2022 ANNUAL REPORT discover the next Cellnet Group Limited and its consolidated entities Financial Report 2021–22 CVR2 We source products and represent market leading brands of interactive and lifestyle technology products into retail, business and digital channels. Our innovative and passionate approach makes us the most exciting and engaging company to partner with. ABN 97 010 721 749 Cellnet Group Limited Tenancy E1/5 Grevillea Pl, Brisbane Airport QLD 4008 t: 1300 255 563 www.cellnet.com.au Cellnet Group Limited and its consolidated entities Financial Report 2021–22 1 The Cellnet Group Cellnet listed on the Australian Stock Exchange in 1999 and now employs more than 70 staff across Australia and New Zealand. Cellnet sources products and represent market leading brands of lifestyle technology including mobile accessories and gaming products into retail, business, and online channels. Cellnet Established in 1992, Cellnet listed on the Australian Stock Exchange (ASX) in 1999 and is a leading distributor of interactive and lifestyle technology products, employing more than 70 people across Australia and New Zealand. Cellnet is one of the largest accessory specialist distributors in the region. Cellnet’s success is derived from its unique managed services model, combining world leading brands, its own 3sixT brand and an innovative category management approach. Cellnet provides extensive reach and coverage across all markets in both the Australian and New Zealand retail and telecommunications channels. cellnet.com.au Turn Left Distribution Turn Left Distribution (TLD) is a leading Interactive Entertainment specialist across Australia and New Zealand. Partnering with some of the world’s market leading gaming brands across software and accessories, TLD provides a full-service distribution model. Working with vendors and partners to manage fully integrated and localised end-to-end, go-to-market solutions. Supported by an overarching marketing and PR strategy as well as event and activation management, TLD offers industry-leading services that connect world leading brands and partners to their customers and the communities they inspire. Building on decades of experience and a team of passionate, dedicated individuals all sharing a love for the culture. Driven by a desire to deliver excellence, TLD aims to provide its partners, customers and the gaming community award winning campaigns, category leading service and products that deliver a highly satisfying entertainment experience. turnleft.net.au Performance Distribution Performance Distribution is a leading specialist in online channels and direct to consumer distribution across Australia and New Zealand. Providing brands with website, database management and digital campaigns as well as traditional distribution services. Performance Distribution provides an Omni-Channel technology platform to brands and retailers that wish to sell online and strengthens the established Cellnet and Turn Left retail network with support for endless aisle and click and collect strategies. cellnet.com.au/performance-distribution Cellnet Group Limited and its consolidated entities Financial Report 2021–22 2 About our Company In 2017, Wentronic Holdings GmbH acquired a majority shareholding in Cellnet. Wentronic distributes AV, IT, and mobility accessories throughout Europe. The investment by Wentronic provides a strong strategic partnership whereby Cellnet and Wentronic can ensure products are sourced in the most cost-efficient manner. In 2018 Cellnet diversified its product offering into gaming with the acquisition of Turn Left Distribution and in 2019 acquired PowerGuard to enter the surge protection power category. In April 2020 Cellnet acquired Performance Distribution, a strategic purchase for infrastructure, knowledge, and experience to accelerate its online business across Australia and New Zealand. Directors Mr Tony Pearson Non-Executive Chairman Mr Kevin Gilmore Non-Executive Deputy Chairman Mr Michael Wendt Non-Executive Director Mr Brian Danos Non-Executive Director Mr Giles Karhan Non-Executive Director Company Secretary Mr Chris Barnes Company Secretary Principal Registered Office Tenancy E1, 5 Grevillea Place, Brisbane Airport QLD 4008 Australia Phone: 1300 255 563 www.cellnet.com.au 30 NUMBER OF YEARS IN OPERATION SINCE 1999 A S X : C LT LISTED ON THE Cellnet Group Limited and its consolidated entities Financial Report 2021–22 3 Cellnet brings logistics in-house, opens new Distribution Centre in Melbourne Cellnet Group Limited (ASX: CLT) is pleased to announce it has invested in its own dedicated Distribution Centre located in Melbourne, in a move to optimise and consolidate its Australian warehousing and logistics operations. The strategic direction to take its supply chain in-house is driven by a desire to further enrich customer experience, with an enhanced distribution model that will deliver omni-channel solutions for traditional retail partners, customised business partner solutions, comprehensive digital channel fulfilment and 3PL services. “This is an extremely exciting step in our supply chain evolution. The need to unify logistics across the group and have direct relationships with freight carriers became more evident during the pandemic.” says Dave Clark, Cellnet Chief Executive. Located in the Heatherton Parkview Estate, the modern 3,600m2 office and distribution facility has sufficient capacity for all Cellnet operations with further headroom available for future growth requirements. Opening on 1 July 2022, Cellnet will commence transitioning from its outsourced providers this month, with initial deliveries from the new facility to commence mid-July ahead of the next iPhone launch. Its online and gaming business units will follow in a carefully managed phased approach to ensure minimal disruption. “The team are looking forward to providing our brand and customer partners an enhanced fulfilment experience from our new facility” Clark adds. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 4 In its most recently published report Digital Australia 2022 (DA22), the Interactive Gaming & Entertainment Association, highlights vitally important role played by the video games industry in keeping people connected during the pandemic. The theme of Digital Australia 2022 is Connected by Games. It’s an effort to find joy and respite despite the Pandemic. DA22 really brings to the forefront the connectivity aspect of this artform and truly dynamic, entertainment industry. It is evident from the data that people have been connected by games, to games and with games. Through the pandemic, games provided a vehicle through which they connected with their families, for personal benefit, to connect to player culture, and connect to the growing value of our digital economy. Friends, family, businesses, and education institutions, all benefited by the platforms that gaming provides. Two-thirds, or more than 17 million of Australia’s 25.8 million residents, are connected with video games. The report reveals over 8.5 million households play games. Games ranked 2nd most popular form of entertainment, with an average age of participants being 35 years. 76% of Australian parents play games to connect with their children. The business and education sector also sees the benefits of gaming as 60% of students learn with games at schools (DA22 IGEA report) With the introduction of the Digital Games Tax Offset in 2021 by the Australian government, the industry is poised and positioned better than ever to get stronger and further establish itself as a major contributor to the local economy. Highlighting the Australian video games industry’s strength and resilience, the industry saw an increase of 23% last year with almost 3500 employment opportunities across the various disciplines and digital games ecosystem. Such support will also ensure alignment with the upward trajectory of video games continuing to be the most popular form of entertainment (Leve Up – A guide to the Aust. Gaming Industry 2022 report) Gaming Industry Cellnet Group Limited and its consolidated entities Financial Report 2021–22 5 As RIG gaming headsets continue to be a category leading brand, our partnerships with mainstream national sports leagues such as the NBL’s Illawarra Hawks and iconic FMCG brand Redbull will continue to compliment core partnerships in the Esports space with the Australian Esports League (AEL) as their exclusive and official partner on all events. Reaching beyond the mainstream, our planned grassroots activations will ensure the brand is front and centre in the minds of our key target demographic. Delivering on all objectives, the partnerships have been renewed and confirmed to continue for the upcoming year which will run well into 2022. RIG will continue to be the official event and game day partner as well as being the official and exclusive headset partner for the upcoming esports program of events. The second half of 2022 will also see popular, renowned software licensed titles such as Nickelodeon and the critically acclaimed, global Netflix hit, Cobra Kai. Both will enjoy a physical release through retail to build on the success of their previously released iterations in 2021. The first half of 2023 will continue to see Turn Left support a strong release slate of highly anticipated titles that include the iconic Street Fighter 6™, multiple exciting additions to the world of Resident Evil™ and the new, dynamic multiplayer IP, Exoprimal™. With console supply still constrained below regular availability and capacity, there is opportunity around future growth for the accessories category. As console supplies becomes more available heading into 2023 and the install base grows, so do accessories attachment sales. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 6 Offering the latest in technology, we are constantly researching and testing new products, and are frequently updating our list of cool tech gadgets. Trending products 5 in 1 Magnetic Wireless Charger Charge up to 5 devices with the ultimate magnetic wireless charging stand. Fast charge each device at the same time with all power ports offering their own power supply up to a combined 45W. With MagSafe compatibility, 3 wireless charging stations, USB-A and USB-C charging, you'll be able to fast charge all devices with ease. Symphony ANC earphones Experience a symphony of sounds with our active noise-cancelling Bluetooth headphones. These headphones deliver a bass boost via the 40mm dynamic drivers, that uncover the rich details of every sound. With up to 50 hours of listening time, super- fast charging, and 3 active noise-cancelling modes, you'll be able to experience truly immersive sound all day long. And with our omnidirectional 5 microphone technology, you'll be able to jump from jamming out to making calls seamlessly. Shuffle Party Speaker Take the party anywhere with this light-up party speaker that packs a punch. This powerful wireless party speaker with bass boost is water-resistant and can play up to 8 hours of uninterrupted tunes, so you can rock on from sunup to sundown. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 7 12-in-1 USB-C Premium Dock + Wireless Charger + Speaker The USB-C™ Multiport Dock adds 3 USB A 3.0 ports, one USB A 2.0 port, one MicroSD & SD card reader, one 4K HDMI™ port, one RJ45 Ethernet port & one 3.5 mm Aux port to a USB-C™ port. Additionally, the Multiport Dock offers the possibility to charge end devices with up to 100 W via the USB-C™ port. The wireless quick charge function charges your smartphone with a power of up to max. 10 W. Simply place the Smartphone on the top of the Multiport Dock. The whole thing is completed by a high-quality loudspeaker with a very good sound image. Its compact size makes it the perfect companion for the office or home. Notebook Protector ChargeAll The PowerGuard Notebook Protector ChargeAll Surge Protector is a travel essential that protects your devices against power spikes and surges and keep them powered when you need them most. Home Multiroom Wi-Fi Speaker Want audio design with decor in mind? Then our Defunc HOME multiroom Wi-Fi speaker is for you. Featuring smart and powerful sound, every detail of HOME has been designed for smooth integration with the details of an authentic home environment. Created together with Swedish top audio engineer and acoustics expert Henrik Isaksson, the speaker’s carefully calibrated components do all music genres and audio types justice. From heavy beats to chatty podcasts to delicate strings, you’ll be listening to your tracks just the way they were meant to be heard. Wherever you are in your home. True Talk Want to truly make your voice heard? Then Defunc TRUE TALK is for you. Featuring Pure Voice™ Bone Conductor Sensor Technology, these earbuds sense your jaw movement vibrations when you‘re talking. Automatically reduce disturbing ambient background noises like wind and traffic, creating an advanced version of ENC (Environment Noise Cancellation). T300RS GT Edition Good stories never end: After the success of The T300 RS, Thrustmaster and GT join strength again to offer gamers a realistic, powerful driving experience, with no compromises. This special GT EDITION of the T300 RS shows a new look of the detachable GT Style wheel and pedal set. Ultimate Bundle Case & Screen Protector The Ultimate Protection Bundle by Impact Zero includes a high impact screen protector, phone case and is backed by a lifetime product warranty with 2-year device repair guarantee. Loaded with all the features you need for worry free use. This maximum strength screen protector and MagSafe compatible phone case includes active impact dispersion for up to 6 meters for ultimate protection where it matters most. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 8 Board members Tony is an experienced international executive and company director, with over ten years’ experience on ASX, Hong Kong, Toronto and not-for-profit boards. He is currently Chair of ASX listed Peak Resources, and a non-executive director of ASX listed Xanadu Mines, a Trustee of the Royal Botanic Garden & Domain Trust, and a non-executive director of Communicare, and the Foundation & Friends of the Botanic Gardens. Tony’s prior non-executive appointments include working as a Commissioner of the Independent Planning Commission, chair of White Ribbon, and non-executive director of Aspire Mining and the International Grammar School. Prior to this, Tony was Managing Director at HSBC. Mr Pearson is a member of the Audit and Risk Committee and the Remuneration and Nomination Committee. Mr Wendt is the Chief Executive Officer of Wentronic Group, a market leading electronic accessory distributor that is headquartered in Braunschweig, Germany. Wentronic employs over 200 people worldwide and has offices in Germany as well as in Hong Kong and China. Mr Wendt has about 30 years of experience in the international electronic accessory industry and has had roles in sales, marketing and human relations. Mr Wendt is currently a member of the Remuneration and Nomination Committee (Chairman). Mr Gilmore is the Managing Partner at Pegu Partners, a capital and strategy advisory firm. He has also held management positions with many multinational corporations such as General Electric, Shell Petroleum, Philips Electronics and Belkin where he gained extensive experience in strategy, business development and marketing. Mr Gilmore is currently a member of Remuneration and Nomination Committee. Tony Pearson B. Bus (Management) Non-Executive Chairman Kevin Gilmore B. Econ. MBA Non-Executive Deputy Chairman Michael Wendt Non-Executive Director Cellnet Group Limited and its consolidated entities Financial Report 2021–22 9 Mr Danos is the Chief Operations Officer for Wentronic GmbH. He has held this position since September 2019 and leads the process, supply chain, quality control and international operations for Wentronic. From April 2015 until August 2019 he was the General Manager of Wentronic Asia Pacific where he led the overall operations of the Asian region and directed Wentronic’s offices in China in all sourcing and logistical operations. Prior to his joining Wentronic Asia Pacific, Mr Danos held the position of Director of Marketing and Sales with A&L International Holdings Limited, a Hong Kong based private label manufacturer. He has also held senior positions with Philips Consumer Electronic Accessories in both Europe and the USA. Mr Danos is currently a member of the Audit and Risk Committee. Giles has worked in operations, sales and marketing and management across both equities and funds management for over 15 years. He has worked in both large Australian Banks and Wealth Managers as well as in boutique funds management. Giles is a keen entrepreneur and currently is the CEO and Founder of Rocking Horse, a debt platform for early stage businesses. He has obtained a Bachelor of Arts from Australian National University (ANU), Graduate Diploma in Finance and Investment (FINSIA) and a Masters of Business Administration from University of Technology, Sydney. Mr Karhan is the Chairman of the Audit and Risk Committee. Brian Danos Bachelor of Science (Management) Non-Executive Director Giles Karhan Non-Executive Director Cellnet Group Limited and its consolidated entities Financial Report 2021–22 10 Executive Leadership Team Dave Clark Chief Executive Chris Barnes B. Acc, CPA, GAICD Chief Financial Officer & Company Secretary Paul Elliot Executive Consultant - Turn Left Distribution Dave is an experienced, results driven executive with over 25 years’ experience in consumer electronics. Appointed as Chief Executive of Cellnet Group in July 2020, Dave was previously the Managing Director of Cellnet NZ for over 10 years. Prior to Cellnet, Dave was with Sony for 10 years managing strategic growth categories including audio, video, computers, and television. After 15 years at Cellnet, Dave has inspired and developed a culture that is highly productive, results driven and rewarding. A strategic thinker, able to turn theory into reality by leading, influencing, developing, and motivating teams. Passionate, enthusiastic, and driven to succeed with a demonstrated and proven ability to deliver practical solutions and with a commitment in achieving long term growth, sustained profitability, and success. Chris has been with the Company for 14 years and has been the Head of Finance for the past 11 years. Over this time, he has gained significant experience in accounting, treasury and corporate finance. Chris is also the Company Secretary and works closely with the Cellnet Board to ensure that a culture of strong governance is in place. He is CPA qualified and is a member of the Australian Institute of Company Directors. Paul was the co-founder, majority owner and CEO of QV Software (QVS) and Turn Left Distribution (TLD). Founded in 2003, both QV Software and TLD went on to establish themselves as the leading independent gaming distributors in Australia. After enjoying years of independent success, QV Software was merged into Turn Left Distribution to build on their combined experience and strengths. In 2018, selling Turn Left Distribution to Cellnet made for a natural progression fit. Over the span of 18 years, Paul has worked with key leading brands across the interactive entertainment space such as; Sony, Nintendo, Microsoft, Capcom, Konami, Disney, Plantronics, Nacon, Thrustmaster, Razer and Steel Series. Paul’s strengths lie in building partner relations and mapping out long term strategic plans, ensuring Turn Left Distribution remains not only relevant in an ever-evolving industry but to also reinvent itself to take advantage of potential growth opportunities that come its way. Paul remains involved with Turn Left Distribution as Executive Consultant. