Vonex
Annual Report 2021

Plain-text annual report

Annual Financial Report For the year ended 30 June 2021 ACN: 063 074 635 Website www.vonex.com.au https://vonex.com.au/investors/ corporate-governance Company Secretary Daniel Smith Share Registry Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace Perth WA 6000 Tel +61 8 9323 2000 Fax +61 8 9323 2033 Auditor RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 ASX Code VN8 Directors Chen Chik (Nicholas) Ong Non-Exec. Chairman Matthew Fahey Managing Director David Vilensky Non-Exec. Director Winnie Lai Hadad Non-Exec. Director Jason Gomersall Non-Exec. Director Registered Office Level 8, 99 St Georges Terrace Perth WA 6000 Tel +61 8 6388 8888 Fax +61 8 6388 8898 Head Office Level 6, 303 Coronation Drive Milton QLD 4064 1800 828 668 Tel Fax 1300 997 999 Solicitors Bowen Buchbinder Vilensky Level 14, 251 Adelaide Terrace Perth WA 6000 Bankers Commonwealth Bank of Australia ANZ Bank Westpac Bank Vonex Limited / Financial Report for the year ended 30 June 20211 Directors’ Report The Directors present their report together with the consolidated financial report for Vonex Limited (“Vonex” or “the Company”) and its controlled entities (collectively the “consolidated entity” or “Group”), for the year ended 30 June 2021. Directors The names and qualifications of persons who have held the position of Director of Vonex Limited at any time during the financial year and up to the date of this report are: Mr Nicholas Ong Non-Executive Chairman Mr Matthew Fahey Managing Director Mr David Vilensky Non-Executive Director Ms Winnie Lai Hadad Non-Executive Director Mr Jason Gomersall Non-Executive Director Information on Directors & Company Secretary Nicholas Ong / Non-Executive Chairman Mr Ong was a Principal Adviser at the Australian Securities Exchange (ASX) and brings 15 years’ experience in IPO, listing rules compliance and corporate governance. Mr Ong has developed a wide network of clients in Asia-Pacific region and provides corporate and transactional advisory services through boutique firm Minerva Corporate Pty Ltd. He is a member of the Governance Institute of Australia and holds a Bachelor of Commerce and a Master of Business Administration from the University of Western Australia. Other directorships of Australian listed companies held by Mr Ong in the last three years are: Current: Helios Energy Limited, White Cliff Minerals Limited, CFoam Limited, Mie Pay Limited and Beroni Group Limited. Previous: CoAssets Limited, Arrow Energy Limited, Tianmei Beverage Group Corporation Limited, Bojun Agriculture Holdings Limited and Jiajiafu Modern Agriculture Limited. Matthew Fahey / Managing Director & CEO Mr Fahey is Vonex Telecom’s Chief Executive Officer and joined the Board as Managing Director. Mr Fahey joined Vonex Ltd in 2013, through the Vonex Group’s acquisition of iTrinity (IP Voice & Data) where he had served as Sales Director. Mr Fahey brings with him 20 years’ of extensive experience in building and managing Telecommunications companies with a well-regarded reputation in the industry for channel partner programs as well as excellence in VoIP and Telco. 2014 saw amazing growth for Vonex, winning the CRN fast 50 award for the fastest growing IT company in Australia. Mr Fahey is focused on accelerating growth both organically and by further acquisition and the continued development of diverse products in order to expand Vonex’s market share. Mr Fahey has not held any other directorships of Australian listed companies in the last three years. Vonex Limited / Financial Report for the year ended 30 June 2021 Jason Gomersall / Non- Executive Director Mr Gomersall is a former Director of 2SG Wholesale and is the Founder, CEO and Managing Director of iseek Communications. Mr Gomersall has long been at the forefront of the telecommunications industry and the mobile phone market since being one of the foundation franchisees of the Optus World chain of retail stores in the 1990s. Mr Gomersall has not held any other directorships of Australian listed companies in the last three years Daniel Smith / Company Secretary Mr Smith is a member of the Australian Institute of Company Directors, a Fellow of the Governance Institute of Australia and has over 14 years’ primary and secondary capital markets expertise. As a director of Minerva Corporate, he has advised on, and been involved in, a significant number of IPOs, RTOs and capital raisings on both the ASX and NSX. His key focus is on corporate governance and compliance, commercial due diligence and transaction structuring, as well as ongoing investor and stakeholder engagement. Mr Smith is currently a director and/or company secretary of numerous companies listed on ASX, AIM and NSX. 2 Directors’ Report David Vilensky / Non- Executive Director Mr Vilensky is a practicing corporate lawyer and the managing director of Perth law firm Bowen Buchbinder Vilensky. He has more than 30 years’ experience in the areas of corporate and business law and in commercial and corporate management. Mr Vilensky practices mainly in the areas of corporate and commercial law, mergers and acquisitions, mining and resources, trade practices and competition law and complex dispute resolution. Mr Vilensky acts for a number of listed and private companies and advises on directors’ duties, due diligence, capital raisings, compliance with ASX Listing Rules, corporate governance and corporate transactions generally. Other directorships of Australian listed companies held by Mr Vilensky in the last three years are: Current: Latin Resources Limited and Oakdale Resources Limited. Mr Vilensky has a Bachelor of Arts, a Bachelor of Laws from the University of Cape Town and is a member of the Law Society of Western Australia. Winnie Lai Hadad / Non-Executive Director Ms Lai Hadad has expertise in change management, corporate governance, business process improvement and has been involved in listings on the Australian Securities Exchange. Ms Lai Hadad has been involved with both investments into China and out-bound investment from China. Her past roles include implementing Coca-Cola bottling strategies into Greater China and administering the first Chinese direct investment in an iron ore mine in the Pilbara Region of Western Australia. Other directorships of Australian listed companies held by Ms Lai Hadad in the last three years are: Current: Avenira Limited. Ms Lai Hadad is a lawyer admitted to practice in Western Australia, a qualified CPA, holds a BA, BCom and MSc, and is a graduate of both the Australian Institute of Company Directors and Governance Institute of Australia. Vonex Limited / Financial Report for the year ended 30 June 20213 Directors’ Report Interests in the securities of the Company As at the date of this report, the interests of the directors in securities of the Company were: Nicholas Ong Matthew Fahey David Vilensky Winnie Lai Hadad Jason Gomersall Ordinary Shares Performance Rights Options 2,826,462 2,550,000 2,552,000 6,781,018 8,830,000 3,000,000 2,550,000 2,550,000 1,500,000 149,367 557,727 Nil Nil 1,500,000 1,500,000 Meetings of Directors The attendance of directors at meeting of the company’s Board of Directors held during the year is as follows: Directors Nicholas Ong Matthew Fahey David Vilensky Winnie Lai Hadad Jason Gomersall Number of Meetings Attended Eligible to Attend 4 4 4 4 4 4 4 4 4 4 Principal Activities The principal activities withing the consolidated entity include the year on year growth within our Retail Telco division and expansion of our Wholesale Telco division during the financial year. Other activities have focused on the continuation of R&D projects within technologies in communications, including the Company’s proprietary cloud hosted PBX system. Vonex Limited / Financial Report for the year ended 30 June 20214 Directors’ Report Financial Position & Operating Results The financial results of the consolidated entity for the financial year ended 30 June 2021 are: Cash and cash equivalents ($) Net assets / (liabilities) ($) Revenue ($) Net loss after tax ($) Loss per share (cents) 30 / Jun / 21 30 / Jun / 20 % Change 3,658,416 5,575,939 19,215,521 4,811,798 6,808,837 15,406,034 (3,984,788) (705,964) (2.10) (0.45) (23%) (18%) 25% (464)% (366)% Dividends Paid or Recommended There were no dividends declared or paid by the Company during the year and no dividend is recommended. Review of Operations MNF Group transaction Subsequent to year-end, on 23 July 2021, the Company announced the that it had agreed to acquire part of MNF Group’s Direct Business which services SME and Consumer customers (the “Direct Business”) for $31 million, comprising $20 million of cash consideration payable on completion and $11 million of deferred cash consideration payable in monthly installments over 12 months. The Direct Business sells cloud phone, internet and mobile services to small-to-medium enterprise and residential customers in Australia, as well as dedicated audio and video conferencing services. The Acquisition will materially expand Vonex’s footprint of SME and residential customers across Australia and will see the Company migrate approximately 5,250 new SME customers to its platform. The Acquisition delivers Vonex a strong platform for organic growth in the Australian telecommunications market through cross-selling internet and mobility products to Direct Business customers. The Direct Business delivered an unaudited FY21 EBITDA of $5.5 million from revenue of $15.0 million. Completion of the acquisition of the Direct Business took place on 9 August 2021. Nextel acquisition On 18 December 2020, Vonex announced that it had entered into a binding term sheet with Nextel Pty Ltd (“Nextel”) to acquire Nextel’s business and operations as a going concern. Nextel, a provider of telecommunications services to business customers, is recognised as an industry leader in the design, installation and maintenance of voice, data and communications networks. It is an established single-source provider to small-to-medium enterprise (SME) businesses with expertise in rolling out wireless, fibre and RFID networks, as well as delivering structured cabling, telephony systems and electrical fit outs to large-scale projects. In FY20, Nextel achieved EBITDA of approximately $450,000 on revenue of approximately $2 million, with infrastructure and specialised projects a key driver. Nextel also brings a highly capable and experienced team headquartered in Sydney that is well positioned to drive further growth from immediate cross sell opportunities. Nextel brings long-term relationships with tier-1 carriers, network partners and customers spanning a range of industries, including LJ Hooker, Endemol Shine Australia, 4 Pines Brewing Co, Lifeline and the Sydney Harbour Federation Trust. Vonex Limited / Financial Report for the year ended 30 June 20215 Directors’ Report Completion of the acquisition of Nextel’s business and operations took place on 3 February 2021, The integration of the operations of Nextel was completed in the June quarter, six months on from when the acquisition was announced. The Company is now engaged in promoting Nextel with proactive marketing campaigns which has have already yielded a $140k infrastructure contract. The Company will continue to explore further synergies between the Nextel business and the Company’s existing operations to identify new opportunities to add value for Vonex’s business customers. Wholesale Operations All Vonex wholesale services became combined and branded as 2SG Wholesale as of 1st January 2021. 