sustainability credentials by reviewing options for use of renewable energy and lowering energy inputs with the aim of reducing the carbon footprint of the WAM® process; and • Build the global profile of AML3D and its products through collaborations with learning institutions and key Throughout the year, the Company has sought out industry players. The Company will establish a Technology new customers and markets and developed a pipeline Advisory Group with participation from leading technical of opportunities which will be built on in FY23. institutions, reviewing and advising on current, future trends Financial Results and Position Revenue for the year was $2,014,828, an increase of over 200% on the Prior Corresponding Period (PCP). Total revenue for the year, inclusive of R&D tax offset and grants, was $2,604,349. EBITDA was a loss of $4,158,702 (PCP: $5,108,666). Overhead expenses of $5,322,291 were $673,655 lower on PCP with the Company continuing to invest in activities in accordance with its business plan. Director and employee benefits were down $1,323,559 on PCP through aligning staff headcount with current and expected medium term demand, with research and development up $831,667 contributing to the enhancement of existing and new technologies. Having established the Adelaide facility during the prior financial year, depreciation and amortisation was $721,119, up $311,974 on PCP. The resulting net loss after tax was $4,897,028 (PCP: $5,515,272) with carried forward tax losses not brought to account. At the end of the financial year, the Company had $2,933,482 in cash and cash equivalents on hand. $3,802,503 of cash was used in operating activities during the financial year, down $2,351,554 on cash consumed during the PCP. Use of IPO funds and developments in 3D metal printing globally. AML3D currently has the only diversified large-scale WAM® metal fabrication facility in the Southern Hemisphere that can produce finished parts and components to a certified standard under an accredited Quality Management System. With the granting of Australian Patent 2019251514, this protection validates the Company’s market leadership in advanced 3D printing solutions and opens up new markets for our technology. These are the advantage that the Company will look to leverage. Material Business Risks There are a number of material business risks which could affect the Company’s ability to achieve its business strategies as follows. Market Acceptance of New Technology AML3D has commercialised its WAM ® technology and has established a number of important relationships and research collaborations. However, there can be no assurances that the market will accept the WAM ® technology, given that it is challenging traditional and well-tried processes such as machining, casting and forging. WAM ® is a disruptive technology in traditional manufacturing industries where many potential users of WAM ® have existing sunk investments in existing processes. In the period from admission to ASX on 16 April 2020 and commencement of quotation of securities on ASX on 20 April 2020 until 30 June 2022, the Company has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with the Company’s business Wire arc additive manufacturing is a new technology in a relatively young industry of 3D metal printing. Widespread awareness- raising of the advantages and value proposition associated with the Company’s WAM ® technology will be required to lift the profile of the technology and educate the market. objectives, as outlined in the prospectus dated 10 February 2020. Customer Conversion Business Strategies and Prospects The Company plans to build on the successes achieved in FY22. The main areas of focus in FY23 will be to: At present, the Company is at a paid trial stage with a number of potential contract manufacturing clients. There can be no guarantee that any of these paid trial customers will convert into regular customer contracts. Although the Company’s client base is • Pursue global business opportunities, focusing initially on expected to diversify as a result of the expansion of the Company’s creating customer and industry partnerships in high margin revenue streams, the Company will initially be substantially reliant sectors such as oil and gas, marine and defence; on a select number of clients. The loss of any of these clients 9 AML3D Limited // ASX: AL3 // ABN 55 602 857 983The Board determines the Company’s risk profile and is responsible for establishing, overseeing and approving the Company’s risk management framework, strategy and policies, internal compliance and internal control. The Board has delegated to the Audit and Risk Committee the responsibility for overseeing the risk management system. The Company’s risk management policy sets out the requirements for the Company’s risk management framework, the process for identification and management of risks and regular reviews. Sustainability AML3D is committed to developing and maintaining sustainable and environmentally conscious operations. One of the benefits of AML3D’s manufacturing process is that it generates considerably less waste material than traditional casting and machining processes. Additive Manufacturing, with wire feedstock, has also been shown to have a lower carbon foot-print and use less energy when compared to may have a negative impact on the to successfully undertake such Risk Management Company’s revenues and profits unless research and development, anticipate they can be replaced with new clients. technical problems, or estimate The Company’s future activities are specifically designed around further business development activities in order research and development costs or time frames accurately will adversely affect the Company’s results. to grow the client base in Australia, Intellectual Property Singapore, and other markets. Reliance on Key Personnel The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management, technical experts and its Directors. In particular, the technology and the development of the ARCEMY® 3D printing modules is largely due to the The Company has been granted Australian Patent 2019251514, along with patents in South Korea and New Zealand, which provides coverage over the method and apparatus for manufacturing 3D metal parts. Despite the granting of the patent, it may not be of commercial benefit to the Company, or may not afford the Company adequate protection from competing products. experience of the Managing Director. The Data Loss and Cyber Security Company has reduced this risk by the appointment of additional technical staff. Access to Raw Materials The Company requires access to markets for its raw materials including titanium alloys, nickel alloys, stainless steel, aluminium alloys and bronze alloys in order to manufacture components. If the Company is unable to secure these materials, this would likely have a material adverse effect on the business and financial performance of the Company. Accreditation The growth of AML3D contract manufacturing services is dependent on retaining Lloyd’s Register and ISO 9001 accreditation for the certification of parts produced for its customers. The Company is reliant on the security of its network environment, vendor environments and websites. Breaches of security including hacking, denial of service attacks, malicious software use, internal Intellectual Property theft, data theft or other external or internal security threats could put the integrity and privacy of customers’ data and business systems conventional manufacturing processes. used by the Company at risk which could impact technology operations and ultimately customer satisfaction with the Company’s products and services, leading to lost customers and revenue. The Company has implemented a Cyber Security system and will continue to monitor its effectiveness. Pandemic Environmental Regulation The Group’s activities are subject to general environmental laws and regulations relating to manufacturing operations, in particular for the disposal and storage of scrap and hazardous materials. No breaches of environmental regulation occurred during the financial year and to the date of this report. The loss of these accreditations would To the date of this report, the Company’s significantly impact the demand for operations have been directly AML3D’s contract manufacturing services. adversely impacted by COVID-19. Significant Changes in the State of Affairs Climate Change Risk The Board is not aware of any current material exposure to risks brought about, or likely to be brought about, by climate change. Research & Development and Technical Risk The Company’s products and technology are the subject of continuous research and development which will likely need to be developed further in order to enable the Company to remain competitive, increase sales and improve the scalability Uncertainty remains as to the scope There were no significant changes in and length of the pandemic has, and the the state of affairs of the Company impact of restrictions that will be imposed during the financial year. to combat the pandemic. The pandemic may result in the loss of or further delay in sales to customers and potential customers. It may also impact access to equipment and supplies, delaying the delivery of products to customers. The Company is actively monitoring risks associated with COVID-19 and implementing risk management measures to mitigate against potential impacts. Environmental and Sustainability Risk Significant Events after the Balance Date No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years, other than: i. On 20 July 2022, the Company of products and technology. There are The Board is not aware of any material issued 37,605,038 ordinary shares no guarantees that the Company will exposure to economic, environmental at $0.0714 per share via a private be able to undertake such research or social sustainability risks to which placement to provide additional and development successfully. Failure the Company may be subject. working capital. 10 AML3D Limited // ASX: AL3 // ABN 55 602 857 983ii. To the date of signing this report, the Company’s operations Directors’ Shareholdings have been directly adversely impacted by COVID-19. Uncertainty remains as to the scope and length of the pandemic and the impact of restrictions that will be imposed to combat the pandemic. The pandemic may result in the loss of or further delay in sales to customers and potential customers. It may also impact access to equipment and supplies, delaying the delivery of products to customers. The Company is actively monitoring risks associated with The following table sets out each Director’s relevant interest in shares, debentures, and rights or options in shares or debentures of the Company or a related body corporate, including securities held directly, indirectly or by related parties, as at the date of this report: Director Fully paid ordinary shares Share Options COVID-19 and implementing risk management measures to Sean Ebert 1,024,999 2,000,000 Andrew Sales Leonard Piro 36,809,850 - 850,000 2,000,000 Further details of Directors’ security holdings, including the numbers subject to escrow restrictions, are provided in the Remuneration Report commencing on page 12. Directors’ and Senior Executives’ Remuneration Details of the Company’s remuneration policies and the nature and amount of the remuneration for the Directors and senior management (including shares, options and rights granted during the financial year) are set out in the Remuneration Report commencing on page 12 and in Notes 9 and 10 to the financial statements. mitigate against potential impacts. Dividends No dividends were declared or paid during the year. Corporate Governance The Board oversees the Company’s business and is responsible for the overall corporate governance of the Company. It monitors the operations, financial position and performance of the Company and oversees its business strategy, including approving the strategy and performance objectives of the Company. The Board is committed to maximising performance and generating value and financial returns for Shareholders. To further these objectives, the Board has created a framework for managing the Company, including the adoption of relevant internal controls, risk management processes and corporate governance policies and practices which the Board believes are appropriate for the business and which are designed to promote the responsible management and conduct of the Company. To the extent relevant and practical, the Company has adopted a corporate governance framework that is consistent with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition). The Company’s Corporate Governance Plan, including key policies, is available on the Company’s website at www.aml3d.com Directors’ Meetings During the financial year, 29 meetings of Directors, including Committees of Directors, were held. Attendances by each Director during