Constellation Technologies Limited
Annual Report 2022

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Constellation Technologies Limited Annual report for the year ended 30 June 2022 ABN 58 009 213 754 Constellation Technologies Limited ABN 58 009 213 754 Annual report - 30 June 2022 Contents Corporate Directory....................................................................................................................................................................... 1 Chairman’s Letter ........................................................................................................................................................................... 2 CEO Report ..................................................................................................................................................................................... 3 Directors Report ............................................................................................................................................................................. 4 Remuneration Report (audited) ................................................................................................................................................. 13 Auditors Independence Declaration........................................................................................................................................... 26 Corporate governance statement .............................................................................................................................................. 27 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...................................................................... 28 Consolidated Statement of Changes in Equity ......................................................................................................................... 30 Consolidated Statement of Cash Flows ..................................................................................................................................... 31 Notes to the Consolidated Statements ...................................................................................................................................... 32 Director’s Declaration .................................................................................................................................................................. 70 Independent Auditors Report...................................................................................................................................................... 71 Shareholder Information ............................................................................................................................................................. 75 Corporate Directory Directors Mr Kartheek Munigoti Executive Director and Chief Executive Officer Mr Raymond Malone Independent Non-Executive Chairman Mr Leath Nicholson Independent Non-Executive Director Mr Anoosh Manzoori Independent Non-Executive Director Company Secretary Ms Terri Bakos Principal registered office and principal place of business Share register Auditor Solicitors Bankers Level 7, 420 Collins Street Melbourne VIC 3000 Australia Telephone: +61 (0)3 8592 4883 Advanced Share Registry Ltd 110 Stirling Highway Nedlands WA 6909 Australia Telephone: +61 (0)8 9389 8033 Facsimile: +61 (0)8 9262 3723 PKF Brisbane Audit Level 6, 10 Eagle Street Brisbane QLD 4000 Australia Telephone: +61 (0)7 3839 9733 Facsimile: +61 (0)7 3832 1407 Nicholson Ryan Lawyers Pty Ltd Level 7, 420 Collins Street Melbourne VIC 3000 Australia Telephone: +61 (0)3 9640 0400 Westpac Banking Corporation 150 Collins Street Melbourne VIC 3000 Australia Stock exchange listings Constellation Technologies Limited shares are listed on the Australian Securities Exchange (ASX: CT1) Website https://www.ct1limited.com 1 Constellation Technologies Limited Annual Report 2022 Chairman’s Letter Dear fellow shareholders, FY22 has been a year of change for the Company. The Company moved its key focus away from its Research & Development activities and the support to its operations in China which were a large cash burn on the Company. As a consequence of these changes and a focus on cost-cutting, the Company’s operating cash flow has improved. This refocus has led to Australian based revenue increasing 46.65% over the prior period primarily due to organic growth but was also due to the establishment of several key contracts in the latter half of the year which will set the Company up for continuing revenue into FY23. Although Research & Development is no longer a key area, the Company will continue to develop additional verticals for the MCT and Callisto temperature monitoring products like the energy efficiency & process monitoring capabilities which will launch in FY23. However, the cash flow impacts of these developments will be far less than the historical levels. Finally, I would like to thank shareholders for their continued support of the Company and the support they have shown to me since l joined the board in June 2022. The next 12 months will be very exciting for the Company. Raymond Malone Independent Non-Executive Chairman 2 Constellation Technologies Limited Annual Report 2022 CEO Report Dear fellow shareholders, It has again been another big year for Constellation and one of many changes. In Australia we have seen increased interest in our flagship product, the MCT Platform from a variety of industrial and commercial verticals which we are starting to formulate into sales activity in the areas of Disaster Monitoring, Structural Monitoring, Smart Refrigeration, Energy Monitoring, Construction Monitoring and Signage Controlling Platforms. Due to the unique features of the MCT Platform and its low code application, the platform has vast potential for application into many industrial and commercial verticals including utilities, manufacturing & hospitality. Over the past several years the Company has developed and marketed several temperature or Cold Chain Critical Control Point monitoring solution products. In this past year these have all been amalgamated under one banner and renamed Callisto to simplify our branding. Sales of Callisto continue to steadily grow organically, however the Company has expanded into new industrial sectors such as Pharmacy and Food Processing. Due to the global impact of COVID-19 and a changing political landscape in China, the Company made the decision during the year to initially place its operations in China up for sale, then decided to close them. Operations in China will be closed over FY23. In the coming year, the Company will further expand its product offering as interest from difference sectors arises. Due to interest from its customer base, the Company is currently developing integrated applications for Callisto and MCT in the areas of Energy Monitoring, Process Monitoring, Digitisation and Analytical solutions to address the requirements of industrial and retail clients of the Callisto product line. These will be launched in the first half of FY23 and will support revenue generation into FY23 and beyond. Finally, l would like to thank all our staff across all regions for their continued dedication and support. FY23 is shaping up to be a turning point for the Company. A crystallisation of current sales interest would see the Company outgrow its operating cost base. Kartheek Munigoti Chief Executive Officer 3 Constellation Technologies Limited Annual Report 2022 Directors Report The directors are pleased to present their report on the consolidated entity consisting of Constellation Technologies Limited (the ‘Company’) and the entities it controls (the ‘Consolidated entity’ or ‘Group’) for the year ended 30 June 2022. Directors and Company Secretary The following persons were directors of Constellation Technologies Limited during the financial year and up to the date of this report or their resignation or appointment as noted: Mr Raymond Malone, Independent Non-Executive Chairman – appointed 7 June 2022 Mr Leath Nicholson, Independent Non-Executive Chairman – vacated 7 June 2022, to become an Independent Non-Executive Director. Mr Anoosh Manzoori, Independent Non-Executive Director Mr Kartheek Munigoti, Executive Director and Chief Executive Officer – appointed 5 July 2021 Mr Adam Gallagher, Executive Director and Chief Executive Officer – resigned 5 July 2021 The following person held office as Company Secretary of Constellation Technologies Limited for the whole of the financial year and up to the date of this report: Ms Terri Bakos Principal activities The principal activities of the Group are to bring innovative solutions to market which leverage cloud, internet of things (IoT), edge-computing sensors, big data, analytics, machine learning (ML), artificial intelligence (AI) and other advanced technologies. Review of operations Financial results Reported revenue from continuing activities for the year has increased 46.65% to $801,822 (2021: $546,762) as a result of increased sales activity in Australia. The Group recorded a loss for the year of $763,358 (2021: $2,795,202), a 72.69% decrease over the prior year primarily due to pending R&D tax incentive rebates (relating to prior years) and a decrease in wages and research & development expenditure due to the wind- down in development of the MeridianCT Platform. On a normalized basis, removing the R&D tax incentive rebates, share-based payments and termination payments to non-continuing staff, our net loss from continuing operations (excluding China operations) would have been $1,103,702. A 58.71% decrease over the period. During the year, the Company made the decision to initially hold the assets of its China operations for sale, then subsequently decided to close all China business operations. As a consequence of this, the Consolidated Statement of Comprehensive Income for the current year and comparative information for the prior year includes the income and expenditure relating to the China operations summarised as discontinued operations. China operations incurred losses of $1,335,948 in the current year and $426,619 in the prior year. These losses exclude costs incurred by Australia & India operations to provide development services and support to China operations. 4 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Financial results continued……. The current year Consolidated Statement of Financial Position has also been adjusted to reflect the change in status of the China operations. Refer to full disclosures in Note 20. As at 30 June 2022 the Group had net assets of $989,340 (2021: $3,011,651) and cash reserves of $524,364 (2021: $2,597,731). Subsequent to year end, the Group has received its FY21 R&D Tax Incentive rebate with a value in excess of $634,000. The directors are of the view that the Group will continue to be able to pay its debts as and when they fall due and have prepared the financial report on a going concern basis. Operations Information on the operations of the Group and its business strategies and prospects is set out in the Chairman’s Letter CEO Report section of this annual report. Dividends No dividends have been paid or proposed by the Group during or since the end of the financial year (2021: nil). Significant changes in the state of affairs Other than the information set out in the Chairman's letter, CEO’s Report and activities section of this annual report, there are no significant changes in the state of affairs that the Group has not disclosed. Event since the end of the reporting period No matters or circumstances have occurred subsequent to year end that have significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial years. Likely developments and expected results of operations Other than the information set out in the Chairman's letter and review of operations and activities section of this annual report, there are no likely developments or details on the expected results of operations that the Group has not disclosed. Environmental regulation The Group is not affected by any significant environmental regulation in respect of its operations. 