Silex Systems Ltd
Annual Report 2022

Plain-text annual report

Annual Report 2022 Forward Looking Statements and Risk Factors: About Silex Systems Limited (ASX: SLX) (OTCQX: SILXY) Silex Systems Limited ABN 69 003 372 067 (Silex) is a technology commercialisation company whose primary asset is the SILEX laser enrichment technology, originally developed at the Company’s technology facility in Sydney, Australia. The SILEX technology has been under development for uranium enrichment jointly with US-based exclusive licensee Global Laser Enrichment LLC (GLE) for a number of years. Success of the SILEX uranium enrichment technology development program and the proposed Paducah commercial project remain subject to a number of factors including the satisfactory completion of the engineering scale-up program and nuclear fuel market conditions and therefore remains subject to associated risks. Silex is also at various stages of development of additional commercial applications of the SILEX technology, including the production of ‘Zero-Spin Silicon’ for the emerging technology of silicon-based quantum computing. The ‘Zero-Spin Silicon’ project remains dependent on the outcomes of the project and the viability of silicon quantum computing and is therefore subject to various risks. The commercial future of the SILEX technology is therefore uncertain and any plans for commercial deployment are speculative. Additionally, Silex has an interest in a unique semiconductor technology known as ‘cREO®’ through its 100% ownership of subsidiary Translucent Inc. The cREO® technology developed by Translucent has been acquired by IQE Plc based in the UK. IQE has paused the development of the cREO® technology until a commercial opportunity arises. The future of IQE’s development program for cREO® is uncertain and remains subject to various technology and market risks. Forward Looking Statements The commercial potential of these technologies is currently unknown. Accordingly, no guarantees as to the future performance of these technologies can be made. The nature of the statements in this Report regarding the future of the SILEX technology as applied to uranium enrichment and Zero-Spin Silicon production, the cREO® technology and any associated commercial prospects are forward- looking and are subject to a number of variables, including but not limited to, unknown risks, contingencies and assumptions which may be beyond the control of Silex, its directors and management. You should not place reliance on any forward-looking statements as actual results could be materially different from those expressed or implied by such forward looking statements as a result of various risk factors. Further, the forward-looking statements contained in this Report involve subjective judgement and analysis and are subject to change due to management’s analysis of Silex’s business, changes in industry trends, government policies and any new or unforeseen circumstances. The Company’s management believes that there are reasonable grounds to make such statements as at the date of this Report. Silex does not intend, and is not obligated, to update the forward-looking statements except to the extent required by law or the ASX Listing Rules. Risk Factors Risk factors that could affect future results and commercial prospects of Silex include, but are not limited to: ongoing economic and social uncertainty, including in relation to the impacts of the COVID-19 pandemic; geopolitical risks, in particular relating to Russia’s invasion of Ukraine and tensions between China and Taiwan which may impact global supply chains; uncertainties related to the effects of climate change and mitigation efforts; the results of the SILEX uranium enrichment engineering development program; the market demand for natural uranium and enriched uranium; the outcome of the project for the production of ‘Zero-Spin Silicon’ for the emerging technology of silicon-based quantum computing; the potential development of, or competition from alternative technologies; the potential for third party claims against the Company’s ownership of Intellectual Property; the potential impact of prevailing laws or government regulations or policies in the USA, Australia or elsewhere; results from IQE’s commercialisation program and the market demand for cREO® products; actions taken by the Company’s commercialisation partners and other stakeholders that could adversely affect the technology development programs and commercialisation strategies; and the outcomes of various strategies and projects undertaken by the Company. Contents Chair’s Report CEO’s Report Technology Overview Directors’ Report Corporate Governance Statement Financial Report Directors’ declaration Independent Auditor’s Report to the Members Shareholders’ Information Company Directory 2 4 7 20 53 55 103 104 109 113 SILEX ANNUAL REPORT 2022 1 Chair’s Report Dear Fellow Shareholders, On behalf of the Silex Board, it is my pleasure to present our 2022 Annual Report for Silex Systems Limited. During the year ended 30 June 2022, your Board and Management team remained dedicated to the commercialisation of our innovative SILEX laser enrichment technology across multiple global markets, with a priority focus on contributing to the reliable and sustainable supply of nuclear fuel for the world’s clean energy needs and developing quantum materials for next-generation quantum computing. We continued to advance our commercialisation programs targeting both the global nuclear fuel industry with the unique SILEX uranium enrichment technology and the emerging quantum computing industry with the SILEX Zero-Spin Silicon project - with pleasing results and significant progress on both fronts. With regard to the SILEX uranium enrichment technology, we are witnessing some significant refocussing on the importance of nuclear power as a key source of zero-emissions base load electricity in a carbon-constrained world. There are also changing dynamics in the nuclear fuel markets, that have the potential to create a ‘Triple Opportunity’ for Silex through our ownership of a 51% interest in SILEX uranium enrichment technology licensee, Global Laser Enrichment (GLE). While no decision has yet been made, Silex and our GLE joint venture partner Cameco Corporation, are reviewing the feasibility of accelerating GLE’s commercialisation program in response to these emerging opportunities. The SILEX uranium enrichment commercialisation program is underpinned by the agreement between GLE and the US Department of Energy for the proposed Paducah, Kentucky project. This large, 2 multi-decade project could enable the SILEX technology to become the ‘go to’ technology for the production of all three grades of nuclear fuel required for today’s conventional nuclear power reactors and for next-generation of advanced Small Modular Reactors (SMRs) currently under development. It is encouraging to reflect on the progress that GLE and Silex have made with the SILEX uranium enrichment technology commercialisation program during the past year. We have seen pleasing results and opportunities emanating from the rebuilding of GLE post-closing of the restructure of the joint venture between Silex and Cameco. This includes securing appointees for GLE’s new executive team and increasing GLE’s presence in the nuclear fuel industry. GLE executed two Letters of Intent with market leading US nuclear utilities and we have been preparing to respond to a potential acceleration of GLE’s commercialisation program. It has been particularly pleasing to see the US government focussed on domestic supply of nuclear fuel for which GLE could potentially be a key player. The Company’s silicon enrichment project is being conducted at our Lucas Heights facility in collaboration with world-leading quantum computing partners, Silicon Quantum Computing Pty Ltd (SQC) and UNSW Sydney. It is now in its third stage which is scheduled for completion at the end of CY2022. Enriched silicon, in the form of Zero-Spin Silicon (ZS-Si), is a key enabling material for silicon-based quantum computing. The project remains on track to achieve its aim of verifying the capability of the SILEX technology for commercial production of high purity ZS-Si. We were delighted to announce the completion of construction of the facility in July 2022 and at the SILEX ANNUAL REPORT 2022Our goal is to deliver long-term value to you, our shareholders, and to do this with a relentless focus on risk management and prudent governance. Our goal is to deliver long-term value to you, our shareholders, and to do this with a relentless focus on risk management and prudent governance. I would like to sincerely thank our CEO, Michael Goldsworthy and CFO, Julie Ducie for their leadership and tenacity and the unwavering efforts of our outstanding team. I thank them for their continued focus and expertise as they strive to execute Silex’s strategy and to capitalise on the growth opportunities for your Company. Finally, my fellow Board members and I, and Silex Management thank you for your continued support. I look forward to updating you again at our Annual General Meeting in October. Craig Roy Chair 30 August 2022 time of writing, this facility was being commissioned in preparation for enrichment testing. The ZS-Si project has been supported by $1.8 million of funding from SQC and a $3 million Federal Government funding grant from the CRC-P. We would like to thank SQC and UNSW Sydney for their expertise, commitment and support of this potentially ground-breaking project. Corporate Governance The Silex Board underwent some changes during the year that resulted in the appointment of Helen Cook as a Non-executive Director in October 2021 to replace Melissa Holzberger. We are delighted with Helen’s appointment and would like to sincerely thank Melissa for her astute counsel and valuable contributions to the Company during her tenure. Helen’s appointment adds a wealth of nuclear industry experience to our Board and I am very pleased to lead a diverse and high-quality Board with a keen focus on our commercialisation programs and risk and governance. The Year Ahead Whilst we all faced some disruptions during FY2022 due to COVID-19, we remain acutely focussed on progressing the commercialisation programs for the SILEX technology, and ensuring that we are at all times positioning to leverage your Company into global growth markets, specifically the uranium and nuclear fuel industry, and the emerging quantum computing industry. We are also continuing to assess technical opportunities in the field of medical radioisotopes and paths to market with potential commercial and strategic partners. 3 SILEX ANNUAL REPORT 2022CEO’s Report Dear Fellow Shareholders, I am pleased to provide my report for FY2022, a year in which Silex’s technology commercialisation projects progressed significantly and we saw the opening up of additional opportunities to add shareholder value in the coming years. This was all achieved against the challenging backdrop of COVID-19. I would like to thank our employees and other stakeholders who worked tirelessly in our efforts to deliver on our objectives in FY2022. Uranium Enrichment Project Under ordinary circumstances, FY2022 was shaping up as a solid year of consolidation and positive progress in the commercialisation of the SILEX uranium enrichment technology, following the completion of the acquisition of SILEX licensee, Global Laser Enrichment (GLE) in January 2021. GLE’s commercialisation plans were steadily ramped up under the new jointly controlled venture (Silex 51% and Cameco 49%) and the newly installed executive team. Then in February this year, Russia’s invasion of Ukraine turned FY2022 into a year of very extraordinary circumstances, with energy markets being thrown into chaos as trade sanctions were progressively imposed on many Russian exports. Today, the global nuclear fuel industry remains vulnerable to the threat of lasting sanctions and this has precipitated the most significant shake up of the nuclear fuel markets in decades. It became clearly evident that the global nuclear industry had become very reliant on Russian sourced nuclear fuel and nuclear technology. The US nuclear industry currently imports around 20% of its enriched uranium fuel requirements from Russia, with similar levels of reliance in other parts of the Western nuclear industry - broadly defined as the nuclear industry not including Russia, China and their allies. To compound this situation, the Western nuclear industry has been in decline over the past decade, with several countries scaling back their nuclear industries and cutting investment in new nuclear fuel assets. Ironically, global concerns over the increasingly severe impacts of climate change have spurred renewed interest in nuclear power over recent years, however this did not transpose to commensurate investment in nuclear fuel supply chains and infrastructure. In the US, this situation has given rise to an urgent need to establish new domestic nuclear fuel production capability and capacity in order to support a reliable and resilient nuclear fuel supply chain. This in turn has opened up new opportunities for GLE, the exclusive licensee of the SILEX laser technology for uranium enrichment. The ‘Triple Opportunity’ emerging for GLE and the SILEX technology in the global nuclear fuel supply chain, driven by climate change threats and geopolitical issues outlined above, consists of the following: 1. Production of natural grade uranium in the form of converted UF6; 2. Production of low enriched uranium for existing nuclear power plants; and 3. Production of higher assay fuel for next-generation advanced SMR1 plants. 1 Advanced Small Modular Reactors (SMRs) produce up to 300MWe power (20% to 30% of large conventional reactors) 4 SILEX ANNUAL REPORT 2022GLE’s commercialisation plans were steadily ramped up under the new jointly controlled venture (Silex 51% and Cameco 49%) and the newly installed executive team. We are firmly of the view that we are witnessing a rapidly changing global energy landscape and expect nuclear power generation demand to increase as the world seeks resilient and sustainable carbon-free base load electricity generation. The SILEX uranium enrichment technology – the only third-generation enrichment technology being commercialised today, can help make nuclear power more efficient and cost-effective. The Triple Opportunity and progress made in the SILEX uranium technology commercialisation program are fully detailed in this Report. Silicon Enrichment Project Silex made excellent progress in the Zero-Spin Silicon (ZS-Si) project during the year. This project aims to demonstrate the commercial potential of our unique SILEX laser enrichment technology to produce highly enriched silicon – a key enabling material for silicon- based quantum computing. This project has also dramatically increased in strategic importance over the year, as the majority of the world’s current supply of enriched silicon is sourced from Russia. Impending trade sanctions have translated into increased interest in our project and a greater urgency to commercialise this important technology. At the time of writing, the Pilot Demonstration Facility which was constructed within the year in review, was being commissioned in preparation for the commencement of enrichment testing. Testing will continue to the end of CY2022, at which time it is anticipated that the demonstration will have verified the capability of the SILEX technology to cost- effectively produce high purity ZS-Si at commercial scale. The initial commercial quantities may potentially be produced in CY2023 and sold to project partner, Silicon Quantum Computing Pty Ltd under an offtake agreement signed in 2019. This could mark the beginning of a new and growing revenue stream and position Silex as a reliable global supplier of this key strategic material. Further detail on progress achieved in the ZS-Si Project and the related market outlook is provided in this Report. Prioritising Health and Safety, ESG Core to our operations and values is prioritisation of the health and safety of our team. During the year we continued to focus on the health, safety and wellbeing of our team members across all sites and thankfully, we reported no lost time injuries or reportable incidents. Full-time operations were maintained at the Company’s Lucas Heights facility with appropriate measures to mitigate the ever-present risks associated with the COVID-19 pandemic. Efforts to safely minimise disruptions to the Company’s activities is ongoing. The Company is well positioned to support and develop its ESG program over the coming year. Our focus on environmental sustainability is underpinned by our aspirations in the nuclear fuel industry, which will help make zero-emissions nuclear energy more affordable. Furthermore, our focus on social responsibility is leveraged through our ZS-Si project for quantum computing, an emerging technology which will drive innovation and solutions to many of society’s intractable problems such as climate change, and more affordable medical treatment. 5 SILEX ANNUAL REPORT 2022Exciting times lie ahead for both our uranium enrichment project and our silicon enrichment project. Finally, I take this opportunity to thank our shareholders for your ongoing support. I would also like to thank the Silex and GLE teams for their dedication and tireless efforts, and to our Board for their continued support of the Company’s strategy. I am in awe of the progress our teams have made over the year in both our uranium and silicon projects, and look forward to providing a further update at the Annual General Meeting in October. Dr Michael Goldsworthy CEO/Managing Director 30 August 2022 6 SILEX ANNUAL REPORT 2022Technology Overview About Silex Silex Systems Limited (Silex) is an Australian technology company focused on the commercialisation of our innovative SILEX laser enrichment technology for application to: 92 14 U Uranium 238.03 Si Silicon 28.0855 Uranium production and enrichment (nuclear power) Silicon enrichment (silicon quantum computing) Other potential markets (e.g. medical radioisotopes) The SILEX Laser Isotope Separation (LIS) technology was invented by Silex Systems scientists Dr Michael Goldsworthy and Dr Horst Struve in the 1990’s at its Lucas Heights facility south of Sydney, Australia. Today, Silex is actively pursuing two applications of the SILEX LIS Technology: • Uranium Enrichment: for the production of natural and enriched uranium • Silicon Enrichment: for the emerging silicon quantum computing industry 7 SILEX ANNUAL REPORT 2022Our ESG Commitment Sustainability is core to our mission and values, prioritising the health and safety of our people and environmental responsibility in everything we do. We are focused on delivering value through the responsible development and commercialisation of our technology and by continually addressing any potential social and environmental impacts of our operations. At Silex, we have a well-defined ESG commitment with three focus areas: 1. Health, safety and wellbeing of our people 2. Environmental responsibility 3. Strong corporate governance Health, safety and wellbeing At the core of our ESG commitment is the health, safety and wellbeing of our people, the safety of our operations and the communities in which we operate. Our philosophy is defined by respect for each other and embracing diversity and inclusion. We recognise the benefits of diversity and promoting equal opportunities at all times. Environment We are committed to bringing innovative technologies to market which can have a positive impact on the global environment. In particular, our SILEX technology is currently focused on: i) improving efficiencies in nuclear fuel production for the generation of zero-emissions nuclear power and contributing to climate change mitigation efforts; ii) developing novel isotopically engineered materials which are key to enabling next-generation quantum computing and nuclear medicine technologies, providing humanity with disruptive tools to solve many global-scale environmental and social issues driven by unchecked human population growth. At the same time, we are committed to protecting the environment in which we operate by mitigating any potential risks or impacts of our activities. Governance Silex is committed to aspiring to, and demonstrating the highest standards of corporate governance. The Board’s focus is on enhancing the interests of shareholders and other key stakeholders whilst ensuring the Company is responsibly operated so that risks are effectively managed or mitigated and our operations are consistent with our ESG commitment at all times. 8 SILEX ANNUAL REPORT 202292 U Uranium 238.03 The SILEX Laser Uranium Enrichment Technology The SILEX technology was invented by Silex Systems scientists Dr Michael Goldsworthy and Dr Horst Struve in the 1990’s at Lucas Heights, Sydney. In order to facilitate the potential commercial deployment of the technology in the United States, an Agreement for Cooperation between the governments of the United States and Australia was signed in May 2000. In June 2001, the technology was officially Classified by the United States and Australian governments, bringing the SILEX technology commercialisation project formally under the strict nuclear safeguards, security and regulatory protocols of each country. The development and commercialisation program for the SILEX uranium enrichment technology has been undertaken jointly since 2007 by Silex (at its Lucas Heights, Sydney facility) and by Global Laser Enrichment LLC (in Wilmington, North Carolina), under an agreement originally executed in 2006 (and as amended in 2021). GLE is the exclusive licensee of the SILEX uranium enrichment technology. Silex acquired a 51% interest in GLE in January 2021 following conclusion of a US Government approval process for a restructure of GLE which also resulted in Cameco Corporation, one of the world’s largest uranium and nuclear fuel suppliers increasing its interest from 24% to 49%. The terms of the GLE restructure were in accordance with a binding Membership Interest Purchase Agreement between Silex, Cameco Corporation (Cameco) and GE-Hitachi Nuclear Energy (GEH) that was executed in December 2019 for the joint purchase of GEH’s 76% interest in GLE. Underpinning GLE’s commercialisation of the SILEX technology, is the landmark 2016 agreement with the US Department of Energy for the purchase of over 200,000 metric tons of depleted uranium hexafluoride (UF6), being tails material stockpiled from previous decades of enrichment operations at the DOE’s gaseous diffusion facility in Paducah, which was shut down in 2013. The Agreement was amended in 2020 to bring it into alignment with evolving market conditions. This tails material will be the feedstock for GLE’s Paducah Laser Enrichment Facility (PLEF). Uranium Enrichment Naturally occurring uranium is dominated by two isotopes, U235 and U238. Nuclear energy is produced by the splitting (or ‘fission’) of the U235 atoms. Natural uranium is made up of ~0.7% of the ‘active’ U235 isotope with the balance (~99.3%) made up of the U238 isotope. Uranium enrichment is the process of concentrating or enriching the U235 isotope up to approximately 5% for use as fuel in a conventional nuclear power reactor. Enrichment is a technically difficult process and accounts for around 30% of the cost of nuclear fuel and approximately 5% of the total cost of the electricity generated by nuclear power. The Separation of Isotopes by Laser EXcitation (SILEX) process is the only third-generation enrichment technology at an advanced stage of commercialisation today. It is able to effectively enrich uranium through highly selective laser excitation of the fluorinated form of uranium – the 235UF6 isotopic molecule. The two methods of uranium enrichment used to date are the now obsolete Gas Diffusion technique (first generation) and Gas Centrifuge (second generation). Silex’s third-generation laser-based process provides much higher enrichment process efficiency compared to these earlier methods, potentially offering significantly lower overall costs. 9 SILEX ANNUAL REPORT 2022Nuclear Fuel Production The SILEX technology could become a major contributor to nuclear fuel production for the world’s current and future nuclear reactor fleet, through the production of uranium in several different forms: • Natural Grade Uranium (Unat): via enrichment of Department of Energy (DOE) owned inventories of depleted UF6 tails at the proposed Paducah Laser Enrichment Facility (PLEF) to produce uranium (in the form of converted UF6) at natural U235 assay of ~0.7%; • Low Enriched Uranium (LEU / LEU+): for use as fuel in today’s conventional large-scale nuclear power reactors – which require fuel with U235 assays of between 4% and 5%, and potentially LEU+, a new grade of fuel with U235 assays between 5% and 10% being considered by several utilities for use in current nuclear reactors to improve economic performance; and • High Assay LEU (HALEU): a customised fuel for next-generation advanced SMRs currently under development – many of which require fuel with U235 assays between 10% and 20%. Evolution of Enrichment Technology 1st Generation Technology Gaseous Diffusion Very low efficiency High cost Obsolete 2nd Generation Technology Centrifuge Modest efficiency Lower cost Current technology 3rd Generation Technology SILEX Laser High efficiency Anticipated to be lowest cost The future of uranium enrichment SILEX laser process much higher separation efficiencies vs. centrifuge technology Uranium production and enrichment are the two largest value drivers of the nuclear fuel cycle, accounting for nearly 80% of the value of a fuel bundle. Key features of the SILEX Uranium Enrichment Technology The SILEX technology is a unique laser-based process that has the potential to economically separate uranium isotopes (as well as commercially valuable isotopes of several other elements). It has a number of advantages over other uranium enrichment processes including: • Inherently higher efficiency and throughput resulting in lower enrichment costs; • Smaller environmental footprint than centrifuge and diffusion plants; • Greater flexibility in producing advanced fuels for advanced SMRs; and • Anticipated to have the lowest enrichment plant capital costs. 