2SG Wholesale is a telecommunications and data wholesaling business which provides Australian Managed Service Providers, ISPs and System Integrators with access to the latest in hardware and connectivity solutions from leading brands. Its provision of fast, secure, business-grade wireless broadband has met strong customer demand amid the rise of working from home across Australia during the COVID-19 pandemic – a trend that is set to continue. Vonex’s Wholesale division showed continued growth in the half year following the successful integration of 2SG Wholesale. During the period, Vonex also delivered digital upgrades that increased product features and reduced costs. The Company deployed newly integrated billing and provisioning platforms across 2SG Wholesale as well as Nextel. 2SG Wholesale has also deployed its new B2B NBN ordering platform for wholesale customers, enabling touchless provisioning and service management—an essential feature as social distancing measures remain part of life in areas of Australia. Successfully integrating 2SG Wholesale has allowed the Company to expand its offering to SME customers by developing and delivering new products. 2SG’s sales growth was strong across its new and existing Wholesale product suite in Q2 FY21, including an 88% increase in Mobile Broadband orders year-on-year for the quarter, Mobile Voice up 321% and NBN with 4G backup increasing by 107% over the same period. This strong growth continued across Q3 and Q4 FY21, reflecting Vonex beginning to capture the cross-selling opportunities the Company identified prior to acquiring 2SG Wholesale. In addition, the business grade mobile broadband offered by 2SG Wholesale is attracting potentially much larger wholesale customers. Discovery Technologies, a subsidiary of ASX 300 member Data#3 Ltd (ASX: DTL), signed up as a new customer during FY21. In addition, Orange Business Services also signed up, a network native digital services company and the global enterprise division of the Orange Group (EPA: ORA) which currently services 3,000 multi-national clients. The Company is currently rolling out 5G services to its customers, providing another significant value proposition to support sales. After having been selected by Optus as a key 5G partner, 2SG has now commenced the launch, which includes a brand new Service Qualification and an automated ordering system for partners and customers. The Company expects this new product to contribute to revenue growth. Retail Growth and Strong Customer Satisfaction In FY21, Vonex grew the number of SME retail customers by 25% year-on-year while Total Contract Value of new customer sales remained strong with Q4 of FY21 representing a near record quarter and June 2021 the most productive month of the financial year. Vonex’s cloud-based PBX phone service surpassed 45,000 active subscribers during the financial period, with growth over the year to June 30 providing a 26% increase over FY20. NBN Assure The Company has rolled out its NBN Assure service to partners following the launch in Q3 FY21. NBN Assure is Vonex’s “always on” business grade broadband service. It is a first-to-market SME specific broadband offering that provides businesses with critical service continuity in the event of a localised or general NBN outage through a wireless 4G failover backup tool. The product is highly valued by customers whose operations conducted online are impacted through network faults. NBN Assure provides business continuity assurance for all critical systems and applications with static identity, enabling users to work as normal when on back up and be able to log into secure cloud systems and still gain access from remote locations such as home. NBN Assure also features cyberattack protection which is gaining a positive response from customers in both the wholesale and retail markets. Oper8tor Oper8tor is a disruptive aggregated communications platform which targets the inclusion of Conference, Voice, Message and Video functionality, facilitating user communication across a broad swathe of channels. The Vonex Limited / Financial Report for the year ended 30 June 20216 Directors’ Report mobile app aims to seamlessly link all voice calls as well as messaging across multiple platforms and devices. In December 2020, Company announced that it was transitioning Oper8tor from one of active research and development, to one which focuses on identifying and engaging the right technical and financial partners to guide Oper8tor’s further development and commercialisation. Vonex will maintain in good standing all intellectual property, websites and internationally granted patents relating to Oper8tor, however it does not anticipate committing further development capital to the project at this time. COVID-19 In light of the COVID-19 pandemic, Vonex implemented a range of initiatives in March 2020 to minimise impact of the virus on its operations. These included: • The Company’s call centre in Cebu in the Philippines remained open as normal with a remote working strategy in place if Cebu staff are placed in lock down and cannot attend work. • Handset stock sourced from China was stockpiled and Vonex had several months of inventory to continue to fulfil new and existing orders without new stock arriving. • Adapting nimbly to the current climate, the Company rapidly rolled out ‘work from home’ marketing campaigns to existing and potential SME customers which highlight how Vonex’s Hosted PBX technology enables a seamless transition for staff to work from home. • Ongoing lockdown’s are expected to have some impact on the organic growth of the business and will continue to impact divisions where site visits are required to complete work, such as Nextel. Corporate Capital Raising Subsequent to the end of the period, on 23 July 2021, Vonex announced that it had received firm commitments from new and existing sophisticated and institutional investors to subscribe for a two-tranche placement of 109,090,909 fully paid ordinary shares (“Shares”) at $0.11 each to raise $12 million before costs (“Placement”). Vonex also announced a Share Purchase Plan (“SPP”) to eligible, existing shareholders to raise up to an additional $2 million at the Placement price. Tranche 1 of the Placement, consisting of 22,502,051 shares to raise $2.475m completed on 30 July 2021, with shareholders approving the issue of shares under Tranche 2 of the Placement at the general meeting held on 30 August 2021. The Company received the support of a strong mix of institutional investors across Australia and New Zealand who were introduced by PAC Partners Securities Pty Ltd, which acted as Lead Manager to the Placement. Net proceeds from the Placement and SPP will be used to part fund the remaining balance of the $20 million consideration payable by Vonex on completion of the acquisition of MNF Group’s Direct business, as well as the $11 million of deferred cash consideration payable in monthly installments over 12 months. Shareholder Meetings At a general meeting held 4 September 2020, all resolutions were passed by way of a poll. At the Company’s AGM held 27 November 2020, all resolutions were passed by way of a poll. R&D Tax Rebate The Company has received a Research and Development Tax Incentive rebate of $0.54 million for FY20 FY201 (FY19FY20: $0.63 million) from the Australian Government’s Research and Development Tax Incentive Program for eligible R&D activities conducted by the Company. The refund was in respect of eligible R&D activities across Vonex’s portfolio. Cash Position The Company ended the financial year with a strong cash balance of $3.658 million. Outlook Following its acquisition of MNF Group’s Direct Business, Vonex is well-placed to execute its clear three-pillar growth strategy. The highly complementary acquisition has transformed Vonex by delivering financial scale and market relevance. Through this deal, Vonex is welcoming a highly experienced new team of 30 staff, more than 5,000 new SME customers and more than 180 new channel partners to its platform, and expects to almost double the Company’s annualised recurring revenue on a full year basis. Vonex has identified and is pursuing opportunities to increase the value of the acquired and combined business by targeting growth in lead generation, brand awareness and average revenue per user. In 2SG Wholesale, Vonex plans to deliver organic growth which is accelerated by the recent acquisition by way of cross-selling opportunities, product range expansion and network cost efficiencies. The Company’s focus continues to be on the recruitment of new Channel Partners across Australia to support the anticipated growth in Hosted Vonex Limited / Financial Report for the year ended 30 June 20217 Directors’ Report PBX and Unified Communications in the region. National marketing programs in Australia’s capital cities remain underway to gain traction with SME customers and facilitate strong growth in registered PBX users. Events After the Reporting Period Vonex is pursuing an established M&A-led growth strategy for FY22 and FY23, targeting profitable IT and telco businesses that offer potential for growth in revenue and profit through further product expansion and cross-selling. With the latest Communications Report from the Australian Communications and Media Authority (ACMA) forecasting the Australian telecommunications industry revenue to grow from $44 billion in 2018 to $47 billion by 2022, Vonex continues to see a positive outlook for growth in sales as the Company’s customer base expands. Significant Changes in the State of Affairs There have been no other significant changes in the state of