5 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Our Board The names of directors in office at any time during or since the end of the financial year are: Mr Kartheek Munigoti Executive Director and Chief Executive Officer Experience: Mr Munigoti has been with the Company since 2016 and has held a variety of positions before being appointed CEO on 5 July 2021. He is the founder of the Company’s core technology and instrumental in the development of the Company’s core IoT Platform, the MeridianCT Platform. Kartheek Munigoti is an IoT expert with 18 years’ experience in creating and managing technology products and businesses and combines a deep knowledge of IoT solutions with experience running technology businesses. Kartheek’s experience and skill-set covers software, firmware and hardware development. Kartheek has been directly involved and/or responsible for the commercialisation of innovative products and services. This includes concept, design, product development and deployment. Qualifications: Date of appointment: 5 July 2021 Bachelor of Engineering (Computer Science & Electronics) Master of Applied Sciences (Software Engineering) Other current directorships: None Former directorships in last 3 years: None Committees: None Equity held as at date of this report: Ordinary Shares Options Performance Rights 42,637,207 16,526,995 - 6 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Mr Raymond Malone Independent Non-Executive Chairman Experience: Mr Malone has extensive business experience, particularly in the areas of strategy and transformation, leading ASX Listed automotive company AMA Group Limited to a market capitalisation in excess of $800m before his departure in 2019. He held the position of Chairman of ASX Listed automotive finance company, Money3 Corporation Limited for 2.5 years until November 2018. Date of appointment: 7 June 2022 Former directorships in last 3 years: Director of AMA Group Limited (ASX:AMA) from 29 January 2009 to 19 March 2015 and then Chairman to 31 August 2019. Chairman of Money3 Corporation Limited (ASX:MNY) 29 January 2016 to 27 November 2018 Committees: None. Equity held as at date of this report: Shares Options 69,343,038 61,621,387 7 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Mr Leath Nicholson Independent Non-Executive Director Experience: Leath was a corporate partner at a leading Melbourne law firm, gaining experience with a breadth of ASX listed entities, before co-founding Foster Nicholson (now Nicholson Ryan) in 2008. Leath's principal clients continue to be ASX listed companies and high net worth individuals. Leath has particular expertise in mergers and acquisitions, IT based transactions, and corporate governance. Qualifications: Date of appointment: 14 October 2016 Bachelor of Economics (Honours) Bachelor of Laws (Honours) Master of Laws (Commercial Law) Other current directorship: Former directorships in last 3 years: Committees: Non-Executive Director of AMA Group Limited (ASX:AMA), since 23 December 2015 Non-Executive Director Money3 Corporation Limited (ASX:MNY) until 15 November 2019 Chair – Remuneration & Nomination Committee Member – Audit & Risk Committee Equity held as at date of this report: Shares Options 17,930,084 15,033,613 8 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Mr Anoosh Manzoori Independent Non-Executive Director Experience: Anoosh has over 20 years’ experience as an entrepreneur, investor, board member and advisor, specialising in helping fast growth technology companies. Following the completion of his tertiary studies Anoosh founded several technology companies including one of Australia’s largest cloud- hosting platforms that he exited via a highly successful trade sale. He is also a director of investment and corporate advisory firm Shape Capital Pty Ltd. Anoosh leverages his experience and strong international network in the technology sector in both corporate and capital markets to help shape and optimise CT1’s continued growth. Qualifications: Date of appointment: 14 October 2016 Bachelor of Science Graduate Diploma in Business Enterprise, Business Other current directorships: Executive Chairman of First Growth Funds Ltd (CSE: FGGL) since 14 December 2017. Non- Executive Chairman of Magnum Mining and Exploration Limited (ASX: MGU) since 11 May 2022. Former directorships in last 3 years: Nil Committees: Chair – Audit & Risk Committee Member – Remuneration & Nomination Committee Equity held as at date of this report: Shares Options 10,260,506 7,201,682 9 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Our management team Mr Adam Gallagher Executive Director and Chief Executive Officer Date of appointment: Date of resignation: Other current directorships: 1 June 2015 5 July 2021 None Former directorships in last 3 years: Envirosuite Limited (ASX:EVS), until 31 July 2020 Committees: None Equity held on termination date: Ordinary Shares Options 26,482,360 24,729,747 Ms Terri Bakos Company Secretary & Chief Financial Officer Experience: Terri has over 25 years’ experience providing company secretarial, financial accounting and compliance services to ASX Listed and unlisted public companies in the technology, financial services, automotive, mining and biotech sectors. She holds a Bachelor of Business in Accounting, is a Chartered Accountant and Chartered Secretary. 10 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Meetings of directors The numbers of meetings of the Group's board of directors and of each board committee held during the year ended 30 June 2022, and the numbers of meetings attended by each director were: Mr Kartheek Munigoti Mr Raymond Malone Mr Leath Nicholson Mr Anoosh Manzoori Mr Adam Gallagher Full meetings of directors A B 10 1 10 10 - 10 1 10 10 - Meetings of committees Audit A B Remuneration A B - - 2 2 - - - 2 2 - - - 1 1 - - - 1 1 - A = Number of meetings attended B = Number of meetings held during the time the director held office or was a member of the committee during the year Shares under option Unissued ordinary shares Unissued ordinary shares of Constellation Technologies Limited under option or right at the date of signing this report are as follows: Options Grant Date Recipients 10/11/2017 Director 14/11/2019 Rights Issue - free attaching 29/05/2020 Employees 29/05/2020 Directors 19/06/2020 Sophisticated Investor Expiry Date 25/10/2021 14/11/2022 29/05/2023 29/05/2023 18/06/2023 Exercise Price $0.100 $0.015 $0.015 $0.015 $0.015 30 June 2022 30 June 2021 - 1,446,550 316,146,295 316,146,295 19,285,714 39,142,858 16,800,000 19,285,714 39,142,858 16,800,000 391,374,867 392,821,417 11 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Performance Rights Grant Date 13/01/2020 Recipients Employees Vesting Date Expiry Date 30 June 2022 13/01/2022 13/04/2022 30 June 2021 - - 3,000,000 3,000,000 No option or performance rights holder has any right under the options or performance rights to participate in any other share issue of the Company or any other entity. Shares issued on the exercise of options or rights 1,284,484 ordinary shares of Constellation Technologies Limited were issued during the year ended 30 June 2022 on the exercise of options or conversion of performance rights granted. Insurance of officers and indemnities Insurance of officers During the financial year, the Group paid a premium in respect of a contract to insure the directors and executives of the Group against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium. Indemnity of auditor Constellation Technologies Limited has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Group or any related entity against a liability incurred by the auditor. During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the Group or any related entity. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001. 12 Constellation Technologies Limited Annual Report 2022 Remuneration Report (audited) The directors present the Constellation Technologies Limited 2022 Remuneration Report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. The report is structured as follows: a) Principles used to determine the nature and amount of remuneration b) Details of remuneration c) Service agreements d) Equity instruments e) Relationship between the remuneration policy and group performance f) Key management personnel disclosures a) Principles used to determine the nature and amount of remuneration Remuneration policy The performance of the Group depends upon the quality of its directors and executives. To prosper, the Group must attract and retain highly skilled directors and executives. Remuneration committee The Board has a Remuneration Committee comprising the following members: Mr Leath Nicholson, Non-Executive Director (chair) Mr Anoosh Manzoori, Non-Executive Director Mr Kartheek Munigoti, the Company’s CEO during the period had a standing invitation to attend Committee meetings, however he is not permitted to vote. The Committee assesses the appropriateness of the nature and amounts of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high-quality board and executive team. Officers are given the opportunity to receive their base emoluments in a variety of forms including cash, salary sacrifice and fringe benefits. It is intended that that the manner of payments chosen will be optimal for the recipient without creating undue cost for the Group. Remuneration structure It is the Group's objective to provide maximum stakeholder benefit from the retention of a high-quality board and executive team by remunerating directors and other key management personnel (KMP) fairly and appropriately with reference to relevant employment market conditions. 13 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… To assist in achieving this objective, the Committee considers the nature and amount of executive directors’ and officers’ emoluments alongside the Group's financial and operational performance. The expected outcomes of the remuneration structure are the retention and motivation of key executives, the attraction of quality management to the Group and performance incentives, which allow executives to share the rewards of the success of the Group. In accordance with best practice corporate governance, the structure of executive and non-executive director remuneration is separate and distinct. Non-executive directors The Board seeks to set aggregate remuneration at a level which provides the Group with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The constitution of Constellation Technologies Limited and the ASX Listing Rules specify that the non- executive directors are entitled to remuneration as determined by the Group in a General Meeting to be apportioned amongst them in such manner as the directors agree and, in default of agreement, equally. The maximum aggregate remuneration currently approved by shareholders for directors' fees is for a total of $400,000 per annum. If a non-executive director performs extra services which in the opinion of the directors are outside the scope of the ordinary duties of the director, the Group may remunerate that director by payment of a fixed sum determined by the directors in addition to or instead of the remuneration referred to above. Non-executive directors are entitled to be paid travel and other expenses properly incurred by them in attending directors or General Meetings of the Group or otherwise in connection with the business of the Group. Executive directors and senior management The Group aims to reward executive directors and senior management with a level and mix of remuneration commensurate with their position and responsibilities within the group and to: • reward executives for Group and individual performance against targets set by reference to appropriate benchmarks; • align the interests of the executives with those of shareholders; • • ensure total remuneration is competitive by market standards. link reward with strategic goals and performance of the