the year were as follows: Board Audit and Risk Meetings Committee Meetings Eligible Meetings Eligible Meetings to attend attended to attend attended 18 18 18 5 5 18 18 18 5 5 8 - 11 3 4 8 - 11 3 4 Directors Sean Ebert Andrew Sales Leonard Piro Stephen Gerlach Kevin Reid 11 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Remuneration Report (audited) The Directors of the Company present this Remuneration 1. Remuneration Governance Report for the Group for the year ended 30 June 2022. The information provided in this Report has been audited as required by s308(3C) of the Corporations Act 2001 (Cth) (Corporations Act) and forms part of the Director’s Report. The Remuneration Report outlines the Company’s key remuneration activities during the financial year ended 30 June Consistent with the Board’s Charter, the Board has taken the decision that at this early stage of the Company’s growth a separate Remuneration and Nomination Committee is not warranted. Accordingly, the Board as a whole carries out the functions of the Remuneration and Nomination Committee, as described in the Committee Charter. Where appropriate, 2022 and remuneration information pertaining to the Company’s this is undertaken by Non-executive Directors only, without Directors and senior management personnel who are the Key the presence or participation of any Executive Director. Management Personnel (KMP) of the Group for the purpose of the Corporations Act and Accounting Standards. These are the personnel who have authority and responsibility for planning, Functions The Board reviews any matters of significance affecting the directing and controlling the activities of the Company. remuneration of the Board and employees of the Company. The report is structured as follows: 1. Remuneration Governance 2. Directors and Key Management Personnel (KMP) 3. Remuneration Policy 4. Remuneration Components 5. Relationship between Remuneration and Group Performance The primary remuneration purpose of the Board is to fulfil its responsibilities to shareholders, including by: a. Ensuring that the approach to executive remuneration demonstrates a clear relationship between key executive performance and remuneration; b. Fairly and responsibly rewarding executives, having regard to the performance of the Company, the performance of the executive and the prevailing remuneration expectations in 6. Details of Directors’ and KMP Remuneration the market; 7. Key Terms of Employment Contracts 8. Terms and Conditions of Share-based Payment Arrangements 9. Directors’ and KMP Equity Holdings 10. Other Transactions with Directors and KMP 12 c. Reviewing the Company’s remuneration, recruitment, retention and termination policies and procedures for senior management; d. Reviewing and approving any equity-based plans and other incentive schemes; e. Clearly distinguishing the structure of Non-executive Director (NED) remuneration from that of executive directors and senior executives, and recommending NED remuneration to the Board; f. Arranging the performance evaluation of the Board, its Committees, individual Directors and senior executives on an annual basis; and g. Overseeing the annual remuneration and performance evaluation of the senior executive team. The Board has adopted protocols for engaging and seeking advice from independent remuneration consultants. Further information about remuneration structures and the relationship between remuneration policy and company performance is set out below. The Board Charter and the Remuneration and Nomination Committee Charter, which outline the terms of reference under which the Committee operates, are available in the Corporate Governance Plan at www.aml3d.com/investors. AML3D Limited // ASX: AL3 // ABN 55 602 857 9832. Directors and Key Management Personnel (KMP) Executive Remuneration The directors and KMP of the Group during the year were: Period of Position Responsibility in FY22 Non-executives Sean Ebert Leonard Piro Stephen Gerlach Kevin Reid Full year. Appointed as Chairman 18 November 2021 Full year To 18 November 2021 To 18 November 2021 Executives Andrew Sales Hamish McEwin Full year Full year Independent Non- executive Chairman Independent Non- executive Director Independent Non- executive Chairman Independent Non- executive Director Managing Director, Chief Executive Officer (CEO) Chief Financial Officer (CFO) 3. Remuneration Policy The Company’s remuneration framework for Directors and senior executives has been designed to remunerate fairly and responsibly, balancing the need to attract and retain key The Board reviews the executive structure and framework on an annual basis to ensure that the remuneration framework remains aligned to business needs. The Board aims to ensure that remuneration practices are: • Competitive and reasonable, enabling the Company to attract and retain key talent; and • Aligned to the Company’s strategic and business objectives and the creation of shareholder value. 4. Remuneration Components Non-Executive Directors Non-executive Directors receive a fixed fee for their participation on the Board. No additional fee is paid for service on Board sub-committees. Directors do not receive performance-based incentives but they are eligible, subject to shareholder approval, for the grant of options that do not include performance-based vesting criteria. Non-Executive Director fees are determined by the Board within an aggregate fee pool limit as approved by shareholders. The current aggregate fee pool, as set out in the Constitution in Rule 14.8 detailing initial fees to Directors, is $400,000. In addition, Directors are eligible to participate in the personnel with a prudent approach to management of costs. Concessional Incentive Option Plan and the Performance The Board’s policy for determining the nature and Rights and Option Plan, subject to approval by shareholders. amount of remuneration for Board members and Executives senior executives of the Company is as follows: Executive remuneration comprises fixed remuneration (salary) Non-Executive Director Remuneration and may include short-term and long-term incentive plan The Board aims to remunerate each Non-executive Director (NED) components. These are set with reference to the Company’s for their time, commitment and responsibilities at market rates performance and the market. Fixed remuneration, which reflects for comparable companies. The Board determines and reviews the individual’s role and responsibility as well as their experience the level of fees payable to Non-executive Directors annually, based on market practice, duties and accountability and subject to the maximum aggregate amount per annum as approved by shareholders. Fees for Non-executive Directors are not linked to the performance of the Group, other than participation in share options (refer to section 8 for share option plans). The Board approves a letter of appointment setting out the key terms and conditions of appointment for each Non-executive Director. Non-executive Directors receive statutory superannuation guarantee payments and skills, includes base pay and statutory superannuation. Remuneration at risk may be provided through short-term and long-term incentive plan components, linked to performance measured against operational and financial targets set by the Company, designed to achieve operational and strategic targets for the sustainable growth of the Company and long- term shareholder value. No short-term or long-term incentive elements were implemented for KMP in the financial year ended 30 June 2022 or to the date of this report. The Board will and do not receive any other retirement benefits. review the remuneration framework during the coming year. 13 AML3D Limited // ASX: AL3 // ABN 55 602 857 9835. Relationship between Remuneration and Group Performance The Board aims to align executive remuneration to the Company’s fixed remuneration in the context of balancing the requirements of strategic and business objectives and the creation of shareholder a rapidly growing and newly ASX-listed company and focussing wealth. The table below sets out key metrics in respect of the on strategic and business objectives to ensure shareholder value. Group’s performance over the past five years. The remuneration There are currently no short-term or long-term incentives on foot. framework is designed to take account of a suitable level for the Cash and cash equivalents 2,933,482 7,200,707 8,227,986 1,158,109 404,136 Net assets/equity 6,631,120 11,528,148 9,712,920 (113,666) 480,145 2022 $ 2021 $ 2020 $ 2019 $ 2018 $ Revenue EBITDA Loss from ordinary activities after income tax expense No of issued shares Basic earnings per share (cents)2 Diluted earnings per share (cents)2 Share price at start of year (cents)1 Share price at end of year (cents) 2,014,828 644,486 288,516 36,057 4,065 (4,158,702) (5,108,666) (3,008,192) (595,966) (26,298) (4,897,029) (5,515,272) (3,094,021) (680,836) (50,301) 150,458,386 150,458,386 132,366,163 12,320,250 11,782,750 (3.3) (3.3) 0.205 0.052 (3.8) (3.8) 0.155 0.205 (3.8) (3.8) 0.20 0.155 (1.3) (1.3) N/A N/A N/A N/A (0) (0) N/A N/A N/A N/A Market capitalisation (Undiluted) 7,823,836 30,843,969 20,516,755 Interim and final dividend (cents) N/A N/A N/A 1. The Company was incorporated in 2014 as a proprietary company 2. Basic earnings per share and diluted earnings per share have and was changed to an unlisted public company on 5 December been retrospectively restated to account for a capital restructure of 2019. Share price at start of FY20 is shown as at commencement shares. A capital reconstruction was undertaken on 29 July 2019 of ASX quotation on 20 April 2020 following admission to the official and 4.2348 shares were issued for every 1 share. The number of list of ASX on 16 April 2020, based on the value of shares taken up shares issued in the previous financial periods have been multiplied pursuant to the prospectus. by 4.2348 for the purpose of EPS calculation. 14 AML3D Limited // ASX: AL3 // ABN 55 602 857 9836. Directors’ and KMP Remuneration Remuneration for the financial year ended 30 June 2022 Short-term employee benefits y r a l a S s e e F & e v i t n e c n i m r e t - t r o h S e v a e l l a u n n A e v a e L e c i v r e S g n o L Post- employment - r e p u S n o i t a u n n a Share-based payments s e r a h S s n o i t p O - e r a h s l a t o T s t n e m y a p d e s a b n o i i t a n m r e T s t fi e n e b m r e t - g n o l r e h t O l a t o T l a t o T ’ k s i r t a ‘ $ $ $ $ $ $ $ $ $ $ $ % Non-executive Directors Sean Ebert1 Leonard Piro Stephen Gerlach2 Kevin Reid3 51,667 40,000 25,000 16,667 Subtotal 133,334 Executives Andrew Sales Hamish McEwin 220,042 228,311 Subtotal 448,353 TOTAL 581,687 - - - - - - - - - - - - - - - - - - - 5,167 4,000 2,500 1,667 13,334 (7,714) 24,739 21,900 7,465 - 22,831 (249) 24,739 44,731 (249) 24,739 58,065 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 56,834 44,000 27,500 18,334 146,668 258,967 258,607 517.574 664,242 1. Appointed as Chairman 18 November 2021. 2. Resigned 18 November 2021. 3. Resigned 18 November 2021 - - - - - - - - - 15 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Remuneration for the financial year ended 30 June 2021 Short-term employee benefits e v a e l l a u n n A r e h t O Post- employment - r e p u S n o i t a u n n a Share-based payments s e r a h S 1 s n o i t p O l a t o T s t n e m y a p d e s a b - e r a h s r e h t O m r e t - g n o l n o i i t a n m r e T $ $ $ $ $ $ $ y r a l a S s e e F & m r e t - t r o h S e v i t n e c n i $ $ Non-executive Directors1 Stephen Gerlach Sean Ebert1 Leonard Piro Kevin Reid 60,000 178,335 40,000 40,000 Subtotal 318,335 Executives1 Andrew Sales Hamish McEwin2 Benjamin Hodgson3 Karsten Bartnicki4 219,278 75,518 164,626 118,385 Subtotal 577,807 TOTAL 896,142 - - - - - - - - - - - - - - - - 19,766 1,418 - - 21,184 21,184 - - - - - - - - - - - 5,700 3,800 3,800 3,800 17,100 20,831 7,174 - 11,035 39,040 56,140 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - s t fi e n e b $ l a t o T l a t o T ’ k s i r t a ‘ $ % - - - - - - - - - - - 65,700 182,135 43,800 43,800 335,435 259,875 84,110 164,626 129,420 638,031 973,466 - - - - - - - - - - - 1. Salary and fee remuneration for Sean Ebert 2. Appointed 1 March 2021. comprised Non-executive Director fees of $40,000 as well as $138,335 (ex GST) paid to his controlled entity, Ebert Industries Pty Ltd, for consultancy services and his services as an Executive Director. 3. Services were provided by Benjamin Hodgson through his controlled entity, Philhodge Business Services Pty Ltd. This agreement was terminated 1 March 2021. 4. Appointed 18 January 2021. Resigned 26 May 2021. 