Jayex Technology Limited
Annual Report 2022

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Jayex Technology Limited ABN 15 119 122 477 ANNUAL REPORT 31 December 2022 Jayex Technology Limited Contents 31 December 2022 Corporate directory Directors' report Auditor's independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent auditor's report to the members of Jayex Technology Limited Shareholder information 2 3 18 19 21 22 23 24 65 66 72 1 Jayex Technology Limited Corporate directory 31 December 2022 Directors Michael Boyd (Executive Chair till 26 October 2022 with subsequent appointment as Non-Executive Chair) Brian Renwick (Non-Executive Director) Nicholas Harper (Executive Director till 1 December 2022 with subsequent appointment as Non-Executive Director) Registered office Level 4 100 Albert Road South Melbourne VIC 3205 Principal place of business 17B Cribb Street Milton QLD 4064 Share register Auditor Solicitors Automic Level 5, 126 Phillip Street Sydney NSW 2000 Phone: 1300 288 664 (in Australia); +61 2 9698 5414 (international) William Buck Level 20, 181 William Street Melbourne VIC 3000 Steinepreis Paganin Level 4, 50 Market Street Melbourne VIC 3000 Stock exchange listing Jayex Technology Limited shares are listed on the Australian Securities Exchange (ASX code: JTL) Website www.jayex.com.au 2 Jayex Technology Limited Directors' report 31 December 2022 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or 'the Group') consisting of Jayex Technology Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the period ended 31 December 2022. Directors The following persons were Directors of Jayex Technology Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Michael Boyd (Executive Chair till 26 October 2022 with subsequent appointment as Non-Executive Chair) Brian Renwick (Non-Executive Director) Nicholas Harper (Executive Director till 1 December 2022 with subsequent appointment as Non-Executive Director) Michael Chan (resigned as Non-Executive Director on 16 December 2022) Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of the development and provision of healthcare industry service technologies. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the consolidated entity after providing for income tax amounted to $7,245,838 (31 December 2021: $3,924,342). 2022 update The company’s revenue from (continuing and discontinued operations) was up from $4,125k in 2021 to $4,303k in 2022, representing a 4% increase. More than 97% of the company’s revenue is currently generated in the UK, therefore the majority of this review will focus on UK operations; with some commentary on Australia and New Zealand operations presented at the end of the section. Jayex Technology is a mature business in a saturated market. The vast majority of our revenue continues to be derived from our two core-product areas; patient check-in and patient calling. We are fortunate to have a very substantial customer base and are also unique in having a substantial share of the market in both product areas. The mature nature of the market has both positive and negative consequences:  Customer churn is very low, as the cost of switching suppliers is high compared to the perceived benefits. Therefore, barring freak conditions such as widespread closure of general practices due to a worldwide pandemic, our revenues are very stable.  For the same reason, it is difficult to achieve material organic gains in market share without a well-executed, highly innovative sales and marketing strategy. We are therefore able to maintain revenue levels from our core products with a low operating expense baseline. Any incremental operating expense should therefore only be committed when there is a compelling commercial case to do so, for example to generate material incremental revenue in the short term. For the first three quarters of 2022 we did not adhere to this approach and this is reflected in our results, where it can be seen that we incurred significant operational expense without any corresponding increase in revenue. From Q4 and into 2023 we are now far more disciplined in ensuring we only invest incremental spend on activities that will generate clear commercial benefit. We would like to clarify that the deficiencies in performance were not due to any lack of effort or commitment from Jayex colleagues and that the continued commitment to the business demonstrated by the team is a key factor that gives confidence in our ability to achieve ambitious profitable growth aspirations. We completed an initial organisational restructuring at the beginning of 2023. This exercise included the elimination of a number of senior roles that are not required by the business at its current scale and stage of development. I am pleased to report that the restructuring also incorporated internal promotions for a number of high-performing team members. As we move forward, we will continue to review our resource requirements and will make changes as and when appropriate. 3 Jayex Technology Limited Directors' report 31 December 2022 We have discontinued some elements of marketing expenditure, where it was observed that there was no material impact on sales performance. We continue to invest in the ongoing development of our software portfolio. In 2022, we expensed more than $800k of development cost, however this did not generate any significant increase in revenue during the year. From Q4 we have changed our approach and have discontinued any development projects that do not have a clear, validated and compelling commercial justification. An area where we have increased development activity from Q4 is in the continuing improvement of the resilience and robustness of our cloud-based products. The customer IT environments in which we operate our services are highly heterogeneous and typically not well set up nor maintained. Additionally, our products need to interact extensively with other third-party applications. We have therefore had to engineer into our products the ability to tolerate technical problems and issues with other systems not within our control. Patient check-in, in particular, is a process that is susceptible to disruption by external systems. At the end of 2022, we were experiencing large numbers of support calls relating to the performance of our cloud check-in solution. As a result, we have committed significant support and development costs to address this. Having now come through this problematic period to the point where we have very few issues with the cloud products, we believe that we are now in a much stronger position. We have seen a couple of competitors release check-in products during the year. These competitors will face exactly the same technical challenges that we have just dealt with, requiring them to either commit to extensive development costs or deliver a poor customer experience. While it is too early to be certain, this may be the reason that we have recently received a number of significant orders from customers that had previously awarded contracts for the same services to one of the new entrants into the check-in market. We treat the reliability of our core products is our highest priority, as this is the biggest determinant of whether we retain customers. As outlined above, while our customers continue to have a good experience with our products, they are very likely to renew their contracts. Hardware remains a key enabler for our software products. At the end of 2022 we signed a contract with a specialist hardware installation partner, who now manages all of our warehousing and can provide customer installations across the whole UK on our behalf. This contract increases our installation capacity, thereby reducing our order-to-cash cycle time, in addition to delivering a reduction in our warehousing and unit installation costs. We have maintained a very small team in Australia and New Zealand, as we review our options for these markets going forward. We experienced some reliability issues with our Appointuit product towards the end of 2022, which has led to service disruption for some of our customers. In order to address this, we have invested additional support effort whilst we deliver a necessary refresh of the code base. We are confident that the changes implemented in Q4 of 2022 leave us in a much stronger position to achieve profitable growth going into 2023. Corporate Mr Robert Hadley was appointed as Chief Executive Officer effective 3 October 2022. Nick Harper moved to an executive position within the company. Nick’s experience in software development has greatly enhanced the leadership capability of the company. During the year the company disposed of its investment in Vitalhub. The company has also closed its operations at Whakaora Hou Limited during the year. Since year end Mr Nathan Woodard resigned as Chief Financial Officer effective 31 January 2023. 4 Jayex Technology Limited Directors' report 31 December 2022 Risks Jayex Technology Ltd’s operating and financial results and performance are subject to various risks and uncertainties, some of which are beyond Jayex's reasonable control. Set out below are matters which the Group has assessed as having the potential to have a material impact on its operating and/or financial results and performance: (i) (ii) (iii) (iv) Events, such as a global/national pandemic, that resulted in prolonged closures of large numbers of general practices in the UK would reduce the usage of our software services, thereby increasing the risk of customers not paying for those services. Key customer structure and changes in procurement approach: currently, the majority of our NHS customer contracts are at an individual practice level. The creation of NHS Integrated Care Systems and Integrated Care Boards could at some stage result in a change in procurement approach, for example a greater usage of competitive tendering. Such a change may then lead to increased competition, thereby presenting a risk to market share and achievable pricing levels. Competition, innovation and developments; Jayex's growth strategy may be impacted by industry disruption, innovation, the actions of our competitors, the ability to identify future acquisitions or generate returns on developments. Failure to attract and retain key employees: a failure to attract and retain key employees may lead to a loss of key knowledge and experience, thereby leading to the risk of a deterioration in the competitiveness of our products and services Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year Following material events have occurred subsequent to the year end: (i) As announced on ASX on 31 January 2023, the company has signed a binding Term Sheet Agreement with Shine Clinical Ltd under which, subject to completion of due diligence processes and completion of formal documentation, the companies will operate a business via a joint venture arrangement that will provide services to:  UK NHS customers in managing disease prevalence, ensuring patients get access to the appropriate treatments for their conditions.  Enable UK pharmaceutical and medical device industry customers to achieve their market access strategies. Jayex and Shine have agreed to bring their respective GP data analytical and revenue optimisation businesses together through the joint venture arrangement to realise the immediate synergy benefits from their complimentary and merged data analytical software programs and to develop new IP to increase the automation of the analytical processes. All IP developed by the joint venture business utilising Jayex’s existing technology will be owned by Jayex. The joint venture will leverage the Jayex customer base and data integration capabilities along with Shine’s healthcare data analytics intellectual property, to deliver services that are highly competitive and rapidly scalable. The joint venture will have sufficient operational capacity and financial standing to be able to credibly compete for and deliver large industry contracts. The joint venture is structured with Shine issuing Jayex with ordinary shares so that Jayex is the holder 30% of the issued capital of Shine. The total consideration payable by Jayex, which is payable over nine milestones, for the Shine shares comprises cash of approximately A$133,000 and approximately 24.3 million shares in Jayex. Both components of the consideration (i.e. the cash and shares in Jayex), are subject to the successful satisfaction of a number of performance milestones by the joint venture business (which is to be operated by Shine). All milestones are required to be completed by 31 December 2023. Each milestone has both a minimum revenue target and gross margin target to ensure profitable contracts. As part of the joint venture, Jayex has agreed to exclusively source its clinical services from Shine for Jayex’s business and the joint venture business. Shine has agreed to exclusively source its technical services and support from Jayex for Shine’s business and the joint venture business. (ii) On 2 March 2023, the company raised additional capital of $320,500 through placement of 32,050,000 shares to sophisticated and professional investors. 5 Jayex Technology Limited Directors' report 31 December 2022 (iii) Shareholders at its General Meeting on 7 March 2023 approved the issuance of 207,692,307 Options towards the repayments of $2.7 million convertible notes and 42,307,693 Options towards the repayment of $555,000 loans, to Covenant Holding (WA) Pty Ltd. The transaction-based comparison table below sets out the impact of the above transaction on the consolidated entity as of 31 December 2022: Consolidated balance sheet as at 31 December 2022 Transaction Post transaction – Pro forma Percentage increase/ decrease following the Transactions 795,425 1,504,654 2,300,079 - - - 795,425 1,504,654 2,300,079 % - - - 7,416,105 1,214,077 8,630,182 (3,255,000) - (3,255,000) 4,161,105 1,214,077 5,375,182 (44%) - (38%) (6,330,103) 3,255,000 (3,075,103) (51%) 28,112,494 (1,866,837) (32,575,760) (6,330,103) - 28,112,494 3,255,000 1,388,163 (32,575,760) (3,075,103) - 3,255,000 - (174%) - (51%) Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Liabilities Equity Issued capital Reserves Accumulated losses No other matter or circumstance has arisen since 31 December 2022 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. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity and the expected results of operations are as follows: Our ultimate goal remains unchanged. Jayex seeks to create superior healthcare solutions that are user-friendly for patients, reliable and easy to maintain for healthcare professionals, offer good value for purchasers and provide long-term returns for our investors, while creating a Company culture that employees feel valued in and proud of. We will do this by accelerating our development, as well as look to partners, collaborators and M&A opportunities to create a comprehensive end-to-end capability healthcare platform. Jayex currently touches 50 million patients annually across these care markets. We will capitalise and utilise our installed base to deliver further and enhanced capability to these care markets through our comprehensive and growing end-to-end cloud-based platform. Our platform will provide everything from Appointment booking, Patient calling, Patient check-in, through to health messaging, self-care monitoring, script management, remote terminal dispensing of pharmaceutical and/or medical cannabis products and telehealth solutions. Environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. 