COSOL
Annual Report 2023

Plain-text annual report

COSOL LTD Annual Report 2023 Unlocking asset potential globally COSOL LTD Annual Report 2023 COSOL LTD F Y23 FINANCIAL HIGHLIGHTS Revenue 55.7%UP YOY ($M) 100 80 60 40 20 0 FY20 FY21 FY22 FY23 Contents IFC COSOL Ltd FY23 Financial Highlights 18 Celebrating Our People 02 Chairman’s Letter 04 CEO’s Report 08 Business Overview 10 Business Overview 19 Community Showcase 20 Board of Directors 22 Executive Team 24 Directors’ Report 12 Our Signature Solutions & Proprietary Software 28 Remuneration Report (Audited) 14 Major Client Overview 38 Auditor’s Independence Declaration 16 Client Showcase 39 Financial Report EBITDA 37.4% UP YOY Group EBITDA ($M) 12 10 8 6 4 2 0 COSOL LTD Annual Report 2023 NPAT 44.3% UP YOY Group NPAT ($M) 10 8 6 4 2 0 FY202 FY21 FY22 FY23 FY20 FY21 FY22 FY23 EBIT 37.0% UP YOY 12 10 8 6 4 2 0 EPS 35.5% UP YOY Group EPS (cents) 6 4 2 0 FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23 01 COSOL LTD Annual Report 2023 CHAIRMAN’S LET TER Dear fellow shareholder It is with great pleasure I present to you the Annual Report of COSOL Limited for 2023, a year of significant growth for your Company when we set new foundations to maintain the trajectory through FY24 and beyond. Geoffrey Lewis Chairman Driving strong growth in revenue and earnings via organic and acquisitive growth has always been our primary objective. I am delighted that COSOL recorded substantial organic growth across all key measures in FY23. Most pleasing is that COSOL’s growth has been achieved with no compromise to operating margins and profitability – the basis for long-term sustainable growth that rewards our investors now and into the future. At the same time, we delivered an acquisitive growth opportunity where we made strategic and financial sense and integrated them into our business with only positive impacts on our core operations. 2023 was a watershed year for COSOL as the Company moved to a new scale of operations with new major customers in exciting new markets and geographies. I am happy to report your Company is now well on its way to becoming the pre-eminent provider of asset management software and services in Australia and in valuable markets internationally. Two ongoing challenges for public companies are demonstrating an ability to manage the business successfully and, at the same time, drive value for investors. COSOL is well positioned to deliver on these commitments as market understanding grows of our operational capability and strategic position. The acquisition of Work Management Solutions (WMS) in August 2022 gave COSOL important capacity expansion and took us into new customer markets where there has been evident appetite for our existing core services. These are markets with vast relevance and significance as owners of heavy asset networks deploy every available resource at eliminating waste and inefficiencies, protecting their bottom lines and boosting their ESG credentials. The same will apply to AssetOn, which COSOL has contracted to acquire in September 2023, that also brings in a blue-chip portfolio of clients that can benefit enormously from our ecosystem of technology and people. FY24 will see COSOL continue to focus on organic growth and continue to be active in assessing potential acquisitions. As we grow further, we will continue to reward our shareholders through dividends and we maintain our policy of distributing up to 50% of NPAT. We are also grateful for the support we have received from shareholders old and new, with several new Australian institutional investors joining the COSOL register over the past 12 months. Our mission is to deliver for our shareholders through diligently managing the growth of COSOL and actively pursuing all corporate and growth opportunities that come our way. In closing I would like to thank fellow Board members for their contribution and the Management team in all locations around the world for their dedication and commitment to COSOL. 02 COSOL LTD Annual Report 2023 2023 was a watershed year for COSOL as the Company moved to a new scale of operations with new major customers in exciting new markets and geographies. 03 COSOL LTD Annual Report 2023 CEO’S REPORT Scott McGowan CEO I am pleased to present our CEO report for the fiscal year 2023, highlighting the achievements and strategic initiatives of our asset management solutions and services company. This year has been marked by strong organic performance, complemented by an earnings accretive acquisition. Our unwavering commitment to innovation, customer satisfaction and operational excellence has propelled us to new heights, positioning us as a leader in the industry. Significant contract wins and extensions Our unwavering commitment to innovation, customer satisfaction, and operational 04 Organic Highlights: Our organic growth remains strong with FY23 witnessing a substantial increase in both top-line revenue and bottom-line profitability. We grew organically in Asia-Pacific and we saw strong growth in both revenue and margins in North America. Our signature solutions continued to gain traction in the market enabling our clients to optimise their asset management strategies, enhance operational efficiency and drive superior financial performance. The dedication of our talented teams, relentless focus on client needs and continuous product enhancements have played a pivotal role in achieving our results in FY23. Earnings Accretive Acquisitions: We have continued to demonstrate our ability to execute on our strategy and deliver an acquisition, Work Management Solutions, during the fiscal year, each contributing significantly to our earnings and expanding our footprint in key markets. These acquisitions have not only broadened our product portfolio but also facilitated cross-selling opportunities and access to new customer segments. As a result, we have further solidified our position as a comprehensive solutions provider in the asset management ecosystem. COSOL LTD Annual Report 2023 Strategic acquisition – Work Management Solutions (WMS) 05 COSOL LTD Annual Report 2023 CEO’S REPORT (CONTINUED) Our dedication to innovation remains unwavering, and we are committed to continuously enhancing our solutions to meet evolving market demands 06 We are well-positioned to capitalise on the opportunities that lie ahead before us. Our dedication to innovation remains unwavering, and we are committed to continuously enhancing our solutions to meet evolving market demands. We will continue to explore avenues for growth, both organically and through strategic acquisitions, always focusing on maximising value for our shareholders. In conclusion, I extend my heartfelt appreciation to our dedicated employees, valued clients, and supportive partners and shareholders who have been instrumental in our achievements during FY23. As we enter the next fiscal year, we remain steadfast in our commitment to delivering exceptional value, fostering innovation and driving sustained growth. OneCOSOL Transformation Project: A milestone achievement during this fiscal year has been the successful execution of the OneCOSOL transformation project. This initiative was undertaken to streamline operations and create synergies across the businesses we acquired optimising resource allocation, improving scalability and enhancing overall organisational agility. The integration process was meticulous and thorough resulting in a cohesive and unified operational structure that leverages the strengths of each acquired entity while maintaining a consistent customer experience. Strategic Outlook: The industries we cater to are currently facing significant challenges when it comes to asset reliability. Largely due to supply chain constraints, workforce skill and availability and lasting effects of COVID, we find ourselves in a unique market position aligned to the growth of COSOL and its capabilities. Financial Highlights Revenue Growth Revenue of $75.1 million increased by $26.9 million (55.7%) compared to the prior year revenue. The revenue growth was a combination of organic growth of $8.9 million (18.4%) and acquisition growth. Dividend The Directors declared an interim dividend of $0.01 to all ordinary shareholders for the half year to 31 December 2022 which was paid in May 2023. The Directors have declared a final dividend of $0.0146 dividend payable to all ordinary shareholders for the current financial full year. The dividend will be fully franked. COSOL LTD Annual Report 2023 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) Earnings Before Interest, Tax, Depreciation and Amortisation of $11.6 million increased by $3.2 million (37.4%) when compared to the prior year. Earnings Per Share (EPS) The basic earnings per share of 5.43 cents grew by 35.5% from 4.01 cents for the prior year showing the strong underlying earnings of the business and disciplined acquisition strategy. Net Profit after Tax Net Profit after Tax of $8.0 million increased by $2.5 million an increase of 44.3% on the prior year. 07 COSOL LTD Annual Report 2023 BUSINESS OVERVIEW Our story Whilst COSOL Limited was listed on the ASX in January 2020, its operating entities have been established leaders in their field for over 20 years. 2000 COSOL Australia was established as a business focused on asset intensive industries including energy, utilities, defence, mining and mineral processing with a focus on Enterprise Asset Management (EAM) software platforms and specialising in data management to drive business improvements. JANUARY 2020 COSOL Limited listed on the Australian Securities Exchange after raising $12 million. Successfully acquired COSOL Australia Pty Ltd on 16 January 2020. DECEMBER 2019 COSOL Limited formed. AUGUST 2020 Exceeded the financial performance forecast in its IPO prospectus. 08 COSOL LTD Annual Report 2023 OCTOBER 2020 Acquired AddOns Inc, expanding our market leading managed services capability in Hitachi Ellipse through the use of proprietary IP and solutions, in particular COSOL Evergreen. Based in the US, AddOns provided us with a platform for growth into the US market. AUGUST 2022 Acquired Work Management Solutions (WMS), a Western Australia-based advisory and technical consulting services company with associated proprietary technology platforms expanding COSOL’s offering to deliver a unique end to end Asset Management as a service. NOVEMBER 2021 Acquired Clarita Solutions Pty Ltd, a dynamic digital solutions company with specialist skills in IBM’s Maximo (a leader in the Gartner Magic Quadrant for EAM software platforms) committed to transforming Enterprise Asset Management (EAM) operations. 09 COSOL LTD Annual Report 2023 BUSINESS OVERVIEW Our services and solutions COSOL is a global provider of asset management solutions for asset-intensive organisations that span across people, process, systems and data elements of the asset management framework to drive quantifiable business improvements. COSOL provides advice, operational expertise and business optimisation outcomes to help clients achieve economic and sustainable improvements in their business operations and supply chain. COSOL’s signature solutions and proprietary software used in combination with best-of-breed technologies and 20+ years industry, technical and functional expertise provides clients with an asset management capability that is vertically integrated, technology enabled and optimised for performance. Experts in the building and optimising asset information ecosystems, COSOL have specialist capabilities in IBM Maximo Application Suite, Hitachi Ellipse, SAP, Esri’s GIS stack and InterPro’s EZMaxSuite, and work with system integrators such as IBM, Accenture, DXC, Deloitte and EY. Drawing on all of COSOL’s unique expertise and end-to-end solution capabilities, we are the first provider of Asset Management as a Service – a complete outsourced solution for asset management operations. Systems partners We are the first provider of Asset Management as a Service – a complete outsourced solution of asset management. 10 n o w l edge Enablers A s s e t K Asset Asset Information Information Ecosystem Ecosystem COSOL LTD Annual Report 2023 PEOPLE DATA We help ensure the right people with the right asset management skills are in place to apply industry best practice processes and effectively manage assets aided by data-based insights. We help put data at the heart of an organisation to connect physical assets with their digital representations and enable fact-based, forward focussed decisions. n o w l edge Enablers A s s e t K Asset Asset Information Information Ecosystem Ecosystem PROCESS SYSTEMS We help embed asset management industry best practices and automate processes to drive efficiency, innovation and continuous improvement. We build and optimise asset information ecosystems by integrating best of breed technologies and automations to support business processes, create efficient workforces, optimise assets and enable predictive maintenance. SIGNATURE SOLUTIONS Our Signature Solutions and Proprietary Software help maximise our clients enterprise software investments and streamline the delivery of complex digital and data projects. Application Managed Support EAM Market Assessments Asset Management as a Service Asset Management Learning Academy Work Stream Manager Data Quality Assessments RPConnect Enterprise Asset Management as a Service Asset Information Ecosystem Roadmaps 11 COSOL LTD Annual Report 2023 OUR SIGNATURE SOLUTIONS & PROPRIETARY SOF TWARE Proprietary digital solutions drive growth opportunities The expansion of COSOL’s signature solutions and proprietary software portfolio continues to drive growth opportunities. Valued by clients as IP which can maximise their enterprise software investments and streamline the delivery of complex digital and data projects, COSOL’s proprietary digital solutions portfolio includes: Asset Management as a Service (AMaaS) The complete outsourced solution utilising COSOL’s end-to-end AMaaS solution and services. Enables clients to manage risk, the lifecycle performance of assets and all associated costs in one solution. Asset Information Ecosystem Roadmaps Charts a journey of maturity-building initiatives to help clients achieve their asset management objectives across people, process, systems and data. EAM as a Service (EAMaaS) With EAMaaS, access your EAM software through a web browser and mobile client while we take care of the security, backups, availability and performance. 12 COSOL LTD Annual Report 2023 Application Managed Support Optimise system performance with timely and knowledgeable technical support services available when your people and organisation need it most. Data Quality Assessment Understand your legacy data and gain clear insights into what’s required to cleanse and migrate your data to reduce the risk and cost associated with data migration projects. Work Stream Manager An App to review and reassess asset management process and execution maturity. Benchmark against standards and targets to aid continuous process improvement. Asset Management Learning Academy Develops the capabilities and knowledge of our clients people to achieve sustainable asset performance with training tailored to organisation’s objectives. 