16 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 7. Key Terms of Employment Contracts Executives Non-Executive Directors Managing Director The Company has entered into Non-Executive Director letters The Company has entered into an executive services agreement of appointment with each of Stephen Gerlach, Leonard Piro, Kevin Reid and Sean Ebert (Letters of Appointment). Each of the Letters of Appointment provide that amongst other things, in consideration for their services, the Company will pay the following fees, exclusive of statutory superannuation: Chairman: $60,000 per annum with Andrew Sales, whereby he was engaged as the Managing Director and Chief Executive Officer (Managing Director) of the Company. Andrew Sales receives a base salary of $220,000 per annum (exclusive of superannuation) for services rendered under the executive services agreement. The Company will also, subject to certain conditions, reimburse the Managing Director for all reasonable travelling intra/interstate or overseas, accommodation Non-Executive Directors: $40,000 per annum and general expenses incurred in the performance of all duties Each Non-Executive Director is also entitled to be reimbursed reasonable expenses incurred in performing their duties. The appointment of the Non-Executive Directors is subject to the provisions of the Constitution and the ASX Listing Rules relating to retirement by rotation and re-election of directors. The appointment of a Non-Executive Director will automatically cease at the end of any meeting at which the relevant Director is not re-elected as a Director by shareholders. A Director may terminate in connection with the business of the Company. There is no short-term or long-term incentive component to his remuneration. The termination provisions in the executive services agreement are on standard commercial terms and generally require a minimum period of notice prior to termination. In the event that the Company elects to terminate the executive services agreement without reason, it must pay the Managing Director the salary payable over a six-month period. their directorship at any time by advising the Board in writing. Chief Financial Officer The Letters of Appointment otherwise contain terms and The Company has entered into an executive services agreement conditions that are considered standard for agreements with Hamish McEwin, whereby he was engaged as the Chief of this nature and are in accordance with the ASX Financial Officer (CFO) of the Company. Hamish McEwin Corporate Governance Council’s Corporate Governance receives a base salary of $250,000 per annum (inclusive of Principles and Recommendations (4th Ed). superannuation) for services rendered under the executive services agreement. The Company will also, subject to certain conditions, reimburse the CFO for all reasonable travelling intra/interstate or overseas, accommodation and general expenses incurred in the performance of all duties in connection with the business of the Company. There is no short-term or long-term incentive component to his remuneration. The termination provisions in the executive services agreement are on standard commercial terms and generally require a minimum period of notice prior to termination. In the event that the Company elects to terminate the executive services agreement without reason, it must pay the CFO the salary payable over a three-month period. 17 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 18 AML3D Limited // ASX: AL3 // ABN 55 602 857 9838. Terms and Conditions of Share-based Payment Arrangements No share-based payments were made during the current financial year (2021: Nil). Concessional Incentive Option Plan The key terms of the Concessional Incentive Option Plan are as follows: Eligibility Employees, contractors or directors (Participants) The Board may in its absolute discretion make a written offer to any Participant to apply for options Offers upon the terms set out in the Concessional Incentive Option Plan and upon such additional terms and conditions as the Board determines. Vesting Conditions Options may be made subject to vesting conditions. Options will only vest while the Participant remains employed, engaged or is an officer of the Company. Where a Participant becomes a: • Good Leaver, unless the Board in its sole and absolute discretion determines otherwise, unvested options will lapse and vested options that have not been exercised will remain exercisable for a period of three months; • Bad Leaver, unvested options will lapse and subject to the discretion of the Board, vested options that have not been exercised will lapse on the date of cessation of employment, engagement or office of the Participant. Disposal restrictions apply, including either Disposal three years after the date of issue of the option or when the option holder ceases to be a Participant. Details of the Concessional Incentive Option Plan were included in the Company’s Prospectus and a copy of the Plan was released to the ASX market announcements platform on 16 April 2020. A copy of the Concessional Incentive Option Plan is available on the Company’s website at www.aml3d.com/investors. Performance Rights and Option Plan A Performance Rights and Option Plan is also in place to accommodate future long-term remuneration incentives but as at the date of this report no grants of performance rights or options have been made pursuant to this plan. Details of the Performance Rights and Option Plan were included in the Company’s Prospectus and a copy of the Plan was released to the ASX market announcements platform on 16 April 2020. A copy of the Performance Rights and Option Plan is available on the Company’s website at www.aml3d.com/investors. 19 AML3D Limited // ASX: AL3 // ABN 55 602 857 98320 AML3D Limited // ASX: AL3 // ABN 55 602 857 9839. Directors’ and KMP Equity Holdings Details of the number of ordinary shares held by Directors and KMP in the Company are set out below. This includes shares held directly, indirectly or beneficially by Directors and KMP, including related party holdings. Balance at 1 Jul 2021 Purchased Sold Other Changes Balance at 30 Jun 2022 Non-executive Directors Sean Ebert 1,024,999 Leonard Piro Stephen Gerlach1 Kevin Reid1 Executives Andrew Sales TOTAL 850,000 300,001 75,001 40,311,250 42,561,251 1. Resigned 18 November 2021 - - - - - - - - - - - - - - (300,001) (75,001) 1,024,999 850,000 - - - 40,311,250 (375,002) 42,186,249 Details of the number of options held by Directors and KMP in the Company are set out below. This includes options held directly, indirectly or beneficially by Directors and KMP, including their related parties. Balance at 1 July 2021 Granted Purchased Options Expired/ Other Balance at Exercised Lapsed Changes 30 June 2022 Vested Unvested Non-executive Directors Sean Ebert 2,000,000 Leonard Piro 2,000,000 Stephen Gerlach1 2,500,000 Kevin Reid1 500,000 TOTAL 7,000,000 1. Resigned 18 November 2021 - - - - - - - - - - - - - - - - - - - - - - 2,000,000 2,000,000 2,000,000 2,000,000 (2,500,000) (500,000) - - - - (3,000,000) 4,000,000 4,000,000 - - - - - Terms of the options granted to Directors are provided in section 8 of this report, above. 10. Other Transactions with Directors and KMP There have been no transactions with Directors and KMP other than those described in this Remuneration Report. Related Party Transactions Details of transactions with related parties including KMP are provided at Note 26 to the financial statements. -- End of Remuneration Report -- 21 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Options and Share Rights Holders of options and share rights do not have any rights to participate in any issue of shares or other interests of the Company or any other entity. During the financial year ended 30 June 2022, no options were issued (2021: nil). No shares were issued on the exercise of options during the financial year ended 30 June 2022 (2021: 2,536,666). No share rights were issued during the financial year ended 30 June 2022 (2021: Nil). In accordance with the Constitution, the Company has entered into Deeds of Indemnity in favour of each of the current Directors and Company Secretary. The indemnities operate to the full extent permitted by law. The Company is not aware of any liability having arisen, and no claims have been made during or since the financial year ending 30 June 2022 under the Deeds of Indemnity. The Company’s subsidiary, AML Technologies (Asia) Pte Limited has provided a letter of indemnity to its Company Secretary. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnity an officer or As at the date of this report, the unissued ordinary shares of auditor of the Company or of any related body corporate the Company under option are as follows. against a liability incurred as such an officer or auditor. Grant date Expiry Date Exercise Number of Price Options 30 July 2019 30 July 2023 $0.30 2,000,000 4 December 4 December 2019 Total 2024 $0.30 7,500,000* 9,500,000 * Comprises 4,000,000 options issued to Directors, 3,000,000 options issued to former Directors and 500,000 options issued to the Company Secretary There have been no options or share rights granted over unissued shares or interests of the controlled entity within the Group during or since the reporting period. Proceedings on behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The Company was not a party to any such proceedings during the financial year. Indemnification and Insurance of Officers or Auditor During the financial year, in accordance with the provisions of the Company’s Constitution, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all Executive Officers of the Company against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001 (Cth). The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Non-Audit Services The Board is satisfied that the provision of non-audit services by its auditor, William Buck, during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the non-audit services provided by the auditors during the year did not compromise the external auditor’s independence. The fees paid or payable to William Buck for non-audit services are set out in Note 11 of the financial report. The non-audit services provided were tax compliance services. Auditor’s Independence Declaration The Auditor’s Independence Declaration is included on page 23, of this annual report. This Directors’ Report is signed in accordance with a resolution of Directors made pursuant to s298(2) of the Corporations Act 2001. On behalf of the Directors Sean Ebert Chairman 30 August 2022 22 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Auditor Independence Declaration AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF AML3D LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2022 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and — no contraventions of any applicable code of professional conduct in relation to the audit. William Buck (SA) ABN: 38 280 203 274 M.D. King Partner Dated this 30th day of August, 2022 in Adelaide, South Australia. 23 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 AML3D Limited Independent auditor’s report to members Report on the Audit of the Financial Report Opinion We have audited the financial report of AML3D Limited (the Company) and its subsidiary (together, the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 24 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 KEY AUDIT MATTER Research and development expenditure - existence and valuation. Refer also to notes 3(i) and 12. The Group incurs significant amounts of research and development costs each year. In 2022 these costs amounted to $1,559,617. Each year the Group makes an assessment as to the amount it expects to claim from the Australian Government by the way of a Research & Development Tax Offset Refund. At 30 June 2022 the amount disclosed as a current trade and other receivable in relation to the refund is $462,374. Overall due to the high level of judgement involved, and the significant carrying amount involved, we have determined that this is a key audit matter area that our audit concentrated on. How our audit addressed it Our audit procedures included: ‒ A detailed evaluation of the Group’s research and development strategy; ‒ Testing the costs incurred; ‒ Engaging our own taxation specialists to consider the appropriateness of the Group's substantiation for the claim; ‒ Reviewing the historical accuracy by comparing the original refunds with actual Tax offset estimations. We assessed the adequacy of the Group's disclosures in respect of the transactions. KEY AUDIT MATTER Revenue recognition. Refer also to notes 2(j) and 6. The Group derives income from the following: How our audit addressed it Our audit procedures included: - Sale of the ARCEMY 3D printing module - Contract manufacturing for customers using owned ARCEMY 3D printing modules - Contract service or technical support for customers using owned ARCEMY 3D printing modules Each revenue stream requires a bespoke that revenue revenue is only recognised recognition model to ensure — When a performance milestone is achieved; and — It can reliably be measured; The application of AASB 15 Revenue from Contracts with Customers can require judgement, thus we considered this area to be a key audit matter. — determining whether revenue recognised is in accordance with the Group’s accounting policies; — Identifying and verifying the achievement of performance milestones and recognition of revenue relative to that achievement; — Examining the existence of revenue by testing both the contract and subsequent receipt of invoicing of the revenue to the customer; — Substantively testing revenue cut-off and the income in advance balance to ensure revenue has been recognised in the correct period. We also assessed the appropriateness of disclosures attached to revenues as required by Accounting Standard AASB 15 Revenue from Contracts with Customers. 