6 Jayex Technology Limited Directors' report 31 December 2022 Information on Directors Name: Title: Qualifications: Experience and expertise: Michael Boyd Executive Chair till 26 October 2022 with subsequent appointment as Non-Executive Chair B. Comm (UWA) Grad. Dip App Fin Michael Boyd is the Chairman of the Company and has been involved since its inception in 2014. Based in Melbourne, he has led the corporate structuring of the Company and the development of the Group’s strategic vision. On a practical level he has initiated contacts with all stakeholder groups including professional bodies, regulatory boards, wholesale distributors and pharmacy groups and individuals. Mr. Boyd has been involved in the creation of new enterprises, both in the private and public sectors, for over 27 years. Mr. Boyd has been successful in developing and growing new projects in diverse areas including healthcare, telecommunications and finance. Trained as a Chartered Accountant, he was a founding Director and Chairman of Sonic Healthcare Ltd, now an ASX listed top 50 company. After leaving Sonic he started Foundation Healthcare, growing it to over 800 healthcare professionals before it was acquired by Sonic. He was also a founding partner of Iridium Satellite bringing it out from bankruptcy to now a NASDAQ listed company. Other current directorships: None Former directorships (last 3 years): None None Special responsibilities: 107,883,880 fully paid ordinary shares Interests in shares: 250,000,000 options Interests in options: Name: Title: Qualifications: Experience and expertise: Brian Renwick Non-Executive Director MBA, FCA, B. Bus. (Accounting) Monash Mr. Renwick is very broadly experienced across the pharmaceutical and healthcare sector in Australia. His involvement with sector commenced in finance roles that led into commercial analysis, marketing and sales. From this broad commercial experience in the manufacturing end of the supply chain he moved into the wholesaling with various business development roles in retail and hospital pharmacy. Mr Renwick’s roles broadened into commercial and business development including as general manager for a corporate pharmacy business. He has completed two Business Development roles within the CSL Limited group. With his detailed commercial knowledge and broad experience across the healthcare sector, Brian has provided consulting advice to Jayex since 2006 and is an important member of the team. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Chairman of Audit and Risk Committee, member of Remuneration and Nomination Committee 1,660,871 fully paid ordinary shares Nil Interests in shares: Interests in options: 7 Jayex Technology Limited Directors' report 31 December 2022 Name: Title: Qualifications: Experience and expertise: Nicholas Harper Executive Director till 1 December 2022 with subsequent appointment as Non- Executive Director MSc Computing Science Nick has over thirty years’ experience working in software development. During that time, he has worked in the public sector (local government), investment banking and the aviation sector in a wide variety of roles and with varied responsibilities. Nick has worked on implementing and maintaining many different types of software systems from batch valuation systems to real-time data processing. Based in the UK, Nick also has extensive experience of project management and software team building. Other current directorships: None Former directorships (last 3 years): None None Special responsibilities: Nil Interests in shares: Nil Interests in options: 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Ms Melanie Leydin was appointed Company Secretary on 19 August 2015. Ms Leydin graduated from Swinburne University in 1997, became a Chartered Accountant in 1999 and since February 2000 had been the principal of chartered accounting firm, Leydin Freyer. Upon the merger of Leydin Freyer with Vistra in November 2021, Ms Leydin is the country head of Vistra Australia. Ms Leydin has over 25 years’ experience in the accounting profession and has extensive experience in relation to public company responsibilities, including ASX and ASIC compliance, control and implementation of corporate governance, statutory financial reporting, reorganisation of Companies and shareholder relations and is a director and company secretary for a number of entities listed on the Australian Securities Exchange. Meetings of Directors The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended 31 December 2022, and the number of meetings attended by each Director were: Full Board Audit & Risk Committee Remuneration & Nomination Committee Attended Held Attended Held Attended Held Michael Boyd Brian Renwick Michael Chan* Nicholas Harper 9 10 10 10 10 10 10 10 - 6 6 - - 6 6 - - 1 1 - - 1 1 - Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee. * Michael Chan resigned as Non-Executive Director effective 16 December 2022. 8 Jayex Technology Limited Directors' report 31 December 2022 Remuneration report (audited) The remuneration report details the key management personnel 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 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 Share-based compensation Additional information Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● ● ● ● competitiveness and reasonableness acceptability to shareholders performance linkage / alignment of executive compensation transparency The Remuneration and Nomination Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. In past consultation with external remuneration consultants, the Remuneration and Nomination Committee has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the consolidated entity. The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by: ● ● having economic profit as a core component of plan design focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value attracting and retaining high calibre executives ● Additionally, the reward framework should seek to enhance executives' interests by: ● ● ● rewarding capability and experience reflecting competitive reward for contribution to growth in shareholder wealth providing a clear structure for earning rewards In accordance with best practice corporate governance, the structure of non-executive Director and executive Director remuneration is separate. Non-executive Directors remuneration Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Remuneration and Nomination Committee. The Remuneration and Nomination Committee may, from time to time, receive advice from independent remuneration consultants to ensure non- executive directors' fees and payments are appropriate and in line with the market. No such consultants were used during the year. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors do not receive share options or other incentives. 9 Jayex Technology Limited Directors' report 31 December 2022 Directors may also be reimbursed for travel and other expenses reasonably incurred in attending to the Company’s affairs. Non-executive directors may be paid such additional or special remuneration as the directors decide is appropriate where a director performs extra work or services which are not in the capacity as Director of the Company or a subsidiary. ASX listing rules require the aggregate non-executive Directors' remuneration be determined periodically by a general meeting. The Company's current Non-Executive Directors fee pool limit is $350,000 as set in Company's Constitution adopted in 2015. Director Role Annual Fee ($) Subject to NED Pool Mr Michael Boyd Mr Brian Renwick Mr Nicholas Harper Total Pool used Non-Executive Chair Non-Executive Director Non-Executive Director 120,000 50,000 50,000 220,000 Yes Yes Yes Executive remuneration The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: ● ● ● ● base pay and non-monetary benefits short-term performance incentives share-based payments other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. The Executive chairman's fees are determined based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Consolidated entity performance and link to remuneration The remuneration of the Non-Executive Directors is not linked to the performance, share price or earnings of the consolidated entity. For the year ended 31 December 2022, the remuneration of Executive Chairman and other executives were not linked to the performance, share price or earnings of the consolidated entity. Refer to the section 'Additional information' below for details of the earnings and total shareholders return for the last five years. Use of remuneration consultants Use of remuneration consultants During the financial year ended 31 December 2022, the consolidated entity did not engage any remuneration consultants. Voting and comments made at the Company's 26 May 2022 Annual General Meeting ('AGM') At the 26 May 2022 AGM, 94.44% of the votes received supported the adoption of the remuneration report for the year ended 31 December 2021. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. 10 Jayex Technology Limited Directors' report 31 December 2022 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. Unless otherwise noted, the named persons were key management personnel for the whole of the period ended 31 December 2022. The key management personnel of the consolidated entity consisted of the following Directors of Jayex Technology Limited: ● ● ● ● Michael Boyd (Executive Chair till 26 October 2022 with subsequent appointment as Non-Executive Chair) Brian Renwick (Non-Executive Director) Nicholas Harper (Executive Director till 1 December 2022 with subsequent appointment as Non-Executive Director) Michael Chan (resigned as Non-Executive Director on 16 December 2022) And the following person: ● ● Robert Hadley (Chief Executive Officer appointed effective 3 October 2022) Nathan Woodard (Chief Financial Officer resigned effective 31 January 2023) Short-term benefits Post- employment benefits Long-term benefits Cash salary and fees $ Cash bonus $ Super- annuation $ Long service leave $ Share- based payments $ Termination benefit $ Total $ 20,000 50,000 47,917 4,167 170,000 131,654 53,324 159,971 637,033 - - - - - - - - - - - - - - - - 2,348 2,348 - - - - - - - - - - - - - - - - - - - 20,000 - 50,000 - 47,917 4,167 - - 170,000 - 131,654 - 53,324 - 162,319 - 639,381 2022 Non-Executive Directors: Mr M Boyd (Non- Executive Chair)(i) Mr B Renwick Mr M Chan(ii) Mr N Harper(iii) Executive Directors: Mr M Boyd (Executive Chair)(i) Mr N Harper(iii) Other Key Management Personnel: Mr R Hadley(iv) Mr N Woodard(v) (i) (ii) (iii) (iv) (v) Mr M Boyd was Executive Chair till 26 October 2022 with subsequent appointment as Non-Executive Chair effective 26 October 2022. Mr M Chan resigned as Non-Executive Director effective 16 December 2022. Mr N Harper was Executive Director till 1 December 2022 with subsequent appointment as Non-Executive Director effective 1 December 2022. Mr R Hadley was appointed as Chief Executive Officer effective 3 October 2022. Mr N Woodard resigned as Chief Financial Officer effective 31 January 2023. 11 Jayex Technology Limited Directors' report 31 December 2022 Short-term benefits Post- employment benefits Long-term benefits Cash salary and fees $ Cash bonus $ Super- annuation $ Long service leave $ Share- based payments $ Termination benefit $ Total $ 50,000 50,000 38,889 173,950 33,532 - - - - - - - - - - 168,387 514,758 41,201 41,201 28,663 28,663 - - - - - - - - - - - - - - - 50,000 50,000 38,889 - - 173,950 33,532 7,160 7,160 - 245,411 - 591,782 2021 Non-Executive Directors: Mr B Renwick Mr M Chan Mr N Harper* Executive Directors: Mr M Boyd (Executive Chair) Mr N Harper* Other Key Management Personnel: Mr N Woodard * Mr N Harper was appointed as the Executive Director effective 11 October 2021 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Non-Executive Directors: Mr M Boyd Mr B Renwick Mr M Chan Mr N Harper Executive Directors: Mr M Boyd Mr N Harper Other Key Management Personnel: Mr. R Hadley Mr. N Woodard Fixed remuneration 2021 2022 At risk - STI At risk - LTI 2022 2021 2022 2021 100% 100% 100% 100% - 100% 100% - 100% 100% 100% 100% 100% 100% - 77% - - - - - - - - - - - - - - - 23% - - - - - - - - - - - - - - - - 12 Jayex Technology Limited Directors' report 31 December 2022 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: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Michael Boyd (Executive Chair till 26 October 2022 with subsequent appointment as Non-Executive Chair) 25 July 2020 No fixed term. Each party may terminate the agreement by giving one months' notice. The Company may make payment in lieu of part of all of the notice period. Base salary of $220,000 per annum till 26 October 2022 and $120,000 per annum as Non-Executive Chair effective 26 October 2022. Nathan Woodard (resigned effective 31 January 2023) Chief Financial Officer 28 August 2018 No fixed term. Each party may terminate the agreement by giving three months' notice. The Company may make payment in lieu of part of all of the notice period. Base salary £90,000 per annum. Nicholas Harper Executive Director for Software till 1 December 2022 with subsequent appointment as Non-Executive Director 11 October 2021 No fixed term. Each party may terminate the agreement by giving three months' notice. The Company may make payment in lieu of part of all of the notice period. Base salary £85,000 per annum till 1 December 2022 and $50,000 per annum as Non- Executive Director effective 1 December 2022. Robert Hadley Chief Executive Officer 3 October 2022 No fixed term. Each party may terminate the agreement by giving three months' notice. The Company may make payment in lieu of part of all of the notice period. Base salary £120,000 per annum. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares During the year no ordinary shares were issued to directors and other key management personnel as part of compensation. Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel as at 31 December 2022 are as follows: Name Number of options granted Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per option at grant date Mr N Woodard 250,000 30/03/2021 31/12/2021 29/03/2024 $0.05 $0.029 Subsequent to the year end, Nathan Woodard resigned as Chief Financial Officer effective 31 January 2023 and the above options were forfeited effective 1 March 2023 under the terms of the Options offer letter. Options granted carry no dividend or voting rights. 13 Jayex Technology Limited Directors' report 31 December 2022 Additional information The earnings of the consolidated entity for the five years to 31 December 2022 are summarised below: Sales revenue EBITDA EBIT Loss after income tax 2022 $ 2021 $ 2020 $ 2019 $ 2018 $ 4,303,996 (1,055,118) (6,412,949) (7,245,838) 4,125,166 (302,076) (3,518,189) (3,924,342) 6,063,000 293,000 (561,000) (799,000) 7,185,000 121,000 (663,000) (960,000) 6,749,000 (342,000) (885,000) (1,125,000) The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end (cents) 2022 1.10 2021 1.90 2020 3.90 2019 3.00 2018 1.90 Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each Director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Ordinary shares Mr M Boyd Mr B Renwick Mr M Chan* Balance at Received the start of as part of remuneration the year Shares acquired Disposals/ other Balance at the end of the year 107,883,880 1,660,871 2,498,180 112,042,931 - - - - - - 50,820 50,820 - 107,883,880 1,660,871 - - (2,549,000) (2,549,000) 109,544,751 * On 1 December 2022, Mr Michael Chan acquired 50,820 shares through on-market trade. The disposal represents shares held by Mr Michael Chan as at the date of resignation as Non-Executive Director on 16 December 2022. Option holding The number of options over ordinary shares in the Company held during the financial year by each Director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Balance at the start of the year Granted Expired/ forfeited/ Balance at the end of the year Exercised other Options over ordinary shares Mr N Woodard* 250,000 250,000 - - - - - - 250,000 250,000 * Subsequent to the year end, Nathan Woodard resigned as Chief Financial Officer effective 31 January 2023 and the above options were forfeited effective 1 March 2023 under the terms of the Options offer letter. During the financial period loans were made by the company’s chairman to the consolidated entity. Details of these transactions are disclosed below: Transactions with related parties The following transactions occurred with related parties. All transactions were carried out on arm's length terms on a basis which is no more or less favourable than if the transactions had occurred with non-related entities except for the interest free loans disclosed in the Terms and Condition section below. 