13 EAM/ERP Market Assessment Enables an informed business decision about suitability of best-of-breed EAM or ERP systems with our unbiased independent assessment and report that will save time, risk and costs. RPConnect® A flexible solution for measuring data quality, migrating data from disparate systems and vaulting legacy data that strengthens digital capabilities and migrates future risks and costs. COSOL LTD Annual Report 2023 MAJOR CLIENT OVERVIEW Natural Resources Energy and Water 14 COSOL LTD Annual Report 2023 15 Public Infrastructure Government and Defence COSOL LTD Annual Report 2023 CLIENT SHOWCASE Defence Department utilises COSOL’s RPConnect® for data migration COSOL continues to deliver value for the Australian Department of Defence with a new contract secured to deliver services under the Defence Enterprise Resource Planning Program (ERP Program) in partnership with IBM. This contract win follows COSOL’s previous Defence work which commenced in April 2021. At the core of this service delivery engagement to the Australian Department of Defence is COSOL’s proprietary RPConnect® Software, which is Defence-cleared to deliver data migration services across the Department’s widespread asset portfolio. RPConnect® facilitates the safe, efficient migration of data from legacy systems to new platforms primed to achieve maximum efficiency and savings from the management of large, asset-intensive networks. Asset Management Improvement with COSOL’s Remote Asset Management Centre (ARC) COSOL is providing Asset Management Improvement services to support Glencore’s Koniambo Nickel Smelter (KNS) to improve asset reliability at their Koniambo site in New Caledonia. Currently underway as part of a 12-month engagement, the key outcome of this project is to improve KNS’s equipment program maintenance (PMs) and SAP master data with an initial focus on Bill of Materials (BOMs) and Production Resources and Tools (PRTs). In addition, COSOL is also performing physical verification of the physical assets and their representation within the KNS CMMS. Through the improvement of KNS’s equipment strategies, tactics, and master data to the appropriate physical asset, COSOL is helping deliver measurable improvements in the reliability of Koniambo Met Plant and Power Station. Carried out through a combination of onsite and remote work activities through COSOL’s Remote Asset Management Centre (ARC), COSOL can deliver a cost-effective solution for KNS that not only limits the impact on their existing onsite teams but enables them to benefit from COSOL’s expertise across the asset management framework. COSOL’s Remote Asset Management Centres, located in Brisbane and Perth, Australia, brings together the shared expertise and knowledge from across COSOL to carry out tasks remotely and cost-effectively for clients including, reliability engineering and analysis, equipment strategies and tactics development, master data developing, documentation development and technical writing including of safe work instructions, plus ERP/EAM Systems Administration and Managed Support. 16 COSOL LTD Annual Report 2023 COSOL’s RPConnect® at the core of Transgrid’s digital system transformation Transgrid operates and manages the high voltage electricity transmission network in NSW and the ACT (Australia), connecting generators, distributors and major end users. Transgrid’s network is the backbone of the National Energy Market, enabling energy trading between Australia’s three largest states along the east coast. COSOL is at the heart of Transgrid’s Digital Core System Transformation using our proprietary software RPConnect® which facilitates the safe, efficient migration of data from legacy systems to new platforms. COSOL continues to partner closely with Transgrid, extending this relationship in December 2022. A testament to the value COSOL delivers to Transgrid is in the increase in the scope of work being provided throughout the year including the Application Managed Support of their legacy platform. COSOL delivers a streamlined maintenance and planning solution for Australia’s largest diversified rail freight services provider COSOL’s asset management systems team has been working with Pacific National for over 10 years to deliver IBM Maximo Enterprise Asset Management (EAM) system optimisation, licensing, continuous improvements, mobility, asset conditioning monitoring solutions, and managed support. Pacific National is the largest provider of diversified rail freight services in Australia. They haul a variety of freight including coal, intermodal containers, steel, and a range of bulk commodities and materials that keep the region’s economy, businesses, and households running. They operate nationally with approximately 3,500 staff in over 100 sites across Australia. As part of the continuous improvement program for Pacific National, COSOL recently implemented a maintenance planning and scheduling solution and online tools to help ensure the right maintenance work was being carried out, at the right time, with the right tools, materials and people. For Pacific National, this streamlined solution will see an increase in asset availability, streamlined maintenance forecasting, and planning, a reduction in overdue maintenance, maximised labour productivity and facility throughput, plus increased efficiencies in Opex and Capex budgetary planning. 17 COSOL LTD Annual Report 2023 CELEBRATING OUR PEOPLE Welcome back Max Rogers In January 2023, we were delighted to welcome Max Rogers back to the COSOL family following five months of recovery from an accident that left Max impaired from the neck down. Max Rogers has been a valuable executive leader at COSOL since 2020 when COSOL acquired AddOns Inc, the North American managed services, hosting, and application support company founded by Max in 2003. From 2020 until late 2022, Max held the role of CEO of COSOL Americas and has recently returned as COSOL’s Principal Solution Architect. Max has always inspired others with his strong personal drive, determined attitude, strong leadership skills, and positive outlook on life. Additionally, Max has always been very active and physically strong, with a love for hunting, golfing, and biking, as well as a background as a university wrestler. All of these physical and mental traits have contributed to his achievements throughout his personal and professional life and, importantly, to his ongoing recovery from his life-changing accident in 2022. “When I was 7 years old, I recall a friend of my dad’s fell off a horse and became a quadriplegic. I vividly remember thinking, ‘Oh gosh, that is horrible. I never want that to happen to me,” Max recalls. “I never would have thought that 44 years later my worst nightmare would happen and change the course of my life forever.” “As I lay in a hospital bed trying to process what had happened, it was the support from friends and colleagues that gave me strength and hope that I could get through this. My first conscious recollection was of Scott McGowan, CEO of COSOL, and Board Director Ben Buckley at my bedside. Both had postponed their return to Australia to lend their full support to me, which I was incredibly grateful for. From there, friends and colleagues donated money and offered their time to help me set up a new house to aid in my recovery.” Choosing to return to work at COSOL as Principal Solution Architect and wellness ambassador has provided Max with a new sense of purpose and drive, while the COSOL global team continues to benefit from Max’s vast knowledge and experience in asset management. COSOL’s Executive General Manager, Annette Henry, recalls her brief time with Max in Denver, USA, “Max has the most amazing mindset. He is a natural coach and mentor, and his many experiences, when woven together, are very compelling. His life stories and experiences continue to be inspiring, and we don’t want to keep that to ourselves.” Drawing on all his experiences and in true Max style, he is determined to inspire and help others. “The most significant lesson I have learned is the importance of mental health and the need to take a breath to enjoy all aspects of life. It is always easier to have a better outlook when you have the right balance in life – and ensuring that work does not take over our lives.” Max believes that the better your attitude, the better your influence will be on people. “I hope to provide people with an opportunity to reflect. I place a lot of value on shared experiences and feel that through my story and as a wellness ambassador at COSOL, I can, in some way, make a difference in other people’s lives by helping them find balance, push through adversity, and enjoy all that life has to offer.” 18 COSOL LTD Annual Report 2023 COMMUNIT Y SHOWCASE University Engineering Scholarship Clarita Solutions – a COSOL company, launched a university scholarship program back in 2020 to financially support high-achieving engineering and IT students studying at the Charles Darwin University (CDU) in Australia’s Northern Territory. CDU is a multi-sector university that provides training and education to more than 21,000 students across its eight campuses and centres in the Northern Territory and Australia. It is one of Australia’s top-performing universities with 92.5% of Engineering & Technology graduates securing full-time employment within four months of completing their studies. Now in its third year, the COSOL CDU Engineering Scholarship, delivered in partnership with CDU has helped support three Engineering Science students who displayed high academic performance, a passion for their course, and a strong intention to use their skills through ongoing employment in the Northern Territory on graduation. The scholarship provides each successful student with $2,500 per semester towards tuition costs, something that recipients acknowledged was invaluable for their studies, citing that the scholarship helped allocate more time and focus on their studies by easing the financial burden of university and reducing the need for outside employment to fund the costs of their degrees. Supporting Women in Digital COSOL has been involved with Women in Digital for the past five years. This is our second year sponsoring the Champion of Change award category which celebrates impact-orientated individuals using digital technology to drive change and create social good. In November 2022 we were pleased to see the Champion of Change award go to Kate Kirwin. Kate is the Founder of She Codes, a for-purpose organisation connecting women to career pathways in technology through coding workshops and programs. Kate’s passion for supporting women in STEM saw her found She Codes in 2015 when she was just 21. Kate’s passion, determination and impact has helped build a pipeline of talented women in tech to fill the technical jobs of the future. COSOL is proud to be part of a movement showcasing and celebrating diversity and inclusion – and explicitly recognising the achievements of women in digital. Pictured: Kate Kirwin receiving her Champion of Change award from COSOL’s Annette Henry. 19 COSOL LTD Annual Report 2023 BOARD OF DIRECTORS Geoffrey Lewis Chairman Ben Buckley Managing Director Lisa Wynne Company Secretary Geoff Lewis has over 20 years’ experience in the global delivery of IT services and outsourcing. He established ASG Group Limited (formerly ASX listed, ASX:ASZ), an IT business solutions provider, in 1996 and was its Managing Director until it was acquired in late 2016 for $350 million by Japanese multinational IT services and consulting business Nomura Research Institute, Ltd. Geoff was appointed as a director on 10 September 2019. Ben Buckley was appointed as Managing Director of COSOL Limited in October of 2020 after joining COSOL Limited as an external consultant to work on corporate strategy and mergers and acquisitions. He has previously held senior leadership roles, including as chief executive officer and chief operating officer with major domestic and international firms. Over three decades he has worked for Nike, Foxtel, Electronic Arts, AFL and FFA, as well as BKD Executive Leaders, an executive search and recruitment firm. Lisa Wynne has a Bachelor Business and is a Fellow of the Governance Institute of Australia and a Member of the Institute of Chartered Accountants. Her experience includes over 15 years of board level experience across the commercial sector with a particular focus on the finance, accounting, corporate services, technology, and resources industries across ASX and TSX listed companies. Her background includes roles as a Non-Executive Director for Dempsey Minerals Limited responsible for strategic governance and operational planning, and as Director and Owner of Blue Horse Corporate and Sila Consulting. 20 COSOL LTD Annual Report 2023 Stephen Johnston CA Grant Pestell LLB Non‑Executive Director Independent Non‑Executive Director Gerald Strautins Independent Non‑Executive Director Stephen Johnston has significant international experience in investment, corporate finance, mergers and acquisitions and commercial management gained over 25 years in Australian industrial and investment organisations. Stephen was the managing director and founder shareholder of Schutz DSL Group, an industrial packaging group with operations in Australia and south east Asia, and was an independent non-executive director of ASG Group Limited (formerly ASX listed, ASX:ASZ), an IT business solutions provider, until it was acquired in late 2016 for $350 million by Japanese multinational IT services and consulting business Nomura Research Institute, Ltd. Stephen was appointed as a director on 10 September 2019. Grant Pestell was a founding director and has been the managing director of Perth-based legal firm Murcia Pestell Hillard since 2000. He has extensive experience advising both listed and private companies, particularly in the ICT, energy and resources and mining services industries. Grant is regularly involved in and advises on complex commercial disputes, strategic contract negotiations, mergers and acquisitions, risk management and large-scale financing. Grant was an independent non-executive director of ASG Group Limited (formerly ASX listed, ASX:ASZ), an IT business solutions provider, until it was acquired in late 2016 for $350 million by Japanese multinational IT services and consulting business Nomura Research Institute, Ltd. Grant was appointed as a director on 7 August 2019. Gerald Strautins has extensive executive, mergers and acquisitions, consulting, programme and business management experience, with particular strength in formulating, implementing and managing strategic managed service/ outsourcing operations and transformation initiatives. Gerald’s strategic business consultancy and corporate management experience was gained through extensive work in Australia, Europe and Asia. He was the Executive – Strategy and M&A of ASG Group Limited (formerly ASX listed, ASX:ASZ), an IT business solutions provider, and was responsible for the strategic direction of the organisation, while also completing in excess of $500 million in mergers and acquisitions transactions. Gerald was appointed as a director on 4 October 2019. 