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 11 Belinda Campos Managing Director - Turn Left Distribution Quang Nguyen GM Product ANZ & Group Digital Peter Young Managing Director - Cellnet New Zealand Jason Leuzzi GM Sales and Operations Belinda was one of the owners of Turn Left Distribution and was extremely excited to stay on after the sale to Cellnet in 2018. Prior to this, Belinda ran both Turn Left and Q V Software as General Manager until both businesses were consolidated under Turn Left, gaining synergies and efficiencies within the business and into the retail channel. Belinda has over 30 years of experience in Management roles including Commercial Manager for Tyco Electronics, completing 15 years’ service. This exposed her to a variety of industries within the Tyco Group including Aviation, I.T Telecom and Professional Services, Structured Cabling and Infrastructure Management along with specializing in technical product knowledge and training to support Maritime and Military requirements. With her strengths in people management and strong business acumen developed over the years, it allows her to be a mentor, as well as a leader in any type of business environment. Peter was appointed Managing Director of Cellnet New Zealand in September 2021 rejoining the business after 12 years leading the sales team of one of New Zealand’s largest IT system integrators through significant growth. Peter brings over 35 years of varied business experience including ownership and development of three startup organisations in the technology and gaming sector as well a strong industry and commercial knowledge of the Australasian IT, retail, and distribution markets gained from previous executive roles. A salesperson at heart, Peter has a strong sales process and sales execution focus consistently overachieving targets and accelerating growth in sales revenue and profitability while building sales team capability and capacity. Peter is also a member of the New Zealand Institute of Directors, serves as a trustee for Community Waitakere and is Co-Chair of the Life Education Trust Auckland West. Jason has been with the company for 9 years. Starting in product and eventually leading the product team, before switching to Sales and ultimately the GM of Sales and Operations. He brings a balanced product and sales approach to management and decision making, with a strong knowledge of the overall business. Jason has been involved with Consumer Electronics’ and Telecommunications for over 30 years. 20 of them in distribution. From a product perspective his self-confessed passion for tech is evident, particularly around design, use, positioning, and marketing. Jason has a passion for tech that is infectious, and it’s something that’s helped inspire internal and external teams to close sales. Always thinking outside the square, his problem-solving, customer first approach has delivered strong relationships with the brands Cellnet represent and the customers Cellnet manage. Quang has been with Cellnet since 2018 and has served in several senior roles across sales and product within the organisation. In his current role Quang overseas Vendor Brands, Own Brands, and Digital across the group. He is an experienced Product, Marketing and eCommerce Executive that has successfully built multi-million-dollar brands, businesses, and services from the ground up both domestically and internationally. Prior to his time at Cellnet, Quang held product, sales, and marketing roles at Telstra and Likewize (formally Brightstar) and co-founded a brand marketing acceleration company that worked with global brands. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 12 Partner brands Cellnet Group Limited and its consolidated entities Financial Report 2021–22 13 owned brands Cellnet owned brands are designed to meet customer needs with the aim of providing quality products catered for a variety of segments and retailers. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 14 A B O U T C O M P L I A N C E Established 2014 in Brisbane Australia, 3sixT is an Australian leader in the mobile accessory industry creating smartphone & tablet accessories for every lifestyle. Our goal is to provide convenient, affordable, and ethical solutions that you can trust and rely on. We pride ourselves on our market-leading 5 Year Product Warranty and market-first Ultimate Program. Our categories include Cases, Screen Protection, Audio, Mounts, Connectivity, Surge Protection and Power. 3sixT continuously works towards a more sustainable future with plastic free packaging and biodegradable and compostable materials. Find out more at 3sixtgear.com Cellnet Group Limited and its consolidated entities Financial Report 2021–22 15 A B O U T PowerGuard: Since 2002, PowerGuard has been one of the leaders in surge protection products across Australia and New Zealand. Designed to protect your most valuable electronics, the products come with a Lifetime Warranty and Connected Equipment Warranty. PowerGuard aims to be the gold standard of surge protection in the market. Lifetime Warranty Connected Equipment Cover Designed & Engineered in Australia Protection at Home and On The Go Cellnet Group Limited and its consolidated entities Financial Report 2021–22 16 A B O U T We are Australia’s newest audio brand, created in Melbourne in 2020. We design, source, and manufacture quality audio products and accessories that are built to withstand life’s greatest adventures. Whether commuting to work, travelling the outback, or chilling on the beach, Wave’s product range is there to provide the soundtrack to your life. We pride ourselves on being an audio brand that offers affordable, ethical products for everyday use. Wave aims to be the true blue Australian brand that is known for quality, and durability. Find out more at waveaudio.com.au Designed & Engineered in Australia Cellnet Group Limited and its consolidated entities Financial Report 2021–22 17 A B O U T For every office, for every family and for every single person – Goobay stands for reliable, uncomplicated functional quality and an attractive price-performance ratio. The claim: always the right accessories for every electronic need. Goobay provides a range of cables, cable management, tv brackets and a large range of USB-C products. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 18 A B O U T Clicktronic believes in the importance of durability and stability. Our quality promise: 10-year warranty on our HDMI™ cables. The proprietary construction of our connection cables makes them extremely robust. The three-part connector construction made of PVC and ABS components compensates for jerky pulling on the cable, making it ideally protected against cable breakage. High-quality, gold-plated contacts and pure copper conductors transmit audio and video signals in maximum quality for a perfect home cinema and gaming experience. The Clicktronic Ultra High-Speed HDMI™ cable enables a razor-sharp picture and has the fastest transmission speed currently available. Cellnet Group Limited and its consolidated entities Financial Report 2021–22 19 digital services Marketplaces Direct Store Cellnet Group Limited and its consolidated entities Financial Report 2021–22 20 eCommerce Brand Stores Brand Stores - Marketplaces Cellnet Group Limited and its consolidated entities Financial Report 2021–22 21 Guided by purpose, Driven by data, Powered by technology, and Enabled by Cellnet Category Management or Catman is the single biggest differentiator between Cellnet and its competitors. It has been the key to not only the survival of the company in recent economic times, it has been the driving force behind our growth and our customers growth. Managing categories requires a deep understanding of the market, the consumer, and the products. The term Catman refers to a number of business functions and principles that all contribute to a seamless enjoyable experience for a consumer, and an efficient profitable business for the retailer. For our customers and partners, this program results in substantial revenue and margin growth, training programs, seamless merchandising, and the removal of their risk in inventory. Our Services Data integration Data analytics Product marketing Space management Field services Financial services Key Deliverables Cost of business reduction for retailer Flexible financial modelling One touch support team Consistent customer experience Strategic ranging & life cycle management Revenue and share growth Catman Services Cellnet uses a range of high-powered tools to: • Bespoke space planning developed with Nielsen • Range development • Individual store planograms and ordering • Min-Max architecture • Weekly data feed • Weekly analysis • Weekly replenishment • Bespoke planogram evolution • Heat-mapping Spaceman Cellnet uses a range of high-powered tools to: • Measure true return on investment • Increase sales through world class planograms, clear ranging strategy and segmentation • Increase margin by ensuring focusing on lifting average sell price and attachment • Cut the cost of doing business by reduced capital investment, obsolescence and administration • Identify trends in categories and devices • Produce more reliable business forecasts • Explore new categories with external market insights • Exploit world leading tools with little IT development or training required • Empower customers with detailed insights by state, store and staff • Know the customer, using demographics and age segmentation • Customer experience management Business Intelligence 22 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 23 Chair and Chief Executive’s Report We present to you the FY2022 report for Cellnet Group Limited. This year Cellnet celebrates 30 years in operation having been incorporated in 1992, and then subsequently listing on the ASX in 1999. The longevity and milestone achieved are a testament to the dedicated and talented team of over 70 professionals across Australia and New Zealand who strive to achieve success each year. Following the landmark FY2021 result with an after-tax profit of $3.81m, in FY2022 Cellnet navigated an increasingly challenging operating environment, with an EBITDA loss of $373,000 for the year ending 30 June 2022. After including one-off and other non-cash items, the company generated an after-tax loss of $2.3 million. The non-cash, non-recurring items that affected the financial reporting period included impairment of goodwill which arose from an acquisition in FY2020 ($481,000) and impairment of right of use assets ($132,000). Total sales were adversely impacted by further Covid-19 restrictions and increased input costs of goods, logistics and freight. The Company also experienced reduced gaming sales with software publishers delaying releases due to Covid-19 disruption. Many of the delayed titles are now set for release in 2023. Online sales from Cellnet managed websites and marketplace stores continued to experience strong growth, up 27% year- on-year. Cellnet own brands which include 3sixT, PowerGuard and Wave Audio continued to perform well in all channels, increasing 12% compared to the same period last year. The Company maintained its strong balance sheet with $6.5m cash at bank as of 30 June 2022 and Net Tangible Assets of 7.5 cents per share. Excluding the dividend payment of $729,000 paid in second quarter of FY2022, cash at bank increased by $201,000 compared with the same period last year. Tony Pearson Chairman Dave Clark Chief Executive Dear Shareholder, In the second-half of the financial year Cellnet moved to optimise and consolidate its Australian warehousing and logistics operations, opening a new distribution centre on 1 July 2022. The strategic direction to take its supply chain in-house was driven by a desire to further enrich customer experience, and offer customised business partner solutions, comprehensive digital channel fulfilment and 3PL services. Located in Melbourne, the modern 3,600m2 office and distribution facility has sufficient capacity for all Cellnet operations with further headroom available for future growth requirements. We acknowledge it has been a challenging year but believe we have now taken appropriate steps to ensure we have the right team in place with a competitive advantage, underpinned by our new distribution centre and market leading brand portfolio. We would also like to take the opportunity to thank all our brand and customer partners for their support and commitment, ensuring Cellnet remains a market leading distributor of lifestyle technology and interactive products. Finally, we would like to thank all our shareholders for their ongoing support. If any current or prospective investors would like to make contact, please email Cellnet Investor Relations on ir@cellnet.com.au. We look forward to a successful year in FY2023. 24 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Corporate Information ABN 97 010 721 749 Directors T. Pearson (Independent Chairman) K. Gilmore (Deputy Chairman) M. Wendt B. Danos G. Karhan Company Secretary C. Barnes Principal Registered Office Cellnet Group Limited E1 / 5 Grevillea Place Brisbane Airport Qld 4008 Phone: 1300 255 563 Fax: 1800 255 563 Banker Westpac Banking Corporation 260 Queen Street Brisbane QLD 4000 Auditor Pitcher Partners 345 Queen Street Brisbane QLD 4000 Share Register Link Market Services Ltd Level 21, 10 Eagle Street Brisbane QLD 4000 Phone: 1300 554 474 Solicitors Reddie Lawyers Level 40, 140 William Street Melbourne VIC 3008 Securities Exchange The Company is listed on the Australian Securities Exchange. The home exchange is Brisbane. Corporate Governance All corporate governance related matters and associated disclosures regarding the company, including the company’s corporate governance statement, can be found on the company’s website in the investor relations section at: https://www.cellnet.com.au/ investor-hub/ Contents Corporate information........................................................24 Directors’ report................................................26 Financial report.................................................41 Statement of financial position...........................................41 Statement of comprehensive income..................................42 Statement of changes in equity...........................................43 Statement of cash flows......................................................44 Notes to the financial statements........................................45 1. Corporate Information.............................................45 2. Significant accounting policies................................45 3. Financial risk management objectives and policies.............................................................55 4. Fair value measurement..........................................58 5. Operating segments................................................59 6. Other income. .........................................................60 7. Items included in profit/(loss)..................................60 8. Income Tax..............................................................61 9. Earnings per share...................................................63 10. Current assets – cash and cash equivalents..............63 11. Current assets – trade and other receivables............64 12. Current assets – inventories.....................................65 13. Non-current assets - property, plant and equipment................................66 14. Non-current assets - intangible assets .....................67 15. Current liabilities - trade and other payables...........69 16. Provisions...............................................................69 17. Interest bearing loans and borrowings. ...................70 18. Derivative financial instruments..............................70 19. Leases.....................................................................71 20. Contributed equity and reserves. ............................71 21. Share based payments............................................73 22. Financial guarantees...............................................75 23. Key management personnel remuneration..............75 24. Related party disclosure..........................................76 25. Subsequent events..................................................76 26. Parent entity information........................................76 27. Auditors’ remuneration...........................................77 28. Dividend franking account.......................................77 29. Cash flow statement reconciliation..........................77 30. Change in accounting policy....................................78 Directors’ declaration. ........................................................79 Independent auditor’s report..............................................80 ASX Additional Information.................................................85 25 Directors’ Report 26 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Your Directors submit their report for the year ended 30 June 2022. Directors The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Tony Pearson B. Com (Management) (Non-Executive Chairman) Tony is an experienced international executive and company director, with over ten years’ experience on ASX, Hong Kong, Toronto and not-for-profit boards. He is currently Chair of ASX listed Peak Resources, and a non-executive director of ASX listed Xanadu Mines, Chair of Lifestyle Solutions, a Trustee of the Royal Botanic Garden & Domain Trust, and a non-executive director of Communicare, and the Foundation & Friends of the Botanic Gardens. Tony’s prior non-executive appointments include as a Commissioner of the Independent Planning Commission, Chair of White Ribbon, and non-executive director of Aspire Mining and the International Grammar School. Mr Pearson is a member of the Audit and Risk Committee and the Remuneration and Nomination Committee. Kevin Gilmore B. Econ. MBA (Non-Executive Director Deputy Chairman) Mr. Gilmore is the Managing Partner at Pegu Partners, a capital and strategy advisory firm. He has also held management positions with many multinational corporations such as General Electric, Shell Petroleum, Philips Electronics and Belkin where he gained extensive experience in strategy, business development and marketing Mr Gilmore is currently a member of Remuneration and Nomination Committee and was a member of the Audit and Risk Committee during the year. Michael Wendt (Non-Executive Director) Mr Wendt is the Chief Executive Officer of Wentronic Group, a market leading electronic accessory distributor that is headquartered in Braunschweig Germany. Wentronic employs over 200 people worldwide and has offices in Germany, Italy, and UK as well as in Honk Kong and China. Mr Wendt has over 26 years of experience in the international electronic accessory industry and has had roles in sales, marketing and human relations. Mr Wendt is currently a member of the Remuneration and Nomination Committee (Chairman). Giles Karhan B. Arts, Grad. Dip. Finance & Investment, MBA (Non-Executive Director) Mr Karhan has worked in operations, sales and marketing, and management roles across both equities and funds management for over 20 years. He has worked in both large Australian banks and wealth managers as well as in boutique funds management. He currently is founder and CEO of Rocking Horse Finance, which accelerates a company’s growth prospects and supports cash flow by providing financing against eligible R&D. Mr Karhan is a keen entrepreneur and has invested in a number of innovative businesses over the past 10 years. He has a wide range of asset management experience with institutional and wholesale clients. Mr Karhan in the Chairman of the Audit and Risk Committee. Brian Danos B. Bus (Management) (Non-Executive Director) Mr. Danos is the Chief Operations Officer for Wentronic GmbH. He has held this position since September 2019 and leads the process, supply chain, quality control and international operations for Wentronic. From April 2015 until August 2019 he was the General Manager of Wentronic Asia Pacific, where he led the overall operations of the Asian region and directed Wentronic’s offices in China in all sourcing and logistical operations. Prior to his joining Wentronic Asia Pacific Mr. Danos held the position of Director of Marketing and Sales with A&L International Holdings Limited, a Hong Kong based private label manufacturer. He has also held senior positions with Philips Consumer Electronic Accessories in both Europe and the USA. Mr Danos is currently a member of the Audit and Risk Committee. Directors’ Report 27 Directors’ Report Chris Barnes B. Acc, CPA, GAICD (Company Secretary and Chief Financial Officer) Mr Barnes has been with the Company since 2006 and has been the Head of Finance since 2010. He holds a Bachelor of Accounting Degree, is a Certified Practicing Accountant (CPA) and is a Member of the Australian Institute of Company Directors. As at the date of this report, the interest of the directors (including their related parties) in the shares and options of Cellnet Group Limited were: Director Number of ordinary shares Number of options/ performance rights M. Wendt 129,658,107 - T. Pearson 2,900,000 - K. Gilmore 4,288,000 4,000,000 G. Karhan - - B. Danos - - Dividends No dividend is declared for the current financial year. A final dividend of 0.30 cents per share was declared on 25th August 2021 and was paid 11 November 2021. Principal activities The principal activities of the group are: • Sourcing products and the distribution of market leading brands of lifestyle technology products including mobile phone, gaming, tablet and notebook/hybrid accessories into retail and business channels in Australia and New Zealand; and • Fulfilment services to the mobile telecommunications and retail industries in Australia and New Zealand. 