10 SILEX ANNUAL REPORT 2022The SILEX Uranium Enrichment Commercialisation Vehicle: Global Laser Enrichment LLC (GLE) GLE is the exclusive licensee of the SILEX uranium enrichment technology. GLE is a 51% / 49% jointly- controlled venture between Silex and global uranium and nuclear fuel provider Cameco Corporation. GLE’s exclusive worldwide license to commercialise the SILEX technology for uranium enrichment is in accordance with a Technology Commercialisation and License Agreement, amended in 2021. The technology commercialisation project is being conducted jointly at GLE’s Wilmington, North Carolina facility and at Silex’s Sydney facility with the current focus on completion of the full-scale demonstration of the SILEX uranium technology utilising a pilot plant, being built at GLE’s Test Loop facility. Silex and Cameco have also negotiated terms for an option for Cameco to purchase from Silex at fair market value, an additional 26% interest in GLE, potentially increasing their interest to 75% (subject to US Government approvals). This option can be exercised by Cameco from two years from completion of the transaction (i.e., from January 2023) up until the date 30 months after the technology is satisfactorily demonstrated at full commercial pilot scale. The GLE/Silex Pilot Demonstration Project for the SILEX Technology: The Pilot Demonstration Project being conducted jointly by Silex and GLE is progressing well with momentum building. Since their appointments in 2021, GLE’s new CEO Stephen Long and CCO James Dobchuk are leading GLE’s commercialisation project with great enthusiasm. Numerous engineering and technical appointments have been made over the past year, and continue to be made for both the GLE technology team in Wilmington, NC and for the Silex technology team in Lucas Heights, Sydney. The focus of the technology development project is on maturation of full-scale laser systems and process separator equipment required for a commercial pilot demonstration, to be conducted at GLE’s Test Loop facility in Wilmington. 2 UxC, LLC various reports Q1 and Q2, 2022 Testing of the first module of full-scale laser systems required for the pilot demonstration was being completed at the time of writing. The laser module, which was designed and built at Silex’s Lucas Heights laser technology development centre, will be shipped to Wilmington and installed over the coming months. Fabrication of additional laser system modules is well advanced, with all modules required for the pilot demonstration facility scheduled to be shipped to Wilmington in 2023. Prototype testing of pilot-scale separator and gas handling systems at GLE’s Test Loop facility is well advanced, with the construction of remaining pilot- scale equipment on track to be completed around the end of CY2023. After integration and commissioning, the full SILEX technology pilot demonstration facility is expected to be put into service as early as 2024 (assuming acceleration of the commercialisation timeline, as outlined above). Successful completion of the pilot demonstration project would result in the technology reaching TRL-6 level – a key milestone in the de-risking of the technology before the focus turns to the construction of the first commercial SILEX uranium enrichment plant. The ‘Triple Opportunity’ for GLE and SILEX Technology: Two key factors are driving potential transformation of the global nuclear fuel supply chain, presenting GLE with a ‘Triple Opportunity’ to produce three different grades of nuclear fuel – all via the deployment of SILEX laser-based uranium enrichment technology: 1. the growing shift towards utilisation of nuclear power by many countries around the world in response to heightened concerns over global climate change; 2. the impact of the Russian invasion of Ukraine which threatens to disrupt the significant supply of Russian nuclear fuel to the US and other Western markets. Russia has historically provided a large proportion of global capacity for uranium, conversion and enrichment at 14%, 27% and 39% respectively2 and Western nuclear fuel markets have become highly dependent on Russian nuclear fuel supply. This has created urgency in establishing alternative supply sources to replace Russian sourced fuel in the medium to long term. 11 SILEX ANNUAL REPORT 2022GLE is very well positioned to help address the emerging supply issues with the unique ability to potentially produce all three grades of nuclear fuel required for current and future nuclear power plants at the planned Paducah Laser Enrichment Facility (PLEF) – described as the ‘Triple Opportunity’: PLEF I: Production of natural grade UF6 via tails processing with the SILEX technology (the original PLEF Project) which will also help alleviate UF6 conversion supply pressure; PLEF II: Production of LEU and LEU+ from natural UF6 via an extension of the PLEF with additional SILEX enrichment capacity to supply fuel for existing reactors; PLEF III: Production of HALEU via additional capacity of SILEX technology to supply fuel for next-generation advanced SMRs. The first opportunity is the original Paducah uranium production project which GLE has been planning for several years. The second and third opportunities, which could also be located at Paducah, would basically involve the addition of more SILEX technology uranium enrichment production modules (without further development of the technology). Potential Commercialisation Timelines3: While no decision has yet been made, Silex and Cameco are assessing the potential to accelerate GLE’s commercialisation timeline, starting with the earlier completion of the pilot demonstration program. This could be coupled with bringing forward a commercial feasibility assessment and NRC licensing activities for the planned PLEF project. The diagram below depicts the baseline (original) and potentially accelerated timelines for commercialisation activities: Baseline – GLE Commercialisation Timeline: Commercial Pilot Demonstration4 PLEF5 Feasibility and Licensing PLEF EPC6 PLEF Commercial Operations c. 2025 c. 2027 c. 2030 Potential Acceleration – GLE Commercialisation Timeline7: Commercial Pilot Demonstration4, Feasibility and Licensing PLEF EPC PLEF Commercial Operations c. 2025 c. 2027 c. 2030 3 Timelines subject to technology demonstration outcomes, market conditions, licensing, commercial support and other factors 4 Includes achievement of Technology Readiness Level 6 (TRL-6) as defined by DOE Technology Readiness Assessment Guide (G 413.3-4A) 5 PLEF: Paducah Laser Enrichment Facility 6 Engineering, Procurement and Construction (EPC) of commercial plant 7 Potential acceleration remains subject to due diligence assessment and may very according to differing scenarios 12 SILEX ANNUAL REPORT 2022Strategic Engagement with Industry and Government Organisations: GLE’s business strategy includes active engagement with industry and government organisations, aimed at developing areas of collaboration and support which will help expedite and de-risk GLE’s commercialisation of the SILEX technology and the potential commencement of the multi-purpose PLEF. Strategic engagement continues in the following three areas: 1. US Nuclear Utility Collaborations – Letters of Intent In June, GLE signed two non-binding Letters of Intent (LOI) with US utilities Constellation Energy Generation and Duke Energy. The LOIs include measures to support GLE’s deployment of SILEX uranium enrichment technology in the US and help address emerging demands across the nuclear fuel supply chain – described above as the ‘Triple Opportunity’. 2. US DOE – HALEU Availability Program In February, GLE submitted a response to the DOE regarding its Request for Information (RFI) for the proposed HALEU Availability Program. This program seeks to address the establishment of US domestic HALEU production capability as soon as possible. The next step will be the issuance of a Request for Proposals (RFP) by the DOE. GLE plans to respond to the RFP and explore opportunities to be a potential participant in the HALEU Availability Program. Importantly, a US$700m funding package for the HALEU Availability Program was included in the Inflation Reduction Act which passed into law in August 2022. 3. Industry Trade Organisations GLE has joined several trade and industry organisations in order to engage with various stakeholders and to keep abreast of industry developments. These include the Uranium Producers of America (UPA), the Nuclear Energy Institute (NEI) based in Washington DC, and the World Nuclear Association (WNA) based in London. 13 SILEX ANNUAL REPORT 2022The Original Paducah Uranium Production Opportunity: The SILEX Technology License Agreement with GLE: The original proposed Paducah commercial project involving the enrichment of depleted UF6 tails inventories owned by the US Department of Energy (DOE) was conceived as an ideal path to market for the SILEX uranium enrichment technology and GLE during the period when a worldwide oversupply of enrichment services existed. Underpinning this opportunity is the 2016 Sales Agreement between GLE and the DOE which provides GLE access to large stockpiles of depleted uranium tails inventories. This Agreement was amended in 2020 to bring it into alignment with evolving market conditions. The PLEF I commercial project opportunity involves GLE constructing the proposed natural UF6 production plant utilising the SILEX technology to enrich the DOE tails inventories which have been stored in the form of depleted uranium hexafluoride (UF6 – containing U235 assays from 0.25% up to 0.5%) to produce natural grade uranium (assay of ~0.7%). Subject to completion of the technology commercialisation project, regulatory approvals, financing and prevailing market conditions, it is possible the PLEF I plant may commence commercial operations as early as 2027. The PLEF I plant will potentially produce natural UF6 at a rate equivalent to a uranium mine with an annual output of up to 5 million pounds of uranium oxide for approximately 30 years, ranking in the top ten of today’s uranium mines by production volume. The Technology Commercialisation and License Agreement between Silex and GLE is an exclusive worldwide license for exploitation of the SILEX technology for uranium enrichment. The License Agreement is independent of Silex’s 51% equity interest in GLE and related commercial benefits flowing from that equity interest. The License Agreement includes royalty revenues and milestone payments to Silex as follows: • Perpetual royalty of a minimum of 7% – on GLE’s enrichment SWU revenues from use of the SILEX technology • US$20 million in Milestone Payments – payable to Silex triggered by commercial development milestones A US$15 million milestone payment was also received by Silex in July 2013. This was triggered by the successful completion of the Test Loop Phase 1 Program Milestone: Technology Demonstration and Validation. This milestone involved the demonstration of efficient enrichment with the SILEX laser technology at the prototype level. 14 SILEX ANNUAL REPORT 2022Nuclear Power Outlook And Fuel Market Update Nuclear power plays an increasingly important role in the supply of carbon-free base load electricity and is anticipated to play a much greater role in the energy mix as countries around the world adopt energy policies to meet more urgent net-zero emissions targets. As evidenced at the 26th Conference of the Parties to the UN Framework Convention on Climate Change (COP26) held in Glasgow in November 2021, there are many countries which have prioritised government policy initiatives relating to tackling climate change and ensuring energy security, stating that nuclear power should form a meaningful part of their energy mix in the future. According to the World Nuclear Association, there are currently 437 operable nuclear reactors globally with 59 reactors under construction and hundreds more planned. Today’s operating reactor fleet currently generates ~10% of the world’s electricity supply. These numbers could rise significantly over the next decade as governments strive to address the key issues of climate change and energy security. World Nuclear Reactor Population 437 340 (78%) 59 (14%) 89 (20%) Operable Reactors Reactors Under Construction Planned Reactors Proposed Reactors* USA France Japan China Russia South Korea India Other *Other Proposed Reactors include 16 proposed in Saudi Arabia, 10 proposed in UK, 8 in Turkey and 8 in South Africa Source: World Nuclear Association August 2022 The US is the world’s largest producer of nuclear power with 92 operable reactors, currently accounting for more than 30% of worldwide nuclear generation of electricity. Despite bold nuclear construction programs in China, India and the Middle East, the US is expected to remain the largest nuclear power generator for years to come. Growth in demand for nuclear power is also being evidenced with life extensions for existing reactors. In the US, nearly all of the operable reactors have been granted operating licence extensions from 40 to 60 years, with some potentially planning to operate for 80 years or more. There is also growing interest and significant international investment being made into the development of next-generation advanced Small 15 SILEX ANNUAL REPORT 2022Modular Reactor (SMR) technologies. Many advanced SMRs are being designed to operate with HALEU fuel, whilst other SMRs will use conventional LEU fuel or in some cases, LEU+ fuel. The global nuclear fuel markets for uranium, conversion services and uranium enrichment services, have been tightening in recent years as the nuclear industry downturn of the prior decade slowly dissipated and climate change issues have turned public sentiment back in favour of nuclear power. From 2017, when the term price of uranium traded at ~US$30 per pound, the term price of uranium has rallied to ~US$50 per pound. Likewise, term conversion prices have increased from ~US$12/kg to ~US$26/kg in the same period. Following the Russian invasion of Ukraine in February 2022, nuclear fuel markets, in particular for enrichment, have tightened even further. As a result of the exposed dependency on Russia, uranium enrichment term contract prices have substantially increased from around US$70/SWU to over US$135/SWU since February as utilities seek to secure fuel supplies under the growing threat of sanctions on Russian sourced enriched uranium. With significant growth forecasted in nuclear power generation around the world and the ever-increasing awareness of the potential contribution of nuclear energy to mitigate the adverse effects of climate change, we remain encouraged by the various opportunities emerging for the SILEX uranium enrichment technology and GLE in the global nuclear industry. 16 SILEX ANNUAL REPORT 202214 Si Silicon 28.0855 ZS-Si Production for Quantum Computing In late 2019, Silex launched a R&D project in conjunction with project partners Silicon Quantum Computing Pty Ltd (SQC) and UNSW Sydney (UNSW), to develop a process for the commercial production of high-purity ‘Zero-Spin Silicon’ (ZS-Si) using a variant of the SILEX laser isotope separation (LIS) technology. ZS-Si is a unique form of isotopically enriched silicon which is a key enabling material for the fabrication of next-generation processor chips which will power silicon-based quantum computers. Until recently, most of the world’s supply of enriched silicon came from Russia, produced with conventional centrifuge technology. The Russian invasion of Ukraine has placed this supply under threat of disruption, which has given rise to some urgency in establishing alternative supply. Silex anticipates that, with a successful conclusion to the ZS-Si project, it can provide a secure and resilient alternative source of enriched silicon to users around the world. Stages 1 and 2 – Completed: The first stage, completed in June 2020, involved a ‘proof-of-concept’ validation of the silicon enrichment process using laboratory-scale equipment, and initial optimisation of the process. The second stage, completed in early 2022, involved testing and further optimisation of the LIS technology utilising a purpose- built prototype facility. Since the completion of stage two, the prototype facility has been used extensively to increase process efficiency and throughput, with improvements incorporated into stage three work. Stage 3: Demonstration of ZS-Si production at commercial pilot scale – Ongoing: The third stage of the project has to date focused on the design, construction and commissioning of the pilot demonstration facility. In July 2022, Silex announced the completion of construction of the pilot demonstration facility. At the time of writing, commissioning activities were being completed in preparation for the commencement of enrichment testing. The third stage of the project will culminate with the demonstration of production of ZS-Si from the SILEX pilot production facility with initial production tests to be undertaken by the end of 2022. The project remains on track to achieve its objectives of utilising a variant of the SILEX LIS technology to produce highly enriched silicon in the form of ZS-Si, and to establish the manufacturing technology and capability to scale-up production as silicon-based quantum computing gains traction globally over the next decade. The first batches of high purity ZS-Si product will be purchased by SQC under an Offtake Agreement that was executed in December 2019. The Agreement includes SQC making three annual payments of $300,000, all of which have been received, as an offset against future purchases of ZS-Si produced by Silex. Silex will retain ownership of the ZS-Si production technology and related Intellectual Property developed through the project. The three-year project, which has a total budget of around $8 million, was awarded a $3m Federal Government funding grant from the CRC-P in February 2020, with SQC contributing another $1.8m including $900k in equity and $900k in cash for advanced ZS-Si purchases. Quantum Computing and ZS-Si Outlook: Quantum computers are expected to be thousands of times more powerful than the most advanced of today’s conventional computers, opening new frontiers and opportunities in many industries, including medicine, artificial intelligence, cybersecurity and global financial systems. Many countries around the world are investing heavily in the development of quantum computing technology, with governments and key corporates (such as Intel, IBM, Google, Microsoft and others) vying for leadership in this emerging strategic industry. ZS-Si is a key enabling material for the silicon Quantum Computer (QC) processor chip. Natural silicon (Si) consists of 3 isotopes: 92.2% Si-28, 3.1% Si-30 (each with zero electron spin state) and 4.7% Si-29 17 SILEX ANNUAL REPORT 2022(with a spin state of ½). The presence of Si-29 in concentrations above 500 parts per million (ppm) (0.05%) prevents effective QC performance, so ZS-Si or enriched silicon must be produced by elimination of the Si-29 isotope. The lower the concentration of Si-29, the better a silicon quantum processor will perform in terms of computational power, accuracy and reliability. Current methods for production of enriched silicon are limited and costly with only small quantities produced annually, mostly using gas centrifuge technology. Should the ZS-Si project be successful, it could potentially enable Australia to establish itself as a world-leader in ZS-Si production. Furthermore, if the market for ZS-Si evolves as anticipated, this could create a new value-added export market for Australia. As the ZS-Si project progresses, Silex will engage with other potential customers, including global computer chip manufacturers who are also developing silicon quantum computing technology. 18 SILEX ANNUAL REPORT 2022 Financial Report for the year ended 30 June 2022 SILEX SYSTEMS LIMITED & ITS SUBSIDIARIES ABN 69 003 372 067 Directors’ Report Your directors present their report on the consolidated entity consisting of Silex Systems Limited (Silex or the Company) and the entities it controlled at the end of, or during the year ended 30 June 2022. 1. Directors The following persons were directors of Silex Systems Limited during the whole of the financial year and up to the date of this report: Mr C A Roy Dr M P Goldsworthy Mr C D Wilks Ms M K Holzberger was a director from the beginning of the year until her resignation on 14 October 2021. Ms H G Cook was appointed as a director on 14 October 2021 and continues in office at the date of this report. 2. Principal activities Silex is primarily focused on the development of the SILEX laser enrichment technology for two key global industries: (i) The nuclear fuel industry – with the unique third-generation SILEX uranium enrichment technology; and (ii) The emerging quantum computing industry – with the SILEX Zero-Spin Silicon project. The development and commercialisation program for the SILEX uranium enrichment technology has been undertaken jointly since 2007 by Silex (at its Lucas Heights, Sydney facility) and by Global Laser Enrichment LLC (GLE) (in Wilmington, North Carolina). GLE is the exclusive licensee of the SILEX uranium enrichment technology. GLE is a 51%/49% jointly-controlled venture between Silex and global uranium and nuclear fuel provider Cameco Corporation. The SILEX Zero-Spin Silicon (ZS-Si) project commenced in December 2019 and is being undertaken with project partners Silicon Quantum Computing Pty Ltd (SQC) and UNSW Sydney (UNSW) at Silex’s Lucas Heights facility, with the objective of developing a variant of the SILEX technology for the commercial production of ZS-Si, a key enabling material for the emerging silicon quantum computing industry. 3. Dividend No dividend payments were made during the year. No dividend has been recommended or declared by the Board. 4. Operating and Financial Review The review contains the following sections: a) Operations b) Financial Results c) Financial Position d) Business Strategy and Future Prospects 20 SILEX ANNUAL REPORT 2022Directors’ Report a) Operations Silex’s operations are currently focused on the development and commercialisation of the SILEX enrichment technology for two commercial applications: (i) Uranium production and enrichment for the production of fuel for the nuclear power industry; and (ii) Silicon enrichment for the production of ‘Zero-Spin Silicon’ used in the emerging quantum computing industry. SILEX Uranium Enrichment The development and commercialisation program for the SILEX uranium enrichment technology has been undertaken jointly since 2007 by Silex (at its Lucas Heights, Sydney facility) and by GLE (in Wilmington, North Carolina), under an agreement originally executed in 2006 (and as amended in 2021). GLE is the exclusive licensee of the SILEX uranium enrichment technology. Silex acquired a 51% interest in GLE in January 2021 following conclusion of a US Government approval process for a restructure of GLE which also resulted in Cameco Corporation, one of the world’s largest uranium and nuclear fuel suppliers increasing its interest from 24% to 49%. The terms of the GLE restructure were in accordance with a binding Membership Interest Purchase Agreement (MIPA) between Silex, Cameco Corporation (Cameco) and GE-Hitachi Nuclear Energy (GEH) that was executed in December 2019 for the joint purchase of GEH’s 76% interest in GLE. Silex and Cameco also negotiated terms for an option for Cameco to purchase from Silex at fair market value, an additional 26% interest in GLE, potentially increasing their interest to 75% (subject to US Government approvals). This option can be exercised by Cameco from two years from completion of the transaction (i.e., from 31 January 2023) up until the date 30 months after the technology is satisfactorily demonstrated at full commercial pilot scale. The technology commercialisation program is currently advancing at both the Silex, Sydney and the GLE, Wilmington project sites. Laser system development activities in Sydney includes maturation of commercial- scale pilot laser systems. Activities in Wilmington include the scaling-up of enrichment process equipment and preparation of the Test Loop facility for future deployment of pilot-scale production equipment required for pre- commercial uranium enrichment testing. The aim of the uranium enrichment project is to complete construction of full-scale laser and separator equipment which will be deployed in GLE’s Test Loop facility in Wilmington, to demonstrate commercial pilot-scale (TRL-6) enrichment of the SILEX technology by the mid-2020’s. GLE’s owners are currently assessing the feasibility of accelerating this timeline in light of emerging geopolitical issues in the nuclear fuel supply chain. Furthermore, these emergent issues may potentially result in multiple opportunities for the SILEX technology in the global nuclear fuel industry including for natural and enriched uranium. Zero-Spin Silicon for Quantum Computing Process In December 2019, Silex launched a new R&D project in conjunction with project partners SQC and UNSW. The aim of the Zero-Spin Silicon (ZS-Si) project is to verify the capability of the SILEX laser isotope separation (LIS) technology for commercial production of a unique form of isotopically enriched silicon which is a key enabling material for next generation processor chips which will power silicon-based quantum computers. Silex’s LIS technology has the potential to efficiently produce ZS-Si to provide a secure supply of this material for initial customer SQC, in support of its world-leading efforts to commercialise silicon-based quantum computing technology in conjunction with UNSW. The three-year, three-stage ZS-Si project was awarded a $3 million Federal Government funding grant from the Cooperative Research Centres Projects (CRC-P) in February 2020. The current project is due for completion at the end of CY2022 with the planned demonstration of production of initial quantities of ZS-Si from a recently constructed pilot demonstration facility at the Company’s Lucas Heights technology development centre. 