Group; and 14 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… The remuneration of the executive directors and senior management may from time-to-time be fixed by the Remuneration Committee. As noted above, the policy is to align executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering short- and long-term incentives. The level of fixed remuneration is set to provide a base level of remuneration, which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the committee, and the process consists of a review of group-wide and individual performance, relevant comparative remuneration in the market and internal, and where appropriate, external advice on policies and practices. In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the committee, having regard to the overall performance of the Group and the performance of the individual during the year. Employment and consultancy contracts The Group utilises a mixture of employment and consultancy contracts to provide the Group with the flexibility to operate effectively in a dynamic industry. It is the Board’s policy that agreements are entered into with all directors, executives and employees. Details of notice periods and termination clauses are disclosed under Section c) below. Voting and comments made at the last annual general meeting At the last annual general meeting (AGM), the Group received approval for the remuneration report adopted for the 2021 financial year. The Group did not receive any specific feedback at the AGM or throughout the year on its remuneration policies. b) Details of remuneration • Mr Raymond Malone, Independent Non-Executive Chairman from 7 June 2022 • Mr Leath Nicholson, Independent Non-Executive Chairman until 7 June 2022, then as an Independent Non-Executive Director from 7 June 2022. • Mr Anoosh Manzoori, Independent Non-Executive Director • Mr Adam Gallagher, Executive Director and Chief Executive Officer until 5 July 2021 • Mr Kartheek Munigoti, Executive Director and Chief Executive Officer from 5 July 2021 Key management personnel (KMP) of the Group 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 Group receiving the highest remuneration. Details of the remuneration of the KMP of the Group are set out in the following tables. Apart from Directors, the following person was considered a KMP during the financial year: • Ms Terri Bakos, Company Secretary & Chief Financial Officer 15 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Amounts of remuneration The following table shows details of remuneration expenses recognised for the Group’s KMP for the year ended 30 June 2022. Cash salary & fees $ Short-term benefits Non- monetary benefits $ Cash bonus $ Post- employm ent benefits Share-based payments Annual leave $ Superann -uation $ Shares $ Options /Rights $ Total $ 4,363 43,750 35,000 164,700 91,364 147,963 487,140 - - - - - - - - - - - - - - - - - - - - - - - 8,551 - 16,200 - 11,458 - 7,487 12,607 - 16,038 28,807 11,458 - - - - - - - 4,363 43,750 35,000 200,909 91,364 168,057 543,443 2022 Non-executive directors Raymond Malone2 Leath Nicholson Anoosh Manzoori Executive directors Kartheek Munigoti Adam Gallagher1 Other KMP Terri Bakos Total compensation 1 Mr Gallagher resigned 5 July 2021. Balance represents payments to Mr Gallagher on termination under his contract. 2 Mr Malone was appointed 7 June 2022. 16 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Cash salary & fees $ Short-term benefits Non- monetary benefits $ Cash bonus $ 70,000 60,000 180,000 154,400 115,332 579,722 - - - - - - - - - - - - 2021 Non-executive directors Leath Nicholson Anoosh Manzoori Executive directors Adam Gallagher Other KMP Kartheek Munigoti Terri Bakos Total compensation Post- employm ent benefits Share-based payments Annual leave $ Superann -uation $ Shares $ Options /Rights $ Total $ - - - - - - - - - - - 70,000 60.000 - 180,000 12,514 10,551 14,820 11,254 40,417 5,000 5,000 5,000 227,150 147,125 23,065 26,074 45,417 10,000 684,277 17 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Fixed remuneration 2021 % 2022 % At risk - STI 2021 % 2022 % At risk - LTI 2021 % 2022 % 100 100 100 94 100 - 100 100 79 100 100 93 - - - - - - - - - - - - - - - 6 - - - - - 21 - 7 Non-executive directors Raymond Malone Leath Nicholson Anoosh Manzoori Executive directors Kartheek Munigoti Adam Gallagher Other KMP Terri Bakos c) Service agreements Raymond Malone The group has a service arrangement with Shildplex Pty Ltd provide the services of Mr Ray Malone as a Non- Executive Chairman of the Group commencing 7 June 2022. The key terms of the arrangement are: • Current fee of $70,000 per annum. • No termination payment. • No notice period. Leath Nicholson The Group has a service arrangement with Catellen Pty Ltd to provide the services of Mr Leath Nicholson as a Non-Executive Director of the Group commencing on 14 October 2016. The key terms of the arrangement are: • Current fee of $70,000 per annum. • No termination payment. • No notice period. Anoosh Manzoori The Group a service arrangement with Shape Capital Pty Limited to provide the services of Mr Anoosh Manzoori as a Non-Executive Director of the Group commencing on 14 October 2016. The key terms of the arrangement are: • Current fee of $60,000 per annum. • No termination payment. • No notice period. 18 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Kartheek Munigoti The Group has an employment contract with Mr Kartheek Munigoti. His contract as Chief Executive Officer remains the same as his position as General Manager and Chief Technical Officer (CTO). The key terms of the arrangement are: • Current salary of $156,000 per annum plus statutory superannuation contributions. • No termination payment other than statutory requirements. • 6 month notice period, except where there is a change in control and the notice period is reduced to 3 months. Terri Bakos The Group has a part-time employment contract with Ms Terri Bakos as Company Secretary and Chief Financial Officer (CFO). The key terms of the arrangement are: • Current salary of $120,000 per annum plus statutory superannuation contributions. • No termination payment other than statutory requirements. • 3 month notice period. Adam Gallagher Mr Gallagher resigned from the Company subsequent to the end of the 2021 financial year on 5 July 2021. The Group had a service arrangement with Famile Pty Ltd to provide the services of Mr Adam Gallagher as an Executive Director and Chief Executive Officer to the Group commencing from 9 February 2019. The key terms of the arrangement were: • Current fee of $180,000 per annum. • No termination payment other than statutory requirements. • 6 month notice period. Note: Mr Munigoti & Ms Bakos received payments during the year above the amounts stated above due to a) payroll being paid on a fortnightly basis, receiving a work from home allowance (not included in the above figures) and working additional days above contract provisions. d) Equity instruments Shares and options granted as compensation. Details on Share and Options or Performance Rights over ordinary shares in the Company that were granted as compensation to each Key Management Person (KMP) during the reporting period and details of any equity that vested during the reporting period are as follows: 19 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Shares Name Grant Date Vesting Date Qty Kartheek Munigoti Terri Bakos Kartheek Munigoti1 Terri Bakos1 02/09/2020 02/09/2020 09/07/2021 09/07/2021 01/07/2021 01/07/2021 - - 172,414 172,414 172,414 172,414 1 Issued as a result of the vesting of Performance Rights. Issue Price $0.029 $0.029 - - Value of Shares Granted $5,000 $5,000 $5,000 $5,000 Year in which shares vests FY22 FY22 - - Options No further options were granted to KMP during the year. No options issued in prior years vested during the year. Performance Rights Name Grant Date Vesting Date Qty Issue Price Kartheek Munigoti Terri Bakos 02/09/2020 02/09/2020 01/07/2021 01/07/2021 172,414 172,414 $0.029 $0.029 Value of Shares Granted $5,000 $5,000 Year in which shares vests FY22 FY22 The above Performance Rights vested on 1/7/2021 and were converted to Ordinary Shares on 9/7/2021. Exercise of options granted as compensation. No options granted as compensation during the current or prior years were exercised during the year by Key Management Personnel. Movement in options granted as compensation. Refer to movement in Key Management Personnel disclosures below. 20 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… e) Relationship between the remuneration policy and group performance Statutory performance indicators The factors that are considered to affect shareholder return in the past five years are summarised below: 30 June 2022 $ Share price at end of year 0.005 30 June 2021 $ 0.016 30 June 2020 $ 0.032 30 June 2019 $ 0.018 30 June 2018 $ 0.010 Market capitalisation at the end of the year ($M) Net profit/(loss) attributable to members Dividends paid 7.3 23.4 31.2 8.92 3.50 (2,099,306) (3,221,821) (2,923,876) (2,177,277) (2,833,837) Nil Nil Nil Nil Nil Fixed remuneration is not linked to Group performance. It is set to the individuals' role, responsibilities and performance and remuneration levels for similar positions in the market. The Board do not believe that financial targets such as net profit are the only appropriate performance measure for the granting of short and long term incentives to KMP. Other financial targets such as cost reduction and key performance indicators such as projects/strategic targets, executive behavior and customer experience are equally as important for a Group in this stage of its life cycle and have a direct and indirect impact on shareholder returns. During the year, the Group granted equity to KMP’s in lieu of cash-based fixed remuneration and as part of a salary sacrifice arrangement. Share prices are subject to the influence of market sentiment toward the sector in which it operates and increase and decreases in the share price may occur independently of executive performance or remuneration. 21 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Key management personnel disclosures f) Share holdings The number of shares in the parent entity held during the financial year ended 30 June 2022 by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Balance on Appointment/ Termination2 Granted as remuneration3 Other changes1 Balance at the end of the year Vested Non-executive directors Raymond Malone Leath Nicholson Anoosh Manzoori - 17,930,084 10,260,506 69,343,038 - - - - - - - - 69,343,038 17,930,084 10,260,506 69,343,038 17,930,084 10,260,506 Executive directors Kartheek Munigoti Adam Gallagher Other KMP Terri Bakos 42,326,862 26,482,360 - (26,482,360) 172,414 - 137,931 - 42,637,207 - 42,637,207 - 172,414 97,172,226 - 42,860,678 172,414 344,828 - 344,828 344,828 137,931 140,515,663 140,515,663 1Other changes reflects the disclosure of additional securities held by a related party to Mr Munigoti. 2 Mr Gallagher resigned on 5 July 2021. Mr Malone was appointed on 7 June 2022. Balance represents balance held on date of resignation or appointment. 