28 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 The Company has maintained its strong balance sheet with $6.5m cash at bank as of 30 June 2022 and Net Tangible Assets of 7.5 cents per share. Excluding the dividend payment of $729,000, cash at bank increased by $201,000 compared with the same period last year. Online sales from Cellnet managed websites and marketplace stores continued to experience strong growth, up 27% year- on-year. Cellnet own brands which include 3sixT, PowerGuard and Wave Audio continued to perform well in all channels, increasing 12% compared to the same period last year. Total sales decreased 18% year-on-year and were adversely impacted by further Covid-19 restrictions and increased input costs of goods, logistics and freight. The Company also experienced reduced gaming sales with software publishers delaying releases due to Covid-19 disruption. Many of the delayed titles are now set for release in 2023. In the second-half of the financial year Cellnet moved to optimise and consolidate its Australian warehousing and logistics operations, opening a new distribution centre on 1 July 2022. The strategic direction to take its supply chain in-house was driven by a desire to further enrich customer experience, and offer customised business partner solutions, comprehensive digital channel fulfilment and 3PL services. Located in Melbourne, the modern 3,600m2 office and distribution facility has sufficient capacity for all Cellnet operations with further headroom available for future growth requirements. “This is an extremely exciting step in our supply chain evolution. The need to unify logistics across the group and have direct relationships with freight carriers became more evident during the pandemic. The team are excited to provide our brand and customer partners an enhanced fulfilment experience.” says Dave Clark, Cellnet Chief Executive. Commenting on the results Clark added “We acknowledge it has been a challenging year, but we believe we have now taken appropriate steps to ensure we have the right team in place with a real competitive advantage, underpinned by our new distribution centre and market leading brand portfolio.” Cellnet Chief Executive, Dave Clark, and Chief Financial Officer, Chris Barnes, are available to discuss the results with investors. To register interest in a Cellnet results briefing please email ir@cellnet.com.au. Directors’ Report continued Operating and financial review The Directors hereby present the results of Cellnet Group for the 2022 financial year. • Strong balance sheet with $6.5m cash at bank as of 30 June 2022 • Net Tangible Assets of 7.5 cents per share • EBITDA loss of $373,000 • Online sales continue to grow, up 27% year-on-year • Cellnet expands own brand range, sales up 12% year-on- year • New distribution centre opens in Melbourne Trans-Tasman lifestyle technology distributor Cellnet Group Limited (“Cellnet” or the “Company”) has announced an EBITDA loss of $373,000 for the year ending 30 June 2022. After including one-off and other non-cash items, the Company generated an after-tax loss of $4.1 million. Statutory EBITDA is reconciled to a net loss after tax as follows: 2022 $000 Statutory EBITDA (373) Depreciation and amortisation (1,032) Impairment expense (613) Interest expense (292) Loss before tax (2,300) Income tax benefit - Net loss attributable to shareholders (2,300) The non-cash, non-recurring items that negatively affected the financial reporting period are as follows: • Impairment of goodwill which arose from an acquisition in FY2020 ($481,000) • Impairment of right of use assets ($132,000) 29 Directors’ Report Significant changes in the state of affairs There have been no significant changes in the state of affairs of the company during or since the end of the financial year. Significant events after balance date There are no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future periods. Share options At the date of this report there were a total of 4,000,000 share options over ordinary shares in the company on issue. No option holder has any rights under the terms of the instruments to participate in any other share issue of the company or any other entity. Grant Date Vest Date Expiry Date Exercise Price ($) Number of Options on Issue at Date of This Report 22/10/2020 13/01/2021 21/10/2023 0.03 2,000,000 22/10/2020 23/02/2021 21/10/2025 0.03 2,000,000 During the financial year, the company issued a total of 1,000,000 ordinary shares on exercise of share options, at an exercise price of $0.03. The total consideration paid on these shares was $30,000, and no amount of consideration is unpaid. Indemnification and insurance of officers Indemnification The Company has agreed to indemnify the current and former Directors and Company Secretaries of its controlled entities for all liabilities to another person, other than the Company or a related body corporate that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Insurance premiums Insurance premiums have been paid in respect of Directors’ and Officers’ Liability Insurance. Insurance premiums paid for Directors insurance covers Directors whilst they are appointed as Directors of the Company and for a period of seven years after their resignation. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of Directors’ and Officers’ liability insurance as such disclosure is prohibited under the terms of the contract. Likely Developments In respect of future strategy and future performance, the group is constantly reviewing the strategic value inherent in the business. In conjunction with this, the group will continue to pursue its trading activities to further improve on operational aspects to produce the most beneficial long term results for the shareholders of the Company. 30 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Non-audit services Non-audit services were provided by the entity’s current auditor, Pitcher Partners during the year. Pitcher Partners received or are due to receive the following amounts for the provision of non-audit services. Consolidated 2022 $ 2021 $ Taxation Services 54,715 110,590 Financial due diligence services 1,000 25,000 55,715 135,590 The board of directors, in accordance with advice provided by the audit and risk committee, is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non- audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the audit and risk committee to ensure they do not impact the impartiality and objectivity of the auditor; and • None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards). Auditor’s independence declaration The Auditor’s independence declaration is set out on page 39 and forms part of the Directors’ report for the financial year ended 30 June 2022. Rounding The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191 dated 1 April 2016 and in accordance with that Instrument, amounts in the financial report and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. Directors’ meetings The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors of the Company during the financial year are: Meetings Board Audit & Risk Nomination & Remuneration1 Held Attended Held Attended Held Attended M. Wendt 16 16 - - - - K. Gilmore 16 15 - - - - B. Danos 16 16 3 3 - - T. Pearson 16 16 3 3 - - G. Karhan 16 16 3 3 - - 1 The Nomination and Remuneration Committee meeting scheduled for 30 June 2022 was convened on 7 July 2022. Committee membership As at the date of this report the Company had an Audit and Risk Committee, and a Nomination and Remuneration Committee. Members acting on the committees of the Board during the year were: Audit & Risk Nomination & Remuneration G. Karhan (Chairman) M. Wendt (Chairman) T. Pearson T. Pearson B. Danos K. Gilmore 31 Remuneration Report (audited) This remuneration report for the year ended 30 June 2022 outlines the remuneration arrangements of the group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308 (3C) of the Act. The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly, including any director (whether executive or otherwise) of the parent. Remuneration report approval at FY21 AGM The FY21 remuneration report received positive shareholder support at the FY21 AGM with a vote of 99.97% in favour. For the purposes of this report, the term “executive” includes the executive directors, senior executives, general managers and secretaries of the group and the term “director” refers to non-executive directors only. The remuneration report is presented under the following sections: 1. Individual key management personnel disclosures 2. Remuneration at a glance 3. Board oversight of remuneration 4. Non-executive director remuneration arrangements 5. Executive remuneration arrangements and the link to company performance 6. Executive contractual arrangements 7. Additional statutory disclosures 1. Individual key management personnel disclosures (i) Directors T. Pearson Chairman (Non-Executive) K. Gilmore Deputy Chairman (Non-Executive) M. Wendt Director (Non-Executive) G. Karhan Director (Non-Executive) B. Danos Director (Non-Executive) (ii) Executives D. Clark Chief Executive Officer C. Barnes Chief Financial Officer and Company Secretary 2. Remuneration at a glance Remuneration levels for key management personnel are competitively set to attract and retain appropriately qualified and experienced executives. The Board as necessary obtains independent advice on the appropriateness of remuneration packages of the group given trends in comparative companies both locally and internationally and the objectives of the Company’s remuneration strategy. Non-Executive Directors receive a fixed fee for their services, although may from time to time receive compensation in the form of shares or share options subject to the approvals outlined in section 4 of the remuneration report. The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The remuneration structures take into account: • the capability and experience of the key management personnel; • the key management personnel’s ability to control performance; • the group’s performance including: - the group’s earnings; and - the growth in share price and delivering of constant returns on shareholder wealth; • the amount of incentives within each key management person's remuneration. Remuneration packages include a mix of fixed and variable remuneration including short and long-term performance- based incentives. Remuneration Report (audited) 32 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Remuneration Report (audited) continued 3. Board oversight of remuneration Nomination and remuneration committee The nomination and remuneration committee is responsible for making recommendations to the board on the remuneration arrangements of directors and executives. The nomination and remuneration committee assesses the appropriateness of the nature and amount of remuneration of non-executive directors and executives on a periodic basis by reference to the relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high performing director and executive team. Remuneration strategy Cellnet Group Limited’s remuneration strategy is designed to attract, motivate and retain employees and non-executive directors by identifying and rewarding high performers and recognising the contribution of each employee to the continued growth and success of the group. To this end, key objectives of the Company’s reward framework are to ensure that remuneration practices: • are aligned to the group’s business strategy; • offer competitive remuneration benchmarked against the external market; • provides strong linkage between the individual and the performance and rewards of the group. Remuneration structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. 4. Non-executive director remuneration arrangements Total remuneration for all Non-Executive Directors, last voted upon by shareholders at the 1999 AGM, is not to exceed $300,000 per annum. Total Non-executive Director remuneration exceeded this limit in the 2021 financial year, due to options granted as detailed below. These options were approved by the shareholders at the AGM held on 22 October 2020. The Chairman’s base fee for the financial year ended 30 June 2022 was $80,000 (2021: $50,000). Non-executive director base fees ranged from $20,000 to $55,000 during the financial year ended 30 June 2022 (2021: $20,000 to $30,000). Non-executive directors do not receive performance related remuneration. Non-executive directors may, at the discretion of the Remuneration Committee and subject to shareholder approval, receive compensation in the form of shares or share options. Terms and conditions of options granted on issue There were no options granted in the 2022 financial year. 15,000,000 options were granted to Non-executive Directors during the previous financial year, as described above. These options were subject to a market-based vesting condition, whereby the options would vest on the earlier of the Volume Weighted Average Price (VWAP) of the company’s shares exceeding a target price for 5 consecutive days on which the shares are traded on the ASX, or 15 trading days regardless of whether shares trade on the ASX for consecutive trading days. For the purpose of these vesting conditions, the options were split into three tranches of 3,000,000, 6,000,000, and 6,000,000 options, with target share-prices of $0.05, $0.10 and $0.15 respectively. The grant date fair value per option of each of the three tranches granted during the previous year are $0.2162, $0.2178 and $0.2175 respectively. In addition, an option cannot be exercised unless the Board acting reasonably is satisfied that the following conditions have been satisfied: • The option holders were also directors at the time when the relevant vesting condition was satisfied; • There is no outstanding breach of the terms of engagement with the company; • No notice of termination of engagement has been either given by the director or received by the company; and • All vesting conditions have been satisfied. 33 The following table summarises the Non-executive Director options issued granted, exercised, or forfeited/lapsed during the financial year: KMP Grant Date Expiry Date Exercise Price Opening Balance No Granted No. Forfeited No Exercised Closing balance K Gilmore 22/10/2020 21/10/2022 $0.03 1,000,000 - - (1,000,000) - K Gilmore 22/10/2020 21/10/2023 $0.03 2,000,000 - - - 2,000,000 K Gilmore 22/10/2020 21/10/2025 $0.03 2,000,000 - - - 2,000,000 All options outstanding as at 30 June 2022 have vested and are exercisable. The full amount of the exercise price of $0.03 was paid on options exercised during the period, and no amount of consideration is unpaid. 5. Executive remuneration arrangements and the link to company performance 5.1 Fixed remuneration Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any fringe benefits tax charges related to employee benefits including motor vehicles) as well as employer contributions to superannuation funds. Remuneration levels are reviewed annually by the Board. 