21 SILEX ANNUAL REPORT 2022Directors’ Report The initial commercial quantities of ZS-Si may potentially be produced from the Silex pilot facility from CY2023, and may be purchased by SQC under an Offtake Agreement executed in December 2019. The Agreement includes SQC making three annual payments of $300,000, all of which have been received, as an offset against future purchases of ZS-Si produced by Silex. cREO® Technology The cREO® technology was purchased by UK-based IQE Plc (AIM: IQE) in early 2018 in accordance with a 2015 License and Assignment Agreement. To date, Silex has received technology purchase payments of US$6.4 million (in IQE shares) and minimum royalties of US$1.3 million, including US$500k on 25 February 2022. In March 2022, IQE advised that it has paused development of the innovative cREO® advanced semiconductor technology until a commercial opportunity arises. Prior to the pause in development, IQE had been developing a product called IQepiMo™ which was built on cREO®, targeting 5G filters for mobile handset devices. IQE has said the technology has become a longer term development opportunity and will retain the technology, capability and IP enabling redeployment if and when appropriate, subject to the continued payment of minimum royalties to Silex. b) Financial Results A summary of consolidated revenue and results is set out below: Revenue from continuing operations Other income (Loss) before tax Income tax expense Net (loss) from continuing operations Net (loss) for the year Net (loss) is attributable to: Owners of Silex Systems Limited 2022 $ 4,394,754 2,817,759 2021 $ 2,067,875 1,365,733 (9,464,422) (6,927,268) - - (9,464,422) (9,464,422) (6,927,268) (6,927,268) (9,464,422) (6,927,268) The net loss from ordinary activities was $9.5m compared to $6.9m in the prior year. The increase in net loss from ordinary activities is mainly due to an increase in activities at GLE compared to the prior year. Silex’s 51% share of the GLE loss increased by $5.8m in the current year (reported as share of net loss of associates and joint ventures accounted for using the equity method). The prior year included five months of losses following the closing of the GLE acquisition on 31 January 2021. The net loss was partly offset by a $1.6m reduction in Development expenditure, reflecting the cessation of Silex’s obligation to reimburse GEH for our share of GLE’s funding at closing. In addition, Silex recommenced being reimbursed by GLE for its costs on the uranium project from closing, resulting in an increase of $3.0m in Recoverable project costs revenue in the current year. Other income increased by $1.5m in the current year mainly due to a foreign currency exchange gain of $0.6m (a loss of $0.2m in the prior year) and a $0.4m increase in Research and development tax incentive income. Employee benefits expense and Research and development materials were also higher in the current year, with increases of $1.4m and $0.6m respectively to the prior period, as our headcount and project activities increased. Further commentary on the results from our operations and the factors contributing to the decreased net loss from ordinary activities (after tax) attributable to members is provided below. 22 SILEX ANNUAL REPORT 2022Directors’ Report Silex Systems The loss generated by Silex Systems reduced from $3.8m in the prior year to $1.8m in the current year. This was mainly due to the increase in Recoverable project costs revenue of $3.0m. This increase was partly offset by an increase in expenses (mainly Employee benefits expense and Research and development materials). Translucent The Translucent segment result was a $0.03m profit in the current year compared to a profit of $0.7m in the prior year. The prior year result included $0.7m Royalty revenue from the sale of intellectual property related to the cREO® technology to IQE Plc. Silex USA The Silex USA segment result was a loss of $7.7m compared to a loss of $3.8m in the prior year. Activities at GLE have increased following the closing of the GLE acquisition on 31 January 2021. c) Financial Position A summary of our balance sheet is set out below: Assets Total current assets Total non-current assets Total assets Liabilities Total current liabilities Total non-current liabilities Total liabilities Net assets Equity Total equity 30 June 2022 $ 30 June 2021 $ 49,683,771 4,433,088 54,116,859 22,746,967 1,294,859 24,041,826 2,717,549 853,156 3,570,705 50,546,154 1,931,124 39,571 1,970,695 22,071,131 50,546,154 22,071,131 As at 30 June 2022, Silex’s net assets were $50.5m. Significant assets include cash holdings of $42.5m (cash and term deposits) and Financial assets at fair value through Other comprehensive income of $4.0m (shares in IQE). The increase in net assets of $28.5m was mainly due to the completion of an equity raise by way of a placement which was followed by a Share Purchase Plan. The net proceeds from the issue of shares were $38.4m. Partly offsetting this was the net loss for the year and a reduction of $1.8m in the value of the IQE shares. Payments for investments accounted for using the equity method (i.e., the Company’s investment in GLE) were $10.1m in the current period ($3.0m in the prior corresponding period). d) Business Strategy and Future Prospects Silex’s Strategy Silex is a technology commercialisation company, focused on the commercialisation of our innovative SILEX laser enrichment technology across multiple markets, with a priority focus on contributing to the reliable and sustainable supply of nuclear fuel for the world’s clean energy needs and quantum materials for next generation quantum computing technology. 23 SILEX ANNUAL REPORT 2022Directors’ Report The execution of our strategy is through the following activities: • Pursuit of the ‘Triple Opportunity’ emerging in the nuclear fuel supply chain for the SILEX uranium enrichment technology through our ownership of a 51% interest in exclusive uranium technology licensee GLE; • Developing the SILEX technology for the production of enriched silicon in the form of Zero-Spin Silicon – a key material required for quantum computer chip fabrication; and • Progressing our assessment of additional potential applications of the SILEX technology in fields such as medical radioisotopes together with potential commercial and strategic partners. SILEX Uranium Enrichment The SILEX technology is the only known third-generation laser-based uranium enrichment technology under commercial development today. Subject to the successful completion of the commercialisation project, market conditions and other factors, the SILEX technology could become a major contributor to nuclear fuel production for the world’s current and future nuclear reactor fleet, through the production of uranium in several different forms: • Natural Grade Uranium (Unat): via enrichment of Department of Energy (DOE) owned inventories of depleted UF6 tails at the proposed Paducah Laser Enrichment Facility (PLEF) to produce uranium (in the form of converted UF6) at natural U235 assay of ~0.7%; • Low Enriched Uranium (LEU): for use as fuel in today’s conventional large-scale nuclear power reactors – which require fuel with U235 assays of between 4% and 5%, and potentially LEU+, a new grade of fuel with U235 assays between 5% and 10% being considered by several utilities for use in current nuclear reactors to improve economic performance; and • High Assay LEU (HALEU): a customised fuel for next generation advanced Small Modular Reactors (SMRs) currently under development – many of which require fuel with U235 assays of between 10% and 20%. Uranium production and enrichment are the two largest value drivers of the nuclear fuel cycle, accounting for nearly 80% of the value of a reactor fuel bundle at current market prices. Commercialisation of the SILEX uranium enrichment technology through licensee GLE may enable the SILEX technology to become a unique, multi-purpose nuclear fuel production platform for existing and emerging nuclear power generation systems. Status of Nuclear Fuel Markets Nuclear power plays an increasingly important role in the supply of carbon-free base load electricity and is anticipated to play a much greater role in the energy mix as countries around the world adopt energy policies to meet more urgent net-zero emissions targets. As evidenced at the 26th Conference of the Parties to the UN Framework Convention on Climate Change (COP26) held in Glasgow in November 2021, there are many countries which have prioritised government policy initiatives relating to tackling climate change and ensuring energy security, stating that nuclear power should form a meaningful part of their energy mix in the future. According to the World Nuclear Association, there are currently 437 operable nuclear reactors globally with 59 reactors under construction and hundreds more planned. Today’s operating reactor fleet currently generates ~10% of the world’s electricity supply. These numbers could rise significantly over the next decade as governments strive to address the key issues of climate change and energy security. The US is the world’s largest producer of nuclear power with 92 operable reactors, currently accounting for more than 30% of worldwide nuclear generation of electricity. Despite bold nuclear construction programs in China, India and the Middle East, the US is expected to remain the largest nuclear power generator for years to come. Growth in demand for nuclear power is also being evidenced with life extensions for existing reactors. In the US, nearly all of the operable reactors have been granted operating licence extensions from 40 to 60 years, with some potentially planning to operate for 80 years or more. 24 SILEX ANNUAL REPORT 2022Directors’ Report There is also growing interest and significant investment being made into the development of next generation advanced SMR technologies. Many advanced SMRs are being designed to operate with HALEU fuel, whilst other SMRs will use conventional LEU fuel or in some cases, LEU+ fuel. The global nuclear fuel markets for uranium, conversion services and uranium enrichment services, have been tightening in recent years as the nuclear industry downturn of the prior decade slowly dissipated and climate change issues have turned public sentiment back in favour of nuclear power. From 2017, when the term price of uranium traded at ~US$30 per pound, the term price of uranium has rallied to ~US$50 per pound. Likewise, term conversion prices have increased from ~US$12/kg to ~US$26/kg in the same period. Following the Russian invasion of Ukraine in February 2022, nuclear fuel markets, in particular for enrichment, have tightened even further. As a result of the exposed dependency on Russia, uranium enrichment term contract prices have substantially increased from around US$70/SWU1 to over US$135/SWU since February as utilities seek to secure fuel supplies under the growing threat of sanctions on Russian sourced enriched uranium. With significant growth forecasted in nuclear power generation around the world and the ever-increasing awareness of the potential contribution of nuclear energy to mitigate the adverse effects of climate change, we remain encouraged by the various opportunities emerging for the SILEX technology and GLE in the global nuclear industry. The ‘Triple Opportunity’ for GLE and SILEX Technology Two key factors are driving potential transformation of the global nuclear fuel supply chain, which in turn is presenting GLE with a ‘Triple Opportunity’ to produce three different grades of nuclear fuel, Unat, LEU/LEU+ and HALEU – all via the deployment of the SILEX uranium enrichment technology: (1) the growing shift towards utilisation of nuclear power by many countries around the world in response to heightened concerns over global climate change; (2) the impact of the Russian invasion of Ukraine which threatens to disrupt the significant supply of Russian nuclear fuel to the US and other Western markets. These factors have highlighted the degree to which Western nuclear fuel markets have become highly dependent on Russian nuclear fuel supply. Russia has historically provided a large proportion of global capacity for uranium, conversion and enrichment at 14%, 27% and 39% respectively2. This has created some urgency in establishing alternative supply sources to replace Russian sourced fuel in the medium-term. While there is no short-term solution to this situation, GLE could be very well positioned to help address the emerging nuclear fuel supply chain issues with the unique potential to produce all three grades of nuclear fuel required for current and future nuclear plants at the planned multi-purpose PLEF: PLEF I: Production of natural grade UF6 via tails processing with the SILEX technology (the original PLEF Project) which will also help alleviate UF6 conversion supply pressure; PLEF II: Production of LEU and LEU+ from natural UF6 via an extension of the PLEF with additional SILEX enrichment capacity to supply fuel for existing reactors; PLEF III: Production of HALEU via additional capacity of SILEX technology to supply fuel for next generation advanced SMRs. The first opportunity is the original Paducah uranium production project which GLE has been planning for several years. The second and third opportunities, which could also be located at Paducah, would basically involve the addition of more SILEX technology uranium enrichment production modules (without further development of the technology). 1SWU – Separative Work Unit – is the unit of enrichment traded in the market 2 UxC, LLC various reports Q1 and Q2, 2022 25 SILEX ANNUAL REPORT 2022Directors’ Report Strategic Engagement with Industry and Government Organisations GLE’s business strategy includes active engagement with industry and government organisations, aimed at developing areas of collaboration and support which will help expedite and de-risk GLE’s commercialisation of the SILEX technology and the potential commencement of the PLEF. In June 2022, GLE signed two non- binding Letters of Intent (LOI) with US utilities Constellation Energy Generation and Duke Energy. The LOIs include measures to support GLE’s deployment of SILEX uranium enrichment technology in the US and help address emerging demands across the nuclear fuel supply chain – described above as the ‘Triple Opportunity’. Potential Commercialisation Timelines* While no decision has yet been made, Silex and Cameco are assessing the potential to accelerate GLE’s commercialisation timeline, starting with the earlier completion of the pilot demonstration project. This could be coupled with bringing forward a commercial feasibility assessment and NRC licensing activities for the planned PLEF project. The diagram below depicts the baseline (original) and potentially accelerated timelines for commercialisation activities: Baseline – GLE Commercialisation Timeline: Commercial Pilot Demonstration# PLEF‡ Feasibility and Licensing PLEF EPC† PLEF Commercial Operations c. 2025 c. 2027 c. 2030 Potential Acceleration – GLE Commercialisation Timeline≈: Commercial Pilot Demonstration#, Feasibility and Licensing PLEF EPC PLEF Commercial Operations c. 2025 c. 2027 c. 2030 The original proposed Paducah commercial project involving the enrichment of depleted UF6 tails inventories owned by the US DOE was conceived as an ideal path to market for the SILEX uranium enrichment technology and GLE during the period when a worldwide oversupply of enrichment services existed. Underpinning this opportunity is the 2016 Sales Agreement between GLE and the DOE which provides GLE access to large stockpiles of depleted uranium tails inventories. This Agreement was amended in 2020 to bring it into alignment with evolving market conditions. The PLEF I commercial project opportunity involves GLE constructing the proposed natural UF6 production plant utilising the SILEX technology to enrich the DOE tails inventories which have been stored in the form of depleted uranium hexafluoride (UF6 – containing U235 assays from 0.25% up to 0.5%) to produce natural grade uranium (assay of ~0.7%). Subject to completion of the technology commercialisation project, regulatory approvals, financing and prevailing market conditions, it may be possible the PLEF I plant could commence commercial operations as early as 2027. * Timelines subject to technology demonstration outcomes, market conditions, licensing, commercial support and other factors # Includes achievement of Technology Readiness Level 6 (TRL-6) as defined by DOE Technology Readiness Assessment Guide (G 413.3-4A) ‡ PLEF: Paducah Laser Enrichment Facility † Engineering, Procurement and Construction (EPC) of commercial plant ≈ Potential acceleration remains subject to due diligence assessment and may very according to differing scenarios 26 SILEX ANNUAL REPORT 2022Directors’ Report The PLEF I plant will potentially produce natural UF6 at a rate equivalent to a uranium mine with an annual output of up to 5 million pounds of uranium oxide for approximately 30 years, ranking in the top ten of today’s uranium mines by production volume. SILEX Technology License Agreement with GLE The Technology Commercialisation and License Agreement between Silex and GLE is an exclusive worldwide license for exploitation of the SILEX technology for uranium enrichment. The License Agreement is independent of Silex’s 51% equity interest in GLE and related commercial benefits flowing from that equity interest. The License Agreement includes royalty revenues and milestone payments to Silex as follows: • Perpetual royalty of a minimum of 7% - on GLE’s enrichment SWU revenues from use of the SILEX technology • US$20 million in Milestone Payments – payable to Silex triggered by commercial development milestones A US$15 million milestone payment was also received by Silex in July 2013. This was triggered by the successful completion of the Test Loop Phase 1 Program Milestone: Technology Demonstration and Validation. This milestone involved the demonstration of efficient enrichment with the SILEX laser technology at the prototype level. The receipt of potential additional milestone payments and royalties and the associated timing remains uncertain. The Company continues to take a considered approach to the SILEX technology commercialisation program in line with current market conditions. Ultimately, the future of the technology and likelihood of success in the remaining commercialisation program is dependent on the continued recovery in the global markets for natural and enriched uranium. Commercialisation of the SILEX uranium enrichment technology therefore remains subject to these and other risks. Zero-Spin Silicon for Quantum Computing Silex’s LIS technology has the potential to efficiently produce ZS-Si to provide a secure source of supply of this key enabling material for the emerging silicon quantum computing market, with sales of initial small quantities of ZS-Si anticipated to commence in 2023. The first batches of high purity ZS-Si product may be purchased by project partner, SQC under an Offtake Agreement that was executed in December 2019. Quantum computers are expected to be thousands of times more powerful than the most advanced of today’s conventional computers, opening new frontiers and opportunities in many industries, including medicine, artificial intelligence, cybersecurity and global financial systems. Many countries around the world are investing heavily in the development of quantum computing technology, with governments and key corporates (such as Intel, IBM, Google, Microsoft and others) vying for leadership in this emerging strategic industry. The first stage of the three-stage project was successfully completed in June 2020, establishing ‘proof-of- concept’ for the silicon laser isotope separation (LIS) process identified by Silex. The second stage of the project was completed in January 2022 which involved the design, construction and operation of a scaled-up prototype demonstration facility, verifying the efficiency and scalability of the silicon LIS technology and the underlying economic limit of the process (in terms of achievable isotopic purity). The third stage, scheduled to be completed in CY2022, aims to verify the capability of the SILEX technology for commercial production of high purity ZS-Si from the SILEX pilot demonstration facility, leading to a full techno- economic assessment of the ZS-Si business case. The construction of the pilot demonstration facility was completed in July 2022 and is currently being commissioned. Initial enrichment testing will commence shortly. Following pilot production demonstration and the full economic assessment of the ZS-Si business case, the Company may proceed with the construction of a SILEX commercial ZS-Si production plant at Silex’s Lucas Heights facility to produce ZS-Si in multiple product formats. The ZS-Si project remains dependent on the outcomes of the project and the viability of silicon quantum computing and is therefore at risk. 27 SILEX ANNUAL REPORT 2022Directors’ Report cREO® Technology In March 2022, IQE advised that it has paused development of the innovative cREO® advanced semiconductor technology until a commercial opportunity arises. Prior to the pause in development, IQE had been developing a product called IqepiMo™ which was built on cREO®, targeting 5G filters for mobile handset devices. IQE has said the technology has become a longer term development however, will retain the technology, capability and IP enabling redeployment if and when appropriate, subject to the continued payment of minimum royalties to Silex. Minimum annual royalties have been payable by IQE since CY2019 with the CY2021 minimum royalty of US$500k being received in February 2022. The commercial prospects of the cREO® technology and the potential for any further minimum royalty payments remain uncertain and subject to risk following the pause in IQE’s development program. 5. Earnings per share Earnings per share (loss) from continuing operations attributable to the ordinary equity holders of the Company 2022 Cents 2021 Cents Basic earnings per share Diluted earnings per share Earnings per share (loss) attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share (4.8) (4.8) (4.8) (4.8) (4.0) (4.0) (4.0) (4.0) 6. Significant changes in state of affairs On 27 September 2021, Silex announced that it had completed an equity raise by way of a placement. 25,972,391 ordinary shares were issued. A Share Purchase Plan was also offered to eligible shareholders and a further 5,343,812 shares were issued. Total cash received from the placement and Share Purchase Plan, net of transaction costs, was $38.4m. 7. Matters subsequent to the end of the financial year The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial statements that have significantly, or may significantly, affect the operations of the consolidated entity, the results of its operations or the state of the consolidated entity in subsequent years other than those referred to in this Directors’ Report. 28 SILEX ANNUAL REPORT 2022Directors’ Report 8. Information on Directors The following information is current as at the date of this report: Mr Craig Roy MBA, MSc, FAICD. Chair – Independent non-executive director Experience and expertise Other current listed company directorships Former listed company directorships in last 3 years Special responsibilities Independent non-executive director and Chair since January 2019. Former Deputy CEO of the CSIRO. Extensive experience as a company director and is currently a Non-executive Director of Sydney Water and Chair of the Australian Research Data Commons. None None Chair of the Board Member of Audit Committee Chair of People & Remuneration Committee Chair of Global Laser Enrichment Holdings LLC Interests in shares, options and rights Number of ordinary shares 259,507 Number of options Number of rights Nil Nil Dr Michael Goldsworthy BSc (Hons), MSc, PhD, FAIP, GAICD. Chief Executive Officer/Managing Director Experience and expertise CEO/MD for thirty years. Founder of the Company and co-inventor of the SILEX laser isotope separation technology. Dr Goldsworthy has been the driving force behind the commercialisation program for the SILEX technology. Other current listed company directorships None Former listed company directorships in last 3 years None Special responsibilities Chief Executive Officer / Managing Director Director of Global Laser Enrichment Holdings LLC Interests in shares, options and rights Number of ordinary shares 6,176,055 Number of options Number of rights 900,000 487,500 29 SILEX ANNUAL REPORT 2022Directors’ Report Mr Christopher Wilks BCom, FAICD. Non-executive director Experience and expertise Non-executive director since 1988. Finance director and CFO of Sonic Healthcare Limited. Various directorships of public companies held over the years. Other current listed company directorships Executive director of Sonic Healthcare Limited since 1989 (Finance director since 1993) Former listed company directorships in last 3 years None Special responsibilities Chair of Audit Committee Member of People & Remuneration Committee Interests in shares, options and rights Number of ordinary shares 2,833,716 Number of options Number of rights Nil Nil Ms Helen Cook LLM, LLB (Hons), BA. Independent non-executive director Experience and expertise Independent non-executive director since October 2021. Commercial lawyer and international nuclear law specialist. Principal of GNE Advisory Pty Ltd, a law practice dedicated to the global civil nuclear energy sector. Other current listed company directorships None Former listed company directorships in last 3 years None Special responsibilities Member of Audit Committee Member of People & Remuneration Committee Interests in shares, options and rights Number of ordinary shares 12,000 Number of options Number of rights Nil Nil 30 SILEX ANNUAL REPORT 2022 Directors’ Report The following director is a former director of the Silex Board: Ms Melissa Holzberger LLM, Dip Intl Nuclear Law, LLB, BA, GDLP, FGIA, GAICD.  