25 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 KEY AUDIT MATTER Liquidity and capital management Refer also to note 2(r). To support the basis of preparation of the financial statements, the Group has prepared a forecast of its cash flows, which includes a number of significant assumptions about sales and production and estimates of cash outflows. The Group has incurred significant losses in the current and prior financial year. We also noted a significant decline in the net current asset position of the Group as at 30 June 2022. As a result, our assessment of liquidity and capital management as it relates to the basis of preparation of the financial statements is considered a key audit matter. We note that subsequent to 30 June 2022, the Group successfully raised $2.85 million from a private capital initiative. This has been factored into the Group’s cash flow forecast and consideration on going concern. How our audit addressed it We assessed the main assumptions in the Group’s cash flow forecast for at least 12 months from the date of signing the auditor’s report, by performing the following procedures, amongst others: — Evaluating the assumptions used in management’s cash flow forecasts; — Compared actual revenue and cost outcomes for the prior period and the current year to date to Group forecasts; — Ensuring that all committed capital purchases and future capital raising initiatives are taken into consideration. We evaluated the Group’s potential opportunities for cash conservation as well as options for raising additional funds. We also considered the appropriateness of the liquidity risk disclosures included within the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 26 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of these financial statements is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our independent auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 22 of the directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of AML3D Limited, for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. 27 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. William Buck (SA) ABN: 38 280 203 274 M.D. King Partner Dated this 30th day of August, 2022 in Adelaide, South Australia. 28 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Financial Statements Consolidated Statement of Loss and Other Comprehensive Income 30 Consolidated Statement of Financial Position 31 Consolidated Statement of Changes in Equity 32 Consolidated Statement of Cashflows Notes to Financial Statements Directors Declaration 32 33 52 29 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Consolidated Statement of Loss and Other Comprehensive Income For the year ended 30 June 2022 Revenue Cost of goods sold Gross profit R&D Tax Offset Government grants Gain on disposal of property, plant and equipment Interest received Depreciation and amortisation Director and employee benefits Interest expense Marketing expenses Occupancy costs Professional fees expense Research and development Workshop expenses Equity settled share based payments Other expenses Loss before income tax expense Income tax Note 6 2022 $ 2,014,828 (1,478,626) 536,202 565,425 24,096 37,865 6,972 7 (721,119) 2021 $ 644,486 (357,144) 287,342 416,521 183,417 - 20,350 (409,145) (1,792,048) (3,115,607) (24,179) (148,176) (126,884) (873,541) (1,559,617) (207,882) - (17,811) (163,178) (197,480) (837,685) (727,950) (344,216) - (614,142) (609,830) (4,897,028) (5,515,272) - - 10 7 8 Loss after tax attributable to the owners of the Company (4,897,028) (5,515,272) Other comprehensive (loss) net of tax Total comprehensive loss for the year attributable to the owners of the Company - - (4,897,028) (5,515,272) Basic and diluted loss per share (cents) 25 (3.3) (3.8) The Consolidated Statement of Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes, which form an integral part of the financial report. 30 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Consolidated Statement of Financial Position As at 30 June 2022 Note 2022 $ 2021 $ ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventory Other financial assets Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Right of use assets Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Contract liabilities Borrowings Lease liabilities Employee benefits TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Lease Liabilities Employee benefits TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Accumulated losses Reserves TOTAL EQUITY The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes, which form an integral part of the financial report. 30(a) 2,933,482 12 13 14 15 16 17 18 19 20 35 21 22 21 22 771,534 905,985 56,000 221,404 7,200,707 522,857 2,031,657 56,000 224,484 4,888,405 10,035,705 2,575,201 2,770,639 347,836 47,479 2,970,516 7,858,921 537,556 62 ,151 3,370,346 13,406,051 510,239 5,624 189,062 175,025 128,907 777,339 451,028 - 178,803 109,626 1,008,857 1,516,796 185,818 33,126 218,994 1,227,801 6,631,120 361,107 - 361,107 1,877,903 11,528,148 23(a) 24 23(d) 20,641,272 20,641,272 (14,683,117) (9,786,089) 672,965 6,631,120 672,965 11,528,148 31 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Consolidated Statement of Changes in Equity For the year ended 30 June 2022 Balance at 1 July 2020 13,310,772 672,965 (4,270,817) 9,7132,920 Issued Capital $ Share Options Reserve $ Accumulated Losses $ Total Equity $ Loss after income tax expense for the year - Shares issued during the year, net of transaction costs 6,569,500 761,000 - - - (5,515,272) (5,515,272) - - 6,569,500 761,000 20,641,272 672,965 (9,786,089) 11,528,148 Share options issued Balance at 30 June 2021 Balance at 1 July 2021 20,641,272 672,965 (9,786,089) 11,528,148 Loss after income tax expense for the year Shares issued during the year, net of transaction costs Options exercised during the year - - - - - - (4,897,028) (4,897,029) - - - - Balance at 30 June 2022 20,641,272 672,965 (14,683,117) 6,631,120 The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes, which form an integral part of the financial report. Consolidated Statement of Cash Flows For the year ended 30 June 2022 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Receipts from Government grants Receipts from R&D tax incentive Payments to suppliers and employees Interest received Finance costs Note 2022 $ 2021 $ 1,453,591 1,248,336 29,049 512,850 546,726 565,261 (5,779,930) (8,519,717) 6,117 (24,179) 23,148 (17,811) Net cash (used in) operating activities 30(b) (3,802,503) (6,154,057) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale of property, plant and equipment Payments for intangible assets Payment for financial assets Purchase of plant and equipment Net cash (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issues of shares, net of costs Repayment of borrowings Repayment of lease liabilities Net cash (used in) provided by financing activities Net (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of year Cash and cash equivalents at end of financial year 30(a) The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes, which form an integral part of the financial report. 32 58,500 (9,315) - (321,207) (272,022) 10,000 (23,633) (179,067) (192,700) - (32,471) (20,000) (1,980,928) (2,033,399) 7,289,100 - (128,923) 7,160,177 (4,267,225) (1,027,279) 7,200,707 2,933,482 8,227,986 7,200,707 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Notes to the Financial Statements For the year ended 30 June 2022 1. General Information c. Taxation i. Income Tax The income tax expense/(income) of the year comprises current income tax expense/(income) and deferred tax AML3D Limited (AML3D or the Company) is a limited liability company expense/(income). incorporated in Australia, whose shares are listed on the ASX. Current income tax expense/(income) charged to the profit The financial statements were authorised for issue by the directors or loss is the tax payable on taxable income calculated on 30 August 2022. The Directors have the power to amend and using applicable income tax rates enacted, or substantially reissue the financial statements. The financial statements comprise the consolidated financial statements of the Company and its controlled entity (the Group). enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. The principle accounting policies adopted in the preparation Deferred income tax expense reflects movements in of these consolidated financial statements are set out below deferred tax assets and deferred tax liabilities during the or included in the accompanying notes. Unless otherwise year as well as unused tax losses. stated, these policies have been consistently applied to all the years presented. 2. Statement of Significant Accounting Policies a. Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations of the Australian Accounting Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on Standards Board and the Corporations Act 2001 (Cth). The accounting or taxable profit and loss. Company is a for profit entity for the purpose of preparing the financial statements. The consolidated financial statements of AML3D comply with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on an accruals basis, except for cashflow information and are based on historical costs, except for the circumstances Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Where temporary differences exist in relation to investments where the fair value method has been applied as detailed in in subsidiaries, branches, associates, and joint ventures, these accounting policies. The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. Comparatives are consistent with prior years, unless otherwise stated. b. Principles of Consolidation As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future tax amounts will be available to utilise those temporary differences and losses. Current tax assets and liabilities are offset where a legally enforceable right of offset exists and it is intended that net settlement or simultaneous realisation and settlement of the consolidated financial statements as well as their results for respective asset and liability will occur. Deferred tax assets the year then ended. Where controlled entities have entered and liabilities are offset where a legally enforceable right of (left) the Consolidated Group during the year, their operating set-off exists, the deferred tax assets and liabilities relate to results have been included (excluded) from the date control income taxes levied by the same taxation authority on either was obtained (ceased). i. Subsidiaries Subsidiaries are entities controlled by the Group. A list of subsidiaries is provided in Note 5. the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered ii. Transactions eliminated on consolidation or settled. All intra-group balances and transactions, and any unrealised ii. Goods and Services Tax (GST) income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred 33 AML3D Limited // ASX: AL3 // ABN 55 602 857 983is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost Class of fixed asset Office and Computer equipment Depreciation rate (%) 20 - 33 of acquisition of the asset or as part of an item of expense. Plant and Equipment Receivables and payables in the Statement of Financial Motor Vehicles 10 - 20 22.5 Position are shown inclusive of GST. Leasehold improvements Over the term of the lease The net amount of GST recoverable from, or payable to, the The assets’ residual values and useful lives are reviewed, Australian Taxation Office is included as a current asset or and adjusted if appropriate, at the end of each reporting liability in the Statement of Financial Position. period. An asset’s carrying amount is written down Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. cash flows included in cash inflows from operations or Gains and losses on disposal of an item of plant payments to suppliers and employees. d. Plant and Equipment i. Recognition and Measurement Items of plant and equipment are measured on the cost basis and carried at cost less accumulated depreciation and impairment losses. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present. Cost includes expenditure that is directly attributable to the acquisition of the asset. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not more than the recoverable amount from these assets. The recoverable amount is assessed based on the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts. Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment. ii. Subsequent Costs The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured and equipment are determined by comparing the proceeds from disposal with the carrying amount of plant and equipment and are recognised net within “other income” in the Statement of Profit or Loss and Other Comprehensive Income. e. Impairment of Non-Financial Assets The carrying amounts of the Group’s non-financial assets, other than deferred tax assets (see accounting policy 2(c)) are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and asset groups. Impairment losses are recognised in the Statement of Profit or Loss and Other Comprehensive Income, unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the Statement of Profit or Loss and Other Comprehensive Income. Impairment losses recognised in respect of cash-generating units are allocated to the other assets in the unit on a pro rata basis. The recoverable amount of an asset or cash generating unit is the greater of its 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 flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. reliably. Any costs of the day-to-day servicing of plant and Impairment losses recognised in prior periods are assessed at equipment are recognised in the Statement of Profit or each reporting date for any indications that the loss has decreased Loss and Other Comprehensive Income as an expense as or no longer exists. An impairment loss is reversed if there has incurred. iii. Depreciation Depreciation is charged to the Statement of Profit or Loss and Other Comprehensive Income on a straight-line basis over the asset’s useful life to the Group commencing from the time the asset is held ready for use. been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised. f. Financial Instruments Depreciation rates and methods are reviewed annually for i. Initial Recognition and Measurement appropriateness. The straight-line depreciation rates used Financial assets and financial liabilities are recognised for the current period are as follows: when the entity becomes a party to the contractual 34 AML3D Limited // ASX: AL3 // ABN 55 602 857 983provisions to the instrument. For financial assets, this is or liabilities assumed, is recognised in the Statement of Profit equivalent to the date that the entity commits itself to either or Loss, and other comprehensive income. the purchase or sale of the asset (i.e. trade date accounting is adopted). Other Financial Assets Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is A financial asset that meets the following conditions is subsequently measured at amortised cost: classified “at fair value through profit or loss”, in which case • The financial asset is managed solely to collect transaction costs are expensed to profit or loss immediately. contractual cash flows; and Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Trade receivables are initially measured at the transaction price. Trade receivables do not contain a significant financing component. ii. Classification and Subsequent Measurement Financial Liabilities A financial liability is measured at fair value through profit and loss if the financial liability is: • A contingent consideration of an acquirer in a business combination to which AASB 3: Business Combinations applies; • Held for trading; or • Initially designated as “at fair value through profit or loss”. All other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. • The contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income: • The contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified; and • The business model for managing the financial assets comprises both contractual cash flows’ collection and the selling of the financial asset. By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently The effective interest rate method is a method of calculating measured at fair value through profit or loss. the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. Any gains or losses arising on changes in fair value are recognised in profit or loss to the extent they are not part of a designated hedging relationship are recognised in profit or loss. The change in fair value of the financial liability attributable to changes in the issuer’s credit risk is taken to other comprehensive income and are not subsequently reclassified to profit or loss. Instead, they are transferred to retained earnings upon The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time option on initial classification and is irrevocable until the financial asset is derecognised. A financial asset is derecognised when the holder’s contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. Cash and Cash Equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, derecognition of the financial liability. If taking the change deposits held at call with banks, other short-term highly in credit risk in other comprehensive income enlarges liquid investments with original maturities of three months or or creates an accounting mismatch, then these gains or less, and bank overdrafts. Bank overdrafts, if any, are shown losses should be taken to profit or loss rather than other within short-term borrowings in current liabilities on the comprehensive income. Statement of financial position. A financial liability is derecognised when it is extinguished (i.e. Trade and Other Receivables when the obligation in the contact is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability is treated as an extinguishment of the existing liability and recognition of new Receivables are usually settled within 60 days. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. financial liability. The difference between the carrying amount Trade and other receivables are initially recognised at fair of the financial liability derecognised and the consideration value and subsequently measured at amortised cost using paid and payable, including any non-cash assets transferred the effective interest method, less any provision for impairment. 35 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Collectability of trade and other receivables are reviewed on an fundsinvested, gains on the disposal of financial assets and ongoing basis. Trade and Other Payables changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective These amounts represent liabilities for goods and services interest method. provided to the Group prior to the end of financial year which are unpaid and stated at their amortised cost. The amounts are g. Employee Benefits unsecured and are generally settled on 30 day terms. i. Short-term Employee Benefits iii. Impairment of Financial Assets Impairment of financial assets is recognised on an expected credit loss (ECL) basis for the following assets: Provision for employee benefits for wages, salaries, annual leave and long service leave that are expected to be settled wholly within 12 months of the reporting date represent obligations resulting from the employee’s services provided • Financial assets measured at amortised cost to the reporting date and are calculated at undiscounted • Debt investments measured at FVOCI When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant amounts based on remuneration wage and salary rates that the Group expects to pay at the reporting date including related payroll on-costs, such as worker’s compensation insurance and payroll tax. ii. Other Long-Term Employee Benefits and available without undue cost or effort. This includes The Group’s obligation in respect of long-term employee both quantitative and qualitative information and analysis benefits is the amount of future benefit that employees have based on the Group’s historical experience and informed earned in return for their service in the current and prior credit assessment and including forward looking information. The Group uses the presumption that an asset which is more than 30 days past due has seen a significant increase in credit risk. The Group uses the presumption that a financial asset is in default when: • The other party is unlikely to pay its credit obligations to the Group in full, without recourse to the Group to actions such as realising security (if any is held); or • The financial asset is more than 90 days past due. periods plus related on-costs; that benefit is discounted to determine its present value. The discount rate applied is determined by reference to market yields on high quality corporate bonds at the reporting date that have maturity dates approximating the terms of the Group’s obligations. iii. Retirement benefit Obligations: Defined contribution superannuation funds A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the Statement of Profit or Loss and Other Comprehensive Income as incurred. Impairment of trade receivables is determined using the iv. Equity-settled Compensation simplified approach in AASB 9 which uses an estimation of lifetime expected losses. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets The Group operates an employee share option plan. The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes pricing model, considering the terms and conditions upon which the options were granted. The amount recognised is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market is reduced directly if no impairment amount was previously conditions not being met. recognised in the allowance account. h. Provisions When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. iv. Finance Income and Expenses Finance income comprises interest income on Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amount required to settle the obligation at the end of the reporting period. 36 AML3D Limited // ASX: AL3 // ABN 55 602 857 983i. Leases The Group as Lessee At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right of use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short term leases (i.e. a lease with a remaining lease term of 12-months or less) and leases of low value assets are recognised as an operating expense on a straight line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • Fixed lease payments less any lease incentives; • Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • The amount expected to be payable by the lessee under residual value guarantees; • The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; • Lease payments under extension options, if the lessee is reasonably certain to exercise the options; and • Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The right of use assets are recognised at an amount equal to the lease liability at the initial date of application, adjusted for previously recognised prepaid or accrued lease payments. The subsequent measurement of the right of use asset is at cost less accumulated depreciation and impairment losses. Right of use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of an underlying asset or the cost of the right of use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. j. Revenue and Other Income i. Revenue from Contracts with Customers The core principle of AASB 15: Revenue from Contracts with Customers is that revenue is recognised on a basis that reflects Step 1: Identify the contract with a customer; Step 2: Identify the performance obligations in the contract and determine at what point they are satisfied; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; Step 5: Recognise revenue as the performance obligations are satisfied. Following the adoption of AASB 15 the Group’s revenue recognition accounting policy is that: The Group derives revenue from the sale of 3D printed metal structures and the sale or right to use of 3D metal printing machines. Revenue from the sale of manufactured metal structures and sale of 3D metal printing machines is recognised upon delivery to the customer. Revenue from right to use 3D metal printing machines is recognised once performance milestones in the contract are satisfied. Broadly, these milestones relate to the delivery of software, training and the machine itself. The customer has the option to make a further payment in order to take ownership of the machine. ii. Service or Technical Support Contracts For service or technical support contracts where the services provided are substantially the same, for example maintenance and technical support, which are transferred with the same pattern of consumption over time and whose consideration consists of a recurring fixed amount over the term of the contract (e.g. monthly or annual payment), in such a way that the customer receives and consumes the benefits of the services as the Group provides them, the revenue recognition model is based on the time elapsed output method. Under this method, revenue is recognised on a straight-line basis over the term of the contract. iii. Grant Revenue Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis. All revenue is stated net of the amount of GST. k. Segment Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses. Currently, the Group comprises one operating segment. Further details of the segment reporting are disclosed in Note 28. l. Intangible Assets i. Patents and Trademarks Costs incurred for patents and trademarks are the transfer of promised goods or service to customers at an capitalised and amortised over the life of the patent or amount that reflects the consideration the Group expects to trademark. The residual value and useful life are reviewed receive in exchange for those goods or services. at each balance date and adjusted if appropriate. Revenue is recognised by applying a five-step process Amortisation is calculated on a straight-line basis over outlined in ASSB 15 which is as follows: periods ranging from one to five years. 