21 COSOL LTD Annual Report 2023 EXECUTIVE TEAM Scott McGowan Anthony Stokes Matt Glasner Chief Executive Officer Chief Financial Officer Chief Operating Officer Scott is the Chief Executive Officer of the COSOL Group and is a highly experienced business executive with a demonstrated ability to lead diverse teams of professionals to new levels of success in highly competitive markets. Scott has over 20 years’ experience in both start-ups and global multinational corporations and possesses strong technical and business qualifications with an impressive track record in strategic planning, organic business growth and the integration of acquisitions to deliver strategic value. Anthony Stokes was appointed as Chief Financial Officer in July 2022. A highly credentialed finance executive with more than 20 years’ experience, Anthony has a wealth of experience in highly competitive and regulated environments. Anthony’s most recent position was General Manager, Financial Planning & Analysis at Virgin Australia, where he worked in senior roles since 2011 across finance, transformation and commercial roles. This included playing a key role in the sale process and transition to Bain Capital’s ownership. Anthony previously worked at KPMG in Deal Advisory Services with significant experience across mergers and acquisitions and equity capital markets transactions. Matt is a seasoned business leader and Non-Executive Director with 20 years of successful transformation and leadership experience. Matt’s previous roles include Chief Commercial Officer for Global ASX listed Integrated Research, Managing Director APAC for First Advantage and Managing Director Experian Marketing Services ANZ. Matt brings solid strategic and tactical expertise across sales and marketing, operations, organisational structure, change management and leadership. Matt graduated from the University of Birmingham, England with a Bachelor of Engineering (Honours) and is a Graduate of the Australian Institute of Company Directors. 22 COSOL LTD Annual Report 2023 23 Annette Henry Executive General Manager Annette joined COSOL as the CEO of Clarita Solutions. In her new role, Annette is focused on growing the COSOL business globally. Annette is a successful entrepreneur with over 28 years working in software solutions, business management and managing strategic vendor/partner relationships. Annette possesses strong leadership and organisational skills combined with business acumen and common sense. Annette has experience growing a company from start-up, shepherding it through mergers and acquisitions, grown shareholder value and demonstrated strong corporate economic growth through strategic sales. Annette has strong operational management and IT product and service development capability combined with her corporate governance experience. COSOL LtD Annual Report 2023 DIRECTORS’ REPORT The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of COSOL Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were directors of COSOL Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Geoffrey James Lewis (Chairman) Gerald Peter Strautins Grant Anthony Pestell Stephen Edward Oliver Johnston Benjamin Thomas Buckley (Managing Director) Directors’ Interests in Shares and Options of COSOL The Directors hold relevant interests in the following shares and other securities of COSOL as at the date of this Directors’ Report: Director G Lewis S Johnston G Pestell G Strautins B Buckley Shares Options 24,250,000 24,250,000 2,500,000 3,000,000 – – – – 235,000 4,176,652 54,235,000 4,176,652 Principal activities During the financial year the principal continuing activities of the consolidated entity were the provision of information technology services. The consolidated entity utilises proprietary software and services to deliver solutions for clients operating in asset-intensive industries, with a particular focus on resource and capital-intensive enterprise asset management (EAM) and infrastructure-focused systems. The consolidated entity aims to optimise business processes and reduce business expenditure for its clients by providing digital business solutions, including business process and strategic reviews, implementation of enterprise resource planning (ERP)/EAM solutions, data migration and ongoing support services. Dividends The directors have declared a final dividend of $0.0146 per ordinary share at record date, payable to all ordinary shareholders for the current financial year. The dividend will be fully franked. The record date for entitlements to this dividend will be 20 October 2023 with payment on 6 November 2023. 24 DIRECTORS’ REPORT CONTINUED Dividends paid during the financial year were as follows: Fully franked interim dividend for the year ended 30 June 2023 of $0.01 (2022: $0.0092) per ordinary share Fully franked final dividend for the year ended 30 June 2022 of $0.01 (2021:$0.01) per ordinary share COSOL LtD Annual Report 2023 Consolidated 2023 $ 2022 $ 1,475,797 1,303,850 1,475,797 1,329,717 2,951,594 2,633,567 Review of operations The profit for the consolidated entity after providing for income tax amounted to $7,986,327 (30 June 2022: $5,532,775). A review of the operations of the consolidated entity during the financial year is set out in the Chairman’s Report within the Annual Report and forms part of this Directors’ Report, and should be read in conjunction with the following: Key highlights include: • Acquired Work Management Solutions Pty Ltd (WMS) expanding the group’s offerings in business advisory and technical consulting services; • Extended Department of Defence relationship to partner with IBM in delivering services under the Defence Enterprise Resource Planning Program (ERP Program) and were awarded a new strategic contract with Glencore’s Koniambo Nickel project to establish an Asset Reliability Centre and deliver operational efficiencies; • Revenue of $75.1 million increased by $26.9 million (55.7%) compared to the prior year with organic growth of $8.8 million (18.4%); and • The directors declared an interim dividend of $0.01 per ordinary share to all ordinary shareholders for the half year ended 31 December 2022 which was paid in May 2023. The directors have declared a final dividend of $0.0146 per ordinary share to all ordinary shareholders for the current financial year. The dividend will be fully franked. Significant changes in the state of affairs Acquisition of Work Management Solutions Pty Ltd On 1 August 2022, COSOL Limited acquired Work Management Solutions Pty Ltd (“WMS”) and it’s subsidiary Asset Management Learning Academy Pty Ltd (“AMLA”), a Perth-based business that delivers business advisory and technical consulting services to resources and utilities sectors. There were no other significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year Acquisition of AssetOn Group COSOL Limited announced on 3 August 2023 that it had entered into a binding Share Purchase Agreement to acquire 100% of the issued shares in two entities, AssetOn Group Pty Ltd and OnPlan Technologies Pty Ltd (“AssetOn Group”). AssetOn Group provides asset maintenance software and services to organisations with large scale asset networks in mining, energy, utilities and manufacturing. COSOL will pay up to $29 million for AssetOn Group, consisting of $18 million in cash, $4 million in scrip and up to a further $7 million earn-out component contingent on achieving earn-out hurdles. 25 COSOL LtD Annual Report 2023 DIRECTORS’ REPORT CONTINUED The upfront cash component will be funded through a placement of 19.6 million new fully paid ordinary shares to raise gross proceeds of $15 million and a $4.6 million drawdown on COSOL’s expanded debt facilities. Earn-out consideration, to the extent paid, will be funded from a combination of operating cash flow and available debt capacity or a portion paid in scrip at COSOL’s election. Chief Operating Officer Matthew Glasner was appointed Chief Operating Officer on 1 July 2023. Likely developments and expected results of operations The Directors and management of the consolidated entity intend to continue operations as conducted during the financial year and in a manner consistent with the consolidated entity’s business model and growth strategy (which includes organic and acquisitive growth). The entity’s operations are centred around the management of physical assets for its customers, with the aim of enhancing the performance and lifespan of these assets while simultaneously eradicating inefficiencies with the aim of decreasing maintenance and repair costs, limiting downtime, and achieve the highest return on investment. For the year ended 30 June 2023, 38% of the entity’s revenue was derived from advisory and professional services, 27% from products and product-led services, and 35% from managed services. Clients in the natural resources sector contributed approximately 50% of revenue for the year, with the remaining clientele operating across utilities, government, defence, and public infrastructure sectors. From a geographical standpoint, 84% of the entity’s revenue for the year originated from our Australian operations, while the US operations contributed the remaining 16%. The entity’s relationships with its customers and suppliers are governed by its contractual arrangements with those parties. Any failure to maintain, renew or replace key contracts and arrangements on commercially acceptable terms, or any failure by a party to perform its obligations under such contracts or arrangements, could have a material adverse effect on the Company and the financial and operational performance of the entity. The Directors and management of the consolidated entity intend on growing the entity both organically and, as opportunities present themselves, through potential acquisitions of complementary and synergistic businesses. While the entity will attempt to undertake all reasonable and appropriate due diligence in respect of any acquisition opportunities, there is a risk that the due diligence and analysis may be incomplete or inaccurate, warranties or indemnities cannot be obtained, or that the benefits and synergies the entity anticipates receiving from such acquisitions may not be realised due to a variety of factors. 26 DIRECTORS’ REPORT CONTINUED COSOL LtD Annual Report 2023 Environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. Economic, Environment and Social Sustainability Risks The consolidated entity does not consider that it has any material exposures to environmental and social sustainability risks. COSOL’s IPO prospectus disclosed the risks that may have a material impact on its financial performance and the market price for its shares. This disclosure included possible material exposure to a decline in economic conditions and the general economic outlook. Meetings of directors The number of meetings of the company’s Board of Directors (‘the Board’) held during the year ended 30 June 2023, and the number of meetings attended by each director were: Full Board Full Board Nomination and Remu- neration Committee Nomination and Remu- neration Committee Risk Committee Risk Committee Audit Committee Audit Committee Attended Held Attended Held Attended Held Attended Held 12 12 12 12 12 12 12 12 12 12 N/A 1 1 N/A N/A – 1 1 – – N/A N/A 2 2 N/A – – 2 2 – N/A 3 N/A 3 N/A – 3 – 3 – Director G Lewis S Johnston G Strautins G Pestell B Buckley N/A = not a member of the relevant committee 27 COSOL LtD Annual Report 2023 REMUNERATION REPORT (AUDITED) The remuneration report details the key management personnel (KMP) remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The key management personnel of the consolidated entity during the financial year were the Directors of the Company, and the Chief Executive Officer and Chief Financial Officer of COSOL Australia Pty Ltd. The remuneration report is set out under the following main headings: • Principles used to determine the nature and amount of remuneration; • Details of remuneration; • Service agreements; and • Share-based compensation. Principles used to determine the nature and amount of remuneration The remuneration policy of the consolidated entity has been designed to align KMP objectives with shareholders’ interests and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas regarding the consolidated entity’s financial results. The Board believes that the remuneration policy is appropriate and effective in its ability to attract and retain the best KMP to run and manage the consolidated entity, as well as create alignment between the goals and interests of Directors, management and shareholders. Remuneration levels for KMP are competitively set to attract and retain appropriately qualified and experienced directors and management for the consolidated entity. The remuneration structures are designed to attract suitably qualified candidates, fairly and responsibly reward the achievement of strategic and financial performance objectives, and incentivise the creation of value for shareholders. The remuneration mix for KMP includes fixed compensation, short and long-term incentives (including equity-based compensation) and superannuation contributions, except that non-executive Directors do not receive equity-based compensation. The Company’s Nomination and Remuneration Committee reviews compensation levels on an annual basis which considers the individual performance of KMP and the performance of the consolidated entity. The Nomination and Remuneration Committee may engage external consultants to provide advice on remuneration matters and to assist it in making remuneration decisions. No external remuneration consultant was engaged during the financial year. The consolidated entity has designed separate and distinct remuneration structures for non-executive Directors and other KMP (including executive Directors). Non-Executive Directors The consolidated entity’s policy is to remunerate non-executive Directors based on market practices, duties and accountability, with independent external advice sought when required. The fees paid to non-executive Directors is reviewed annually, and the current maximum aggregate amount of fees that can be paid to non-executive Directors is $600,000 per annum which can be increased only with prior shareholder approval. The non-executive Directors do not receive additional fees for serving on committees of the Board, and are not entitled to any termination benefits or retirement (other than superannuation) benefits. 