Independent non-executive director Resigned 14 October 2021 Experience and expertise Independent non-executive director 2.5 years. Experienced company director, commercial lawyer and international nuclear law specialist. Founder and principal of the firm Sloan Holzberger Lawyers, is a Non-executive director of ASX-listed company, Paladin Energy Limited and is a member of the Federal Government’s Australian Radiation Protection and Nuclear Safety Agency’s (ARPANSA) Radiation Health and Safety Advisory Council. Other current listed company directorships Non-executive director of Paladin Energy Limited since May 2021. Former listed company directorships in last 3 years None Special responsibilities Chair of Audit Committee (until 14 October 2021) Member of People & Remuneration Committee (until 14 October 2021) Interests in shares, options and rights Number of ordinary shares (as at 14 October 2021) 27,777 Number of options Number of rights Nil Nil 9. Meetings The number of directors’ meetings held during the financial year and the number of meetings attended by each director are set out in the following table: Director’s name Mr C A Roy Dr M P Goldsworthy Ms H G Cook Mr C D Wilks Former director Ms M K Holzberger Directors’ Meetings Audit Committee Meetings People & Remuneration Committee Meetings Number Held* Number Attended Number Held* Number Attended Number Held* Number Attended 20 20 10 20 10 20 20 10 20 8 3 2 3 1 3 2 3 1 2 2 2 - 2 2 2 - *Number of meetings held during the time the director held office or was a member of the committee during the year Not a member of the relevant committee at the time the scheduled meetings were held 31 SILEX ANNUAL REPORT 2022Directors’ Report 10. Remuneration Report On behalf of the People & Remuneration Committee and the Board, I am pleased to present to you the FY2022 Silex Systems Limited Remuneration Report, for which we seek your support at our Annual General Meeting (AGM) in October 2022. The details of the remuneration received by the Company’s Key Management Personnel (KMP) are prepared in accordance with accounting standards, legislative requirements and best practice corporate governance guidance. The Company’s People & Remuneration Committee oversees remuneration strategy, policy and framework, and executive KMP remuneration. The Committee regularly evaluates the Company’s strategy and objectives and makes remuneration recommendations to the Board which include focused performance measures for executive KMP. Our remuneration strategy has the following objectives: • attract, motivate and retain highly qualified and specialised personnel; • alignment of remuneration outcomes with the successful delivery of the Company’s strategy; • align the interests of our directors and executive KMP with Silex’s shareholders and other stakeholders; and • ensure competitive, reasonable and transparent renumeration outcomes with appropriate standards of governance. The Company continued its execution of its strategic priorities in FY2022, with solid progress on the SILEX uranium enrichment technology demonstration and commercialisation program in conjunction with GLE and addressing the evolving nuclear fuel market conditions. In addition, our ZS-Si project continued to progress at a steady pace and is now preparing for the final stages of demonstration of production for initial quantities of ZS-Si from the SILEX pilot demonstration facility. As communicated in our last Remuneration Report, we have now granted multi-year incentives for our CEO/MD (as approved by shareholders at the 2021 AGM) and for our CFO/Company Secretary. These multi-year, equity-based incentives are viewed as both modest and appropriate given the significance of the potential achievement of the targets on the long-term value for shareholders. These incentives and the underlying performance objectives are described further in the report. The Committee and the Board believe equity-based compensation is important to conserve cash reserves as much as possible and to motivate employees to align their interests with those of our shareholders to drive positive outcomes in the longer term. Our Employee Incentive Plan (EIP), is an important component of our remuneration structure to drive performance, incentivise retention and to also attract the best possible candidates for our Company. We are pleased that staff have welcomed the opportunity to receive equity-based compensation. The EIP allows us to use a variety of equity awards, vesting criteria, eligibility and tailored key performance indicators as may be appropriate from time to time. Following a 12-year base remuneration freeze for our CEO/MD and a 6-year freeze for our CFO/Company Secretary and following careful consideration of performance, market data and conditions, the Board approved an increase of 8.72% for our CEO/MD and 7.07% for our CFO/Company Secretary from 1 July 2022. In addition, and as a reflection of the substantially increased activities and additional governance responsibilities of the Company and GLE and following consideration of market data, an increase of $20,000 per annum was resolved to be paid to the Chair from 1 July 2022. These increases will be reflected in next year’s Remuneration Report. All other Board and Committee fees remain unchanged since the last Remuneration Report. Details of the remuneration outcomes for FY2022, reflecting the achievements during the year and the new multi- year equity-based remuneration arrangements for our executive KMP are provided in this report. 32 SILEX ANNUAL REPORT 2022Directors’ Report We believe that our remuneration programs are modest, effective, align our team’s interests with those of the Company’s shareholders and reflect strong governance. We continuously monitor market developments and best practice recommendations with respect to compensation to ensure our decisions are appropriate in relation to the Company’s performance and to enable adjustment of our remuneration structure and practices as required. We invite you to review the full Remuneration Report and we look forward to answering any questions you may have at our AGM in October 2022. Craig Roy Chair, People & Remuneration Committee 33 SILEX ANNUAL REPORT 2022Directors’ Report The Directors present the Remuneration Report for the year ended 30 June 2022, outlining key aspects of our remuneration policy and framework, and remuneration awarded for the Company’s non-executive directors, executive directors and other executive Key Management Personnel (KMP). The report contains the following sections: (a) Directors and KMP disclosed in this report (b) Remuneration governance (c) Linking remuneration structure to Company performance (d) Voting at the Company’s 2021 Annual General Meeting (e) Elements of executive KMP remuneration (f) Link between FY2022 remuneration and performance (g) Contractual arrangements with executive KMPs (h) Non-executive directors’ remuneration arrangements (i) Directors’ and KMP remuneration (j) Performance-based remuneration granted and forfeited during the year (k) Terms and conditions of the equity-based payment arrangements (l) Reconciliation of options, rights and ordinary shares held by executive KMP a) Directors and KMP disclosed in this report The 2022 Remuneration Report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001 and accounting standard requirements and applies to KMP of the Company. KMP are defined as those persons who have authority and responsibility for planning, directing and controlling the activities of the Company. The KMP covered in this report are as follows: Name Position Non-executive and executive directors Mr C A Roy Dr M P Goldsworthy Chair and Non-executive director CEO/Managing Director – Executive director Ms H G Cook (from 14 October 2021) Non-executive director Mr C D Wilks Non-executive director Former Non-executive director Ms M K Holzberger (until 14 October 2021) Non-executive director Other executive KMP Ms J E Ducie CFO/Company Secretary 34 SILEX ANNUAL REPORT 2022Directors’ Report b) Remuneration governance Board oversight The Silex Board is ultimately responsible for ensuring that the Company’s remuneration structure is equitable and aligned with the long-term interests of shareholders. The Board and its advisors are independent of Management when making decisions affecting employee remuneration. People & Remuneration Committee structure The People & Remuneration Committee is a committee of the Board comprised of a majority of independent non- executive directors. The Chair of the Committee is also an independent non-executive director. Its role is to make recommendations to the Board regarding the Company’s remuneration policies and practices, including those applicable to the Company’s KMP. Members of the People & Remuneration Committee as at the 30 June 2022 were as follows: Committee members Committee secretary Mr C A Roy | Chair Ms H G Cook Mr C D Wilks Ms J E Ducie Number of meetings in FY2022 2 Other individuals who regularly attended meetings Dr M P Goldsworthy | CEO/MD The role of the People & Remuneration Committee is to: • Review and recommend to the Board appropriate remuneration policies and practices that are competitive and reasonable for the Company relative to its performance, and to make specific recommendations in relation to KMP compensation, as well as the general application to all employees; • Determine and recommend remuneration levels of the CEO/MD and CFO/Company Secretary for Board approval; • Manage the incentive plans which apply to executive KMP, including key performance indicators and performance hurdles; and • Review and make recommendations to the Board regarding the remuneration of non-executive directors. The role and responsibilities of the People & Remuneration Committee are set out in the People & Remuneration Committee Charter, which is available on the Company’s website at: https://www.silex.com.au/corporate/ corporate-governance/. The Company did not engage remuneration consultants during FY2022. The Company accesses market data and industry remuneration surveys and reports on a regular basis. 35 SILEX ANNUAL REPORT 2022Directors’ Report c) Linking remuneration structure to Company performance Remuneration strategy, policy and framework In determining executive KMP remuneration, the Board’s policy is based on the principle of aligning remuneration outcomes with the successful delivery of strategy whilst ensuring our remuneration practices are designed to attract, motivate and retain highly qualified and specialised personnel. High regard for contemporary market practice, good governance and alignment to changing business circumstances is maintained at all times. The Company aims to reward executive KMP with a level and mix of remuneration commensurate with their position and responsibilities within the Company that is competitive within the market. Remuneration for executive KMP is reviewed annually and considers market data, insights into remuneration trends, the performance of the Company and the individual, and the broader economic and operating environment. Following a review of the Company’s executive KMP incentive programs during FY2021, a multi-year incentive program was developed, involving the issue of Short-term incentives (STIs), Long-term incentives (LTIs) and an Extended LTI using a variety of equity-based awards and therefore aligned with the creation of shareholder value over the long-term. The new Extended LTI for our CEO/MD was approved by shareholders at the 2021 AGM, and a similar incentive was granted for our CFO/Company Secretary. The executive KMP remuneration framework comprises of two components: • Total fixed remuneration; and • At-risk incentives. 36 SILEX ANNUAL REPORT 2022Directors’ Report Remuneration structure Element Purpose Performance Metrics Structure Value Total Fixed Remuneration (TFR) STI* Provide competitive market salary, including superannuation and non-monetary benefits Reward for in- year performance, retention via 2-year escrow period applied to any equity incentive award Nil Base remuneration Positioned at median market rate and with reference to role experience Performance may be linked to financial metrics such as cash flow management and to non-financial measures, such as commercial deliverables, and other specific operational and strategic deliverables for the Company. CEO: FY2022 - 75,000 Performance Rights** Potential value: $81,818 (Nb. FY2022 to FY2025 –award of 75,000 Performance Rights per annum. Underlying performance criteria to be set by the Board at the commencement of each financial year) A one-off gross cash bonus of $60,000 was awarded to the CEO for FY2022 in recognition of the rebuilding of GLE post-closing of the Silex acquisition and general strong Company performance across the Company’s technology commercialisation projects. Value: $60,000 CFO: FY2022 - 70,000 Performance Rights Potential value: $51,436 (Nb. FY2022 to FY2024 – award of 70,000 Performance Rights per annum. Underlying performance criteria to be set by the Board at the commencement of each financial year) Value: $50,000 A one-off gross cash bonus of $50,000 was awarded to the CFO for FY2022 in recognition of the rebuilding of GLE post-closing of the Silex acquisition and general strong Company performance across the Company’s technology commercialisation projects. 37 SILEX ANNUAL REPORT 2022Directors’ Report Element Purpose Performance Metrics Structure Value LTI* Alignment to long- term shareholder value, retention via 2-year escrow period applied to any equity incentive award Performance linked to contribution to the creation of shareholder value over the longer term. CEO: FY2022 – 750,000 options** issued 29 October 2021***, representing 150,000 options per annum for FY2021 through to and including FY2025 Potential value: $577,470 Expensed over FY2021 to FY2027. CFO: FY2022 – 300,000 options issued 29 October 2021***, representing 100,000 options per annum for FY2022 through to and including FY2024 Potential value: $139,390 Expensed over FY2022 to FY2026. Extended LTI* Alignment to long- term shareholder value, retention via 2-year escrow period applied to any equity incentive award Performance linked to scale-up of the unique SILEX uranium enrichment technology by 31 December 2025. CEO: FY2022 – 412,500 Performance Rights** (to cover 5.5 performance years commencing 1 July 2020 and ending 31 December 2025) Potential value: $466,950 Performance linked to long-term shareholder value, retention. CFO: 300,000 Performance Rights (to cover 5 performance years commencing 1 July 2021 and ending 30 June 2026) Potential value: $239,550 Expensed over FY2022 to FY2026. * At all times the Board has the discretion to make a final determination based on Company performance or other factors. Incentive awards may be clawed back or cancelled if the relevant executive acts fraudulently or dishonestly or breaches their obligations to the Company **Approved by shareholders at the 2021 AGM ***Option exercise price of $0.94, based on the 10-trading day VWAP preceding 25 June 2021 38 SILEX ANNUAL REPORT 2022Directors’ Report TFR is comprised of base salary and superannuation. TFR is reviewed annually, or on promotion. It is benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation. The Committee aims to position executives at or near the median, with flexibility to take into account capability, experience, and value to the organisation and performance of the individual. With regard to FY2022, it was once again resolved that no increases be awarded with respect to TFR. Being cognizant of a 12 and 6-year base remuneration freeze for our CEO/MD and CFO/Company Secretary respectively and following careful consideration of performance, market data and conditions, the Committee recommended an increase of 8.72% for our CEO/MD and 7.07% for our CFO/Company Secretary from 1 July 2022 (i.e., for FY2023). A multi-year equity-based incentive program has been developed, involving the issue of Short-term incentives (STIs), Long-term incentives (LTIs) and Extended LTIs for the CEO/MD and CFO/Company Secretary. Annual STIs and LTIs have been set through to FY2024 for the CFO and FY2025 for the CEO, in order to drive performance and talent retention. STIs have a 12-month performance period. LTIs are assessed over a three-year period and are designed to promote long-term stability in share price appreciation. The CEO’s Extended LTI has performance criteria specifically tailored to outcomes relating to the scale-up of the unique SILEX uranium enrichment technology and will be assessed over a performance period ending 31 December 2025. Achievement of the CEO’s Extended LTI will be subject to independent Board verification. The Extended LTI for the CFO has performance criteria tailored to growth in long-term shareholder value and will be assessed over a performance period ending 30 June 2026. Assessing performance and claw-back of remuneration The People & Remuneration Committee is responsible for assessing performance against KPIs and determining the incentive awards to be paid to all senior management. To assist in this assessment, the Committee receives detailed reports on performance from Management which are based on independently verifiable data such as financial measures, market information and data from independently run surveys. At all times, the Board has the discretion to make a final determination. In the unlikely event of serious misconduct or a material misstatement in the Company’s financial statements the Board can cancel or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous financial years. d) Voting at the Company’s 2021 Annual General Meeting Silex Systems Limited received more than 95% of “yes” votes on its Remuneration Report for the 2021 financial year. 39 SILEX ANNUAL REPORT 2022Directors’ Report e) Elements of executive KMP remuneration The executive KMP remuneration for FY2022 comprised the following elements: CEO/MD CFO/Company Secretary Total Fixed Remuneration (TFR) Composition Base salary and superannuation Base salary and superannuation Assessment Based on responsibilities, performance and market data Based on responsibilities, performance and market data At risk No Short-Term Incentives No Composition An equity-based STI may be granted annually at the discretion of the Board. As per shareholder approval at the 2021 AGM, the current STI comprises an annual grant of 75,000 Performance Rights through to FY2025. An equity-based STI may be granted annually at the discretion of the Board. The STI is intended to comprise an annual grant of 70,000 Performance Rights through to FY2024. Opportunity 75,000 Performance Rights 70,000 Performance Rights Assessment KPIs were intended to be stretch targets and focussed on delivering priorities associated with increasing shareholder value, including delivery of technology milestones for the Company’s projects and the achievement of other strategic and commercial performance measures associated with both Silex and GLE. Assessment: 95% of the performance rights will vest subject to completion of an underlying service- condition ending 31 July 2022. 71,250 shares are pending for issue to the CEO. The shares to be issued are subject to a 2-year trading restriction from the date of issue. KPIs were intended to be stretch targets and focussed on delivering priorities associated with increasing shareholder value, including delivery of technology milestones for the Company’s projects and the achievement of other strategic and commercial performance measures associated with both Silex and GLE. Assessment: 95% of the performance rights will vest subject to completion of an underlying service- condition ending 31 July 2022. 66,500 shares are pending for issue to the CFO. The shares to be issued are subject to a 2-year trading restriction from the date of issue. One-off Cash STI A one-off gross cash bonus of $60,000 was awarded in recognition of the rebuilding of GLE post-closing of the Silex acquisition and general strong Company performance across the Company’s technology commercialisation projects. A one-off gross cash bonus of $50,000 was awarded in recognition of the rebuilding of GLE post-closing of the Silex acquisition and general strong Company performance across the Company’s technology commercialisation projects. Board discretion The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any STI award. The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any STI award. Long-Term Incentives Composition As per shareholder approval at the 2021 AGM, an equity-based LTI to cover five performance years (i.e., FY2021 through to and including FY2025) was issued. The multi-year incentive, equivalent to an annual grant of 150,000 options, was issued on 29 October 2021 for the five years ending 30 June 2025. An equity-based LTI to cover three performance years has been granted (i.e., FY2022 through to and including FY2024). The multi-year incentive, equivalent to an annual grant of 100,000 options, was issued on 29 October 2021 for three years ending 30 June 2024. Opportunity Issue of 750,000 options (i.e., 150,000 options attributable to each year from FY2021 to FY2025) Issue of 300,000 options (i.e., 100,000 options attributable to each year from FY2022 to FY2024) 40 SILEX ANNUAL REPORT 2022Directors’ Report CEO/MD CFO/Company Secretary Assessment The equity-based LTI have vesting periods that end from 25 June 2024 to 30 June 2027. In the event the options are eligible to be exercised, any resulting allotment of Silex Systems Limited shares will be subject to a further escrow period of 2 years. Exercise price In accordance with shareholder approval, the options’ exercise price is $0.94. This exercise price was determined based on the volume weighted average price at which the Company’s shares were traded on the Australian Stock Exchange for the 10-trading days preceding 25 June 2021. The equity-based LTI have vesting periods that end from 30 June 2024 to 30 June 2026. Any resulting allotment of Silex Systems Limited shares on completion of the underlying service-condition and option exercise, will be subject to a further escrow period of 2 years. The options’ exercise price of $0.94 was determined based on the volume weighted average price at which the Company’s shares are traded on the Australian Stock Exchange for the 10-trading days preceding the 25 June 2021. Forfeiture and termination Options will lapse if vesting conditions are not met. Options will be forfeited on cessation of employment unless the Board determines otherwise. Options will lapse if vesting conditions are not met. Options will be forfeited on cessation of employment unless the Board determines otherwise. Board discretion The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any LTI award. The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any LTI award. Extended Long-Term Incentive Composition As per shareholder approval at the 2021 AGM, the equity-based Extended LTI is a multi-year incentive equivalent to 412,500 Performance Rights for a 5.5 year performance period ending 31 December 2025. An equity-based Extended LTI is a multi-year incentive equivalent to 300,000 Performance Rights for a 5-year performance period ending 30 June 2026. Opportunity Issue of 412,500 Performance Rights Assessment The performance period of the Extended LTI commenced on 1 July 2020 and ends 31 December 2025. The performance criteria are linked to specifically tailored outcomes relating to the scale-up of the unique SILEX uranium enrichment technology and will be assessed over a performance period ending 31 December 2025. Achievement will be subject to independent Board verification and the Extended LTI may be subject to early-vesting. In the event the performance criteria is achieved, any resulting allotment of Silex Systems Limited shares will be subject to a further escrow period of 2 years. Issue of 300,000 Performance Rights (granted 21 June 2022 and to be issued in FY2023) The performance period of the Extended LTI commenced on 1 July 2021 and ends 30 June 2026. The Extended LTI is subject to service-based and performance-based criteria linked to increased shareholder value. In the event the vesting criteria is achieved, any resulting allotment of Silex Systems Limited shares will be subject to a further escrow period of 2 years. Forfeiture and termination Performance Rights will lapse if performance conditions are not met. Rights will be forfeited on cessation of employment unless the Board determines otherwise. Performance Rights will lapse if performance conditions are not met. Rights will be forfeited on cessation of employment unless the Board determines otherwise. Board discretion The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any Extended LTI award. The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing (down to zero, if appropriate) any Extended LTI award. 