K-TIG
Annual Report 2023

Plain-text annual report

K-TIG Limited and Its Controlled Entities ABN 28 158 307 549 Consolidated Annual Report - 30 June 2023 K-TIG Limited and Its Controlled Entities Corporate Directory For the year ended 30 June 2023 Directorships as at the date of this report Stuart Carmichael, Non-Executive Chairman Adrian Smith, Managing Director Syed Basar Shueb, Non-Executive Director Anthony McIntosh, Non-Executive Director Darryl Abotomey, Non-Executive Director Company secretary Brett Tucker Registered office Principal place of business Ground Floor 16 Ord Street West Perth WA 6005 Building 5 9 William Street Mile End SA 5031 Phone: (08) 7324 6800 Share registry Auditor Solicitors Principal Bankers Automic Group Level 5, 191 St Georges Terrace Perth WA 6000 BDO Audit Pty Ltd BDO Centre Level 7, 420 King William Street Adelaide SA 5000 Hamilton Locke Level 27, 152-158 St Georges Terrace Perth WA 6000 Westpac Banking Corporation 275 Kent Street Sydney NSW 2000 Stock exchange listing K-TIG Limited shares are listed on the Australian Securities Exchange (ASX code: KTG) Website www.k-tig.com K-TIG Limited and Its Controlled Entities Contents Review of Operations 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 ASX Additional Information 2 3 17 18 19 20 21 22 52 53 56 K-TIG Limited and Its Controlled Entities Review of Operations For the year ended 30 June 2023 Overview K-TIG is a transformative, industry-disrupting welding technology that seeks to change the economics of fabrication. K- TIG’s high-speed precision welding technology welds up to 100 times faster than traditional TIG welding, achieving full penetration in a single pass in materials up to 16mm in thickness and typically operates at twice the speed of plasma welding. K-TIG works across a wide range of applications and is particularly well suited to corrosion-resistant materials such as stainless steel, nickel alloys, titanium alloys, carbon steels, and most exotic materials. It easily handles longitudinal and circumferential welds on pipes, spooling, vessels, tanks and other materials in a single pass. Originally developed by the CSIRO, K-TIG owns all rights, title and interest in and to the proprietary and patented technology and has been awarded Australian Industrial Product of the Year and the DTC Defence Industry Award. The group recorded $3.10m of revenue for the current year (2022: $3.8m). The reduction in revenue was mainly attributable to customers delaying their commitment to purchases due to their uncertainty of the economic situation arising from higher interest rates and the slowing down of economies across major markets. Loss from ordinary activities for the Group after providing for income tax to $6.4m (2022: $6.0m). The increase in loss is mainly attributable to lower revenue and gross margin, acquisition and recompliance costs associated with the Graham’s Engineering Limited acquisition, amounting to $1.7m and continued significant investment in several strategic areas focused on defence, nuclear, USA and UK and higher costs for travel and general expenses. Net operating expenses (acquisition and recompliance costs) of $6.8m for the current year (2022: $8.4m) were lower by 20% year on year. K-TIG continues working with Defence Primes and Nuclear to demonstrate the advantages of Keyhole TIG welding to their applications. In addition, K-TIG continues to invest in R&D to expand the range of metals that can be used utilising the K-TIG technology. 2 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 The Directors present their report, together with the financial statements, on K-TIG Limited (“K-TIG” or “Company”) and its controlled entities (“consolidated group”) for the ended 30 June 2023. Directors The following persons were directors of K-TIG Limited during the financial year and up to the date of this report unless otherwise stated: Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Principal activities K-TIG is a transformative, industry-disrupting welding technology that is changing the economics of fabrication with its proprietary high-speed precision welding technology. Dividends No dividends were declared or paid out during the financial year (30 June 2022: Nil). Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated group during the financial year. Review of operations Refer to the Review of Operations in the preceding section. Matters subsequent to the end of the financial year As per the ASX announcement dated 1 September 2023, the share purchase agreement “SPA” to acquire Graham Engineering Limited “GEL” has reached its sunset date 31 August 2023 with a number of conditions precedent not yet satisfied. Challenging capital market conditions caused by underlying macro and geopolitical events have made the completion of the transaction within the sunset date extremely difficult. Notwithstanding the above, at this point in time, K-TIG remains committed to completing the SPA, and, subject to the intentions of GEL, is willing to negotiate in good faith variations to the SPA to allow this to occur. In the event that a variation cannot be agreed, either party may terminate the SPA. The Company is currently exploring a number of funding options in order to complete the transaction, as such the Company advises the supplementary prospectus dated 21 July 2023 will be withdrawn. The Company intends to lodge the relevant supplementary (withdrawal) prospectus with ASIC and the ASX shortly. Likely developments and expected results of operations The Company continues to build an extensive sales pipeline in key growth markets, including the United States, United Kingdom and Europe. Environmental regulation The consolidated group is not subject to any significant environmental regulation under Australian Commonwealth or State law. 3 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Information on directors Name: Title: Qualifications: Experience and expertise: Stuart Carmichael Non-Executive Chairman (Appointed 30 June 2017) B Com, C.A (Aust) Mr Carmichael has extensive international corporate advisory, mergers and acquisitions, and operational experience. Mr Carmichael held various senior executive leadership positions with UGL, DTZ, AJG and KPMG Corporate Finance. Mr Carmichael has extensive corporate and operational experience across multiple geographies, having lived and worked in the US, UK, Europe, the Middle East and Australia. Mr Carmichael’s sector experience includes the construction, transportation and logistics, facilities management, corporate real estate and professional services sectors. Mr Carmichael graduated from the University of Western Australia with a Bachelor of Commerce degree, majoring in Accounting and Finance and is a qualified Chartered Accountant. Other current directorships: Non-Executive Director of De.mem Limited (ASX:DEM) Non-Executive Director of Orexplore Technologies Limited (ASX:OXT) Former directorships (last 3 years): Non-Executive Director of Osteopore Limited (ASX:OSX) - October 2021 Non-Executive Director of Swick Mining Services Limited (ASX:SWK)- February 2022 Non-Executive Chairman of Schrole Limited (ASX:SCL) - May 2022 Non-Executive Director of ClearVue Technologies Limited (ASX:CPV) – June 2023 Non-Executive Director of Harvest Technology Group Limited (ASX:HTG) – October 2022 Name: Title: Qualifications: Experience and expertise: Syed Basar Shueb Non-Executive Director (Appointed 30 September 2019) Bachelor of Science in Computer Engineering Mr Shueb is the General Manager of the Pal Group of Companies, a subsidiary of the Abu Dhabi-based Royal Group, chaired by His Highness Sheikh Tahnoon Bin Zayed Al Nahyan, and is the Chairman of Royal Falcon Mining LLC. Mr Shueb has extensive experience in the process, manufacturing, fabrication, construction and service industries. - Other current directorships: Former directorships (last 3 years): - 4 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Name: Title: Qualifications: Experience and expertise: Adrian Smith Managing Director (Appointed 1 November 2020) Executive Director (Appointed 28 July 2020 – 1 November 2020) Non-executive Director (Appointed 20 February 2020 - 28 July 2020) B.E. (Hons), B.SC. MBA, FAICD Mr Smith has both large public company and private SME board experience and has demonstrated history of growing innovative, business-to-business companies in both Managing Director and Chief Executive Officer roles. Skilled at working with technology and business entrepreneurs to transition companies from small start-ups into sustainable enterprises, Mr Smith brings a strong focus on managing people and relationships to deliver exceptional performance. Mr Smith has previously had the role of Managing Director of Rheinmetall Defence Australia Pty Ltd. Previously, Mr Smith was the founder and Chief Executive Officer of Sydac, a simulation and training business. Sydac was founded in 1988 and culminated in becoming the world’s #2 supplier of railway training systems with a staff of 135 and offices in Australia, Europe and India before negotiating an exit with German multi-national Knorr-Bremse GmbH. Non-Executive Director UniSA Ventures Other current directorships: Former directorships (last 3 years): - Name: Title: Qualifications: Experience and expertise: Anthony McIntosh Non-Executive Director (Appointed 23 June 2020) B Com, GAICD Mr McIntosh has extensive experience in investment marketing, investor relations and strategic planning, with a focus on small caps, as well as a strong and well-established network of stockbroking and investment fund manager. Mr McIntosh is a graduate of the Australian Institute Company Director course and Bond University with a Bachelor of Commerce degree majoring in marketing. Other current directorships: Non-Executive Director of Strategic Energy Resources Limited (ASX:SER) Non-Executive Director of Copper Strike Resources Limited (ASX:CSE) Non-Executive Director of Koonenberry Gold Limited (ASX:KNB) Former directorships (last 3 years): Non-Executive Director of Echo Resources Limited (ASX: EAR) – November 2019 Non-Executive Director of Alice Queen Limited (ASX:AQX) – May 2022 Name: Title: Qualifications: Experience and expertise: Trish White Non-Executive Director (Appointed 1 December 2021 to 7 August 2023) AM BE BA DUniv (hc)(Adel) HonFIEAust FAICD Ms White is a professional director and advisor who brings substantial board-level experience in strategy, business development, major project and risk management. Ms White has a unique set of skills and capabilities formed over a career which spanned roles in broadcasting, defence science, national infrastructure projects, senior cabinet minister executive in the resources and energy sector and non- executive directorships. Ms White is currently Non-Executive Director of Flinders Port Holdings Pty Ltd, Non- Executive Director of Office of National Rail Safety Regulator and is a former Chair and National President of Engineers Australia. She has held directorships in the manufacturing, insurance and education sectors and was a senior cabinet minister in the South Australian Government with portfolios of Transport and Infrastructure, Urban Development and Planning, Science and Information Economy and Education. - Other current directorships: Former directorships (last 3 years): - 5 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Name: Title: Qualifications: Experience and expertise: David Acton Non-Executive Director (Appointed 1 December 2021 to 31 December 2022) Bachelor of Business, CFA Mr Acton has extensive international equity capital markets experience with long- standing relationships with institutional investors both in Australia and internationally. Mr Acton has been a Senior Advisor at Rothschild Australia with a focus on Equity capital markets since 2017. Prior to 2017, Mr Acton spent 25 years at global investment banks with roles in equity research, distribution and capital markets. Between 2000 and 2016, Mr Acton worked at Goldman Sachs in New York, Singapore and Sydney as an equity specialist advising institutional investors. From 2006 to 2016 Mr Acton was a partner at Goldman Sachs JBWere and a Managing Director at Goldman Sachs where he held board and risk committee roles. Other current directorships: Former directorships (last 3 years): FirstWave Cloud Technology Limited (ASX: FCT) – June 2021 - Name: Title: Qualifications: Experience and expertise: Darryl Abotomey Non-Executive Director (Appointed 4 April 2022) B.Com, FCPA, MAICD Mr Abotomey brings over 40 years of executive leadership and financial expertise having held Board and executive leadership roles across manufacturing, global paper and packaging distribution and automotive aftermarket industries. Mr Abotomey was most recently Chief Executive Officer and Managing Director of Bapcor Limited, Asia Pacific’s leading provider of vehicle parts, accessories, equipment, service and solutions, where during his 10 years in that role he was instrumental to the successful growth and expansion of the business in line with its strategic growth plan. Between 2006 and 2010, Mr Abotomey served as CFO/COO and Director of the Board of Exego Group Pty Limited (Repco) and as an independent director of CPI Group Ltd. From 2000, Mr Abotomey served as a Board Director and CFO of Paperlinx Limited, where he led the due diligence, funding and settlement negotiations for international acquisitions. He successfully transitioned the business involving multi-country legal, financial, statutory, business culture, cultural, tax