28 REMUNERATION REPORT (AUDITED) CONTINUED COSOL LtD Annual Report 2023 Other KMP (including executive Directors) The Board’s policy for determining the nature and amount of remuneration for other KMP including executive Directors is to reward those personnel based on their position and responsibility, subject to annual reviews. The remuneration structure includes fixed base pay, short-term incentives, long-term incentives (including equity-based compensation), and other remuneration such as superannuation and long service leave. This structure implements the consolidated entity’s practice of directly linking incentive components of the remuneration of KMP and other management personnel to the performance of the consolidated entity through total shareholder return, EBITDA, sustainable business practices and EBIT and return on capital measures, and is designed to ensure continued and sustainable growth in the consolidated entity’s business, financial and share price performance. Remuneration Report Approval This Remuneration Report for the financial year ended 30 June 2023 will be put to shareholders for approval at COSOL’s AGM which will be held during November 2023. ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 18 November 2021, where the shareholders approved a maximum annual aggregate remuneration of $600,000. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. Short-term benefits Post- employ- ment benefits Long-term benefits Share- based payments Cash bonus $ Non- monetary $ Super- annuation $ Long service leave $ Equity- settled $ Other $ total $ Cash salary and fees $ 102,692 71,885 77,000 71,885 445,000 2023 Directors: G Lewis S Johnston G Pestell G Strautins B Buckley KMP: – – – – – S McGowan 452,663 21,992 A McVinish A Stokes 94,737 305,257 – – 1,621,119 21,992 – – – – – – – – – 10,802 7,561 – 7,561 – 32,945 3,287 24,611 86,767 – – – – – – – – – – – – – 33,835 7,533 – – 41,368 – – – – – – – – – 113,494 79,446 77,000 79,446 478,835 515,133 98,024 329,868 1,771,246 Andrew McVinish resigned as Chief Financial Officer effective 1 August 2022. Anthony Stokes was appointed Chief Financial Officer on 1 August 2022. 29 COSOL LtD Annual Report 2023 REMUNERATION REPORT (AUDITED) CONTINUED Short-term benefits Post- employ- ment benefits Long-term benefits Share- based payments Cash bonus $ Non- monetary $ Super- annuation $ Long service leave $ Equity- settled $ Other $ total $ – – – – – – – – – – – – – 8,095 5,641 – 5,641 – 23,789 21,718 64,884 – – – – – – – – – – – – 56,145 22,405 8,883 87,433 – – – – – – – 89,044 62,051 63,138 62,051 416,145 522,035 247,780 – 1,462,244 Cash salary and fees $ 80,949 56,410 63,138 56,410 360,000 2022 Directors: G Lewis S Johnston G Pestell G Strautins B Buckley KMP: S McGowan 294,592 181,249 A McVinish 217,179 – 1,128,678 181,249 30 REMUNERATION REPORT (AUDITED) CONTINUED COSOL LtD Annual Report 2023 Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Scott McGowan Chief Executive Officer Agreement commenced: 16 January 2020 Term of agreement: Until agreement is validly terminated in accordance with its terms. Details: Notice period: either party may terminate the agreement without cause by providing the other party with no less than 6 months’ written notice. Mr McGowan may terminate if a material breach of the agreement by COSOL Australia is not remedied within 14 days of receiving notice. COSOL Australia may terminate the agreement with no less than 3 months’ written notice where Mr McGowan is absent for more than 3 months in any rolling 12 month period, or immediately with cause in circumstances considered standard for agreements of this nature in Australia, including serious or persistent breaches of the agreement, grave misconduct or wilful neglect in the discharge of his duties under the agreement. Salary: $400,000 per annum (inclusive of statutory superannuation) Cash short-term performance-based incentive: up to $200,000 per annum (inclusive of statutory superannuation), payable on the following terms: • 25% incentive payment based on delivery of annual target EBIT for COSOL Asia Pacific; • 25% incentive payment based on delivery of annual target EBIT for COSOL North America; • 25% incentive payment based on delivery of acquisitions that equate to target annualised EBIT contributions; and • 25% incentive payments based on delivery of Hitachi Asia Pacific Group Managed Services Agreement target outcomes. Expenses: The consolidated entity will reimburse Mr McGowan for all reasonable expenses incurred by him in the performance of his duties in connection with the consolidated entity. Leave: The agreement otherwise contains leave entitlements, termination and confidentiality provisions and general provisions considered standard for an agreement of this nature. Name: Title: Anthony Stokes Chief Financial Officer Agreement commenced: 1 August 2022 Term of agreement: Until agreement is validly terminated in accordance with its terms. Details: Notice period: either party can terminate this agreement by giving 3 months’ written notice. COSOL can terminate the agreement immediately for a material breach of the agreement. Salary: $350,000 per annum (exclusive of statutory superannuation). Cash short-term incentives: up to $100,000 per annum (inclusive of statutory superannuation), payable on the following terms: • 80% incentive payment based on delivery of annual target EBIT for COSOL Group; and • 20% incentive payment based on delivery of the Employee’s performance measures. 31 COSOL LtD Annual Report 2023 REMUNERATION REPORT (AUDITED) CONTINUED Key management personnel have no entitlement to termination payments in the event of removal for misconduct. The Company has entered into agreements with its Directors, and agreed the following remuneration: Director G Lewis S Johnston G Pestell G Strautins B Buckley Annual remuneration inclusive of superannuation 110,000 77,000 77,000 77,000 420,000 761,000 The Directors each serve until retirement, subject to re-election as required by the Company’s constitution and the Corporations Act 2001. Share-based compensation Issue of shares During the financial year, the Company did not issue any ordinary shares (2022: 2,000,000 ordinary shares at $0.3625 per share) to directors or key management personnel as a result of the exercise of options (there are no amounts unpaid on the shares issued). Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: 17 November 2020 17 November 2020 17 November 2020 17 November 2020 17 November 2020 17 November 2020 Vesting date and exercisable date 31 August 2022 and 1 September 2022 31 August 2023 and 1 September 2023 31 August 2022 and 1 September 2022 31 August 2023 and 1 September 2023 17 November 2020 and 29 September 2024 17 November 2020 and 29 September 2024 Expiry date 15 October 2022 15 October 2023 15 October 2022 15 October 2023 29 September 2024 29 September 2024 30 June 2023 15 October 2023 1 August 2026 Fair value per option at grant date Exercise price $0.4150 $28,812 $0.4150 $25,500 $0.4150 $19,208 $0.4150 $17,000 $0.9000 $123,978 $1.0000 $115,662 $0.8300 $54,658 Number of options Name granted Grant date S McGowan Tranche 2 S McGowan Tranche 3 B Buckley Tranche 2 B Buckley Tranche 3 B Buckley Tranche 4 B Buckley Tranche 5 A Stokes Tranche 1 832,046 900,000 593,329 600,000 1,500,000 1,483,323 800,000 32 REMUNERATION REPORT (AUDITED) CONTINUED COSOL LtD Annual Report 2023 Number of options Name granted Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per option at grant date A Stokes Tranche 2 A Stokes Tranche 3 600,000 600,000 30 June 2023 15 October 2024 1 August 2026 30 June 2023 15 October 2025 1 August 2026 $0.8300 $40,994 $0.8300 $40,994 Options granted carry no dividend or voting rights. The key terms, including performance conditions, of the options granted are detailed below. Mr McGowan and Mr Buckley: Performance milestones: • 20% of each tranche based on total shareholder return indexed against the ASX Small Industrials Index (50% vest if TSR equals the Index, and an additional 4% vest for each 1% by which the TSR exceeds the Index); • 40% of each tranche based on achieving strategic initiatives as defined by the Board (including non-financial measures) (4% vest for each percentile achieved above the 75th percentile); and • 40% of each tranche based on achieving budgeted EBIT and ROC for COSOL Australia Pty Ltd (4% vest for each percentile achieved above the 75th percentile). Clawback: The Board reserves the right to “claw back” vested options in the event that material errors in satisfaction of performance milestones are discovered. Mr Stokes: The option holder must remain employed by COSOL and its related companies. Any options which do not vest will automatically lapse. Performance milestones: • 20% of each tranche based on total shareholder return indexed against the ASX Small Industrials Index (50% vest if TSR equals the Index, and an additional 4% vest for each 1% by which the TSR exceeds the Index); • 40% of each tranche for M&A targets hitting their budget or business case numbers (4% vest for each percentile achieved above the 75th percentile); and • 40% of each tranche based on COSOL Limited achieving budgeted NPAT and ROC (4% vest for each percentile achieved above the 75th percentile). Clawback: The Board reserves the right to “claw back” vested options in the event that material errors in satisfaction of performance milestones are discovered. The performance milestones applicable to the LTI options granted to KMP during the financial year were chosen because they create an appropriate link between the KMP’s remuneration and the performance of the consolidated entity, and deliver on an objective of encouraging continued and sustainable growth in the consolidated entity’s business, financial and share price performance. In respect of TSR, the ASX Small Industrials Index, as an external factor for determining satisfaction of a performance milestone, was chosen as it is an index containing a number of peer companies in the IT sector and companies of a size and financial performance that the consolidated entity is striving to achieve. this concludes the remuneration report, which has been audited. 33 COSOL LtD Annual Report 2023 DIRECTORS’ REPORT CONTINUED Shares under option Unissued ordinary shares of COSOL Limited under option at the date of this report are as follows: Grant date 17 November 2020 17 November 2020 17 November 2020 17 November 2020 17 November 2020 2 December 2021 13 July 2022 30 June 2023 30 June 2023 Expiry date 15 October 2023 15 October 2023 2 September 2023 29 September 2024 10 November 2025 2 September 2024 31 March 2026 1 August 2026 1 August 2026 Exercise price Number under option $0.4150 1,193,329 $0.4150 1,732,046 $0.7000 93,750 $0.9000 1,500,000 $1.0000 1,483,323 $0.9500 $0.8100 750,000 750,000 $0.8300 2,000,000 $0.8900 2,000,000 11,502,448 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the company or of any other body corporate. Shares issued on the exercise of options During the financial year, the Company did not issue any ordinary shares (2022: 2,000,000 ordinary shares at $0.3625 per share) to directors or key management personnel as a result of the exercise of options (there are no amounts unpaid on the shares issued). Indemnity and insurance of officers The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. 34 DIRECTORS’ REPORT CONTINUED COSOL LtD Annual Report 2023 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 company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 33 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s 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 as disclosed in note 33 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 objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and 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 immediately after this directors’ report. Auditor Elderton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Geoffrey Lewis Chairman 22 August 2023 35 COSOL LtD Annual Report 2023 AUDITOR’S INDEPENDENCE DECL ARATION Auditor's Independence Declaration To those charged with the governance of COSOL Limited As auditor for the audit of COSOL Limited for the year ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been: • no contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and • no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of COSOL Limited and the entities it controlled during the year. Elderton Audit Pty Ltd Rafay Nabeel Director 22 August 2023 Perth 36 FINANCIAL REPORT 38 Statement of profit or loss and other comprehensive income 39 Statement of financial position 40 Statement of changes in equity 41 Statement of cash flows 42 Notes to the financial statements 83 Directors’ declaration 84 Independent auditor’s report 89 Shareholder information 93 Corporate directory COSOL LtD Cosol Ltd Annual Report 2023 Annual Report 2023 General information The financial statements cover COSOL Limited as a consolidated entity consisting of COSOL Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is COSOL Limited’s functional and presentation currency. COSOL Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office Unit 1, 490-500 Adelaide Street, Brisbane City QLD 4000 Principal place of business Unit 1, 490-500 Adelaide Street, Brisbane City QLD 4000 A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 22 August 2023. The directors have the power to amend and reissue the financial statements. 37 COSOL LtD Annual Report 2023 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2023 Revenue Other income Interest income Expenses Cost of Sales Depreciation and amortisation expense Salaries & Wages Share based payments Operating and General Expenses Finance costs Profit before income tax expense Income tax expense Profit after income tax expense for the year attributable to the owners of COSOL Limited Other comprehensive income Items that are or may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax total comprehensive income for the year attributable to the owners of COSOL Limited Basic earnings per share Diluted earnings per share Consolidated 2023 $ 2022 $ 75,102,347 48,236,369 47,246 8,798 207,624 5,942 (48,292,503) (29,697,331) (516,474) (390,814) (8,323,979) (5,646,035) (92,156) (167,993) (6,839,541) (4,490,009) (924,451) (430,786) 10,169,287 7,626,967 (2,182,960) (2,094,192) 7,986,327 5,532,775 93,125 93,125 185,303 185,303 8,079,452 5,718,078 Cents 5.43 5.08 Cents 4.01 3.78 Note 4 5 6 7 29 40 40 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 38 STATEMENT OF FINANCIAL POSITION As at 30 June 2023 COSOL LtD Annual Report 2023 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments and other receivables Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangibles Deferred tax Total non-current assets total assets Liabilities Current liabilities Trade and other payables Bank loans Lease liabilities Income tax Employee benefits Deferred consideration Accrued and other liabilities Total current liabilities Non-current liabilities Bank loans Lease liabilities Deferred tax Deferred consideration Total non-current liabilities total liabilities Net assets Equity Issued capital Reserves Retained profits total equity Consolidated 2023 $ 2022 $ Note 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 4,564,847 6,216,777 17,601,216 8,295,671 91,965 134,485 7,467,403 4,821,661 29,725,431 19,468,594 378,677 2,327,105 251,390 255,224 45,250,191 39,757,403 1,175,513 639,234 49,131,486 40,903,251 78,856,917 60,371,845 3,383,041 5,089,114 2,000,000 3,303,800 492,741 – 102,294 536,581 1,603,397 1,173,383 1,875,000 2,150,802 13,927,586 5,536,184 23,281,765 17,892,158 10,632,708 5,781,645 1,927,337 356,274 189,183 157,201 – 1,875,000 12,916,319 8,003,029 36,198,084 25,895,187 42,658,833 34,476,658 29,094,381 26,132,220 785,165 599,884 12,779,287 7,744,554 42,658,833 34,476,658 The above statement of financial position should be read in conjunction with the accompanying notes. 