3 Granted on the vesting of Performance Rights issued in prior year. 22 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Option holdings The number of options over ordinary shares in the parent entity held during the financial year ended 30 June 2022 by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Balance on Appointment/ Termination1 Granted as remun- eration Other changes Balance at the end of the year Vested and exercisable Non-executive directors Raymond Malone Leath Nicholson Anoosh Manzoori - 15,033,613 7,201,682 61,621,387 - - Executive directors Kartheek Munigoti Adam Gallagher Other KMP Terri Bakos 16,526,995 24,729,747 - (24,729,747) 8,571,428 - 72,063,465 36,891,640 - - - - - - - - - - - - - - 61,621,387 15,033,613 7,201,682 61,621,387 15,033,613 7,201,682 16,526,995 - 16,526,995 - 8,571,428 8,571,428 108,955,105 108,955,105 1 Mr Gallagher resigned on 5 July 2021. Mr Malone was appointed on 7 June 2022. Balance represents balance held on date of resignation or appointment. Performance Rights holdings The number of rights over ordinary shares in the parent entity held during the financial year ended 30 June 2022 by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Granted as remuneration Exercised Other changes1 Balance at the end of the year Vested and exercisable Non-executive directors Raymond Malone Leath Nicholson Anoosh Manzoori Executive directors Kartheek Munigoti Adam Gallagher Other KMP Terri Bakos - - - 310,345 - 172,414 482,759 - - - - - - - - - - - (172,414) - (137,931) - - - (172,414) - (344,828) (137,931) 1Other changes reflects the disclosure of additional securities held by a related party to Mr Munigoti. - - - - - - - - - - - - - - 23 Constellation Technologies Limited Annual Report 2022 Remuneration report continued… Transactions with KMP and related parties Transactions between key management personnel related parties are on normal commercial terms and conditions no more favorable than those available to other parties unless otherwise stated. The following transactions occurred during the year ended 30 June 2022: During the Year 2022 $ 16,000 Outstanding at end of Year 2022 $ During the Year 2021 $ Outstanding at end of Year 2021 $ - 13,042 Office rent and outgoings paid on an arm's length commercial basis to FNJ Properties Pty Ltd, a company associated with director, Leath Nicholson in respect of the Groups's Melbourne Offices. Compensation received in cash. Legal fees paid on normal commercial terms to Nicholson Ryan Lawyers Pty Ltd, a company associated with director Leath Nicholson. Compensation received in cash. Directors fees payable to Catellen Pty Ltd, a company associated with Leath Nicholson Directors and other related fees payable to Famile Pty Ltd, a company associated with Adam Gallagher Directors fees payable to Shape Capital Pty Ltd, a company associated with Anoosh Manzoori Directors fees payable to Shildplex Pty Ltd, company associated with Raymond Malone - - - - 45,800 - 63,557 43,750 - 70,000 91,364 - 180,000 35,000 - 60,000 5,000 4,363 4,363 - - [This concludes the remuneration report, which has been audited] 24 Constellation Technologies Limited Annual Report 2022 Directors Report continued… Rounding of amounts The Group is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the directors' report. Amounts in the directors' report have been rounded off in accordance with the instrument to the nearest dollar. Non-audit services Fees paid or payable to PKF Brisbane Audit being the lead auditor of the Group, for non-audit and other assurance work during the year totaled $Nil (2021: $4,000). Amounts paid to PKF Kexin (Beijing) Business Advisory Co., Ltd and its related practices for non-audit and other assurance work totaled $Nil (2021: $20,601). Details of the amounts paid or payable to the auditors for non-audit services provided during the financial year are outlined in note 17 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial by the auditors (or by another person or firm on the auditors’ behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services discussed in note 17 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectively of the auditors; 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 issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditors own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks or rewards. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. This report is made in accordance with a resolution of directors. Mr Kartheek Munigoti Executive Director and Chief Executive Officer Melbourne 29 August 2022 25 Constellation Technologies Limited Annual Report 2022 U ’ C C UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF CONSTELLATION TECHNOLOGIES LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2022, there have been no contraventions of: (a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) any applicable code of professional conduct in relation to the audit. PKF BRISBANE AUDIT SHAUN LINDEMANN PARTNER BRISBANE 29 AUGUST 2022 26 Corporate governance statement Constellation Technologies Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance. Constellation Technologies Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (4th edition) published by the ASX Corporate Governance Council. The 2022 Corporate Governance Statement dated as at 30 June 2022 reflects the corporate governance practices in place throughout the 2022 financial year. The 2022 Corporate Governance Statement was approved by the Board on 29 August 2022. A description of the Group's current corporate governance practices is set out in the Group's Corporate Governance Statement which can be viewed at www.ct1limited.com. 27 Constellation Technologies Limited Annual Report 2022 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2022 Revenue from continuing operations Cost of sales Gross profit/(loss) Other gains/(losses) - net Distribution costs General and administrative expenses Research and development expenses Selling and market expenses Notes 2022 $ 2021 $ 2a 3a 3b 801,822 (495,689) 546,762 (406,180) 306,133 140,582 774,659 78,696 (3,537) (1,625,669) (198,345) (16,621) (5,228) (2,293,247) (665,850) (50,873) Operating loss from continuing operations (763,380) (2,795,920) Finance income Finance expense Finance costs - net Loss before income tax from continuing operations Income tax expense Loss from continuing operations Loss from discontinued operations Loss for the period Net loss attributable to equity holders of the company Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Total comprehensive loss for the year, net of tax 22 - 22 718 - 718 (763,358) - (763,358) (1,335,948) (2,795,202) - (2,795,202) (426,619) (2,099,306) (3,221,821) (2,099,306) (3,221,821) 4 20 27,495 3,443 (2,071,811) (3,218,378) Total comprehensive loss attributable to equity holders of the company (2,071,811) (3,218,378) Loss per share for loss attributable to the ordinary equity holders of the company: Basic/diluted earnings per share Loss per share – continuing operations Basic/diluted earnings per share 18 18 (0.143) (0.233) (0.052) (0.202) Cents Cents The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 28 Constellation Technologies Limited Annual Report 2022 Consolidated Statement of Financial Position As at 30 June 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Inventory Other Total current assets Non-current assets Trade and other receivables Property, plant and equipment Total non-current assets Total assets Liabilities Current liabilities Notes 2022 $ 2021 $ 5a 5b 5a 6b 524,364 759,889 24,638 58,142 2,597,731 714,787 71,953 547,821 1,367,033 3,932,292 - 11,396 11,396 36,382 131,953 168,335 1,378,429 4,100,627 Trade and other payables 5c Borrowings 6c 6d Provisions Contract liabilities 2b Net liabilities directly associated with discontinued operations 20 152,657 - 65,261 12,000 159,171 615,525 14,949 123,481 335,021 - 389,089 1,088,976 389,089 1,088,976 989,340 3,011,651 7a 7b 18,283,350 707,915 (18,001,925) 18,196,600 762,670 (15,947,619) 989,340 3,011,651 Total current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 29 Constellation Technologies Limited Annual Report 2022 Consolidated Statement of Changes in Equity For the year ended 30 June 2022 Notes Share Capital Reserves $ $ Accumulated Losses $ Total equity $ At 1 July 2020 Loss for the period Other comprehensive income Total comprehensive loss for the period 16,390,763 - - 845,977 - 3,443 (12,809,798) (3,221,821) - 4,426,942 (6,221,821) 3,443 - 3,443 (3,221,821) (3,218,378) Transactions with owners in their capacity as owners: Shares issued, net of transaction costs Share based payments Lapse of options - - 1,805,837 - - (49,750) 47,000 (84,000) - - 84,000 1,756,087 47,000 - 1,805,837 (86,750) 84,000 1,803,087 Balance at 30 June 2021 18,196,600 762,670 (15,947,619) 3,011,651 At 1 July 2021 18,196,600 762,670 (15,947,619) 3,011,651 Loss for the period Other comprehensive income Total comprehensive loss for the period - - - - 27,495 (2,099,306) - (2,099,306) 27,495 27,495 (2,099,306) (2,071,811) Transactions with owners in their capacity as owners: Share based payments Lapse of options 86,750 - (37,250) (45,000) 86,750 (82,250) - 45,000 45,000 49,500 - 49,500 Balance at 30 June 2022 18,283,350 707,915 (18,001,925) 989,340 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 30 Constellation Technologies Limited Annual Report 2022 Consolidated Statement of Cash Flows For the year ended 30 June 2022 Cash flows related to operating activities Receipts from customers Payments to suppliers and employees Interest paid Other income receipts Notes 2022 $ 2021 $ 902,217 (3,126,795) (146) 144,187 1,500,342 (4,358,134) (1,527) 58,855 Net cash used in operating activities 8 (2,080,537) (2,800,464) Cash flows relating to investing activities Payment for purchases of plant and equipment Interest received Payments for deposits Loans to other entities Net cash from/(used in) investing activities Cash flows relating to financing cash flows Proceeds from issue of equity Repayment of lease liabilities - 287 - - (71,021) 1,890 (413,155) (206,578) 287 (688,864) - (15,403) 1,722,087 (43,639) Net cash from/(used in) financing activities (15,403) 1,678,448 Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Foreign exchange movement (2,095,653) 2,597,731 23,818 (1,880,80) 4,405,173 3,438 Cash and cash equivalents at the end of the year 5a 525,896 2,597,731 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 31 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements For the year ended 30 June 2022 1. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision makers, who are responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board and the Chief Executive Officer of Constellation Technologies Limited. The Group has identified one reportable segment; that is, the sale and commercialisation of the IoT Solution. The segment details are therefore fully reflected in the body of the financial statements. 2. Revenue from contracts with customers a) Disaggregation of revenue from contracts with customers The Group derives revenue from the transfer of goods and services at a point in time and over time in the following categories: 2022 Timing of revenue recognition At a point in time Over time Monitor tag revenue $ Monitoring subscription revenue $ Consulting revenue $ Labour-hire revenue $ Total $ - 36,103 - 415,466 7,850 117,600 224,803 - 232,653 589,169 36,103 415,466 125,450 224,803 801,822 2021 Timing of revenue recognition At a point in time Over time Monitor tag revenue $ Monitoring subscription revenue $ Consulting revenue $ Labour-hire revenue $ Total $ - 67,805 - 234,762 7,650 - 236,545 - 244,195 302,587 67,805 234,762 7,650 236,545 546,762 32 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … b) Liabilities related to contracts with customers 2022 $ 2021 $ Contract liabilities – deferred revenue on consulting contracts 12,000 335,023 12,000 335,023 c) Accounting policies Installation and use of monitor tags Revenue from the sale of the food temperature monitoring tags are recognised over time when the customer has access and thus control of the gadget and where the tag is considered distinct from other services provided to the customer. Contracts do not provide for discounts or rebates which give rise to variable consideration. Neither do they contain provision for warranties. Monitoring subscriptions Revenue from the sale of monitoring subscriptions is recognised on a straight-line basis over the subscription term. Consulting Revenue from the provision of consulting and ad hoc maintenance services is recognised typically over time when the Group has an enforceable right to payment for its performance completed to date. Customer contracts will include a statement of work, which will describe the work to be completed and the time frame for its completion. These services are invoiced at the point in time of completion of performance obligations within the statement of work. Therefore revenue is recognised when the performance obligation is completed. Labour hire Revenue from the provision of labour hire services is recognised on a straight-line basis over the term of the hire agreement. Critical judgements in allocating the transaction price Management allocates the transaction price to each performance obligation based on an assessment of work completed at each reporting date for consulting revenue. Due to variations between each contract, up front payments and changes to projects during the term of engagement, judgement is used in estimating the completion of performance obligations and allocating the transaction price to each performance obligation. 