and insurance issues. During his time at Amcor, Mr Abotomey was CFO of Sunclipse Inc, a subsidiary of Amcor based in the USA and held roles of regional and group general manager at Amcor Fibre Packaging and Amcor Printing Papers Group in Australia, where he was responsible for international trade, including logistics and supply chain. Mr Abotomey also gained extensive experience in strategy, business restructuring, information technology and product launching. Other current directorships: Former directorships (last 3 years): Bapcor Limited (ASX: BAP) – November 2011 to December 2021 Adrad Limited (ASX: AHL) Tye Soon Limited (SGX: BFU) May 2021 to December 2021 6 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Interests in the securities of the group Director Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White (5) David Acton (6) Ordinary Shares (1) Options (2) Performance Rights (3) 70,176 1,011,262 1,040,000 504,286 - 57,143 - 2,682,867 148,000 72,000 72,000 72,000 - - - 364,000 600,000 600,000 - 600,000 - - - 1,800,000 Long Term Incentive (4) - - 800,000 - - - - 800,000 (1) Ordinary shares are fully paid (2) Unlisted options exercisable at $0.30 per option, expiring 30 Sep 2023 (3) Performance rights per director, 200,000 class A, 200,000 class B and 200,000 class C (4) Vesting long-term incentive shares (5) Resigned as a Director on 07 August 2023 (6) Resigned as a Director on 31 December 2022 Other current directorships quoted above are current directorships for listed entities only and exclude 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 Brett Tucker (Appointed 5 January 2017) Mr. Tucker has acted as Company Secretary to several ASX listed and private companies and has been involved in numerous public corporate acquisitions and transactions. Mr. Tucker is a Chartered Accountant with a strong corporate and compliance background gained from experience in an international accounting practice, working in audit and taxation across a wide range of industries. Deborah Ho (Appointed 31 January 2019 and resigned 10 May 2023) Ms. Ho has over seven years of experience in company secretarial, corporate compliance and financial accounting matters. She has acted as Company Secretary and financial accountant for several publicly listed Australian companies and gained audit experience from her time with international accounting practices. She holds a Bachelor of Commerce from Curtin University and is an Associate Member of the Governance Institute of Australia. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') and each Board committee held during the year ended 30 June 2023, and the number of meetings attended by each director was: Name Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White (2) David Acton (3) Board Meeting Held 15 15 15 15 15 15 7 Attended 15 - 14 14 14 14 7 Audit & Risk Committee (1) Attended - - - - - - - Held - - - - - - - (1) These are conducted by the Board as a whole as part of board meetings (2) Resigned as a Director on 07 August 2023 (3) Resigned as a Director on 31 December 2022 Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons with authority and responsibility for planning, directing and controlling the entity's activities, directly or indirectly, including all directors. 7 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) 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 Board is responsible for determining and reviewing directors and senior executives compensation arrangements. The Board assesses the appropriateness of the nature and amount of emoluments of such officers yearly by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high-quality board and executive team. The expected outcome of this remuneration structure is to retain and motivate the Directors and Senior Executives. The board has adopted a formal Remuneration Committee Charter and Remuneration Policy as part of its Corporate Governance Policies and Procedures. Currently, the entire Board performs the function of the Remuneration Committee. However, given that the consolidated group remains at an early stage of development, the Board’s overall approach to compensation remains subject to change. Accordingly, it will continue to evolve as the consolidated group grows and develops its business. In accordance with best practice corporate governance, the structure of non-executive director and executive director/managing director remuneration is separate. Non-executive directors’ remuneration The Constitution provides that the remuneration of non-executive Directors will not be more than the aggregate fixed sum determined by a general meeting of shareholders. The remuneration of executive Directors will be set by the Directors and may be paid by way of a fixed salary or consultancy fee. Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. Non-executive Directors do not receive performance-based pay. The maximum aggregate amount which has been approved to be paid to non-executive Directors is currently set at A$500,000 per annum. Executive directors Executive Directors are not entitled to receive any additional compensation, including employee options, in their capacity as Directors. Chairman’s fees The chairman’s fees are determined independently of the fees of non-executive Directors based on comparative roles in the external market. Additional fees A Director may also be paid fees or other amounts as the Directors determine if a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out-of-pocket expenses incurred as a result of their directorship or any special duties. Retirement allowances for directors Superannuation contributions required under the Australian Superannuation Guarantee Legislation continue to be made and are deducted from the Directors’ overall fee entitlements where applicable. 8 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) Executive remuneration Compensation objectives Pursuant to the Remuneration Policy, the consolidated group’s compensation policies and practices are designed to: (a) align executive remuneration with shareholder interests; (b) retain, motivate and reward appropriately qualified executive talent for the benefit of the consolidated group; (c) (d) (e) to achieve a level of remuneration that reflects the competitive market in which the consolidated group operates; to ensure that individual remuneration is linked to performance criteria if appropriate; and to ensure that executives are rewarded for both financial and non-financial performance. The Board aims to satisfy these objectives by adopting a compensation program for executive officers that combines base remuneration, which is market-related, with performance-based remuneration, which is determined annually. All market comparisons reflect an informal assessment and are based on the Board’s knowledge and experience in executive compensation matters. The Company retained no remuneration consultant in determining the remuneration of any of the KMP. Overall remuneration decisions are subject to the discretion of the Board. They can be changed to reflect competitive and business conditions in the consolidated group's and shareholders' interests to do so. Executive remuneration and other terms of employment are reviewed annually by the Board regarding the performance and relevant comparative information. Compensation components In accordance with the remuneration policy, the compensation currently consists primarily of three elements: base salary, cash bonus and long-term equity incentives. Each element of compensation is described in more detail below. Base salary A primary element of the Company’s compensation program is base salary. The Company believes a competitive base salary is necessary to attract and retain qualified executive officers. Accordingly, the amount payable to an executive officer is determined based on the scope of their responsibilities and prior experience while considering an informal evaluation of competitive market compensation for similar positions and overall market demand for such executives at the time of hire. Base salaries are reviewed annually and increased for merit reasons, based on the executive officer’s success in meeting or exceeding Company and individual objectives. Additionally, base salaries can be adjusted as warranted throughout the year to reflect promotions or other changes in the scope or breadth of the executive officer’s role or responsibilities and market competitiveness. Cash bonus plan Remuneration for certain individuals is directly linked to the performance of the consolidated group. A portion of a cash bonus and incentive payments are dependent on defined milestones being met. In addition, ad hoc cash bonuses may be paid from time to time if deemed appropriate by the Board, based on the attainment of particular objectives. Long-term equity incentives Equity-based awards are a variable element of compensation that allows executive officers to be rewarded for their sustained contributions to the consolidated group. Equity awards reward continued employment by an executive officer, with an associated benefit to K-TIG of attracting employees, continuity and retention. Executives may participate in share, performance rights and option schemes generally made in accordance with thresholds set in plans approved by shareholders if deemed appropriate. However, the Board considers it appropriate to retain the flexibility to issue shares, performance rights and options to executives outside of approved schemes in exceptional circumstances. Voting and comments made at the Company's 2022 Annual General Meeting ('AGM') At the 2022 AGM, 99.17% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Details of the consolidated group's remuneration of key management personnel are set out in the following tables. The value of remuneration received or receivable by key management personnel for the consolidated group for the financial year is as follows: 9 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) 2023 Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White (2) David Acton (3) Salary & Fees Cash Bonus (1) Other Fees Super- annuation Equity-Settled Options 85,000 60,000 350,000 60,000 60,000 60,000 30,000 705,000 - - 262,500 - - - - 262,500 - - - - - - - - 8,925 6,300 36,896 6,300 6,300 6,300 3,150 74,171 10,699 10,699 255,713 10,699 - - - 287,810 Total 104,624 76,999 905,109 76,999 66,300 66,300 33,150 1,329,481 (1) Cash bonus related to mutually agreed revenue and operational KPI’s being met at a maximum of 75% of base salary per Executive Services Agreement as approved by shareholders (2) Appointed 1 December 2021, resigned 7 August 2023 (3) Appointed 1 December 2021, resigned 31 December 2022 (4) No fees have been paid to Syed Basar Shueb but have been accrued. Since December 2022, all fees have not been paid but have been accrued 2022 Stuart Carmichael Syed Basar Shueb Mark Twycross Adrian Smith Anthony McIntosh Trish White David Acton Darryl Abotomey Salary & Fees Cash Bonus - - - 262,500 - - - - 262,500 74,583 49,583 17,500 350,000 49,583 35,000 35,000 15,000 626,249 Other Fees Super- annuation Equity-Settled Options - - - - - - - - - 7,458 4,958 (831) 35,000 4,958 3,500 3,500 1,500 60,043 61,207 61,207 61,207 493,118 61,207 - - - 737,946 Total 143,248 115,748 77,876 1,140,618 115,748 38,500 38,500 16,500 1,686,738 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White David Acton Fixed Remuneration 2023 2022 57% 90% 47% 86% 34% 43% 47% 86% 100% 100% 100% 100% 100% 100% At Risk - STI At Risk - LTI 2023 - - 29% - - - - 2022 - - 23% - - - - 2023 10% 14% 28% 14% - - - 2022 43% 53% 43% 53% - - - Cash bonuses are dependent on meeting defined performance measures. Adrian Smith is entitled to an STI cash bonus of up to 75% of base salary (excluding super) payable each anniversary (01 November) subject to the satisfaction of mutually agreed revenue and operational KPI’s. The Board has approved the maximum 75% of base salary payable, and the bonus is accrued evenly up to 30 June 2023 on this basis. The bonus is payable on the anniversary of the commencement of employment as Managing Director. Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: 10 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) Name: Title: Agreement commenced: Term of agreement: Details: Adrian Smith Managing Director (from 1 November 2020) 1 November 2020 (as an amendment to the existing Executive Services Agreement) Until 1 November 2023 (1 month written notice) Base salary of $29,166.67 per month plus superannuation Cash bonus of up to 75% of base salary (excluding superannuation) subject to the satisfaction of mutually agreed KPI’s Grant of 1,800,000 after consolidated conversion (1 to 2.5 basis) long-term incentive shares to be issued at subsequent anniversary dates of commencement of employment in the new role The Board will conduct a review of the terms annually Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares No ordinary shares were issued to directors and other key management personnel as part of compensation during the year ended 30 June 2023. Performance rights The terms and conditions of each grant of performance rights over ordinary shares affecting the remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name Number of Performance Rights Granted Consoliated Conversion (1to 2.5 basis) Revised Number of Performance Rights Granted Grant Date Milestone Expiry Date Date Exercise Price Fair Value per Performance Right at Grant Date Stuart Carmichael 27/11/2020 22/12/2025 - Class A - Class B - Class C Syed Shueb - Class A - Class B - Class C Anthony McIntosh - Class A - Class B - Class C 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 (300,000) (300,000) (300,000) - (300,000) (300,000) (300,000) (300,000) (300,000) (300,000) 200,000 200,000 200,000 - 200,000 200,000 200,000 200,000 200,000 200,000 Before 1 Apr 2021 Before 1 Oct 2021 Before 1 Oct 2022 27/11/2020 22/12/2025 Before 1 Apr 2021 Before 1 Oct 2021 Before 1 Oct 2022 27/11/2020 22/12/2025 Before 1 Apr 2021 Before 1 Oct 2021 Before 1 Oct 2022 $ - $ - $ - $ - $ - $ - $ - $ - $ - $0.0995 $0.1252 $0.1563 $0.0995 $0.1252 $0.1563 $0.0995 $0.1252 $0.1563 The Performance rights have the following milestones attached to them and are subject to the milestone dates set out below: a) Tranche 1 (Class A): 600,000 performance rights will vest when the Company achieves a volume-weighted average price (“VWAP”) of at least $0.35 over any twenty consecutive trading day period before 1 April 2021; b) Tranche 2 (Class B): 600,000 performance rights will vest when the Company achieves a VWAP of at least $0.50 over c) any twenty consecutive trading day period before 1 October 2021; and (Tranche 3 (Class C): 600,000 performance rights will vest when the Company achieves a VWAP of at least $0.75 over any twenty consecutive trading day period before 1 October 2022. Performance rights granted carry no dividend or voting rights. All performance rights were granted over unissued fully paid ordinary shares in the Company. Performance rights vest based on the vesting period, whereby the executive becomes beneficially entitled to the performance rights on the vesting date. Performance rights are exercisable by the holder from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. No amounts are paid or payable by the recipient regarding granting such performance rights. 11 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) Tranche 1 had already vested before the relevant milestone date of 1 April 2021, and Tranche 2 has already vested before the relevant milestone date of 1 October 2021. Accordingly, the holders had not exercised the vested performance rights as of 30 June 2023. The share-based payment expense recognised concerning performance rights over ordinary shares granted and the value of performance rights exercised and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2023 are set out below: Name Stuart Carmichael Syed Basar Shueb Anthony McIntosh Shared-Based Payment expense of Performance Rights Granted during the Year $ 10,699 10,699 10,699 32,097 Value of Performance Rights Exercised during the Year $ Value of Performance Rights Lapsed during the Year $ - - - - - - - - Remuneration Consisting of Performance Rights for the Year % 10% 14% 14% Options No options were granted to directors and other key management personnel as part of compensation during the year ended 30 June 2023. Long-term incentive shares The terms and conditions of each grant of long-term incentive shares affecting the remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name Adrian Smith - Tranche 1 - Tranche 2 - Tranche 3 Number of Long term Incentive Share Consolidated Conversion ( 1 to 2.5 basis) Number of Long term Incentive Share Grant Date Vesting Date Fair Value per Share at Grant Date 1,000,000 1,500,000 2,000,000 (600,000) (900,000) (1,200,000) 400,000 600,000 800,000 27/11/2020 27/11/2020 27/11/2020 01/11/2021 01/11/2022 01/11/2023 $0.27 $0.27 $0.27 On 1 November 2020, Mr Smith was appointed as Managing Director of the Company. Shares will be issued at each employment anniversary, with 50% of shares issued subject to a voluntary escrow period of 12 months. The share-based payment expense recognised concerning long-term incentive shares granted and the value of long-term incentive shares lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2023 are set out below: Long-Term Incentive Shares Adrian Smith Balance at the Start of the Year 3,500,000 Consolidated Conversion ( 1 to 2.5 basis) (2,100,000) Number of Long-Term Incentive Shares Converted to Ordinary Shares during the Year Balance at the End of the Year (600,000) 800,000 12 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) Name Adrian Smith Shared-Based Payment expense of Long Term Incentive Shares Granted during the Year $ 255,713 Value of Long Term Incentive Shares Lapsed during the Year $ - Remuneration Consisting of Long Term Incentive Shares for the Year % 28% 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 group, including their personally related parties, is set out below: Ordinary Shares Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White (1) David Acton (2) Balance at the Start of the Year Consolidated Conversion ( 1 to 2.5 basis) Received as part of Remuneration Additions / Other Disposals / Other Balance at the End of the Year 175,438 2,528,155 1,100,000 975,000 - - - 4,778,593 (105,262) (1,516,893) (660,000) (585,000) - - - (2,867,155) - - 600,000 - - - - 600,000 - - - 114,286 - 57,143 - 171,429 - - - - - - - - 70,176 1,011,262 1,040,000 504,286 - 57,143 - 2,682,867 (1) Appointed 1 December 2021, resigned 7 August 2023 (2) Appointed 1 December 2021, resigned 31 December 2022 Performance rights holding The number of performance rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated group, including their personally related parties, is set out below: Performance Rights over Ordinary Shares Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White David Acton Balance at the Start of the Year (1) 1,500,000 1,500,000 - 1,500,000 - - - Consolidated Conversion ( 1 to 2.5 basis) (900,000) (900,000) - (900,000) - - - 4,500,000 (2,700,000) Granted upon Appointment Additions / Other Exercised / ( Lapsed ) - - - - - - - - - - - - - - - - - - - - - - - - Balance at the End of the Year 600,000 600,000 - 600,000 - - - 1,800,000 (1) 1,800,000 performance rights (600,000 per each key management personnel holding these rights) had vested and were exercisable at 30 June 2023 13 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Remuneration report audited (continued) 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 group, including their personally related parties, is set out below: Options over Ordinary Shares Stuart Carmichael Syed Basar Shueb Adrian Smith Anthony McIntosh Darryl Abotomey Trish White David Acton Balance at the Start of the Year (1) Consolidated Conversion ( 1 to 2.5 basis) 370,000 180,000 180,000 180,000 - - - 910,000 (222,000) (108,000) (108,000) (108,000) - - - (546,000) Granted upon Appointment Additions / Other Exercised / ( Lapsed ) Balance at the End of the Year - - - - - - - - - - - - - - - - - - - - - - - - 148,000 72,000 72,000 72,000 - - - 364,000 (1) All options are exercisable at 30 June 2023 Long-term incentive shares holding Following approval by shareholders at the Company’s Annual General Meeting on 27 November 2020, Mr Smith is earning up to 1,800,000 after Consolidate conversion 1 to 2.5 basis (previous amount was 4,500,000) ordinary shares in the Company. Long-term incentive shares of 1,000,000 were converted to ordinary shares during the financial year (30 June 2022: 1,000,000). Other transactions with key management personnel and their related parties During the financial year, payments for company secretarial, accounting and corporate advisory fees, totalling $195,946 (30 June 2022: $120,730), were made to Ventnor Capital Pty Ltd (the director-related entity of Mr Carmichael). The current trade and other payable balance as at 30 June 2023 $97,224 (30 June 2022: nil). All transactions were made on normal commercial terms and conditions and at market rates. No related party loans were held or provided by the Company at any time during the financial year (30 June 2022: nil). This concludes the remuneration report, which has been audited. Additional information The earnings of the consolidated group for the five years to 30 June 2023 are summarised below: Sales revenue EBITDA EBIT Loss after income tax 2023 $ 2022 $ 2021 $ 3,095,724 (6,061,852) 3,702,512 (5,767,474) 1,561,556 (4,233,702) 2020 $ 333,366 (8,245,702) 2019 $ 1,069,198 (1,641,599) (6,251,718) (6,431,749) (5,954,261) (5,962,663) (4,473,399) (4,482,667) (8,407,290) (8,411,825) (1,686,617) (1,690,187) The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end ($) (1) Total dividends declared (cents per share) (1) Basic loss per share (cents per share) (1) 2023 $ 0.14 - (3.20) 2022 $ 0.25 - (3.43) 2021 $ 0.44 - (2.76) 2020 $ 0.19 - (6.97) 2019 $ - - - (1) Despite the consolidated group applying the continuation method of accounting for the acquisition of Keyhole TIG Ltd in the financial year ended 30 June 2020, the TSR factors have not been presented for financial years before 30 June 2020 due to incomparable operations and capital structures. 14 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Shares under option Unissued ordinary shares of K-TIG Limited under option at the date of this report are as follows: Unissued ordinary shares Grant Date 30/09/2019 Expiry Date 30/09/2023 Exercise Price $0.30 Balance at the Start of the Year 6,612,152 Consolidated Conversion ( 1 to 2.5 basis) (3,967,291) Number under Option 2,644,861 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options There were no shares issued of K-TIG Limited during the year ended 30 June 2023 and up to the date of this report on the exercise of options granted: Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against liability to the extent permitted by the Corporations Act 2001. The insurance contract prohibits disclosure of the liability's nature and the premium's amount. 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 There were a total of $3,621 in non-audit services provided during the financial year by the auditor (30 June 2022: $2,352). 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 24 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 undermines the general principles relating to auditor independence as set out in APES 110 – Part 4A of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing economic risks and rewards. ● Officers of the Company who are former partners of BDO Audit Pty Ltd There are no officers of the Company who are former partners of BDO Audit Pty Ltd. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. 15 K-TIG Limited and Its Controlled Entities Directors' report For the year ended 30 June 2023 Auditor BDO Audit Pty Ltd was appointed at the last AGM, a change from BDO Audit (SA) Pty Ltd. BDO Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a directors resolution pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Stuart Carmichael Chairman 29 September 2023 Perth 16 Tel: +61 8 7324 6000 Fax: +61 8 7324 6111 www.bdo.com.au BDO Centre Level 7, 420 King William Street Adelaide SA 5000 GPO Box 2018 Adelaide SA 5001 Australia DECLARATION OF INDEPENDENCE BY ANDREW TICKLE TO THE DIRECTORS OF K-TIG LIMITED As lead auditor of K-Tig Limited for the year ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of K-Tig Limited and the entities it controlled during the period. Andrew Tickle Director BDO Audit Pty Ltd Adelaide, 29 September 2023 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 17K-TIG Limited and Its Controlled Entities Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023 Sales revenue Cost of sales Gross profit/(loss) Other income Expenses Marketing expenses Corporate expense Service expense Employee benefits expense Office/workshop expense Travel expense R&D expense Other expenses Due Diligence and Pre-Acquisiton Costs Total operating expenses (Loss) before income tax expense Income tax expense (Loss) for the year Other comprehensive income / (expense) Total comprehensive loss for the year Loss per share to owners of K-TIG Limited Basic loss per share Diluted loss per share Note 3 4 Consolidated 2023 $ 3,095,724 (1,503,759) 1,591,964 2022 $ 3,702,512 (1,427,035) 2,275,477 653,925 190,583 (325,291) (832,429) (290,230) (4,601,726) (409,035) (343,727) (78,975) (39,419) (1,756,807) (8,677,639) (494,464) (1,381,117) (453,022) (5,544,729) (292,907) (189,891) (59,067) (13,526) - (8,428,722) (6,431,749) (5,962,663) - - (6,431,749) (5,962,663) 330,012 18,474 (6,101,738) (5,944,188) Cents Cents (3.20) (3.17) (3.43) (3.35) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 18 K-TIG Limited and Its Controlled Entities Consolidated statement of financial position As at 30 June 2023 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Financial assets Total current assets Non-current assets Other receivables Property, plant and equipment Right-of-use-assets Intangibles Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Amounts received in advance Financial Liabilities Lease Labilities Employee benefits Total current liabilities Non-current liabilities Lease liabilities Employee benefits Total non-current liabilities Total liabilities Net assets Equity Issued capital Share based payment reserve Foreign currency translation reserve Accumulated losses Total Equity Note Consolidated 2023 $ 2022 $ 7 8 9 15 8 10 11 12 13 14 15 16 17 16 17 18 19 818,859 872,105 1,841,307 740,000 4,272,271 14,150 513,578 661,114 19,819 1,208,661 3,726,745 856,547 1,309,187 40,000 5,932,479 14,150 426,366 437,320 30,876 908,712 5,480,932 6,841,191 2,491,141 444,259 2,837,220 111,135 266,697 6,150,452 565,162 - 565,162 1,211,147 322,256 - 77,730 199,935 1,811,068 359,590 16,715 376,305 6,715,614 2,187,373 (1,234,683) 4,653,818 27,839,529 2,145,652 335,347 (31,555,211) (1,234,683) 27,299,304 2,566,786 5,335 (25,217,606) 4,653,818 