41 SILEX ANNUAL REPORT 2022Directors’ Report f) Link between FY2022 remuneration and performance FY2022 performance and impact on remuneration The Company’s performance during FY2022 remained strong, with continued delivery on a number of strategic priorities including, solid progress with the execution of the SILEX uranium enrichment technology demonstration and commercialisation program in conjunction with GLE and preparing to respond to evolving nuclear fuel market conditions, and the continued progress with regard to our ZS-Si project, which is in the final stages of demonstration of production for initial quantities of ZS-Si from the SILEX pilot demonstration facility. This performance and the execution of the various opportunities presenting to the Company was reflected in the appreciation of the Silex share price during FY2022. For further information on the Company’s performance during the year, refer to the Operating and Financial Review in Section 4 of this Directors’ Report. As a result of these positive achievements, the Board awarded both the CEO/MD and CFO/Company Secretary 95% of the FY2022 performance rights (subject to completion of the service-condition ending 31 July 2022). In addition, the Board’s implementation of multi-year equity-based incentives for the Company’s executive KMP is intended to retain KMP and to provide longer term benefits if key service and performance conditions are met together with sustained appreciation in shareholder value. Statutory performance indicators We aim to align executive KMP remuneration to our strategic and business objectives and the creation of shareholder wealth. The below table shows measures of the Company’s financial performance over the last five years as required by the Corporations Act 2001. However, as a pre-revenue company, the below measures are generally not the measures used in determining the variable amounts of remuneration to be awarded to KMPs. As a consequence, there is only a partial correlation between the statutory key performance measures and the variable remuneration awarded. Year ended 30 June EPS Cents Total STI awards to KMP ($) Share price at 30 June ($) 2018 2019 2020 2021 2022* (2.7) (3.0) (4.5) (4.0) (4.8) N/A 60,000 61,600 62,935 228,601 0.20 0.40 0.78 0.90 2.10 *Includes one-off performance payment (cash) of $60,000 for the CEO/MD and $50,000 for the CFO/Company Secretary and STIs paid via Performance Rights 42 SILEX ANNUAL REPORT 2022Directors’ Report g) Contractual arrangements with executive KMPs Component CEO/MD CFO/Company Secretary Total Fixed Remuneration $550,000 $325,000 Contract duration Ongoing Common Law Contract Ongoing Common Law Contract Notice by the individual or Company 6 months 6 months Termination of employment (without cause) Partial payment for pro-rata STI, if applicable, may be at Board discretion Partial payment for pro-rata STI, if applicable, may be at Board discretion Unvested LTI and Extended LTI may remain on foot subject to achievement of the performance criteria at the original date of testing Unvested LTI and Extended LTI may remain on foot subject to achievement of the performance criteria at the original date of testing Payment of Long Service Leave accrued prior to 31 December 2014 at pre-1 January 2015 TFR of $800,000. Long Service Leave accrued after 1 January 2015 will be payable as per statutory requirements Termination of employment (with cause) or by the individual STI is not awarded and all unvested LTI and Extended LTI will lapse. Vested and unexercised LTI may be exercised following termination at Board discretion STI is not awarded, and all unvested LTI and Extended LTI will lapse. Vested and unexercised LTI may be exercised following termination at Board discretion 43 SILEX ANNUAL REPORT 2022Directors’ Report h) Non-executive directors’ remuneration arrangements Non-executive directors receive a directors’ fee and a fee for chairing or participating on Board committees. They do not receive performance-based pay or retirement allowances. The fees are exclusive of superannuation and are reviewed annually taking into account comparable roles and market data. The directors’ fees were reviewed in FY2022 and an annual fee increase of $20,000 was resolved to be paid to the Chair with effect from 1 July 2022 reflecting the substantial increase in activities and additional governance responsibilities of the Company and GLE. Other Board and Committee fees have not changed since the last Remuneration Report. Additional fees may be payable to non-executive directors should they undertake specific consulting projects for the Company in the areas of their expertise. No additional fees were paid for additional services and consulting rendered during FY2022. The maximum annual aggregate directors’ fee pool limit is $750,000 and was approved by shareholders at the 2011 AGM. All non-executive directors enter into a written agreement with the Company in the form of a letter appointment. The current annual fee structure is outlined below: Chair Other Non-executive directors Audit Committee – Chair Audit Committee – Member People & Remuneration Committee – Chair People & Remuneration Committee – Member Other From 1 July 2022 120,000 80,000 Year ended 30 June 2022 100,000 80,000 10,000 8,000 10,000 8,000 10,000 8,000 8,000 8,000 Global Laser Enrichment Holdings LLC – Chair* 40,000 40,000 * Payable from 1 January 2021 for the 3 years ending 31 December 2023. Payable 50% in cash and 50% via the issue of Silex shares, as approved by shareholders at the 2021 AGM. 44 SILEX ANNUAL REPORT 2022Directors’ Report i) Directors’ and KMP remuneration The table below has been prepared in accordance with the requirements of the Corporations Act 2001 and relevant accounting regulations in Australia. This table details the remuneration for the Company’s KMP for the current and previous financial year. Fixed remuneration Variable remuneration   Cash salary and fees* $ Non – monetary benefits – shares‡ $ Annual and long service leave# $ Post- employment benefits $ Perf. Payments (cash)* $ Perf. Rights (deferred shares)‡ $ Options‡ $ Perf. Related % Total $ Name Year Executive directors Dr M P Goldsworthy 2022 524,406 2021 526,106 - - 21,952 5,494 Non-executive directors Mr C A Roy† Ms H G Cook (from 14/10/2021) Mr C D Wilks Former directors Ms M K Holzberger (until 14/10/2021) 2022 2021 2022 2021 2022 2021 2022 2021 154,242 46,408 137,358 10,000 68,571 - 97,429 96,000 28,389 98,000 - - - - - - - - - - - - - - Other key management personnel and group executives Ms J E Ducie 2022 2021 299,406 302,906 - - - - 10,838 19,009 32,790 24,503 823,812 829,012 2022 2021 2022 2021 348,631 46,408 331,358 10,000 - - Total executive directors and other KMP Total NED remuneration Total KMP ≈ remuneration  27,468 60,000 151,037 156,754 941,617 23,894 - 3,803 6,857 - 9,743 9,120 2,839 9,310 - - - - - - - - - 43,758 21,202 620,454 - - - - - - - - - - - - - - - - 200,650 151,161 75,428 - 107,172 105,120 31,228 107,310 39% 10% - - - - - - - - 27,468 50,000 122,784 86,325 596,821 22,094 - 20,190 21,462 385,661 43% 11% 54,936 110,000 273,821 243,079 1,538,438 45,988 19,439 22,233 - - - 63,948 42,664 1,006,115 - - - 414,478 - 363,591 2022 1,172,443 46,408 32,790 74,375 110,000 273,821 243,079 1,952,916 2021 1,160,370 10,000 24,503 68,221 - 63,948 42,664 1,369,706 * Short-term benefits as per Corporations Regulations 2M 3.03(1) Item 6. # Other long-term benefits as per Corporations Regulations 2M 3.03(1) Item 8. The amounts disclosed in this column represent the increase/ (decrease) in the associated provisions. ‡ Equity-settled share-based payments as per Corporations Regulations 2M.3.03(1) Item 11. With regard to the group’s executives, this includes STI (via Performance Rights), LTI (via Options) and Extended LTI (via Performance Rights). † The Company commenced payment of directors’ fees for the role of Chair of Global Laser Enrichment Holdings LLC to Mr C A Roy from 1 January 2021. Refer to section h) for further details. ≈ Total KMP remuneration (including executive KMP and NEDs) has increased by $583,210 compared to the prior year. $446,696 of the increase is due to an increase in share-based payments, including the accounting impact of the multi-year equity-based incentives for the Company’s executive KMP. $110,000 of the increase relates to one-off performance payments (cash) to executive KMP. 45 SILEX ANNUAL REPORT 2022                                                                                                        Directors’ Report j) Performance-based remuneration granted and forfeited during the year A summary of the performance-based remuneration granted and forfeited to the executive KMP during FY2022: STI (Rights) STI (Cash) LTI (Options) Extended LTI (Rights) Total opportunity $ Awarded* % Forfeited % Total opportunity $ Awarded % Forfeited % Value granted** $ Value exercised $ Value granted** $ Awarded % Forfeited % 81,818 95% 5% 60,000 100% 0% 577,470 115,500 466,950 51,436 95% 5% 50,000 100% 0% 139,390 91,500 239,550 - - - - Name Dr M P Goldsworthy Ms J E Ducie * STI (Rights) Awards subject to completion of service-based condition ending 31 July 2022. ** The value at grant date calculated in accordance with AASB 2 Share-based Payment of options and rights granted during the year as part of remuneration. The Extended LTI rights for Dr M P Goldsworthy were issued 29 October 2021 and the Extended LTI rights for Ms J E Ducie are pending for issue. k) Terms and conditions of the equity-based payment arrangements STI – Performance Rights Commencing FY2021, an annual STI in the form of Performance Rights is to be issued to executive KMP. The rights vest at the end of a 12-month performance period subject to the achievement of individually tailored KPIs. Each right that vests is converted into one ordinary share. The rights carry no dividend or voting rights. The fair value of the rights is determined based on the market price of the Company’s shares at the grant date or for those rights which are subject to a market condition, with reference to a Monte Carlo simulation taking into account the volatility of the Company’s shares and other factors. Grant Date 26/07/2021 26/07/2021 14/10/2021 14/10/2021 Vesting date 31/07/2022 31/07/2022 31/07/2022 31/07/2022 Value per right grant date Performance achieved % Vested %* $0.791 $0.510 $1.132 $0.721 94% 100% 94% 100% - - - - * Award subject to completion of service-based condition ending 31 July 2022. 46 SILEX ANNUAL REPORT 2022  Directors’ Report LTI – Options The number of options over ordinary shares in the Company provided as remuneration to executive KMP is shown below. The options carry no dividend or voting rights. The options are subject to a service-based condition which must be satisfied for the options to vest. When exercisable, each option is convertible into one ordinary share of Silex Systems Limited. The exercise price of options is based on the volume weighted average price at which the Company’s shares are traded on the Australian Stock Exchange for the 10-trading days before the options are granted or for the 10-trading days preceding a Board resolution to grant options. Details of options vested during the year are shown below. The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Grant date 21/05/2019 02/12/2019 01/04/2020 23/11/2020 24/03/2021 26/07/2021 26/07/2021 26/07/2021 14/10/2021 14/10/2021 14/10/2021 14/10/2021 14/10/2021 Vesting and exercise date Expiry date Exercise price Value per option at grant date 21/05/2022 20/05/2024 21/05/2022 01/12/2024 01/04/2023 31/03/2025 23/11/2023 22/11/2025 24/03/2024 23/03/2026 30/06/2024 28/10/2026 30/06/2025 30/06/2027 30/06/2026 30/06/2028 25/06/2024 28/10/2026 30/06/2024 28/10/2026 30/06/2025 28/10/2027 30/06/2026 28/10/2028 30/06/2027 28/10/2029 $0.35 $0.35 $0.21 $0.57 $1.20 $0.94 $0.94 $0.94 $0.94 $0.94 $0.94 $0.94 $0.94 $0.1635 $0.1589 $0.1458 $0.3056 $0.6709 $0.4321 $0.4714 $0.4904 $0.7249 $0.7249 $0.7727 $0.7965 $0.8308 Performance achieved % Vested % 100% 100% 100% 100% TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD Extended LTI – Performance Rights Extended LTIs in the form of Performance Rights have been granted to executive KMP. The rights vest at the end of multi-year performance periods subject to the achievement of individually tailored objectives. Each right that vests is converted into one ordinary share. The rights carry no dividend or voting rights. The fair value of the rights is determined based on the market price of the Company’s shares at the grant date or for those rights which are subject to a market condition, with reference to a Monte Carlo simulation taking into account the volatility of the Company’s shares and other factors. Grant date 14/10/2021 21/06/2022 21/06/2022 21/06/2022 21/06/2022 Vesting date Value per right grant date Performance achieved Vested % No later than 31/12/2025 30/06/2023 30/06/2024 30/06/2025 30/06/2026 $1.132 $0.742 $0.808 $0.809 $0.835 TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD 47 SILEX ANNUAL REPORT 2022Directors’ Report l) Reconciliation of options, rights and ordinary shares held by executive KMP Options held by KMP The table below shows a reconciliation of options held by each executive KMP from the beginning to the end of FY2022. There were no vested and exercisable options as at 30 June 2022. Vested Balance at end of year Balance at the start of the year Granted as compensation Number % Exercised Other changes Vested and exercisable Unvested 100,000 150,000 - - - 750,000 100,000 100% 100,000 - - - - - - 100,000 100,000 200,000 - 100,000 100% 100,000 - - - - - - - - - - - - 300,000 - - - - - - - - - - 150,000 - 750,000 - - - - 100,000 200,000 - 300,000 Name and grant date Dr M P Goldsworthy 02/12/2019 23/11/2020 14/10/2021 Ms J E Ducie 21/05/2019 01/04/2020 24/03/2021 26/07/2021 Rights held by KMP The table below shows a reconciliation of rights held by each KMP from the beginning to the end of FY2022. Name and grant date Dr M P Goldsworthy 14/10/2021 14/10/2021* Ms J E Ducie** 25/09/2020 25/10/2021* Balance at the start of the year Granted as compensation Number % Number % Balance at end of year (Unvested) Vested Forfeited - - 412,500 75,000 - - - - - - - - 412,500 75,000 50,000 - - 41,666 83% 8,334 17% 70,000 - - - - - 70,000 *95% of the performance rights will vest subject to completion of an underlying service-condition on 31 July 2022. **300,000 Extended LTI rights for Ms J E Ducie with a grant date of 21 June 2022 will be issued in FY2023. 48 SILEX ANNUAL REPORT 2022                                                                              Directors’ Report Shares held by KMP The below table shows the number of ordinary shares in the Company that were held during the financial year by KMP of the Company, including by entities related to them: Name Balance at the start of the year Received during the year on the exercise of options Received on vesting of rights to shares Other changes during the year Balance at the end of the year Directors of Silex Systems Limited Mr C A Roy Dr M P Goldsworthy Ms H G Cook Mr C D Wilks Former director Ms M K Holzberger* Other executive KMP Ms J E Ducie 175,000 5,999,055 N/A 2,814,021 27,777 - 100,000 - 77,000 - - - - - - 20,000 100,000 41,666 * This information relates to the period the individual was a director. Securities Trading Policy 84,507 - 12,000 19,695 259,507 6,176,055 12,000 2,833,716 - - N/A 161,666 The Silex Securities Trading Policy applies to all staff including KMP. It prohibits staff from buying or selling Silex securities at times when they are in possession of inside information. In addition, staff are only permitted to trade in Silex securities during certain open periods. The Silex Securities Trading Policy is available on the Company’s website at www.silex.com.au/corporate/corporate-governance/. 49 SILEX ANNUAL REPORT 2022Directors’ Report 11. Shares under option Unissued ordinary shares of Silex Systems Limited under option at the date of this report are as follows: Date options granted* Expiry date Issue price of shares Number under option 21/05/2019 01/04/2020 23/11/2020 24/03/2021 26/07/2021 14/10/2021 18/03/2022 20/05/2024 31/03/2025 22/11/2025 23/03/2026 Various Various 17/03/2027 $0.35 $0.21 $0.57 $1.20 $0.94 $0.94 $1.19 140,000 660,000 150,000 1,000,000 300,000 750,000 600,000 * The options granted include issues to eligible employees in accordance with the Employee Incentive Plan and includes options granted as remuneration to KMP. No option holder has any right under the options to participate in any other share issue of the Company or any other entity. No options were granted since the end of the financial year. 12. Company secretary Ms J E Ducie BBus, CA, MBA (Exec), GAICD was appointed to the position of Company secretary in 2010. Before joining Silex, Ms Ducie held a senior finance position in the Construction industry in the Middle East and prior to that worked as a Senior Associate with a Chartered Accounting Practice. 13. Indemnification and insurance of directors The Company has entered into Deeds to indemnify the directors of the Company against all liabilities to persons (other than the Company or related body corporate) which arise out of the performance of their normal duties as directors or executive officers unless the liability relates to conduct involving lack of good faith. The Company has agreed to indemnify the directors and executive officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity. The Directors’ & Officers’ Liability Insurance provides cover against all costs and expenses involved in defending legal actions and any resulting payments arising from a liability to persons (other than the Company) incurred in their position as a director or executive officer unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain advantage. The insurance policy does not allow specific disclosure of the nature of the liabilities insured against or the premium paid under the policy. 50 SILEX ANNUAL REPORT 2022Directors’ Report 14. Environmental regulation Silex seeks to be compliant with all environmental laws and regulations relevant to its operations. The Company monitors compliance on a regular basis. The Audit Committee has oversight of environmental risks and compliance. The Company is subject to the environmental and health and safety regulations applicable to tenants of the Lucas Heights Science and Technology Centre. The Company is also bound by the rules and regulations set out in the Australian Radiation Protection and Nuclear Safety Act, 1998, and is a licensee under the Act. To the best of the Directors’ knowledge, all environmental and health and safety regulatory requirements have been met and there have been no claims made, prosecutions commenced or fines incurred during the financial year. 15. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important. During the year, there were no fees paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms. 16. Auditors’ independence declaration A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 52. This report is made in accordance with a resolution of the Directors. Dr M P Goldsworthy CEO/MD Sydney, 25 August 2022 Mr C A Roy Chair 51 SILEX ANNUAL REPORT 2022Auditor’s independence declaration As lead auditor for the audit of Silex Systems Limited for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Silex Systems Limited and the entities it controlled during the year. Aishwarya Chandran Partner PricewaterhouseCoopers Sydney 25 August 2022 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T +61 2 9659 2476, F +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation 52 SILEX ANNUAL REPORT 2022Corporate Governance Statement 30 June 2022 Silex Systems Limited (the Company) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (4th Edition) published by the ASX Corporate Governance Council. The 2022 Corporate Governance Statement is dated as at 30 June 2022 and reflects the corporate governance practices in place throughout the 2022 financial year. The 2022 Corporate Governance Statement was approved by the Board and lodged with the ASX Appendix 4G on 25 August 2022. A description of the Company’s current corporate governance practices is set out in the Company’s Corporate Governance Statement which can be viewed at www.silex.com.au/Corporate-Governance. 53 SILEX ANNUAL REPORT 202254 SILEX ANNUAL REPORT 2022Financial Report for the year ended 30 June 2022 Contents Financial statements Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report to the members 56 57 58 59 60 61 103 104 This financial report covers the consolidated entity consisting of Silex Systems Limited and its subsidiaries. The financial report is presented in the Australian currency. Silex Systems Limited is a company limited by its shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Silex Systems Limited Building 64 Lucas Heights Science & Technology Centre New Illawarra Road Lucas Heights NSW 2234 Australia A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report on pages 20 to 28, which is not part of this financial report. The financial report was authorised for issue by the Directors on 25 August 2022. The Directors have the power to amend and reissue the financial report. All announcements, financial reports and other information are available on our website: www.silex.com.au SILEX SYSTEMS LIMITED & ITS SUBSIDIARIES ABN 69 003 372 067 55 SILEX ANNUAL REPORT 2022Consolidated income statement for the year ended 30 June 2022 Revenue from contracts with customers Interest revenue Revenue from continuing operations Other income Research and development materials Development expenditure Finance costs Depreciation and amortisation expense Employee benefits expense Consultants and professional fees Notes 3 3 4 5 5 Printing, postage, freight, stationery and communications Property outgoings Net foreign exchange losses Net impairment gains /(losses) Share of net loss of associates and joint ventures accounted for using the equity method 15(b) Other expenses from continuing activities (Loss) before income tax Income tax expense Net (loss) from continuing operations Net (loss) for the year Net (loss) is attributable to: Owners of Silex Systems Limited 6 2022 $ 4,217,102 177,652 4,394,754 2,817,759 (1,238,917) 2021 $ 1,924,440 143,435 2,067,875 1,365,733 (594,567) – (1,601,413) (20,123) (441,495) (5,840,343) (604,905) (62,072) (66,609) – 13,554 (7,952,325) (463,700) (9,464,422) – (9,464,422) (9,464,422) (1,590) (312,332) (4,427,100) (675,834) (46,529) (46,973) (219,823) (2,665) (2,125,072) (306,978) (6,927,268) – (6,927,268) (6,927,268) (9,464,422) (6,927,268) Cents Cents Earnings per share (loss) from continuing operations attributable to the ordinary equity holders of the company Basic earnings per share Diluted earnings per share 21 21 Earnings per share (loss) attributable to the ordinary equity holders of the company Basic earnings per share Diluted earnings per share 21 21 (4.8) (4.8) (4.8) (4.8) (4.0) (4.0) (4.0) (4.0) The above consolidated income statement should be read in conjunction with the accompanying notes. 56 SILEX ANNUAL REPORT 2022Consolidated statement of comprehensive income for the year ended 30 June 2022 Net (loss) for the year Other comprehensive income Items that may be reclassified to profit or loss: Notes 2022 $ 2021 $ (9,464,422) (6,927,268) Exchange differences on translation of foreign operations 622,006 (829,010) Items that will not be reclassified to profit or loss: Changes in the fair value of equity investments at fair value through other comprehensive income 7(e) Other comprehensive income for the year, net of tax Total comprehensive income for the year Attributable to: Owners of Silex Systems Limited Total comprehensive income for the year (2,319,217) (1,697,211) 2,015,407 1,186,397 (11,161,633) (5,740,871) (11,161,633) (11,161,633) (5,740,871) (5,740,871) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 57 SILEX ANNUAL REPORT 2022 Consolidated balance sheet as at 30 June 2022 Assets Current assets Cash and cash equivalents Other financial assets at amortised cost – term deposits Trade and other receivables Other current assets Financial assets at fair value through other comprehensive income Total current assets Non-current assets Investments accounted for using the equity method Right-of-use assets Property, plant and equipment Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Lease liabilities Provisions Total current liabilities Non-current liabilities Lease liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity Notes 30 June 2022 $ 30 June 2021 $ 7(a) 7(b) 7(c) 7(d) 7(e) 15(b) 9(a) 7(f) 8(a) 9(a) 8(b) 9(a) 8(b) 5,036,333 37,500,000 2,817,239 332,219 3,997,980 49,683,771 3,121,797 990,489 320,802 4,433,088 54,116,859 6,402,798 7,700,000 2,628,652 215,743 5,799,774 22,746,967 916,254 42,041 336,564 1,294,859 24,041,826 1,717,766 1,123,767 200,191 799,592 36,613 770,744 2,717,549 1,931,124 782,311 70,845 853,156 3,570,705 50,546,154 1,791 37,780 39,571 1,970,695 22,071,131 10(a) 10(b) 10(c) 271,543,434 232,645,003 11,043,273 12,002,259 (232,040,553) (222,576,131) 50,546,154 22,071,131 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 58 SILEX ANNUAL REPORT 2022Consolidated statement changes in equity for the year ended 30 June 2022 Attributable to owners of Silex Systems Limited Contributed equity $ Reserves $ Accumulated losses $ Total $ Balance at 30 June 2020 232,645,003 10,470,065 (215,648,863) 27,466,205 Net (loss) for the year Other comprehensive income Total comprehensive income for the year – – – – (6,927,268) 1,186,397 – (6,927,268) 1,186,397 1,186,397 (6,927,268) (5,740,871) Transactions with owners in their capacity as owners Employee share schemes – value of employee services – – 345,797 345,797 – – 345,797 345,797 Balance at 30 June 2021 232,645,003 12,002,259 (222,576,131) 22,071,131 Net (loss) for the year Other comprehensive income Total comprehensive income for the year – – – – (9,464,422) (1,697,211) – (9,464,422) (1,697,211) (1,697,211) (9,464,422) (11,161,633) Transactions with owners in their capacity as owners Contributions of equity net of transaction costs Employee share schemes – value of employee services Transfer from share-based payments reserve 38,614,990 – – 1,021,666 283,441 (283,441) 38,898,431 738,225 – – – – 38,614,990 1,021,666 – 39,636,656 Balance at 30 June 2022 271,543,434 11,043,273 (232,040,553) 50,546,154 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 59 SILEX ANNUAL REPORT 2022Consolidated statement of cash flows for the year ended 30 June 2022 Notes 2022 $ 2021 $ Cash flows from operating activities Receipts from customers and government grants (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Net cash inflows/(outflows) from operating activities 11(a) Cash flows from investing activities Payment for investments accounted for using the equity method Payments for financial assets at amortised cost – term deposits Proceeds from other financial assets at amortised cost – term deposits Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of financial assets at fair value through other comprehensive income 7(e) 6,813,725 (6,452,730) 71,767 (20,123) 412,639 (10,139,080) (43,800,000) 14,000,000 (125,362) – – Net cash (outflows)/inflows from investing activities (40,064,442) Cash flows from financing activities Proceeds from issue of shares, net of transaction costs 10(a) Repayment of principal elements of leases Net cash inflows from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash Cash and cash equivalents at end of year* 38,502,173 (304,721) 38,197,452 (1,454,351) 6,402,798 87,886 5,036,333 2,841,240 (7,874,844) 260,193 (1,590) (4,775,001) (3,005,054) – 9,100,000 (182,614) 1,682 3,877,575 9,791,589 – (199,337) (199,337) 4,817,251 1,615,034 (29,487) 6,402,798 Non-cash financing and investing activities 11(b) *Term deposits excluded from Cash and cash equivalents 37,500,000 7,700,000 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 60 SILEX ANNUAL REPORT 2022 Note 1 Contents Significant changes in the current reporting period Page 62 How numbers are calculated 2 3 4 5 6 7 8 9 10 11 Risk 12 13 14 Segment information Revenue from continuing operations Other income Expenses Income tax expense Assets Liabilities Leases Equity Cash flow information Critical accounting estimates and judgements Financial risk management Climate Change Group structure 15 Interests in other entities Additional notes to the financial statements 16 17 18 19 20 21 22 23 Commitments for expenditure and guarantees Events occurring after reporting date Related party transactions Share-based payments Remuneration of auditors Earnings per share Parent entity financial information Summary of significant accounting policies 62 64 65 66 67 68 72 74 75 78 79 79 83 83 86 86 86 86 91 92 94 95 61 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022 Note 1 Significant changes in the current reporting period On 27 September 2021, Silex announced that it had completed an equity raise by way of a placement. 