14 Jayex Technology Limited Directors' report 31 December 2022 Consolidated Consolidated 2022 $ 2021 $ Interest on convertible Notes issued to Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) 175,260 183,172 Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated Consolidated 2022 $ 2021 $ Current payables: Accrued loan interest payable to Covenant Holdings (WA) Pty Ltd (an entity related to Non- Executive Chair Michael Boyd) 87,750 - The payables due to related parties were payable on demand and did not bear interest. Loans to/from related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Current borrowings: Convertible Notes issued to Covenant Holdings (WA) Pty Ltd (an entity related to Non- Executive Chair Michael Boyd) Loans from Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) (i), (ii) Loan from Michael Boyd, Non-Executive Chair (iii) Loan from Michael Boyd, Non-Executive Chair(iv) Non-current borrowings: Loans from Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) (i), (ii) Loan from Michael Boyd, Non-Executive Chair (iii) Consolidated 2022 $ 2021 $ 2,700,000 2,128,826 555,000 188,517 266,642 3,710,159 - - - 2,128,826 - - - 555,000 188,517 743,517 Terms and conditions Loan The terms of the loans made by Covenant Holdings (WA) Pty Ltd to companies within the consolidated entity are as follows: (i) (ii) Loan from Covenant Holdings (WA) Pty Ltd to P2U Pty Ltd: Balance as at 31 December 2022 and 31 December 2021 - $55,000; loan is interest free, unsecured and is repayable on 1 April 2023. Loan from Covenant Holdings (WA) Pty Ltd to Whakaora Hou Limited: Balance as at 31 December 2022: $500,000 (31 December 2021: 500,000); loan is interest free, unsecured and is repayable on 1 April 2023. (iii) Loan from Michael Boyd, Non-Executive Chair to Whakaora Hou Limited: Balance as at 31 December 2022: $188,517 (31 December 2021: $188,517) This is an interest free unsecured loan and is repayable on 1 April 2023. (iv) Loan from Michael Boyd, Non-Executive Chair to Jayex Technology Limited: Balance as at 31 December 2022: $266,642 (31 December 2021:nil) This is an interest free unsecured loan and is repayable on 30 June 2023. 15 Jayex Technology Limited Directors' report 31 December 2022 Convertible notes Convertible Notes are unsecured and issued on 13 October 2020 at an interest rate of 6.5% per annum. These are repayable on 13 October 2022 for balance not converted into shares. Refer to note 16 for further information on convertible notes. Subsequent to the year end, shareholders at its General Meeting on 7 March 2023 approved the issuance of 207,692,307 Options towards the repayments of $2.7 million convertible notes and 42,307,693 Options towards the repayment of $555,000 loans, to Covenant Holding (WA) Pty Ltd. This concludes the remuneration report, which has been audited. Shares under options Unissued ordinary shares of Jayex Technology Limited under option outstanding at the date of this report are as follows: Grant date 04 May 2021 7 March 2023 Expiry date 03 May 2024 7 March 2026 Exercise price Number under options $0.05 $0.01 250,000 250,000,000 250,250,000 No person entitled to exercise the options had or has any right by virtue of the options granted to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of Jayex Technology Limited issued on the exercise of options during the year ended 31 December 2022 and up to the date of this report. 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. 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 period by the auditor are outlined in note 25 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 25 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 (including Independence Standards) 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. ● Officers of the Company who are former partners of William Buck Audit (Vic) Pty Ltd There are no officers of the Company who are former partners of William Buck Audit (Vic) Pty Ltd. 16 Jayex Technology Limited Directors' report 31 December 2022 Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 18. Auditor William Buck Audit (Vic) 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 ___________________________ Michael Boyd Chairman 30 March 2023 Melbourne 17 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF JAYEX TECHNOLOGY LIMITED I declare that, to the best of my knowledge and belief, during the year ended 31 December 2022 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and — no contraventions of any applicable code of professional conduct in relation to the audit. William Buck Audit (Vic) Pty Ltd ABN: 59 116 151 136 A. A. Finnis Director Melbourne, 30 March 2023 Level 20, 181 William Street, Melbourne VIC 3000 +61 3 9824 8555 vic.info@williambuck.com williambuck.com.au William Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation. Auditors Independence Declaration-1 Jayex Technology Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2022 Revenue from continuing operations Other income Expenses Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Marketing expenses Administrative, corporate and other expenses Finance costs Impairment of intangible assets Consolidated Restated Note 2022 $ 2021 $ 6 7 8 8 8 14 4,303,996 3,586,303 202,936 1,289,021 (916,882) (3,107,925) (373,742) (73,551) (1,488,442) (919,068) (3,748,022) (570,807) (3,047,888) (589,892) (107,078) (1,454,690) (839,650) (2,513,800) Loss before income tax benefit from continuing operations (6,120,700) (4,248,481) Income tax benefit 86,179 433,497 Loss after income tax benefit from continuing operations (6,034,521) (3,814,984) Loss after income tax expense from discontinued operations 9 (1,211,317) (109,358) Loss after income tax (expense)/benefit for the year attributable to the owners of Jayex Technology Limited (7,245,838) (3,924,342) Other comprehensive income/(loss) Items that will not be reclassified subsequently to profit or loss (Loss)/gain on the revaluation of equity instruments at fair value through other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income/(loss) for the year, net of tax (106,961) 57,091 (154,927) 404,108 (261,888) 461,199 Total comprehensive loss for the year attributable to the owners of Jayex Technology Limited (7,507,726) (3,463,143) Total comprehensive loss for the year is attributable to: Continuing operations Discontinued operations (6,296,409) (1,211,317) (3,353,785) (109,358) (7,507,726) (3,463,143) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 19 Jayex Technology Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2022 Earnings per share for loss from continuing operations attributable to the owners of Jayex Technology Limited Basic earnings per share Diluted earnings per share Earnings per share for loss from discontinued operations attributable to the owners of Jayex Technology Limited Basic earnings per share Diluted earnings per share Earnings per share for loss attributable to the owners of Jayex Technology Limited Basic earnings per share Diluted earnings per share 32 32 32 32 32 32 Cents Cents (2.42) (2.42) (1.73) (1.73) (0.49) (0.49) (0.05) (0.05) (2.91) (2.91) (1.78) (1.78) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 20 Jayex Technology Limited Consolidated statement of financial position As at 31 December 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Non-current assets Deposits Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Plant and equipment Right-of-use assets Intangibles Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Lease liabilities Provision for income tax on capital gains Employee benefits Provisions Contract liabilities Total current liabilities Non-current liabilities Borrowings Lease liabilities Deferred tax Employee benefits Total non-current liabilities Total liabilities Net assets/(liabilities) Equity Issued capital Reserves Accumulated losses Total equity/(deficiency) Consolidated Restated Note 2022 $ 2021 $ 10 11 12 13 14 15 16 17 18 19 239,379 397,659 139,324 19,063 795,425 982,716 838,348 246,614 47,578 2,115,256 39,363 - 1,414,828 - 50,463 - 1,504,654 54,113 536,001 1,368,846 193,289 247,265 5,176,729 7,576,243 2,300,079 9,691,499 1,824,437 4,136,825 51,764 39,940 27,281 236,344 1,099,514 7,416,105 1,033,059 2,607,101 149,823 199,447 49,743 215,046 1,615,450 5,869,669 1,208,889 3,461 - 1,727 1,214,077 2,454,826 112,979 59,744 16,658 2,644,207 8,630,182 8,513,876 (6,330,103) 1,177,623 20 21 28,112,494 28,112,494 (1,654,819) (25,280,052) (1,866,837) (32,575,760) (6,330,103) 1,177,623 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 21 Jayex Technology Limited Consolidated statement of changes in equity For the year ended 31 December 2022 Consolidated (Restated) Shared- based payment reserve $ Issued capital $ Foreign exchange reserve $ Financial asset reserve $ Accumulated losses $ Total equity $ Balance at 1 January 2021 26,861,089 - (2,128,205) - (21,355,710) 3,377,174 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 20) Vesting of share based payments - - - 1,251,405 - - - - - 12,187 - - (3,924,342) (3,924,342) 404,108 57,091 - 461,199 404,108 57,091 (3,924,342) (3,463,143) - - - - - - 1,251,405 12,187 Balance at 31 December 2021 28,112,494 12,187 (1,724,097) 57,091 (25,280,052) 1,177,623 Consolidated Shared- based payment reserve $ Issued capital $ Foreign exchange reserve $ Financial asset reserve $ Accumulated losses $ Total deficiency in equity $ Balance at 1 January 2022 28,112,494 12,187 (1,724,097) 57,091 (25,280,052) 1,177,623 Loss after income tax benefit for the year Other comprehensive loss for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Disposal of financial assets - - - - - - - - - - (7,245,838) (7,245,838) (154,927) (106,961) - (261,888) (154,927) (106,961) (7,245,838) (7,507,726) - 49,870 (49,870) - Balance at 31 December 2022 28,112,494 12,187 (1,879,024) - (32,575,760) (6,330,103) The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 22 Jayex Technology Limited Consolidated statement of cash flows For the year ended 31 December 2022 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Other revenue Interest and other finance costs paid Income taxes paid Net operating cash used in continuing operations Consolidated Note 2022 $ 2021 $ 4,237,280 (4,815,541) 133,887 (172,605) (199,447) (816,426) 3,878,647 (5,309,349) 251,328 (223,749) - (1,403,123) Net operating cash (used in)/ generated by discontinued operations (39,944) 146,434 Net cash used in operating activities (856,370) (1,256,689) Cash flows from investing activities Proceeds from disposal of Acute business Payments for disposal of Acute business Payment for investments Proceeds from disposal of investments Net cash from/(used in) continuing operations’ investing activities - - - 429,040 429,040 1,583,707 (850,303) (1,368,846) - (635,442) Net cash used in the investing activities of discontinued operations - (134,724) Net cash from/(used in) investing activities 429,040 (770,166) Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Proceeds from borrowings Repayment of borrowings Repayment of convertible notes Repayment of lease liabilities Net cash used in continuing operations’ financing activities - 266,642 (391,111) - (136,676) (261,145) 1,292,092 (40,687) 1,116,071 (111,607) (300,000) (116,707) (1,839,162) Net cash used in the financing activities of discontinued operations (20,569) (18,520) Net cash (used in)/from financing activities Net 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 Cash and cash equivalents at the end of the financial year (281,714) 1,820,642 (709,044) 982,716 (34,293) (206,213) 1,182,183 6,746 239,379 982,716 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 23 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 1. General information The financial statements cover Jayex Technology Limited as a consolidated entity consisting of Jayex Technology Limited ("the Company") and the entities it controlled at the end of, or during, the period. The financial statements are presented in Australian dollars, which is Jayex Technology Limited's functional and presentation currency. Jayex Technology Ltd is a for-profit company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Registered office Principal place of business Level 4 100 Albert Road South Melbourne VIC 3205 17B Cribb Street Milton QLD 4064 The financial statements were authorised for issue, in accordance with a resolution of Directors, on 30 March 2023. The Directors have the power to amend and reissue the financial statements. Note 2. 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 periods presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Other accounting pronouncements which have become effective from 1 January 2022 and have therefore been adopted have not had a significant impact on the Group’s financial results or position. 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 year ended 31 December 2022. Going concern The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The working capital position as at 31 December 2022 of the consolidated entity, as disclosed in the statement of financial position, is an apparent excess of current liabilities over current assets of $6,620,680 (2021: $3,754,413). However, the current liabilities as at 31 December 2022 contain a number of liability accounts, including Contract liabilities and Convertible notes, which represent the results of accounting adjustments and do not represent amounts currently payable, or expected to become payable, to third parties. Excluding these liability amounts from the calculation of working capital at 31 December 2022, results in adjusted working capital deficit of $2,821,166 (2021: working capital surplus of $58,912). The cash balance at 31 December 2022 was $239,379 (2021: $982,716). The consolidated entity incurred a net loss after tax for the financial year ended 31 December 2022 of $7,245,838 (2021: $3,924,342) and had net cash outflows from operating activities of $856,370 (2021: $1,256,689). These conditions give rise to a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern. Notwithstanding these results, the directors believe that the company will be able to continue as a going concern and as a result the financial statements have been prepared on a going concern basis. The accounts have been prepared on the assumption that the company is a going concern for the following reasons: 24 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) ● ● ● ● ● ● The consolidated entity has a large and very stable customer base, with a very low churn rate across the core products; The consolidated entity has entered into a joint venture with Shine Clinical Limited which is expected to deliver industry contracts (between $0.5 – 2 million) which are typically multi-month and repeating annually; an organizational restructure and various efficiency projects have delivered material reductions in operational expenditure. The consolidated entity has further ability to scale down if required; financial support has been consistently offered by related parties of the Directors; the Board is of the opinion that the consolidated entity has, or shall have access to, sufficient funds to meet the planned corporate activities and working capital requirements; and as the Company is an ASX-listed entity, the consolidated entity has the ability to raise additional funds if required. This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. 