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 19 K-TIG Limited and Its Controlled Entities Consolidated statement of changes in equity For the year ended 30 June 2023 Consolidated Balance at 1 July 2021 Loss for the year Other comprehensive Total comprehensive loss for the year Transactions with owners in their capacity as owners Issue of shares, net of transaction costs Share-based payments - performance rights, net of Share-based payments - Balance at 30 June 2022 Issued Capital $ Convertible Note 23,443,733 - - - 3,585,570 - 270,000 27,299,303 - - - - - - - - Consolidated Balance at 1 July 2022 Loss for the year Other comprehensive Total comprehensive loss for the year Transactions with owners in Issue of shares, net of transaction costs Cost of Capital Raise Share-based payments - performance rights, net of transaction costs Share-based payments - performance rights Conversion of long term incentive shares to director Balance at 30 June 2023 Issued Capital $ Convertible Note - - - - - - 27,299,304 - - - 150,000 (140,000) - 125,225 405,000 - - - - 1,097,121 (270,000) 2,566,785 Shared Based Payments Reserve $ 2,566,786 - - - - 109,091 (125,225) (405,000) Shared Based Payments Reserve $ 1,739,664 Foreign Currency Translation Reserve $ (13,141) Accumulated Losses $ (19,254,943) - 18,476 18,476 (5,962,663) - (5,962,663) Total $ 5,915,313 (5,962,663) 18,476 (5,944,186) - - - 5,335 - - - 3,585,570 1,097,121 - (25,217,606) 4,653,818 Foreign Currency Translation Reserve $ Accumulated Losses $ Total $ 5,335 (25,123,462) 4,747,963 - 330,012 330,012 (6,431,749) (6,431,749) (6,431,749) 330,012 (6,101,738) - - - - 150,000 (140,000) 109,091 - - 27,839,529 - 2,145,652 335,347 (31,555,211) (1,234,683) The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 20 K-TIG Limited and Its Controlled Entities Consolidated statement of cash flows For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Other income Interest and other finance costs paid Net cash used / (provided) in operating activities Cash flows from investing activities Payments for financial assets Payments for property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from convertible note Payments for rights issue cost Repayment of lease liabilities Net cash provided / (used) by financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of the period Note Consolidated 2023 $ 2022 $ 3,202,171 (8,373,677) (5,171,506) 10,088 643,838 (7,909) (4,525,490) 4,068,951 (8,747,202) (4,678,251) 683 2,953 (8,402) (4,683,017) - (266,021) (266,021) - (154,526) (154,526) 150,000 2,000,000 (140,000) (126,376) 1,883,625 (2,907,886) 3,726,745 818,859 3,585,570 - - (88,920) 3,496,650 (1,340,893) 5,067,638 3,726,745 30 32 7 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 21 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. Unless otherwise stated, these policies have been consistently applied to all the years presented. New or amended Accounting Standards and Interpretations adopted The consolidated group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been adopted early. Adoption of the new and amended accounting standards had no material financial impact on the consolidated group. 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'). For the year ended 30 June 2023, the consolidated group reported a loss of $6.4m (2022: $6.0m loss) and cash used in operating activities of $5.2m (2022: $4.7m cash used). The increase in loss is mainly attributable to the lower revenue and grow margin, acquisition and recompliance costs associated with the Graham’s Engineering Limited acquisition amounting to $1.7m. Notwithstanding these events, the Directors believe that it is reasonably foreseeable that the consolidated entity will continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report; having prepared forecast cashflow information for a period of least 12 months from the end of the reporting period, taking into consideration of the following factors: • The ability to raise capital for the “GEL” acquisition • Continued revenue growth as a result of having established operations in key markets such as the UK and USA • Careful cashflow management, including controlling discretionary spending and prioritisation of capital expenditure • The continued receipt of R&D tax incentives claims for eligible expenditure incurred in the year ended 30 June 2024 Should the Group be unable to maintain sufficient funding outlined above, there are material uncertainties that may cast significant doubt about the Group to continue as a going concern. Therefore the Group may be unable to realise its assets and extinguish its liabilities in the normal course of business. The financial report does not include any adjustments relating to the amounts or classification of recorded assets and liabilities that might be necessary should the Group not continue as a going concern. The Directors believe that the Group will be successful in the above matters and accordingly, have prepared the financial report on a going concern basis. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss. 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 group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 2. Equity structure The equity structure (the number and type of equity instruments issued) in the financial statements reflects the equity structure of KTG. Earnings per share The weighted average number of shares outstanding for the year ended 30 June 2023 is based on the combined weighted average number of shares of the K-TIG Limited consolidated group outstanding in the year. 22 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) Parent entity information In accordance with the Corporations Act 2001, these financial statements only present the consolidated group's results. Supplementary information about the legal parent entity is disclosed in Note 26. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of K-TIG Limited ('company' or 'parent entity') as at 30 June 2023, and the results for the year then ended. K-TIG Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated group'. Subsidiaries are all those entities over which the consolidated group has control. The consolidated group controls an entity when the consolidated group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated group 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 group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Without the loss of control, a change in ownership interest 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. Where the consolidated group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary, together with any cumulative translation differences recognised in equity. In addition, the consolidated group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for allocating resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is K-TIG 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. Revenue recognition The consolidated group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price; allocates the transaction price to the separate performance obligations based on the relative stand-alone selling price of each distinct good or service to be delivered, and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. 23 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered. Revenue from government grants Grant income is recognised in line with AASB 120, when there is reasonable assurance that the consolidated group has complied with the conditions attached to the grant. WaaS Welding as a Service (WaaS) revenue is recognised at an amount that reflects the greater of the minimum monthly charge or the usage rate stipulated in the contract, which the consolidated group is expected to be entitled to under an operating lease in accordance with AASB 16. The minimum term of the license or lease period is generally three years. The license or lease equipment is capitalised as an asset and depreciated over the expected useful life being five years. Upon signing of the license or lease contract, the customer is generally required to make a prepayment which is recorded on the statement of financial position as “Amounts received in advance”. After delivery and commissioning of the WaaS asset, the prepayment is applied against the monthly fee until it is exhausted. 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. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the temporary taxable difference is associated with interests in subsidiaries, associates or joint ventures, and the reversal timing can be controlled, it is probable that the temporary difference will not reverse in the foreseeable future. ● Deferred tax assets are recognised for temporary deductible 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. Conversely, 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. 24 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) Prior to the acquisition of Keyhole TIG Limited in September 2019, K-TIG Limited (the 'legal parent') and its wholly-owned Australian subsidiaries had formed an income tax consolidated group under the tax consolidation regime. K-TIG Limited is in the process of adding Keyhole TIG Limited to that group. The legal parent and each subsidiary in the consolidated tax group continue to account for their own current and deferred tax amounts. Accordingly, the consolidated tax group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to the consolidated tax group members. In addition to its own current and deferred tax amounts, the legal parent also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the consolidated tax group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the consolidated tax group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the legal parent to the subsidiaries nor a distribution by the subsidiaries to the legal parent. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period, or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also include bank overdrafts, shown within borrowings in current liabilities on the statement of financial position. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. In addition, trade receivables have been grouped based on days overdue to measure the expected credit losses. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Inventories Materials and components, and finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of direct materials. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and 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 completion costs and the costs necessary to make the sale. 25 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) Financial assets Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows. The contractual terms of the financial assets give rise to cash flows that are solely principal payments and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The consolidated group’s cash and cash equivalents, trade and other receivables fall into this category of financial instruments. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred, and the consolidated group 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. Impairment of financial assets The consolidated group recognises a loss allowance for expected credit losses on financial assets, which are measured at amortised cost. The measurement of the loss allowance depends upon the consolidated group'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 are 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 based on the probability-weighted present value of anticipated cash shortfalls over the instrument's life discounted at the original effective interest rate. Property, plant and equipment Plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure 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 over their expected useful lives as follows: Leasehold improvements WaaS assets Plant and equipment Computer Equipment 2 years 5 years 2.5 - 20 years 3 years If appropriate, the residual values, useful lives and depreciation methods are reviewed and adjusted at each reporting date. Leasehold improvements are depreciated over the unexpired lease period or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the disposed item is transferred directly to retained profits. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories. Right-of-use assets are depreciated on a straight-line basis over the unexpired lease period or the asset's estimated useful life, whichever is shorter. Where the consolidated group 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 an impairment or adjusted for any remeasurement of lease liabilities. 26 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) The consolidated group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Intangible assets Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the intangible asset's carrying amount. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected consumption pattern or useful life are accounted for prospectively by changing the amortisation method or period. Patents and trademarks Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis throughout their expected benefit, their finite life of 10 years. Amortisation expense is recognised as R&D expense in the profit or Loss. Impairment of non-financial assets 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. The recoverable amount is the higher of an asset's fair value less disposal costs and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated group before the end of the financial year, which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. As a result, 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. A convertible note is assessed on initial recognition for any element that may indicate an equity component, being a fixed dollar value for a fixed amount of equity instruments. Any instrument to demonstrating this is recognised as a liability. A convertible note liability is assessed for any embedded derivatives. If an embedded derivative is identified, it is recognised at fair value and subsequently remeasured at each balance date with movements through the profit or loss. Any remaining value of the convertible note is assessed as a financial liability at amortised cost, with the remaining value amortised using the effective interest rate that unwinds the balance to its expected maturity value. Refer to Note 15 for specific application of this policy. Leases As a lessee For any new contracts entered into by the group, the consolidated group considers whether a contract is or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition, the consolidated group assesses whether the contract meets three key evaluations which are whether: - The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the consolidated group; - The consolidated group has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; - The consolidated group has the right to direct the use of the identified asset throughout the period of use. The consolidated group assesses whether it has the right to direct ‘how and for what purposes’ the asset is used throughout the period of use. 27 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) As a lessor The consolidated group’s accounting policy under AASB 16 has not changed from the comparative period. As a lessor, the consolidated group classified its leases as either operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset and classified as an operating lease if it does not. 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 lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated group'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, and the exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; the certainty of a purchase option; and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the consolidated group has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated group 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, the experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on 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 rendering services. 28 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) The cost of equity-settled transactions are measured at fair value on the grant date. Fair value is independently determined using either the Black-Scholes option pricing model or a Monte Carlo simulation that takes into account the exercise price, the term of the option, the impact of dilution, the share price at the grant date and the 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 group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date, less amounts already recognised in previous periods. 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 group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated group 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 market participants' assumptions 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 input level 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 unavailable, or the valuation is deemed significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in the 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. 29 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) Dividends Dividends are recognised when declared during the financial year and are no longer at the company's discretion. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree. In addition, all acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed, and the fair value of the consideration transferred. The fair value of any pre-existing investment in the acquiree is recognised as goodwill. However, suppose the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer. In that case, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends either earlier (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share are calculated by dividing the profit attributable to the owners of K-TIG Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjust 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 concerning 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. 30 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 1. Significant accounting policies (continued) New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory have not been adopted early by the consolidated group for the annual reporting period ended 30 June 2022. Accordingly, the consolidated group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Note 2. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates concerning assets, liabilities, contingent liabilities, revenue and expenses. Management believes management's judgements, estimates and assumptions based on historical experience and other factors, including expectations of future events, to be reasonable under the circumstances. However, the resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Share-based payment transactions The consolidated group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black- Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would not impact the carrying amounts of assets and liabilities within the next annual reporting period. Still, they may impact profit or loss and equity. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. Estimation of useful lives of assets The consolidated group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. Therefore, the depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated group assesses the impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value-less disposal costs or value-in-use calculations, which incorporate a number of key estimates and assumptions. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and a lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised or an option to terminate the lease will not be exercised when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option or not to exercise a termination option are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; the existence of significant leasehold improvements; and the costs and disruption of replacing the asset. The consolidated group reassesses whether it is reasonably certain to exercise an extension option or not exercise a termination option if there is a significant event or significant change in circumstances. Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the consolidated group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. 31 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 2. Critical accounting judgements, estimates and assumptions (continued) Employee benefits provision As discussed in Note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Note 3. Revenue Revenue from contracts with customers Sale of goods Rendering services Other trading revenue Revenue from Waas lessor arrangements Disaggregation of revenue The disaggregation of revenue from contracts with the customer is as follows: Geographical regions United States Rest of the World Asia Pacific (including New Zealand) United Kingdom Australia Timing of revenue recognition Revenue recognised at a point in time Revenue recognised over time Note 4. Other Income Interest received Other income Research & development tax incentive Net gain on disposal of property, plant and equipment Consolidated 2023 $ 2,700,073 297,128 35,752 3,032,953 62,770 3,095,724 2022 $ 3,380,832 179,676 18,267 3,578,775 123,737 3,702,512 Consolidated 2023 $ 1,188,290 565,692 559,897 541,034 240,811 3,095,724 2022 $ 1,089,414 516,385 706,998 457,616 932,099 3,702,512 Consolidated 2023 $ 3,032,953 62,770 3,095,724 2022 $ 3,578,775 123,737 3,702,512 Consolidated 2023 $ 10,088 8,576 635,262 - 653,925 2022 $ 683 2,892 186,947 61 190,583 32 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 5. Expenses Loss before income tax from continuing operations includes the following specific expenses: (6,431,749) (5,962,663) Consolidated 2023 $ 2022 $ Depreciation Expense Leasehold improvements Plant and equipment Computer equipment WaaS assets Right-of-use assets Amortisation Amortisation of intangibles Finance Costs Interest and finance charges on credit cards and premium financing Interest and finance charges on lease liabilities Interest on convertible note Interest on convertible note at amortised cost Net Foreign Exchange (Gain) / Loss Net foreign exchange (gain) / loss Rent Rental expenses relating to operating leases not recognised due to short period or low value Superannuation and Pension Expense Defined Contribution superannuation and pension expense Professional Fees General legal fees Due Diligence and Pre-Acquisiton Costs Share-Based Payment Expense Share Based Payments Expense Performance rights issued to directors Long-term incentive shares granted to director Performance rights issued to previous director Performance rights issued to employees 5,947 112,672 35,938 24,253 106,657 285,467 11,057 11,057 8,610 34,200 61,196 76,025 180,031 52,065 52,065 2,788 2,788 46,077 77,958 25,337 26,358 80,458 256,188 11,057 11,057 6,810 1,592 - - 8,402 (18,136) (18,136) 57,436 57,436 279,195 279,195 242,451 242,451 9,121 1,756,807 1,765,928 203,235 32,097 255,713 10,699 (95,274) 203,235 15,625 - 15,625 - 244,828 493,118 - 360,975 1,098,921 33 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 6. Income tax expense Loss before income tax expense Consolidated 2023 $ 2022 $ (6,431,749) (5,962,663) Prima facie tax payable from ordinary activities at 25% (2022: 25%) (1,607,937) (1,490,666) Due diligence and pre-acquisition costs Non-deductible expenses Non-assessable income Share based payments Deferred tax asset not recognised Income tax expense 403,797 196,521 (158,815) 50,809 1,115,625 - 3,883 (46,737) 274,730 1,258,789 - - Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognised due to the uncertainty of future recovery. A re-assessment was carried out of unused tax losses from prior periods before the reverse takeover in September 2019; the balances are as follows: Unused tax losses - revenue Unused tax losses - capital Deductible temporary differences Potential benefit at 25% (2022: 25%) Note 7. Cash and cash equivalents Cash at bank Consolidated 2023 $ 21,043,862 2,181,918 6,201,491 29,427,271 2022 $ 17,352,438 2,181,918 5,669,646 25,204,002 7,356,818 6,301,001 Consolidated 2023 $ 818,859 2022 $ 3,726,745 The carrying amounts of cash and cash equivalents approximate their fair value and are denominated in the following currencies: Australian dollar British pound Euro United states dollar Consolidated 2023 $ 446,228 54,500 21,351 296,780 818,859 2022 $ 3,298,056 95,331 77,454 255,904 3,726,745 34 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 8. Trade and other receivables Current Trade Receivables Trade receivables Provision for expected losses Other Receivables GST and VAT receivables Prepayments Other receivables Trade and Other Receivables Non-current Other Receivables Other receivables Consolidated 2023 $ 2022 $ 237,207 - 237,207 94,760 246,033 294,104 634,898 322,956 (10,071) 312,884 86,547 217,688 239,428 543,663 872,105 856,547 14,150 14,150 14,150 14,150 Allowance for expected credit losses The consolidated group has recognized $ Nil (30 June 2022: $10,071) in profit or loss in respect of the expected credit losses for the year ended 30 June 2023 due to the upfront nature of equipment sales and payments received during the next period from customers. Consolidated Not overdue 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Note 9. Inventories Materials and components Finished goods Goods in transit Expected Credit Loss Rate Carrying Amount 2023 % 0% 0% 0% 0% 2022 % 0% 0% 0% 100% 2023 $ 97,562 113,608 - 26,037 237,207 2022 $ 32,917 137,949 142,019 10,071 322,956 Allowance for Expected Credit Losses 2023 $ 2022 $ - - - - - - - - 10,071 10,071 Consolidated 2023 $ 581,099 1,260,208 - 1,841,307 2022 $ 776,438 265,098 267,651 1,309,187 35 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 10. Property, plant and equipment Leasehold improvements - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation Computer and equipment - at cost Less: Accumulated depreciation WaaS assets - at cost Less: Accumulated depreciation Consolidated 2023 $ 224,814 (189,232) 35,583 666,558 (288,395) 378,163 139,644 (91,363) 48,281 121,266 (69,716) 51,550 2022 $ 183,307 (183,285) 22 449,015 (175,723) 273,292 132,673 (55,425) 77,248 121,267 (45,463) 75,804 513,578 426,366 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 as at 1 July 2021 Additions Disposals Depreciation expense Balance as at 30 June 2022 Additions Depreciation expense Balance as at 30 June 2023 Note 11. Right-of-use assets Land and buildings Less: Accumulated depreciation Leasehold Improvements 46,099 Plant and Equipment Computer Equipment 276,368 23,108 WaaS Assets 202,124 Total 547,699 - - (46,077) 22 41,507 (5,947) 35,583 74,882 - (77,958) 273,292 217,543 (112,672) 378,163 79,477 - (25,337) 77,248 6,971 (35,938) 48,281 - (99,962) (26,358) 75,804 - (24,253) 51,551 154,359 (99,962) (175,730) 426,366 266,022 (178,809) 513,578 Consolidated 2023 $ 767,771 (106,657) 661,114 2022 $ 437,320 - 437,320 The consolidated group leases office and warehouse equipment under either short-term or low-value agreements, so have been expensed as incurred and not capitalised as right-of-use assets (Note 5). 