25,972,391 ordinary shares were issued. A Share Purchase Plan was also offered to eligible shareholders and a further 5,343,812 shares were issued. Total cash received from the placement and Share Purchase Plan, net of transaction costs, was $38.4m. Note 2 Segment information a) Description of segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. Management has determined that there are three operating segments based on the reports reviewed by Management and the Board of Directors to make strategic decisions. These segments are Silex Systems, Translucent and Silex USA. Silex Systems is based in New South Wales and Translucent and Silex USA are based in North Carolina. The Silex USA segment includes the loss from GLE. b) Segment information provided to Management and the Board of Directors The segment information provided to Management and the Board of Directors for the reportable segments for the year ended 30 June 2022 is as follows: Segment result The Board of Directors assess the performance of the operating segments based on results that excludes exchange gains and losses on intercompany loans which eliminate on consolidation. A reconciliation of the segment result to Net (loss) from continuing operations is provided as follows: 2022 Total segment revenue Inter-segment revenue Revenue from external customers Interest revenue Revenue from continuing operations Silex Systems $ Translucent $ Silex USA $ 4,258,382 1,029,025 (41,280) (1,029,025) 4,217,102 177,652 4,394,754 – – – – – – Total $ 5,287,407 (1,070,305) 4,217,102 177,652 4,394,754 Segment result (1,812,697) 26,387 (7,678,112) (9,464,422) Other profit and loss disclosures Depreciation and amortisation Interest expense Income tax expense Share of net loss of joint venture using the equity method 441,495 20,123 – – – – – – – – – 441,495 20,123 – 7,952,325 7,952,325 62 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Total segment assets Total assets include: Additions to non-current assets (other than deferred tax and investments in joint ventures) Amount invested in joint ventures accounted for using the equity method 46,623,708 4,258,888 3,234,263 54,116,859 1,196,615 - - - - 1,196,615 10,139,080 10,139,080 Total segment liabilities 3,559,673 11,032 - 3,570,705 2021 Total segment revenue Inter-segment revenue Silex Systems $ Translucent $ Silex USA $ Total $ 1,363,821 (105,509) 1,619,261 - 2,983,082 (953,133) - (1,058,642) Revenue from external customers 1,258,312 666,128 Interest revenue Revenue from continuing operations Segment result Other profit and loss disclosures Depreciation and amortisation Interest expense Income tax expense Share of net loss of joint venture accounted for using the equity method Total segment assets Total assets include: Additions to non-current assets (other than deferred tax and investments in joint ventures) Amount invested in joint ventures accounted for using the equity method 143,435 1,401,747 (3,791,942) - 666,128 663,353 - - - 1,924,440 143,435 2,067,875 (3,798,679) (6,927,268) 312,332 - - 312,332 1,590 - - 1,590 - - - - - - 2,125,072 2,125,072 15,422,737 7,647,681 971,408 24,041,826 372,253 - - 372,253 Total segment liabilities 1,961,692 9,003 - c) Other segment information (i) Segment revenue - - 3,005,054 3,005,054 1,970,695 Sales between Silex entities are carried out at arm’s length and are eliminated on consolidation. Silex is domiciled in Australia. Segment revenues are allocated based on the country in which the customer is located. The amount of the Company’s revenue from external customers in the United States is $4,217,102 (2021: $1,258,312) and the total segment revenue from external customers in Wales, United Kingdom is $nil (2021: $666,128). Translucent and Silex USA are domiciled in the United States. 63 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022        (ii) Segment result The Board of Directors assess the performance of the operating segments based on results that excludes exchange gains and losses on intercompany loans which eliminate on consolidation. A reconciliation of the segment result to Net (loss) from continuing operations is provided as follows: Segment result Net (loss) before income tax from continuing operations (iii) Segment assets 2022 $ 2021 $ (9,464,422) (9,464,422) (6,927,268) (6,927,268) Assets which eliminate on consolidation such as investments in controlled entities and intercompany receivables are excluded from segment assets. Segment assets agree to the balance sheet for both periods. The total of non-current assets located in Australia is $1,311,291 (2021: $340,635) and the total of these non-current assets located in the United States is $3,121,797 (2021: $954,224). (iv) Segment liabilities Reportable segment liabilities exclude intercompany loans, income tax payable and deferred tax liabilities. Segment liabilities agree to the balance sheet for both periods. Note 3 Revenue from continuing operations Recoverable project costs Royalty–revenue - sale of cREO® technology Interest revenue 2022 $ 2021 $ 4,217,102 1,258,312 - 666,128 4,217,102 1,924,440 177,652 143,435 4,394,754 2,067,875 Revenue is measured at the fair value of the consideration received or receivable. a) Revenue is recognised for the major business activities as follows: (i) Recoverable project costs Project costs recoverable from GLE for the Company’s costs incurred for the SILEX uranium enrichment development program is recorded as Revenue when the related costs are incurred. Revenue recognised in advance is recognised as accrued income. Revenue is recognised at a point in time. 64 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(ii) Royalty–revenue - sale of intellectual property – cREO® technology – accounting policy and significant judgements Variable consideration from the sale of Translucent’s cREO® technology is required to be estimated in accordance with AASB 15 Revenue from Contracts with Customers. In accordance with the 2015 Option, License and Assignment Agreement between the Company and IQE Plc, IQE is required to make minimum royalty payments for the 6 years ending 31 December 2024. The third annual payment of US$500,000, which was accrued in the year ended 30 June 2021, was invoiced and received during the year. The variable consideration in the form of royalties relating to the sale of the cREO® technology is calculated using the most likely amount method. The revenue is currently recognised at a point in time and estimated at each reporting date. The Company has not accrued the fourth minimum annual royalty payment (US$500,000) during the year ended 30 June 2022. (iii) Interest revenue Interest revenue is recognised on a time proportion basis using the effective interest method. b) Disaggregation of revenues Revenues of $4,217,102 (2021: $1,258,312) were derived from GLE for Recoverable project costs on the uranium enrichment project. GLE is based in the US. Royalty revenue of $nil (2021: $666,128) was derived from IQE Plc in relation to the sale of the cREO® technology. IQE Plc is based in Wales, United Kingdom. Note 4 Other Income Research and development tax incentive Cooperative Research Centres Project (CRC-P) Grant Government Assistance - COVID related Foreign currency exchange gains (net) Other income - project subsidy Profit on sale of property, plant and equipment 2022 $ 2021 $ 1,512,324 1,087,674 423,336 128,927 - 147,450 591,972 290,127 - - - 1,682 2,817,759 1,365,733 Government grants relating to the Research and development tax incentive are recognised when there is reasonable assurance that the grant will be received and the amount can be reliably calculated. (i) Research and development tax incentive Research and development tax incentive income of $1,512,324 (2021: $1,087,674) was recognised as Other income by the Company during the year. The Company has met the conditions of the tax incentive. (ii) Cooperative Research Centres Project (CRC-P) Grant CRC-P Grant income of $423,336 (2021: $128,927) was recognised during the year. The Company has met the conditions of the grant. (iii) Government Assistance – COVID related Government assistance income (COVID-19 related) in the form of JobKeeper and Cash Boost of $nil (2021: $147,450) was recognised during the year. JobKeeper and Cash Boost income was accounted for as government grants and disclosed as Other income in accordance with AASB 120 Accounting for Government Grants and Disclosures of Government Assistance. The Company has met the conditions of the government assistance programs. 65 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 5 Expenses Net (loss) from continuing operations before income tax includes the following expenses: Depreciation of plant and equipment – refer note 7(f) Depreciation on right-of-use assets – refer note 9(b) Total depreciation and amortisation Finance costs Interest and finance charges paid/payable Finance costs expensed Defined contribution superannuation expense Foreign exchange losses (net) 2022 $ 2021 $ 141,124 116,996 300,371 441,495 195,336 312,332 20,123 20,123 1,590 1,590 269,124 213,036 - 219,823 66 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 6 Income tax expense This note provides an analysis of the Company’s income tax expense and explains why a deferred tax asset has not been recognised by the Company. (a) Numerical reconciliation of income tax expense to prima facie tax payable (Loss) before income tax expense Income tax calculated @ 25.0% (2021: 26.0%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: 2022 $ 2021 $ (9,464,422) (2,366,106) (6,927,268) (1,801,090) Share based payments 269,519 (Loss) on disposal of Financial assets at fair value through other comprehensive income - Research and development tax incentive Other government assistance Sundry items Net deferred tax asset not recognised Effect of higher rates on overseas income Income tax expense 89,907 (92,112) 344,791 (9,750) 472,494 - 2,000 1,552 (1,622,093) (1,466,702) 1,507,317 1,388,319 114,776 78,383 - - The Australian Government enacted legislation during the year which reduces the corporate tax rate for certain small and medium entities from 26% for FY2021 to 25% for FY2022 and later income years. The Company expects to qualify for this reduction. As a consequence, the Company has remeasured its deferred tax balances based on the effective tax rate that will apply in the year the temporary differences are expected to reverse. 2022 $ 2021 $ (b) Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at tax rate 190,776,276 179,171,210 45,513,665 42,917,494 A deferred tax asset has not been recognised as the consolidated entity has a history of tax losses. The benefit of a deferred tax asset will only be obtained if: (i) (ii) the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised; the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deductions for the losses. 67 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022    Note 7 Assets This note provides information about the Company’s assets. Note 7(a) Current assets - Cash and cash equivalents Cash at bank and on hand 2022 $ 2021 $ 5,036,333 6,402,798 Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Additional information on the Company’s exposure to interest rate risk is discussed in note 13. Note 7(b) Current assets - Other financial assets at amortised cost - Term deposits Bank deposits 2022 $ 2021 $ 37,500,000 7,700,000 Other financial assets at amortised cost are assets held to collect the contractual cash flows and the contractual terms give rise to cash flows that are solely payments of principal and interest. Other financial assets at amortised cost are included in current assets as all have maturities less than 12 months from the end of the reporting period. The bank deposits at 30 June 2022 earn interest at between 0.3% and 1.85% (2021: between 0.25% and 1.10%). Note 7(c) Trade and other receivables Trade receivables from contracts with customers Accrued royalty revenue from sale of Translucent’s cREO® technology Accrued income - other Derivative financial instruments - forward exchange contracts Other receivables Loss allowance 30 June 2022 $ 30 June 2021 $ 425,755 504,131 - 2,144,404 158,603 88,477 - 666,128 1,397,153 - 74,563 (13,323) 2,817,239 2,628,652 (i) Accrued royalty revenue from sale of cREO® technology This represents accrued consideration from the sale of cREO® technology (royalties). (ii) Accrued income - other Accrued income includes accrued research and development tax incentive, accrued COVID-19 related government assistance, accrued project subsidy income and accrued interest. (iii) Impairment of receivables Information about the impairment of receivables can be found in note 13(c). (iv) Foreign exchange and interest rate risk Information concerning the Company’s exposure to foreign currency in relation to trade and other receivables is provided in note 13. (vi) Fair value and credit risk Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. Refer note 13 for information on credit risk. 68 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 7(d) Current assets - Other current assets Prepayments 2022 $ 2021 $ 332,219 215,743 Note 7(e) Current assets - Financial assets at fair value through other comprehensive income 2022 $ 2021 $ Level 1* Listed securities Equity securities – shares in IQE Plc 3,997,980 5,799,774 * Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Company is the current bid price. During the prior year, the Company sold 30% of its shares in IQE Plc and received $3,877,575 (US$3,018,722). The gain was included in Other comprehensive income. No shares were sold in the current year. Refer also to point (ii) below. (i) Classification and measurement of financial assets at fair value through other comprehensive income The Company irrevocably elected to value its shares in IQE at 30 June 2019 as financial assets at fair value through other comprehensive income. This election was made so that large movements in the value of the shares do not significantly impact the consolidated income statement. The shares are classified as Level 1 in the fair value hierarchy. There were no dividends received during the current or prior years. For an analysis of the sensitivity of financial assets at fair value through other comprehensive income to foreign exchange rate and price risk, refer to note 13(b). (ii) Amounts recognised in Other comprehensive income During the year, the following gains/(losses) were recognised in Other comprehensive income: (Losses)/profits recognised in Other comprehensive income (refer note 10(b)) (2,319,217) 2,015,407 2022 $ 2021 $ 69 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 7(f) Non-current assets – Property, plant and equipment At 30 June 2020 Cost Accumulated depreciation Net book amount Year ended 30 June 2021 Opening net book amount Exchange differences Additions Disposals Depreciation charge Closing net book value At 30 June 2021 Cost Accumulated depreciation Net book amount Year ended 30 June 2022 Opening net book amount Exchange differences Additions Disposals Depreciation charge Closing net book value At 30 June 2022 Cost Accumulated depreciation Net book amount Plant & equipment $ Motor vehicles $ Total $ 1,152,197 (901,330) 69,190 (48,557) 250,867 20,633 1,221,387 (949,887) 271,500 250,867 - 20,633 (554) 182,614 - - (107,373) 326,108 - (9,623) 10,456 271,500 (554) 182,614 - (116,996) 336,564 1,330,804 (1,004,696) 54,535 1,385,339 (44,079) (1,048,775) 326,108 10,456 336,564 326,108 10,456 336,564 - - 125,362 - - (138,190) 313,280 - (2,934) 7,522 - 125,362 - (141,124) 320,802 1,456,166 (1,142,886) 313,280 58,087 1,514,253 (50,565) (1,193,451) 7,522 320,802 Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives, as follows: • Leasehold improvements 2 – 5 years • Plant and Machinery 1 – 10 years • Vehicles 3 – 7 years • Furniture, fittings and equipment 3 – 10 years 70 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022The asset’s residual value and useful live are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (refer note 23(h)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is Company policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. Note 7(g) Deferred tax assets The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Provision for employee entitlements, warranties, restructuring and decommissioning Depreciation and amortisation Payables and other provisions Financial assets at fair value through other comprehensive income Lease liabilities Deferred grant income Credit losses Tax losses Set-off deferred tax liabilities pursuant to set-off provisions Net deferred tax assets not recognised* Net deferred tax assets * A deferred tax asset has not been recognised as the consolidated entity has a history of tax losses. 2022 $ 2021 $ 217,609 - 575,827 127,960 245,626 202,131 11,198 572,839 - 9,601 4,696 3,645 - 3,131 45,513,665 46,685,383 (3,512,344) 42,917,494 43,720,039 (2,271,892) (43,173,039) (41,448,147) - - 71 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 8 Liabilities This note provides information about the Company’s liabilities. Note 8(a) Trade and other payables Trade creditors Unearned income Other payables 2022 $ 2021 $ 479,548 298,426 918,785 614,578 319,433 1,717,766 210,763 1,123,767 These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured. Trade creditors are usually paid within 45 days of recognition. Trade creditors, derivative financial instruments and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. (i) Amounts not expected to be settled within the next 12 months Other payables include accruals for annual leave. The entire annual leave obligation is presented as current, since the Company does not have an unconditional right to defer settlement. However, based on past experience, the Company does not expect all employees to take the full amount of accrued annual leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months: Current annual leave obligations expected to be settled after 12 months 2022 $ 41,341 2021 $ 8,735 (ii) Risk exposure Information about the Company’s exposure to foreign exchange risk is provided in note 13. Note 8(b) Provisions Employee benefits - long service leave Warranty provision Make good provision Current $ 653,511 146,081 - 799,592 2022 Non-current $ Total $ Current $ 2021 Non-current $ 30,845 684,356 584,663 37,780 - 146,081 146,081 40,000 40,000 - - Total $ 622,443 146,081 40,000 870,437 770,744 37,780 808,524 40,000 70,845 (i) Amounts not expected to be settled within the next 12 months The current provision for long service leave includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the Company does not have an unconditional right to defer settlement. However, based on past experience, the Company does not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months. Current long service leave obligations expected to be settled after 12 months 2022 $ 2021 $ 622,040 537,889 72 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022 Movements in each class of provision during the financial year, other than long service leave, are set out below: Carrying amount at start of the year Carrying amount at end of the year Warranty $ 146,081 146,081 Provision is made for the estimated warranty claims in respect of solar panels that were previously sold by the Company. The claims may be settled in the next financial year and this may be extended into future years. Carrying amount at start of the year Carrying amount at end of the year Make good $ 40,000 40,000 The Company is required to restore its leased premises under the terms of the lease contracts. A provision has been recognised for the present value of the estimated expenditure required to meet these obligations. Note 8(c) Non-current liabilities - Deferred tax liabilities The balance comprising temporary differences attributable to: Foreign currency cash balances and loans Financial assets at fair value through other comprehensive income Depreciation and amortisation Right-of-use assets Accrued income Set off deferred tax liabilities pursuant to set-off provisions Net deferred tax liabilities 2022 $ 2021 $ 3,092,455 1,635,158 - 382,896 34,282 247,622 137,985 3,512,344 - 10,510 243,328 2,271,892 (3,512,344) (2,271,892) - - 73 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 9 Leases This note provides information for leases where the Company is a lessee. Note 9(a) Amounts recognised in the balance sheet The balance sheet shows the following amounts relating to leases: Right-of-use assets Buildings Equipment Lease liabilities Current Non-current 2022 $ 988,848 1,641 990,489 200,191 782,311 982,502 2021 $ 37,940 4,101 42,041 36,613 1,791 38,404 Additions to the right-of-use assets during the current year were $1,248,819 (2021: $189,639). Note 9(b) Amounts recognised in the income statement The income statement shows the following amounts related to leases: Depreciation charge on right-of-use assets Buildings Equipment Interest expense (included in finance costs) 2022 $ 2021 $ 297,911 192,876 2,460 2,460 300,371 195,336 20,123 1,590 The total cash outflows for leases during the current year was $324,844 (2021: $200,827). Note 9(c) The Company’s leasing activities and how these are accounted for The Company leases buildings and equipment. Rental contracts are generally for fixed periods of 1 year to 5 years but may have extension options. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: 74 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022• fixed payments less any lease incentive receivable; • variable lease payments that are based on an index or rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the Company under residual value guarantees; • the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made before the commencement date less any lease incentives received; and • any initial direct costs. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. Note 10 Equity The note provides information about the Company’s equity. Note 10(a) Contributed equity (i) Share capital Ordinary shares Fully paid Parent entity Parent entity 2022 Shares 2021 Shares 2022 $ 2021 $ 204,974,961 172,767,339 271,543,434 232,645,003 75 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 (iii) Movements in ordinary share capital Date 30 June 2020 30 June 2021 Details Balance Balance 1 September 2021 Issue of shares - performance rights 1 October 2021 Issue of shares - capital raise 29 October 2021 Issue of shares - Share Purchase Plan 8 November 2021 Issue of shares - other * Various Various Issue of shares - options exercise Transfer from share-based payments reserve - options Less: Transaction costs arising on share issues 30 June 2022 Balance Number of shares 172,767,339 172,767,339 381,940 25,972,391 5,343,812 84,507 424,972 - 204,974,961 - 204,974,961 Total $ 232,645,003 232,645,003 213,928 32,984,937 7,000,001 112,817 148,740 69,513 273,174,939 (1,631,505) 271,543,434 * As per shareholder approval granted at the 2021 AGM, 84,507 shares issued in lieu of cash Director’s fees for the 3-years ending 31 December 2023 (iii) Ordinary shares Ordinary shares are classified as equity. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. 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. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are not included in the cost of the acquisition as part of the purchase consideration. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (iv) Options Information relating to the Silex Systems Limited Employee Incentive Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 19(b). (v) Performance Rights Information relating to the Silex Systems Limited Employee Incentive Plan, including details of Performance Rights issued, vested/forfeited and lapsed during the financial year and rights outstanding at the end of the financial year, is set out in note 19(c). (vi) Capital risk management The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may issue new shares. 