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'). 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 3. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Jayex Technology Ltd ('Company' or 'parent entity') as at 31 December 2022 and the results of all subsidiaries for the period then ended. Jayex Technology Ltd and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Details of subsidiaries are included in note 29. 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. Foreign currency translation The financial statements are presented in Australian dollars, which is Jayex Technology 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. 25 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) 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 predominantly derives revenue from the sale of goods and services. Significant contracts with customers depict various performance obligations, such as: ● ● ● ● ● Supply and delivery of equipment, along with the software license to run on such equipment. This also include installation services and web portal access; Additional services (if contracted and included to that standard services agreement); Annual, ongoing software license and support services; Software customisation (development) and related support services; and Annual and ongoing extended warranty services. To determine whether to recognise revenue, the consolidated entity follows a 5-step process: ● ● ● ● ● Identifying the contract with a customer Identifying the performance obligations Determining the transaction price Allocating the transaction price to the performance obligations Recognising revenue when/as performance obligation(s) are satisfied. Revenue is recognised either at a point in time or over time, when (or as) the consolidated entity satisfies performance obligations by transferring the promised goods or services to its customers. Rendering of services All deals are done on an annual basis with the option to pay for additional year(s)' warranty and software support at the time of the sale in advance. Revenue is recognised on a straight-line basis over the term of the contract for such services. This method best depicts the transfer of services to the customer as the consolidated entity’s historical experience demonstrates no statistically significant variation in the quantum of services provided in each year of a multi-year contract. Under AASB 15, the consolidated entity concluded that revenue from warranty and software support services will continue to be recognised over time, using an input method to measure progress towards complete satisfaction of the service similar to the previous accounting policy, because the customer simultaneously receives and consumes the benefits provided by the consolidated entity. The consolidated entity recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the consolidated entity satisfies a performance obligation before it receives the consideration, the consolidated entity recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. Equipment (Kiosk) sale and installation The supply, installation and commissioning of requested equipment by the consolidated entity to the customer in accordance with a contract. Revenue is recognized at the point in time when the equipment has been commissioned and commences operation in accordance with specifications, at which point the performance obligation is satisfied. The equipment can only be installed by the company, as such the customer cannot derive benefits from the equipment until after installation of the software to run it, consequently, the revenue is recognized at a point in time after installation. Software licences Provision, over a specified period, of licence permitting and enabling the customer to access and use the software product supplied by the consolidated entity. Revenue is recognized on a straight line basis over the specified period, i.e. over time. 26 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) Extended warranties Provision, over a specified period, of an extended warranty in favour of the customer to repair or replace equipment previously supplied by the consolidated entity. Revenue is recognized on a straight-line basis over the specified warranty period, i.e. over time. Software support services Provision by the consolidated entity, over a specified period, of telephone and online software support services to the customer, whereby client queries and problems are resolved by consolidated entity staff as required. Revenue is recognized on a straight-line basis over the specified period, i.e. over time. Software development services The supply, installation and commissioning of specific specialised software enhancements as required by the customer, which are outside of, or in addition to, the standard software product offered by the consolidated entity. Revenue is recognized over time as and when the software development services are delivered and recognition ceases once the project has been commissioned and commences operation in accordance with customer specifications at which point the performance obligation is satisfied. At this point any further service provided in relation to such development would be covered by Software support services as described above. Other income Interest Interest income 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. Government grants Government grants are recognised when there is reasonable assurance that the grant will be received and all grant conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is expected 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 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. Discontinued operations A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of profit or loss and other comprehensive income. Cash and cash equivalents Cash and cash equivalents include 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. 27 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) Inventories Stock in transit 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. 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. Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Financial assets at amortised cost A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or loss. 28 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) 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 basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Motor vehicles Computer equipment Office equipment Furniture and fittings 4 - 5 years 3 years 3 - 5 years 4 - 5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. 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. 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. Intangible assets with indefinite useful lives are not amortised, but tested for impairment annually, either individually or at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. Amortisation expense is included in depreciation and amortisation expense in the Statement of profit or loss and other comprehensive income. 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. 29 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. 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 7 years. Software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis generally over 5-7 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset. When these assets are acquired as part of a business combination they are recognised separately from goodwill. The assets are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Customer relationships When these assets are acquired as part of a business combination they are recognised separately from goodwill. The assets are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis generally over the assets’ estimated useful lives of 10 years. 30 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) 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. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash- generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. 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 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. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. 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. The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a current liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. 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. 31 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) 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. Contract liabilities Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. 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. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-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. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either: (i) the Binomial 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; or, (ii) Barren option pricing model which takes into account largely the same factors as the above model, but also takes into account the relevant predetermined level (the barrier), with the fair value calculated using a trinomial lattice. 32 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 2. Significant accounting policies (continued) 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. 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. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. 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. Loss per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Jayex Technology Ltd, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for share splits or bonus elements in ordinary shares issued during the financial period. 33 Jayex Technology Limited Notes to the consolidated financial statements 3 1 December 2022 No te 2. Significant accounting policies (continued) 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. Note 3. 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. 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 disco unted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Refer to note 23 for key inputs used in the valuation models. Warranty provision In determining the level of provision required for warranties the consolidated entity has made judgements in respect of the expected performance of the products, the number of customers who will actually claim under the warranty and how often, and the costs of fulfilling the conditions of the warranty. The provision is based on estimates made from historical warranty data associated with similar products and services. Estimates on the churn of customer relationships. Management has estimated that the average customer retention is 10 years. Amortisation of intangible assets related to customer relationship has accordingly been amortised over 10 years. Existing customers pay an annual subscription renewal identifying the existing useful life of their product. Our churn is estimated to be at 3%. The majority of our customers are repeat purchasers. 34 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 4. Restatement of comparatives Correction of error The Group has noted a prior period error for the year ended 31 December 2021 where the disposal of capitalised software was incorrectly adjusted against the foreign currency translation reserve. The Group has restated each of its affected financial statement line items for the prior period ended 31 December 2021, in accordance with AASB 108 "Accounting Policies, Changes in Accounting Estimates and Errors". The impact of the change is presented below: Assets Intangible assets Total assets Liabilities Deferred Tax Liabilities Total Liabilities Equity Reserves Accumulated losses Total equity As previously reported 2021 $ Adjustment $ As Restated 2021 $ 5,465,959 9,980,729 (289,230) (289,230) 5,176,729 9,691,499 139,282 8,593,414 (79,538) (79,538) 59,744 8,513,876 (1,390,173) (25,335,006) 1,387,315 (264,646) 54,954 (209,692) (1,654,819) (25,280,052) 1,177,623 As previously reported 2021 $ As Restated Adjustment $ 2021 $ Loss after income tax expense from continuing operations (4,248,481) - (4,248,481) Income tax benefit/(expense) Loss after income tax benefit from continuing operations Loss after income tax expense from discontinued operations Loss after income tax (expense)/benefit for the year attributable to the owners of Jayex Technology Limited Other comprehensive loss for the year, net of tax 378,543 (3,869,938) (109,358) (3,979,296) 54,954 54,954 - 54,954 433,497 (3,814,984) (109,358) (3,924,342) 461,199 - 461,199 Total comprehensive loss for the year (3,518,097) 54,954 (3,463,143) Cents Cents Reported Adjustment Restated Cents Basic and diluted earnings/(loss) per share from continuing operations Basic and diluted earnings/(loss) per share from discontinued operations Basic and diluted earnings/(loss) per share attributable to the owners of Jayex Technology Limited (1.76) (0.05) (1.81) 0.02 - 0.02 (1.73) (0.05) (1.78) 35 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 5. Operating segments Identification of reportable operating segments The consolidated entity is organised into two operating segments: Australia and United Kingdom (UK). These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation), excluding capital-raising expenses and share-based payments. 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. No changes to the policy above have occurred during the financial year. The Consolidated entity had the following discontinued operations during year ended 31 December 2022 and 31 December 2021: (i) (ii) During the year ended 31 December 2022, the consolidated entity has closed its operations at Whakaora Hou Limited (WHL). WHL had been grouped under the Australia operation segment. In the segment information below, the discontinued operating results of WHL for the year ended 31 December 2022 and comparative results for the year ended 31 December 2021 of, $1,247,400 and $204,410 respectively have been presented separately from Australia Segment. Refer to note 9 for details on discontinued operating results. During previous year, the Group sold its on-premises Acute hospital queue management business to Canadian based medical technology company Vitalhub Inc. where Vitalhub acquired Jayex’s hospital contracts in both the United Kingdom and Australia. In the segment information below, the discontinued operating results of Acute business from United Kingdom and Australia segments have been presented separately. Refer to note 9 for details on discontinued operating results. Intersegment transactions Intersegment transactions were made at market rates. The Australian operating segment charges a management fee to the United Kingdom operating segment. 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. Major customers The consolidated entity does not have a major customer that contributes more than 10% or more to the consolidated entity's revenue. 