affairs of the consolidated entity during the financial year. Subsequent to the reporting period on 30 July 2021 Vonex raised $2,475,000 in a share placement via the issue of 22,502,051 ordinary fully-paid shares at $0.11 per share, as part of the two-tranche placement announced 23 July 2021. On 30 August 2021, shareholders approved the issue of an additional 86,588,858 shares at $0.11 per shares pursuant to tranche 2, which will raise an additional $9.525m. Subsequent to the reporting period on 9 August 2021 Vonex has drawn down a $16m debt facility from Longreach Credit Investors to part fund the initial $20 million consideration payable by Vonex on completion of the acquisition of MNF Group’s Direct business. Subsequent to the reporting period on 18 August 2021 Vonex announced that its SPP received strong support and was heavily over-subscribed with in excess of $3.7 million of demand from eligible Vonex shareholders. On 19 August 2021, Vonex issued 18,181,485 shares to the SPP subscribers. Apart from the disclosures made within this report, no other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. Vonex Limited / Financial Report for the year ended 30 June 20218 Directors’ Report Remuneration Report (Audited) The remuneration report is set out under the following main headings: A B C D E F G H Remuneration Governance Remuneration Structure Details of Remuneration Share-Based Compensation Equity Instruments Issued on Exercise of Remuneration Options Value of Options to Directors Equity Instruments Disclosures Relating to Key Management Personnel Other Transactions with Key Management Personnel I Additional Statutory Information The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The remuneration arrangements detailed in this report are for the key management personnel (“KMP”) of the Group as follows: Mr Nicholas Ong Non-Executive Chairman Mr Matthew Fahey Managing Director Mr David Vilensky Non-Executive Director Ms Winnie Lai Hadad Non-Executive Director Mr Jason Gomersall Non-Executive Director Use of remuneration consultants The Company did not employ services of consultants to review its existing remuneration policies. Voting and comments made at the Company’s 2020 Annual General Meeting The Company received 83.4% of “yes” proxy votes on its remuneration report for the 2020 financial year, inclusive of discretionary proxy votes, with the resolution passing by way of a poll. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. A Remuneration Governance B Remuneration Structure Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group. Key management personnel comprise the Directors of the Group and Executives of the Group. The performance of the Group depends upon the quality of its key management personnel. To prosper the Group must attract, motivate and retain appropriately skilled directors and executives. The Group’s broad remuneration policy is to ensure the remuneration package properly reflects the person’s duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. The Group does not engage the services of any remuneration consultants. Non-Executive remuneration arrangements The remuneration of Non-Executive Directors (NED) consists of Directors’ fees, payable in arrears. They serve on a month to month basis and there are no termination benefits payable. Non-Executive Directors are able to participate in share option-based incentive programmes in accordance with Group policy. When required to spend time on Group Business outside of NED duties, Directors are paid consulting fees on time spent and details of which are contained in the Remuneration Table disclosed in Section C of this Report. Remuneration of Non-Executive Directors are based on Vonex Limited / Financial Report for the year ended 30 June 20219 Directors’ Report fees approved by the Board of Directors and is set at levels to reflect market conditions and encourage the continued services of the Directors. The Group has provided variable remuneration incentive schemes to certain Non-Executive Directors as detailed in Note 31. Non-Executive Directors’ fees are determined within an aggregate directors’ fee pool limit, which will be periodically recommended for approval by shareholders. The maximum currently stands at $500,000 per annum as per Section 13.8 of the Company’s constitution and may be varied by ordinary resolution of the shareholders in general meeting. C Details of Remuneration The key management personnel (“KMP”) of the Group are the Directors and management of Vonex Limited detailed in the table below. Details of the remuneration of the Directors of the Group are set out below: Short-term benefits Post- employment benefits Share-based payment 30/06/2021 Salary & fees ($) Cash bonus ($) Long service leave ($) Super- annuation ($) Performance rights/options (I) ($) Total ($) Percentage remuneration consisting of performance rights/options for the year Directors Mr Fahey 286,000 Mr Ong Mr Vilensky Ms Hadad 60,000 60,000 60,000 Mr Gomersall 60,000 Total 526,000 - - - - - - 5,722 - - - - 27,170 5,700 5,700 5,700 5,700 364,525 683,417 317,428 383,128 196,328 262,028 181,650 247,350 181,650 247,350 5,722 49,970 1,241,581 1,823,273 53% 83% 75% 73% 73% 68% (I) Total includes issued options valued at $1,211,000 approved at Annual General Meeting on 27 November 2020. Vonex Limited / Financial Report for the year ended 30 June 202110 Directors’ Report Short-term benefits Post- employment benefits Share-based payment 30/06/2020 Salary & fees ($) Cash bonus ($) Long service leave ($) Super- annuation ($) Performance rights/options (iv) ($) Total ($) Percentage remuneration consisting of performance rights for the year Directors Mr Fahey (ii) 283,000 Mr Ong (ii) 57,000 Mr Vilensky (ii) 57,000 Ms Hadad (ii) 57,000 Mr Gomersall (i) (ii) Total 17,000 471,000 - - - - - - 5,428 26,885 19,734 335,047 - - - - 5,415 5,415 5,415 1,615 190,148 252,563 190,148 252,563 - - 62,415 18,615 5,428 44,745 400,030 921,203 6% 75% 75% 0% 0% 43% (i) Mr Gomersall (Non-Executive Director) (appointed on 28 February 2020) (ii) Executive and Non-Executive directors volunteered to reduce their fees by 22% for the period 1 April 2020 to 30 June 2020 The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Director Mr Fahey Mr Ong Mr Vilensky Ms Hadad Mr Gomersall Fixed Remuneration* At risk-LTI** 2021 47% 17% 25% 27% 27% 2020 94% 25% 25% 100% 100% 2021 53% 83% 75% 73% 73% 2020 6% 75% 75% 0% 0% *Fixed Remuneration includes short term benefits and post-employment benefits Performance rights are at risk - **Long term incentives are provided by way of the performance rights issued with long term performance milestones (Tranche 1,2 and 3). The percentages disclosed reflect the fair value of remuneration based on the value of the performance rights at grant date subject to future vesting conditions. Options are at risk - **Long term incentives are provided by way of options issued, exercisable from 1 Dec 2020 to 1 Dec 2023, at a exercise price of $0.37. Vonex Limited / Financial Report for the year ended 30 June 202111 Directors’ Report Remuneration Policy Non-Executive Directors Total remuneration for all Non-Executive Directors, is not to exceed $500,000 per annum as approved by shareholders. This does not include Consulting Fees. Non-Executive Directors received a fixed fee for their services of $60,000 per annum (excl. GST) plus superannuation for services performed. The Group has provided variable remuneration incentive schemes to certain Non-Executive Directors as detailed in Note 31. There are no termination or retirement benefits for non-executive directors (other than statutory superannuation). Executive Director Mr Matthew Fahey / Chief Executive Officer Outlined below is a summary of the material provisions of the Executive Services Agreement between the Company and Mr Matthew Fahey. Mr Fahey receives an annual salary of $250,000 plus statutory superannuation. Mr Fahey is also entitled to director fee of $36,000 per annum. Either party may terminate the Executive Services Agreement by giving six (6) months written notice. A bonus based on key performance indicators (“KPIs”) will be paid as follows: The Company may at any time during the Term or any extension thereof pay a performance-based bonus over and above the salary. In determining the extent of any performance based bonus, the Company shall take into consideration the key performance indicators of the Executive and the Company, as the Company may set from time to time, and any other matter that it deems appropriate and may issue shares in the Company to the Executive in lieu of cash if the Executive consents. Equity Instruments Issued on Exercise of Remuneration Options No equity instruments were issued during the year to Directors or key management personnel as a result of exercising remuneration options (2020: Nil). D Share-Based Compensation E Short term and long term incentives In prior financial years Mr Fahey, Mr Ong and Mr Vilensky were issued performance rights incentives for their work and ongoing commitment and contribution to the Company. The performance rights were issued in three tranches, each with different performance milestones. Refer to Note 31 for further details in respect to the performance rights granted. In the current financial year, all directors were issued options for their work and ongoing commitment and contribution to the Company. Refer to Note 31 for further details in respect to the options granted. Vonex Limited / Financial Report for the year ended 30 June 202112 Directors’ Report F Value of Options to Directors Options – Directors During the year Vonex Ltd issued 10,000,000 options in one tranche to directors as part of their remuneration. Type of options Grant date Expiry date Exercise price Value per option at grant date Date exercisable % vested during the year % forfeited during the year Financial year options vest Range of possible values relating to future payments Directors 27 Nov 2020 1 Dec 2023 $0.370 $0.1211 Between 1 Dec 2020 to 1 Dec 2023 100% - 2021 - When exercisable, each option is convertible into one ordinary share of Vonex Ltd. Further information on the options is set out in Note 31 to the Financial Statements. Total value of options issued is $1,211,000, breakdown as follows: Director Option Holding Mr Matthew Fahey Mr Nicholas Ong Mr David Vilensky Ms Winnie Lai Hadid Mr Jason Gomersall 3,000,000 2,500,000 1,500,000 1,500,000 1,500,000 $ Value 363,300 302,750 181,650 181,650 181,650 Vonex Limited / Financial Report for the year ended 30 June 202113 Directors’ Report G Equity Instruments Disclosures Relating to Key Management Personnel Share Holdings The numbers of shares in the Company held during the financial year by each Director and other key management personnel of the Group are set out below. 