76 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Note 10(b) Reserves Foreign currency translation reserve Revaluation - Fair value through other comprehensive income Transactions with non-controlling interests Share-based payments reserve Movements in reserves: Foreign currency translation reserve Balance at the beginning of the financial year Net exchange differences on translation of foreign controlled entity Balance at the end of the financial year Revaluation - Fair value through other comprehensive income Balance at the beginning of the financial year Differences on revaluation Balance at the end of the financial year Transactions with non-controlling interests Balance at the beginning of the financial year Balance at the end of the financial year Share-based payments reserve Balance at the beginning of the financial year Share-based payment expense Transfer to share capital Balance at the end of the financial year Nature and purpose of reserves: (i) Foreign currency translation reserve 2022 $ 2021 $ (40,089) (662,095) (1,763,566) 555,651 (2,906,913) (2,906,913) 15,753,841 15,015,616 11,043,273 12,002,259 2022 $ 2021 $ (662,095) 622,006 (40,089) 166,915 (829,010) (662,095) 2022 $ 2021 $ 555,651 (1,459,756) (2,319,217) (1,763,566) 2,015,407 555,651 2022 $ 2021 $ (2,906,913) (2,906,913) (2,906,913) (2,906,913) 2022 $ 2021 $ 15,015,616 14,669,819 1,021,666 345,797 (283,441) - 15,753,841 15,015,616 Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in note 23(c). The reserve is recognised in profit and loss when the net investment is disposed of. 77 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 (ii) Revaluation – Fair value through other comprehensive income Changes in the fair value of investments that are classified as fair value through other comprehensive income are recognised in Other comprehensive income and accumulated in a separate reserve within equity. Amounts are not reclassified to profit or loss when the associated assets are sold or impaired. (iii) Transactions with non-controlling interests This reserve is used to record the differences described in note 23(b) which may arise as a result of transactions with non-controlling interests that do not result in a loss of control. (iv) Share-based payments reserve The Share-based payments reserve is used to recognise: • the grant date fair value of options issued to employees but, not exercised; • the grant date fair value of deferred shares (i.e., performance rights) granted to employees but, not yet vested; and • the grant date fair value of shares to be issued. Note 10(c) Accumulated losses Accumulated losses at the beginning of the financial year Net (loss) attributable to members of Silex Systems Limited Accumulated losses at the end of the financial year Note 11 Cash flow information (a) Reconciliation of net (loss) after income tax to net cash (outflows) from operating activities Net (loss) after income tax Depreciation and amortisation Non cash employee benefits expense - share based payments (Profit) on sale of plant and equipment Net exchange differences Share of net losses of joint ventures (Increase)/decrease in prepayments and other current assets (Increase) in trade and other debtors (Increase)/decrease in accrued income - other Increase in trade and other creditors Increase in provisions Net cash inflows/(outflows) from operating activities (b) Non-cash investing and financing activities 2022 $ 2021 $ (222,576,131) (215,648,863) (9,464,422) (6,927,268) (232,040,553) (222,576,131) 2022 $ 2021 $ (9,464,422) (6,927,268) 441,495 1,078,074 - 54,318 7,952,325 (116,476) (107,464) (81,123) 593,999 61,913 412,639 312,332 345,797 (1,682) 24,051 2,125,072 182,378 (467,789) (428,695) 28,166 32,637 (4,775,001) Details regarding Non-cash investing and financing activities are disclosed in other notes. The acquisition of right-of- use assets is detailed in note 9 and options and rights issued under the Silex Systems Limited Employee Incentive Plan in note 19. 78 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Note 12 Critical accounting estimates and judgments Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The area involving significant estimates or judgements is the recognition of variable consideration (in the form of revenue royalties) from the sale of the cREO® technology (note 3). Note 13 Financial risk management The Company’s activities expose it to a variety of financial risks; market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’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 Company. The Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange risk. Risk management is carried out by senior management under policies approved by the Board of Directors. Senior management identifies, evaluates and manages financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk and investing excess liquidity. (a) Derivatives Foreign exchange contracts are used to manage foreign exchange risk. The Company may enter into forward exchange contracts which are economic hedges for foreign currencies to be traded at a future date but do not satisfy the requirements for hedge accounting. These contracts are fair valued by comparing the contracted rate to the current market rate for a contract with the same remaining period to maturity. Any changes in fair values are taken to the income statement immediately. The Company’s policy is to hedge a proportion of its anticipated cash flows in USD. At year end, the Company held US$1,650,000 forward exchange contracts with contractual dates up to October 2022 (2021: US$nil of forward exchange) to purchase USD as part of its strategy to minimise the financial effects of foreign currency fluctuations. The Board monitors the Company’s hedging strategy on a continuing basis. The fair value of derivative contracts outstanding at year end totals $158,603 and is recorded in Trade and other receivables (2021: $nil). 79 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 (b) Market risk (i) Foreign exchange risk The Company operates internationally and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Company’s exposure to USD foreign currency risk at the reporting date, expressed in Australian dollars, was as follows: Cash and cash equivalents Trade and other receivables 2022 AUD 923,236 846,755 2021 AUD 4,041,384 616,378 Forward exchange contracts - buy foreign currency 2,235,731 - Profit or loss is sensitive to the value of the AUD compared to the USD. Impact on post-tax profit 2022 $ 2021 $ (543,173) (607,534) 734,881 821,958 Impact on other components of equity 2022 $ (543,173) 734,881 2021 $ (607,534) 821,958 AUD/USD - increase by 15% AUD/USD - decrease by 15% The Company also owns shares in IQE Plc, a UK based company, resulting from the 2015 Option, License and Assignment Agreement signed. IQE’s shares are listed on the London Stock Exchange (GBP currency) (AIM: IQE). The impact of an increase or decrease in the AUD/GBP would not impact post-tax profits as it is accounted for in Other comprehensive income. The impact of a 15% increase in the AUD/GBP would decrease other components of equity by $521,476 (2021: $756,492) and a 15% decrease in the AUD/GBP would increase other components of equity by $705,526 (2021: $1,023,490). (ii) Cash flow and fair value interest rate risk As the Company has interest-bearing assets, the Company’s income and operating cash flows are influenced by changes in market interest rates. Company policy is to maintain the majority of cash and cash equivalents at fixed rates by the use of term deposits. The Company manages its cash flow interest rate risk by having a spread of maturity dates with different institutions. As at the reporting date, the Company had the following variable interest rate cash and cash equivalents: Cash and cash equivalents 0.61% 4,680,495 - Weighted average interest rate % Balance $ Weighted average interest rate % Balance $ - 30 June 2022 30 June 2021 Profit or loss is sensitive to higher / lower interest income from cash and cash equivalents as a result of changes in interest rates. 80 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Impact on post-tax profit 2022 $ 4,269 (4,269) 2021 $ - - Impact on other components of equity 2022 $ 4,269 (4,269) 2021 $ - - Interest rates - increase by 1.00% Interest rates - decrease by 1.00% (iii) Price risk The Company’s exposure to equity securities price risk arises from the Company’s shares in IQE Plc which are classified in the balance sheet as financial assets at fair value through other comprehensive income. The impact of an increase or decrease in the IQE share price would not impact post-tax profits as it is accounted for in Other comprehensive income. The impact of a 10% increase in IQE’s share price would increase other components of equity by $399,798 (2021: $579,977) and a 10% decrease in IQE’s share price would reduce other components of equity by $399,798 (2021: $579,977). The impact of a 20% increase in IQE’s share price would increase other components of equity by $799,596 (2021: $1,159,955) and a 20% decrease in IQE’s share price would reduce other components of equity by $799,596 (2021: $1,159,955). (c) Credit risk Credit risk arises from cash and cash equivalents, term deposits, contract assets and receivables. The Company has a concentration of credit risk with its main receipts coming from GLE for Recoverable project costs, banks (interest income) and government (Research and development tax incentive and CRC-P grant). The Company has policies in place to ensure that transactions are with entities with an appropriate credit history. For banks and financial institutions, only independently rated parties with a minimum rating as approved by the Board are accepted. Cash transactions are limited to high credit quality financial institutions. The Company has policies that limit the amount of credit exposure to any one financial institution. As the Company holds a 51% interest in GLE, the credit risk is mitigated. The credit quality of customers, banks and governments can be assessed by reference to external credit ratings (if available). If they are independently rated, these ratings are used. Otherwise, if there is no independent rating, the Company assesses the credit quality by taking into account the financial position, past experience and other factors. Impairment of financial assets While cash and cash equivalents are subject to the impairment requirements of AASB 9, the identified impairment loss was immaterial. All of the Company’s term deposits (disclosed under AASB 9 as Other financial assets at amortised cost) are considered to have low credit risk given the credit ratings of the bank where the deposits are held. The Company has reviewed the credit ratings and corporate default rates of the various banks by credit rating agencies. Applying the expected credit loss model, the identified impairment loss was immaterial at 30 June 2022 and 30 June 2021. 81 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Cash and cash equivalents and other financial assets at amortised cost - term deposits ANZ Banking Group Limited National Australia Bank Bendigo and Adelaide Bank Limited Bank of Queensland Bank of America 2022 $ 2021 $ 27,281,264 5,617,682 5,500,000 4,000,000 2,000,000 7,500,000 255,069 - 3,500,000 985,116 42,536,333 14,102,798 Trade and other receivables are also subject to the expected credit loss model. Impairment losses for accrued interest revenue and accrued Research and development tax incentive were also immaterial at 30 June 2022 (and at 30 June 2021) after reviewing the credit ratings of the various banks (interest) and the Federal Government (Research and development tax incentive). The Company also had accrued royalty revenue at 30 June 2022 of $nil from the sale of the Company’s cREO® technology (2021: $666,128). The accrued royalty revenue in the prior year related to minimum royalties for the year ended 31 December 2021. A 2.0% expected credit loss rate was applied to the prior year balance with a loss allowance of $13,323 booked at 30 June 2021. (d) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company manages liquidity by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements The Company had access to the following undrawn borrowing facilities at the reporting date: Floating rate Expiring within one year (documentary credit facility and visa facility) 2022 $ 2021 $ 200,000 200,000 200,000 200,000 The documentary credit facility and visa facility may be drawn at any time and is subject to annual review. 82 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Maturities of financial liabilities The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows. Less than 6 months $ 6-12 months $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contractual cash flows $ Carrying Amounts (assets)/ liabilities $ 607,541 114,434 721,975 - 135,472 135,472 - - 276,780 574,490 276,780 574,490 - - - 607,541 1,101,176 607,541 982,502 1,708,717 1,590,043 Less than 6 months $ 6-12 months $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contractual cash flows $ Carrying Amounts (assets)/ liabilities $ 389,409 20,759 410,168 - 16,882 16,882 - 1,832 1,832 - - - - - - 389,409 39,473 428,882 389,409 38,404 427,813 At 30 June 2022 Non-derivatives Non-interest bearing Lease liabilities Total non-derivatives At 30 June 2021 Non-derivatives Non-interest bearing Lease liabilities Total non-derivatives (e) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual values at the current market interest rates that is available to the Company for similar instruments. Note 14 Climate Change In preparing these consolidated financial statements the group has considered the impact of climate change risks on the assets and liabilities recognised and presented within the consolidated financial statements. The Company is continuing to develop its assessment of the impact of climate change in line with emerging industry and regulatory guidance. Note 15 Interests in other entities (a) Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 23(b). 83 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Name of entity Translucent Inc Silex USA LLC Place of business/country of incorporation Class of shares USA Ordinary Total USA Interest Total 2022 % 100.0% 100.0% 100% 100% 2021 % 100.0% 100.0% 100% 100% (b) Interests in joint ventures Set out below are details of the Global Laser Enrichment Holdings LLC (GLE Holdco) joint venture as at 30 June 2022, which is material to the Company: Place of business/ country of % of ownership interest Nature of Measurement Carrying amount Name of entity incorporation 2022 2021 relationship method 2022 2021 Global Laser Enrichment Holdings LLC USA 51% 51% Joint venture Equity method 3,121,797 916,254 GLE Holdco acquired Global Laser Enrichment LLC (GLE) on 31 January 2021. GLE holds the exclusive worldwide license to commercialise the SILEX technology for uranium enrichment. GLE’s current focus is to complete the full-scale demonstration of the technology utilising a pilot plant currently being built in Wilmington, NC. Cameco Corporation indirectly owns the remaining 49% of GLE Holdco. (i) Significant judgement: existence of joint control In accordance with the Amended and Restated Limited Liability Company Agreement of GLE Holdco, decisions of the Governing Board are based on the voting of percentage of interests held by the GLE Holdco Governing Board Members. Silex’s Governing Board Members hold 51% interest and the Cameco Governing Board Members, 49%. The affirmative vote of Governing Board members representing greater than 51% of the total percentage interests is required for an affirmative vote. Therefore, Silex has joint control of GLE Holdco with Cameco. (ii) Commitments and contingent liabilities in respect of the GLE Holdco joint venture Commitments - joint ventures Commitment to provide funding for joint venture’s capital commitments, if called 6,512,588 3,717,586 2022 $ 2021 $ Contingent liabilities - joint venture Share of joint venture’s contingent liabilities - - (iii) Summarised financial information for GLE Holdco joint venture The tables below provide summarised financial information for the GLE Holdco joint venture. The information disclosed reflects the amounts presented in the financial statements of GLE Holdco and not Silex’s share of those amounts. The information has been amended to reflect adjustments made by the Company when using the equity method, including fair value adjustments and modifications for differences in accounting policy. 84 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022 Notes to the financial statements 30 June 2022 a) Summarised balance sheet Current assets Cash and cash equivalents Other current assets Total current assets Non-current assets Current liabilities Financial liabilities (excluding trade payables) Other current liabilities Total current liabilities Non-current liabilities Financial liabilities (excluding trade payables) Other non-current liabilities Total non-current liabilities Net assets b) Reconciliation to carrying amounts Opening net assets Additional capital contributed (Loss) for the period Other comprehensive income Closing net assets Company’s share in % Company’s share in $ Carrying amount Summarised statement of comprehensive income Revenue Interest income Depreciation and amortisation Interest expense Income tax expense (Loss) from continuing operations (Loss) for the period Other comprehensive income Total comprehensive income 2022 $ 2021 $ 8,923,862 3,486,276 625,447 305,190 9,549,309 3,791,466 7,186,774 7,423,570 855,117 720,889 2,271,850 1,729,474 3,126,967 2,450,363 7,463,276 6,961,436 24,669 6,661 7,487,945 6,968,097 6,121,171 1,796,576 2022 $ 2021 $ 1,796,576 - 19,908,492 5,895,282 (15,592,794) (4,166,808) 8,897 68,102 6,121,171 1,796,576 51% 3,121,797 3,121,797 51% 916,254 916,254 2022 $ 2021 $ - - - - 1,169,800 440,407 148,393 62,928 - - (15,592,794) (15,592,794) (4,166,808) (4,166,808) 8,897 68,102 (15,583,897) (4,098,706) (c) Transactions with non-controlling interests There were no transactions with non-controlling interests in the current year or in the prior year. 85 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022  Notes to the financial statements 30 June 2022 Note 16 Commitments for expenditure and guarantees The Company did not have any Capital expenditure contracted at the reporting date that was not recognised as liabilities (2021: $nil). The Company has not provided any guarantees as at 30 June 2022 (2021: $nil). Note 17 Events occurring after reporting date The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial statements that have significantly or may significantly, affect the operations of the consolidated entity, the results of its operations or the state of the consolidated entity in subsequent years other than those referred to in this report. Note 18 Related party transactions (a) Subsidiaries Interests in subsidiaries are set out in note 15(a). (b) Key management personnel compensation Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments (c) Transactions with other related parties The following transactions occurred with related parties: Contributions to superannuation funds on behalf of employees Note 19 Share-based payments (a) Silex Systems Limited Employee Incentive Plan 2022 $ 2021 $ 1,282,443 1,160,370 74,375 32,790 563,308 68,221 24,503 116,612 1,952,916 1,369,706 2022 $ 2021 $ 290,524 225,136 The Silex Systems Limited Employee Incentive Plan (the Plan) was established in May 2019 by a resolution of the Silex Board and was approved by Shareholders at the 2019 Annual General Meeting. All full-time and part-time staff and executive directors of the consolidated entity are eligible to participate in the Plan. The Company established the Plan to encourage employees to share in the ownership of the Company and to promote the long-term success of the Company as a goal shared by all employees. In accordance with the Plan, an award of options, performance rights or exempt share awards may be granted. Participation in the Plan is at the Board’s discretion and no individual has a contractual right to participate in the Plan or to receive any guaranteed benefits. 86 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 (b) Options Under the Plan, options issued were granted for no consideration. The options granted to staff are for a five-year period and become exercisable after three years of the date of the grant. The options granted to executive KMP are with respect to multi-year performance periods ending between 25 June 2024 and 30 June 2027 for the CEO/MD and between 30 June 2024 and 30 June 2026 for the CFO/Company Secretary. The options expire approximately two years following expiry of the various performance periods. The options lapse if the holder ceases to be an eligible employee other than by reason of death or permanent disablement, unless the Board determines otherwise in its absolute discretion. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. The exercise price of options is based on the volume weighted average price at which the Company’s shares are traded on the Australian Stock Exchange for the 10-trading days before the options are granted or for the 10-trading days preceding a Board resolution to grant options. Amounts received on the exercise of options are recognised as share capital. Set out below are summaries of options granted under the Plan including the options outstanding at the end of the year: Consolidated and parent entity – 2022 Expiry date Exercise price (cents) Balance at start of year (Number) Issued during the year (Number) Lapsed/ forfeited during the year (Number) Exercised during the year (Number) Balance at end of the year (Number) Exercisable at the end of year (Number) Grant date 21/05/2019 20/05/2024 02/12/2019 01/12/2024 01/04/2020 31/03/2025 23/11/2020 22/11/2025 35 35 21 57 500,000 100,000 660,000 150,000 24/03/2021 23/03/2026 120 1,000,000 - - - - - (35,028) (324,972) 140,000 140,000 - (100,000) - - - - - - 660,000 150,000 - - - - 1,000,000 - 26/07/2021 28/10/2026 26/07/2021 30/06/2027 26/07/2021 30/06/2028 14/10/2021 28/10/2026 14/10/2021 28/10/2026 14/10/2021 28/10/2027 14/10/2021 28/10/2028 14/10/2021 28/10/2029 94 94 94 94 94 94 94 94 18/03/2022 17/03/2027 119 - - - - - - - - - 100,000 - 100,000 100,000 - - 150,000 - 150,000 - 150,000 - 150,000 - 150,000 - 600,000 - - - - - - - - - - 100,000 100,000 100,000 150,000 150,000 150,000 150,000 150,000 600,000 - - - - - - - -  - 2,410,000 1,650,000 (35,028) (424,972) 3,600,000 140,000 Weighted average exercise price $0.68 $1.03 $0.35 $0.35 $0.88 $0.35 87 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Consolidated and parent entity – 2021 Grant date Expiry date 21/05/2019 20/05/2024 02/12/2019 01/12/2024 01/04/2020 31/03/2025 23/11/2020 22/11/2025 Exercise price (cents) 35 35 21 57 24/03/2021 23/03/2026 120 Balance at start of year (Number) 500,000 100,000 660,000 - - Issued during the year (Number) - - - Lapsed/ forfeited during the year (Number) - - - 150,000 - Exercised during the year (Number) - - - - Balance at end of the year (Number) 500,000 Exercisable at the end of year (Number) - 100,000 - 660,000 - 150,000 - 1,000,000 - - 1,000,000 - Weighted average exercise price $0.28 $1.12 1,260,000 1,150,000 - - - 2,410,000 - - $0.68 - The market price of shares under option at 30 June 2022 was $2.10 (2021: $0.90). The weighted average remaining contractual life of share options outstanding at the end of the period was 4.1 years (2021: 4.0 years). 88 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Fair value of options granted The assessed fair value at grant date of options granted during the year ended 30 June 2022 was determined using a Binomial option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the options. The assessed fair value of options at grant date and the model inputs included the following: Fair value (cents) Grant date Vesting date Exercise Price (cents) Share price at grant date (cents) Expiry date Expected volatility Expected dividend yield Risk-free interest rate Days to expiration 43.21 26/07/2021 30/06/2024 94 28/10/2026 47.14 26/07/2021 30/06/2025 94 30/06/2027 49.04 26/07/2021 30/06/2026 94 30/06/2028 72.49 14/10/2021 25/06/2024 94 28/10/2026 72.49 14/10/2021 30/06/2024 94 28/10/2026 77.27 14/10/2021 30/06/2025 94 28/10/2027 79.65 14/10/2021 30/06/2026 94 28/10/2028 83.08 14/10/2021 30/06/2027 94 28/10/2029 74.35 18/03/2022 18/03/2025 119 17/03/2027 102 102 102 146 146 146 146 146 130 73% 73% 70% 73% 73% 73% 70% 70% 74% - - - - - - - - - 0.49% 0.64% 0.75% 0.79% 0.79% 1.01% 1.16% 1.30% 2.03% 1,435 1,800 2,165 1,396 1,396 1,761 2,126 2,492 1,460 A 22.5% discount for lack of marketability was applied to the options granted 26 July 2021 and 14 October 2021 as these options have a 2-year restriction on trading from the date of exercise. The assessed fair value of options at grant date and the model inputs for options issued in the prior year included the following: Fair value (cents) Grant date Vesting date Exercise Price (cents) Expiry date 30.60 23/11/2020 30/06/2023 57 22/11/2025 67.10 24/03/2021 24/06/2024 120 23/03/2026 Share price at grant date (cents) 58.5 125.5 Expected volatility Expected dividend yield Risk-free interest rate Days to expiration 72% 73% - - 0.10% 0.10% 1,460 1,460 The expected price volatility is based on the historical volatility adjusted for any expected changes to future volatility due to publicly available information. (c) Performance Rights The rights issued under the Plan were subject to performance-based and service-based vesting conditions. Rights convert into one ordinary share each on vesting at an exercise price of nil, subject to the satisfaction of vesting conditions. If an employee ceases to be employed by the Company during the vesting period, the rights will be forfeited, except in limited circumstances that are at the discretion of the Board. 89 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Notes to the financial statements 30 June 2022 Set out below are summaries of performance rights granted under the Plan: Consolidated and parent entity – 2022 Grant date Exercise Price 25/09/2020 23/11/2020 26/07/2021 14/10/2021 25/10/2021 Nil Nil Nil Nil Nil Balance at start of year (Number) Issued during the year (Number) 390,000 100,000 - - 70,000 Lapsed/ forfeited during the year (Number) (85,060) (23,000) - Exercised during the year (Number) (304,940) (77,000) - - - 487,500 - - 250,000 - - Balance at end of the year (Number) - - 70,000 487,500 250,000 490,000 807,500 (108,060) (381,940) 807,500 Consolidated and parent entity – 2021 Grant date Exercise Price 25/09/2020 23/11/2020 Nil Nil Balance at start of year (Number) - - - Issued during the year (Number) Lapsed/ forfeited during the year (Number) Exercised during the year (Number) Balance at end of the year (Number) 390,000 - - 100,000 - - 490,000 - - 390,000 100,000 490,000 The fair value of rights granted on 26 July 2021 that do not have market conditions was $0.791 and the fair value of rights granted on 26 July 2021 that have market conditions was $0.51. The fair value of rights granted on 14 October 2021 that do not have market conditions was $1.132 and the fair value of rights granted on 14 October 2021 that have market conditions was $0.721. The fair value of rights granted on 25 October 2021 was $1.291. The fair values were estimated taking the market price of the Company’s shares on the grant date and noting that no dividends were expected to be received during the vesting period. A 22.5% discount for lack of marketability was applied to the rights granted on 26 July 2021 and 14 October 2021 as the rights have a 2-year restriction on trading following conversion of the vested rights to ordinary shares. An 11.25% discount for lack of marketability was applied to the rights granted on 25 October 2021 as the rights have a 1-year restriction on trading following conversion of the vested rights to ordinary shares. For the prior year, the fair value of rights granted on 25 September 2020 and 23 November 2020, that have market conditions was $0.216 and $0.235 respectively. The model inputs for the rights granted during the year ended 30 June 2022 (with the 26 July 2021 issue listed first, the 14 October 2021 next and the 25 October 2021 issue last – unless advised otherwise) included: (i) Rights are granted for no consideration for all issues (ii) Exercise price $nil for all issues (iii) Grant date: 26 July 2021, 14 October 2021 and 25 October 2021 (2021: 25 September 2020 and 23 November 2020) (iv) Vesting date: 31 July 2021 except for the extended long-term incentive rights which have a vesting date of no later than 25 December 2025 (2021: 31 July 2021 and 30 June 2021) (v) Share price at grant date: $1.02, $1.46 and $1.455 (2021: $0.565 and $0.585) 90 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022 Notes to the financial statements 30 June 2022 (vi) Expected volatility of the Company’s shares: 78%, 78% and 78% (2021: 77% and 77%) (vii) Expected dividend yield: nil and nil (2021: nil and nil) (viii) Risk-free interest rate: 0.017%, 0.043% and 0.108% (2021: 0.13% and 0.06%) A Monte Carlo simulation approach was used to value the rights that are subject to market conditions. 