5.2 Variable remuneration – short term incentive (STI) and long term incentive (LTI) Performance linked remuneration includes both STI and LTI and is designed to reward executives for meeting or exceeding their financial and personal objectives. The STI is an ‘at risk’ bonus provided in the form of cash. 5.3 STI bonus The group operates an annual STI program that applies to executives and awards a cash bonus subject to the attainment of clearly defined group, business unit and individual measures. Actual STI payments awarded to each executive depends on the extent to which specific targets set at the beginning of each 12 months are met. The targets consist of a number of key performance indicators (KPIs) covering financial and non-financial, corporate and individual measures of performance. A summary of these measures and weightings are set out below. Return on equity Chief Executive Officer 100% Chief Financial Officer 100% These performance indicators were chosen as they represent the key drivers for the short-term success of the business and provide a framework for delivering long-term value. At the end of the financial year the Board assesses the actual performance of the group and the individual against their respective financial KPI’s set at the beginning of the financial year. No bonus is awarded where performance falls below 90% of the return on equity target. Performance beyond 90% is uncapped, and there is therefore no maximum amount of STI that may be awarded. The following table outlines the proportion of the agreed STI (as a percentage of base remuneration) that was earned and forfeited in relation to the 2022 financial year. Proportion of maximum STI earned in FY22 Proportion of maximum STI forfeited in FY22 D. Clark 0% 0% C. Barnes 0% 0% No other executives were eligible to earn an STI in the 2022 financial year. STI awards for 2021 and 2022 financial years For the 2022 financial year, there was no STI earned. For the 2021 financial year, a total payment of $217,478 was made in the 2021 financial year which represents 100% of the total STI cash bonus previously accrued in that period which has vested to executives. Remuneration Report (audited) 34 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 5.4 LTIs Executive Share Option Plan The Board has established an Executive Share Option Plan which is designed to provide incentives to the Executives of the group. The plan was approved by shareholders at the Annual General Meeting held on 18 December 2007. Under the plan the Board has the discretion to issue options to Executives as long as the issue does not result in the Executive owning or controlling the exercise of voting power attached to 5% or more of all shares then on issue. Each option is convertible to one ordinary share. The exercise price of the option is determined by the Board. The rules governing the operation of the plan may be amended, waived or modified, at any time by resolution of the Board provided there is no reduction of rights to Executives in the plan. If an amendment reduces the rights of Executives in the plan, it requires written consent of three-quarters of affected Executives. LTI Plan The Board has established a Long Term Incentive Plan which is designed to provide incentives to the Executives of the group. The plan was approved by shareholders at the Annual General Meeting held on 18 December 2007. The purpose and rules of the plan are the same as the Executive Share Option Plan described above, except that there is no prohibition on issuing shares if it would result in an Executive owning (legally or beneficially) or controlling the exercise of voting power attached to 5% or more of all shares then on issue. Performance Rights Plan On 10 October 2018 at the Company’s Annual General Meeting, shareholders approved a performance rights plan. Under this plan, performance rights (which may take the form of options or ordinary shares) are issued to executives. The rights deliver ordinary shares to senior management and Directors (at no cost to the senior management employee or Director) where the performance hurdle (where applicable) in relation to those performance rights is met. 5.5 STI structure The Board considers that the above performance-linked remuneration structure is appropriate at this time. It provides both short-term focus on operating performance and longer term focus on share price growth. 5.6 Consequences of performance on shareholder wealth In considering the group’s performance and benefits for shareholder wealth, the Board has regard to the following indices in respect of the current financial year and previous financial years. Details 2022 2021 (restated) 2019 2018 2017 Net profit / (loss) attributable to equity holders of the Company ($2,300,000) $3,773,000 ($2,373,000) $405,000 $5,982,000 Return on equity (8.0%) 15.2% (10.98%) 1.9% 38.2% Dividends paid - - - $782,439 $688,946 Reduction (increase) of share capital ($30,000) ($336,000) ($4,936,000) - - Change in share price ($0.028) $0.01 ($0.19) ($0.17) $0.11 5.7 Other benefits During the current and prior year, there were no non-cash bonuses or benefits provided to executives. Remuneration Report (audited) continued 35 6. Executive contractual arrangements It is the group’s policy that service contracts for executives are unlimited in term but capable of termination as per the relevant period of notice and that the group retains the right to terminate the contract immediately, by making payment that is commensurate with pay in lieu of notice. The service contract outlines the components of remuneration paid to the executive but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account cost-of-living changes, any change in the scope of the role performed by the senior executive and any changes required to meet the principles of the remuneration policy. Standard executive termination payment provisions apply to all current executives, including the Chief Executive Officer. The standards contractual provisions are as follows: Notice period Payment in lieu of notice Treatment of STI on termination Treatment of LTI on termination Employer initiated termination 3 months 3 months Pro-rated for time and performance Pro-rated for time and performance Termination for serious misconduct None None Unvested awards forfeited Unvested awards forfeited Employee initiated termination 3 months 3 months Pro-rated for time and performance Pro-rated for time and performance. Remuneration Report (audited) 36 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 6.1 Directors’ and executive officers’ remuneration The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly, including any director (whether executive or otherwise). Remuneration of Directors and executive officers are as follows: Short Term $ Post Employment $ Long Term Benefits $ Termination benefits $ Year Salary & Fees STI Cash Bonus Motor Vehicle Allowances Non- Monetary benefits Superannuation Benefits Cash Incentives Long Service Leave Share- based Payment Termination/ Retention Benefits Total $ % Performance Related % Options/ shares Non-executive directors M. Wendt 2022 26,000 - - - - - - - - 26,000 - - 2021 19,637 - - - - - - 83,400 - 103,037 80.9 80.9 B. Danos 2022 17,333 - - - - - - - - 17,333 - - 2021 20,000 - - - - - - - - 20,000 - - K. Gilmore 2022 47,667 - - - - - - - - 47,667 - - 2021 20,000 - - - - - - 83,400 - 103,400 80.7 80.7 T. Pearson 2022 69,333 - - - 6,933 - - - - 76,267 - - 2021 39,638 - - - 3,766 - - 83,400 - 126,804 65.8 65.8 Giles Karhan 2022 26,000 - - - - - - - - 26,000 - - 2021 30,000 - - - - - - - - 30,000 - - Total non-executive directors 2022 186,333 - - - 6,933 - - - - 193,267 - - 2021 129,275 - - - 3,766 - - 250,200 - 383,241 65.3% 65.3% Short Term $ Post Employment $ Long Term Benefits $ Termination benefits $ Year Salary & Fees STI Cash Bonus Motor Vehicle Allowances Non- Monetary benefits Superannuation Benefits Cash Incentives Long Service Leave Share- based Payment Termination/ Retention Benefits Total $ % Performance Related % Options/ Rights Executives D. Clark 2022 281,486 - - - 8,955 - 4,228 - - 294,669 - - 2021 267,145 116,704 13,017 - 9,227 - 9,812 - - 415,905 28.1 - C. Barnes 2022 250,432 - - - 29,460 - 4,057 - - 283,948 - - 2021 256,579 100,774 - - 21,694 - 5,749 - - 384,796 26. 2 - Total executives 2022 531,918 - - - 38,415 - 8,285 - - 578,617 - - 2021 523,724 217,478 13,017 - 30,921 - 15,561 - - 800,701 27.2 - Total key management personnel 2022 718,251 - - - 45,348 - 8,285 - - 771,884 - - 2021 652,999 217,478 13,017 - 34,687 - 15,561 250,200 - 1,183,942 39.5 21.1 Remuneration Report (audited) continued 37 7. Additional statutory disclosures This section sets out the additional disclosures required under the Corporations Act 2001. Transactions and balances with related parties: Wentronic Holding GmbH Wentronic Holding GmbH and its associated entities hold 53.23% (2021: 53.45%) of the ordinary shares in Cellnet Group Limited. At 30 June 2022, the group had a nil receivable from Wentronic Holding GmbH (2021: $92,000). Wentronic Asia Pacific Limited During the current and comparative financial years, the group enlisted the services of Wentronic Asia Pacific Limited (WAPL). WAPL is a wholly owned subsidiary of Wentronic Holding GmbH, Cellnet’s controlling shareholder. A function of WAPL is to source and procure inventory through bulk buying arrangements with third party suppliers on behalf of the Wentronic Group. Cellnet pays WAPL a 6% management/services fee for coordination of the purchasing and logistics function provided by WAPL under a service agreement. The total value of transactions with WAPL under these arrangements during the year ended 30 June 2022 was $757,000 (2021: $840,000). At 30 June 2022, the group had a total of $33,000 owing to WAPL in respect of these arrangements (30 June 2021: $9,000). Wentronic GmbH At 30 June 2022, the group had a nil receivable from Wentronic GmbH, a wholly owned subsidiary of Wentronic Holdings GmbH, (2021: $9,000), arising from expense recharging arrangements. Option/right holdings: The tables below details the number of options or rights over ordinary shares in the company held by directors, KMP or their related parties: 2022 Director/KMP No. Held at 1/7/2021 No. Granted No. forfeited No. Exercised No. Held at 30/6/2022 No. Vested & Exercisable K. Gilmore 5,000,000 - - (1,000,000) 4,000,000 4,000,000 2021 Director/ KMP No. Held at 1/7/2020 No. Granted No. Lapsed No. Exercised No. Held at 30/6/2021 No. Vested & Exercisable M. Wendt - 5,000,000 - (5,000,000) - - B. Danos - - - - - - K. Gilmore - 5,000,000 - - 5,000,000 5,000,000 T. Pearson - 5,000,000 - (5,000,000) - - G. Karhan - - - - - - C. Barnes 425,000 - (425,000) - - - D. Clark 425,000 - (425,000) - - - Remuneration Report (audited) 38 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Shareholdings: The table below details the number of ordinary shares in the company held by directors, KMP or their related parties. Unless otherwise stated, shares were acquired on-market. 2022 Director/ KMP No. Held at 1/7/2021 No. Acquired – Bonus Shares No. Acquired – On Market No. Acquired – Exercise of Options No. Disposed Shareholding at date of appointment/ resignation No. Held at 30/6/2022 M. Wendt 129,658,107 - - - - - 129,658,107 K. Gilmore 3,288,000 - - 1,000,000 - - 4,288,000 T. Pearson 6,375,000 - - - (3,475,000) - 2,900,000 G. Karhan - - - - - - B. Danos - - - - - - C. Barnes 762,528 - - - - - 762,528 D. Clark 1,000,000 - - - - - 1,000,000 2021 Director/ KMP No. Held at 1/7/2020 No. Acquired – Rights Offer No. Acquired – On Market No. Acquired – Exercise of Options No. Disposed Shareholder at date of appointment/ resignation No. Held at 30/6/2021 M. Wendt 124,658,107 - - 5,000,000 - - 129,658,107 K. Gilmore 3,288,000 - - - - - 3,288,000 T. Pearson - 875,000 500,000 5,000,000 - - 6,375,000 G. Karhan - - - - - - B. Danos - - - - - - C. Barnes 644,750 117,778 - - - - 762,528 D. Clark 750,000 - 250,000 - - - 1,000,000 End of Remuneration Report This report is made with a resolution of the Directors: Tony Pearson Chairman Signed at Brisbane on 30th August 2022 Remuneration Report (audited) continued 39 Remuneration Report (audited) Auditor’s independence declaration Brisbane Sydney Newcastle Melbourne Adelaide Perth Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. pitcher.com.au NIGEL FISCHER MARK NICHOLSON PETER CAMENZULI JASON EVANS KYLIE LAMPRECHT NORMAN THURECHT BRETT HEADRICK WARWICK FACE COLE WILKINSON SIMON CHUN JEREMY JONES TOM SPLATT JAMES FIELD DANIEL COLWELL ROBYN COOPER FELICITY CRIMSTON CHERYL MASON KIERAN WALLIS MURRAY GRAHAM ANDREW ROBIN KAREN LEVINE Level 38, 345 Queen Street Brisbane, QLD 4000 Postal address GPO Box 1144 Brisbane, QLD 4001 p. +61 7 3222 8444 The Directors Cellnet Group Limited E1, 5-6 Grevillea Place BRISBANE AIRPORT QLD 4008 Auditor’s Independence Declaration In relation to the independent audit for the year ended 30 June 2022, to the best of my knowledge and belief there have been: (i) No contraventions of the auditor independence requirements of the Corporations Act 2001; and (ii) No contraventions of APES 110 Code of Ethics for Professional Accountants (including Independence Standards). This declaration is in respect of Cellnet Group Limited and the entities it controlled during the year. PITCHER PARTNERS DANIEL COLWELL Partner Brisbane, Queensland 30th August 2022 40 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Financial Report Consolidated statement of financial position As at 30 June 2022 Consolidated Note 2022 2021 1 July 2020 $000 $000 Restated* $000 Restated* ASSETS Current assets Cash and cash equivalents 10 6,471 6,999 6,936 Trade and other receivables 11 9,347 13,161 15,027 Inventories 12 21,848 17,700 15,377 Other current assets 757 1,566 1,409 Derivative financial instruments 18 69 - 37 Total current assets 38,492 39,426 38,786 Non-current assets Property, plant and equipment 13 275 293 299 Right of use asset 19 663 408 700 Deferred tax assets (net) 8(c) 3,051 3,095 3,015 Intangible assets 14 4,526 5,559 5,928 Total non-current assets 8,515 9,355 9,942 TOTAL ASSETS 47,007 48,781 48,728 LIABILITIES Current liabilities Trade and other payables 15 14,449 10,073 11,905 Provisions 16 877 860 768 Current tax liabilities 8(c) 8 49 33 Lease liability 19 324 229 360 Interest-bearing loans and borrowings 17 4,936 8,359 9,042 Total current liabilities 20,594 19,570 22,108 Non-current liabilities Provisions 16 77 69 168 Lease liability 19 516 252 420 Interest-bearing loans and borrowings 17 - - 1,250 Total non-current liabilities 593 321 1,838 TOTAL LIABILITIES 21,187 19,891 23,946 NET ASSETS 25,820 28,890 24,782 EQUITY Issued capital 20(a) 38,755 38,725 38,389 Reserves 20(b) 10,526 13,626 9,854 Accumulated losses (23,461) (23,461) (23,461) TOTAL EQUITY 25,820 28,890 24,782 The above statement of financial position should be read in conjunction with the accompanying notes. * See note 30 for details regarding the restatement as a result of change in accounting policy. Financial Report 42 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Consolidated statement of comprehensive income For the year ended 30 June 2022 Consolidated Note 2022 2021 $000 $000 Restated* Revenue from contracts with customers 5 78,579 96,141 Other income 6 1 517 Materials, packaging and consumables used (61,795) (72,527) Depreciation and amortisation expense (1,032) (1,045) Employee benefit expense (8,731) (10,238) Finance costs (571) (754) Freight expense (2,556) (2,137) Occupancy expense (106) (142) Warehousing expense (2,879) (2,797) Other expense (2,597) (3,260) Impairment expense (613) - Profit / (loss) before income tax (2,300) 3,758 Income tax (expense) / benefit 8(a) - 15 Net profit / (loss) for the period 7 (2,300) 3,773 Items that may be reclassified subsequently to profit or loss Foreign currency translation (71) (251) Total comprehensive income / (loss) for the period (2,371) 3,522 Earnings per share for profit attributable to the ordinary equity holders of the Company Basic earnings per share (cents per share) 9 (0.95) 1.60 Diluted earnings per share (cents per share) 9 (0.95) 1.57 The above statement of comprehensive income should be read in conjunction with the accompanying notes. * See note 30 for details regarding the restatement as a result of change in accounting policy. 43 Financial Report Consolidated statement of changes in equity For the year ended 30 June 2022 Share capital $000 Reserve for own shares $000 Foreign Currency translation reserve $000 Share based payment reserve $000 Reserve for Profits $000 Accumulated losses $000 Total equity $000 At 1 July 2021 as originally stated 38,725 (25) (590) 1,945 12,952 (23,461) 29,546 Restatement as a result of change in accounting policy (note 30) - - - - (656) - (656) Restated balance at 1 July 2021 38,725 (25) (590) 1,945 12,296 (23,461) 28,890 Loss for the period - - - - - (2,300) (2,300) Foreign currency translation - - (71) - - - (71) Total comprehensive profit for the period - - (71) - - (2,300) (2,371) Transfers to/from reserves - - - - (2,300) 2,300 - Transactions with owners in their capacity as owners: Issue of shares 30 - - - - - 30 Share based payments - - - - - - - Dividends paid - - - - (729) - (729) Balance as at 30 June 2022 38,755 (25) (661) 1,945 9,267 (23,461) 25,820 At 1 July 2020 as originally stated 38,389 (25) (339) 1,695 9,142 (23,461) 25,401 Restatement as a result of change in accounting policy (note 30) - - - - (619) - (619) Restated balance at 1 July 2020 38,389 (25) (339) 1,695 8,523 (23,461) 24,782 Profit for the period (restated) - - - - - 3,773 3,773 Foreign currency translation - - (251) - - - (251) Total comprehensive income for the period (restated) - - (251) - - 3,773 3,522 Transfers to/from reserves 3,773 (3,773) - Transactions with owners in their capacity as owners: Issue of shares 336 - - - - - 336 Share based payments - - - 250 - - 250 Balance as at 30 June 2021 38,725 (25) (590) 1,945 12,296 (23,461) 28,890 The above statement of changes in equity should be read in conjunction with the accompanying notes. 44 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Financial Report continued Consolidated statement of cash flows For the year ended 30 June 2022 Consolidated Note 2022 2021 $000 $000 Restated* Cash flows from / (used in) operating activities Receipts from customers (inclusive of GST) 91,981 107,253 Payments to suppliers and employees (inclusive of GST) (87,475) (104,021) Income tax paid - (51) Interest paid (292) (560) Net cash flows from / (used in) operating activities 29 4,214 2,621 Cash flows used in investing activities Purchase of property, plant and equipment (59) (64) Payments for purchase of intangibles - (168) Net cash flows used in investing activities (59) (232) Cash flows from financing activities Proceeds from issuance of shares 20 30 300 Principal repayments on leases 19 (435) (445) Proceeds from borrowings 16,570 26,509 Repayment of borrowings (19,993) (28,442) Dividends (729) - Net cash flows (used in) / from financing activities (4,557) (2,078) Net increase / (decrease) in cash and cash equivalents (402) 311 Net foreign exchange differences (126) (248) Cash and cash equivalents at beginning of period 6,999 6,936 Cash and cash equivalents at end of period 10 6,471 6,999 The above statement of cash flows should be read in conjunction with the accompanying notes. * See note 30 for details regarding the restatement as a result of change in accounting policy. 45 Financial Report 1. Corporate Information Cellnet Group Limited (the ‘Company’) is a company limited by shares and incorporated in Australia. The consolidated financial report of the Company for the financial year ended 30 June 2022 comprises the Company and its subsidiaries (together referred to as the ‘group’ or the ‘consolidated entity’). The company is a for-profit entity for the purpose or preparing these financial statements. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company. The financial report was authorised for issue by the Directors on 30th August 2022. The nature of the operations and principal activities of the group are described in the directors’ report. 2. Significant accounting policies (a) Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The financial report is presented in Australian dollars and has been prepared on the historical cost basis, except for derivative financial instruments and contingent consideration liabilities which are measured at fair value. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191 dated 1 April 2016 and in accordance with that Instrument, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Refer to note 2(v) for further information on the critical accounting estimates and judgements made in the preparation of these financial statements. The financial report complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. (b) New accounting standards and interpretations (i) Application of new accounting standards No new or revised accounting standards considered as having a material effect on the group have become effective for the first time in preparing this financial report. (ii) Accounting standards and interpretations issued but not yet effective The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the group. The group has decided not to early adopt any of these new and amended pronouncements. The directors have assessed that none of these standards will have a material impact on the group’s financial statements in the period of initial application. (c) Basis of Consolidation The consolidated financial statements comprise the financial statements of Cellnet Group Ltd and its subsidiaries (as outlined in note 24) as at and for the year ended 30 June each year (the group or the consolidated entity). Interests in associates are equity accounted and are not part of the group. Subsidiaries are all those entities over which the group has control. The group controls an entity where it has power over the entity, exposure or rights to variable returns from its involvement with the entity, and for which it has the ability to use its power over the entity to affect the amount of its returns. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all Notes to the financial statements 46 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Intra-group balances and any unrealised gains and losses or income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. (d) Foreign currency (i) Functional and presentation currency Both the functional and presentation currency of Cellnet Group Limited and its Australian subsidiaries are Australian dollars ($). The group has subsidiaries with functional currencies of New Zealand dollars and United States dollars. The results of these subsidiaries which are translated to the presentation currency as described in (iii) below. (ii) Transactions and balances Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance date are translated to Australian dollars at the foreign exchange rate ruling at reporting date. Foreign exchange differences arising on translation are recognised in net income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. (iii) Financial statements of foreign operations The assets and liabilities of foreign operations are translated to Australian dollars at foreign exchange rates ruling at the balance date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on translation are recognised directly in a separate component of equity. (e) Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination the group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. (f) Revenue from contracts with customers Revenue from the sale of goods is recognised at the point in time when control of the products has transferred, being when the products are delivered to the customer. Products are typically sold with an attaching contractual or constructive entitlement to rebates and other incentive arrangements. As such, revenue from the sale of goods is recognised based on the price specified in the contract (i.e. the gross sale price) net of the estimated rebates and incentives. Accumulated experience is used to estimate and provide for the rebates and incentives, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected rebates and incentives payable to customers in relation to sales made until the end of the reporting period. Notes to the financial statements 2. Significant accounting policies continued 47 Financial Report In addition, products sold by the group carry a right of return. A refund liability (included in trade and other payables) and a right to returned goods asset (other current assets in the statement of financial position) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at an operating segment level (expected value method). Because the percentage of sales returns has been steady for a number of years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date. Sales are made with credit terms of 60 days or less; as such no element of financing is deemed present in sales of goods made to customers. The group does not generally receive funds in advance of providing goods nor provide goods in advance of contractual entitlement to invoice the customer. Disaggregation of revenue The group’s sole material source of revenue is the sale of goods to customers. The nature of contracts with customers for sale of goods is consistent across the group. Required disaggregation disclosures under AASB 15 are made within note 5. (g) Financial instruments (i) Financial assets Initial recognition and measurement Financial assets within the scope of AASB 9 Financial Instruments are classified as at amortised cost, at fair value through profit and loss, or at fair value through other comprehensive income. The group determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through the profit or loss, on the basis of both the group’s business model for managing the financial assets, and the contractual cash flow characteristics of the financial asset. The group’s financial assets include cash and short-term deposits (amortised cost), trade and other receivables (amortised cost), and derivative financial instruments (fair value through profit and loss). (ii) Financial liabilities Initial recognition and measurement Financial liabilities within the scope of AASB 9 Financial Instruments are classified as at amortised cost, at fair value through profit and loss, or as derivatives designated as hedging instruments as appropriate. The group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair values plus, in the case of loans and borrowings, directly attributable transaction costs. The group’s financial liabilities include trade and other payables (amortised cost), and contingent consideration payable (fair value through profit and loss). Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. (iii) Fair value of financial instruments Information regarding fair value measurements made by the group is included in note 4. 48 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 2. Significant accounting policies continued (h) Receivables Receivables from contracts with customers, loans, and other receivables are stated at their amortised cost less allowances for expected credit losses. Receivables from contracts with customers are recognised at the time the goods are delivered to the customer, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Other receivables are recognised when the entity becomes party to the contractual provisions of the asset. The group applies the simplified expected credit loss model prescribed in AASB 9 to determine an allowance for expected credit losses on its receivables from contracts with customers and its other receivables. Under this approach, the lifetime expected credit losses are estimated using a provision matrix based on historical rates of losses observed on similar assets, as adjusted for the group’s forecasts of future economic conditions. The measurement of expected credit losses reflects the group’s ‘expected rate of loss’, which is a product of the probability of default and the loss given default, and its ‘exposure at default’, which is typically the carrying amount of the relevant asset. In determining the allowance for expected credit losses, the group has consideration to expected recoveries through collateral or trade credit insurance arrangements. The group has identified contractual payments more than 90 days past due as default events for the purpose of measuring expected credit losses. These default events have been selected based on the company’s historical experience. Receivables are written off when they exceed 150 days past due and have been submitted to the group’s trade credit insurer for processing. (i) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Cost is calculated using the average cost method and includes direct and allocated costs incurred in acquiring the inventories and bringing them to their present location and condition. A provision is recognised when there is objective evidence that the group will not be able to sell the inventory at normal reseller pricing. (j) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise of cash at bank and in hand and short-term deposits with a maturity of 60 days or less that are readily convertible to known amounts of cash and which are subject to insignificant risks of change in values. (k) Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy (m)). Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged to net income on a straight- line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives in the current and comparative periods are as follows: Leasehold improvements 3–5 years Plant and equipment 2–3 years The residual value, useful life and depreciation method applied to an asset are reassessed at least annually. An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. 49 Financial Report (l) Intangible assets (i) Goodwill Goodwill acquired in a business combination is initially measured at cost of the business combination being the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. (ii) Other intangible assets Other intangible assets that are acquired by the group are stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy (m)). The group’s other intangible assets represent software assets purchased by the entity or developed by a third party, and customer and supplier relationships acquired through business combination transactions. (iii) Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. (iv) Amortisation Amortisation is charged to net income on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each balance date. Other intangible assets are amortised from the date they are available for use over their estimated useful lives. (m) Impairment The carrying amounts of the group’s property, plant and equipment and intangible assets, are reviewed at each balance date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see below). For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in net income. Impairment losses recognised in respect of cash- generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash- generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis. Calculation of recoverable amount The recoverable amount of property, plant and equipment and intangible assets is the greater of their fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash- generating unit to which the asset relates. Impairment losses, other than in respect of goodwill, are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. 50 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 2. Significant accounting policies continued An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (n) Trade and other payables Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing and are normally settled on average between 30 day and 45 day terms. They represent liabilities for goods and services provided to the group prior to the end of the financial year that are unpaid and arise when the group becomes obliged to make future payments in respect of the purchase of these goods and services. (o) Interest-bearing loans and borrowings Interest-bearing borrowings are recognised initially at fair value of the consideration received less related transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost applying the effective interest method. (p) Provisions and employee leave benefits (i) Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in net income net of any reimbursement. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance date using a discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount rate. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. (ii) Long-term service benefits The group’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to high quality corporate bonds at the balance date which have maturity dates approximating the terms of the group’s obligations. (iii) Wages, salaries, annual leave and sick leave Liabilities for employee benefits for wages, salaries and annual leave that are expected to be wholly settled within 12 months of the reporting date represent present obligations resulting from employees’ services provided to reporting date, and are calculated using undiscounted amounts based on remuneration wage and salary rates that the group expects to pay as at reporting date including related on-costs, such as worker’s remuneration insurance and payroll tax. Amounts not expected to be wholly settled within 12 months are carried at a net present value determined in the same manner as long service leave benefits described in note 2(p) (ii). Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (q) Share based payment transactions The group provides incentives to KMP in the form of share based payments. There are currently share based payment plans in place for the KMP. The cost of share based payments with KMP is measured by reference to the fair value of the equity instrument at the date at which they are granted (refer note 21 for further details). 51 Financial Report (r) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (s) Leases Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments (including in-substance fixed payments), less any lease incentives receivable • Variable lease payments that are based on an index or a rate • Amounts expected to be payable by the group under residual value guarantees • The exercise price of a purchase option if the group is reasonably certain to exercise that option, and • Payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the group’s incremental rate of borrowing is used, being the rate that the group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost comprising the following: • The amount of the initial measurement of lease liability • Any lease payments made at or before the commencement date less any lease incentives received • Any initial direct costs, and • Restoration costs 52 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 2. Significant accounting policies continued Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. (t) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred tax is provided using the statement of financial position method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for - initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority Tax consolidation The Company and its wholly-owned Australian resident subsidiaries have formed a tax-consolidated entity with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated entity is Cellnet Group Limited. Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated entity are recognised in the separate financial statements of the members of the tax-consolidated entity using the ‘separate taxpayer’ within the consolidated entity approach. Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts in the separate financial statements of each entity and the tax values applied under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses or unused tax credits of the subsidiaries are assumed by the head entity in the tax consolidated entity and are recognised as amounts payable / (receivable) to / (from) other entities in the tax-consolidated entity in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution. The Company recognises deferred tax assets arising from unused tax losses and unused tax credits of the tax-consolidated entity to the extent that it is probable that future taxable profits of the tax-consolidated entity will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses and unused tax credits as a result of revised assessments of the probability of recoverability are recognised by the head entity only. The head entity, in conjunction with other members of the tax-consolidated entity, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated entity in respect of tax amounts. The tax funding arrangements require payments to / (from) the head entity equal to the current tax liability / (asset) 53 Financial Report assumed by the head entity and any tax-loss or tax credit related deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity payable / (receivable) equal in amount to the tax liability / (asset) assumed. The inter-entity payable / (receivable) is at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. (u) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the relevant taxation authority is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the relevant taxation authority are classified as operating cash flows. (v) Critical accounting estimates and judgements Management discusses with the Audit Committee the development, selection and disclosure of the group’s critical accounting judgements and estimates and the application of these policies and estimates. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Revenue recognition As described in note 2(f) revenue is recognised net of expected sales returns, incentives and rebates offered to customers. Management applies the expected value method in making estimates of the amounts of incentives and rebates outstanding and the value of expected returns (including any associated right to returned goods asset) as at balance date based on customer trading and claim history, the terms of underlying contractual arrangements, and historical rates of product return. Such estimates involve the use of management’s judgement and the actual amount of incentives and rebates settled, and products returned, may vary from the amounts accrued at balance date. Valuation of consideration paid and net assets acquired in business combinations Consideration paid and net assets acquired in business combination transactions are recognised at their acquisition date fair values. The most significant judgements and assumptions are made in determining the fair value of identifiable intangible assets (customer and supplier relationships) and contingent consideration payable. These assumptions include forecast cash flows (including growth rates), probability weightings applied to different earn-out scenarios, customer and supplier attrition rates, contributory asset charges and discount rates. Impairment assessment for cash-generating units containing goodwill The group completes an impairment assessment on cash-generating units to which goodwill is allocated on an annual basis, or otherwise where there are indicators that CGU assets may be impaired. This assessment involves comparison of the value-in- use of a cash-generating unit to its carrying value. There are a number of assumptions made in the determination of value-in-use, which are outlined in detail in note 14(b). 