33 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Customer contract with multiple performance obligations The Group frequently enters into multiple contracts with the same customer and where that occurs the Group treats those arrangements as one contract if the contracts are entered into at or near the same time and are commercially interrelated. The Group does not consider contracts closed more than three months apart as a single contract. The Group's subscription contracts are combining an obligation to receive a monitor tag and customer support and monitoring services. The provision of monitor tags is treated as a separate performance obligation to the services provided. As a result, the total transaction price for a customer contract is allocated amongst the distinct performance obligations based on their relative stand-alone selling prices. Where the stand-alone prices are highly variable, the Group applies a residual approach. Incremental costs of obtaining customer contracts Commissions on obtaining any customer contracts are capitalised and amortised over the term, where the term is greater than 12 months. Financing components The group does not recognise adjustments to transaction prices or contract balances where the period between the transfer of promised goods or services to the customer and payment by customer does not exceed 12 months. 3. Other gains & expense items a) Other gains/(losses) Government COVID-19 cash incentives R&D tax rebate incentives Net foreign exchange (losses) Loss on disposal of assets Gain on deconsolidation of dormant entities 2022 $ - 778,277 (3,618) - - 2021 $ 58,855 - 186 (1,640) 21,295 774,659 78,696 34 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … b) Breakdown of expenses by nature Notes 2022 $ 2021 $ General and administrative expenses: Accounting and audit Bad debts and expected credit losses Computer costs Consulting costs Depreciation Employee benefits Insurance Legal Listing and share registry Occupancy Share-based payments Superannuation Travel and entertainment Other i) Depreciation Office Equipment Plant and Equipment i) 16 53,770 (10,090) 178 - 13,764 1,105,838 91,334 38,298 63,252 33,527 69,708 69,834 14,359 81,897 56,423 11,189 20,401 70,304 13,765 1,411,662 69,711 68,104 98,648 51,272 122,250 112,436 16,586 170,496 1,625,669 2,293,247 2022 $ 13,218 546 2021 $ 12,919 846 13,764 13,765 35 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 4. Income tax expense a) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense Tax at the Australian tax rate of 25% (2021: 26%) (763,358) (190,839) (2,795,202) (726,752) 2022 $ 2021 $ Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Entertainment Employee leave obligations Expected credit losses Research & Development Rebate Share-based payments expense Superannuation liability Unrealised foreign exchange movements Subtotal Difference in overseas tax rate Tax losses and other timing differences for which no deferred tax asset is recognised Income tax expense - - - (36,046) 17,427 - 25,980 (183,478) - - - - 39,636 - 25,416 (661,700) (867) 1,198 184,345 660,502 - - Tax losses b) The Group does not recognise as a deferred tax asset carried forward tax losses. Deferred tax assets are recognised for deductible temporary differences only if the entities consider it is probable that future taxable amounts will be available to utilise those temporary differences and losses. As at 30 June 2022, no deferred tax balances have been recognised (2021: nil). Unused tax losses available to the Group are currently not known and have not been included as the Group has not yet calculated a reliable estimate of these losses. 36 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 5. Financial assets and financial liabilities a) Cash and cash equivalents Current assets Cash at bank and on hand 2022 $ 2021 $ 524,364 2,597,731 Reconciliation to cash flow statement The above figures reconcile to the amount of cash shown in the consolidated statement of cash flows at the end of the financial year as follows: Balances as above Balance held by discontinued operations Balances as per statement of cash flows Note 20 2022 $ 524,364 1,532 525,896 2021 $ 2,597,731 - 2,597,731 Classification as cash equivalents Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours notice with no loss of interest. See note 21 for the Group’s other accounting policies on cash and cash equivalents. Risk exposure The Group's maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. 37 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … b) Trade and other receivables Trade receivables Provision for impairment Other receivables Current $ 91,441 (1,424) 90,017 669,8721 Total trade and other receivables 759,889 1 Includes a $634,444 R&D tax incentive rebate. 2022 Non- current $ Total Current $ $ 2021 Non- current $ Total $ - - - - - 91,441 (1,424) 466,625 (11,514) 36,382 503,007 (11,514) - 90,017 455,111 36,382 491,493 669,872 259,676 - 259,676 759,889 714,787 36,382 751,169 Classification as trade and other receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 10(b). Other receivables Other receivables are amounts due from parties other than customers that are deemed to be receivable within 12 months. Other receivables are impaired in accordance with note 21 (n). c) Trade and other payables Trade payables Accrued expenses Other payables Current $ 74,632 69,742 8,283 Total trade and other payables 152,657 2022 Non- current $ Total $ Current $ 2021 Non- current $ Total $ - - - - 74,632 69,742 8,283 268,899 233,859 112,767 152,657 615,525 - - - - 268,899 233,859 112,767 615,525 38 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … c) Trade and other payables continued…. Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. 6. Non-financial assets and liabilities a) Other current assets 2022 Current Non-current $ $ Total Current $ $ - 39,490 - 18,652 58,142 - - - - - - 39,490 - 18,652 20,594 78,263 413,155 35,809 58,142 547,821 2021 Non- current $ Total $ - - - - - 20,594 78,263 413,155 35,809 547,821 Prepayments Consumables Deposits Security deposits Other current assets are non-financial benefits that the consolidated entity shall be entitled to receive within a twelve month period. b) Property, plant & equipment At 30 June 2022 Cost or fair value Accumulated depreciation Net book amount Opening net book value Exchange differences Additions Disposals Net book value - discontinued operations Depreciation charge Closing net book value Furniture & fittings $ Plant & equipment $ Property – right-of-use assets $ 89,910 (79,727) 10,183 47,001 1,131 - - 5,498 (4,285) 1,213 64,969 2,545 - - - - - 19,983 455 - - Total $ 95,408 (84,012) 11,396 131,953 4,131 - - (24,731) (13,218) 10,183 (65,755) (546) 1,213 (20,438) - (110,924) (13,764) - 11,396 39 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Furniture & fittings $ Plant & equipment $ Property – right-of-use assets $ 116,557 (69,556) 47,001 17,941 (2,249) 47,972 (139) (16,524) 47,001 95,728 (30,759) 64,969 4,593 (597) 90,342 (1,495) (27,874) 64,969 79,931 (59,948) 19,983 59,618 220 - - (39,855) 19,983 Total $ 292,216 (160,263) 131,953 82,152 (2,626) 138,314 (1,634) (84,253) 131,953 At 30 June 2021 Cost or fair value Accumulated depreciation Net book amount Opening net book value Exchange differences Additions Disposals Depreciation charge Closing net book value c) Borrowings 2022 Current $ Non-current $ Total $ Current $ 2021 Non-current $ Total $ Lease liability - - - 14,949 - 14,949 d) Employee benefit obligations 2022 2021 Current Non-current Total Current Non-current Total $ $ $ $ $ $ Leave obligations 65,263 - 65,263 123,481 - 123,481 Leave obligations The leave obligations cover the Group’s liabilities for annual leave which are classified as short-term benefits, as explained in note 20(q). The current portion of this liability includes all of the accrued annual leave. The entire amount of the provision of $65,263 (2021: $123,481) is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. 40 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 7. Equity a) Contributed Equity Ordinary shares - fully paid 1,471,200,370 18,283,350 1,467,577,250 18,196,600 30 June 2022 30 June 2022 $ No. 30 June 2021 30 June 2021 $ No. Movement in ordinary shares Balance at 1 July 2020 Issue of securities at $0.029 each - ESOP Exercise of options Conversion of Performance Rights - ESOP Transfer from share based payment reserve No. of shares $ 1,347,887,247 16,390,763 1,172,415 114,805,789 3,711,799 - 34,000 1,722,087 - 49,750 Balance at 30 June 2021 1,467,577,250 18,196,600 Conversion of Performance Rights - ESOP Issue of securities at $0.020 – ESOP Issue of securities at $0.022 - ESOP 1,284,484 975,000 1,363,636 37,250 19,500 30,000 Balance at 30 June 2022 1,471,200,370 18,283,350 41 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Ordinary shares Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the Group in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Options Information relating to options, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in notes 7(b) and 16. Reserves b) The following table shows a breakdown of the consolidated balance sheet line item ‘reserves’ and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table. Share-based payments $ Foreign currency translation $ Total $ Balance at 1 July 2021 867,743 (105,073) 762,670 Currency translation differences Other comprehensive income for the year - - 27,495 27,495 27,495 27,495 Transactions with owners in their capacity as owners Share-based payment expenses Lapse of options (37,250) (45,000) - - (37,250) (45,000) At 30 June 2022 785,493 (77,578) 707,915 42 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Share-based payments $ Foreign currency translation $ Balance at 1 July 2020 954,493 (108,516) Currency translation differences Other comprehensive income for the year - - 3,443 3,443 Total $ 845,977 - 3,443 3,443 Transactions with owners in their capacity as owners Share-based payment expenses Lapse of options (2,750) (84,000) - - (2,750) (84,000) At 30 June 2021 867,743 (105,073) 762,670 i) Nature and purpose of reserves Foreign currency translation Exchange differences arising on translation of the foreign controlled subsidiaries are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. Share-based payments The share-based payment reserve records items recognised as expenses on valuation of share options and rights issued to Key Management Personnel, other employees and eligible contractors. ii) Options and Rights on Issue Options and rights 391,374,867 785,493 397,105,901 867,743 30 June 2022 No. 30 June 2022 $ 30 June 2021 No. 30 June 2021 $ 43 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Movement in options and rights Balance at 1 July 2020 Exercise of Options Issue of rights - ESOP Issue of rights - ESOP Issue of rights - ESOP Conversion of rights - ESOP Lapse of options Balance at 30 June 2021 Conversion of rights - ESOP Lapse of rights - ESOP Lapse of options Balance at 30 June 2022 Note Number of options $ a) b) c) d) 537,892,989 954,493 (114,805,789) 344,828 827,587 448,276 (3,711,799) (23,890,191) - 10.000 24,000 13,000 (49,750) (84,000) 397,105,901 867,743 (1,284,484) (3,000,000) (1,446,550) (37,250) (30,000) (15,000) 391,374,867 785,493 a) Unlisted options at $0.015, expiring 14 November 2022 On 15 November 2019, Constellation Technologies Limited issued 487,029,970 options free-attaching to the 487,029,970 right-issue shares. As these options are outside the scope of AASB 2 Share-based Payment, no share-based payment expense was recognised for the issue of these unlisted options. During the period, Nil (2021: 114,805,789) of these options were exercised. b) Unlisted performance rights vesting 1 July 2021, expiring 30 September 2021 Issue to Key Management Personnel as part of the Company’s long-term incentive program. c) Unlisted performance rights vesting 1 July 2021, expiring 30 September 2021 Issue to employees as part of the Company’s long-term incentive program. d) Unlisted performance rights vesting 1 October 2020, 1 January 2021 & July 2021, expiring 30 June 2022 Issue to employee as part of the Company’s long-term incentive program. Tranche to vest in four equal portions over a 12 month period. 