36 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 5. Operating segments (continued) Operating segment information Consolidated - 2022 Revenue Sales to external customers Total revenue Other revenue Segment operating expenses EBITDA Interest expense Depreciation & amortisation expense Impairment of intangibles* Fair value change in the derivative instrument Loss before income tax benefit Income tax benefit Loss after income tax benefit continuing operations Loss after income tax from discontinued operations (note 9) Loss after income tax Australia $ United Kingdom $ Total $ 320,142 320,142 82,741 (1,215,428) (812,545) 3,983,854 3,983,854 51,146 (4,371,372) (336,372) 4,303,996 4,303,996 133,887 (5,586,800) (1,148,917) (919,068) (373,742) (3,748,022) 69,049 (6,120,700) 86,179 (6,034,521) (1,211,317) (7,245,838) *The impairment cost of intangibles of $3,748,022 related United Kingdom operating segment. Consolidated - 2022 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Consolidated - 2021 (restated) Revenue Sales to external customers Total revenue Other revenue Segment operating expenses EBITDA Interest expense Depreciation & amortisation expense Impairment of assets** Share based payment expense Fair value change in the derivative instrument Loss before income tax benefit Income tax benefit Loss after income tax benefit continuing operations Loss after income tax from discontinued operations (note 9) Loss after income tax Australia $ United Kingdom $ Total $ 61,971 1,451,204 1,513,175 733,454 53,451 786,905 795,425 1,504,655 2,300,080 4,199,383 5,189 4,204,572 3,216,722 1,208,888 4,425,610 7,416,105 1,214,077 8,630,182 Australia $ United Kingdom $ Total $ 562,267 562,267 62,608 (1,991,485) (1,366,610) 3,024,036 3,024,036 188,581 (3,176,791) 35,826 3,586,303 3,586,303 251,189 (5,168,276) (1,330,784) (839,650) (589,892) (2,513,800) (12,187) 1,037,832 (4,248,481) 433,497 (3,814,984) (109,358) (3,924,342) **Out of total impairment cost of intangibles of $2,513,800, $585,800 and $1,928,000 was related Australia and United Kingdom operating segments respectively. 37 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 5. Operating segments (continued) Consolidated – Dec 2021 (restated) Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Note 6. Revenue From continuing operations Sales revenue Australia $ United Kingdom $ Total $ 256,708 2,653,246 2,909,954 1,858,548 4,922,997 6,781,545 2,115,256 7,576,243 9,691,499 2,718,354 819,744 3,538,098 3,151,315 1,824,463 4,975,778 5,869,669 2,644,207 8,513,876 Consolidated 2022 $ 2021 $ 4,303,996 3,586,303 Sales revenue is revenue generated from the consolidated entity's healthcare industry service provision businesses. For 2022, revenue includes $1,592,158 (2021: $1,247,528) included in the contract liability balance at the beginning of the period. Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Major product lines Supply and installation of Kiosks (at a point of time) Software licences and support services (over time) Extended warranty and software support (over time) Software development customisation services (over time) Software development supports services (over time) Note 7. Other income Fair value change in the derivative instrument Government grants Foreign exchange gains Other Other income 38 Consolidated 2022 $ 2021 $ 1,672,713 2,254,609 376,674 - - 1,414,378 1,790,569 343,414 23,621 14,321 4,303,996 3,586,303 Consolidated 2022 $ 2021 $ 69,049 - 82,741 51,146 1,037,832 251,031 - 158 202,936 1,289,021 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 8. Expenses Loss before income tax from continuing operations includes the following specific expenses: Depreciation Plant and equipment Buildings right-of-use assets Total depreciation Amortisation Software Customer relationships Total amortisation Total depreciation and amortisation Finance costs Interest and finance charges on borrowings and convertible notes Interest and finance charges paid/payable on lease liabilities Finance costs expensed Superannuation expense Defined contribution superannuation expense Employee benefits expense excluding superannuation Employee benefits expense excluding superannuation Consolidated 2022 $ 2021 $ - 119,441 19,607 142,994 119,441 162,601 45,146 209,155 113,154 314,137 254,301 427,291 373,742 589,892 913,015 6,053 813,729 25,921 919,068 839,650 41,872 52,981 3,066,053 2,994,907 39 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 9. Discontinued operations Description During previous year, the Group sold its on-premises Acute hospital queue management business to Canadian based medical technology company Vitalhub Inc. Under the agreement, Vitalhub acquired Jayex’s hospital contracts in both the UK and Australia for a consideration of £1.04 million (~$1.9 million AUD) in cash and £0.26 million (~$0.47million AUD) in Vitalhub shares (150,078 shares in total). Financial performance information Revenue Raw materials and consumables used Employee benefits expense Professional services expenses Other expense Total expenses Profit before income tax expense Income tax expense Profit after income tax expense Gain on disposal before income tax Income tax expense Gain/(loss) on disposal after income tax expense Gain after income tax expense from discontinued operations Details of the disposal Total sale consideration Carrying amount of net assets disposed Consideration from release of Escrow Disposal costs Gain on disposal before income tax Income tax expense Gain/(loss) on disposal after income tax Consolidated 2022 $ 2021 $ - - - - - - - - - 538,863 (10,658) (217,783) (90,738) (9,127) (328,306) 210,557 - 210,557 36,083 - 82,838 (196,343) 36,083 (113,505) 36,083 97,052 Consolidated 2022 $ 2021 $ - - 36,083 - 2,173,109 (1,239,968) - (850,303) 36,083 - 82,838 (196,343) 36,083 (113,505) The gain on disposal for the period ended 31 December 2022 related to the release of escrowed funds held which was recognised as a contingent asset in the previous financial year. 40 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 9. Discontinued operations (continued) Closure of Whakaora Hou Limited operations During the year ended 31 December 2022, the consolidated entity has closed its operations at Whakaora Hou Limited (WHL). The financial performance of the discontinued operations of WHL during the year as following: Financial performance information Revenue Professional services expenses Foreign exchange gains/losses Depreciation and amortisation Other expense Impairment of intangible asset Impairment of plant and equipment Total expenses Loss before income tax expense Income tax expense Loss after income tax expense Gain on disposal before income tax Income tax expense Consolidated 2022 $ 2021 $ - (14,131) 18,308 (98,540) (15,510) (974,388) (163,139) (1,247,400) - (53,216) (3,727) (112,421) (37,046) - - (206,410) (1,247,400) - (206,410) - (1,247,400) (206,410) - - - - Loss on disposal after income tax expense (1,247,400) (206,410) Loss after income tax expense from discontinued operations (1,247,400) (206,410) 41 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 10. Trade and other receivables Trade receivables, net of expected credit losses Other receivables Consolidated 2022 $ 2021 $ 388,058 9,601 819,452 18,896 397,659 838,348 The ageing of the trade receivables and allowance for expected credit losses provided for above are as follows: Expected credit loss rate 2022 % Expected credit loss rate 2021 % Carrying amount 2022 $'000 Carrying amount 2021 $'000 Allowance Allowance for expected credit losses 2022 $'000 for expected credit losses 2021 $'000 Not overdue 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue - - - 82% - - 33.00% - 32,670 290,336 54,390 61,258 - 493,538 - 243,052 125,099 - (50,596) - - - (42,237) - 438,654 861,689 (50,596) (42,237) Note 11. Financial assets at fair value through other comprehensive income Investment in Vitalhub shares Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening fair value Additions Revaluation increments Revaluation decrements Disposals Closing fair value Consolidated 2022 $ 2021 $ - 536,001 536,001 - - (106,961) (429,040) - 478,910 57,091 - - - 536,001 On 14 May 2021, in-part consideration towards the sales of Acute business for GBP 260k (equivalent to $472k), the company were issued 150,078 shares in Vitalhub Corporation at CAD 2.915 per share. These investment in shares is classified as level 1 in fair value measurement hierarchy as the Vitalhub Corporation is listed on Toronto Stock Exchange (TSXV: VHI). At the time of initial recognition, the company has made an irrevocable election for these investments to present subsequent changes in fair value in other comprehensive income. During the year ended 31 December 2022, the company disposed all the Vitalhub shares for net proceeds of AUD 429,040. Refer to note 23 for further information on fair value measurement. 42 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 12. Financial assets at fair value through profit or loss Investment in Brainworks Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening fair value Additions foreign exchange Closing fair value Consolidated 2022 $ 2021 $ 1,414,828 1,368,846 1,368,846 - 45,982 - 1,368,846 - 1,414,828 1,368,846 In 2021 financial year, Jayex Technology Limited executed a binding Head of Agreement ('HoA') for the strategic investment into Brainworks Foundry Inc. ('Brainworks'), based in Delaware, United States. Brainworks’ Smart Health AI technology platform is currently undergoing preliminary clinical trials and is designed to allow a patient’s vital signs, incl. heart rate, respiratory rate, blood oxygenation etc. to be measured simply by pointing the camera of a smartphone at the patient’s face for 5-30 seconds. The platform can securely store a patient’s health data and deliver test results to key healthcare professionals and other non-regulated stakeholders. Medio Labs, a brand operating under and owned by Brainworks, is a new AI-enhanced healthcare service developed by applying Brainworks’ latest discoveries in AI and neuroscience and molecular sensing. The investment into Brainworks fits with Jayex’s renewed and repositioned business model, and to extend its SaaS Connect data management capabilities for GP Clinics into more GP/Patient related services such as remote patient monitoring. Following the HoA, the company has invested $1.36 million in Brainworks to subscribe 1,234,566 Brainworks shares at an issue price of USD 0.81 for a total consideration of USD 1 million (equivalent to ÄUD 1.36 million). The investment has been held at fair value with subsequent changes carried through the statement of profit or loss. In determining the fair value of the investment as at 31 December 2022 the Company engaged an independent valuation specialist. Based on the valuation, the fair value of the investment as 31 December 2022 approximates its carrying value above at $1.41m. Refer to note 23 for further information on fair value measurement. 43 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 13. Plant and equipment Leasehold improvements - at cost Less: Impairment Less: Accumulated depreciation Plant and equipment - at cost Less: Impairment Less: Accumulated depreciation Motor vehicles - at cost Less: Accumulated depreciation Office equipment - at cost Less: Accumulated depreciation Furniture and fittings - at cost Less: Accumulated depreciation Consolidated 2022 $ 2021 $ 177,090 (139,522) (37,568) - 28,628 (23,617) (5,011) - 17,253 (17,253) - 180,210 - (13,508) 166,702 26,587 - - 26,587 54,207 (54,207) - 245,000 (245,000) - 258,990 (258,990) - 89,079 (89,079) - 93,204 (93,204) - - 193,289 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 January 2021 Additions Depreciation expense Balance at 31 December 2021 Exchange differences Impairment of assets* Depreciation expense Balance at 31 December 2022 Furniture & fittings $ Office equipment $ Plant & equipment $ Leasehold improvement $ Total $ 9,724 - (9,724) 9,883 - (9,883) - - - - - - - - - - 28,851 - (2,264) 26,587 (107) (23,617) (2,863) 136,061 44,149 (13,508) 166,702 (4,670) (139,522) (22,510) 184,519 44,149 (35,379) 193,289 (4,777) (163,139) (25,373) - - - *Impairment charge relates to assets of Whakaora Hou Limited, the operations of which are closed during the year ended 31 December 2022. Refer to note 9 for further details. 44 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 14. Intangibles Goodwill - at cost Less: Impairment Product development - at cost Less: Accumulated amortisation Less: Impairment Software platform - at cost Less: Accumulated amortisation - Software Less: Impairment Customer relationships - at cost Less: Accumulated amortisation - Customer relationships Less: Impairment Consolidated 2022 $ 2021 (Restated) $ 9,942,846 10,103,930 (6,464,986) (9,942,846) 3,638,944 - 1,109,426 (135,038) (974,388) - 1,069,172 (80,188) - 988,984 1,460,674 (1,434,943) (25,731) - 2,444,810 (2,200,380) (244,430) - 1,813,484 (1,739,316) 74,168 2,551,232 (2,076,599) 474,633 - 5,176,729 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 January 2021 Disposals Additions Exchange differences Impairment of assets Amortisation expense Balance at 31 December 2021 Additions Exchange differences Impairment of assets* Amortisation expense Goodwill $ Patents & trademarks $ Software platform $ Customer relationships $ Development cost $ Total $ 5,719,966 (452,000) - 298,978 (1,928,000) - 3,638,944 - (161,083) (3,477,861) - 585,800 - - - (585,800) - - - - - - - 453,281 (289,230) - 23,271 - (113,154) 74,168 - (3,291) (25,731) (45,146) 1,503,137 (787,968) - 73,601 - (314,137) 474,633 - (21,048) (244,430) (209,155) 974,629 - 94,543 - - (80,188) 9,236,813 (1,529,198) 94,543 395,850 (2,513,800) (507,479) 988,984 48,539 (7,664) (974,388) (55,471) 5,176,729 48,539 (193,086) (4,722,410) (309,772) - - - - Balance at 31 December 2022 - * During the year Consolidated entity impaired $ 4,772,410 of its intangible assets of which: (i) (ii) $974,388 relates to the discontinued operations of Whakaora Hou Limited, the operations of which are closed during the year ended 31 December 2022. Refer to note 9 for further details; and $3,748,022 of which relates to the continuing operations at company’s UK subsidiary, Jayex Technology Ltd. It is comprised of impairment of goodwill and customer relationships recognised at the time of the acquisition of the UK business and software platform developed by the company. The impairment is driven by losses incurred at the UK business and Group’s assessment that the carrying amount of these asset exceeds its recoverable amount. 