39 COSOL LtD Annual Report 2023 STATEMENT OF CHANGES IN EQUIT Y For the year ended 30 June 2023 Consolidated Issued capital $ Share based payment reserve $ Foreign exchange reserve $ Retained profits $ total equity $ Balance at 1 July 2021 20,029,972 314,903 (13,975) 4,845,346 25,176,246 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 27) – – – 5,247,741 – – – – Share-based payments (note 41) 888,426 113,653 – 5,532,775 5,532,775 185,303 – 185,303 185,303 5,532,775 5,718,078 – – – – – – – 5,247,741 1,002,079 (33,919) (2,633,567) (2,633,567) Adjustment to tax on listing fees for equity issue Dividends paid (note 30) Balance at 30 June 2022 Consolidated (33,919) – – – 26,132,220 428,556 171,328 7,744,554 34,476,658 Issued capital $ Share based payment reserve $ Foreign exchange reserve $ Retained profits $ total equity $ Balance at 1 July 2022 26,132,220 428,556 171,328 7,744,554 34,476,658 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 27) – – – 3,000,000 – – – – Share-based payments (note 41) – 92,156 Adjustment to tax on listing fees for equity issue Dividends paid (note 30) Balance at 30 June 2023 (37,839) – – – – 7,986,327 7,986,327 93,125 – 93,125 93,125 7,986,327 8,079,452 – – – – – – – 3,000,000 92,156 (37,839) (2,951,594) (2,951,594) 29,094,381 520,712 264,453 12,779,287 42,658,833 The above statement of changes in equity should be read in conjunction with the accompanying notes. 40 STATEMENT OF CASH FLOWS For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Other revenue Interest and other finance costs paid Income taxes paid Net cash from operating activities Cash flows from investing activities Payment for purchase of business, net of cash acquired Final payments for prior period’s business acquisition Payments for property, plant and equipment Payments for intangibles Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of bank loans Repayment of lease liabilities Share issue transaction costs Dividends paid Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents COSOL LtD Annual Report 2023 Consolidated 2023 $ 2022 $ Note 74,704,917 50,629,975 (66,282,401) (41,081,123) 8,422,516 9,548,852 8,798 47,246 5,942 207,624 (924,451) (430,786) (2,811,670) (1,643,544) 4,742,439 7,688,088 (3,311,099) (6,637,514) (2,150,802) (3,051,635) (227,152) (115,146) (1,013,249) (765,318) (6,702,302) (10,569,613) – 854,507 14,632,708 9,795,381 (11,085,445) (2,959,936) (308,890) (268,860) (37,839) – 39 36 36 12 14 27 30 (2,951,594) (2,633,567) 248,940 4,787,525 (1,710,923) 1,906,000 6,216,777 4,184,432 58,993 126,345 Cash and cash equivalents at the end of the financial year 8 4,564,847 6,216,777 The above statement of cash flows should be read in conjunction with the accompanying notes. 41 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS 30 June 2023 Note 1. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. 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 (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 35. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of COSOL Limited (‘company’ or ‘parent entity’) as at 30 June 2023 and the results of all subsidiaries for the year then ended. COSOL Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity 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 consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. 42 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 1. Significant accounting policies continued Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is COSOL Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition The consolidated entity recognises revenue as follows: Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding discounts, rebates, customer returns and other sales taxes or duty. The following specific revenue recognition criteria must also be met before revenue is recognised: The Group recognises revenue from contracts with customers based on a five step model as set out in IFRS 15: 1. 2. Identify the contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met. Identify the performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer. 3. Determine the transaction price: The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. 43 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 1. Significant accounting policies continued 4. Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Group will allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group expects to be entitled in exchange for satisfying each performance obligation. 5. Recognise revenue when (or as) the entity satisfies a performance obligation at a point in time or over time. The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met: • The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; or • The Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or • The Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. For performance obligations where any one of the above conditions are not met, revenue is recognised at a point in time at which the performance obligation is satisfied. The Group is required to assess each of its contracts with customers to determine whether performance obligations are satisfied over time or at a point in time in order to determine the appropriate method of recognising revenue. Revenue is recognised in the statement of profit or loss and other comprehensive income to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue will not occur and the revenue and costs, if applicable, can be measured reliably. Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns and discounts. Revenue is recognised in the profit or loss when significant risk and reward of ownership have been transferred to the customer, recovery of consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and amount of revenue can be measured reliably. The Group assessed its revenue streams and the following measurement methods have been identified and adopted in the preparation of these financial statements: Revenue streams Sale of licenses Set-up and support activities Maintenance services Consulting services Interest Measurement methods Revenue for licenses sold is recognised at a point in time. Revenue is recognised for arrangements involving software including implementation support over time until the implementation services are completed. Revenue is recognised throughout the period of the maintenance contract, i.e. over time. Revenue is recognised over the time spent on the provision of the consulting services. Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. 44 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 1. Significant accounting policies continued Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Government grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. COSOL Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. 45 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 1. Significant accounting policies continued Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents 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. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Inventories Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of 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. Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line or diminishing value basis, as appropriate to the type of asset, to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Leasehold improvements 3-10 years Plant and equipment 2-5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. 46 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 1. Significant accounting policies continued Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset 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 commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying 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 leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity 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. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Research and development Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity has sufficient resources and intent to complete the development; and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years. 47 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 1. Significant accounting policies continued Website Significant costs associated with the development of the revenue generating aspects of the website, are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of three years. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed 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. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. 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 entity’s 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 expected 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. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. 48 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 1. Significant accounting policies continued Provisions Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Monte Carlo or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Monte Carlo or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: • during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. • from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. 49 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 1. Significant accounting policies continued All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the company. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. 50 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of COSOL Limited, 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 financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings 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 shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services tax (‘GSt’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the 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 tax authority is included in other receivables or other payables in the statement of financial position. 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 tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. 51 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 1. Significant accounting policies continued New Accounting 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 2023. The consolidated entity’s assessment of the impact of these new or 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 January 2020 and early adoption 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. Note 2. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Monte Carlo or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Revenue from contracts with customers involving sale of goods When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the consolidated entity is considered to be the point of delivery of the goods to the customer, as this is deemed to be the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded access. 52 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 2. Critical accounting judgements, estimates and assumptions continued Determination of variable consideration Judgement is exercised in estimating variable consideration which is determined having regard to past experience with respect to the goods returned to the consolidated entity where the customer maintains a right of return pursuant to the customer contract or where goods or services have a variable component. Revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates and forward-looking information that is available. The allowance for expected credit losses is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. Fair value measurement hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. 53 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 2. Critical accounting judgements, estimates and assumptions continued Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Income tax The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated entity’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Employee benefits provision As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. 54 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 2. Critical accounting judgements, estimates and assumptions continued Deferred consideration The deferred consideration liability is the difference between the total purchase consideration, usually on an acquisition of a business combination, and the amounts paid or settled up to the reporting date, discounted to net present value. The consolidated entity applies provisional accounting for any business combination. Any reassessment of the liability during the earlier of the finalisation of the provisional accounting or 12 months from acquisition-date is adjusted for retrospectively as part of the provisional accounting rules in accordance with AASB 3 ‘Business Combinations’. Thereafter, at each reporting date, the deferred consideration liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a corresponding gain or loss to profit or loss. The increase in the liability resulting from the passage of time is recognised as a finance cost. Business combinations As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. Note 3. Operating segments Identification of reportable operating segments The consolidated entity is organised into two geographic region of Americas (including USA, Canada and South America) and Australia (including the rest of the world). The Australian segment is formed by the three entities (two were subject to earn out targets in during the year). The consolidated entity is focussed on a single operating model and with the ability to deploy the resources remotely there was an increase in the extent of inter company revenue with Australian segment consultants providing capacity to the Americas segment, this work was charged on commercial terms with the ultimate customer invoiced by the Americas segment. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. Intersegment transactions Intersegment transactions were made at market rates. These transactions consist of consultancy services. Intersegment transactions are eliminated on consolidation. Intersegment receivables, payables and loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. 55 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 3. Operating segments continued Major customers During the year ended 30 June 2023 approximately 25% (Period ended 30 June 2022: 30%) of the consolidated entity’s external revenue was derived from sales to two major customers (Period ended 30 June 2022: two major customers) in the COSOL Asia Pacific segment. Operating segment information COSOL Asia Pacific $ COSOL North America $ total $ 63,041,642 12,060,705 75,102,347 966,844 – 966,844 64,008,486 12,060,705 76,069,191 8,775 23 8,798 64,017,261 12,060,728 76,077,989 (966,844) 75,111,145 8,694,204 2,907,210 11,601,414 (370,909) (145,565) (516,474) 8,775 23 8,798 (915,881) (8,570) (924,451) 7,416,189 2,753,098 10,169,287 (2,182,960) 7,986,327 75,458,461 4,682,713 80,141,174 (1,284,257) 78,856,917 35,979,728 1,502,613 37,482,341 (1,284,257) 36,198,084 Consolidated – 2023 Revenue Sales to external customers Intersegment sales Total sales revenue Other revenue Total segment revenue Intersegment eliminations total revenue EBItDA Depreciation and amortisation Interest revenue Finance costs Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Intersegment eliminations total assets Liabilities Segment liabilities Intersegment eliminations total liabilities 56 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 4. Revenue Rendering of services Product sales Revenue Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Geographical regions Asia Pacific North America Europe, Middle East & Africa Rest of world Note 5. Other income Government grants Reimbursement of expenses Other income Consolidated 2023 $ 2022 $ 65,691,613 41,933,260 9,410,734 6,303,109 75,102,347 48,236,369 Consolidated 2023 $ 2022 $ 61,746,082 38,706,838 12,060,705 8,469,277 1,251,128 44,432 801,700 258,554 75,102,347 48,236,369 Consolidated 2023 $ 2022 $ – 150,000 47,246 47,246 57,624 207,624 Note 6. Depreciation and amortisation expense Depreciation on property, plant and equipment Amortisation of right-of-use assets Amortisation of website costs Consolidated 2023 $ 102,884 374,090 39,500 516,474 2022 $ 112,651 238,663 39,500 390,814 57 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 7. Income tax expense Income tax expense Current tax Deferred tax – origination and reversal of temporary differences Under/(Over) Provision for Prior Year – current tax Under/(Over) Provision for Prior Year – deferred tax Aggregate income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Amortisation of due diligence costs Entertainment expenses Share-based payments Non assessable income Deductible equity raising costs Other costs Under/(Over) Provision for Prior Year – current tax Difference in overseas tax rates Reduction in company tax rates recognised through P&L Under/(Over Provision for Prior Year – deferred tax Effects of differences in foreign exchange translation rate Income tax expense Amounts charged directly to equity Deferred tax assets (note 15) Consolidated 2023 $ 2022 $ 2,855,209 2,397,682 (48,932) (263,654) (623,317) (114,198) – 74,362 2,182,960 2,094,192 10,169,287 7,626,967 3,050,786 2,288,090 – 37,049 27,647 – (37,839) (23,663) 44,375 21,255 50,398 (45,000) (37,839) – 3,053,980 2,321,279 (623,317) (114,198) (245,427) (129,393) – – (2,276) (57,858) 74,362 – 2,182,960 2,094,192 Consolidated 2023 $ 2022 $ 37,839 33,919 58 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 8. Cash and cash equivalents Cash on hand Cash at bank Note 9. trade and other receivables Trade receivables Less: Allowance for expected credit losses Consolidated 2023 $ 360 2022 $ 360 4,564,487 6,216,417 4,564,847 6,216,777 Consolidated 2023 $ 2022 $ 18,375,027 8,635,108 (773,811) (339,437) 17,601,216 8,295,671 Allowance for expected credit losses The consolidated entity has recognised a loss of $434,374 (Period ended 30 June 2022: $181,682) in profit or loss in respect of the expected credit losses for the year ended 30 June 2023. Movements in the allowance for expected credit losses are as follows: Opening balance Additional provisions recognised Closing balance Note 10. Inventories Stock on hand – at cost Consolidated 2023 $ 339,437 434,374 773,811 2022 $ 157,755 181,682 339,437 Consolidated 2023 $ 2022 $ 91,965 134,485 59 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 11. Prepayments and other receivables Consolidated 2023 $ 2022 $ 4,562,039 2,802,266 1,057,934 580,710 159,089 – 1,688,341 1,438,685 7,467,403 4,821,661 Consolidated 2023 $ 39,180 (17,811) 21,369 49,389 (10,099) 39,290 2022 $ 24,623 (13,971) 10,652 24,845 (8,770) 16,075 471,345 321,397 (214,403) (152,030) 256,942 169,367 293,171 243,796 (232,168) (189,251) 61,003 54,545 2,379 (2,306) 73 3,079 (3,079) – 2,379 (2,103) 276 2,964 (2,489) 475 378,677 251,390 Accrued revenue Prepayments Income tax receivable Other current assets Note 12. Property, plant and equipment Leasehold improvements – at cost Less: Accumulated depreciation Fixtures and fittings – at cost Less: Accumulated depreciation Computer equipment – at cost Less: Accumulated depreciation Office equipment – at cost Less: Accumulated depreciation Low value asset pool – at cost Less: Accumulated depreciation Computer software – at cost Less: Accumulated depreciation 60 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 12. Property, plant and equipment continued Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Buildings and improve- ments $ Computers $ Furniture and fixtures $ Low value asset pool $ Office equipment $ Computer software $ 15,054 121,436 – 104,057 13,466 5,789 368 3,595 – 559 – – 89,001 5,300 3,583 1,738 – 95 total $ 241,254 115,146 7,641 (4,770) (59,721) (3,180) (283) (43,339) (1,358) (112,651) 10,652 14,240 169,367 145,695 16,075 25,630 101 2,312 – 276 – – 54,545 41,587 606 475 251,390 – – 227,152 3,019 (3,624) (60,432) (2,415) (203) (35,735) (475) (102,884) 21,369 256,942 39,290 73 61,003 – 378,677 Consolidated Balance at 1 July 2021 Additions Exchange differences Depreciation expense Balance at 30 June 2022 Additions Exchange differences Depreciation expense Balance at 30 June 2023 Note 13. Right-of-use assets Land and buildings – right-of-use Less: Accumulated depreciation Consolidated 2023 $ 2022 $ 2,810,504 902,627 (483,399) (647,403) 2,327,105 255,224 61 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 13. Right-of-use assets continued Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Exchange differences Depreciation expense Balance at 30 June 2022 Additions Exchange differences Depreciation expense Balance at 30 June 2023 Note 14. Intangibles Goodwill – at cost Development – at cost Website – at cost Less: Accumulated amortisation Land and buildings – right-of-use $ 214,531 278,426 930 total $ 214,531 278,426 930 (238,663) (238,663) 255,224 255,224 2,437,491 2,437,491 8,480 8,480 (374,090) (374,090) 2,327,105 2,327,105 Consolidated 2023 $ 2022 $ 43,401,977 38,882,938 1,773,952 159,845 802,048 118,500 (85,583) (46,083) 74,262 72,417 45,250,191 39,757,403 The Group performed the annual impairment test in June 2023. The Group considers the relationship between its equity market capitalisation and the net assets shown on the balance sheet, among other factors, when reviewing for indicators of impairment. No indicators of impairment are noted. In considering the carrying value of goodwill, the Directors have adopted a value-in-use methodology to determine the recoverable amounts of each CGU which confirms that no impairment charge is necessary. The recoverable amounts of each CGU have been determined based on value-in-use calculation that uses the cash flow budgets over a one year period, followed by an extrapolation of expected cash flows for the CGUs over a four year period using the growth rates determined by management and the assumptions outlined below. The present value of the expected cash flow and a terminal value for each segment is determined by applying a suitable discount rate. 62 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 14. Intangibles continued Key assumptions used in value in use calculations and sensitivity to changes in assumptions: • Management’s key assumption is that stable economic conditions prevail for the foreseeable future. Cash flow projections reflect stable profit margin previously achieved and that no material deterioration in the cash margin is anticipated. The sensitivity analysis undertaken considers each key assumption in isolation and does not take into account any remedial action that may be taken if, for example, margins were to deteriorate. The calculation of each CGU is most sensitive to the following assumptions: • Gross profit margins – are based upon the FY24 budgets and margins achieved in the current year. Gross profit margins are the most sensitive margin to the value-in-use calculation. • Cost price inflation – has been based upon publicly available information. • Growth rate estimates – it has been acknowledged that technological change, macro-economic factors and action of competitors can impact on growth rate assumptions. Growth rates for revenue and costs have been assumed post year 4 at 3%. If terminal growth was to reduce to zero, in real terms, then it is estimated that a goodwill impairment charge is unlikely. • Discount rates – represent the current market risks, taking into consideration the time value of money and specific risks not incorporated in the cash flow forecasts. The discount rate is based upon the weighted average cost of capital (WACC). WACC is assessed taking into account the expected return on investment by investors, the cost of debt servicing plus beta factors for industry risk. The Directors have adopted a WACC of 14% which is applied to the forecast pre-tax cash flows after capital expenditure of each CGU. Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Goodwill $ System Development $ Website $ total $ 24,270,721 – 111,917 24,382,638 – 802,048 Additions through business combinations (note 36) 16,598,328 Remeasurement adjustments Amortisation expense Balance at 30 June 2022 Additions (1,986,111) – 38,882,938 – Additions through business combinations (note 36) 4,519,039 – – – 802,048 971,904 – – – Amortisation expense Balance at 30 June 2023 – – – 802,048 16,598,328 (1,986,111) (39,500) (39,500) 72,417 39,757,403 41,345 1,013,249 – 4,519,039 (39,500) (39,500) 43,401,977 1,773,952 74,262 45,250,191 63 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 15. Deferred tax Deferred tax asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Employee benefits Other provisions Right-of-use assets Blackhole expenses Borrowing costs Other deferred tax assets Amounts recognised in equity: Transaction costs on share issue Deferred tax asset Movements: Opening balance Credited to profit or loss (note 7) Charged to equity (note 7) Additions through business combinations (note 36) Closing balance Note 16. trade and other payables Trade payables Refer to note 31 for further information on financial instruments. Note 17. Bank loans Bank loans Refer to note 31 for further information on financial instruments. 64 Consolidated 2023 $ 2022 $ 661,980 438,104 15,371 4,761 15,076 2,382 420,838 107,498 – 8,782 25,381 1,058 1,137,674 563,557 37,839 75,677 1,175,513 639,234 639,234 169,953 603,370 69,783 (37,839) (33,919) 404,165 – 1,175,513 639,234 Consolidated 2023 $ 2022 $ 3,383,041 5,089,114 Consolidated 2023 $ 2022 $ 2,000,000 3,303,800 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 18. Lease liabilities Lease liability – rent right-of-use Lease liability – equipment Refer to note 31 for further information on financial instruments. Note 19. Income tax Provision for income tax Note 20. Employee benefits Annual leave Long service leave Employee benefits Consolidated 2023 $ 478,817 13,924 492,741 2022 $ 88,893 13,401 102,294 Consolidated 2023 $ 2022 $ – 536,581 Consolidated 2023 $ 1,128,250 459,336 15,811 2022 $ 914,077 244,923 14,383 1,603,397 1,173,383 The employee benefits provision represents fringe benefit tax payable within 12 months. The annual and long service leave provisions represent entitlements owing to current employees. The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. Note 21. Deferred consideration Deferred consideration – current Consolidated 2023 $ 2022 $ 1,875,000 2,150,802 The provision represents the obligation to pay contingent consideration following the acquisition of a business or assets. 65 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 21. Deferred consideration continued Movements in provisions Consolidated – 2023 Carrying amount at the start of the year Payment in relation to acquisition of Clarita Solutions Pty Ltd Payment in relation to acquisition of COSOL Americas Inc Change from current to non-current (note 26) Carrying amount at the end of the year Note 22. Accrued and other liabilities Payroll tax payable Superannuation payable GST payable Accrued expenses Deferred revenue Other current liabilities Deferred consideration – current $ 2,150,802 (1,875,000) (275,802) 1,875,000 1,875,000 Consolidated 2023 $ 86,241 619,014 1,765,869 1,844,761 2022 $ 394,975 307,827 790,881 962,724 3,684,746 2,234,205 5,926,955 845,572 13,927,586 5,536,184 Note 23. Bank loans The consolidated entity has secured new finance facilities totalling $17.5 million with Westpac Banking Corporation during the financial year. This comprises a term debt facility of $8,000,000 (interest only), $6,000,000 (principal plus interest over the term), a multi option facility for $3,250,000 and a corporate credit card facility for $250,000, with $12,632,708 drawn as at the balance date. The term of these facilities is 4 years and have been provided on a secured basis and are subject to the Group continuing to meet several performance covenants. As at 30 June 2023, the Group was in compliance with all these covenants. Consolidated 2023 $ 2022 $ 10,632,708 5,781,645 Bank loans Refer to note 31 for further information on financial instruments. 