44 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 8. Cash flow information Reconciliation of profit/(loss) after income tax to net cash inflow (outflow) from operating activities Loss for the year Adjustments for Depreciation Finance costs Finance income Share-based payments Employee salary sacrifice to acquire equity Disposal of assets Change in operating assets and liabilities Movement in trade and other receivables Movement in other current assets Movement in trade and other payables Movement in contract liabilities Movement in other operating liabilities Net cash outflow from operating activities 2022 $ (2,099,306) 2021 $ (3,221,821) 58,294 - (287) 69,708 - - 416,766 86,147 (230,618) (323,023) (58,218) 84,253 - (1,890) 122,250 34,000 1,640 (467,546) (101,458) 355,180 309,973 84,955 (2,080,537) (2,800,464) Non-cash investing and financing activities Non-cash investing and financing activities disclosed in other notes are: Options and shares issued to employees under the 'employee share option plan' for no cash consideration - note 16. 9. Critical estimates and judgements The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about each of these estimates and judgements is included in other notes together with information about the basis of calculation for each affected line item in the financial statements. 45 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Significant estimates and judgements The areas involving significant estimates or judgements are: • Recognition of revenue and allocation of transaction price - note 2c • Non-recognition of carry-forward tax losses - note 4b • Estimation of employee benefit obligations - note 6d • Estimation of share-based payments - note 16 • Application of the going concern assumption - note 21a Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. In assessing the carrying value of the company’s assets and liabilities, the directors have taken into consideration the economic outlook in light of the COVID-19 pandemic. The pandemic has not had a material impact on the Group’s Australian operations to date and therefore no additional provisions specific to the pandemic has been taken up in the Australian accounts to reflect this. However, during the year, the Company made the decision to close its operations in China. Refer to the CEO’s report for further information. All receivables in China have been fully provided for as their recoverability cannot be ascertained. 10. Financial risk management This note explains the Group's exposure to financial risks and how these risks could affect the Group’s future financial performance. The Group’s risk management is predominantly controlled by the Board. The Board monitors the Group's financial risk management policies and exposures and approves substantial financial transactions. It also reviews the effectiveness of internal controls relating to market risk, credit risk and liquidity risk. a) Market risk Foreign exchange risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. The Group is primarily exposed to changes in the Chinese yuan and Indian rupee against the Australian dollar on translation into the Group's presentation currency of subsidiaries' financial information. However, there are no material financial assets and liabilities denominated in currencies other than the functional currency of each entity. Therefore, management has concluded that market risk from foreign exchange fluctuation is not material. b) Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. 46 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Risk management Credit risk is managed through the maintenance of procedures (such as the utilisation of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring the financial stability of significant customers and counterparties), ensuring to the extent possible that customers and counterparties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Credit terms are normally 30 days from the invoice date. Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating. Impairment of financial assets The Group has one type of financial asset subject to the expected credit loss model: trade receivables for sales of monitor tags, the provision of monitoring subscriptions, consulting and labour hire services. While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the identified impairment loss was immaterial. Trade receivables The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 24 months before 30 June 2022 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the loss allowance as at 30 June 2021 and 30 June 2022 were determined as follows for trade receivables: 2022 Expected credit loss rate Gross carrying amount Loss allowance Current $ 1.11% 58,153 647 Days past due 1-30 $ 31-60 $ 61-90 91-120 $ $ 121+ $ Total $ 1.13% 32,772 0.00% - 0.00% - 370 - - 0.00% 78.89% - - 516 91,441 407 1,424 47 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 2021 Current $ 1-30 $ 31-60 $ 61-90 91-120 $ $ 121+ $ Total $ Days past due Expected credit loss rate Gross carrying amount Loss allowance 0.00% - - 16,283 54,012 7,577 519 3.19% 14.03% 44.38% 60.53% 80.46% 1,999 2,050 1,487 75,831 910 900 1,608 11,514 Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 121 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. The directors have deemed that no additional provision over and above current provisions are warranted in light of the COVID-19 pandemic due to the recoverability of receivables to date and the Company’s relationships with its customers. This will however be monitored closely into the future. c) Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: • preparing forward looking cash flow analyses in relation to its operating, investing and financing activities; obtaining funding from a variety of sources; maintaining a reputable credit profile; managing credit risk related to financial assets; investing cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets. • • • • • Maturities of financial liabilities The tables below analyse the Group's financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. 48 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Contractual maturities of financial liabilities 2022 Trade and other payables Total Less than 6 months $ 152,850 152,850 6 - 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cashflows Carrying amount (assets)/ liabilities $ $ $ - - $ - - $ - - $ - 152,850 152,850 - 152,850 152,850 Less than 6 months 6 - 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cashflows Carrying amount (assets)/ liabilities $ 615,525 615,525 $ - - $ - - $ - - $ - $ 615,525 $ 615,525 - 615,525 615,525 2021 Trade and other payables Total 11. Capital management a) Risk management The Group's objectives when managing capital are to • safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to reduce the cost of capital. • In order to maintain or adjust the capital structure, the Group may issue new shares or reduce its capital, subject to the provisions of the Group's constitution. The capital structure of the Group consists of equity attributed to equity holders of the group, comprising contributed equity, reserves and accumulated losses. By monitoring undiscounted cash flow forecasts and actual cash flows provided to the Board by the Group's management, the Board monitors the need to raise additional equity from the equity markets. b) Dividends No dividends were declared or paid to members for the year ended 30 June 2022 (2021: nil). The Group’s franking account balance was nil at 30 June 2022 (2021: nil). 49 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 12. Interest in other entities Material subsidiaries The Group’s principal subsidiaries at 30 June 2022 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. Name of entity Note Place of business/country of incorporation Ownership interest held by the group 2022 2021 % % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Constellation Technologies Australia Pty Ltd Beijing Constellation Technology Development Co. Ltd CCP IoT Technologies Pvt Ltd CCP IP Pty Ltd CCP Asia Pacific Pty Ltd CCP Network North America Inc. Agen Inc. 1 Australia China India Australia Australia United States United States 2 2 1. Formerly CCP Network Australia Pty Ltd 2. Entities in the process of being wound up. 13. Contingent liabilities The Group had no contingent liabilities at 30 June 2022 (2021: nil). 50 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 14. Events occurring after the reporting period No other matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial years. 15. Related party transactions Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments 2022 $ 503,178 28,807 11,458 543,443 2021 $ 602,786 26,074 55,417 684,277 Detailed remuneration disclosures are provided in the remuneration report. 51 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Transactions with other related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred during the year ended 30 June 2022 with related parties and were outstanding as the reporting date: During the Year 2022 $ Outstanding at end of Year 2022 $ During the Year 2021 $ Outstanding at end of Year 2021 $ Office rent and outgoings paid on an arms's length commercial basis to FNJ Properties Pty Ltd, a company associated with director, Leath Nicholson in respect of the Company's Melbourne Offices. Payment received in cash and equity. Legal fees paid on normal commercial terms to Nicholson Ryan Lawyers Pty Ltd, a company associated with director Leath Nicholson. Payment received in cash and equity. Directors fees payable to Catellen Pty Ltd, a company associated with Leath Nicholson Directors and other related fees payable to Famile Pty Ltd, a company associated with Adam Gallagher Directors fees payable to Shape Capital Pty Ltd, a company associated with Anoosh Manzoori Directors fees payable to Shildplex Pty Ltd, company associated with Raymond Malone - - - - 16,000 - 13,042 45,800 - 63,557 70,000 180,000 43,750 91,364 35,000 - - - 60,000 5,000 4,363 4,363 - - 52 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 16. Share-based payments Share options and performance rights on issue Set out below are summaries of all options & rights, including those issued under the ESOP: Weighted average exercise price per share $ 0.027 - $ 0.050 $ 0.000 $0.015 2022 Number of options & performance rights 397,105,901 - (4,446,550) (1,284,484) 391,374,867 391,374,867 Weighted average exercise price per share $ 0.018 $ 0.000 $ 0.015 $ 0.015 $0.027 2021 Number of options & performance rights 537,892,989 1,620,691 $ 0.065 (118,517,588) 397,105,901 367,302,967 As at 1 July Granted during the year Forfeited during the year Exercised As at 30 June Vested and exercisable Share options outstanding at the end of the year have the following expiry date and exercise prices: Grant Date Recipients Expiry Date 10/11/2017 Director 14/11/2019 29/05/2020 29/05/2020 Directors 19/06/2020 25/10/2021 Rights Issue - free attaching 14/11/2022 29/05/2023 Employees 29/05/2023 18/06/2023 Sophisticated Investor Exercise Price $0.100 $0.015 $0.015 $0.015 $0.015 30 June 2022 30 June 2021 - 316,146,295 19,285,714 39,142,858 16,800,000 