45 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 14. Intangibles (continued) Goodwill For the purpose of ongoing annual impairment testing goodwill is allocated to the following cash-generating units, which are the units expected to benefit from the synergies of the business combinations in which the goodwill arises: Jayex Technology Limited (United Kingdom) Methodology Consolidated 2022 $ 2021 $ - 3,638,944 An impairment loss expense in the profit or loss is recognised when the carrying amount of an asset exceeds its recoverable amount. The Company determined the recoverable amounts of Jayex Technology Limited CGU using a value in use approach. The recoverable amounts of the CGU of $(1.8) million has been determined by valuation models that estimated the future cash flows relying on historical performance and growth, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU. The discounted cash flow model used in the assessment of value in use is sensitive to a number of key assumptions, including revenue growth rates, discount rates, operating costs and foreign exchange rates. These assumptions can change over short periods of time and can have a significant impact on the carrying value of the assets. Impairment testing for CGUs containing goodwill Goodwill arose in the business combinations for the acquisition of Jayex Technology Limited in 2015. It represented the excess of the cost of the acquisition over the fair value of the Group’s share of the identifiable net assets acquired and contingent liabilities assumed at the date of acquisition. Goodwill is allocated to the Group’s cash generating units (CGUs) identified according to the Group’s operating segments for impairment testing purposes. In assessing whether an impairment adjustment is required for the carrying value of an asset, its carrying value is compared with its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value-in- use. Value in use and key assumptions The Company estimates the value-in-use of Jayex Technology Limited CGU using discounted cash flows. For the 2022 reporting period, the recoverable amount of the cash generating units (CGUs) was determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a one-year period. Cash flows beyond the one-year period are extrapolated using the estimated growth rates and assumptions used in the value in use calculations are stated below: • Pre-tax discount rate - 16.5% • Foreign exchange rate - £/$A 0.5625 • Period over which cash flows projected - 5 years • Growth projections - revenue increase at average rates of 5% per annum, based on past trends • Expenses increase at average rates of 5% per annum, based on past trends of reducing cost base compared to revenues • Long term growth rate used to extrapolate cash flow projections beyond forecast period - 5% per annum Apart from the considerations described in determining the value-in-use of the cash-generating units described above, management is not currently aware of any other probable changes that would necessitate changes in its key estimates. 46 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 14. Intangibles (continued) Impairment The Consolidated entity has performed an impairment assessment based on its cash generating units, which is Jayex Technology CGU. As a result of the assessment the Company has recognised an impairment to goodwill asset of $3.47 million in relation to the Jayex Technology CGU for the year ended 31 December 2022. Note 15. Trade and other payables Trade payables Accrued expenses Interest payable GST and VAT payable Other payables Refer to note 22 for further information on financial instruments. Note 16. Borrowings Derivative liability Borrowings - current Convertible notes payable Consolidated 2022 $ 2021 $ 447,161 454,158 87,750 196,092 639,276 206,381 406,712 - 154,204 265,762 1,824,437 1,033,059 Consolidated 2022 $ 2021 $ - 1,436,825 2,700,000 69,049 409,226 2,128,826 4,136,825 2,607,101 In 2020 financial year, the Company issued 3,000,000 convertible notes each having a face value of $1.00 to Covenant Holding (WA) Pty Ltd towards the settlement of its $3m borrowings. Convertible notes are unsecured and bears an interest rate of 6.5% per annum. The Convertible Notes are convertible into Shares in whole or in part at the sole election of the Noteholder at the Conversion Price at any time on or before the redemption date. Conversion Price will be determined as the greater of $0.05 and a 20% discount to the volume weighted average price of Shares on the ASX calculated over the 30 days on which trades in Shares were recorded immediately prior to the conversion date. Convertible notes were repayable on 13 October 2022, being the original redemption date, for the balance of convertible notes not converted into shares as at that date. In 2021 financial year, the company repaid $300,000 of Convertible Notes. During the year ended 31 December 2022, the redemption date for convertible notes have been extended by 12 months to 13 October 2023. As of 31 December 2022, there are 2,700,000 convertible notes outstanding with the carrying value of $2.7 million payable on 13 October 2023, if not converted into shares as at that date. The convertibles notes contained an embedded derivative representing the option to convert the convertible notes into equity shares. At the inception date on 13 October 2020, this derivative liability was fair valued at $1,386,000. As of 31 December 2022, the derivative liability was fair valued at $nil (31 December 2021: $69,049) due to a change in the date of the proposed settlement of convertible notes with Company's Share Options in lieu of cash payment. The change in the fair value is recognised in the statement of profit and loss. Subsequent to the year end, shareholders at its General Meeting on 7 March 2023 approved the issuance of 207,692,307 Options to Covenant Holding (WA) Pty Ltd towards the repayments of $2.7 million convertible notes. Refer to note 19 for the information on borrowings. 47 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 17. Provisions Provision for warranties Provision for credit notes Consolidated 2022 $ 2021 $ 212,571 23,773 147,228 67,818 236,344 215,046 Warranties The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent trends that may suggest future claims could differ from historical amounts. Credit notes The provision represents the estimated credit notes which may be granted in future periods in respect of products sold prior to the reporting date. The provision is estimated based on historical credit note information, sales levels and any recent trends that may suggest future issues of credit notes could differ from historical amounts. Movements in provisions Movements in each class of provision during the current financial year, other than employee benefits, are set out below: Consolidated - 2022 Carrying amount at the start of the year Additional provisions recognised Reduction in provision required Carrying amount at the end of the year Note 18. Contract liabilities Contract liabilities consist of the following: Warranties Credit notes $ $ 147,228 65,343 - 67,818 - (44,045) 212,571 23,773 Consolidated 2022 $ 2021 $ Contract liabilities - Deferred service income 1,099,514 1,615,450 Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening balance Payment in advance Transfer to Revenue - included in the opening balance Transfer to Revenue - revenue originated during the year Closing balance 1,615,450 2,829,110 (1,592,158) (1,752,888) 1,436,773 1,929,677 (1,247,528) (503,472) 1,099,514 1,615,450 Contract liabilities represents sales invoiced in advance for the provision of contracted services. 48 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 19. Borrowings Borrowings - non-current Refer to note 22 for further information on financial instruments. Consolidated 2022 $ 2021 $ 1,208,889 2,454,826 The current borrowings in note 16 and non- current borrowing above, totalling to $2,645,714 comprises of: (i) (ii) (iii) $1,010,159 of current loans that have been advanced to the consolidated entity by a related party. Refer note 27 for further information. $746,666 loan payable to National Westminster Bank, United Kingdom with an interest rate of 2.05% per annum. GBP 600k loan originally taken is repayable by June 2026 with repayment started from July 2021. As at 31 December 2022, current and non-current portions of loan are at GBP 120k (equivalent to $213,333) and GBP300k (equivalent to $533,333) respectively. $888,889 loan payable to National Westminster Bank, United Kingdom with an interest rate of 2.05% per annum. GBP 600k loan originally taken is repayable by February 2027 with repayment starting from March 2022. As at 31 December 2022, current and non-current portions of loan are at GBP 120k (equivalent to $213,333) and GBP500k (equivalent to $675,556) respectively. Note 20. Issued capital Consolidated 2022 Shares 2021 Shares 2022 $ 2021 $ Ordinary shares - fully paid 249,228,539 249,228,539 28,112,494 28,112,494 Movements in ordinary share capital Details Balance Placement of shares Rights issue Capital raising costs Balance Balance Date No of shares Issue price $ 1 January 2021 4 June 2021 22 September 2021 201,363,024 19,090,755 28,774,760 - 26,861,089 572,724 719,368 (40,687) $0.03 $0.03 $0.00 31 December 2021 249,228,539 28,112,494 31 December 2022 249,228,539 28,112,494 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. 49 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 20. Issued capital (continued) 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. No external requirements have been imposed on the consolidated entity in regards to capital management. 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. No changes to what is regarded as capital nor how it is managed have occurred during the financial year Note 21. Reserves Financial asset reserve Foreign currency reserve Share-based payments reserve Consolidated 2022 $ 2021 (Restated) $ - (1,879,024) 12,187 57,091 (1,724,097) 12,187 (1,866,837) (1,654,819) Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. 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. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 January 2021 Foreign currency translation Shared-based payments Movement in the value of investments Balance at 31 December 2021 Foreign currency translation Movement in the value of investments Disposal of financial assets Foreign currency reserve $ Share-based payments reserve $ Financial asset reserve $ Total $ (2,128,205) 404,108 - - (1,724,097) (154,927) - - - - 12,187 - 12,187 - - - - - - 57,091 (2,128,205) 404,108 12,187 57,091 57,091 - (106,961) 49,870 (1,654,819) (154,927) (106,961) 49,870 Balance at 31 December 2022 (1,879,024) 12,187 - (1,866,837) Financial asset reserve relates to revaluation movement in the financial assets at fair value through other comprehensive income in note 11. 50 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 22. Financial instruments Financial risk management objectives The entity’s principal financial instruments comprise cash and cash equivalents, trade and other receivables, investments, trade and other payables and borrowings. The main purpose of these financial instruments is to finance the entity’s operations. The entity has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been throughout the entire period, the entity’s policy that no trading in financial instruments shall be undertaken. There are no major risks arising from the entity’s financial instruments, as no significant term deposits/cash investments are maintained. Minor risks are summarised below. The Board reviews and agrees policies for managing each of these risks. 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. This exposure could have a material effect on the results of the consolidated entity in the long term, in particular the exchange differences arising from the translation of the consolidated entity's net investment in Jayex Technology Limited (JUK), and its future revenue and expense streams. The average exchange rates and reporting date exchange rates applied were as follows: Australian dollars Pound sterling (GBP) New Zealand dollar (NZD) United States dollar (USD) Canadian dollar (CAD) Average exchange rate 2022 Average exchange rates 2021 Reporting date exchange rate 2022 Acquisition date exchange rate 2021 0.5626 1.0937 0.6947 0.9029 0.5461 1.0619 0.9418 0.7514 0.5625 1.0711 0.6775 0.9123 0.5376 1.0628 0.9245 0.7256 As noted above, foreign currency risk arises when future commercial transactions and recognised financial assets and liabilities are denominated in a currency that is not the entity's functional currency. 51 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 22. 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 Pound Sterling New Zealand dollars Canadian dollars* United States dollars** Assets Liabilities 2022 $ 2021 $ 2022 $ 2021 $ 658,181 27,812 - 1,414,828 1,649,673 55,628 536,001 1,368,846 4,269,803 788,517 - - 5,084,924 675,390 - - 2,100,821 3,610,148 5,058,320 5,760,314 * ** This relates to investment in the shares of Vitalhub Corporation listed on Toronto Stock Exchange (TSXV: VHI) in Canadian dollars. The investment is fully disposed during the year ended 31 December 2022. This relates to investment in the shares of Brainworks Foundry Inc. based United States of America. The shares were issued with share price in United States dollars (Refer to note 12 for further details). The consolidated entity has exposure to fluctuations between the UK Pound Sterling, the New Zealand dollars, the United States dollar, the Canadian dollar and the Australian dollars. If the Australian dollar weakened /strengthened against the UK Pound Sterling, by 1% it would increase/decrease the net asset position of the consolidated entity by approximately $3,300/$3,300 respectively (31 December 2021: $20,000/$20,000 respectively). If the Australian dollar weakened /strengthened against the New Zealand dollar by 1% it would increase/decrease the net asset position of the consolidated entity by approximately $3,300/$3,300 respectively (31 December 2021: $6,000/$6,000 respectively). If the Australian dollar weakened /strengthened against the United States dollar by 1% it would increase/decrease the net asset position of the consolidated entity by approximately $14,000/$14,000 respectively (31 December 2021: $14,000/$13,000 respectively). If the Australian dollar weakened /strengthened against the Canadian dollar by 1% it would increase/decrease the net asset position of the consolidated entity by nil (31 December 2021: $5,400/$5,300 respectively). Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity is not exposed to any significant interest rate risk. As at reporting date the consolidated entity has cash at bank of $239,379 and borrowings of $5,345,714 Cash at bank as at reporting date is held in a number of bank accounts, operated by the consolidated entity's parent entity and its subsidiaries and its head office function. Interest on bank accounts is insignificant. The interest rates on borrowings are at fixed rates of 6.5 percent per annum on the face value of the convertible notes of $2,700,000 and 2.05 percent per annum on a loan of $1,635,556 (equivalent to GBP920,000). Any feasible change in market rates is not expected to have a material impact on the financial results of the consolidated entity. Refer to note 16 for further information on convertible notes. 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 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 1 year. 52 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 22. Financial instruments (continued) The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. 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 continuously monitors defaults of customers and other counterparties, identified either individually or by group and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. Other than trade receivables, the consolidated entity's main counterparties are major, reputable banks and government sales tax authorities. The consolidated entity is satisfied that the risk of default on the part of these counterparties is low. The consolidated entity’s management considers that all of the financial assets referred to above that are not impaired or past due at the reporting date are of good credit quality. Liquidity risk 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. 