54 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 2. Significant accounting policies continued Impairment losses for stock on hand The group’s inventory is exposed to a risk of obsolescence. A provision for obsolescence is raised where there is evidence suggesting that the net realisable value of inventory is less than its cost to the group. Management relies on inventory ageing data, days stock on hand (based on recent sales data), and future sales forecasts in determining the required provision against inventory at an individual product level. Note 7 discloses the amount of stock which has been scrapped throughout the course of the year, or which has been written down to net realisable value in accordance with the policy outlined in note 2(i). Share based payments The group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by management using a binomial model. The related assumptions are detailed in note 21. The accounting estimates and assumptions relating to equity-settled share-based payments will have no impact on the carrying amounts of assets and liabilities, or on profit or loss, within the next annual reporting period. Recovery of deferred tax assets Deferred tax assets are recognised for tax losses and deductible temporary differences to the extent that management considers that it is probable that future taxable profits will be available to utilise temporary differences and recognised tax losses. Where the group has made a taxable loss in the current or preceding year, a deferred tax asset for carry forward tax losses is only recognised to the extent that there is convincing other evidence that sufficient taxable profit will be available against which the recognised unused tax losses can be utilised. Significant judgement was required to determine the amount of deferred tax assets that can be recognised, based upon the probability weighted forecasts of future taxable profits over the next three years. (v) Earnings per share Expected credit loss allowances on trade receivables The group recognises an allowance for expected credit losses on its trade receivables. The basis for determination of this allowance is as described in note 2(h). There are a number of assumptions made in the determination of the allowance for expected credit losses, which are outlined in detail in note 11. (w) Earnings per share The group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. Potential ordinary shares shall be treated as dilutive when their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations. (x) Government grants Government grants are recognised when there is reasonable certainty that the grant will be received and all grant conditions are 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 depreciable assets are credited to deferred income and are recognised in profit or loss over the period and in the proportions in which depreciation expense on those assets is recognised. Government grants include amounts received or receivable under the Australian Federal Government’s JobKeeper Payment Scheme, and the New Zealand Federal Government’s Job Subsidy Scheme, which provides a temporary subsidy to eligible businesses significantly affected by coronavirus (COVID-19). Wage subsidies received have been offset against the related employee benefits expense in the statement of comprehensive income. The amount of these subsidies received during the year has been disclosed in note 7. 55 Financial Report 3. Financial risk management objectives and policies The group’s principal financial instruments comprise of receivables, payables, cash and short-term deposits, interest bearing loans, lease liabilities and forward foreign currency contracts. Risk exposures and responses The group manages its exposure to key financial risks, including interest and currency risk in accordance with the group’s financial risk management policy. The objective of this policy is to support the delivery of the group’s financial targets whilst protecting future financial security. The group enters into derivative transactions, principally forward currency exchange contracts. The purpose is to manage the currency risks arising from the group’s operations. The main risks arising from the group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessment of market forecasts for interest rate and foreign exchange prices. Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through using future rolling cash flow forecasts. Primary responsibility for identification and control of financial risks rests with the Audit & Risk Committees under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identified below, including the setting of limits for forward currency contracts, credit allowances and future cash flow forecast projections. Interest rate risk The group’s exposure to market interest rates relates solely to the group’s short-term cash deposits and interest bearing loans and borrowings as disclosed in note 10 and 17. Note 2022 2021 $000 $000 Cash and cash equivalents 10 6,471 6,999 Interest bearing loans and borrowings 17 (4,936) (8,359) 1,535 (1,360) The group frequently analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative hedging positions and the mix of fixed and variable interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 30 June 2022, if interest rates had moved as illustrated in the table below, with all other variables held constant, post-tax profit and net assets would have been affected as follows: Post tax profit higher/(lower) Net assets higher/(lower) 2022 2021 2022 2021 Consolidated $000 $000 $000 $000 +1% (100 basis points) (2021: 1%) (6) (10) (6) (10) -0.5% (50 basis points) (2021: 0.5%) 3 5 3 5 The movements in profit are due to higher / lower cash receipts / payments from variable rate net interest bearing balances. 56 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Foreign currency risk The group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than Australian dollars. The currencies giving rise to risk are primarily U.S dollars and New Zealand dollars. The group enters into forward foreign exchange contracts to hedge certain anticipated purchase commitments denominated in foreign currencies (principally U.S dollars). The terms of these commitments are no more than 45 days. It is the group’s policy not to enter into forward contracts until a firm commitment is in place. The group has subsidiaries with function currencies of New Zealand and United States dollars. There are currently no hedges in place to mitigate the foreign currency risk for these subsidiaries. Entering into forward foreign currency exchange contracts minimises the risk of sharp fluctuations in foreign exchange rates and allows for better cash flow management in relation to paying international suppliers. At balance date, the group had the following exposure to US$ foreign currency, expressed in Australian dollars that is not designated as cash flow hedges: 2022 2021 $000 $000 Financial assets Trade and other receivables 480 98 480 98 Financial liabilities Trade and other payables (6,973) (2,359) Forward foreign currency contracts* (1,308) (118) (8,281) (2,477) Net exposure (7,801) (2,379) At 30 June 2022, had the Australian dollar moved, as illustrated in the table below, with all other variables held constant, post-tax profit and other comprehensive income would have been affected as follows: Post tax profit higher/(lower) Net assets higher/(lower) 2022 2021 2022 2021 Consolidated $000 $000 $000 $000 AUD / USD +10% (2021: +10%) 661 206 661 206 AUD / USD -10% (2021: -10%) (807) (251) (807) (251) Significant assumptions: The reasonably possible movement was calculated by taking the USD spot rate as at balance date, moving the spot rate by the reasonably possible movements and then re-converting the USD into AUD with the ‘new spot rate’. This amount was then tax effected. This methodology reflects the translation methodology undertaken by the group. Credit Risk Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The maximum exposure to credit risk on financial assets of the group is the carrying amount, net of any allowance for expected credit losses, as disclosed in the maturity analysis table below. The group mitigates this risk by adopting procedures whereby it only deals with creditworthy customers. Wherever possible the group also insures debtors that have an approved credit limit of greater than $5,000 through trade credit insurance. Where possible trade receivables that are greater than $5,000 are insured up to 90% of the approved credit limit, with a $5,000 excess payable per claim. Details regarding the determination of the allowance for expected credit losses are contained in note 11(a). Liquidity risk Liquidity risk arises from both the financial liabilities and lease liabilities of the group and the group’s subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due. The group’s objective is to maintain a balance between continuity of at cash funding and short-term fixed cash deposits. The group manages its liquidity risk by monitoring the total cash inflows and outflows expected on a daily basis. Notes to the financial statements 3. Financial risk management objectives and policies continued 57 Financial Report Maturity analysis of financial assets, financial liabilities and lease liabilities based on management’s expectation is presented below. 2022 Note Carrying Value $000 Total contractual cash flows 6 months or less 6 – 12 months 1 – 5 years Financial assets Cash and cash equivalents 10 6,471 - - - - Trade and other receivables 11 9,347 9,347 9,347 - - Derivative financial instruments 18 69 69 69 - - 15,887 9,416 9,416 Financial liabilities Trade and other payables 15 (14,449) (14,449) (14,449) - - Interest bearing loans and borrowings 17 (4,936) (4,936) (4,936) - - (19,385) (19,385) (19,385) - - Lease liabilities (840) (899) (24) (146) (542) Net inflow / (outflow) (4,338) (10,868) (9,993) (146) (542) 2021 Carrying Value $000 Total contractual cash flows 6 months or less 6 – 12 months 1 – 5 years Financial assets Cash and cash equivalents 10 6,999 - - - - Trade and other receivables 11 13,161 13,161 13,161 - - Derivative financial instruments 18 - - - - - 20,160 13,161 13,161 - - Financial liabilities Trade and other payables 15 (10,073) (10,073) (10,073) - - Interest bearing loans and borrowings 17 (8,359) (8,359) (8,359) - - (18,432) (18,432) (18,432) - - Lease liabilities (481) (512) (186) (59) (267) Net inflow / (outflow) 1,247 (5,783) (5,457) (59) (267) 58 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 4. Fair Value Measurement The fair values together with the carrying amounts of financial assets and financial liabilities shown in the statement of financial position are outlined in the table below. For short term trade receivables and payables with a maturity date of less than one year, the carrying amount, as adjusted for any allowances for impairment, is deemed to reflect the fair value. 2022 2021 Note Carrying amount $000 Fair value $000 Carrying amount $000 Fair value $000 Amortised cost Cash and cash equivalents 10 6,471 6,471 6,999 6,999 Trade and other receivables 11 9,347 9,347 13,161 13,161 Trade and other payables 15 (14,449) (14,449) (10,073) (10,073) Borrowings 17 (4,936) (4,936) (8,359) (8,359) Fair value through profit or loss Derivative financial instruments 18 69 69 - - (3,498) (3,498) 1,728 1,728 Fair value hierarchy Outlined below are the judgements and estimates made in determining the fair value of assets and liabilities that are recognised and measured at fair value. To provide an indication about the reliability of the inputs used in determining fair value, the group has classified its assets and liabilities into the three levels prescribed under the accounting standards, as follows: Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. That is, all valuation inputs are observable. Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The only balances on the group’s balance sheet which is measured at fair value are forward foreign exchange contracts (refer note 18). The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date. Such fair value measurement is included in level 2, as it is based on an observable input. At the conclusion of the earn-out period, being 30 June 2021, the group has assessed that the earn-out targets as described above have not been met and the liability has been valued at $nil as at 30 June 2021, resulting in a gain on remeasurement of the contingent liability in the prior financial year of $131,000, being the value of the contingent consideration liability recognised as at the comparative balance date of 30 June 2020. Performance Distribution Contingent consideration consisted of contractual earn- out arrangements amounting to 35% of net profit before tax generated by the acquired business for a three year period subsequent to the acquisition date of 1 April 2020. On 18 March 2021, the group entered into an agreement with the former owner of the Performance Distribution business whereby a payment of $100,000 was made by the group in full and final settlement of any future contingent consideration liability payable under the business acquisition agreement. As a result of this arrangement, the contingent consideration liability has been derecognised and a gain on settlement of the liability amounting to $264,000 has been recorded in profit and loss in the prior financial year. 59 Financial Report 5. Operating segments Identification of reportable segments An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker (the Chief Executive Officer) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Operating segments are identified by management based on the manner in which products are sold. The group has identified three operating segments, being Cellnet Australia, Cellnet New Zealand, and Turn Left Distribution. The Cellnet Australia and Cellnet New Zealand operating segments are aggregated into the one reportable segment (Cellnet), based on the similar economic characteristics that exist between these two segments, and similarities in the nature of products, type and class of customer for these products, distributions methods and similar economic and regulatory environments in Australia and New Zealand. Financial information for each of the group’s reportable segments is set out below: Cellnet Turn Left Corporate and Eliminations Total $'000 $'000 $'000 $'000 June 2022 Australia 43,802 21,605 - 65,407 New Zealand 13,172 - - 13,172 Total Revenue from contracts with customers 56,974 21,605 - 78,579 Other income 1 - - 1 Loss before tax (1,659) (641) (2,300) Segment assets 32,992 13,978 36 47,006 Segment liabilities 14,814 6,372 - 21,186 June 2021 Australia 56,541 23,307 - 79,848 New Zealand 16,293 - - 16,293 Total Revenue from contracts with customers 72,834 23,307 - 96,141 Other income 22 - 495 517 Profit before tax (restated) 1,623 1,758 377 3,758 Segment assets (restated) 33,420 13,449 1,912 48,781 Segment liabilities 16,037 3,854 - 19,891 60 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 6. Other income 2022 2021 $000 $000 Fair value gain on revaluation of contingent consideration payable - 495 Other income 1 22 Total other revenue 1 517 7. Items included in profit/(loss) 2022 2021 $000 $000 Increase / (decrease) in credit loss allowance 12 819 Loss on scrapping of / provisioning for obsolete inventory 3,252 1,801 Depreciation of right-of-use assets 407 438 Impairment of right-of-use assets 132 - Impairment of intangible assets 481 - Interest expense on lease liabilities 39 31 Government grants – wage subsidies1 (267) (667) Defined contribution employee superannuation expense 516 579 Share-based payments expense/(income) - 250 Fair value (gains) / losses on FX derivatives 69 - Net foreign exchange losses/ (gains) 170 (321) 1 During the year the group received $126,176 under the Australian government’s JobKeeper wage subsidy scheme, and $140,598 under the New Zealand government’s wage subsidy scheme. These amounts have been offset against employee benefits expense in the statement of comprehensive income. 61 Financial Report 8. Income Tax 2022 2021 (a) Income tax expense / (benefit) $000 $000 Restated* The major components to income tax are: Current income tax charge - 50 Prior year under/ (over) provision – current tax (41) - Prior year under/ (over) provision – deferred tax (34) Deferred income tax charge 75 (65) Total income tax expense/(benefit) - (15) 2022 2021 (b) Numerical reconciliation between aggregate tax expense / (benefit) recognised in net income and tax expense / (benefit) calculated per the statutory income tax rate $'000 $'000 Restated* A reconciliation between tax expense / (benefit) and the product of accounting profit / (loss) before income tax multiplied by the group’s applicable income tax rate is as follows: Accounting profit/(loss) before tax (2,300) 3,758 At the parent entity’s statutory income tax rate 30% (2021: 30%) (690) 1,127 Adjustments in respect of income tax: Entertainment 5 9 Impairment (goodwill) 144 - Share-based payments - 75 Effect of lower tax rate in New Zealand (28%) (5) (3) Prior year under / (over) provision 75 Fair value gain on revaluation of contingent consideration payable - (149) Other 15 (15) Recognition of previously unrecognised tax losses - (1,075) De-recognition of deferred tax assets for tax losses - - Current year losses not recognised 456 - Aggregate income tax expense / (benefit) - (15) 62 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 8. Income Tax continued Recognised deferred tax assets and liabilities Consolidated 2022 2022 2021 2021 $000 $000 $000 $000 (c) Current tax liability Deferred tax asset Current tax liability Deferred tax asset Restated Opening balance (49) 3,095 (33) 2,750 Tax paid / (refund) - - 51 - Charged to income / (expense) - (75) (65) 80 Charged to equity - - - 265 Prior year over / (under) provision 41 34 - - FX translation - (3) (2) - Closing balance (8) 3,051 (49) 3,095 Deferred income tax at 30 June relates to the following: 2022 2021 $000 $000 Restated Net deferred tax assets Allowance for expected credit losses 70 296 Right of return liabilities (net of right to returned goods asset) 96 167 Lease liability (net of right of use assets) 53 22 Employee provisions 281 270 Unrealised foreign exchange gain (21) - Sundry accruals 485 721 Other (24) 33 Inventory 997 1,082 Intangible assets (510) (593) Tax losses carried forward 2,875 (991) Tax losses not recognised (1,251) 1,802 Net deferred tax asset 3,051 3,095 At 30 June 2022, the group has assessed that deferred tax assets recognised above relating to carried forward tax losses of the Australian tax consolidated group are recoverable. This assessment is based on forecast taxable profits over a three year period, and a history of profits arising in all but one (2021) of the last seven financial years. (d) Tax losses not recognised The group has gross tax losses, stated in the reporting currency of Australian dollars, for which no deferred tax asset is recognised on the statement of financial position of $5,413,000 (Tax effected: $1,624,000) (2021: $2,350,000 (Tax effected: $705,000) which are available indefinitely for offset against future gains subject to meeting the relevant statutory tests. 63 Financial Report 9. Earnings per share The following reflects the income used in the basic and diluted earnings per share computations: 2022 2021 $000 $000 Restated (a) Earnings used in calculating earnings per share For basic earnings per share: Profit / (Loss) from continuing operations (2,300) 3,773 Net profit/(loss) attributable to ordinary equity holders (2,300) 3,773 For diluted earnings per share: Profit / (loss) from continuing operations (2,300) 3,773 Net profit/(loss) attributable to ordinary equity holders (2,300) 3,773 2022 2021 No. 000 No. 000 (b) Weighted average number of shares Weighted average number of shares (basic) at 30 June 243,362 236,008 Weighted average number of shares adjusted for effect of dilution 243,362 240,629 Potential ordinary shares under option and restricted shares are considered non-dilutive where the current share price is lower than the exercise price. 2022 2021 $000 $000 (c) Earnings per share Basic earnings per share (cents per share) (0.95) 1.60 Diluted earnings per share (cents per share) (0.95) 1.57 10. Current assets – cash and cash equivalents 2022 2021 $000 $000 Cash at bank and in hand 6,471 6,999 6,471 6,999 Cash and funds held at bank earns interest at floating rates based on daily bank deposit rates. 