300,000 Extended LTI rights with market conditions (i.e., 4 tranches of 75,000 rights) have been granted to the CFO/ Company Secretary. The fair value has been calculated using a Monte Carlo simulation approach. Inputs include: the rights will be issued for no consideration, have an exercise price of nil, a grant date of 21 June 2022, share price at grant date of $1.865, expected volatility of 75% and expected risk-free interest rates between 2.87% and 3.69%, vesting dates of 30 June 2023, 30 June 2024, 30 June 2025 and 30 June 2026. A 22.5% discount for lack of marketability has been applied. The fair value has been calculated at $0.742, $0.808, $0.809 and $0.835. (d) Shares granted to the Chair (as approved at the 2021 AGM) The Silex Chair also serves as the Chair of the GLE Holdco Governing Board until 31 December 2023. In view of the extra work load and responsibility associated with the role of GLE Chair, it was resolved to pay additional Directors’ fees from 1 January 2021. As per shareholder approval granted at the 2021 AGM, 50% of the annual fees for the 3-year tenure have been paid via the issue of Silex shares. 84,507 shares at the 10-trading day volume weighted average price at which the Company’s shares traded on the Australian Stock Exchange preceding 17 December 2020, being $0.71, were issued on 8 November 2021. A proportion of the shares will vest annually in line with the completion of each year of service through to 31 December 2023. 28,169 shares vested on 31 December 2021. The assessed fair value of the shares is based on the share price on 8 November 2021 of $1.335. (e) Expenses arising from share-based transactions Total expenses arising from share-based payment transactions recognised during the period as part of remuneration expense were as follows: Options granted and to be granted Performance rights granted and to be granted Shares to be granted in lieu of Directors’ fees Note 20 Remuneration of auditors 2022 $ 2021 $ 519,097 137,975 512,569 197,822 46,408 10,000 1,078,074 345,797 During the year the following fees were paid or payable for services provided by PricewaterhouseCoopers Australia (PwC) as auditor of the parent entity, Silex Systems Limited, its related practices and non-audit firms: Auditors of the Company – PwC Audit and review of financial reports Company Controlled entities and joint ventures Total audit and review of financial reports 2022 $ 2021 $ 96,300 104,000 - 12,000 96,300 116,000 Total services provided by PwC 96,300 116,000 91 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 21 Earnings per share (a) Basic earnings per share Total basic earnings per share attributable to the ordinary equity holders of the Company 2022 Cents (4.8) 2021 Cents (4.0) Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (b) Diluted earnings per share Total diluted earnings per share attributable to the ordinary equity holders of the Company 2022 Cents (4.8) 2021 Cents (4.0) Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 92 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(c) Reconciliation of earnings used in calculating earnings per share Basic earnings per share (Loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share Diluted earnings per share (Loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share (d) Weighted average number of shares used in the denominator Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share: Weighted average number of ordinary shares on issue used in the calculation of diluted earnings per share: (e) Information concerning the classification of securities 2022 $ 2021 $ (9,464,422) (6,927,268) (9,464,422) (6,927,268) 2022 Number 2021 Number 196,045,799 172,767,339 196,045,799 172,767,339 Options and performance rights granted in the current and prior years were not included in the calculation of diluted earnings per share because they are anti-dilutive for the year ended 30 June 2022. The options and performance rights could potentially dilute basic earnings per share in the future. Further information about options and performance rights is included in note 19. 93 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 22 Parent entity financial information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance Sheet Current assets Total assets Current liabilities Total liabilities Net assets Shareholders’ equity Issued capital Reserves Share-based payments Accumulated losses Total equity Net (loss) for the period 2022 $ 2021 $ 45,312,985 46,625,394 2,706,517 3,559,673 15,044,132 15,956,274 2,453,923 2,493,494 43,065,721 13,462,780 271,543,434 232,645,003 15,558,967 14,820,742 (244,036,680) (234,002,965) 43,065,721 13,462,780 (10,033,715) (4,973,682) Total comprehensive income (10,033,715) (4,973,682) The Net (loss) for the period above differs from the segment result disclosed in note 2 as the segment result excludes exchange gains and losses on intercompany loans (which eliminate on consolidation), write-downs of intercompany loans (which eliminate on consolidation) and impairment charges for investments in subsidiaries (which eliminate on consolidation). (b) Guarantees entered into by the parent company The parent has provided $nil (2021: $nil) guarantees. (c) Contractual commitments for the acquisition of property, plant or equipment As at 30 June 2022 (and 30 June 2021), the parent entity did not have any contractual commitments for the acquisition of property, plant or equipment. (d) Basis of preparation This parent entity financial information has been prepared on the same basis as the consolidated financial statements except as set out below: Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Silex Systems Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. 94 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Note 23 Summary of significant accounting policies This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent that they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the group consisting of Silex Systems Limited and its subsidiaries. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Silex Systems Limited is a for-profit entity for the purposes of preparing the financial statements. (i) Compliance with IFRS The consolidated financial statements of the Silex Systems Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These financial statements have been prepared on a historical cost basis, except for Financial assets at fair value through other comprehensive income which are measured at fair value. (iii) New standards and interpretations not yet adopted Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting periods and have not been adopted early by the Company. These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. (b) Principles of consolidation and equity accounting (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Silex Systems Limited (the parent entity) as at 30 June 2022 and the results of all subsidiaries for the year then ended. Silex Systems Limited and its subsidiaries together are referred to in this financial report as the Company, Silex, the consolidated entity or the group. Subsidiaries are all those entities over which the Company has control, being the power to govern the financial and operating policies, generally accompanying a shareholding of more than onehalf of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Company. Intercompany transactions, balances and unrealised gains on transactions between group companies 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 Company. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively. 95 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(ii) Joint arrangements Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. The Company’s investment in GLE Holdco is a joint venture. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated balance sheet. (iii) Equity method of accounting for joint ventures Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Company’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Company’s share of movements in Other comprehensive income of the investee in Other comprehensive income. Dividends received or receivable from joint ventures are recognised as a reduction in the carrying amount of the investment. Where the Company’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Company and its joint ventures are eliminated to the extent of the Company’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Company. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 23(h). (iv) Changes in ownership interests The Company treats transactions with non-controlling interests that do not result in a loss of control, as transactions with equity owners of the Company. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Silex Systems Limited. When the Company ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in Other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in Other comprehensive income are reclassified to profit or loss. If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in Other comprehensive income are reclassified to profit or loss where appropriate. (c) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is Silex Systems Limited’s functional and presentation currency. 96 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(ii) Transactions and balances Foreign currency transactions are translated into the functional currency 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (iii) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised in Other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings, are recognised in Other comprehensive income. The Company’s funding of its investment in its subsidiaries has been deemed part of its net investment. When a foreign operation is sold or borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the income statement as part of the gain or loss on sale. (d) Revenue recognition The accounting policies for the Company’s revenue from contracts with customers are explained in note 3. (e) Government grants and Research and development tax incentive income Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Note 4 provides further information on how the Company accounts for government grants. Research and development tax incentive income is based on eligible activities in the period. 97 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(f) Income tax The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (g) Leases The Company’s leasing policy is described in note 9(c). (h) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (i) Investments and other financial assets (i) Classification The Company classifies its financial assets in the following categories: • those to be measured subsequently at fair value (either through Other comprehensive income (OCI) or through profit or loss); and • those to be at amortised cost. The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The Company reclassifies debt investments when and only when its business model for managing those assets changes. 98 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(ii) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade date, being the date on which the Company commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. (iii) Measurement At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets at fair value through profit or loss are expensed in profit or loss. Debt instruments Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments: (a) Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest revenue from these financial assets is included in revenue using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. (b) FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss. (c) FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises. Equity instruments The Company subsequently measures all equity investments at fair value. Where the Company’s Management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments is recognised in profit or loss as other income when the group’s right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. (iv) Impairment The Company assesses on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Refer note 13(c) for further details. 99 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(j) Measurement and fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and availableforsale securities) is based on quoted market prices at the balance sheet date. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for longterm debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments. (k) Employee benefits (i) Wages and salaries, annual leave and personal leave Liabilities for wages and salaries, including non-monetary benefits and annual leave are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for nonaccumulating personal leave are recognised when the leave is taken and measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Retirement benefit obligations Employees of the Company are entitled to benefits on retirement, disability or death from the Company’s defined contribution retirement plans. The fund receives fixed contributions from the Company and the Company’s legal or constructive obligation is limited to these contributions. Contributions to the defined contribution fund are recognised as an expense as they become payable. (iv) Share-based payments Share-based compensation benefits have been provided to employees via the Silex Systems Limited Employee Incentive Plan (the Plan) which was established in May 2019. Information relating to the Plan is set out in note 19. Options The fair value of options granted under the Plan are recognised as an employee benefit expense with a corresponding increase in equity in the share-based payments reserve. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is determined using a Binomial option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. 100 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022The fair value of the options granted excludes the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the Company revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the relevant balance of the sharebased payments reserve is transferred to share capital. Performance Rights Performance Rights granted under the Plan are a right to acquire fully paid ordinary shares in the Company for $nil consideration, subject to meeting certain pre-determined key performance indicators and vesting conditions. These may be used as a short-term or long-term incentive vehicle. For Performance Rights with non-market vesting conditions, the estimated number of rights that will vest are revised at the end of each reporting period and adjustments are recognised in profit or loss and the share-based payments reserve. For Performance Rights with market vesting conditions, the fair value at grant date is calculated using a Monte Carlo simulation and recognised in profit or loss. No adjustment is made for the estimated number of rights that will vest at each reporting date as this has already been factored into the grant date fair value of the rights. The fair value is recognised over the relevant service period. Shares in lieu of cash for Directors’ Fees Shares may be granted to directors in lieu of cash for services performed (subject to shareholder approval). The fair value of the shares is calculated on the grant date. The expense is recognised in the profit or loss over the service period to which the issue of shares relates to. The amount relating to future periods (unearned amount) is included in Trade and other receivables. (v) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Company recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary redundancy. (l) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. 101 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022(m) Research and development costs Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense when it is incurred. Costs incurred on development projects relating to the design and testing of new or improved products are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technical feasibility and its costs can be measured reliably. Other expenditure that does not meet these expenditure criteria are recognised as an expense as incurred. Given the stage of development of the Company’s technologies, research and development costs are expensed as incurred. (n) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds 102 Notes to the financial statements30 June 2022SILEX ANNUAL REPORT 2022Directors’ declaration 30 June 2022 In the directors’ opinion: (a) the financial statements and notes set out on pages 55 to 102 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Note 23(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Dr M P Goldsworthy CEO/MD Sydney, 25 August 2022 Mr C A Roy Chair 103 SILEX ANNUAL REPORT 2022Independent auditor’s report To the members of Silex Systems Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Silex Systems Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 30 June 2022 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: • the consolidated balance sheet as at 30 June 2022 • the consolidated statement of comprehensive income for the year then ended • the consolidated statement of changes in equity for the year then ended • the consolidated statement of cash flows for the year then ended • the consolidated income statement for the year then ended • the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information • the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & 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. PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 T +61 2 8266 0000, F +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T +61 2 9659 2476, F +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation 104 SILEX ANNUAL REPORT 2022Independent auditor’s report Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality Audit scope Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. The Group's operational and financial processes are managed by a corporate function in Sydney, where substantially all of our audit procedures are performed. For the purpose of our audit we used overall Group materiality of $0.47 million, which represents approximately 5% of the Group’s loss before tax. We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. We chose Group loss before tax because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 T +61 2 8266 0000, F +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T +61 2 9659 2476, F +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation 105 SILEX ANNUAL REPORT 2022 Independent auditor’s report 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 for the current period. The key audit 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. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk Committee. Key audit matter How our audit addressed the key audit matter Recoverable project costs (Refer to note 3) Our audit procedures included: Project costs incurred by Silex Systems Limited in relation to the Uranium Enrichment Project (“UEP”) are recharged to GLE. We considered this matter a key audit matter due to the magnitude of the revenue, and the judgemental nature of determining which expenses can be recharged. considering the Group’s accounting policy in line with the Australian Accounting Standards; developing an understanding and evaluating key controls over the revenue to receivables business process; for a sample of revenue transactions, obtaining source documents, evidencing cash receipts, assessing that the costs incurred were recognised in the right period and eligible to be recharged; evaluating the related financial statement disclosures for consistency with Australian Accounting Standards requirements. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor’s report, the other information we obtained included the Company Directory, Forward Looking Statements and Risk Factors, Directors’ report, Corporate Governance Statement and Shareholders’ information. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take. PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 T +61 2 8266 0000, F +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T +61 2 9659 2476, F +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation 106 SILEX ANNUAL REPORT 2022Independent auditor’s report 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 have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 the 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: auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 32 to 49 of the directors’ report for the year ended 30 June 2022. In our opinion, the remuneration report of Silex Systems Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 T +61 2 8266 0000, F +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T +61 2 9659 2476, F +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation 107 SILEX ANNUAL REPORT 2022Independent auditor’s report 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. PricewaterhouseCoopers Aishwarya Chandran Partner PricewaterhouseCoopers Sydney 25 August 2022 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650, SYDNEY NSW 2001 T +61 2 8266 0000, F +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T +61 2 9659 2476, F +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation 108 SILEX ANNUAL REPORT 2022Shareholders’ information Information relating to shareholders as at 12 August 2022 (a) Distribution of equity securities Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Class of equity security: Ordinary Shares Options Performance rights No. of holders % of shares No. of holders % of options No. of holders % of rights 2,503 2,683 817 1,145 235 0.62% 3.48% 3.08% 16.90% 75.92% - - - 16 8 24 - - - - - - - - - 26.67% 21 39.63% 73.33% 1  60.37% 100.00% 22 100.00% Total number of holders 7,383 100.00% There were 519 holders of less than a marketable parcel of ordinary shares. (b) Names of twenty largest quoted equity security holders as at 12 August 2022 Name Jardvan Pty Ltd McCusker Holdings Pty Ltd Majenta Holdings Pty Ltd HSBC Custody Nominees (Australia) Limited Polly Pty Ltd Hillboi Nominees Pty Ltd Citicorp Nominees Pty Limited Sachem Cove Special Opportunities Fund LP Throvena Pty Ltd Spar Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited JP Morgan Nominees Australia Pty Limited Hamlac Pty Ltd Mr Christopher David Wilks Silicon Quantum Computing Pty Ltd National Nominees Limited Quintal Pty Ltd BNP Paribas Noms Pty Ltd Sporran Lean Pty Ltd BNP Paribas Nominees Pty Ltd Number of securities 29,801,030 Percentage held 14.54% 8,000,000 5,703,923 4,127,002 4,073,863 4,039,835 3,488,628 3,118,965 2,978,203 2,863,234 2,765,256 2,537,087 2,525,937 2,405,070 2,300,000 2,088,935 2,002,952 1,828,389 1,791,000 1,776,585 3.90% 2.78% 2.01% 1.99% 1.97% 1.70% 1.52% 1.45% 1.40% 1.35% 1.24% 1.23% 1.17% 1.12% 1.02% 0.98% 0.89% 0.87% 0.87% 90,215,894 44.01% 109 SILEX ANNUAL REPORT 2022  Shareholders’ information Information relating to shareholders as at 12 August 2022 (c) Substantial holders Name Jardvan Pty Ltd (d) Voting rights Number of securities 29,801,030 Percentage held 14.54% The voting rights attaching to each class of equity securities are set out below: • Ordinary shares: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. • Options: No voting rights. • Performance rights: No voting rights. (e) Securities subject to voluntary escrow as at 12 August 2022 As at 12 August 2022, shares subject to voluntary escrow were as follows: Number of shares Escrow period ends 263,274 28,169 118,666 28,169 100,000 100,000 31/08/2022 31/12/2022 31/08/2023 31/12/2023 22/05/2024 06/06/2024 (f) Unquoted equity securities as at 12 August 2022 Options issued under the Silex Systems Limited Employee Incentive Plan Performance rights issued under the Silex Systems Limited Employee Incentive Plan Number on issue 3,600,000 807,500 Number of holders 24 22 110 SILEX ANNUAL REPORT 2022Company directory Directors Mr C A Roy | Chair Dr M P Goldsworthy | CEO/MD Ms H G Cook Mr C D Wilks People & Remuneration Committee Mr C A Roy | Chair Ms H G Cook Mr C D Wilks Audit Committee Mr C D Wilks | Chair Ms H G Cook Mr C A Roy Company Secretary Ms J E Ducie Registered Office and Principal Place of Business Building 64, Lucas Heights Science & Technology Centre New Illawarra Road Lucas Heights NSW 2234, Australia Postal address: PO Box 75, Menai Central NSW 2234, Australia P +61 2 9704 8888 F +61 2 9704 8851 E W www.silex.com.au investor.relations@silex.com.au Share Registry Computershare Registry Services Pty Limited Level 5, 115 Grenfell Street, Adelaide, South Australia 5000, Australia GPO Box 1903 Adelaide South Australia 5001, Australia Enquiries: Within Australia: 1300 556 161 Outside Australia: +61 8 8236 2300 E web.queries@computershare.com.au W www.computershare.com.au Stock Exchange Listed on the Australian Stock Exchange, Ticker: SLX Listed on the OTCQX International, Ticker: SILXY Auditors PricewaterhouseCoopers Solicitors Dentons Australia Limited Bankers Australia and New Zealand Banking Group Limited American Depository Receipts (ADR) Information Silex Systems Limited’s ADRs may be purchased on the US OTCQX market. Details are as follows: Ratio: 1 ADR = 5 ordinary shares Symbol: SILXY CUSIP: 827046 10 3 9414F102 Exchange: OTCQX Country: Australia www.silex.com.au 

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