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. Consolidated - 2022 Non-derivatives Non-interest bearing Trade and other payables Accruals Borrowings Lease liabilities Interest-bearing Borrowings Convertible notes Total non-derivatives Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ - - - - 1,370,279 454,158 1,010,159 51,764 - - - 3,462 2.05% 6.50% 426,667 2,700,000 6,013,027 1,208,889 - 1,212,351 - - - - - - - Remaining contractual maturities $ - - - - - - - 1,370,279 454,158 1,010,159 55,226 1,635,556 2,700,000 7,225,378 53 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 22. Financial instruments (continued) Consolidated - 2021 Non-derivatives Non-interest bearing Trade and other payables Accruals Borrowings Lease liabilities Interest-bearing Borrowings Convertible notes Total non-derivatives Derivatives Derivative liability Total derivatives Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ - - - - 626,343 406,709 - 149,823 - - 743,517 112,980 2.05% 6.50% 409,226 2,128,826 3,720,927 1,711,309 - 2,567,806 - 69,049 69,049 - - - - - - - - - - - Remaining contractual maturities $ - - - - - - - - - 626,343 406,709 743,517 262,803 2,120,535 2,128,826 6,288,733 69,049 69,049 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. Note 23. Fair value measurement Fair value hierarchy The following tables detail the consolidated entity's assets and liabilities, measured or disclosed 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 Level 3: Unobservable inputs for the asset or liability Consolidated - 2022 Assets Investment in Brainworks Total assets Liabilities Derivative liability* Total liabilities Level 1 $ Level 2 $ Level 3 $ Total $ - - - - - - - - 1,414,828 1,414,828 1,414,828 1,414,828 - - - - * As of 31 December 2022, the derivative liability was fair valued at $nil (31 December 2021: $69,049) due to a proposed settlement of convertible notes with Company's Share Options in lieu of cash payment. Refer to note 16 for further details 54 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 23. Fair value measurement (continued) Consolidated - 2021 Assets Investment in Vitalhub shares Investment in Brainworks Total assets Liabilities Derivative liability Total liabilities Level 1 $ Level 2 $ Level 3 $ Total $ 536,001 - 536,001 - - - - - - - - 1,368,846 1,368,846 536,001 1,368,846 1,904,847 69,049 69,049 69,049 69,049 There were no transfers between levels during the financial year. Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current and previous financial year are set out below: Consolidated Balance at 1 January 2021 Additions Balance at 31 December 2021 Transfers into level 3 Transfers out level 3 Gains recognised in profit or loss Disposals Foreign exchange gains Balance at 31 December 2022 Investment in Brainworks $ Total $ - 1,368,846 - 1,368,846 1,368,846 - - - - 45,982 1,368,846 - - - - 45,982 1,414,828 1,414,828 The level 3 financial assets unobservable inputs and sensitivity are as follows: Description Unobservable inputs Valuation methodology Sensitivity Unlisted shares Acquisition cost A 10% increase/decrease in shares would increase/decrease the net asset position of the consolidated entity by approximately $142k respectively. Retention at acquisition cost where the investment was within six months of the valuation date. The Company assessed that there has been no material change in the prospects of the investee Refer to note 16 for unobservable inputs and sensitivity on derivative liability. 55 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 24. 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 Note 25. Remuneration of auditors Consolidated 2022 $ 2021 $ 637,033 2,348 - 555,959 28,663 7,160 639,381 591,782 During the financial period the following fees were paid or payable for services provided by the auditor of the Company, and its network firms: Audit services Audit or review of the financial statements Other services Preparation of the tax return Audit services - network firms Audit or review of the financial statements Note 26. Contingent assets Consolidated 2022 $ 2021 $ 91,500 58,500 - 2,500 91,500 61,000 21,329 53,562 On 17 May 2021, the Group sold its on-premises Acute hospital queue management business to Canadian based medical technology company Vitalhub Inc. £428k (equivalent to $788k) of consideration receivable, which was equivalent to the recurring annual revenue attributable to such Customer Contracts multiplied by 3.1 which was invoiced but unsettled at the point-of-Sale completion, was held in escrow and was contingent upon a future event taking place (the receipt of cash from customers). On proof of settlement these Escrow held recurring revenue amounts was released on request. Out of the balance of the contingent asset of £32k as of end of previous financial year, the company received £19k (equivalent to $36k) during the half-year ended 30 June 2022 which is recognised as other income from discontinued operations (refer to note 9 for information). The company is no longer eligible to received the balance of £13k and there is nil balance of contingent consideration as of 31 December 2022. 56 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 27. Related party transactions Parent entity Jayex Technology Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 29. Key management personnel Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the Directors' report. Transactions with related parties The following transactions occurred with related parties. All transactions were carried out on arm's length terms on a basis which is no more or less favourable than if the transactions had occurred with non-related entities except for the interest free loans disclosed in the Terms and Condition section below. Consolidated 2022 $ 2021 $ Interest on convertible Notes issued to Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) 175,260 183,172 Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated 2022 $ 2021 $ Current payables: Accrued interest payable on convertible Notes issued to Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) 87,750 - The payables due to related parties were payable on demand and did not bear interest. Loans to/from related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Current borrowings: Convertible Notes issued to Covenant Holdings (WA) Pty Ltd (an entity related to Non- Executive Chair Michael Boyd) Loans from Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) (i),(ii) Loan from Michael Boyd, Non-Executive Chair (iii) Loan from Michael Boyd, Non-Executive Chair(iv) Non-current borrowings: Loans from Covenant Holdings (WA) Pty Ltd (an entity related to Non-Executive Chair Michael Boyd) (i),(ii) Loan from Michael Boyd, Non-Executive Chair (iii) 57 Consolidated 2022 $ 2021 $ 2,700,000 2,128,826 555,000 188,517 266,642 3,710,159 - - - 2,128,826 - - - 555,000 188,517 743,517 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 27. Related party transactions (continued) Terms and conditions Loans The terms of the loans made by the related parties to companies within the consolidated entity are as follows: (i) (ii) Loan from Covenant Holdings (WA) Pty Ltd to P2U Pty Ltd: Balance as at 31 December 2022 and 31 December 2021 - $55,000; loan is interest free, unsecured and is repayable on 1 April 2023. Loan from Covenant Holdings (WA) Pty Ltd to Whakaora Hou Limited: Balance as at 31 December 2022: $500,000 (31 December 2021: 500,000); loan is interest free, unsecured and is repayable on 1 April 2023. (iii) Loan from Michael Boyd, Non-Executive Chair to Whakaora Hou Limited: Balance as at 31 December 2022: $188,517 (31 December 2021: $188,517) This is an interest free unsecured loan and is repayable on 1 April 2023. (iv) Loan from Michael Boyd, Non-Executive Chair to Jayex Technology Limited: Balance as at 31 December 2022: $266,642 (31 December 2021: nil) This is an interest free unsecured loan and is repayable on 30 June 2023. Convertible notes Convertible Notes are unsecured and issued on 13 October 2020 at an interest rate of 6.5% per annum. These are repayable on 13 October 2022 for balance not converted into shares. Refer to note 16 for further information on convertible notes. Subsequent to the year end, shareholders at its General Meeting on 7 March 2023 approved the issuance of 207,692,307 Options towards the repayments of $2.7 million convertible notes and 42,307,693 Options towards the repayment of $555,000 loans, to Covenant Holding (WA) Pty Ltd. Note 28. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive loss Parent 2022 $ 2021 $ (1,362,052) (535,245) (1,362,052) (535,245) 58 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 28. Parent entity information (continued) Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Financial asset reserve Share-based payments reserve Accumulated losses Total equity Parent 2022 $ 2021 $ 28,852 18,740 10,615,453 11,108,926 6,642,521 5,666,985 6,642,521 5,666,985 28,112,494 28,112,494 57,091 - 12,187 12,187 (22,739,831) (24,151,749) 3,972,932 5,441,941 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 31 December 2022 or 31 December 2021. Contingent liabilities With the exception of any matter referred to note 34 Contingent liabilities, the parent entity had no contingent liabilities as at 31 December 2022 or 31 December 2021. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 31 December 2022 or 31 December 2021. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for the following: ● ● investments in subsidiaries 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. 59 Jayex Technology Limited Notes to the consolidated financial statements 3 1 December 2022 Note 30. 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 2: Name Jayex Technology Limited P2U Pty Ltd Jayex Australia Pty Ltd Express RX Pty Ltd Appointuit Pty Ltd Jayex New Zealand Limited Whakaora Hou Limited Principal place of business / Country of incorporation United Kingdom Australia Australia Australia Australia New Zealand New Zealand Ownership interest 2021 2022 % % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Note 30. Events after the reporting period Following material events have occurred subsequent to the year end: (i) As announced on ASX on 31 January 2023, the company has signed a binding Term Sheet Agreement with Shine Clinical Ltd under which, subject to completion of due diligence processes and completion of formal documentation, the companies will operate a business via a joint venture arrangement that will provide services to:  UK NHS customers in managing disease prevalence, ensuring patients get access to the appropriate treatments for their conditions.  Enable UK pharmaceutical and medical device industry customers to achieve their market access strategies. Jayex and Shine have agreed to bring their respective GP data analytical and revenue optimisation businesses together through the joint venture arrangement to realise the immediate synergy benefits from their complimentary and merged data analytical software programs and to develop new IP to increase the automation of the analytical processes. All IP developed by the joint venture business utilising Jayex’s existing technology will be owned by Jayex. The joint venture will leverage the Jayex customer base and data integration capabilities along with Shine’s healthcare data analytics intellectual property, to deliver services that are highly competitive and rapidly scalable. The joint venture will have sufficient operational capacity and financial standing to be able to credibly compete for and deliver large industry contracts. The joint venture is structured with Shine issuing Jayex with ordinary shares so that Jayex is the holder 30% of the issued capital of Shine. The total consideration payable by Jayex, which is payable over nine milestones, for the Shine shares comprises cash of approximately A$133,000 and approximately 24.3 million shares in Jayex. Both components of the consideration (i.e. the cash and shares in Jayex), are subject to the successful satisfaction of a number of performance milestones by the joint venture business (which is to be operated by Shine). All milestones are required to be completed by 31 December 2023. Each milestone has both a minimum revenue target and gross margin target to ensure profitable contracts. As part of the joint venture, Jayex has agreed to exclusively source its clinical services from Shine for Jayex’s business and the joint venture business. Shine has agreed to exclusively source its technical services and support from Jayex for Shine’s business and the joint venture business. (ii) On 2 March 2023, the company raised additional capital of $320,500 through placement of 32,050,000 shares to sophisticated and professional investors. (iii) Shareholders at its General Meeting on 7 March 2023 approved the issuance of 207,692,307 Options towards the repayments of $2.7 million convertible notes and 42,307,693 Options towards the repayment of $555,000 loans, to Covenant Holding (WA) Pty Ltd. The transaction-based comparison table below sets out the impact of the above transaction on the consolidated entity as of 31 December 2022: 60 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 29. Interests in subsidiaries (continued) Consolidated balance sheet as at 31 December 2022 Transaction Post transaction – Pro forma Percentage increase/ decrease following the Transactions 795,425 1,504,654 2,300,079 - - - 795,425 1,504,654 2,300,079 % - - - 7,416,105 1,214,077 8,630,182 (3,255,000) - (3,255,000) 4,161,105 1,214,077 5,375,182 (44%) - (38%) (6,330,103) 3,255,000 (3,075,103) (51%) 28,112,494 (1,866,837) (32,575,760) (6,330,103) - 3,255,000 - 3,255,000 28,112,494 1,388,163 (32,575,760) (3,075,103) - (174%) - (51%) Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Liabilities Equity Issued capital Reserves Accumulated losses No other matter or circumstance has arisen since 31 December 2022 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. 61 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 31. Reconciliation of loss after income tax to net cash used in operating activities Loss after income tax (expense)/benefit for the year (7,245,838) (3,924,342) Consolidated 2022 $ 2021 $ Adjustments for: Depreciation and amortisation Net loss on disposal of property, plant and equipment Share-based payments Non-cash interest expense Fair value remeasurement of derivative financial instrument Loss on disposal of Acute business Impairment of assets Change in operating assets and liabilities: Decrease in trade and other receivables Decrease in inventories Decrease in prepayments Increase/(decrease) in trade and other payables Decrease in deferred tax liabilities Increase/(decrease) in employee benefits Increase in other provisions Increase/(decrease) in deferred revenue Net cash used in operating activities Note 32. Earnings per share Earnings per share for loss from continuing operations Loss after income tax attributable to the owners of Jayex Technology Limited 472,283 - - 730,261 (69,049) - 4,885,549 702,313 53,310 12,187 616,604 (1,037,832) (82,828) 2,513,800 393,340 107,290 35,665 395,058 (59,744) (46,744) 61,497 (515,938) 445,282 94,399 7,287 (636,385) (213,620) 5,787 8,630 178,719 (856,370) (1,256,689) Consolidated 2022 $ 2021 $ (6,034,521) (3,814,984) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 249,228,539 220,230,242 Weighted average number of ordinary shares used in calculating diluted earnings per share 249,228,539 220,230,242 Basic earnings per share Diluted earnings per share Cents Cents (2.42) (2.42) (1.73) (1.73) Consolidated 2022 $ 2021 $ Earnings per share for loss from discontinued operations Loss after income tax attributable to the owners of Jayex Technology Limited (1,211,317) (109,358) 62 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 32. Earnings per share (continued) Weighted average number of ordinary shares used in calculating basic earnings per share 249,228,539 220,230,242 Weighted average number of ordinary shares used in calculating diluted earnings per share 249,228,539 220,230,242 Number Number Basic earnings per share Diluted earnings per share Earnings per share for loss Loss after income tax attributable to the owners of Jayex Technology Limited Cents Cents (0.49) (0.49) (0.05) (0.05) Consolidated 2022 $ 2021 $ (7,245,838) (3,924,342) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 249,228,539 220,230,242 Weighted average number of ordinary shares used in calculating diluted earnings per share 249,228,539 220,230,242 Basic earnings per share Diluted earnings per share Cents Cents (2.91) (2.91) (1.78) (1.78) Number of contingent shares not included in the diluted earnings per share calculation as they are anti-dilutive: 500,000 (2021: 500,000). Note 33. Share-based payments (a) Share-based compensation During the year no ordinary shares were issued to directors and employees as part of compensation. (b) Employee options A share option plan (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 employees of the consolidated entity. In accordance with the Plan options were issued in 2016 for nil consideration and were granted in accordance with performance guidelines established by the Nomination and Remuneration Committee. As the instruments issued in 2016 have a nil exercise price, they represent performance rights; these are referred to as "options" in these financial statements and the accompanying directors' report. 