37 AML3D Limited // ASX: AL3 // ABN 55 602 857 983ii. Software and Website Development Costs p. Share-based Payments Costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and or cost reduction are capitalised. Amortisation is calculated on a straight-line basis over All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, periods ranging from one to three years. the fair values of employees’ services are determined indirectly by m. Foreign Currency Translation i. Functional and Presentation Currency reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for Items included in the financial statement of each of the example profitability and earnings per share growth targets Group’s entities are measured using the currency of the and performance conditions). primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial q. Research and Development Expenditure statements are presented in Australian dollars, which is Research and development costs are expensed in the period in AML3D’s functional and presentation currency. which they are incurred. Development costs are not capitalised ii. Transactions and Balances Foreign currency transactions are translated into the as there is uncertainty on whether the costs will provide a future economic benefit to the consolidated group. functional currency using the exchange rates prevailing at r. Going Concern the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement or deferred in equity if the gain or loss relates to a qualifying cash flow hedge. iii. Foreign Operations The results and financial position of all the foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: As at 30 June 2022, the Group had a net asset position of $6,631,120 (2021: $11,528,148) and cash and cash equivalents of $2,933,482 (2021: $7,200,707). The decrease in net assets from the prior year is the result of the Company continuing with the development of its technology whilst building its customer pipeline. Subsequent to the end of the financial year, the Group raised $2,685,000 (before costs) through a placement of 37,605,038 shares. The Group expects that cash and cash equivalents post capital raise in conjunction with stringent controls over the net cash outflows from operating activities will be sufficient to cover a. Assets and liabilities for each balance sheet ongoing operations. presented are translated at the closing rate at the date of that balance sheet; b. Income and expenses for each income statement and statement of comprehensive Moreover, the directors have proactively sought to improved cash performance via the following initiatives: • continued focus on expanding revenue; and income are translated at average exchange rates • continued focus on cost containment in all areas of business. (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and c. All resulting exchange differences are recognised in other comprehensive income. n. Inventory Inventories consists of finished goods, work in progress and raw materials which are measured at the lower of cost and net As a result of the above matters, the Directors are of the view that the consolidated entity will continue as a going concern and, therefore, will realise its assets and liabilities and commitments in the normal course of business and at the amounts stated in the financial statements. The Directors remain confident about the successful achievement of projected targets and therefore no adjustments have been made to these financial statements relating to the recoverability and classification of the asset carrying amounts or the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a realisable value. going concern. Cost comprises direct materials, direct labour and an appropriate 3. Critical Accounting Estimates and Assumptions portion of variable and fixed overhead expenditure. o. Earnings per Share Both the basic and diluted earnings per share have been The Group makes estimates and assumptions in preparing the financial statements. The resulting accounting estimates will, by definition, seldom equal the related actual results. This note calculated using the loss attributable to shareholders of the parent provides an overview of the areas that involve a higher degree of company as the numerator, i.e. no adjustments to loss were judgement or complexity and of items which are more likely to be necessary in respect of the reported figures, which is divided by materially adjusted due to estimates and assumptions differing to the weighted average number or ordinary shares outstanding actual outcomes. The areas involving significant estimates and during the year. 38 assumptions are: AML3D Limited // ASX: AL3 // ABN 55 602 857 983i. Key Estimate – R&D Tax Incentive cost/value, quantity and the period of transfer related Where the Group expects to receive the Australian Government’s Research and Development Tax Incentive, the Group accounts for the amount refundable on an to the goods or services promised. 4. New, Revised or Amended Accounting Standards accruals basis. In determining the amount of the R&D Tax The Group has adopted all the new, revised or amended Offset Incentive at year end, there is an estimation process Accounting Standards issued by the Australian Accounting to determine what expenditure will qualify for the incentive. Standards Board (AASB) which are effective for the current External advice is sought to provide assurance that the reporting period with no material impact to the financial estimates are reasonable. ii. Key Estimate – Lease Term The lease term is defined as the non-cancellable period of a lease together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and also periods covered by an option to terminate the lease where the lessee is reasonably certain not to exercise that option. The decision on whether or not the options to extend are reasonably going to be exercised is a key management judgement that the entity will make. The Group determines the likelihood to exercise statements. 5. Interest in Controlled Entities The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries: Name of entity Country of incorporation Percentage Owned 2022 2021 AML Technologies (Asia) Pte Ltd Singapore 100% 100% on a lease-by-lease basis looking at various factors such as which assets are strategic and which are key to the future 6. Revenue strategy of the entity. iii. Key Estimate – Share-based Payments The Group operates equity-settled share-based payment and option schemes. The fair value of the equity to which option holders become entitled is measured at grant date Revenue from contracts with customers and recognised as an expense over the vesting period, with Timing of revenue recognition: 2022 $ 2021 $ 2,014,828 644,486 a corresponding increase to an equity account. The fair - At a point in time 1,964,828 644 ,486 value of shares is ascertained as the market bid price. The fair value of options is ascertained using the Black-Scholes - Over time pricing model, which incorporates all market vesting conditions. The amount to be expensed is determined by reference to the fair value of the options or shares granted. 7. Expenses 50,000 - 2,014,828 644,486 This expense takes in account any market performance conditions and the impact of any non-vesting conditions but ignores the effect of any service and non-market performance vesting conditions. Loss before income tax has been arrived at after charging the following losses and expenses from continuing operations: Non-market vesting conditions are taken into account when considering the number of options expected to vest. At the end of each reporting period, the Group revises its estimates Depreciation of non- current assets of the number of options which are expected to vest based Amortisation of intangible assets 23,987 11,322 on the non-market vesting conditions. Revisions to prior period estimate are recognised in profit or loss and equity. Depreciation of right of use assets Any changes to the estimation are adjusted in the subsequent financial year. Fair value of options issued for services from suppliers is determined with reference to the supplier’s invoice value. iv. Key Judgements – Performance obligations relating to revenue recognition under AASB 15 To identify a performance obligation under AASB 15, the promise must be sufficiently specific to be able to determine when the obligation is satisfied. Management exercises judgement to determine whether the promise is sufficiently specific by taking into account any conditions specified in the arrangement, explicit or implicit, regarding the promised goods and services. In making this assessment, management includes the nature/type, 189,720 112,078 721,119 409,145 39 2022 $ 2021 $ 507,412 285,745 AML3D Limited // ASX: AL3 // ABN 55 602 857 9838. Income Tax a. Income Tax Expense The taxation benefits of utilised tax losses and temporary difference not brought to account will only be obtained if: Current tax expense Deferred tax expense Total tax benefit 2022 2021 $ - - - $ - - - • The Group derives assessable income of a nature and an amount sufficient for tax losses and future deductions to be offset against; • The Group continues to comply with the condition for utilisation of tax loses imposed by law; and • No change in tax legislation affecting the availability of utilisation losses. b. The prima facie tax on loss from ordinary activities 9. Key Management Personnel Disclosures before income tax is reconciled to the income tax expense as follows: a. Details of Key Management Personnel The directors and executives of AML3D Limited during the Prima facie tax payable on (loss) 2022 $ 2021 financial year were: $ Names Directors from ordinary activities before (1,394,021) (1,365,925) income tax at 25% (2021: 26%) Add tax effect of: Permanent Differences 124,426 132,273 Less tax effect of: Andrew Sales (Managing Director) Sean Ebert (Chairman) Leonard Piro Temporary Differences (45,423) 49,445 Add: Tax losses not recognised 1,315,017 1,184,207 Stephen Gerlach Income Tax Expense/(Benefit) - - Tax Losses and Unrecognised Temporary Differences Due to inherent uncertainty surrounding forward forecasts, and therefore the Group’s ability to fully utilise tax losses in the Kevin Reid Executives Appointed Resigned 14 November 2014 30 August 2019 30 August 2019 - - - 30 August 18 November 2019 2021 3 December 18 November 2019 2021 Hamish McEwin (Chief Financial Officer) 1 March 2021 - future, a deferred tax asset for tax losses and deferred tax assets b. Key Management Personnel Compensation for temporary differences have only been recognised to the extent that they offset deferred tax liabilities. The tax losses and temporary differences for which no deferred tax assets have been recognised are as follows: The aggregate compensation made to Key Management Personnel of the company is set out below: 2022 $ 2021 $ Available tax losses for which 2022 $ 2021 $ Short-term employee benefits 606,177 917,326 Post-employment benefits 58,065 56,140 no deferred tax asset is 10,495,245 6,327,398 Share-based payments - - recognised Potential tax benefit at 25% (2021: 26%) Net deductible temporary Total 664,242 973,466 2,623,811 1,645,123 The compensation of each member of the Key Management Personnel of the Company is set out in the Remuneration Report. differences for which no deferred 817,919 508,401 tax asset has been recognised Potential tax benefit at 25% (2021: 26%) 204,480 132,184 Income Tax Expense/(Benefit) - - 40 AML3D Limited // ASX: AL3 // ABN 55 602 857 98310. Equity Settled Share-based Payments 13. Inventory No shares or options where issued in satisfaction of services provided by suppliers or Directors during the current financial year (2021: Nil). 