36 K-TIG Limited and Its Controlled Entities Notes to the financial statements 30 June 2023 Note 12. Intangibles Trademarks - at cost Less: Accumulated amortisation Consolidated 2023 $ 110,569 (90,750) 19,819 2022 $ 110,569 (79,693) 30,876 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 1 July 2022 Additions Amortisation expense Note 13. Trade and other payables Trade payables Other payables Accrued expenses Refer to note 21 for further information on financial instruments. Note 14. Amounts received in advance Amounts Received in Advance Consolidated 2023 $ 30,876 - (11,057) 19,819 2022 $ 41,933 - (11,057) 30,876 Consolidated 2023 $ 1,416,857 247,875 826,409 2,491,141 2022 $ 411,148 438,592 361,407 1,211,147 Consolidated 2023 $ 444,259 444,259 2022 $ 322,256 322,256 Reconciliation Reconciliation of the written down value at the beginning and end of the current and previous financial year are set out below: Balance at 01 July Sales and service Transfer to revenue Balance at 30 June Consolidated 2023 $ 322,256 556,172 (434,169) 444,259 2022 $ 170,945 556,172 (404,861) 322,256 Unsatisfied performance obligations - Sales and service The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $444,259 as at 30 June 2023 (30 June 2022: $322,256) and is expected to be recognised as revenue in future periods as follows: 37 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 14. Amounts received in advance (continued) Within 6 months 6 to 12 months 1-2 years 2-3 years 3-4 years 4-5 years Note 15. Financial Liabilities Financial liability at amortised cost Financial liability at fair value Financial liability coupon interest expense Balance at 01 July Financial liability at amortised cost Interest expense of financial liability at amortised cost Balance at 30 June Balance at 01 July Financial liability at fair value Movement in fair value Balance at 30 June Balance at 01 July Financial liability coupon interest expense Balance at 30 June Consolidated 2023 $ 302,367 44,330 46,700 37,175 10,348 3,339 444,259 2022 $ 215,810 18,360 13,267 42,757 29,353 2,709 322,256 Consolidated 2022 $ 2023 $ 2,313,238 462,787 61,195 2,837,220 Consolidated 2022 $ 2023 $ - 2,242,053 71,185 2,313,238 Consolidated 2022 $ 2023 $ - 457,947 4,840 462,787 Consolidated 2022 $ 2023 $ - 61,195 61,195 - - - - - - - - In March 2023, the consolidated group issued 2,000 convertible notes with a face value of $1,000 for proceeds of $2,000,000. The notes have an interest of 10% per annum, simple and non-compounding accruing daily. Interest is repayable on conversion or redemption in cash or at the election of the consolidated group and subject to shareholder approval, through the issue of shares issued at the conversion price at maturity. Subject to satisfaction of the following conversion conditions, the Note will automatically convert into ordinary shares in the consolidated group upon the next equity raise of equal to or greater than $4,000,000: a) The consolidated group obtaining shareholder approval for the conversion of the Notes into shares and options in the capital of the consolidated group. b) The consolidated group obtaining approval the Notes are not inconsistent with Listing Rule 6.1; and c) The consolidated group completing a future capital raise of no less than $4,000,000 38 K-TRIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 15. Financial Liabilities (continued) On conversion of the Notes, and subject to satisfaction of the conversion conditions, the note holders will received one unquoted options for every share issued to conversion with an exercise price equal to the conversion price and expiring 36 months after the conversion date (Conversion Options). In the event the conversion conditions are not satisfied , the consolidated group must, prior to maturity a) Seek shareholder approval for the issue of 20,000,000 options with an exercise price equal to the consolidated group’s 20 day VWAP as at the date of the shareholder meeting, expiring 36 months after the issued date, such that each noteholder is issued 10,000 options per note (Redemption Options) and pay the monies payable. In the event the shareholder approval for the redemption options is not obtained, reimburse the Noteholder a further $350 for each note in addition to the principal and accrued interest. b) The number of redemption options was varied as part of the consolidated group’s share consolidation such that 8,000,000 are now on hand. The consolidated group has identified an embedded derivative, being an instrument where its value changes in response to a change in a specified financial instrument price, being the 8,000,000 Redemption Options. This instrument is a financial liability valued at fair value with movements taken through the statement of profit or loss. To assess fair value, the consolidated group has firstly utilised a Monte Carlo model to estimate the 20 day VWAP. The results are then applied to a Black Scholes model to estimate the value of the average value of the option. This approach has been applied to the two scenarios where redemption options could be issued being; a) A successful capital raise with conversion options not approved by shareholders but redemption options approved (Scenario 1) b) An unsuccessful capital raise with redemption options approved (Scenario 2) A probability factor of each scenario has then been estimated and applied against each scenario to finalise the fair value estimate. The inputs used in the fair value model for each scenario are: Input Spot price - adjusted for share consolidation Risk free rate Volatility Conversion timing Probability Fair value per option Scenario 1 Scenario 2 $0.3625 3.5512% 100% Mid February 24 12.50% $0.2303 $0.3625 3.5512% 100% Early March 25 12.50% $0.2277 As the inputs are unobservable, the fair value is a level 3 estimate. The fair value on initial recognition of $2,242,053 for the embedded derivative is subtracted from the value of the host liability being $2,700,000. This host liability is the maximum principal repayment under the note, being the initial $1,000 per note plus the additional $350. The remaining amount on initial recognition is then unwound back to $2,700,000 at maturity using the effective interest method. A financial asset of $700,000 is also recorded on initial recognition. This represents the value of the optionality that the consolidated group holds through its shareholders to opt for the settlement option that maximise their economic benefit. This value will be held at cost and considered for impairment indicators when it becomes probable that the shareholders will opt for a conversion option where the settlement option exceeds the carrying value of the convertible note components being the host liability at amortised cost, the embedded derivative at fair value and the financial asset at cost. 39 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 16. Lease liabilities Current Non current Balance at 01 July Adoption of AASB 16 Interest expense Repayments Balance at 30 June Note 17. Employee benefits Current Non-current Note 18. Issued capital Consolidated Ordinary shares - fully paid Series A preference shares Consolidated 2023 $ 111,135 565,162 676,296 2022 $ 77,730 359,590 437,320 Consolidated 2023 $ 437,320 308,439 19,859 (89,322) 676,296 2022 $ 85,209 437,320 1,592 (86,801) 437,320 Consolidated 2023 $ 266,697 - 266,697 2022 $ 199,935 16,715 216,650 2023 Shares 73,328,415 30 June 2022 Shares 181,111,261 2023 $ 30 June 2022 $ 27,839,529 27,299,304 - - - - 73,328,415 181,111,261 27,839,529 27,299,304 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. Capital risk management The consolidated group’s objectives when managing capital is to safeguard its ability to continue as a going concern so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the consolidated statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. To maintain or adjust the capital structure, the consolidated group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 40 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 18. Issued capital (continued) Movements in ordinary shares for the financial year Date 1 Jul 2022 30 Dec 2022 30 Dec 2022 20 Mar 2023 31 Mar 2023 5 Jun 2023 31 Dec 2022 Details Balance Conversion of long term shares to director Directors placement of shares Cost of Capital Raise Employee Incentive shares Consolidated Conversion (1 to 2.5 basis) Balance Number of Shares 181,111,261 1,500,000 428,571 - 280,000 (109,991,417) 73,328,415 $ 27,299,304 405,000 150,000 (140,000) 125,225 - 27,839,529 As at 30 June 2023, up to 8,020,036 deferred consideration shares are to be issued in 3 tranches based on the cumulative revenue over 48 months from 1 January 2020. a) Tranche 1: expired; b) Tranche 2: up to 4,010,018 deferred consideration shares to be issued if K-TIG achieves $60,000,000 of cumulative revenue within 48 months from 1 January 2020; and c) Tranche 3: up to 4,010,018 deferred consideration shares to be issued if K-TIG achieves $15,000,000 of cumulative EBITDA within 48 months from 1 January 2020. Note 19. Reserves Options reserve Performance rights reserve Consolidated 2023 $ 871,990 1,273,662 2,145,652 2022 $ 871,990 1,694,796 2,566,786 The reserves are used to recognise share-based payment transactions. Amounts will be transferred to issued share capital upon share options or performance rights being exercised, or long-term incentive shares being converted. Movements in options reserve for the year Date 1 Jul 2022 Details Balance 26 May 2023 Consolidated Conversion Movements in performance rights reserve for the year Date 1 Jul 2022 30 Dec 2022 3 Mar 2023 31 May 2022 26 May 2023 30 Jun 2023 30 Jun 2023 30 Jun 2023 Details Balance Conversion of long term shares to director Share based payments - performance rights to Staff Options lapsed for employees Consolidated Conversion Share based payments - performance rights to Directors Share based payments - performance rights to previous Director Share based payments - performance rights to Staff Number of Options 6,612,152 (3,967,291) 2,644,861 Number of Performance Rights 10,830,000 (1,500,000) (280,000) (1,000,000) (4,830,000) - - - 3,220,000 $ 871,990 - 871,990 $ 1,694,796 (405,000) (125,225) (197,720) - 287,810 10,699 8,302 1,273,662 Refer to Note 33 for more details on the calculation of the fair value of the performance rights issued and the related share- based payment expense for the year. 41 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 19. Reserves (continued) On 1 November 2020, Mr Smith was appointed as Managing Director of the Company. Shares will be issued to Mr Smith at each anniversary of employment as follows, with 50% of shares issued subject to a voluntary escrow period of 12 months as follows after consolidate version: - 400,000 shares to be issued on 1 November 2021; - 600,00,000 shares to be issued on 1 November 2022; and - 800,000 shares to be issued on 1 November 2023. Refer to Note 33 for more details on the calculation of the fair value of the long-term incentive shares granted and the related share-based payment expense for the year. Note 20. Dividends No dividends were paid during the financial year ended 30 June 2023 (2022: Nil). Franking credits available for subsequent periods based on a 25% tax rate is Nil (30 June 2022: 25%). Note 21. Financial instruments Financial risk management objectives The consolidated group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated group. Risk management is carried out by senior finance executives (‘finance’) in consultation with the Board of Directors (‘the Board’). Finance identifies and evaluates financial risks within the consolidated group’s operating units. Finance reports to the Board monthly. Market risk Foreign currency risk The consolidated group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. These transactions include customer sales agreements and supplier agreements. 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. To protect against exchange rate movements, the consolidated group monitors its cash balances in foreign currencies. In addition, it utilises accumulated foreign currencies to purchase supplies to mitigate the exposure to currency changes. The carrying amount of the consolidated group’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Consolidated US dollars Euros British pound Assets Liabilities 2023 $ 1,221,651 129,923 1,147,740 2,499,314 2022 $ 909,162 127,974 122,892 1,160,028 2023 $ 180,643 3,577 1,387,045 1,571,266 2022 $ 214,693 3,667 52,495 270,855 The consolidated group had net financial assets denominated in foreign currencies of 928,049 as at 30 June 2023 (30 June 2022: net assets $889,174). Based on this exposure, had the Australian dollar weakened by 10% against these foreign currencies with all other variables held constant, the consolidated group’s loss before tax for the year would have been $92,804 lower (30 June 2022: $88,917 lower), and equity would have been $92,804 lower (30 June 2022: $88,917 lower). The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date. As a result, the actual foreign exchange gain for the year ended 30 June 2023 was $52,065 (30 June 2022: $18,136). 42 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 21. Financial instruments (continued) Price risk The consolidated group is not exposed to any significant price risk; refer to the market risk commentary above. Interest rate risk There are no loans or borrowings subject to interest rate risk as at 30 June 2023 or 30 June 2022. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated group. The consolidated group has a strict process of obtaining advance payment for all equipment sales prior to shipment. The consolidated group is exposed to customer credit for its WaaS licence customers in relation to the ongoing monthly payments after the initial Advance Payment has been consumed. Furthermore, K-TIG retains the full title of the products provided under a WaaS operating licence agreement. This exposure is managed carefully with close interaction with the customer. 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 consolidated statement of financial position and notes to the financial statements. The consolidated group does not hold any collateral. 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. Liquidity risk Vigilant liquidity risk management requires the consolidated group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to pay debts as and when they become due and payable. The consolidated group 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 group’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; therefore, these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2023 Non-derivatives Non-interest bearing Trade payables Other payables Interest Bearing Lease Liabilities Consolidated - 2022 Non-derivatives Non-interest bearing Trade payables Other payables Interest Bearing Lease Liabilities Weighted Average Interest Rate 1 Year or Less Between 1 and 2 years Between 2 and 5 Years Over 5 Years Remaining Contractual Maturities % - - 4.94 $ $ $ $ $ 1,416,857 247,875 - - - - - - 1,416,857 247,875 111,135 1,775,866 118,288 118,288 355,558 355,558 91,315 91,315 676,296 2,341,027 Weighted Average Interest Rate 1 Year or Less Between 1 and 2 years Between 2 and 5 Years Over 5 Years Remaining Contractual Maturities % - - 4.94 $ $ $ $ $ - - - - 83,156 83,156 276,433 276,433 - - - 411,148 438,592 437,320 1,287,060 411,148 438,592 77,731 927,471 43 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 21. Financial instruments (continued) The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Note 22. Key management personnel disclosures Short-term employee benefits Post-employment benefits Share-based payments Consolidated 2023 $ 967,500 74,171 287,810 1,329,481 2022 $ 888,749 60,043 737,946 1,686,738 Note 23. Remuneration of auditors During the financial year, the following fees were paid or payable for services provided by BDO, the auditor of the company, its network firms and unrelated firms: Audit services - BDO Audit Pty Ltd Audit of financial statements Review of half year financial statements Total audit and review of financial statements Non-Audit services - BDO Audit Pty Ltd Business advice and consulting (1) Total non-audit fees Consolidated 2023 $ 2022 $ 31,415 18,000 49,415 41,000 18,000 59,000 3,621 3,621 2,352 2,352 Note 24. Contingent assets and liabilities Contingent assets No contingent assets are noted as at 30 June 2023 (30 June 2022: Nil). Contingent liabilities In the opinion of the Directors, the consolidated group has contingencies concerning deferred consideration shares as at 30 June 2023 (30 June 2022: deferred consideration shares and consultancy services agreement). Deferred Consideration Shares During the financial year ended 30 June 2020, K-TIG Limited completed the 100% acquisition of Keyhole TIG Limited. Part of the acquisition consideration includes up to 30,075,135 deferred consideration shares. Refer to Note 17 for terms of consideration shares. Note 25. Commitments There are no lessee commitments as at 30 June 2023 related to equipment operating lease commitments (30 June 2022: $0). The consolidated group has recognized the facility lease commitments as right-of-use assets at its primary place of business. Refer to Note 11 for right-of-use assets. Lessor commitments receivable Lessor commitments relate to operating lease payments to be received from WaaS license agreements. Licenses have a minimum term of 0-3 years (generally 3-year minimum terms). As at 30 June 2023, all operating lease payments to be received are payable in US dollars or Euros, and for the purposes of the maturity analysis have been translated at the spot rate at the reporting date. The maturity analysis of undiscounted operating lease payments to be received is below. The lessor commitments receivable include one license with a customer with no minimum term with a maximum term of 10 years, where the maximum term could likely be 5 years. Within 1 year 1-2 years 44 Consolidated 2023 $ 24,141 - 24,141 2022 $ 60,744 22,540 83,284 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 26. Related party transactions Parent entity K-TIG Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in Note 27. Key management personnel Disclosures relating to key management personnel are set out in Note 21, and the remuneration report is included in the directors’ report. Transactions with related parties The following transactions occurred with related parties: Ventnor Capital Pty Ltd provided company secretarial, accounting and corporate advisory services (director-related entity of Mr Carmichael) Consolidated 2023 $ 86,996 2022 $ 120,730 86,996 120,730 Receivable from and payable to related parties: No receivables balances are outstanding at the reporting date in relation to transactions with related parties. Payables balances outstanding at the reporting date in relation to transactions with related parties: Consolidated 2023 $ - 226,513 32,375 437,500 696,388 2022 $ 120,730 148,166 - 175,000 443,896 Ventnor Capital Pty Ltd provided company secretarial, accounting and corporate advisory services (director-related entity of Mr Carmichael) (1) Directors fees payable (2) Director Salary (3) Directors cash bonus payable (4) (1) Stuart Carmichael ceased being a director and shareholder of Ventnor Capital Pty Ltd effective 01 February 2023 (2) Director's fees accrued awaiting payment (3) Director salary accrued awaiting payment (4) Expected director to achieve defined performance KPI’s; payment to be made at the anniversary date (01 November) Loans to/from related parties No loans to/from related parties were outstanding as of 30 June 2023 or 30 June 2022. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 45 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 27. Parent entity information Below is supplementary information about the legal parent entity (K-TIG Limited) for the full year ended 30 June 2023. Statement of profit / (loss) and other comprehensive income Operating Loss after income tax Due Diligence and Acquisition Costs Total comprehensive loss Statement of financial position Total current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total liabilities Net assets / (liabilities) Equity Issued capital Reserves (1) Accumulated losses Total equity Consolidated 2023 $ 1,246,560 1,756,807 3,003,367 2022 $ 5,991,505 5,991,505 1,364,848 3,315,684 - - 1,364,848 3,315,684 4,976,490 - 4,976,490 518,302 - 518,302 (3,611,641) 2,797,382 43,686,730 5,289,153 (52,587,525) (3,611,641) 46,671,253 5,710,287 (49,584,158) 2,797,382 1) Relates to option reserve and performance right/performance share reserve Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity has not entered into any guarantees in relation to the debts of its subsidiaries. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2023 and 30 June 2022. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated group, as disclosed in Note 1. Note 28. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in Note 1. Details of the legal parent’s subsidiary at the end of the reporting period are as follows: Name Kabuni USA Inc. Stirling Minerals Pty Limited Keyhole TIG Pty Limited Keyhole TIG (USA) Inc. Keyhole TIG (UK) Pty Ltd Principal place of business / Country of Incorporation United States Australia Australia United States United Kingdom Ownership Interest 2022 % 100% 100% 100% 100% 100% 2023 % 100% 100% 100% 100% 100% Note 29. Events after the reporting period As per the ASX announcement dated 1 September 2023, the share purchase agreement “SPA” to acquire Graham Engineering Limited “GEL” has reached its sunset date 31 August 2023 with a number of conditions precedent not yet satisfied. 46 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 29. Events after the reporting period (continued) Challenging capital market conditions caused by underlying macro and geopolitical events have made the completion of the transaction within the sunset date extremely difficult. Notwithstanding the above, at this point in time, K-TIG remains committed to completing the SPA, and, subject to the intentions of GEL, is willing to negotiate in good faith variations to the SPA to allow this to occur. In the event that a variation cannot be agreed, either party may terminate the SPA. The Company is currently exploring a number of funding options in order to complete the transaction, as such the Company advises the supplementary prospectus dated 21 July 2023 will be withdrawn. The Company intends to lodge the relevant supplementary (withdrawal) prospectus with ASIC and the ASX shortly. Note 30. Reconciliation of profit after income tax to net cash from operating activities Loss after income tax expense for the year Adjustments for: Depreciation Amortisation of trademarks Property, plant and equipment written-off Share based payments Change in operating assets and liabilities: (Increase)/decrease in trade receivables (Increase)/decrease in other receivables and prepayments (Increase)/decrease in inventories Increase/(decrease) in trade payables Increase/(decrease) in income in advance Increase/(Decrease) in employee benefits Increase/(Decrease) in Financial Liabilities Net cash to (used in) operating activities Note 31. Non-cash investing and financing activities Share based payments expense Note 32. Changes in liabilities arising from financing activities Balance at 30 June 2021 Additions Cash (used) in financing activities Balance at 30 June 2022 Additions Cash (used) in financing activities Balance at 30 June 2023 47 Consolidated 2023 $ 2022 $ (6,431,749) (5,962,663) 285,467 11,057 - 109,091 256,241 11,057 - 1,098,921 349,357 - (532,120) 1,374,138 122,003 50,047 137,220 (4,525,490) 392,508 (344,052) (635,914) 336,269 151,311 13,306 - (4,683,017) Consolidated 2023 $ 109,091 2022 $ 1,098,921 Consolidated Lease Liability $ 85,209 437,320 (85,209) Total $ 85,209 437,320 (85,209) 437,320 437,320 308,439 (69,463) 676,296 308,439 (69,463) 676,296 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 33. Loss per share Loss after income tax attributable to the owners of K-TIG Limited (6,431,749) (5,962,663) Consolidated 2023 $ 2022 $ Basic loss per share Diluted loss per share Weighted average number of ordinary shares Weighted average number of ordinary shares used in calculating basic loss per share Note 34. Share-based payments Options 30 June 2023 No options were granted during the financial year. Set out below are the options exercisable at the end of the financial year: Cents Cents (3.20) (3.17) (3.43) (3.35) Number Number 200,743,189 173,779,754 Grant Date 29/01/2018 30/09/2019 21/02/2020 26/06/2020 Expiry Date 30/04/2021 30/09/2023 30/09/2023 30/09/2023 Exercise Price $0.23 $0.30 $0.30 $0.30 Balance at the Start of the Year - 5,472,152 960,000 180,000 6,612,152 Consolidated Conversion ( 1 to 2.5 basis) - (3,283,291) (576,000) (108,000) (3,967,291) 2023 2022 Number - 2,188,861 384,000 72,000 2,644,861 Number - 5,472,152 960,000 180,000 6,612,152 2023 Grant Date 30/09/2019 21/02/2020 26/06/2020 Expiry Date Exercise Price 30/04/2021 30/09/2023 30/09/2023 $0.23 $0.30 $0.30 2022 Grant Date 30/09/2019 21/02/2020 26/06/2020 Expiry Date Exercise Price 30/04/2021 30/09/2023 30/09/2023 $0.23 $0.30 $0.30 Balance at the Start of the Year 5,472,152 960,000 180,000 6,612,152 Consolidated Conversion ( 1 to 2.5 basis) (3,283,291) (576,000) (108,000) (3,967,291) Granted - - - - Exercised - - - - Balance at the Start of the Year 5,472,152 960,000 180,000 6,612,152 Granted - - - - Exercised - - - - Expired / Cancelled - - - - Balance at the End of the Year 2,188,861 384,000 72,000 2,644,861 Balance at the End of the Year 5,472,152 960,000 180,000 6,612,152 Performance Rights The performance rights are subject to the satisfaction of certain milestones and the Board’s discretion as per the tables listed below. Mark Twycross resigned as a director on 1 December 2021. The board exercised their discretion to remove the service conditions of his unvested (class c) performance shares. This modification has no impact on the fair value of the performance rights or the other vesting conditions. 