64 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 11. Current assets – trade and other receivables 2022 2021 $000 $000 Receivables from contracts with customers 8,447 13,283 Allowances for expected credit losses (234) (993) 8,213 12,290 Other receivables and prepayments 1,134 871 Carrying amount of trade and other receivables 9,347 13,161 The tables below show the calculation of the expected credit loss provision for receivables from contracts with customers at both 30 June 2022 and 30 June 2021. Current 0-30 days past due 31-60 days past due Over 60 days past due Other* Total $000 $000 $000 $000 $000 $000 30 June 2022 Expected loss rates 0.05% 0.96% 1.57% 24.47% - 2.78% Gross carrying amount 7,236 254 21 936 - 8,447 Loss allowance 3 2 - 229 - 234 30 June 2021 Expected loss rates 0.05% 1.01% 2.00% 12.82% 23.79% 3.56% Gross carrying amount 6,298 1,657 487 1,723 3,118 13,283 Loss allowance 3 17 10 221 742 993 *There is a significant concentration of credit risk within a single customer account balance, which has different characteristics to the remainder of the groups trade receivables. For this reason the gross carrying value of this receivable and the related credit loss allowance have been disclosed separate from the group’s other receivables from contracts with customers. (a) Allowance for expected credit losses As described in note 2(h), the group applies the simplified expected credit loss model prescribed in AASB 9 to determine an allowance for expected credit losses on its receivables from contracts with customers. To measure the expected credit losses, receivables from contracts with customers have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles for sales over a 4-5 year period prior to 30 June 2022 and 30 June 2021 respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking macroeconomic factors affecting the ability of customers to settle the receivables. The group has identified retail trade industry output growth and retail sector gross margin trends as the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. 65 Financial Report The closing loss allowances for receivables from contracts with customers as at 30 June 2022 reconcile to the opening loss allowance as follows: 2022 2021 $000 $000 At 1 July 993 176 Increase in loss allowances recognised in profit or loss 12 819 Receivables written off during the year as uncollectable (771) (2) At 30 June 234 993 12. Current assets – inventories 2022 2021 $000 $000 Stock on hand 23,861 19,561 Less: provision for obsolescence (2,013) (1,861) Total inventories at the lower of cost and net realisable value 21,848 17,700 66 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 13. Non-current assets – property, plant and equipment Reconciliation of the carrying amounts at the beginning and end of the period. Leasehold improvements Plant & Equipment Total $000 $000 $000 For the year ended 30 June 2022 At 1 July 2021 net of accumulated depreciation and impairment 81 212 293 Additions - 59 59 Disposals - (4) (4) Depreciation charge for the year (13) (60) (73) At 30 June 2022 net of accumulated depreciation and impairment 68 207 275 At 30 June 2022 Cost 527 7,302 7,829 Accumulated depreciation and impairment (459) (7,095) (7,554) Net carrying amount 68 207 275 Leasehold improvements Plant & Equipment Total $000 $000s $000 For the year ended 30 June 2021 At 1 July 2020 net of accumulated depreciation and impairment 95 204 299 Additions - 64 64 Disposals - - - Depreciation charge for the year (14) (56) (70) At 30 June 2021 net of accumulated depreciation and impairment 81 212 293 At 30 June 2021 Cost 527 7,247 7,774 Accumulated depreciation and impairment (446) (7,035) (7,481) Net carrying amount 81 212 293 67 Financial Report 14. Non-current assets - intangible assets 2022 2021 $000 $000 Restated Software 92 150 Goodwill 2,373 2,854 Supplier relationships 2,061 2,555 Net carrying amount 4,526 5,559 (a) Movements in intangible asset balances during the year Software Goodwill Customer Relationships Supplier Relationships Total $000 $000 $000 $000s $000 For the year ended 30 June 2022 Written down value at 1 July 150 2,854 - 2,555 5,559 Additions - - - - - Disposals (4) - - - (4) Amortisation charge for the year (54) - - (494) (548) Impairment charge for the year - (481) - - (481) Written down value at 30 June 2022 92 2,373 - 2,061 4,526 At 30 June 2022 Cost 164 2,854 286 3,957 7,261 Accumulated amortisation and impairment (72) (481) (286) (1,896) (2,735) Net carrying amount 92 2,373 - 2,061 4,526 For the year ended 30 June 2021 Written down value at 1 July (restated) - 2,854 24 3,050 5,928 Additions (restated) 168 - - - 168 Amortisation charge for the year (restated) (18) - (24) (495) (537) Written down value at 30 June 2021 (restated) 150 2,854 - 2,555 5,559 At 30 June 2021 Cost (restated) 168 2,854 286 3,957 7,265 Accumulated amortisation and impairment (restated) (18) - (286) (1,402) (1,706) Net carrying amount (restated) 150 2,854 - 2,555 5,559 68 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 (b) Impairment testing At each balance date, the group completes an impairment assessment for each cash-generating unit (CGU) to which goodwill is allocated. Where indicators of impairment are present for other CGUs, these CGUs are also tested for impairment. As the carrying value of the group’s net assets exceeds its market capitalisation, the group recorded a loss for the year, and operations continue to be affected to varying degrees by the impact of the COVID-19 pandemic on consumer demand, impairment indicators are deemed to be present for each CGU within the group at balance date and each has been tested for impairment. The recoverable amount of each CGU has been determined as its value-in-use. Value-in- use is determined as the present value of future CGU cash flows. In calculating value-in-use, the group has projected cash flows over a 5 year period, based on the board approved budget/forecast for FY22. An impairment charge of $613,000 was recognised against the Cellnet Australia CGU, $481,000 of which was recorded against goodwill and the remaining $132,000 attributed to right- of-use assets. This impairment is a result of a downwards revision of the EBITDA assumption from $2.907m in the impairment assessment completed at 30 June 2021 to an EBITDA loss of $84,000 at 31 December 2021. The results of the impairment assessments completed at 30 June 2022 indicated that value-in-use of each CGU exceeds the CGU carrying value. The table below summarises the key assumptions applied in testing CGUs for impairment: 2022 Goodwill allocated to CGU EBITDA Average Annual Revenue growth Terminal growth rate Pre-tax discount rate Cash-generating unit ($’000) ($’000) % % % Cellnet Australia - 1,068 3% 2.5% 18% Cellnet New Zealand - 971 3% 2.5% 18% Turn Left Distribution 1,946 1,580 3% 2.5% 18% Cellnet Online 427 51 5% 2.5% 18% For the Turn Left Distribution and Cellnet Online CGUs, the following reasonably possible changes in the EBITDA assumption would have resulted in an impairment charge being recognised at 30 June 2022: 2022 Change in EBITDA Required for Impairment Cash-generating unit ($’000) Turn Left Distribution (903) Cellnet Online (34) Further, an increase in the discount rate across all CGUs by 100 basis points does not result in any impairment charge being recognised. The following assumptions were applied in the impairment assessment completed as at the comparative balance date: 2021 Goodwill allocated to CGU EBITDA Average Annual Revenue growth Terminal growth rate Pre-tax discount rate Cash-generating unit ($’000) ($’000) % % % Cellnet Australia 481 2,907 3% 2% 16% Cellnet New Zealand - 1,736 2% 2% 16% Turn Left Distribution 1,946 1,296 3% 2% 16% Cellnet Online 427 10 16% 2% 16% Notes to the financial statements 14. Non-current assets - intangible assets continued 69 (b) Impairment testing (continued) For the Cellnet Australia, Cellnet New Zealand, and Turn Left Distribution CGUs, the following reasonably possible changes in the EBITDA assumption would have resulted in an impairment charge being recognised at 30 June 2021: 2021 Change in EBITDA Required for Impairment Cash-generating unit ($’000) Cellnet Australia (150) Turn Left Distribution (155) Online (54) Further, an increase in the discount rate applied for the Cellnet Australia CGU by 70 basis points would have resulted in an impairment charge being recognised for this CGU at 30 June 2021. No reasonably possible change in any of the assumptions above for the New Zealand CGU would result in an impairment of the carrying value of this CGU at 30 June 2021 15. Current liabilities – trade and other payables 2022 2021 $000 $000 Trade payables 10,931 4,083 Rebate and incentive liability 2,188 2,646 Right of return liability 1,080 2,127 Other payables and accrued expenses 250 1,217 14,449 10,073 16. Provisions 2022 2021 $000 $000 Current Provision for long-service leave 357 339 Provision for annual leave 520 521 877 860 Non-Current Provision for long-service leave 77 69 77 69 70 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 17. Interest bearing loans and borrowings Weighted Average Interest Rate Maturity 2022 2021 % $000 $000 Current (a) Business Finance 3.83 1 July – 2 August 2022 2,598 - 3.06 6 - 29 July 2021 - 2,846 (b) Invoice Finance 3.29 Various 2,338 5,513 4,936 8,359 (a) $3,500,000 Business finance facility This facility consists of three individual facilities, namely surrendered bills of lading, trade finance- imports and special documentary import letters of credit. The combined limit of $3,500,000 applies across these individual facilities. As at 30 June 2022, the company has drawn down $2,598,000 (2021: $2,846,000) under its trade finance – imports facility. This facility is subject to annual review, and individual trade finance drawdowns under the facility as at balance date mature on the dates disclosed above. (b) $15,000,000 Invoice finance facility This is a facility for terms of trade. The total limit of the facility is $15,000,000 (2021: $17,000,000). As at 30 June 2022, $2,338,000 was outstanding under this facility (2021: $5,513,000). Amounts owing under the facility are matched to the trade terms of the underlying financed transaction up to a maximum of 60 days. All facilities above are secured by a general security agreement given by Cellnet Group Limited and Turn Left Distribution Pty Ltd over all existing and future assets and undertakings. Breaches of covenants The group’s facilities are subjected to covenant clauses, whereby the group is required to meet certain key financial ratios. The group did not fulfil the interest cover ratio date as required in the contract. These facilities are subject to review annually with the next review date being 30 November 2022. Due to this breach of the covenant clause, the bank is contractually entitled to request for immediate repayment of the outstanding facility amounts. The outstanding balance is presented as a current liability as at 30 June 2022. Reconciliation of changes in borrowings to related financing cash flows per the statement of cash flows There were no non-cash movements in borrowings during the current or prior financial years. Changes in the borrowings arising from cash flows are as disclosed in the statement of cash flows. 18. Derivative Financial Instruments 2022 2021 $000 $000 Current Forward foreign currency exchange contracts 69 - 69 - Forward foreign currency exchange contracts are carried at fair value at balance date. Changes in the fair value of forward foreign currency exchange contracts that economically hedge monetary assets and liabilities in foreign currencies are recognised in profit or loss. Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to the monetary items are recognised as part of materials, packaging and consumables used expenditure in the statement of comprehensive income, and are included in foreign currency gains or losses disclosed in note 7. 71 Financial Report 19. Leases (a) Right-of-use assets All of the group’s right-of-use assets relate to leases of premises. Reconciliation of changes in the carrying amount of right-of-use assets during the period is as follows: 2022 2021 $000 $000 Opening value as at 1 July 408 700 Additions 794 146 Impairment (132) - Depreciation (407) (438) Closing value at 30 June 663 408 At 30 June Cost 1,665 1,006 Accumulated depreciation (1,002) (598) Net carrying amount 663 408 (b) Lease liabilities 2022 2021 $000 $000 Opening value as at 1 July 481 780 Additions (non-cash) 794 146 Principal repayments (cash outflow) (435) (445) Closing value at 30 June 840 481 At 30 June Current 324 229 Non-current 516 252 Total lease liability 840 481 During the year, the group entered into 1 year extensions on two existing leases in Sydney and a 4 year extension on a lease in Auckland. During the comparative year the group entered into 1 year extensions on two existing leases in Sydney. These non-cash financing activities resulted in an increase in lease liabilities of $794,000 (2021: $146,000) on initial recognition. 20. Contributed equity and reserves 2022 2021 No. of shares No. of shares (a) Share capital Ordinary shares on issue at 1 July 242,594,634 231,601,856 Shares issued – bonus shares - 992,778 Shares issued – exercise of options (note 21) 1,000,000 10,000,000 Ordinary shares on issue 30 June 243,594,634 242,594,634 2022 2021 $000 $000 Share capital at 1 July 38,725 38,389 Shares issued – exercise of options 30 300 Shares issued – bonus shares - 36 Share capital at 30 June 38,755 38,725 Fully paid ordinary shares carry one vote per share and carry the right to receive a dividend. 72 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 20. Contributed equity and reserves continued Bonus shares 2022 2021 $000 $000 Restated (b) Reserves Translation reserve (661) (590) Reserve for own shares (25) (25) Reserve for profit 9,267 12,296 Share based payment reserve 1,945 1,945 10,526 13,626 Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currency is different to the presentation currency of the reporting entity. Reserve for own shares The reserve for own shares represents the cost of shares held by an equity remuneration plan that the group is required to include in the financial report. At 30 June 2022 the group held 18,209 of the Company’s shares (2021: 18,209). This reserve will be reversed against share capital when the underlying shares are exercised under performance rights. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s own equity instruments. Reserve for profit Profits are transferred to the reserve for profits to facilitate future franked dividend payments in accordance with Australian taxation requirements for franked dividend payments to be sourced from profits. Share based payment reserve The share based payment reserve is used to recognise the value of equity-settled share based payments to employees. (c) Capital management When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management adjusts the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, or issue new shares. Management monitors capital through the capital adequacy ratio (net assets/total assets). The target for the group’s capital adequacy ratio is between 40% and 60%. The capital adequacy ratios based on continuing operations at 30 June 2022 and 2021 were as follows: 2022 2021 $'000 $000 Restated Net Assets 25,820 28,890 Total Assets 47,007 48,781 Capital adequacy ratio 55% 59% 73 Financial Report 21. Share based payments (a) Long term incentive plan – employee options At 30 June 2022, no share options were outstanding under the company’s long-term incentive plan (2021: nil). Details of the options issued are as follows: Options granted 1,587,500, 312,500 and 500,000 (totalling 2,400,000) Grant date 29 November 2017, 17 April 2018 and 10 October 2018 Issue date 1 July 2018, 1 July 2018 and 10 October 2018 Consideration payable $Nil Exercise price $0.28, $0.375 and $0.28 Last exercise date 5pm Brisbane time on the date which is 12 months subsequent to market release of FY2021 result. Exercise conditions Subject to the Plan Rules, an option cannot be exercised unless the Board acting reasonably is satisfied that the following conditions have been satisfied: • The employee remains employed by the company • There is no outstanding breach of the terms of engagement with the Company. • No notice of termination of engagement has been either been given by the employee or received by the Company. • All performance hurdles have been met. Performance hurdles Options will vest upon meeting various profit before tax performance hurdles over the financial years 2019 to 2021. The following table illustrates movements in the number of employee share options on issue during the year: 2022 2021 Number of options Weighted Average Exercise Price Number of options Weighted Average Exercise Price $ $ Opening balance - - 1,587,500 0.315 Lapsed - vesting conditions not satisfied - - (1,275,000) 0.315 Forfeited - employee departure - - (312,500) 0.315 Outstanding as at 30 June - - - - Vested and exercisable - - - -- 74 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 (b) Non-executive Director options At the Annual General Meeting held on 22 October 2020 shareholders approved the issue of options to non-executive directors of the company, as consideration for the directors agreeing to forego cash payments for all or part of their director fees during the 2021 financial year. Details of the options issued are as follows: Options granted 15,000,000 Grant date 22 October 2020 Issue date 22 October 2020 Consideration payable $Nil Exercise price $0.03 Expiry date 21 October 2022 (3,000,000 options), 21 October 2023 (6,000,000 options) and 21 October 2025 (6,000,000 options). Exercise conditions An option cannot be exercised unless the Board acting reasonably is satisfied that the following conditions have been satisfied: • The option holders were also directors at the time when the relevant vesting condition was satisfied • There is no outstanding breach of the terms of engagement with the Company. • No notice of termination of engagement has been either been given by the director or received by the Company. • All vesting conditions have been satisfied. Vesting conditions Each tranche will vest on the earliest to occur of the Volume Weighted Average Price (VWAP) of the company’s shares exceeding a target price: • for 5 consecutive trading days on which shares are traded on the ASX; and • 15 trading days regardless of whether shares trade on the ASX on consecutive trading days. As the vesting conditions above are market conditions, these were taken into consideration in deriving the grant date fair value of the options. Provided that the Directors remain in service with the company over the life of the options, the grant date fair value of the options will be recognised in full as an expense regardless of whether the market-based vesting conditions are satisfied. The fair value of the options granted was determined by management using an option pricing model. Expected volatility was determined based on historical stock price volatility over a period consistent with the life of the options. The table below summarises the key inputs into the valuation model for each tranche of options granted: Tranche Vesting (Target) Price Life (years) No. of Options Exercise Price Expected Volatility Risk Free Rate Value per Option $ % % $ Tranche 1 $0.05 2 3,000,000 0.03 50 0.26 0.2162 Tranche 2 $0.10 3 6,000,000 0.03 50 0.28 0.2178 Tranche 3 $0.15 5 6,000,000 0.03 50 0.45 0.2175 Notes to the financial statements 21. Share based payments continued 75 Financial Report The share price at the grant date was $0.052. The following table illustrates movements in the number of director share options on issue during the year: 2022 2021 Weighted Average Exercise Price Weighted Average Exercise Price # $ # $ Opening balance – 1 July 5,000,000 0.03 - - Granted during the year - - 15,000,000 0.03 Exercised during the year (1,000,000) 0.03 (10,000,000) 0.03 Outstanding as at 30 June 4,000,000 0.03 5,000,000 0.03 Vested and exercisable 4,000,000 0.03 5,000,000 0.03 All options vested during the year. All outstanding options remain exercisable as at 30 June 2022. The group has recognised nil share-based payments expense in respect of these options during the year (2021: $250,200). 