2021 Opening Balance Received as Remuneration Received During Year on Exercise of Options Net Change Other Closing Balance Directors Mr Matthew Fahey 6,408,291 Mr Nicholas Ong 2,644,645 Mr David Vilensky 2,550,000 Ms Winnie Lai Hadid Mr Jason Gomersall - - 11,602,936 - - - - - - - - - - - - 100,000 6,508,291 - - 58,823 285,000 443,823 2,644,645 2,550,000 58,823 285,000 12,046,759 Vonex Limited / Financial Report for the year ended 30 June 202114 Directors’ Report Deferred Performance Shares Holdings The table shows how many deferred KMP performance shares have been granted, vested and forfeited during the period. Year Granted No Granted Grant Date Value per share Grant Date value Vested value Forfeited value Maximum value yet to vest Mr Fahey Tranche 3 Tranche 2 Tranche 3 Mr Ong Tranche 3 Tranche 2 Tranche 3 Mr Vilensky Tranche 3 Tranche 2 Tranche 3 FY17 FY18 FY18 FY17 FY18 FY18 FY17 FY18 FY18 130,000 100,000 100,000 330,000 130,000 1,210,000 1,210,000 2,550,000 130,000 1,210,000 1,210,000 2,550,000 $0.45 $0.20 $0.20 $0.45 $0.20 $0.20 $0.45 $0.20 $0.20 $58,500 $20,000 $20,000 $58,500 $20,000 - $58,500 $58,500 $242,000 $242,000 $242,000 - $58,500 $58,500 $242,000 $242,000 $242,000 - - - - - - - - - - - - $20,000 - - $242,000 - - $242,000 The above tables excludes 8,500,000 Performance rights issued to Mr Matthew Fahey on 28 July 2017 in relation to Oper8tor rights. These rights have nil value and expire on 28 July 2022. Vonex Limited / Financial Report for the year ended 30 June 202115 Directors’ Report 2021 Opening Balance Vested during the period Net Change Other Closing Balance Directors Mr Matthew Fahey 8,830,000* Mr Nicholas Ong 2,550,000 Mr David Vilensky 2,550,000 13,930,000 - - - - - - - - 8,830,000 2,550,000 2,550,000 13,930,000 *8,500,000 Performance rights relate to Oper8tor rights issued on 28 July 2017. These rights have nil value and expire on 28 July 2022. Option Holdings The table shows how many deferred KMP options have been granted, vested and forfeited during the period. 2021 Opening Balance Granted during the period Exercised during the period Closing Balance Directors Mr Matthew Fahey - 3,000,000 Mr Nicholas Ong 52,000 2,500,000 Mr David Vilensky Ms Winnie Lai Hadid Mr Jason Gomersall - - - 1,500,000 1,500,000 1,500,000 52,000 10,000,000 - - - - - - 3,000,000 2,552,000 1,500,000 1,500,000 1,500,000 10,052,000 Vonex Limited / Financial Report for the year ended 30 June 202116 Directors’ Report H Other Transactions with Key Management Personnel Transactions with Related Parties The following transactions occurred with related parties: Services Provided Company secretarial, corporate compliance, bookkeeping and accounting fees from Minerva Corporate (director-related entity of Nicholas Ong) 2021 $ 56,788 2020 $ 74,161 Payments for legal fees from Bowen Buchbinder Vilensky (director-related entity of David Vilensky) 26,033 37,378 Receivable from and Payable to Related Parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Current Payables 2021 $ Trade payables to Minerva Corporate (director-related entity of Nicholas Ong) 9,900 2020 $ 4,950 I Additional Statutory Information Relationship between remuneration and the Group’s performance The following table shows key performance indicators for the Group over the last five years: * No closing share price as the company was unlisted ** Restated loss for the year. Refer to Note 32 for Restatement. 2021 2020 2019 2018 2017 Loss for the year $3,984,788 $705,964** $2,791,622 $14,713,402 $9,737,819 Closing Share Price 12.5 cents 11.0 cents 11.0 cents 14.0 cents N/A* KMP Incentives $1,241,581 $400,030 $342,538 $1,105,537 $702,000 Total KMP Remuneration $1,823,273 $921,203 $1,138,252 $1,734,754 $1,503,715 End of Audited Remuneration Report Vonex Limited / Financial Report for the year ended 30 June 202117 Directors’ Report Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Options At the date of this report the Company has the following options on issue: a) 14,500,000 options exercisable at $0.30 on or before 7 June 2023; b) 14,719,731 options exercisable at $0.20 on or before 30 November 2022; c) 3,215,060 options exercisable at $0.20 on or before 30 November 2022; d) 1,800,000 options exercisable at $0.20 on or before 30 November 2022; and e) 10,000,000 options exercisable at $0.37 on or before 1 December 2023. Environmental Regulation The Group’s operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory. Officer’s Indemnities and Insurance The Company has paid a premium for a contract insuring all Directors and executive officers of the Company and certain related bodies corporate against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. The Directors have not included in this report details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors and executive officers insurance liability contract as disclosure is prohibited under the terms of the contract. The Company has agreed to indemnify each person who is, or has been a director, officer or agent of the Company and/or of certain of its related bodies corporate against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as director, officer or agent, except where the liability arises out of conduct involving a lack of good faith. The Company is required to meet the full amount of any such liabilities, including costs and expenses for a period of seven years. No liability has arisen since the end of the previous financial year which the Company would, by operation of the above indemnities, be required to meet. Vonex Limited / Financial Report for the year ended 30 June 202118 Directors’ Report Performance Rights As at the date of this report the Company has 27,460,000 performance rights held with the following performance conditions: a) 780,000 convertible upon the Company reaching $10 million annualised revenue per annum in any quarter. These performance rights have vested but not yet converted to ordinary shares (i); b) 4,840,000 convertible upon the Company achieving audited gross revenue of $15 million in a financial year. These performance rights have vested but not yet converted to ordinary shares (ii); c) 4,840,000 convertible upon the Company achieving audited net profit after tax of $1 million in a financial year (ii); d) 2,000,000 convertible into ordinary shares upon completion of the beta version of the Oper8tor App and commencement of the official Oper8tor launch in Europe; e) 5,000,000 convertible into ordinary shares upon the Oper8tor App achieving 10 million active users; and f) 10,000,000 convertible into ordinary shares upon the Oper8tor App achieving 50 million active users;. (i) Notwithstanding the performance conditions above, all the performance rights will vest automatically if there is a trade sale of all or any part of the business or assets of the Company or if the Company merges with another company or is the subject of a successful takeover or if the multi-platform phone call and messaging communication app called “Oper8tor” is spun out into a separate Company. (ii) Notwithstanding the performance conditions above, all the performance rights will vest automatically if there is a trade sale of all or any part of the business or assets of the Company or if the Company merges with another company or is the subject of a takeover of 50.1% or more, or if the multi-platform phone call and messaging communication app called “Oper8tor” is spun out into a separate Company. Subject to achievement of the performance conditions, one share will be issued for each performance right that has vested on the same terms and conditions as the Company’s issued shares and will rank equally with all other issued shares from the issue date. Proceedings on Behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. Vonex Limited / Financial Report for the year ended 30 June 202119 Directors’ Report Non-Audit Services The Company may decide to employ the Auditor on assignments additional to their statutory audit duties. Details of the amounts paid or payable to the Auditor for audit and non-audit services provided during the year are set out below. The Board has considered the position and, in accordance with the advice received from the Audit Compliance and Risk Management Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The Directors are satisfied that the provision of non-audit services by the Auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act for the following reasons: • all non-audit services are reviewed by the Audit Compliance and Risk Management Committee to ensure they do not impact the impartiality; and • objectivity of the Auditor, none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the Auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms. Assurance Services Audit Services RSM Australia Partners Total remuneration for audit and assurance services Corporate Services RSM Australia Pty Ltd Total remuneration for corporate services 2021 $ 95,000 95,000 - - 2020 $ 79,000 79,000 31,025 31,025 Auditor Auditor’s Independence Declaration RSM Australia Partners was appointed as the Group’s auditor at the 2011 Annual General Meeting and continues in office in accordance with section 327 of the Corporations Act 2001. A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is included within this financial report. This Directors’ Report is signed in accordance with a resolution of the Board of Directors. Nicholas Ong Chairman 31 August 2021 Vonex Limited / Financial Report for the year ended 30 June 202120 Auditor’s Independence Declaration RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION RSM Australia Partners As lead auditor for the audit of the financial report of Vonex Limited for the year ended 30 June 2021, I declare Level 32, Exchange Tower that, to the best of my knowledge and belief, there have been no contraventions of: 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au As lead auditor for the audit of the financial report of Vonex Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of: AUDITOR’S INDEPENDENCE DECLARATION RSM AUSTRALIA PARTNERS the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (i) Perth, WA (ii) Dated: 31 August 2021 any applicable code of professional conduct in relation to the audit. TUTU PHONG Partner RSM AUSTRALIA PARTNERS Perth, WA Dated: 31 August 2021 TUTU PHONG Partner THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Vonex Limited / Financial Report for the