11. Remuneration of Auditors During the year, the following fees were paid or payable for services provided by the auditor of the parent entity and non- related audit firms: Finished goods Work in progress Raw materials Total 2022 $ 2021 $ 14. Other Financial Assets a. William Buck Adelaide i. Audit and other assurance services Audit and review of the financial report ii. Taxation services Tax compliance and advisory services b. Fiducia LLP audit fees Audit and review of subsidiary financial report 12. Trade and Other Receivables 42,850 32,000 Total Term deposit (current) 32,275 30,226 15. Other Assets 3,168 2,689 Prepayments Total 2022 $ 2021 $ 741,888 1,284,360 28,421 578,223 135,676 169,074 905,985 2,031,657 2022 $ 56,000 56,000 2021 $ 56,000 56,000 2022 $ 2021 $ 221,404 224,484 221,404 224,484 Trade receivables Less: Allowance for expected credit loss Sub Total 2022 $ 2021 $ 316,675 106,573 (9,020) (26,074) 307,655 80,499 R&D Tax Offset Refund Due 462,374 410,000 Other receivables 1,505 32,358 Total 771,534 522,857 Trade receivables are non-interest bearing and generally on terms of 14-90 days. The receivables at reporting date have been reviewed to determine whether there are any expected credit losses. An allowance for credit loss is included for any receivable where the entire balance is not considered collectible. Additional information in relation to financial risks concerning or with a potential impact on financial assets and liabilities is disclosed in Note 31 – Financial Risk Management. 41 AML3D Limited // ASX: AL3 // ABN 55 602 857 98342 AML3D Limited // ASX: AL3 // ABN 55 602 857 98316. Plant and Equipment Cost Office and Computer Equipment $ Plant and Equipment $ Motor Leasehold Vehicles Improvements $ $ Total $ Balance 1 July 2020 36,978 1,109,621 Additions Assets under construction Balance 1 July 2021 Additions Disposals 126,845 - 163,823 79,532 - 504,988 1,053,911 2,668,520 541,473 (331,587) Balance at 30 June 2022 243,355 2,878,406 69,674 50,897 - 120,571 57,254 (40,923) 136,902 13,250 1,229,523 198,191 - 211,441 6,225 - 880,921 1,053,911 3,164,355 684,484 (372,510) 217,666 3,476,329 Accumulated depreciation and impairment Balance 1 July 2020 Net depreciation expense Balance 1 July 2021 Net depreciation expense Balance at 30 June 2022 Net book value At 30 June 2021 At 30 June 2022 Office and Computer Equipment $ 6,527 25,198 31,725 49,256 80,981 Plant and Equipment $ Motor Vehicles $ 95,084 237,597 332,681 423,848 756,529 6,360 18,178 24,538 5,156 29,694 Leasehold Improvements $ - 4,772 4,772 29,152 33,924 Total $ 107,971 285,745 393,716 507,412 901,128 132,098 162,374 2,335,839 2,121,877 96,033 107,208 206,669 183,742 2,770,639 2,575,201 17. Right of Use Assets i. AASB 16 related amounts recognised in the statement of The Group’s lease portfolio comprises a single leased building. The lease has an remaining term of one year and ten months. An option to extend or terminate is contained in the lease agreement. These clauses provide the Group opportunities to manage the lease in order to align with its strategies. All the extension or termination options are only exercisable by the Group. The extension options, which management were financial position: Right-of-use assets 2022 $ 2021 $ Leased buildings 584,986 584,986 Accumulated depreciation (237,150) (47,430) Net carrying amount 347,836 537,556 reasonably certain to be exercised, have been included in the Movement in carrying amounts calculation of the lease liability. Leased buildings: Opening balance Restatement of carrying amount on renegotiation of leas Depreciation expense for the year ended 537,556 411,478 - 238,156 (189,720) (112,078) Net carrying amount 347,836 537,556 43 AML3D Limited // ASX: AL3 // ABN 55 602 857 98344 AML3D Limited // ASX: AL3 // ABN 55 602 857 983ii. AASB 16 related amounts recognised in the 20. Contract Liabilities statement of loss: Depreciation charge related to right of use assets Interest expense on lease liabilities 18. Intangible Assets 2022 $ 2021 $ 189,720 112,078 Total Customer deposits 2022 $ 5,624 5,624 2021 $ 451,028 451,028 22,929 17,811 Contract liabilities represent non-interest bearing customers deposits for which not all contractual performance obligations have been met. 2022 $ 2021 $ Reconciliation of movements in Contract Liabilities: Patents and Trademarks – at cost 34,550 34,550 of the year Balance at the beginning 2022 $ 451,028 2021 $ - – accumulated amortisation (21,225) (14,295) Payments received in advance 390,599 631,028 Net carrying value Software – at cost 13,325 20 ,255 Transfer to revenue - 134,694 125,379 performance obligations (836,003) (180,000) satisfied – accumulated amortisation (100,540) (83,483) Balance at the end of the year 5,624 451,028 Net carrying value Website – at cost 34,154 16,569 41,896 16,569 21. Lease Liabilities – accumulated amortisation (16,569) (16,569) Net carrying value Total intangibles - - 47,479 62,151 2022 $ 2021 $ Lease liability (current) 175,025 178,803 Reconciliation of movements in Intangible Assets: 2022 $ 2021 $ Lease liability (non-current) 185,818 361,107 Balance at the beginning of the year 62,151 41,002 Additions to intangible assets 9,315 32,471 Total 360,843 539,910 22. Employee Benefits Amortisation charged to intangible assets (23,987) (11,322) Current Balance at the end of the year 47,479 62,151 Intangible assets have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense in the statement of profit and loss and other comprehensive income. Annual Leave Total Non-current At each reporting date the directors review intangible assets for Long Service Leave impairment. No impairment was assessed as necessary in the 2022 financial year (2021: Nil). 19. Trade and Other Payables Total 2022 $ 2021 $ 128,907 109,626 128,907 109,626 2022 $ 33,126 33,126 2021 $ - - 2022 $ 2021 $ Trade payables 187,025 512,163 Other payables and accrued expenses Total 323,214 510,239 265,176 777,339 Trade and other payables are unsecured, non-interest bearing and normally settled within 30 days. 45 AML3D Limited // ASX: AL3 // ABN 55 602 857 98323. Equity a. Issued Capital 150,458,386 fully paid ordinary shares (2021: 150,458,386) 2022 $ 2021 $ 20,641,272 20,641,272 Ordinary shares participate in dividends and the proceeds on winding of the Company in proportion to the number of shares held. iv. 333,333 shares were issued on 1 April 2021 on the exercise options at an exercise price of $0.30 for a total consideration of $100,000. v. 66,667 shares were issued on 11 June 2021 on the exercise options at an exercise price of $0.30 for a total consideration of $20,000. vi. 50,000 shares were issued on 11 June 2021 on the exercise options at an exercise price of $0.30 for a total consideration of $15,000. vii. 16,667 shares were issued on 18 June 2021 on the exercise options at an exercise price of $0.30 for a total consideration of $5,000. viii. 33,333 shares were issued on 30 June 2021 on the exercise options at an exercise price of $0.30 for a total On a show of hands, every holder of ordinary shares present at consideration of $10,000. a meeting or by proxy is entitled to one vote, and on a poll each share is entitled to one vote. c. Capital Management The Company does not have authorised capital or par value in respect of its shares. Management controls the capital of the Company in order to generate long-term shareholder value and ensure that the Company can fund its operations and continue as b. Movement in Ordinary Shares: a going concern. Balance at beginning of financial year Balance at end of financial year 2022 Number $ The Company is subject to externally imposed capital requirements. 150,458,386 20,641,272 There have been no changes in the strategy adopted by management to control the capital of the Group since the 150,458,386 20,641,272 issue of the prospectus. d. Reserves 2021 Number $ The Group’s reserves comprise a share-based payments reserve. A summary of the movements in the reserve is as follows: Balance at beginning of financial year 132,366,163 13,310,772 Current Shares issued during the year 15,555,557 7,000,001 Options exercised during the year 2,536,666 761,000 Balance at beginning of financial year Share-based payment Total shares issued 150,458,386 21,071,773 expense - Options issued 2022 $ 2021 $ 672,965 672,965 - - Costs of the shares issued Balance at end of financial year (430,501) Balance end of financial year 672,965 672,965 The reserve records the value of share-based payments provided. 150,458,386 20,641,272 i. The Company issued 15,555,557 shares on 12 October 2020 via a private placement at an issue price of $0.45 per share for a total consideration of $7,000,001. ii. 1,666,666 shares were issued on 28 October 2020 on the exercise options at an exercise price of $0.30 for a total consideration of $500,000. iii. 370,000 shares were issued on 26 February 2021 on the exercise options at an exercise price of $0.30 for a total consideration of $111,000. 46 AML3D Limited // ASX: AL3 // ABN 55 602 857 983The following table details the tranches of options outstanding as at 30 June 2022. Number of Options Grant Date Expiry Share Price Exercise Fair value Date at Grant Date Price at Grant Date 2,000,000 30 July 2019 30 July 2023 7,500,000 4 December 2019 4 December 2024 $0.10 $0.15 $0.30 $0.30 $0.02 $0.06 9,500,000 e. Movement in Options on Issue Value $ 49,474 451,408 500,882 2022 2021 26. Related Party Disclosures Number of Options Number of Options The following paragraphs provide details of transactions and balances with related parties. 9,500,000 17,166,179 a. Compensation of Key Management Personnel - - Details of Key Management Personnel compensation are recorded (2,536,666) in Note 9 (b) (5,129,513) b. Other transactions with Key Management Personnel 9,500,000 9,500,000 i. Mr Andrew Sales 2022 $ 2021 $ During the financial year, the Company engaged the services of a company controlled by Mr Sales’ sister to provide IT services. These services were conducted on standard commercial terms. The value of the services for the financial year was $7,733 (2021: $11,296). ii. Mr Sean Ebert and his related entities (9,786,089) (4,270,817) In addition to his services as a director, during the previous Balance at beginning of financial year Options exercised Options lapsed Balance at end of financial year 24. Accumulated Losses Balance at beginning of financial year Loss attributable to members of the entity (4,897,028) (5,515,272) Balance at end of financial year 25. Loss per Share Basic (loss) per share (cents): Loss used in calculating basic earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share (14,683,117) (9,786,089) 2022 $ (3.3) 2021 $ (3.8) (4,897,028) (5,515,272) 2022 No. 2021 No. 150,458,386 144,822,684 The rights of options are non-dilutive as the Company has incurred a loss for the year. financial year the Company engaged the services of a company controlled by Mr Ebert to provide executive services to the Company. The services were conducted on standard commercial terms. The total value of the services for the prior financial year was $138,335 (2022: Nil). There were no outstanding related party balances as at 30 June 2022. c. Controlled Entities During the financial year, the Company provided loan funds to its Singaporean subsidiary, AML Technologies (Asia) Pte Ltd to enable its subsidiary to meet start-up expenses. The transactions were conducted on commercial terms and conditions. 47 AML3D Limited // ASX: AL3 // ABN 55 602 857 98327. Contingencies 29. Subsequent Events In the opinion of the Directors, besides the guarantees disclosed No matters or circumstances have arisen since the end of the in Note 33, the Group did not have any contingent liabilities or financial year which significantly affected or could significantly assets as 30 June 2022. 28. Segment Reporting i. Operating segments The Company operates in the additive manufacturing affect the operations of the Company, the results of those operations and the state of affairs of the Company in future financial years except for: i. On 20 July 2022, the Company issued 37,605,038 ordinary shares at $0.0714 per share via a private placement to sector in Australia and South East Asia. For management provide additional working capital. ii. To the date of signing this report, the Company’s operations have been directly adversely impacted by COVID-19. Uncertainty remains as to the scope and length of the pandemic and the impact of restrictions that will be imposed to combat the pandemic. The pandemic may result in the loss of or further delay in sales to customers and potential customers. It may also impact access to equipment and supplies, delaying the delivery of products to customers. The Company is actively monitoring risks associated with COVID-19 and implementing risk management measures to mitigate against potential impacts. purposes, the Group has one main operating segment which involves the provision of 3D printing services and machinery sales in all territories in which it operates. All of the Group’s activities are inter-related and discrete financial information is reported to the (Chief Operating Decision Maker), being the Managing Director, as a single segment. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results for this segment are equivalent to the financial statements of the Group as a whole. All amounts reported to the Managing Director, being the chief operating decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group. ii. Geographic area Revenues from external customers attributed to Australia and other countries is as follows: Australia Singapore United States Japan Other 2022 $ 2021 $ 1,552,661 534,252 383,498 84,598 78,669 - - - 24,596 1,040 Total Revenue 2,014,828 644,486 iii. Major customers The Group has certain customers which represent more than 10% of the Group’s revenue from contracts with customers. Each customer is a customer of the 3D printing services and machine sales operating segment. Revenue for those customers is as follows: 2022 % 83% - 2021 % - 94% 4 Customers 4 Customers 48 AML3D Limited // ASX: AL3 // ABN 55 602 857 98330. Notes to the Statements of Cashflows 31. Financial Risk Management a. Reconciliation of Cash and Cash Equivalents The Group’s financial risk management is predominantly 2022 $ controlled by the Managing Director and Chief Financial Officer 2021 with the oversight of the Board and the Audit and Risk Committee. $ a. Financial Risk Management Cash and cash at bank 2,933,482 7,200,707 b. Reconciliation of loss for the year to net cash flows used in operating activities The Group enters into financial instruments which consist of deposits with banks, accounts receivable and payables. The totals for each category of financial instrument is shown in this Note. The Group has not entered into any derivative financial instruments. (Loss) for the year after income tax Non-cash items Depreciation and amortisation of non-current assets 2022 $ 2021 $ b. Significant Accounting Policies Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement (4,897,028) (5,515,272) and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2 to the financial statements. 721,119 409,145 c. Interest Rate Risk Management Expected credit losses - 26,074 The Group is exposed to interest rate risk as it places funds at floating interest rates. In the current low interest environment, the Gain on disposal of property, plant and equipment Changes in assets and liabilities Decrease / (increase) in trade and other receivables Decrease in prepayments and other assets Decrease / (increase) in inventories Increase / (decrease) in trade and other payables Increase / (decrease) in contract liabilities (37,865) - Group is exposed to minimal interest rate risk. d. Credit Risk Management (165,609) 202,267 contractual obligations resulting in financial loss to the Group. Credit risk refers to the risk that a counterparty will default on its 5,013 10,756 The Group has adopted a policy of dealing only with creditworthy counterparties (where such information is available) and obtaining sufficient collateral (such as up front deposits before commencing work), as a means of mitigating the risk of financial loss from 1,108,270 (1,919,282) defaults. The Group’s exposure is constantly monitored. (261,101) 99,554 credit risk exposure to any one single counterparty or any group Except for one customer, the Group does not have any significant (540,404) 451,028 of counterparties having similar characteristics. Sales to that customer are denominated in Singapore dollars and the Group has not hedged the receivable. Increase in financial liabilities Increase in employee benefits 212,695 52,407 - The credit risk on liquid funds is limited because the 81,673 counterparties are banks with high credit ratings assigned by international credit-rating agencies. Net cash (used) in operating activities (3,802,503) (6,154,057) The quality of debtors is monitored by the ageing of open invoices in accounts receivable. Trade receivables are analysed as follows: Not impaired - Within trade terms - Past due but not impaired Impaired 2022 $ 2021 $ 294,923 107,632 80,499 - - Past due and impaired 9,020 26,074 Total trade receivables 411,675 106,573 Receivables that are past due but not impaired comprise customers which do not have any objective evidence that the receivable may be impaired. The Company knows why certain customers are past due and expects that they will be paid. 49 AML3D Limited // ASX: AL3 // ABN 55 602 857 983An allowance for expected credit losses has however been recognised at 30 June 2022 for balances past due. Analysis of trade receivables: Per aged debtors report 2022 Trade receivables Total 2021 Trade receivables Total Not past Due $ 60-90 days $ >90 days Total $ $ 199,923 80,861 35,891 316,675 199,923 80,861 35,891 316,675 80,499 80,499 - - 26,074 106,573 26,074 106,573 For the year ended 30 June 2022, no expense has been recognised during the financial year then ended for the allowance for expected credit losses (2021: $26,000). Maturity profile of financial instruments Expected Maturity dates Weighted average interest Interest Bearing rate (%) Less than 1 year 1 - 5 years $ 56,000 2,933,482 - 2,989,482 - 189,062 175,025 364,087 56,000 7,200,707 - 7,256,707 - 178,803 178,803 1% 1% 4% 5% 1% 1% 5% $ - - - - - - 185,818 185,818 - - - - - 361,107 361,107 Non interest bearing $ - - 771,534 771,534 415,239 - - 415,239 - - 522,857 522,857 777,339 - Total $ 56,000 2,933,482 771,534 3,761,016 415,239 189,062 360,843 965,144 56,000 7,200,707 522,857 7,779,564 777,339 539,910 777,339 1,317,249 2022 Financial Assets Other financial assets Cash and cash equivalents Trade and other receivables Total Financial Liabilities Trade and other payables Borrowings Lease liabilities Total 2021 Financial Assets Other financial assets Cash and cash equivalents Trade and other receivables Total Financial Liabilities Trade and other payables Lease liabilities Total The amounts listed above equate to fair value. The cashflows in the maturity analysis above are not expected to occur significantly earlier than disclosed. 50 AML3D Limited // ASX: AL3 // ABN 55 602 857 983e. Liquidity Risk Management 33. Guarantees Liquidity risk arises from the possibility that the Group may AML3D has the following guarantee in place: encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. • A guarantee secured by a bank term deposit of $36,000 for the lease of its premises at 35 Woomera Avenue, The Group manages liquidity risk by maintaining adequate cash Edinburgh SA 5111. reserves and monitoring its actual and forecast cashflows and financial obligations. The Group endeavours to pay its creditors within agreed trade terms. f. Currency Risk The Group operates in international markets, however, products and services are invoiced in Australian dollars where possible, in order to eliminate the risk of exposure to foreign • A guarantee secured by a bank term deposit of $20,000 for a corporate credit card facility provided by the Group’s banker Commonwealth Bank of Australia. 34. Capital Commitments At 30 June 2022, AML3D had no commitments for capital equipment ordered but not yet received (2021: Nil). currency rate risks. 35. Borrowings 32. Information relating to AML3D Limited (the Parent) The following information has been extracted from the books and records of the parent and has been prepared in accordance with Insurance premium funding Total borrowings 2022 $ 189,062 189,062 Australian Accounting Standards. Statement of Financial Position Assets Current assets Reconciliation of movements in borrowings 2022 $ 2021 $ Balance at the beginning of the year Additional borrowings Repayment of borrowings 5,427,220 10,325,229 Balance at the end of the year - 212,695 (23,633) 189,062 Non-current assets 2,9710,516 3,370,346 Total assets Liabilities 8,397,736 13,695,575 Current liabilities 1,005,945 1,508,753 Non-current liabilities 218,994 361,107 Total liabilities 1,224,939 1,869,860 Net assets Equity Issued capital Reserves 7,172,797 11,825,715 20,641,272 20,641,272 672,965 672,965 Accumulated losses (14,141,440) (9,488,522) Total equity 7,172,797 11,825,715 Statement of Profit or Loss and Other Comprehensive Income 2022 $ 2021 $ Total loss for the year 4,652,918 5,254,289 Total comprehensive loss for the year 4,652,918 5,254,289 The parent entity has entered into two bank guarantees represented by term deposits, the first for $36,000 in respect of the leased premises at Edinburgh, Adelaide, and the second for $20,000 in respect of a corporate credit card facility provided by the Group’s banker Commonwealth Bank of Australia. Other than these guarantees, the parent entity had no contingent liabilities at 30 June 2022. 2021 $ - - - - - - 51 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Directors’ Declaration Directors’ Declaration In accordance with a resolution of the Directors of AML3D Limited (Company), the Directors of the Company declare that: 1. In the opinion of the Directors, the financial statements and notes for the year ended 30 June 2022 are in accordance with the Corporations Act 2001 and: a. Comply with Accounting Standards, which, as stated in basis of preparation Note 2 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. Give a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and its performance for the year ended on that date; 2. In the opinion of the Directors, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and 3. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. Sean Ebert Chairman Dated this 30th day of August 2022 52 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 Additional Shareholder Information The following information is current as at 25 August 2022: Stock Exchange Listing Shareholding Following are details of fully paid ordinary shares on issue: Admitted to the Official List of ASX on 16 April 2020; quotation commenced on 20 April 2020. ASX:AL3 Fully Paid Number of Number of 20 Largest Shareholders – Ordinary Shares Ordinary Shares on Issue holders shares Quoted on ASX 2,971 188,063,424 There are 8 holders of 9,500,000 unquoted options each of which converts to 1 share upon exercise. Distribution of Shareholders Range of Units 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Number of Percentage of Holders total securities 105 1,018 566 1,070 212 2,971 0.04% 1.62% 2.36% 19.44% 76.54% 100.00% Unmarketable Parcels The number of shareholders holding less than a marketable parcel is 930. Substantial Shareholders Substantial shareholders as disclosed by notices received by the Company as at 25 August 2022 are: 1 2 2 4 5 6 6 8 8 10 Name MR ANDREW MICHAEL CLAYTON SALES KYLIE MARIE COLLUM DEOR CAPITAL AND INVESTMENTS PTY LTD Number of Shares held % 36,199,850 19.25 7,002,801 3.72 7,002,801 3.72 GLOBAL ASSET SOLUTIONS 6,987,420 3.72 MR KENNETH JOSEPH HALL TOBIAS LEE KLINE RICKY JAMES LEGG MEWTWO GLOBAL INVESTMENTS SCINTILLA STRATEGIC INVESTMENTS LIMITED ARETZIS COMMERCIAL PTY LTD 11 CITICORP NOMINEES PTY LTD 12 MR BENJAMIN FEGAN 13 TOBIAS LEE KLINE + PRUE LOUISE KLINE 6,117,850 3.25 3,501,400 1.86 3,501,400 1.86 3,000,000 1.60 3,000,000 1.60 2,801,120 1.49 2,676,130 2,192,250 1.42 1.17 2,100,840 1.12 Shareholder Number of ordinary shares Andrew Michael Clayton Sales 36,199,850 13 TRIHOLM INVESTMENTS PTY LTD 2,100,840 1.12 15 FLODOR PTY LTD 1,630,252 0.87 Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary Shares: • Each ordinary share is entitled to one vote when a poll is called, otherwise each member at a meeting or by proxy has one vote on a show of hands. Other: • Options do not confer upon the holder an entitlement to vote on any resolutions proposed by the Company except as required by law. MR MOHAMED ALAA SALLAHEDIN ALJAWHARI + MR INGY MOHAMED FIKRY FARID ABDELSHAFEI JEWEL CREEK VENTURES PTY LTD MR ANDREW PAUL NUNN + MS ALEXANDRA DIMOS SAJ TIGER INVESTMENTS PTY LTD MICJUD PTY LTD 16 16 16 16 20 Total 1,400,560 0.74 1,400,560 0.74 1,400,560 0.74 1,400,560 0.74 1,400,280 0.74 96,817,474 51.48 53 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Corporate Directory AML3D Limited ABN 55 602 857 983 Directors Sean Ebert Andrew Sales Leonard Piro Chairman Managing Director Non-executive Director Company Secretary Christine Manuel Registered Office and Principal Place of Business 35 Woomera Avenue Edinburgh SA 5111 Ph: +61 8 8258 2658 Share Register Computershare Investor Services – Australia Level 5, 115 Grenfell Street Adelaide SA 5000 Ph: (08) 8236 2300 / 1300 850 505 Website: www.computershare.com.au Auditor William Buck Chartered Accountants Level 6, 211 Victoria Square Adelaide SA 5000 54 AML3D Limited // ASX: AL3 // ABN 55 602 857 983 55 AML3D Limited // ASX: AL3 // ABN 55 602 857 983Australia 35 Woomera Avenue, Edinburgh SA 5111 Australia +61 8 8258 2658 info@aml3d.com www.aml3d.com Australian Patent 2019251514 VED M O R P P A A R I T IME MA N U F A C T U R E R D E I F I T R E C Panama Chock Wire classification ER70S-6 Wire diameter Total print time Deposited mass Machined mass Size YS UTS Elongation 1.2 mm 188 hours 1,250 kg 705 kg 1500 x 1290 x 540 mm 450 - 480 MPa 550 - 580 MPa > 25% DNV.COM/AF ADDITIVE MANUFACTURING FACILITY QUALIFICATION WAM ®: Wire Additive Manufacturing. AML3D ®, WAM ®, WAMSoft ®, ARCEMY ® are all registered trademarks for AML3D ®.

Continue reading text version or see original annual report in PDF format above