66 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 23. Bank loans continued total secured liabilities The total secured liabilities (current and non-current) are as follows: Bank loans Assets pledged as security The bank overdraft and loans are secured against the assets of the consolidated entity. Financing arrangements Unrestricted access was available at 30 June 2023 to the following lines of credit: Total facilities Bank loans – multi option facility Bank loans – term debt facility Corporate credit cards Used at the reporting date Bank loans – multi option facility Bank loans – term debt facility Corporate credit cards Unused at the reporting date Bank loans – multi option facility Bank loans – term debt facility Corporate credit cards Consolidated 2023 $ 2022 $ 12,632,708 9,085,445 Consolidated 2023 $ 2022 $ 3,250,000 3,250,000 14,000,000 12,000,000 250,000 250,000 17,500,000 15,500,000 – – 12,632,708 9,085,445 19,275 8,453 12,651,983 9,093,898 3,250,000 3,250,000 1,367,292 2,914,555 230,725 241,547 4,848,017 6,406,102 67 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 24. Lease liabilities Lease liability – equipment Refer to note 31 for further information on financial instruments. Note 25. Deferred tax Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Property, plant and equipment Prepayments Other deferred tax liabilities Intangibles Deferred tax liability Movements: Opening balance Charged/(credited) to profit or loss (note 7) Closing balance Note 26. Deferred consideration Deferred consideration Refer note 21 for further information on deferred consideration. Note 27. Issued capital Consolidated 2023 $ 2022 $ 1,927,337 189,183 Consolidated 2023 $ 2022 $ 76,027 1,780 268,592 9,875 356,274 157,201 199,073 356,274 34,229 – 101,247 21,725 157,201 276,710 (119,509) 157,201 Consolidated 2023 $ 2022 $ – 1,875,000 Ordinary shares – fully paid 147,579,711 141,919,333 29,094,381 26,132,220 Consolidated 2023 Shares 2022 Shares 2023 $ 2022 $ 68 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 27. Issued capital continued Movements in ordinary share capital Details Balance Date Shares Issue price $ 1 July 2021 131,771,695 20,029,972 Issue of shares – exercise of share options 29 September 2021 1,200,000 $0.3625 435,000 Issue of shares in business combination 19 November 2021 7,951,123 $0.6600 5,247,741 Issue of shares – exercise of share options 22 November 2021 Issue of shares – exercise of share options 24 June 2022 Adjustment for fair value attributable to share options converted Adjustment to tax effect of listing fees 800,000 196,515 – – $0.3625 $0.5500 $0.0000 $0.0000 290,000 109,086 54,340 (33,919) Balance 30 June 2022 141,919,333 26,132,220 Issue of shares in business acquisition 3 August 2022 5,660,378 $0.5300 3,000,000 Adjustment to tax effect of listing fees – $0.0000 (37,839) Balance 30 June 2023 147,579,711 29,094,381 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital risk management The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company’s share price at the time of the investment. The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. 69 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 28. Reserves Foreign currency reserve Share-based payments reserve Foreign currency reserve Consolidated 2023 $ 264,453 520,712 785,165 2022 $ 171,328 428,556 599,884 The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Note 29. Retained profits Retained profits at the beginning of the financial year Profit after income tax expense for the year Dividends paid (note 30) Retained profits at the end of the financial year Note 30. Dividends Dividends Dividends paid during the financial year were as follows: Fully franked interim dividend for the year ended 30 June 2023 of $0.01 (2022: $0.0092) per ordinary share Fully franked final dividend for the year ended 30 June 2022 of $0.01 (2021: $0.01) per ordinary share 70 Consolidated 2023 $ 2022 $ 7,744,554 4,845,346 7,986,327 5,532,775 (2,951,594) (2,633,567) 12,779,287 7,744,554 Consolidated 2023 $ 2022 $ 1,475,797 1,303,850 1,475,797 1,329,717 2,951,594 2,633,567 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 30. Dividends continued Franking credits Consolidated 2023 $ 2022 $ Franking credits available at the reporting date based on a tax rate of 30% 3,492,715 988,538 Franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date based on a tax rate of 30% (3,946) 1,736,316 Franking credits available for subsequent financial years based on a tax rate of 30% 3,488,769 2,724,854 Note 31. Financial instruments Financial risk management objectives The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity’s operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The average exchange rates and reporting date exchange rates applied were as follows: Australian dollars US dollars Average exchange rates Reporting date exchange rates 2023 0.6734 2022 0.7217 2023 2022 0.6630 0.6889 71 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 31. Financial instruments continued The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Consolidated US dollars Assets Liabilities 2023 $ 2022 $ 2023 $ 2022 $ 3,104,639 2,598,519 996,232 1,223,959 The consolidated entity had net assets denominated in foreign currencies of $2,108,406 (assets of $3,104,639 less liabilities of $996,232) as at 30 June 2023 (2022: $1,374,560 (assets of $2,598,519 less liabilities of $1,223,959)). The expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last twelve months of each year and the spot rate at each reporting date, is not considered to be a material risk. The actual foreign exchange gain for the year ended 30 June 2023 was $42,718 (2022: gain of $51,413). Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity’s main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the consolidated entity to interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity to fair value interest rate risk. As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate swap contracts outstanding: Consolidated Bank loans 2023 2022 Weighted average interest rate % Weighted average interest rate % Balance $ Balance $ 4.87% 12,632,708 5.05% 9,085,445 Net exposure to cash flow interest rate risk 12,632,708 9,085,445 An analysis by remaining contractual maturities in shown in ‘liquidity and interest rate risk management’ below. For the consolidated entity the bank loans outstanding, totalling $12,632,708 (2022: $9,085,445), are principal and interest payment loans. Quarterly cash outlays of approximately $185,000 (2022: $100,000) are required to service the interest payments. The expected volatility of interest rates, as assessed using market data and analysts’ forecasts, is not considered to be a material risk. In addition, minimum principal repayments of $2,000,000 (2023: $3,303,800) are due during the year ending 30 June 2024. 72 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 31. Financial instruments continued Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than one year. Allowance for expected credit losses The consolidated entity has recognised a loss of $434,374 (2022: $181,682) in profit or loss in respect of the expected credit losses for the year ended 30 June 2023. Refer to note 9 for further information on expected credit losses. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements Unused borrowing facilities at the reporting date: Bank loans – multi option facility Bank loans – term debt facility Corporate credit cards Consolidated 2023 $ 2022 $ 3,250,000 3,250,000 1,367,292 2,914,555 230,725 241,547 4,848,017 6,406,102 Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time. 73 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 31. Financial instruments continued Remaining contractual maturities The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ – 3,383,041 – – 4.87% 2,000,000 2,000,000 8,632,708 4.96% 492,741 574,094 1,353,243 Total non-derivatives 5,875,782 2,574,094 9,985,951 Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ Consolidated – 2023 Non-derivatives Non-interest bearing Trade payables Interest-bearing – variable Bank loans Lease liability Consolidated – 2022 Non-derivatives Non-interest bearing Trade payables Interest-bearing – variable Bank loans Lease liability – 5,089,115 – – 5.05% 3,303,800 3,303,800 2,477,845 4.00% 102,294 189,183 – Total non-derivatives 8,495,209 3,492,983 2,477,845 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 74 – – – – 3,383,041 12,632,708 2,420,078 18,435,827 – – – – 5,089,115 9,085,445 291,477 14,466,037 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 32. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Share-based payments Consolidated 2023 $ 2022 $ 1,643,111 1,309,927 86,767 41,368 64,884 87,433 1,771,246 1,462,244 Note 33. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Elderton Audit Pty Limited, the auditor of the company, its network firms and unrelated firms: Audit services – Audit of the financial statements Other services – Half year review Audit of the acquisition of Work Management Solutions Pty Ltd as at 31 July 2022 Consolidated 2023 $ 2022 $ 45,000 45,000 13,500 8,000 21,500 66,500 13,200 – 13,200 58,200 75 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 34. Related party transactions Parent entity COSOL Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 37. Key management personnel Disclosures relating to key management personnel are set out in note 32 and the remuneration report included in the directors’ report. transactions with related parties The following transactions occurred with related parties: Mr Pestell, a non-executive Director, is Managing Director and part owner of, and has significant influence but not control over, Murcia Pestell Hillard Lawyers, the consolidated entity’s Australian legal adviser. Murcia Pestell Hillard Lawyers is not a material services supplier to the consolidated entity and the consolidated entity is not a material client of Murcia Pestell Hillard Lawyers. During the financial period, the consolidated entity paid fees as below in connection with the provision of legal services. These transactions occurred within a normal customer-supplier relationship and on terms and conditions no more favourable than those available to other parties on an arms-length basis. During the financial year, fees were paid for accounting services by the consolidated entity to a party related to a key management personnel employee. These transactions were on a normal commercial basis. Consolidated 2023 $ 2022 $ Payment for goods and services: Payment for services from other related party – legal services Payment for services from other related party – accounting services 276,074 119,034 296,450 – Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated 2023 $ 2022 $ – 100,161 Current payables: Trade payables to other related party Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 76 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 35. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Net assets Equity Issued capital Share-based payments reserve Retained profits Total equity Parent 2023 $ 2022 $ 481,030 6,775,703 481,030 6,775,703 Parent 2023 $ 2022 $ 2,993,539 1,245,845 51,166,769 42,932,024 8,774,739 6,543,834 19,407,447 11,775,376 31,759,322 31,156,648 29,113,301 26,132,220 520,712 428,556 2,125,309 4,595,872 31,759,322 31,156,648 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2023 and 30 June 2022. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2023 and 30 June 2022. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following: • • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. 77 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 36. Business combinations On 1 August 2022, COSOL Limited acquired 100% of the ordinary shares of Work Management Solutions Pty Ltd (“WMS”) and its subsidiary Asset Management Learning Academy Pty Ltd (“AMLA”) for the total consideration of $6,667,803. This is a Perth-based business that delivers business advisory and technical consulting services to the resources and utilities sectors. The consideration amount is settled by COSOL Limited through issuance of shares amounting to $3,000,000 and cash consideration amounting to $3,667,803. The acquisition was in line with COSOL’s stated objective of moving to become a global player in the enterprise asset management services space. The acquisition resulted in goodwill of $4,519,039 to be recognised in the consolidated financial statements. The acquired business contributed revenues of $17,990,794 and profit before tax of $1,697,149 to the consolidated entity for the period from 1 August 2022 to 30 June 2023. Details of the acquisition are as follows: Fair value $ 356,704 2,899,176 174,290 489,112 404,166 (660,372) (147,095) (515,055) (852,162) 2,148,764 4,519,039 6,667,803 3,667,803 3,000,000 6,667,803 176,320 6,667,803 (356,704) (3,000,000) 3,311,099 Cash and cash equivalents Trade receivables Prepayments Other current assets Deferred tax asset Trade payables Employee benefits Accrued expenses Other liabilities Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid or payable to vendor COSOL Limited shares issued to vendor Acquisition costs expensed to profit or loss Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents Less: shares issued by company as part of consideration Net cash used 78 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 37. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1: Name COSOL Australia Pty Limited COSOL Americas Inc (previously AddOns Inc) Clarita Solutions Pty Limited Work Management Solutions Pty Ltd Asset Management Learning Academy Pty Ltd Principal place of business/ Country of incorporation 2023 % 2022 % Ownership interest Australia USA Australia Australia Australia 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% – – During the financial year, AddOns Inc changed its name to COSOL Americas Inc. Note 38. Events after the reporting period Acquisition of AssetOn Group COSOL Limited announced on 3 August 2023 that it had entered into a binding Share Purchase Agreement to acquire 100% of the issued shares in two entities, AssetOn Group Pty Ltd and OnPlan Technologies Pty Ltd (“AssetOn Group”). AssetOn Group provides asset maintenance software and services to organisations with large scale asset networks in mining, energy, utilities and manufacturing. COSOL will pay up to $29 million for AssetOn Group, consisting of $18 million in cash, $4 million in scrip and up to a further $7 million earn-out component contingent on achieving earn-out hurdles. The upfront cash component will be funded through a placement of 19.6 million new fully paid ordinary shares to raise gross proceeds of $15 million and a $4.6 million drawdown on COSOL’s expanded debt facilities. Earn-out consideration, to the extent paid, will be funded from a combination of operating cash flow and available debt capacity or a portion paid in scrip at COSOL’s election. Chief Operating Officer Matthew Glasner was appointed Chief Operating Officer on 1 July 2023. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. 79 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 39. Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Adjustments for: Depreciation and amortisation Share-based payments Foreign currency differences Change in operating assets and liabilities: Increase in trade and other receivables Decrease in inventories Increase in deferred tax assets Increase in accrued revenue Decrease/(increase) in prepayments Decrease in other operating assets Increase/(decrease) in trade and other payables Increase/(decrease) in provision for income tax Increase/(decrease) in deferred tax liabilities Increase in employee benefits Decrease in other provisions Increase/(decrease) in other operating liabilities Net cash from operating activities Consolidated 2023 $ 2022 $ 7,986,327 5,532,775 516,474 92,156 22,633 390,781 113,653 50,420 (6,406,369) 42,520 (132,113) (1,759,773) (302,934) 239,456 (1,389,004) (695,670) 199,073 282,919 (2,150,802) 8,197,546 (1,257,740) 5,504 (35,864) (771,200) 454,186 1,017,482 3,529,982 606,021 (119,509) 162,009 (1,097,326) (893,086) 4,742,439 7,688,088 80 NOTES TO THE FINANCIAL STATEMENTS CONTINUED COSOL LtD Annual Report 2023 Note 40. Earnings per share Consolidated 2023 $ 2022 $ Profit after income tax attributable to the owners of COSOL Limited 7,986,327 5,532,775 Weighted average number of ordinary shares used in calculating basic earnings per share 147,067,950 138,043,550 Adjustments for calculation of diluted earnings per share: Options over ordinary shares 10,003,307 8,382,568 Weighted average number of ordinary shares used in calculating diluted earnings per share 157,071,257 146,426,118 Number Number Basic earnings per share Diluted earnings per share Cents 5.43 5.08 Cents 4.01 3.78 Note 41. Share-based payments A share option plan has been established by the consolidated entity and approved by shareholders at a general meeting, whereby the consolidated entity may, at the discretion of the Nomination and Remuneration Committee, grant options over ordinary shares in the company to certain key management personnel of the consolidated entity. The options are issued for nil consideration and are granted in accordance with performance guidelines established by the Nomination and Remuneration Committee. Set out below are summaries of options granted under the plan: Number of options 2023 Weighted average exercise price 2023 Number of options 2022 Outstanding at the beginning of the financial year 8,087,500 $0.7000 9,337,500 Granted Exercised Expired 4,750,000 $0.8521 750,000 – $0.0000 (2,000,000) (1,335,052) $0.6427 – Outstanding at the end of the financial year 11,502,448 $0.7695 8,087,500 Exercisable at the end of the financial year 4,502,448 $0.7356 3,000,000 Weighted average exercise price 2022 $0.6100 $0.9500 $0.3600 $0.0000 $0.7000 $0.9500 81 COSOL LtD Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED Note 41. Share-based payments continued Granted Exercised – – – – – – – – – Grant date Exercise price Balance at the start of the period 17/11/2020 $0.4150 900,000 17/11/2020 $0.4150 900,000 tranche Tranche 2 Mr McGowan Tranche 3 Mr McGowan Tranche 2 Mr Buckley 17/11/2020 $0.4150 600,000 Tranche 3 Mr Buckley 17/11/2020 $0.4150 600,000 Tranche 1 Senior Leadership Team Tranche 2 Senior Leadership Team 17/11/2020 $0.6100 668,750 17/11/2020 $0.7000 668,750 Tranche 4 Mr Buckley 17/11/2020 $0.9000 1,500,000 Tranche 5 Mr Buckley 17/11/2020 $1.0000 1,500,000 02/12/2021 $0.9500 750,000 Tranche 3 Senior Leadership Team Tranche 1 Senior Leadership Team 13/07/2022 $0.8100 Tranche 1 Mr Stokes 30/06/2023 $0.8300 Tranche 2 Mr Stokes 30/06/2023 $0.8300 Tranche 3 Mr Stokes 30/06/2023 $0.8300 Tranche 1 Senior Leadership Team Tranche 2 Senior Leadership Team Tranche 3 Senior Leadership Team 30/06/2023 $0.8900 30/06/2023 $0.8900 30/06/2023 $0.8900 – – – – – – – 750,000 800,000 600,000 600,000 800,000 600,000 600,000 8,087,500 4,750,000 Expired/ other Balance at the end of the period (67,954) 832,046 – 900,000 (6,671) 593,329 – 600,000 (668,750) – (575,000) 93,750 – 1,500,000 (16,677) 1,483,323 – – – – – – – – 750,000 750,000 800,000 600,000 600,000 800,000 600,000 600,000 (1,335,052) 11,502,448 – – – – – – – – – – – – – – – – – These options were valued using a Monte Carlo option model as they can only be exercised at the end of the applicable service period and have a relatively short life. They were valued based on a 53% volatility, 0.09% (Tranche 1) and 0.42% (Tranche 2) risk free rate, and a share price at grant date of $0.71. The weighted average share price during the financial year was $0.7695 (2022: $0.70). The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.81 years (2022: 1.74 years). 82 COSOL LtD Annual Report 2023 DIRECTORS’ DECL ARATION 30 June 2023 In the directors’ opinion: • • • • the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2023 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. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Geoffrey Lewis Chairman 22 August 2023 83 COSOL LtD Annual Report 2023 INDEPENDENT AUDITOR’S REPORT to the members of COSOL Limited Independent Auditor's Report to the members of COSOL Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of COSOL Limited (“the Company”) and its subsidiaries (collectively referred to as “the Group”), which comprises the consolidated statement of financial position as at 30 June 2023, 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, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's financial position as at 30 June 2023 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described as in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current year. 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. We have determined the matters described below to be key audit matters to be communicated in our report. 84 INDEPENDENT AUDITOR ’S REPORT CONTINUED COSOL LtD Annual Report 2023 Revenue recognition Refer to Total Revenue ($75,102,347), Note 4 (Revenue) to the financial report Key Audit Matter How our audit addressed the matter Revenue relating to consulting and other related services is a key audit matter due to significant audit effort and judgement we have applied in recognition and assessing measurement of revenue. the Group’s This was driven by the multiple revenue types with different recognition criteria across different products and services, increasing the possibility identifying of performance incorrectly recognising revenue using AASB 15 Revenue from Contracts with Customers (‘AASB 15’). inappropriately and the Group obligations Our audit work included, but was not restricted to, the following: • We completed a walkthrough test of the Group’s revenue system and assessed related controls. • We selected a sample of revenue using systematic sampling methods, and vouched each item selected to invoices and other supporting documentation. • We reviewed the major agreements with the customers to understand the key terms and conditions. We clarified elements of our understanding of the contracts through inquiries with the Group management. • We selected a systematic sample of the revenue recognised close to the year-end and vouched each selected item to related invoices and other supporting documents to ensure proper cut-off is applied. • We assessed the adequacy of the Group’s revenue disclosures using our understanding obtained during the testing against the requirements of AASB 15. Business Combination Refer to Note 36 (Business combinations) to the financial report Key Audit Matter How our audit addressed the matter On 1 August 2022, COSOL limited acquired 100% of the ordinary shares of a Work Management Solutions Pty Ltd. This Business combination is a key audit matter due to the: • Significant audit effort and judgement we have applied in assessing the Group’s recognition and measurement of investment in subsidiary and goodwill; and • The degree of estimation involved in measurement of fair values of the net assets of subsidiary as at the date of acquisition, contingent consideration and also due to complex calculations involved as at that date 3 Business Combinations. per AASB as Our audit work included, but was not restricted to, the following: • We have reviewed the share purchase agreement in order to understand the terms and conditions of the business combination along with the consideration paid or to be paid. • We reviewed the accounting treatment as at acquisition and ensured the investment in subsidiary and related goodwill is correctly calculated and recorded in the books. • We assessed the reasonableness of fair value of net assets as at acquisition date. • We have verified assets and liabilities of subsidiary at the acquisition date and ensured that these are accounted for accurately for calculation of net assets. • We assessed the compliance and adequacy of the disclosure in the financial report as per requirements of AASB 3. 85 COSOL LtD Annual Report 2023 INDEPENDENT AUDITOR ’S REPORT CONTINUED Goodwill impairment Refer to Note 14 (Intangibles) to the financial report Key Audit Matter How our audit addressed the matter test financial the amount of goodwill Under AASB 136, the Group is required to annually for impairment. This annual impairment test was significant to our audit because the balance of $ 43,703,858 as of June 30, 2023 is material to the addition, statements. management’s assessment process is complex and highly is based on assumptions, specifically gross profit margins, cost price inflation, growth and discount rates, which are affected by expected future market or economic conditions. judgmental and In Our audit work included, but was not restricted to, the following: • We have reviewed the impairment test performed by the management. • We have assessed the reasonableness of the assumptions and methodology used by the management for impairment test in particular those relating to the forecasted revenue growth and profit margins. • We have compared the value in use of each cash generating unit and compared with respective good will recognised. • We assessed the compliance and adequacy of the disclosure in the financial report as per requirements of AASB 136. • We verified measurement period adjustments in goodwill with supporting documents. • We also focused on the adequacy of the Group’s disclosures about those assumptions to which the outcome of the impairment test is most sensitive, that is, those that have the most significant effect on the determination of the recoverable amount of goodwill. Other Information The directors are responsible for the other information. The other information obtained at the date of this auditor's report is included in the Group’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 accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Directors for the Financial Report The directors of the Group 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 Group’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 Group or to cease operations, or have no realistic alternative but to do so. 86 INDEPENDENT AUDITOR ’S REPORT CONTINUED COSOL LtD Annual Report 2023 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current year 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 of the directors’ report for the year ended 30 June 2023. The directors of the COSOL Limited 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 in accordance with Australian Auditing Standards. 87 COSOL LtD Annual Report 2023 INDEPENDENT AUDITOR ’S REPORT CONTINUED Opinion In our opinion, the Remuneration Report of COSOL Limited for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001. Elderton Audit Pty Ltd Rafay Nabeel Director 22 August 2023 Perth 88 COSOL LtD Annual Report 2023 SHAREHOLDER INFORMATION 30 June 2023 The shareholder information set out below was applicable as at 10 August 2023. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Each fully paid ordinary share entitles the holder to one vote. Ordinary shares Options over ordinary shares Number of holders % of total shares issued Number of holders % of total shares issued 93 177 65 168 89 592 30 0.04 0.32 0.34 4.03 95.27 100.00 5.07 – – – 1 7 8 – – – – 0.82 99.18 100.00 – Options do not have any voting rights, and all options on issue were issued under an employee incentive scheme. There are no shareholders holding less than a marketable parcel of ordinary shares. 89 COSOL LtD Annual Report 2023 SHAREHOLDER INFORMATION CONTINUED Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary shares Number held 24,250,000 19,000,000 % of total shares issued 16.43 12.87 9,710,065 6,003,000 5,000,000 4,783,000 4,300,000 3,826,210 3,530,642 3,000,000 2,890,338 2,385,337 2,385,337 2,385,337 2,285,755 2,047,150 2,036,000 2,000,000 2,000,000 2,000,000 6.58 4.07 3.39 3.24 2.91 2.59 2.39 2.03 1.96 1.62 1.62 1.62 1.55 1.39 1.38 1.36 1.36 1.36 105,818,171 71.72 MR GEOFFREY JAMES LEWIS & MRS ANNE MARIE LEWIS JRF CO PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED MR GREGORY ROBERT WOOD & MRS JANETTE HELEN WOOD SNJ BUSINESS SOLUTIONS PTY LTD MR BRADLEY RONALD SKEGGS JRF CO PTY LTD MR GLENN MAXWELL ROGERS BNP PARIBAS NOMS PTY LTD MR GERALD PETER STRAUTINS NATIONAL NOMINEES LIMITED MR DAVID ALEXANDER LESTANI MR BRADLEY SAMUEL MILLER MR PAUL ANTHONY LESTANI MR ANDREW MCKENZIE & MRS CATHERINE MCKENZIE HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED WAIHEKE HOLDINGS PTY LTD MR BRADLEY RONALD SKEGGS & MR TOM BRADLEY SKEGGS MR GRANT ANTHONY PESTELL BNP PARIBAS NOMS PTY LTD Unquoted equity securities There are 11,502,448 unquoted options on issue with 8 holders. 90 SHAREHOLDER INFORMATION CONTINUED COSOL LtD Annual Report 2023 Substantial holders Substantial holders in the company with a relevant interest in fully paid ordinary shares of more than 5% are set out below: Ordinary shares Number held 24,250,000 24,250,000 7,615,541 % of total shares issued 16.43 16.43 5.16 Mr Geoffrey James Lewis and Mrs Annemarie Lewis Mr Stephen Edward Johnston and Mrs Sarah Johnston MicroEquities Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no other classes of equity securities. 91 COSOL LtD Annual Report 2023 This page has been left blank intentionally. 92 COSOL LtD Annual Report 2023 CORPORATE DIRECTORY 30 June 2023 Directors Share register Geoffrey Lewis – Non-Executive Chairman Link Market Services Limited Stephen Johnston – Non-Executive Director Grant Pestell – Non-Executive Director Gerald Strautins – Non-Executive Director Benjamin Buckley – Managing Director Company secretary Lisa Wynne – Company Secretary Key Management Scott McGowan – Chief Executive Officer Anthony Stokes – Chief Financial Officer Notice of annual general meeting The annual general meeting of COSOL Limited is to be held on 16 November 2023. Time and place to be announced. Registered office Unit 1, 490-500 Adelaide Street Brisbane City QLD 4000 Principal place of business Unit 1, 490-500 Adelaide Street Brisbane City QLD 4000 QVI Building Level 12, 250 St George’s Terrace Perth WA 6000 Email: registrars@linkmarketservices.com.au Website: www.linkmarketservices.com.au Auditor Elderton Audit Pty Ltd Level 32, 152 St George’s Terrace Perth WA 6000 Solicitors Murcia Pestell Hillard Lawyers Suite 183 Level 6, 580 Hay Street Perth WA 6000 Stock exchange listing COSOL Limited shares are listed on the Australian Securities Exchange (ASX code: COS) www.asx.com.au Website www.cosol.global Incorporation Incorporated in Australia as a public company limited by shares ACN: 635 371 363 ABN: 66 635 371 363 colliercreative.com.au #CSO0022 93 www.cosol.global 

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