year ended 30 June 202121 Consolidated Statement of Profit or Loss & Other Comprehensive Income Sales Revenue Cost of sales Gross Profit Other Revenues Disposal of mining royalties Administration Expenses Amortisation Account and audit fees Bad & doubtful debt expenses Contractor expenses Dealer commissions Depreciation expenses Directors’ fees Employee expenses Finance costs Insurance expense Impairment expense Legal fees Loss on disposal of non-current assets Occupancy expenses Repairs and maintenance Share based payment expense Stamp duty Travel expenses Loss before income tax Income tax benefit Net loss for the year Other comprehensive income for the year Note 2 4 3 4 4 4 16 31 2021 $ 18,259,243 2020 $ Restated 12,770,304 (12,737,896) (8,096,081) 5,521,347 4,674,223 956,278 - (1,416,444) (536,804) (109,118) (82,016) (1,081,592) (769,090) (321,325) (302,220) (3,579,201) (58,957) (129,426) (771,319) (104,958) (3,411) (22,190) (7,579) (1,269,776) (322) (22,260) (4,110,383) 125,595 (3,984,788) - 885,730 1,750,000 (1,109,404) (238,181) (123,906) (11,623) (556,492) (635,440) (330,075) (241,995) (3,592,062) (57,184) (94,596) - (46,954) (2,541) (511) (1,446) (770,573) (136,868) (107,931) (747,829) 41,865 (705,964) - Total comprehensive loss for the year (3,984,788) (705,964) Basic and diluted earnings per share of loss attributable to the owners of Vonex Limited (cents per share) (2.10) (0.45) The accompanying notes form part of these financial statements | Refer to note 32 for detailed information on Restatement of comparatives Vonex Limited / Financial Report for the year ended 30 June 202122 Consolidated Statement of Financial Position Current Assets Cash and cash equivalents Trade and other receivables Contract assets Other current assets Total Current Assets Non-Current Assets Intangible assets Plant and equipment Contract assets Right of Use Assets Other non-current assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Provisions Lease liability Total Current Liabilities Non-Current Liabilities Provisions Lease liability Deferred tax liability Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Note 9 10 11 12 13 16 11 17 12 19 18 20 18 20 5 21 22 27 2021 $ 3,658,416 1,684,355 60,676 463,858 5,867,305 4,507,400 335,630 7,918 908,037 109,244 5,868,229 11,735,534 3,888,885 521,842 346,815 4,757,542 121,031 648,513 632,509 1,402,053 6,159,595 5,575,939 2020 $ Restated 4,811,798 1,480,524 55,155 441,608 6,789,085 4,233,417 201,201 32,860 883,200 90,800 5,441,478 12,230,563 3,181,665 456,271 267,300 3,905,236 75,136 683,250 758,104 1,516,490 5,421,726 6,808,837 50,442,160 5,177,748 47,642,165 5,230,937 (50,043,969) (46,064,265) 5,575,939 6,808,837 The accompanying notes form part of these financial statements | Refer to note 32 for detailed information on Restatement of comparatives Vonex Limited / Financial Report for the year ended 30 June 202123 Consolidated Statement of Changes in Equity At 1 July 2019 45,484,270 (45,308,426) 3,158,579 3,334,423 Issued Capital Accumulated Losses Reserves $ $ $ Total $ At 1 July 2020 47,642,165 (46,064,265) 5,230,937 6,808,837 47,642,165 (46,064,265) 5,230,937 6,808,837 Comprehensive income Loss for the year Total comprehensive income / (loss) for the year - - (705,964) (705,964) Transactions with owners, in their capacity as owners Shares issued during the year 2,157,895 Vesting of performance shares and rights Share-based payment – options, performance shares and rights Capital-raising proceeds received in advance (net of costs) Retained earnings adjustment - adoption of AASB 16 Capital raising costs At 30 June 2020 - - - - - - - - - (49,875) - Comprehensive income Loss for the year Total comprehensive income / (loss) for the year - - (3,984,788) (3,984,788) Transactions with owners, in their capacity as owners Shares issued during the year Vesting of performance shares and rights Increase in asset reserve Share-based payment – options, performance shares and rights Capital-raising reserve transferred to share capital (net of costs) Retained earnings adjustment – reversal of options valuation expired 3 August 2020 Capital raising costs At 30 June 2021 1,478,210 20,000 - - 1,301,785 - - - - - - - 5,084 - - - - - (705,964) (705,964) 2,157,895 - 770,573 770,573 1,301,785 - - 1,301,785 (49,875) - - - - (20,000) 3,904 1,269,776 (1,301,785) (5,084) - (3,984,788) (3,984,788) 1,478,210 - 3,904 1,269,776 - - - 50,442,160 (50,043,969) 5,177,748 5,575,939 The accompanying notes form part of these financial statements Vonex Limited / Financial Report for the year ended 30 June 202124 Consolidated Statement of Cash Flows Note 26 32 Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Research and development tax offset Government grants Interest received Interest paid Net cash used in operating activities Cash Flows From Investing Activities Receipt of capital grant Payments for physical non-current assets Payments of stamp duty for business acquisition Payment to acquire business Proceeds from disposal of property, plant and equipment Proceeds from/(Repayment of) loans Proceeds from disposal of mining royalty Net movement in bonds Net cash provided by/(used) in investing activities Cash Flows From Financing Activities Proceeds from application funds held in trust, net of costs Net repayment of borrowings Leasing payments Net cash provided by financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Exchange rate adjustments Cash and cash equivalents at end of the financial year 9 The accompanying notes form part of these financial statements 2021 $ 17,223,379 (18,221,230) 541,661 163,570 1,090 (50,864) (342,394) 70,000 (161,021) (136,869) (334,367) 1,137 329 - (75,680) (636,471) - - (173,644) (173,644) (1,152,509) 4,811,798 (873) 3,658,416 2020 $ 12,129,637 (13,589,900) 629,569 101,500 6,458 (6,506) (729,242) - (73,164) - (444,180) 218 818 1,750,000 - 1,233,692 1,320,500 (362) (185,334) 1,134,804 1,639,254 3,173,355 (811) 4,811,798 Vonex Limited / Financial Report for the year ended 30 June 202125 Consolidated Notes to the Financial Statements The consolidated financial statements and notes represent those of Vonex Limited and the entities it controlled during the year (“the consolidated entity”). Vonex Limited is a public company, incorporated and domiciled in Australia. The address of the Company’s registered office and principal place of business is Level 8, 99 St Georges Terrace, Perth, WA, 6000. The separate financial statements of the parent entity, Vonex Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue by the Board on 31 August 2021. Note 1 Statement of Significant Accounting Policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: Conceptual Framework for Financial Reporting (Conceptual Framework) The consolidated entity has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards, but it has not had a material impact on the consolidated entity's financial statements. (a) Principles of Consolidation The consolidated financial statements incorporate the assets, liabilities and result of entities controlled by Vonex Limited at the end of the reporting period. A controlled entity is an entity over which Vonex Limited has the ability or right to govern the financial and operating policies so as to obtain benefits from the entity’s activities. In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated entity have been eliminated in full on consolidation. Where controlled entities have entered or left the consolidated entity during the year, the financial performance of those entities is included only for the period of the year that they were controlled. (b) Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated financial statements, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held Vonex Limited / Financial Report for the year ended 30 June 2021 26 Consolidated Notes to the Financial Statements equity interest shall form the cost of the investment in the separate financial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer. Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of profit and loss and other comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of profit and loss and other comprehensive income unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of profit or loss and other comprehensive income. (c) Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (revenue) is charged or credited outside profit or loss when the tax related to items that are recognised outside profit or loss. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (d) Plant and Equipment Each class of plant and equipment is carried at cost or fair value, less, where applicable, any accumulated depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed included the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. 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 profit or loss. Vonex Limited / Financial Report for the year ended 30 June 2021 27 Consolidated Notes to the Financial Statements Depreciation The depreciable amount of plant and equipment is depreciated on the straight line method over their useful lives commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Furniture and Fixtures Plant and Equipment Leasehold Improvements Motor Vehicles Computer Equipment Depreciation Rate 15% - 25% 15% - 33.3% 12% 20% 50% The asset’s residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. 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. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. (i) Plant and Equipment The asset’s residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. 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. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. (ii) Impairment of Assets At each reporting date, the consolidated entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss and other comprehensive income immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in the statement of profit and loss and other comprehensive income immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment testing is performed annually for intangible assets with indefinite useful lives. Vonex Limited / Financial Report for the year ended 30 June 2021 28 Consolidated Notes to the Financial Statements (e) Employee Entitlements Provision is made for the consolidated entity’s obligation for short-term employee benefits. Short-term employee benefits are benefits that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The consolidated entity’s obligations for short-term employee benefits such as wages and salaries are recognised as a part of current trade and other payables in the statement of financial position. The consolidated entity’s obligations for employees’ annual leave entitlements are recognised as provisions in the statement of financial position. Short-term employee benefits Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it’s carrying value is written off. 1. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. 2. Financial assets at fair value through other comprehensive income Liabilities for wages and salaries, including non- monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Other long-term employee benefits 3. Impairment of financial assets The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are 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 corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. (f) Provisions Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (g) Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided. The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset’s carrying value with a corresponding expense through profit or loss. Vonex Limited / Financial Report for the year ended 30 June 2021 29 Consolidated Notes to the Financial Statements (h) Cash and Cash Equivalents Sale of goods Cash and equivalents include cash on hand, deposits held at call with banks and other short term highly liquid investments. For the purpose of the statement of cash flows, cash includes deposits at call, which are readily convertible to cash on hand and subject to an insignificant risk of changes in value. (i) Revenue and Other Income Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability. Revenue from the sale of goods represents sales of customer equipment to consumer and corporate customers. Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods or service. Revenue arrangements with multiple deliverables Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable is considered to be a separate unit of accounting and is accounted for separately. Interest Revenue is recognised as the interest accrues using the effective interest rate method, which for floating rate financial assets is the rate inherent in the instrument. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. (j) Contract assets Contract assets are recognised when the consolidated entity has satisfied the performance obligations in the contract and either has not recognised a receivable to reflect its unconditional right to consideration or the consideration is not due. Contract assets are treated as financial assets for impairment purposes. (k) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use of sale. All other borrowing costs are recognised as an expense in the period in which they are incurred. Borrowing costs predominately consist of interest and other costs that the company incurs in connection with the borrowing of funds. Rendering of telecommunications services (l) Goods and Services Tax (“GST”) Revenue from the rendering of retail telecommunications services includes the provision of data, internet, voice and other services. Revenue from the rendering of data and internet services to consumers and corporate customers is recognised on a straight-line basis over the period the service is provided. Revenue for voice services is recognised at completion of the call. Revenue from wholesale hosted PBX service customers is charged based on the number of PBX registrations recorded on a daily basis and invoiced monthly in arrears. Where revenue for services is invoiced to customers and/ or received in advance, the amount that is unearned at a reporting date is recognised in the statement of financial position as deferred income, and its recognition in the profit or loss is deferred until the period to which the invoiced amount relates. The company is registered for GST. Revenues, expenses and assets and liabilities are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (“ATO”). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the item of the expense. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Receivables and payables in the statement of financial position are shown inclusive of GST. 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 ATO, are presented as operating cash flows. Vonex Limited / Financial Report for the year ended 30 June 2021 30 Consolidated Notes to the Financial Statements (m) Trade and other payables Impairment These amounts represent liabilities for goods, services and other commitments provided to the consolidated entity at the end of the reporting period that remain unpaid. Trade payables are recognised at their transaction price. Trade payables are obligations on the basis of normal credit terms. Trade payables are predominately unsecured. (n) Trade and other receivables All trade receivables are recognised initially at the transaction price (i.e. cost) less any provision for impairment and allowance for any uncollectable amounts. Receivable terms for the consolidated entity are due for settlement within 4-30 days from the date of the invoice. Collect ability of trade debtors is reviewed on an ongoing basis. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. At the end of each reporting period, the carrying amount of trade and other receivables are reviewed to determine whether there is any objective evidence that the amounts are not recoverable. If so, an impairment loss is recognised immediately in the statement of profit or loss and other comprehensive income. When identified, debts which are known to be uncollectible are written off. (o) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (p) Critical Accounting Estimates and Judgements The Directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the consolidated entity. There have been no judgements, apart from those involving estimation, in applying accounting policies that have a significant effect on the amounts recognised in these financial statements. Following is a summary of the key assumptions concerning the future and other key sources of estimation at reporting date that have not been disclosed elsewhere in these financial statements. Share based payment transactions The consolidated entity measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by management using an appropriate valuation model that use estimates and assumptions. Management exercises judgement in preparing the valuations and these may affect the value of any share-based payments recorded in the financial statements (refer to notes 30 for further details). The consolidated entity assesses impairment at the end of each reporting period by evaluation conditions and events specific to the consolidated entity that may be indicative of impairment triggers. Validity for future operations are all elements that are considered. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash- generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. (q) Right-Of-Use Assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of- use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. (r) Segment Reporting Identification of reportable operating segments The consolidated entity is organised into three operating segments based on differences in products and services provided: retail telecommunications, wholesale telecommuncations and corporate. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. Vonex Limited / Financial Report for the year ended 30 June 2021 31 Consolidated Notes to the Financial Statements Types of products and services The principal products and services of each of these operating segments are as follows: Retail Telecommunications: engaged in the sale of hardware and the full suite of telecommunication services including the provision of data, internet, voice (including IP voice) and billing services within Australia. Wholesale Telecommunications: provides wholesale customers access to the core Vonex PBX, call termination services, NBN and 4G mobile broadband at wholesale rates via a “white label” model. Corporate: engaged in managing the corporate affairs of the Group, including capital-raising its headquarters central functions as well as its risk management and self-insurance activities along with special development projects. (s) Intangibles Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Customer List Customer List is amortised on a straight line basis over the life of the contracts. The residual values and useful lives are reviewed annually at each balance date and adjusted, if appropriate. Trademarks Trademark is amortised on a straight line basis over the period of 10 years from April 2013. The residual values and useful lives are reviewed annually at each balance date and adjusted, if appropriate. Patents Patent is amortised on a straight line basis over the period of 10 years from April 2013. The residual values and useful lives are reviewed annually at each balance date and adjusted, if appropriate. Customer & Supply contracts (2SG) The customer and supply contract is being amortised on a straight-line basis over two periods dependent on contract terms (5 years and 10 years). The residual values and useful lives are reviewed annually at each balance date and adjusted, if appropriate. (t) Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. (u) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (v) Earnings Per Share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by weighted average number of ordinary shares outstanding during the financial year, adjusted for the bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (w) New, revised or amending Accounting Standards and Interpretations adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2021. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Vonex Limited / Financial Report for the year ended 30 June 2021 32 Consolidated Notes to the Financial Statements Note 2 Revenue Revenue from Customers Sales revenue Disaggregation of Revenue The disaggregation of revenue from customers is as follows: 2021 $ 2020 $ 18,259,243 12,770,304 Retail Wholesale Corporate Total Consolidated - 30 June 2021 $ $ Major service lines Telephony Internet Hardware Cabling/Infrastructure/Security Hosted PBX Geographic regions Australia 6,049,139 2,309,863 2,567,436 4,895,422 707,482 106,103 73,050 - - 1,550,748 9,430,160 8,829,083 9,430,160 8,788,318 United States of America - 40,765 9,430,160 8,829,083 Consolidated - 30 June 2020 Major service lines Telephony Internet Hardware Hosted PBX Geographic regions Australia 6,141,624 301,662 1,780,553 2,146,175 845,336 63,135 - 1,491,819 8,767,513 4,002,791 8,767,513 3,956,401 United States of America - 46,390 8,767,513 4,002,791 $ - - - - - - - - - - - - - - - - - $ 8,359,002 7,462,858 780,532 106,103 1,550,748 18,259,243 18,218,478 40,765 18,259,243 6,443,286 3,926,728 908,471 1,491,819 12,770,304 12,723,914 46,390 12,770,304 Vonex Limited / Financial Report for the year ended 30 June 202133 Consolidated Notes to the Financial Statements Note 3 Other Income Other Income Interest received Research & development tax offset Disposal of operating lease Government Incentive Rebate Debt forgiveness Gain on disposal of plant and equipment Other income Total other income 2021 $ 1,091 541,661 42,788 150,000 21,864 78,683 120,191 2020 $ 6,816 629,569 - 167,500 20,080 - 61,765 956,278 885,730 Vonex Limited / Financial Report for the year ended 30 June 202134 Consolidated Notes to the Financial Statements Note 4 Loss for the Year Loss before income tax includes the following specific expenses: Expenses Cost of sales Cost of sales Depreciation Leasehold improvements Plant and equipment Office and computer equipment Motor vehicles Licences Land and buildings right-of-use assets Plant and equipment right-of-use assets Total depreciation Amortisaiton Patents and trademarks Customer list Customer and supplier contracts (2SG) Total amortisation Finance costs 2021 $ Restated 2020 $ (12,737,896) (8,096,081) (8,848) (7,747) (45,989) (6,289) - (232,010) (20,442) (9,185) (12,537) (64,097) - (1,718) (226,670) (15,868) (321,325) (330,075) (9,949) (72,082) (454,773) (14,508) (72,082) (151,591) (536,804) (238,181) Interest and finance charges payable/paid on lease liabilities Interest charges on insurance premium funding and credit cards Total finance costs (49,808) (9,149) (58,957) (52,393) (4,791) (57,184) Vonex Limited / Financial Report for the year ended 30 June 202135 Consolidated Notes to the Financial Statements Note 5 Income Tax Expense (a) Income Tax Expense Current tax expense Deferred tax expense Income tax expense (b) Reconciliation 2021 $ - (125,595) (125,595) Restated 2020 $ - (41,865) (41,865) The prima facie tax on the loss is reconciled to income tax expense as follows: Loss for the year (4,110,383) (747,829) Prima facie tax expense at 25% (2020:26%) (1,027,596) (194,436) Non-deductible expenses Non-assessable income Deferred tax asset not brought to account Income tax benefit (c) Deferred Tax Asset 531,720 (37,500) 407,781 (125,595) Deferred tax asset not brought to account comprises the future benefits at applicable tax rates: 2021 $ 203,701 (210,311) 159,181 (41,865) 2020 $ Tax losses – revenue (resident) 5,364,624 5,435,793 Accruals and provisions Business related costs Other 210,967 - (86,805) 160,152 100,702 (12,223) 5,488,785 5,684,424 Vonex Limited / Financial Report for the year ended 30 June 202136 Consolidated Notes to the Financial Statements (d) Deferred Tax Liabilities Deferred tax liability of $632,509 (2020: $758,104). Resident tax losses calculated at the Australian income tax rate of 25% (2020:26%). This asset has not been recognised as an asset in the statement of financial position as its realisation is not considered probable. The asset will only be obtained if: (a) the company derives future assessable income of a nature and of an amount sufficient to enable the asset from the deductions for the loss to be realised; (b) the company continues to comply with the conditions for deductibility imposed by the law; and (c) no changes in tax legislation adversely affect the consolidated entity in realising the asset from deductions for the losses. Refer to note 32 for detailed information on Restatement of comparatives. Note 6 Key Management Personnel Disclosures The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Share-based payments 2021 $ 531,722 49,970 1,241,581 1,823,273 2020 $ 476,428 44,745 400,030 921,203 Vonex Limited / Financial Report for the year ended 30 June 202137 Consolidated Notes to the Financial Statements Note 7 Auditor’s Remuneration Remuneration of the auditor Auditing or reviewing the financial report Other services Note 8 Earnings per Share 2021 $ 95,000 - 95,000 2021 $ 2020 $ 79,000 31,025 110,025 Restated 2020 $ Loss for the year (3,984,788) (705,964) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic loss per share No. of Shares No. of Shares 189,358,459 156,437,810 There is no dilution of shares due to options as the potential ordinary shares are not dilutive and are therefore not included in the calculation of diluted loss per share. Note 9 Cash and Cash Equivalents Cash on hand Cash at bank 2021 $ 1,352 2020 $ 1,352 3,657,064 4,810,446 3,658,416 4,811,798 Vonex Limited / Financial Report for the year ended 30 June 202138 Consolidated Notes to the Financial Statements Note 10 Trade and Other Receivables Current Trade debtors Less: Allowance for expected credit losses Other debtors 2021 $ 1,112,865 (66,106) 1,046,759 637,596 1,684,355 2020 $ 696,784 (43,635) 653,149 827,375 1,480,524 Allowance for expected credit losses The consolidated entity has recognised a loss of $25,775 in profit or loss in respect of the expected credit losses for the year ended 30 June 2021. The ageing of the receivables and allowance for expected credit losses provided for the above are as follows: Consolidated 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Expected credit loss rate 2021 Carrying amount 2021 Allowance for expected credit losses 2021 % 0% 11% 100% $ 929,039 132,959 50,867 1,112,865 $ - 15,239 50,867 66,106 Movements in the allowance for expected credit losses (2021: provision for impairment of receivables) are as follows: Reconciliation: Opening balance Additions Receivables written off during the year as uncollectable Closing balance Consolidated 2021 $ 43,635 25,775 (3,304) 66,106 2020 $ 39,400 11,623 (7,388) 43,635 Vonex Limited / Financial Report for the year ended 30 June 202139 Consolidated Notes to the Financial Statements Note 11 Current Assets - Contract Assets Current Contract assets Non Current Contract assets Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at the beginning of the year Additional provision Transfer to sales adjustments Balance at the end of the year Note 12 Other Assets Current Bonds/deposits paid Works in progress Inventory Prepayments Non Current Bonds/deposits paid (i) 2021 $ 60,676 2020 $ 55,155 7,918 32,860 88,015 115,536 (134,957) 68,594 2021 $ 38,500 43,942 94,926 286,490 463,858 109,244 109,244 56,162 96,033 (64,180) 88,015 2020 $ 14,314 - 56,869 370,425 441,608 90,800 90,800 (I) Covers bank guarantee facilities that are in place securing leased premises for staff and operations based in Brisbane, QLD, Sydney, NSW and bond paid on office premises in Perth, WA. Funds held in a bank term deposit are securing the bank guarantee facility. The bank guarantee facilities will be in place for the term of the property lease. Vonex Limited / Financial Report for the year ended 30 June 202140 Consolidated Notes to the Financial Statements Note 13 Intangible Assets Goodwill Less: Accumulated amortisation Intangible assets – provisionnaly acquired (Nextel) Less: Accumulated amortisation Customer list Less: Accumulated amortisation Acquisition of IP (Oper8tor) Less: Accumulated amortisation Customer & Supply contracts (2SG) Less: Accumulated amortisation Patents and trademarks - at cost Less: Accumulated amortisation Domain name acquisition 2021 $ 524,140 - 524,140 1,542,326 - 1,542,326 720,081 (588,397) 131,684 600,000 (600,000) - 2,908,977 (606,364) 2,302,613 222,130 (217,564) 4,566 2,071 2,071 Restated 2020 $ 524,140 - 524,140 - - - 720,081 (516,315) 203,766 600,000 - 600,000 2,908,977 (151,591) 2,757,386 182,350 (36,296) 146,054 2,071 2,071 4,507,400 4,233,417 Vonex Limited / Financial Report for the year ended 30 June 202141 Consolidated Notes to the Financial Statements Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Customer List Goodwill (a) Intangible Assets – Provisionally Acquired (Nextel) (b) Oper8tor Patents and trademarks Domain name Contract assets from 2SG (a) Total Consolidated Balance at 30 June 2019 275,848 - Additions/(Disposal) - 524,140 Amortisation expense (72,082) - Balance at 30 June 2020 203,766 524,140 - - - - 600,000 103,221 2,071 - 981,140 - - 57,341 (14,508) - - 2,908,977 3,490,458 (151,591) (238,181) 600,000 146,054 2,071 2,757,386 4,233,417 Additions/(Disposal) - Amortisation expense (72,082) Impairment expense (i) - - - - 1,542,326 - - - - 39,780 (9,949) (600,000) (171,319) - - - - 1,582,106 (454,773) (536,804) - (771,319) Balance at 30 June 2021 131,684 524,140 1,542,326 - 4,566 2,071 2,302,613 4,507,400 (i) During the financial year the Company advised that it was working with Ragnar Capital Partners LLP (Ragnar) regarding various funding options for the continuation of the Oper8tor development along with advising on 29 January 2021 that it does not anticipate committing further development capital to the project. The ability to identify and engage with the right technical and financial partners to guide Oper8tor’s further development has been unsuccessful to date. As a result, the Company has taken the decision to write down carrying values pertaining to the Oper8tor development including any values attributed to the national and international patents. (a) Business combination – 2SG Wholesale Pty Ltd On 28 February 2020, Vonex Ltd acquired the business of 2SG Wholesale Pty Ltd (‘2SG’). 2SG Wholesale is a telecommunications and data wholesaler based in Brisbane, Queensland which provides Australian Managed Service Providers, ISPs and System Integrators with access to the latest in hardware and connectivity solutions from leading brands. 