63 Jayex Technology Limited Notes to the consolidated financial statements 31 December 2022 Note 33. Share-based payments (continued) Set out below are summaries of options granted under the plan: Weighted average exercise price 2022 Number of options 2022 Weighted average exercise price 2021 Number of options 2021 Outstanding at the beginning of the financial year Granted Forfeited Expired 500,000 - - - $0.05 $0.00 $0.00 $0.00 - 750,000 (250,000) - $0.00 $0.05 $0.05 $0.00 Outstanding at the end of the financial year 500,000 $0.05 500,000 $0.05 2022 Grant date Expiry date price Exercise Balance at the start of the year Granted Expired/ forfeited/ other Exercised 30/03/2021 04/05/2021 29/03/2024 03/05/2024 $0.05 $0.05 250,000 250,000 500,000 - - - - - - Balance at the end of the year - - - 250,000 250,000 500,000 2021 Grant date Expiry date price Exercise Balance at the start of the year Granted Expired/ forfeited/ other Exercised Balance at the end of the year 30/03/2021 04/05/2021 04/05/2021 29/03/2024 03/05/2024 03/05/2024 $0.05 $0.05 $0.05 - - - - 250,000 250,000 250,000 750,000 - - - - - - (250,000) (250,000) 250,000 250,000 - 500,000 Weighted average exercise price $0.00 $0.05 $0.00 $0.05 $0.05 500,000 options are exercisable as at 31 December 2022 (31 December 2021: 500,000). Note 34. Contingent liabilities The Group had no material contingent liabilities as at the date of this report (2021:nil). 64 Jayex Technology Limited Directors' declaration 31 December 2022 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 2 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 31 December 2022 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 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 ___________________________ Michael Boyd Chairman 30 March 2023 Melbourne 65 Jayex Technology Limited INDEPENDENT AUDITOR’S REPORT TO MEMBERS Report on the Audit of the Financial Report Opinion We have audited the financial report of Jayex Technology Limited (the Company and its subsidiaries (the Group)), which comprises the consolidated statement of financial position as at 31 December 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its financial performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2 to the financial report, which describes that for the year ended 31 December 2022 the Group incurred a loss of $7,245,838 and net cash outflows from operating activities of $856,370. The Group also had a net current liability position of $6,620,680 at year end. These conditions, along with other matters set out in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Level 20, 181 William Street, Melbourne VIC 3000 +61 3 9824 8555 vic.info@williambuck.com williambuck.com.au William Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Impairment of intangible assets Area of focus Refer also to notes 2 and 14 In accordance with AASB 136 Impairment of Assets the Group is required to, at least annually, perform an impairment assessment of goodwill, intangible assets that have an indefinite useful life or are not yet ready for use. For intangible assets with a definite useful life an assessment is required to be performed at least annually as to whether an impairment indicator exists. All intangible assets including goodwill have been allocated to the Group’s single cash generating unit (“CGU”). The Group has determined that an impairment indicator exists for the definite life intangible assets in addition to the periodical testing of indefinite life intangible assets. As a result the Group assessed the recoverable amount of the underlying CGU which was supported by a value in use model. As a result of this exercise, an impairment charge of $4,722,410 was recorded which decreased the carrying value of goodwill and other intangible assets to $nil as at 31 December 2022. Due to the significance of the impairment over the carrying value of intangible assets and the judgement involved, we consider this to be a key audit matter. How our audit addressed it Our audit procedures included: ⎯ Considering and assessing management’s determination of its cash generating units (‘CGU’); ⎯ Reviewing the movement in the value of goodwill and other intangible assets through the profit and loss including impairment and amortisation expenses; A detailed evaluation of the Group’s budgeting procedures upon which the forecast is based and testing the principles and integrity of the value-in use model; and ⎯ Testing the accuracy of the calculation derived from the forecast model and assessing key inputs to the calculations such as revenue growth, terminal growth, gross margins, and working capital assumptions and the discount rate. We also considered the adequacy of the Group’s disclosures in the notes to the financial report. Discontinued operations Area of focus Refer also to notes 2 and 9 During the year, the Whakaora Hou Limited (“WHL”) business was wound down as a result of a reorganisation. This event is significant to our audit because the assessment of the classification as a discontinued operation is complex and involves a certain level of management judgement including determining the date of classification of the WHL business as held for sale and the presentation of its results separately as discontinued operations. As such this has been included as a key audit matter. How our audit addressed it Our audit procedures included: ⎯ Determining that the WHL business met the definition of a discontinued operation as defined under AASB 5 Non-current Assets Held for Sale and Discontinued Operations; and ⎯ Evaluating the balances as at date of winding down and ensuring that the financial performance to that date has been accurately and completely recorded. Under AASB 5 Non-current Assets Held for Sale and Discontinued Operations the business is measured at the lower of the carrying amount and its fair value less cost to sell. We also ensured that these matters were completely and accurately disclosed in the financial statements. Financial Assets through Profit & Loss Area of focus Refer also to notes 2 and 12 As at 31 December 2022, the Group held $1,414,828 of Standard Preferred Stock in Medio Labs, which is an unlisted company registered in Delaware, United States. The directors commissioned an external expert to appraise the fair value of the asset at reporting date. The expert concluded that the historical carrying value of the investment was appropriate and within the range calculated by them. This investment is classified as a level 3 financial asset in the fair value hierarchy, carried at fair value with changes recorded in the profit or loss. This is a key audit matter due to complexities around the accounting treatment for the initial classification and subsequent valuations of the investments. There are significant judgements involved in the valuation of level 3 investments in accordance with AASB 9 Financial Instruments and there is a risk that they have not been valued appropriately. How our audit addressed it Our audit procedures included; ⎯ Agreeing the stock holding to a confirmation of the share register of Brainworks Foundry Inc; ⎯ Assessing the work, independence and skill of the external expert in calculating the value of the asset, including the appropriateness of the model employed in the calculation and the inputs and assumptions used; ⎯ Ensuring the movement in the fair value of the asset appropriately booked to the profit or loss; ⎯ Assessing the classification of the asset as Level 3 in the fair value hierarchy; and ⎯ Assessing available information which may impact the value of the unlisted securities. We also ensured that these matters were completely and accurately disclosed in the financial statements. How our audit addressed it Our audit procedures included; ⎯ Understanding the terms of the convertible note agreement, including an assessment of the variable conversion clause as meeting the definition of an embedded derivative under accounting standards; ⎯ Assessing the reasonableness of the inputs and assumptions used in calculating the value of the embedded derivative; ⎯ Ensuring the movement in the fair value of the embedded derivative appropriately booked to the profit or loss; and ⎯ Ensuring that the interest charge was appropriate in accreting value to the underlying host contract as at matures. We also ensured that these matters were completely and accurately disclosed in the financial statements, including the directors’ assertion in the related parties note disclosure that the note is at arms-length terms. Convertible Notes Area of focus Refer also to notes 2 and 16 The Group has issued convertible notes to a major shareholder and related party, Covenant Holdings (WA) Pty Ltd. The convertible notes have a variable equity conversion clause, which on conversion will entitle the noteholder to acquire shares at a discount of 20% to the 30-day volume weighted average traded price of the Company’s shares, subject to a price floor of 5 cents per share. As this conversion clause is variable in nature, it is considered to be a financial derivative contract and from initial recognition it is separately fair valued on the statement of financial position, and then subsequently fair valued through the profit or loss at each reporting date. In addition to the above, at each reporting date the Group journals an interest accrual to unwind the discount of the underlying host contract from its initial recognition through to its face value at the maturity of the notes. The directors have represented that the convertible notes, both in the related party transactions note and in the Remuneration Report are at arms-length terms. This is a key audit matter as accounting for convertible notes is complex and involves a certain level of management judgement. Other Information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 31 December 2022, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of these financial statements is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our independent auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report of the directors’ report for the year ended 31 December 2022. In our opinion, the Remuneration Report of Jayex Technology Limited, for the year ended 31 December 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Yours Faithfully William Buck Audit (Vic) Pty Ltd ABN: 59 116 151 136 A. A. Finnis Director Melbourne, 30 March 2023 Jayex Technology Limited Shareholder information 31 December 2022 The shareholder information set out below was applicable as at 28 March 2023. Corporate governance Refer to the Company's Corporate Governance statement at: http://jayexhealthcare.com.au/investor/corporate-governence/. There is no current on-market buy-back. Distribution of equity securities Analysis of number of equity 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 Equity security holders Number of unquoted Share Options Number of holders of ordinary shares - - - - 2 2 - 28 31 80 219 170 528 284 Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: COVENANT HOLDINGS(WA)PTY LTD VECTOR LONDON LTD MARY KATHLEEN SIMCOX TURBINE CAPITAL LIMITED DONOVAN PRODUCTS PTY LTD BODIE INVESTMENTS PTY LTD DONOVAN PRODUCTS PTY LTD MR DEAN HENRY CLEARY COVENANT HOLDINGS (WA) PTY LTD MR JOEL DAVID WEBB MR JEREMY RUBEN & MRS VANESSA RUBEN RHYD-Y-FELIN PTY LTD MRS VANESSA FAYE CONNOR CITICORP NOMINEES PTY LIMITED MR DAVID ARITI MS PHAROTH SAN & MR KADEN SAN AMG CORPORATE PTY LTD MR JIANJUN ZHOU MR YULIANG FAN MS CHUNYAN NIU SUPER MSJ PTY LTD INTERNATIONAL BUSINESS NETWORK (SERVICES) PTY LTD MR CHRISTOPHER JOHN KETTLE Ordinary shares Number held 103,883,880 19,003,378 17,500,000 8,800,000 5,025,000 5,000,000 4,754,693 4,140,000 4,000,000 3,754,311 3,008,067 3,000,000 2,970,819 2,856,663 2,839,777 2,835,172 2,549,000 2,225,000 2,000,000 2,000,000 2,000,000 2,000,000 1,913,368 % of total shares issued 36.93% 6.76% 6.22% 3.13% 1.79% 1.78% 1.69% 1.47% 1.42% 1.33% 1.07% 1.07% 1.06% 1.02% 1.01% 1.01% 0.91% 0.79% 0.71% 0.71% 0.71% 0.71% 0.68% 72 208,059,128 73.97% Jayex Technology Limited Shareholder information 31 December 2022 Unquoted equity securities Employee options with an exercise price of $0.05 expiring 7 June 2024 Options with an exercise price of $0.015 expiring 7 March 2026 The following persons hold 20% or more unquoted equity securities: Substantial holders Substantial holders in the Company are set out below: Number on issue Number of holders 250,000 250,000,000 1 1 Ordinary shares % of total shares issued Number held COVENANT HOLDINGS(WA)PTY LTD 103,883,880 36.93% The information set out above regarding the names and number of shares held by substantial holders is as disclosed in substantial holding notices given to the Company. 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. Options Options do not have voting rights attached. There are no other classes of equity securities. Corporate Governance Statement The Company’s 2022 Corporate Governance Statement has been released to ASX on this day and is available on the Company’s website at: https://www.jayex.com/en-au/investor/corporate-governance/ Annual General Meeting Jayex Technology Limited advises that its Annual General Meeting will be held on or about Thursday, 25 May 2023. The time and other details relating to the meeting will be advised in the Notice of Meeting to be sent to all Shareholders and released to ASX immediately upon despatch. The Closing date for receipt of nomination for the position of Director is Wednesday, 12 April 2023. Any nominations must be received in writing no later than 5.00pm (Melbourne time) on Wednesday, 12 April 2023 at the Company’s Registered Office. The Company notes that the deadline for nominations for the position of Director is separate to voting on Director elections. Details of the Directors to be elected will be provided in the Company’s Notice of Annual General Meeting in due course. 73

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