1,446,550 316,146,295 19,285,714 39,142,858 16,800,000 391,374,867 392,821,417 Weighted average remaining contractual life of options outstanding at end of Year: 0.48 1.48 53 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Performance rights outstanding at the end of the year have the following terms: Grant Date 13/01/2020 2/09/2020 2/09/2021 Recipients Employees Employees Employees Vesting Date Expiry Date 13/04/2022 13/01/2022 30/09/2021 1/07/2021 30/06/2022 1/07/2021 Weighted average remaining contractual life of rights outstanding at end of Year: Employee share scheme 30 June 2022 30 June 2021 - - - - - 3,000,000 1,172,415 112,069 4,284,484 0.92 The Company has established the 'employee share option plan' (ESOP) to provide long-term incentives for employees (including directors) to deliver long-term shareholder returns. Participation in the plan is at the Board's discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Shareholders last approved the Company’s capacity to issue securities under the ESOP at the 2021 Annual General Meeting. Since the last approval, the following equity has been issued under the scheme: Shares Name Term Code Issue Date Grant Date Vesting Qty Date Issue Price Value of Shares Granted Value Vested $ $ $ Employees Employees A B 26/11/21 01/12/21 26/11/21 01/12/21 26/11/21 01/12/21 975,000 1,363,636 0.0200 0.0220 19,500 19,500 30,000 30,000 A) Issue to an employee at $0.020 each under the terms of an employment contract, being the 60 day VWAP as at 15 January 2020. B) Issue to an employee at $0.022 each under the term of an employment contract, being the 30 day VWAP as at 6 January 2020. Options Nil Options have been issued Rights Nil Rights have been issued Other share based payment arrangements No other equity has been issued to employees or directors outside of the Company ESOP during the year. 54 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Valuation of share options No options were issued during the year. Expenses arising from share-based payment transactions Expenses arising from shares issued to key management personnel Expenses arising from options issued to key management personnel Expenses arising from rights issued to key management personnel Expenses arising from shares issued to other employees Expenses arising from rights issued to other employees Expenses arising from shares issued to consultants 2022 $ 11,458 - - 49,500 8,750 - 69,708 2021 $ 45,417 - - 25,500 10,000 75,333 156,250 Additional $34,000 share-based payments expense in FY21 relates to a salary sacrifice arrangement with employees to acquire shares. This share-based payment expense has been allocated as an employee benefit at note 3(b). 17. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: Audit and review of financial statements PKF Brisbane Audit PKF Kexin (Beijing) Business Advisory Co., Ltd Non-audit services PKF Brisbane Audit PKF Kexin (Beijing) Business Advisory Co., Ltd 2022 $ 54,300 10,763 65,063 - - - 2021 $ 52,000 25,545 77,545 4,000 20,601 24,601 Non-audit services include due diligence advisory services provided to the Company during the prior year. 55 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 18. Loss per share (a) Reconciliation of loss used in calculating loss per share Loss attributable to equity holders of the Group used in calculating loss per share: - From continuing operations - From discontinued operations (b) Weighted average number of shares used as the denominator 2022 $ 2021 $ (763,358) (1,335,948) (2,795,202) (426,619) (2,099,306) (3,221,821) 2022 No. 2021 No. Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 1,470,195,342 1,381,166,017 There are 391,374,867 share options on issue not included in diluted earnings per share as these would have an anti-dilutive effect on earnings per share. These potential ordinary shares are anti-dilutive as their conversion to ordinary shares would decrease loss per share. If these shares options were included in the calculation of diluted earnings per share, the weighted average number of shares used in the denominator would be 1,862,113,161. 56 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 19. Parent entity financial information Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance Sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Share capital Reserves - Share-based payments Retained earnings Income Statement Loss for the year Total comprehensive loss Note a) 2022 $ 2021 $ 1,015,833 6,695,866 7,711,699 (97,640) - (97,640) 1,840,355 7,550,081 9,390,436 (85,582) - (85,582) 93,073,901 92,987,151 5,449,491 (89,169,039) 5,531,741 (87,990,418) 9,354,353 10,528,474 a) 1,740,295 1,740,295 1,223,621 1,223,621 a) Provision for impairment of Investment in China subsidiary During the period, the Company made the decision to close its China subsidiary, Beijing Constellation Technology Development Co. Ltd. A provision for impairment for 100% of the carrying value of the investment in the subsidiary of $1,600,000 has been made in the parent entity financial statements. 57 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 20. Discontinued operations Due to challenging global economic conditions and the changing political/regulatory climate in China, the Company made the decision during the year to hold its wholly owned subsidiary, Beijing Constellation Technologies Development Co., Ltd for sale. The Company actively pursued the sale of the entity, but subsequently decided to wind-down operations in China. This process is expected to be completed in the next 12 months. a) Assets and liabilities held for sale As at 30 June 2022, the entity held the following assets and liabilities: Assets Cash at bank Trade and other receivables Provision for non-recovery of trade and other receivables Other assets Property, plant & equipment Liabilities Trade & other payables Net liability associated with discontinued operations 30 June 2022 $ 1,532 884,374 (884,374) 5,152 66,393 (232,248) (159,171) 58 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … b) Statement of Profit or Loss and other Comprehensive Income The entity recognised the following loss for the year ending 30 June 2022. For comparative purposes, the Company is disclosing the prior period loss for this entity. Revenue Expenses Other gains/(losses) Loss from discontinued operations Income tax expense 30 June 2022 30 June 2021 $ $ 125,076 (1,461,642) 618 919,352 (1,347,185) 1,214 (1,335,948) - (426,619) - Loss from discontinued operations (1,335,948) (426,619) Loss per share - discontinued operations (0.090) (0.030) The expenses disclosed above do not include any expenses incurred by other subsidiaries of the Group in providing management, technical or software development services specific to Chinese projects undertaken by the China entity. c) Statement of Cashflows Net operating outflows Net investing inflows/(outflows) Net financing outflows Net cash outflows 30 June 2022 30 June 2021 $ $ (576,875) 264 (15,403) (288,951) (47,448) (43,639) (592,014) (380,038) 59 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … 21. Summary of significant accounting policies This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Constellation Technologies Limited and the entities its controlled. a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Constellation Technologies Limited is a for-profit entity for the purpose of preparing the financial statements. i) Compliance with IFRS The consolidated financial statements of the Constellation Technologies Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). ii) Historical cost convention The financial statements have been prepared on a historical cost basis. iii) Going concern The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. As disclosed in the financial statements, the Group is in a net asset position of $989,340, net current asset position of $977,944 and has net operating cash outflows of $1,503,662 from continuing operations. The Group generated a loss after tax from continuing operations for the year of $763,358. The group’s cash position decreased to $524,364 as at 30 June 2022. 60 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Notwithstanding the historical losses to date the directors believe that the going concern basis of preparation is appropriate due to the following reasons: • • • • • • Significant progress has been made in releasing the Group’s intellectual property. Revenue from Australian operations has increased 46.65% over the prior year; The Company has entered into new sales agreements which equates to an estimated $900,000 in revenue in the next 12 to 15 months. This revenue is expected to be profitable. The Company received its FY21 R&D tax incentive rebate payment in July 2022 with a value in excess of $634,000. The Company has initiated cost saving processes, including the discontinuation of its operations in China. A successful history in raising capital via the issue of new ordinary shares should the need arise. There are also 391,374,867 options outstanding that could potentially raise up to $5.8m from shareholders should the Company’s share price rise above the exercise price of 1.5 cents.; and The Company has the ability to negotiate payment in equity in lieu of cash with its consultants and suppliers, improving the Group’s cash coverage. New and amended standards adopted by the group No new standards came into effect for the annual reporting period commencing 1 July 2021. New standards and interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2022. The consolidated entity’s assessment of the impact of these new amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below: Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 July 2022 and early adopted is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the consolidated entity has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the consolidated entity may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the consolidated entity’s financial statements. 61 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … b) c) d) Principles of consolidation Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. This has been identified as the Board and chief executive officer. Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Australian dollar ($), which is Constellation Technologies Limited's functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the consolidated statement of profit or loss on a net basis within other gains/(losses). Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non- monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income. 62 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each consolidated balance sheet presented are translated at the closing rate at the date of that consolidated balance sheet income and expenses for each consolidated statement of profit or loss and consolidated statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and all resulting exchange differences are recognised in other comprehensive income. • • e) f) g) On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Revenue recognition The accounting policies for the Group’s revenue from contracts with customers are explained in note 2. Contract assets & liabilities Contract assets represents the Group’s right to consideration in exchange for goods or services that the entity has transferred to the customer. Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer. Income tax The income tax expense or credit for the year is the tax payable on the current year's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting year in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 63 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting year and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. h) i) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entities incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts excepted to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following; future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 64 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … j) k) l) Discontinued operations A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that represents a major line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the profit or loss and other comprehensive income. Where a decision is made to treat a major line of business or area of operations as discontinued the comparative information is restated to reflect as if that major line of business or area of operations had been discontinued in the prior year. Impairment of assets Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non- financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting year. Cash and cash equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet. m) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance. See note 5(b) for further information about the Group’s accounting for trade receivables and note 10(b) for a description of the Group's impairment policies. 65 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … n) Investments and other financial assets Classification The Group classifies its financial assets in the following measurement categories: • • those to be measured subsequently at fair value (either through OCI or through profit or loss), and those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Impairment The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see note 10(b) for further details. 66 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … o) Property, plant and equipment Plant & Equipment Plant & equipment acquired are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting year in which they are incurred. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting year. An assets carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. Right-of-use assets These includes leases of rental properties and equipment. A right-of-use asset is recogised at the commencement date of a lease. The right-of-use asst is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commence date, net of any lease incentives received, any initial direct costs incurred, and except where included in the cost of inventories, an estimate of the cost expected to be incurred for dismantling and removing the underlaying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the lease asset at the end of the lease term, the depreciation is over the estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short- term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. 67 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … p) q) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting year. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Employee benefits Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the year in which the employees render the related service are recognised in respect of employees’ services up to the end of the year and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet. Share-based payments Share-based compensation benefits are provided to employees via the 'employee share option plan' (ESOP). Information relating to these schemes is set out in note 16. Employee options The fair value of options granted under the ESOP is recognised as a share-based payment expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted: • • including any market performance conditions (e.g. the Group’s share price) excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the Group over a specified time period), and including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period of time). • The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each year, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. 68 Constellation Technologies Limited Annual Report 2022 Notes to the Consolidated Statements continued … r) s) Contributed equity 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. Loss per share Basic loss per share Basic loss per share is calculated by dividing: • the loss attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted loss per share Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account: • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. • t) Rounding of amounts The Group is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest dollar. u) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. v) Inventory Stock on hand is stated at the lower of cost and net realisable value on a ‘first in first out’ basis or FIFO. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 69 Constellation Technologies Limited Annual Report 2022 Director’s Declaration In the directors' opinion: the financial statements and notes set out on pages 28 to 69 are in accordance with the Corporations Act 2001, including: • complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and • giving a true and fair view of the consolidated entity's financial position as at 30 June 2022 and of its performance for the financial year ended on that date, and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Note 20(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of directors. Mr Kartheek Munigoti Executive Director and Chief Executive Officer 70 Constellation Technologies Limited Annual Report 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CONSTELLATION TECHNOLOGIES LIMITED Report on the Financial Report Opinion We have audited the accompanying financial report of Constellation Technologies Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. In our opinion the financial report of Constellation Technologies Limited is in accordance with the Corporations Act 2001, including: a) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and b) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the consolidated entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. 71 1. Revenue recognition Why significant How our audit addressed the key audit matter As at 30 June 2022 the recorded revenue from continuing operations of the group was $801,822 (2021: $546,762), as disclosed in Note 2. In addition, $125,076 revenue from discontinued operations (2021: $919,352) were recorded, as disclosed in Note 20. As disclosed in the accounting policy in Note 2, the group has multiple revenue streams with customers, which includes Monitor tag revenue, Monitoring subscription revenue, Consulting revenue and Labour hire revenue. Revenue recognition is considered a Key Audit Matter (KAM) due to: • The significance of the balance; and • The different recognised in regions. streams of different revenue geographic Our work included, but was not limited to, the following procedures: • Understanding the consolidated entity’s for accounting policies and processes recognising contract revenue; • Tracing revenue samples to contracts, and revenue assessing recognition based on five steps required under AASB 15 Revenue from Contracts with Customers; management’s the • Checking customer receipts, and agreeing details general ledger; and invoices and bank the to • Performing cut-off testing to ensure revenue transactions around the year end have been recorded in the correct period and any contract assets or contract liabilities has been properly accounted for. Reviewing the disclosures at Note 2 and Note 20 to ensure in accordance with AASB 15 Revenue from Contracts with Customers. they are appropriate and that Other Information The Directors are responsible for the other information. The other information comprises the information included in the consolidated entity’s Annual Report, 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 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. 72 Directors’ Responsibilities 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 consolidated entity’s ability 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 consolidated entity or to cease operations, or have 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 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 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 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 consolidated entity’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 consolidated entity’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 consolidated entity 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 consolidated entity to express an opinion on the group financial report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 73 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, actions taken to eliminate threats or safeguards applied. 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 We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2022. 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. Opinion In our opinion, the Remuneration Report of Constellation Technologies Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. PKF BRISBANE AUDIT SHAUN LINDEMANN PARTNER BRISBANE 29 August 2022 74 Shareholder Information As at 23 August 2022 Distribution of equity securities The number of shareholders, by size of holding in each class of equity are: Distribution 100,001 and over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total No. of holders 656 418 14 34 123 Ordinary Shares No. of shares 1,450,487,790 20,485,462 125,552 81,746 19,817 No. of holders Options No. of shares 176 387,278,271 4,055,061 16,030 19,853 5,652 76 2 8 22 1,245 1,471,200,370 284 391,374,867 There were 544 holders of less than a marketable parcel of 16,212,580 ordinary shares. 75 Constellation Technologies Limited Annual Report 2022 Shareholder Information Twenty largest holders of quoted securities are: Name of registered holder LG Equities Pty Ltd 1 2 Mr Yi Zhang 3 MRGL Pty Ltd 4 Mrs Xiaofang Zhang 5 Mr Xiaoniu Bao 6 HSBC Custody Nominees (Australia) Limited Berne No 132 Nominees Pty Ltd 7 Kartheek Munigoti Shankar Rao 8 9 Berne No 132 Nominees Pty Ltd 10 S&M French Investments Pty Ltd 11 Miss Mengjiao Zhao 12 Austanco PtyLtd 13 Hongmen Capital Holdings Pty Ltd 14 Mainline Solutions Pty Ltd 15 K&M Holdings Australia Pty Ltd 16 Mr Christopher Thomas Titmarsh 17 DSA Superannuation Nominees Pty Ltd 18 Mr Jarrod David Shelley 19 Phil Munday Investments Pty Ltd 20 BNP Paribas Nominees Pty Ltd Substantial shareholders No. of shares % of holding 94,466,988 90,000,000 51,189,192 44,000,000 41,760,000 35,082,981 30,750,000 30,341,882 30,000,000 24,884,983 22,210,131 21,975,000 21,688,474 21,079,044 21,000,000 18,004,625 17,000,000 16,679,271 16,601,666 16,197,181 6.42 6.12 3.48 3.00 2.84 2.38 2.09 2.06 2.04 1.69 1.51 1.49 1.47 1.43 1.43 1.22 1.16 1.13 1.13 1.10 664,911,418 45.19 The names of the substantial shareholders who have notified the Group in accordance with section 371B of the Corporations Act 2001 are as follows. Quantity and Percentage of shares stipulated are as supplied by the substantial shareholder: Name of registered holder 1 Constellation Technologies Limited* 2 Raymond Malone 3 Mengjiao Zhao 4 K&M Holdings Australia Pty Ltd 5 Mainline Solutions Pty Limited 6 S&M French Investments Pty Ltd No. of shares 284,412,116 156,276,694 84,865,427 35,840,430 33,249,673 28,984,983 % of holding 19.33 11.61 5.78 7.03 6.52 5.69 *Subject to voluntary escrow arrangements between the Company and Shareholders giving rise to classification as a substantial shareholder under the Corporations Act 2001. 76 Constellation Technologies Limited Annual Report 2022 Shareholder Information Voting rights The voting rights attached t equity securities are set out below: Ordinary shares Each ordinary share is entitled to on vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. Options and performance rights Options and performance rights are not entitled to voting rights. Unquoted equity security holdings greater than 20% No single shareholder has an unquoted equity holding greater than a 20%. Escrowed securities holdings The following securities holdings are subject to restrictions or voluntary escrow arrangements. Security Type Ordinary Shares On market buy-back There is no current on-market buy-back of the Group’s securities. Qty Escrow Date 284,412,116 07/06/24 77 Constellation Technologies Limited Annual Report 2022

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