48 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 34. Share-based payments (continued) As per the General meeting held on 26 May 2023, the consolidation conversion of rights will be on the basis of the of 1 security for every 2.5 securities. The table below is reflective of the consolidated conversion. Class A B C Number of Performance Rights 800,000 Milestone The Company achieving of at least $0.35 over twenty consecutive trading day period before Milestone Date Milestone Date 1 April 2021 800,000 The Company achieving of at least $0.50 over twenty consecutive trading day period before Milestone Date 1 October 2021 800,000 The Company achieving of at least $0.70 over twenty consecutive trading day period before Milestone Date 1 October 2021 Set out below are the performance rights exercisable at the end of the financial year: Grant Date 27/11/2020 27/11/2020 Expiry Date 22/12/2025 22/12/2025 Exercise Price - - Balance at the Start of the Year 2,000,000 2,000,000 4,000,000 Consolidated Conversion ( 1 to 2.5 basis) (1,200,000) (1,200,000) (2,400,000) 2023 2022 Number Number 800,000 800,000 1,600,000 2,000,000 2,000,000 4,000,000 2023 Grant Date 27/11/2020 27/11/2020 27/11/2020 Expiry Date Exercise Price 22/12/2025 22/12/2025 22/12/2025 - - - 2022 Grant Date 27/11/2020 27/11/2020 27/11/2020 Expiry Date Exercise Price 22/12/2025 22/12/2025 22/12/2025 - - - Balance at the Start of the Year 2,000,000 2,000,000 2,000,000 6,000,000 Consolidated Conversion ( 1 to 2.5 basis) (1,200,000) (1,200,000) (1,200,000) (3,600,000) Exercised / Expired / Cancelled - - - - Balance at the End of the Year Vested at the End of the Year 800,000 800,000 800,000 2,400,000 800,000 800,000 800,000 2,400,000 Balance at the Start of the Year 2,000,000 2,000,000 2,000,000 6,000,000 Granted - - - - Exercised / Expired / Cancelled - - - - Balance at the End of the Year 2,000,000 2,000,000 2,000,000 6,000,000 Vested at the End of the Year 2,000,000 2,000,000 - 4,000,000 Long-term incentive shares On 1 November 2020, Mr Smith was appointed as Managing Director of the Company. Shares will be issued to Mr Smith at each anniversary of employment as follows, with 50% of shares issued subject to a voluntary escrow period of 12 months as follows: 49 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 34. Share-based payments (continued) 2023 Grant Date Adrian Smith - Tranche 2 - Tranche 3 2022 Grant Date Adrian Smith - Tranche 1 - Tranche 2 - Tranche 3 Grant Date Expiry Date Balance at the Start of the Year Consolidated Conversion ( 1 to 2.5 basis) Exercise Price Converted to Ordinary Shares Balance at the End of the Year 27/11/2020 27/11/2020 01/11/2022 01/11/2023 $0.27 $0.27 1,500,000 2,000,000 3,500,000 (900,000) (1,200,000) (2,100,000) 600,000 - 600,000 - 800,000 800,000 Grant Date Expiry Date Exercise Price Balance at the Start of the Year Granted Converted to Ordinary Shares Balance at the End of the Year 27/11/2020 27/11/2020 27/11/2020 01/11/2021 01/11/2022 01/11/2023 $0.27 $0.27 $0.27 1,000,000 1,500,000 2,000,000 4,500,000 - - - - 1,000,000 - - 1,000,000 - 1,500,000 2,000,000 3,500,000 Performance Rights to Staff The performance rights for staff are subject to the satisfaction of certain milestones; the performance rights are valued using the monte carlo, black scholes methods and KPI milestones. The valuation model inputs used to determine the fair value at the grant date are as follows: 2023 Grant Date 30/04/2021 25/06/2021 (1) 26/06/2021 19/07/2021 (2) Expiry Date 30/04/2026 25/06/2026 26/06/2026 19/07/2026 Share Price at Grant Date $0.425 $0.440 $0.440 $0.385 Exercise Price - - - - Expected Volatility 100% 100% - 100% Dividend Yield 0% 0% - 0% Risk-Free Interest Rate 0.070% 0.070% - 0.035% Fair Value at Grant Date $0.3090 $0.4400 $0.4400 $0.3850 (1) Employee no longer employed by the Company, performance rights are cancelled. (2) Employee no longer employed by the Company, performance rights are cancelled. 2022 Grant Date 30/04/2021 25/06/2021 26/06/2021 19/07/2021 Expiry Date 30/04/2026 25/06/2026 26/06/2026 19/07/2026 Share Price at Grant Date $0.425 $0.440 $0.440 $0.385 Exercise Price - - - - Expected Volatility 100% 100% - 100% Dividend Yield 0% 0% - 0% Risk-Free Interest Rate 0.070% 0.070% - 0.035% Fair Value at Grant Date $0.3090 $0.4400 $0.4400 $0.3850 2023 Performance Rights - Tranche 1 - Tranche 2 (1) - Tranche 3 - Tranche 4 (2) Grant Date 30/04/2021 25/06/2021 26/06/2021 19/07/2021 Expiry Date 30/04/2026 25/06/2026 26/06/2026 19/07/2026 Methodology Monte Carlo Black Sholes KPI Milestone Black Sholes Balance at the Start of the Year Consolidat ed Conversion ( 1 to 2.5 150,000 300,000 280,000 300,000 1,030,000 (90,000) (180,000) (168,000) (180,000) (618,000) Converted to Ordinary Shares - - (112,000) - (112,000) Balance at the End of the Year 60,000 - - - 60,000 Expired - (120,000) - (120,000) (240,000) (1) Employee no longer employed by the Company, performance rights are cancelled. (2) Employee no longer employed by the Company, performance rights are cancelled. 50 K-TIG Limited and Its Controlled Entities Notes to the financial statements For the year ended 30 June 2023 Note 34. Share-based payments (continued) 2022 Performance Rights - Tranche 1 - Tranche 2 - Tranche 3 - Tranche 4 Grant Date 30/04/2021 25/06/2021 26/06/2021 19/07/2021 Expiry Date 30/04/2026 25/06/2026 26/06/2026 19/07/2026 Methodology Monte Carlo Black Sholes KPI Milestone Black Sholes Balance at the Start of the Year - - - - - Converted to Ordinary Shares - - - - - Balance at the End of the Year 150,000 300,000 280,000 300,000 1,030,000 Granted 150,000 300,000 280,000 300,000 1,030,000 Options granted pre 01 July 2021 were considered to be granted during the current period when the employment commenced. Note 35. Operating Segment The consolidated group is considered to be one operating segment based on products delivered. This operating segment is based on the internal reports reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’) in assessing performance and determining the allocation of resources. Accordingly, the information presented in the financial statements approximates the information of the operating segment. 51 K-TIG Limited and Its Controlled Entities Directors’ Declaration For the year ended 30 June 2023 In the directors' opinion: ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the consolidated group's financial position as at 30 June 2023 and of its performance for the financial year ended on that date; 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 Stuart Carmichael Chairman 29 September 2023 Perth 52 Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF K-TIG LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of K-Tig Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year 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 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent membe r firms. Liability limited by a scheme approved under Professional Standards Legislation. 53 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. Revenue Recognition and measurement KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT Refer to Note 3 of the financial report and Our audit procedures included but were not limited to: Note 1 for the accounting policy. Revenue recognition was identified as a key audit matter due to: • • • • The significance of revenue to the financial report The complex nature and terms of revenue transactions and associated payment arrangements The large size of individual revenue transactions, and Sales being recorded by overseas • • • • • Understanding and documenting the processes and controls used by the Group in recording revenue Assessing the revenue recognition policy for compliance with AASB 15 Revenues Checking a sample of revenue transactions to evaluate whether they were appropriately recorded as revenue ensuring the amounts recorded agreed to supporting evidence Reviewing the terms and conditions of a sample of executed sales agreements and ensuring that the accounting treatment has been correctly applied Checking, for a sample of revenue in advance amounts, Group entities. whether the amount recognised in the current period was consistent with services supplied per the terms of the customer agreement Convertible Note KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN OUR AUDIT Refer to Note 15 of the financial report Our audit procedures included but were not limited to and note 1 for the accounting policy. The convertible note was identified as a key audit matter due to; • Understanding and documenting key terms of the agreement • Obtaining management’s accounting position and assessing for compliance with Australian Accounting Standards • • The significance of the liability to the • Assessing the fair value of the embedded derivative with the statement of financial position support of an auditors expert with the fair value determined The complex nature of the terms and conditions, including a number of settlement options with the assistance of an independent expert engaged by the Group. This included assessing the reasonableness of the key inputs used in the valuation model and methodology • The use of fair value measurement in • Reviewing the adequacy of the disclosures , including the the accounting significant estimates and judgements involved and the accounting policy adopted 54 Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2023, 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 the financial report 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 auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 9 to 14 of the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of K-Tig Limited, for the year ended 30 June 2023, complies with section 300A of the Corporations Act 2001. 55 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. BDO Audit Pty Ltd Andrew Tickle Director Adelaide, 29 September 2023 56 K-TIG Limited and Its Controlled Entities ASX Additional Information Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current at 27 September 2023. Ordinary Fully Paid Shares Distribution of Share Holders Shareholders 1 1,001 5,001 10,001 100,001 - 1,000 - 5,000 - 10,000 - 100,000 - and over Number of Holders Number of Shares 565 836 366 571 97 2,435 299,089 2,220,883 2,743,194 17,825,217 50,240,032 73,328,415 There were 254 holders holding a total of 62,921 ordinary shares holding less than a marketable parcel. Top Twenty Share Holders The names of the twenty largest holders of quoted shares are listed below: Position 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Name ADVANCED SCIENCE & INNOVATION COMPANY (ASIC) LLC HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR NEIL GARRY LE QUESNE BUTTONWOOD NOMINEES PTY LTD MR RICHARD SMITH CITICORP NOMINEES PTY LIMITED SYED BASAR SHUEB SYDAC NOMINEES PTY LTD MRS KAREN CHRISTINE JARVIS SRG PARTNERS PTY LTD GREAT PLAINS HOLDING COMPANY PTY LTD MRS LYNETTE ANNE SHARMAN & MR MICHAEL DAVID SHARMAN SWHL INVESTMENTS PTY LTD GRAYSON NOMINEES PTY LTD NETWEALTH INVESTMENTS LIMITED INTERDALE PTY LTD WIGTOWN PTY LIMITED BBR HOLDINGS PTY LTD JAGEN PTY LTD GARDEN ENTERPRISES PTY LTD Substantial Share Holders of Issued Capital Name ADVANCED SCIENCE & INNOVATION COMPANY (ASIC) LLC HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR NEIL GARRY LE QUESNE Unlisted Options – exercisable at $0.30 per option expiring 30 September 2023 Number of Shares 7,886,828 7,155,903 4,784,963 2,323,572 2,060,000 2,051,558 1,011,262 1,000,000 965,123 948,000 849,320 763,446 710,334 600,000 538,967 504,286 500,000 477,134 460,000 451,947 36,042,643 Number of Shares 7,886,828 7,155,903 4,784,963 62,673,771 % 10.76% 9.76% 6.53% 3.17% 2.81% 2.80% 1.38% 1.36% 1.32% 1.29% 1.16% 1.04% 0.97% 0.82% 0.74% 0.69% 0.68% 0.65% 0.63% 0.62% 49.15% % 10.76% 9.76% 6.53% 27.04% Distribution of Option Holders 5,001 10,001 100,001 - 10,000 - 100,000 - and over 57 Number of Holders Number of Options 1 20 10 31 6,000 965,157 1,673,706 2,644,863 K-TIG Limited and Its Controlled Entities ASX Additional Information Substantial Option Holders Name DIVERSE CAPITAL PTE LTD LONHRO (WA) PTY LTD LDHW PTY LTD SOLAR MATE PTY LTD SRG PARTNERS PTY LTD SBV CAPITAL PTY LTD ACNS CAPITAL MARKETS PTY LTD TR NOMINEEES PTY LTD Performance Rights Substantial Performance Rights Holders – Class A Name of KMP STUART CARMICHAEL Name of Registered Holder SBV CAPITAL PTY LTD MARK TWYCROSS MR MARK TWYCROSS SYED BASAR SHUEB SYED BASAR SHUEB ANTHONY MCINTOSH MUTUAL TRUST PTY LTD Distribution of Performance Right Holders - Class A Substantial Performance Rights Holders – Class B Name of KMP STUART CARMICHAEL SYED BASAR SHUEB Name of Registered Holder SBV CAPITAL PTY LTD SYED BASAR SHUEB ANTHONY MCINTOSH MUTUAL TRUST PTY LTD MARK TWYCROSS MR MARK TWYCROSS Distribution of Performance Right Holders - Class B Substantial Performance Rights Holders – Class C Name of KMP STUART CARMICHAEL Name of Registered Holder SBV CAPITAL PTY LTD SYED BASAR SHUEB SYED BASAR SHUEB ANTHONY MCINTOSH MARK TWYCROSS MUTUAL TRUST PTY LTD MR MARK TWYCROSS Number of Options 259,908 216,604 200,000 170,000 159,908 148,000 141,286 140,000 1,435,768 Number of Performance Rights 200,000 200,000 200,000 200,000 % 9.83% 8.19% 7.56% 6.43% 6.05% 5.60% 5.34% 5.29% 54.29% % 25.00% 25.00% 25.00% 25.00% 100,001 - and over Number of Holders 4 Number of Performance Rights 800,000 Number of Performance Rights 200,000 200,000 200,000 200,000 Number of Holders 100,001 - and over 4 % 25.00% 25.00% 25.00% 25.00% Number of Performance Rights 800,000 Number of Performance Rights 200,000 200,000 200,000 200,000 % 25.00% 25.00% 25.00% 25.00% 58 K-TIG Limited and Its Controlled Entities ASX Additional Information Distribution of Performance Right Holders - Class C 100,001 - and over 4 Number of Holders Number of Performance Rights 800,000 Restricted Securities Restricted Class Fully Paid Ordinary Shares On-Market Buy Back There is no current on-market buyback. Number of Securities 883,429 Restriction Period 12 months from date of quotation Voting Rights All ordinary shares carry one vote per share without restriction. Options have no voting rights. Corporate Governance The Company’s corporate governance statement tig.com/investors#governance is found on the Company’s website at https://www.k- 59 

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