22. Financial guarantees The group has provided financial guarantees in respect of rental leasing arrangements disclosed in Note 19. The group’s financier has also provided performance guarantees in the form of standby letters of credit to the group’s suppliers. The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required. 2022 2021 $000 $000 Bank guarantees provided – rental leases 157 37 Standby letters of credit 94 94 23. Key management personnel remuneration 2022 2021 $ $ Short-term employee benefits 718,251 883,494 Post-employment benefits 45,348 34,687 Long-term employee benefits 8,285 265,761 Total compensation 771,884 1,183,942 24. Related party disclosure The consolidated financial statements include the financial statements of Cellnet Group Ltd and the subsidiaries included in the following table: % Equity interest Name Country of incorporation 2022 2021 Cellnet Group Limited (Parent) Australia 100 100 Cellnet Ltd New Zealand 100 100 C&C Warehouse (Holdings) Pty Ltd Australia 100 100 Regadget Pty Ltd Australia 100 100 OYT Pty Ltd Australia 100 100 Turn Left Distribution Pty Ltd Australia 100 100 3SixT Pty Ltd (formerly Cellnet Online Pty Ltd) Australia 100 100 3SixT Limited (deregistered) Hong Kong 0 100 76 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 24. Related party disclosure continued Entity with ultimate control over the group Wentronic Holding GmbH and its associated entities holds 53.23% (2021: 53.45%) of the ordinary shares in Cellnet Group Limited. At 30 June 2022, the group had nil receivable from Wentronic Holding GmbH (2021: $92,000). Transactions with entities under common control Wentronic Asia Pacific Limited During the current and comparative financial years, the group enlisted the services of Wentronic Asia Pacific Limited (WAPL). WAPL is a wholly owned subsidiary of Wentronic Holding GmbH, Cellnet’s controlling shareholder. A function of WAPL is to source and procure inventory through bulk buying arrangements with third party suppliers on behalf of the Wentronic Group. Cellnet pays WAPL a 6% management/services fee for coordination of the purchasing and logistics function provided by WAPL under a service agreement. The total value of transactions with WAPL under these arrangements during the year ended 30 June 2022 was $757,000 (2021: $840,000). At 30 June 2022, the group had a total of $33,000 owing to WAPL in respect of these arrangements (30 June 2021: $9,000). Wentronic GmbH At 30 June 2022, the group had a nil receivable from Wentronic GmbH, a wholly owned subsidiary of Wentronic Holdings Gmbh, (2021: $9,000), arising from expense recharging arrangements. 25. Subsequent events There are no other matters or circumstances that 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 periods. 26. Parent entity information 2022 2021 $000 $000 Restated Current assets 28,427 29,146 Total assets 40,558 42,204 Current liabilities (19,175) (18,614) Total liabilities (19,453) (18,928) Net assets 19,453 23,276 Issued capital 38,755 38,725 Retained earnings / (accumulated losses) (27,240) (27,240) Reserve for own shares (25) (25) Reserve for profits 6,018 9,871 Reserve for share based payment 1,945 1,945 Total shareholder’s equity 19,453 23,276 Profit / (loss) of the parent entity after tax (1,931) 2,415 Total comprehensive income of the parent entity (1,931) 2,415 The parent has not issued any guarantees in relation to the debts of its subsidiaries and has no contingent liabilities or contractual obligations as at 30 June 2022 (2021: Nil). 77 Financial Report 27. Auditors’ remuneration 2022 2021 $000 $000 Amounts received or due and receivable by the auditors (Pitcher Partners) for: Audit services Audit or review of the financial report of the entity and any other entity in the group 135,000 112,000 Non-audit services Taxation compliance services in relation to the entity and any other entity in the group 54,715 110,590 Financial due diligence 1,000 25,000 190,715 247,590 28. Dividends franking account Franking credit balance The amount of franking credits available for the subsequent financial year are $nil (2021: $nil). 29. Cash flow statement reconciliation 2022 2021 Reconciliation of net profit after tax to net cash flows from operations: $000 $000 Restated Net profit / (loss) (2,300) 3,773 Adjustments for: Depreciation and amortisation 1,032 1,045 Impairment expense 613 - Share based payments expense / (benefit) - 286 Fair value gain on revaluation of contingent consideration payable - (495) Foreign exchange differences 55 - Net loss on disposal of property, plant and equipment 4 - Changes in assets and liabilities: (Increase) / decrease in trade and other receivables 3,814 1,879 (Increase) / decrease in other current assets 809 (158) (Increase) / decrease in inventories (4,148) (2,330) (Increase) / decrease in deferred tax assets (41) (80) (Decrease) / increase in trade and other payables 4,376 (1,346) (Decrease) / increase in provisions 25 (6) (Decrease) / increase in current tax liability 44 16 Change in derivative financial instruments (69) 37 Net cash from operating activities 4,214 2,621 78 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Notes to the financial statements 30. Change in accounting policy In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision for configuration and customisation costs incurred in relation to implementation of Software as a Service (SaaS) arrangements. As a result, the Group has changed its accounting policy with respect to these costs. The nature and effect of these changes is described below. The Group’s accounting policy has historically been to capitalise costs related to the configuration of SaaS arrangements as non-current assets in the Consolidated Statement of Financial Position. Under the group’s revised accounting policy, to the extent that such costs modify or enhance a software application that the group does not control (as is typically the case for SaaS applications used by the group), these costs are expensed as incurred. This change in accounting policy has been applied retrospectively, as required by Australian Accounting Standards. Historical financial information has been restated to account for the impact of the change in accounting policy in relation to SaaS arrangements, as follows. 30 June 2021 Adjustments 30 June 2021 (Restated) 30 June 2020 Adjustments 1 July 2020 (Restated) $'000 $'000 $'000 $'000 $'000 $'000 Consolidated statement of financial position (extract) Intangible assets 6,495 (936) 5,559 6,812 (884) 5,928 Deferred tax assets 2,815 280 3,095 2,750 265 3,015 Net assets 29,546 (656) 28,890 29,546 (619) 28,927 Reserves 14,282 (656) 13,626 10,473 (619) 9,854 Total equity 29,546 (656) 28,890 25,401 (619) 24,782 2021 Adjustments 2021 (Restated) $'000 $'000 $'000 Consolidated statement of comprehensive income (extract) Other expenses (3,087) (173) (3,260) Depreciation and amortisation expense (1,166) 121 (1,045) Profit / (loss) before tax 3,810 (52) 3,758 Income tax (expense) / benefit - 15 15 Net profit / (loss) for the period 3,810 (37) 3,773 Consolidated statement of cash flows (extract) Payments to suppliers and employees (inclusive of GST) (103,848) (173) (104,021) Net cash flows from operating activities 2,794 (173) 2,621 Payments for purchase of intangibles (341) 173 (168) Net cash flows used in investing activities (405) 173 (232) Basic and diluted earnings per share for the prior year have also been restated. The amount of the correction for basic and diluted earnings per share was an increase of 1 cents per share respectively. 79 Directors’ declaration In accordance with a resolution of the Directors of Cellnet Group Limited, I state that: In the opinion of the Directors: a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the company’s financial position as at 30 June 2022 and of their performance for the year ended on that date; ii) complying with Australian Accounting Standards and Corporations Regulations 2001; b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(a); c) 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 d) this declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2022. On behalf of the Board Tony Pearson Chairman Brisbane 30th August 2022 Directors’ declaration 80 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Brisbane Sydney Newcastle Melbourne Adelaide Perth Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. pitcher.com.au NIGEL FISCHER MARK NICHOLSON PETER CAMENZULI JASON EVANS KYLIE LAMPRECHT NORMAN THURECHT BRETT HEADRICK WARWICK FACE COLE WILKINSON SIMON CHUN JEREMY JONES TOM SPLATT JAMES FIELD DANIEL COLWELL ROBYN COOPER FELICITY CRIMSTON CHERYL MASON KIERAN WALLIS MURRAY GRAHAM ANDREW ROBIN KAREN LEVINE Level 38, 345 Queen Street Brisbane, QLD 4000 Postal address GPO Box 1144 Brisbane, QLD 4001 p. +61 7 3222 8444 The Directors Cellnet Group Limited E1, 5-6 Grevillea Place BRISBANE AIRPORT QLD 4008 Auditor’s Independence Declaration In relation to the independent audit for the year ended 30 June 2022, to the best of my knowledge and belief there have been: (i) No contraventions of the auditor independence requirements of the Corporations Act 2001; and (ii) No contraventions of APES 110 Code of Ethics for Professional Accountants (including Independence Standards). This declaration is in respect of Cellnet Group Limited and the entities it controlled during the year. PITCHER PARTNERS DANIEL COLWELL Partner Brisbane, Queensland 30th August 2022 81 Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Key Audit Matter How our audit addressed the key audit matter Impairment testing for non-current assets Refer to note 14 Intangible assets and note 2(v) Critical accounting estimates and judgements Impairment testing for goodwill is required to be completed annually under Australian Accounting Standard AASB 136 Impairment of Assets. This standard also requires impairment testing to be conducted for other non-current assets where there is an indicator that those assets may be impaired. At the reporting date the carrying value of the Group’s net assets exceeded the Group’s market capitalisation, which is an indicator that non-current assets may be impaired. Certain cash-generating units (CGUs) with the Group also performed below budget expectations for the year, with operations continuing to be impacted by the ongoing COVID-19 pandemic, with these results also considered an indicator of impairment within those CGUs. Impairment testing for non-current assets is a key audit matter due to the significant estimates and assumptions (as disclosed in notes 2(v) and 14) made by the Group, specifically concerning discounted cash flows. Our procedures included, amongst others: Understanding and evaluating relevant controls over impairment of non-current assets; Assessing management’s determination of the Group’s CGUs based on our understanding of the nature of the Group’s business and the identifiable groups of cash generating assets; Comparing the cash flow forecasts used in the value-in-use calculation to Board approved budgets for the 2023 financial year; Confirming that forecasts used in value-in-use calculations include reasonable assumptions over the forecast period; Checking the mathematical accuracy of the impairment testing model and its consistency with the requirements of AASB 136; Assessing the reasonableness of significant estimates and assumptions used for the impairment assessment, in particular, those relating to the budgeted EBITDA, annual growth rates, discount rate and terminal growth rates used in the cash flow forecasts; Evaluating the impact of sensitivities in respect of reasonable changes to forecast cash flows, discount rates, growth rates and terminal growth rate used in management’s impairment testing calculations; and Assessing the adequacy of disclosures in the financial report. Recoverability of deferred tax assets Refer to note 8 Income tax and note 2(v) Critical accounting estimates and judgements At 30 June 2022, the Group has a total of $3.05 million of deferred tax assets recognised on its balance sheet. Australian Accounting Standards require deferred tax assets to be recognised to the extent that it is probable that sufficient future taxable profits will be generated in order for the benefits of the deferred tax assets to be realised. These benefits are realised by reducing tax payable on future taxable profits. Recoverability of deferred tax assets is a key audit matter due to the high degree of estimation and assumptions (as disclosed in notes 2(v) and 8) made by the Group concerning forecast taxable profits. We have assessed the recoverability of deferred tax assets by: Understanding and evaluating relevant controls in place for assessing the recoverability of deferred tax assets; Obtaining management’s forecast of taxable income for the next 3 years and agreeing the FY23 forecast to the latest Board approved budget; Performing procedures over forecast information in response to the key audit matter regarding impairment testing for non-current assets, noting that the same forecast information for the Group’s CGUs are used in management’s assessment regarding recoverability of deferred tax assets; Checking the mathematical accuracy of management’s calculation of forecast taxable profit; and Assessing the adequacy of disclosures in the financial report. Independent Auditor’s Report 82 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Valuation of inventory Refer to note 12 Inventories and note 2(v) Critical accounting estimates and judgements The Group held inventory of $21.85 million at 30 June 2022. The valuation of inventory is a key audit matter for the following reasons: Retailer demand continues to be subdued in some segments serviced by the Group in Australia and New Zealand as a result of the COVID-19 pandemic, with prevailing uncertainty in future consumer demand for these markets; A large portion of the Group’s inventory is considered to be at risk of obsolescence due to its attachment to electronic and telecommunications devices, such as smartphone handsets; Delays in the rollout of the Group’s online strategy. Our procedures included, amongst others: Understanding and evaluating the design and implementation of the relevant controls over the determination of the provision for inventory obsolescence; Evaluating the appropriateness of the Group’s obsolescence model, including the basis for obsolescence triggers and the percentage write- downs applied at each trigger point; Confirming the methodology applied for providing for inventory obsolescence is consistent with that applied in previous reporting periods, adjusted where necessary for changes in assumptions based on actual and forecast demand; Testing the net realisable value of a sample of inventory items through subsequent sales transactions, and confirming results of this testing align with assumptions applied in the obsolescence model; Revenue recognition – variable consideration Refer to note 2(v) Critical accounting estimates and judgements Revenue is recognised net of estimated incentives, rebates and expected returns. Rebate and incentive arrangements offered by the Group vary and are customer specific. These obligations are established either in contract or through principal of constructive obligation based on customary business practice. The expected reversal of sales through customers exercising their right of return is estimated based on historical rates of return. Due to the variety of contractual terms with customers and the degree of judgement involved, the estimation of variable consideration in respect of these items is considered to be complex. There is a risk that revenue could be misstated due to the level of estimation and judgement required in accounting for these obligations. As such, we considered revenue recognition to be a key audit matter. Our procedures included, amongst others: Understanding and evaluating the relevant controls over the recognition of revenue, net of estimated incentives, rebates and expected returns; Evaluating the appropriateness of the Group’s revenue recognition accounting policies; Assessing the accuracy of rebates and incentives recognised throughout the year based on the terms of underlying contractual or constructive obligations; Recalculating the valuation of liabilities for outstanding rebates and incentives at year end, having regard to contractual arrangements in place; Assessing the calculation of the right of return liability and associated right to returned goods asset at year end, including testing the accuracy of the historical rate of return applied and the valuation of the right to returned goods asset; and Assessing the adequacy of disclosures in the financial report. 83 Independent Auditor’s Report Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly 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. 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 84 Cellnet Group Limited and its consolidated entities Financial Report 2021–22 Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included on pages 8 to 17 of the director’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Cellnet Group Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. 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. PITCHER PARTNERS DANIEL COLWELL Partner Brisbane, Queensland 30th August 2022 85 As at 8 September 2022 Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. Shareholdings 20 largest shareholders Name Ordinary shares held % of capital held Wentronic Holding Gmbh 118,738,107 48.74% Michael Wendt 10,920,000 4.48% BNP Paribas Noms Pty Ltd 8,822,114 3.62% Faraday Capital Pty Ltd 6,464,808 2.65% EDP Investments 4,109,589 1.69% Kevin Gilmore 4,288,000 1.76% Cuzzilla Family Super 3,000,000 1.23% Mr Tony Masahiro Pearson 2,900,000 1.19% TBelle Super Fund 2,810,947 1.15% Scintilla Strategic Investments Pty Ltd 2,000,000 0.82% Chemical Trustee Ltd 1,820,000 0.75% Philadelphia Investments Pty Ltd 1,650,274 0.68% G and C Smart Super Fund 1,620,309 0.67% Mr Jonathon Matthews 1,565,249 0.65% Mr Rob Peebles 1,437,371 0.59% Mr Alex Po-Tsun Chu 1,371,925 0.56% LB Campos Pty Limited 1,369,863 0.56% Lilyfield Holdings Pty Ltd 1,250,000 0.51% Mr David Anthony Clark 1,000,000 0.41% Mrs Bronte Anne North 998,256 0.41% Top 20 Holders 178,136,812 73.13% All other holders 65,457,822 26.87% All holders 243,594,634 100.00% ASX Additional information ASX Additional information Substantial shareholders The number of shares held by substantial shareholders and their associates, as advised in substantial holder notices given to the Company, are set out below: Shareholder Shares per notice Wentronic Holding Gmbh 118,738,107 Distribution of equity security holders Category No. of holders % of holders 1 – 1000 111 8.83% 1,001 – 5,000 308 24.50% 5,001 – 10,000 216 17.18% 10,001 – 50,000 332 26.41% 50,001 – 100,000 116 9.23% 100,001 and over 174 13.85% The number of shareholders holding less than a marketable parcel of ordinary shares is 787. Options held over ordinary shares: 4,000,000. Number of holders: 1 ABN 97 010 721 749 Cellnet Group Limited Tenancy E1/5 Grevillea Pl, Brisbane Airport QLD 4008 t: 1300 255 563 www.cellnet.com.au