2SG ’s mobile broadband capability provides Australian ISPs the opportunity to sell a wireless broadband solution via the Optus 4G Network. Integration with Australia’s premier carriers facilitates the delivery of the latest fixed line, mobile connectivity and hardware solutions country-wide. The intangible assets of $2,908,977 represents the expansion of Vonex’s diversified wholesale service offerings commencement as it expands its brand and exposure within the Australia telecommunications market along with extensive cross- sell opportunities within 2SG’s customer base acquired as part of the total consideration. The purchase price was recalculated during the year and the comparative balances restated, please refer to note 32. The recalculation of the acquisition gave rise to a deferred tax liability of $799,969 in respect of this acquisition and $524,140 of goodwill. The customer and supply contract of $2,908,977 is being amortised on a straight-line basis over two periods dependent on the contract term (5 years and 10 years). (b) Business combination – Nextel Pty Ltd On 3 February 2021, Vonex Ltd acquired the business of Nextel Pty Ltd (‘Nextel’). Nextel is a Sydney, NSW based business providing telecommunications services to business customers and is recognised as an industry leader in the design, installation and maintenance of voice, data and communications networks. It is an established single-source provider to small-to-medium enterprise (SME) businesses with expertise in rolling out wireless, fibre and RFID networks, as well as delivering structured cabling, telephony systems and electrical fit outs to large-scale projects. The intangible assets of $1,542,326 represents a substantial enhancement of Vonex’s presence in the Sydney and NSW markets for telco services to small-to-medium enterprises (SMEs), adding market-leading products and services will create opportunities for cross-selling and product expansion through a growing national SME customer. Vonex Limited / Financial Report for the year ended 30 June 2021 Revenue The value-in-use model is based on the budget approved by the Board. The forecast budget process was developed based on revenue expectations for the year built around existing customer contracts along with ongoing cross-selling opportunities withing the existing wholesale customer base to sustain growth. Sensitivities As disclosed in note 1p, the Board has made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. The sensitivities are as follows: • Revenue growth rate would need to decrease to 2.3% or lower before goodwill would need to be impaired, with all other assumptions remaining constant; or • The pre-tax discount rate would be required to increase to 14.2% or more before goodwill would need to be impaired, with all other assumptions remaining constant. 42 Consolidated Notes to the Financial Statements Key Assumptions Used for Value-in-Use Calculations The recoverable amount of the CGU within the business segment is determined on the basis of value-in-use (VIU). In the Wholesale CGU, our experience and continued expansion in the wholesale telecommunications sector and opportunities in sustaining wholesale underpins the forecast growth. The following describes the assumptions on which management has based its cash flow projections when determining value in use: Revenue growth rate The growth rate represents a steady indexation rate which does not exceed management’s expectations of the long term average growth rate for the business in which each CGU operates. The rate applied in the cash flow projection is 4%. Discount rate For the Wholesale CGU, the pre-tax discount rate applied to cash flow projections is 11.3%. Cash flows Value-in-use calculations use cash flow projections from approved budgets based on past performance and expectations for the future covering a four year period. Note 14 Subsidiaries (a) Parent Entity The parent entity within the Group is Vonex Ltd. (b) Subsidiaries Subsidiaries IP Voice and Data Pty Ltd (ABN 45 147 537 871) Oper8tor Pty Ltd (ABN 14 601 220 633) Vonex Wholesale Pty Ltd (ABN 98 138 093 482) Subsidiaries of IP Voice and Data Pty Ltd Ownership Interest Country of incorporation Class of shares 2021 AUS AUS AUS Ordinary Ordinary Ordinary 100% 100% 100% 2020 100% 100% 100% Itrinity Australia Pty Ltd (ACN 131 196 886) AUS Ordinary 100% 100% Vonex Limited / Financial Report for the year ended 30 June 202143 Consolidated Notes to the Financial Statements Note 15 Parent Entity Disclosures Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Financial Performance Loss for the year Other comprehensive income Total comprehensive loss for the year 2021 $ 3,392,528 4,536,435 7,928,963 775,796 2,301,389 3,077,185 4,851,778 Restated 2020 $ 5,013,545 4,342,741 9,356,286 715,014 2,628,314 3,343,328 6,012,958 116,101,056 113,301,061 5,161,685 5,216,335 (116,410,963) (112,504,438) 4,851,778 6,012,958 (3,912,144) - (3,912,144) 3,902 - 3,902 Guarantees Commitments for expenditure Vonex Ltd has entered into a parental guarantee for one of its subsidiaries in connection with Wholesale Broadband services being acquired from NBN Co. (2020: nil). Vonex Ltd has no commitments to acquire property, plant and equipment, and has no contingent liabilities (2020: nil). Vonex Limited / Financial Report for the year ended 30 June 202144 Consolidated Notes to the Financial Statements Note 16 Plant and Equipment Leasehold improvements At cost Accumulated depreciation Plant and Equipment At cost Accumulated depreciation Office & Computer equipment At cost Accumulated depreciation Licenses & Development (inc. software) At cost Accumulated depreciation Motor Vehicles At cost Accumulated depreciation 2021 $ 89,257 (16,271) 72,986 115,021 (75,986) 39,035 520,612 (367,214) 153,398 249,587 (249,587) - 76,500 (6,289) 70,211 2020 $ 39,128 (14,528) 24,600 115,024 (71,915) 43,109 423,050 (289,558) 133,492 249,587 (249,587) - - - - Total plant and equipment 335,630 201,201 Vonex Limited / Financial Report for the year ended 30 June 202145 Consolidated Notes to the Financial Statements Movements in Carrying Amounts Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year: Leasehold Improvements Plant & Equipment Office & Computer Licenses & Development Motor Vehicles Balance at 1 July 2019 28,940 56,626 127,195 1,718 Additions 4,845 1,561 70,394 Disposal / Write off - (2,541) - - - Depreciation (9,185) (12,537) (64,097) (1,718) Carrying amount at 30 June 2020 24,600 43,109 133,492 Balance at 1 July 2020 24,600 43,109 133,492 Additions 57,333 6,724 66,156 Disposal / Write off (99) (3,051) (261) Depreciation (8,848) (7,747) (45,989) Carrying amount at 30 June 2021 72,986 39,035 153,398 - - - - - - Total 214,479 76,800 (2,541) (87,537) 201,201 201,201 - - - - - - 76,500 206,713 - (3,411) (6,289) (68,873) 70,211 335,630 Vonex Limited / Financial Report for the year ended 30 June 202146 Consolidated Notes to the Financial Statements Note 17 Right of Use Assets Leasehold improvements Land and buildings – right of use Accumulated depreciation Plant and Equipment Plant and equipment – right of use Accumulated depreciation 2021 $ 1,323,695 (458,680) 865,015 79,333 (36,311) 43,022 2020 $ 1,046,405 (226,670) 819,735 79,333 (15,868) 63,465 908,037 883,200 The consolidated entity leases land and buildings for its offices under agreements of between one to four years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The addition to right-of-use assets during the year were $277,290. The consolidated entity leases office equipment under agreements of less than two years. Vonex Limited / Financial Report for the year ended 30 June 202147 Consolidated Notes to the Financial Statements Note 18 Provisions Current Annual leave Long service leave Non Current Long service leave Make good 2021 $ 353,275 168,567 521,842 68,397 52,634 121,031 Provision for employee benefits represents amounts accrued for annual leave and long service leave. Movements in Carrying Amounts Carrying amount at the start of the year Additional provisions recognised Amounts used 2021 $ 531,407 358,238 (246,772) 2020 $ 326,242 130,029 456,271 46,685 28,451 75,136 2020 $ 504,654 367,636 (340,883) Carrying amount at the end of the year 642,873 531,407 The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the consolidated entity does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. However, these amounts must be classified as current liabilities since the consolidated entity does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. The non-current portion for this provision pertains to amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service. Vonex Limited / Financial Report for the year ended 30 June 202148 Consolidated Notes to the Financial Statements Note 19 Trade and Other Payables Trade payables PAYG withholding GST Superannuation guarantee Other payables and accruals Trade creditors are expected to be paid within agreed terms. Note 20 Lease Liability Current Chattel mortgage leases (i) Lease liability Non Current Chattel mortgage leases (i) Lease liability 2021 $ 3,128,712 87,943 66,726 87,619 517,885 2020 $ 1,755,852 154,346 79,534 73,062 1,118,871 3,888,885 3,181,665 2021 $ 42,926 303,889 346,815 42,444 606,069 648,513 2020 $ - 267,300 267,300 - 683,250 683,250 Refer to note 32 for detailed information on Restatement of comparatives. (i) On 2 June 2021 a new Chattel Mortgage facililty was entered into to payout the existing finance lease obligations relating to 4 motor vehicles and specialised equipment acquired with the Nextel business acquisition. Vonex Limited / Financial Report for the year ended 30 June 202149 Consolidated Notes to the Financial Statements Note 21 Issued Capital Fully paid ordinary shares 50,442,160 193,133,473 47,642,165 170,922,309 2021 2020 $ No. $ No. Movements in Ordinary Shares $ No. Issue Price $ Balance at 30 June 2019 45,484,270 149,343,362 Issue of shares to settle acquisition of 2SG 02/03/2020 2,157,895 21,578,947 0.10 Balance at 30 June 2020 47,642,165 170,922,309 Issue of shares on placement 01/07/2020 1,400,000 14,736,843 0.095 Issue of shares on conversion of Vodia performance rights Issue of shares to settle service provider and for employee entitlements 01/07/2020 20,000 100,000 0.20 21/09/2020 220,513 1,750,000 0.126 Issue of shares to settle acquisition of Nextel 03/02/2021 1,238,129 5,502,795 Issue of shares to settle service provider 14/05/2021 19,569 121,526 0.225 0.161 Capital raising costs (98,216) Balance at 30 June 2021 50,442,160 193,133,473 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. At the shareholders meetings each ordinary share is entitled to one vote. The company does not have authorised share capital and there is no par value for shares. Capital Risk Management The Company is not subject to any externally imposed capital requirements. Management’s objectives when managing capital is to ensure the company continues as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders. The company’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. Vonex Limited / Financial Report for the year ended 30 June 202150 Consolidated Notes to the Financial Statements The working capital position of the company at 30 June 2021 and 30 June 2020 are as follows: Total borrowings (including trade and other payables) Less: cash and cash equivalents Net debt Total equity Total capital Note 22 Reserves Asset revaluation reserve Options premium reserve Share based payments reserve Capital raising reserve Balance at the end of the year Asset Revaluation Reserve Balance at the beginning of the year Increase in reserve Reduction in reserve – disposal of assets Balance at the end of the year The reserve records revaluations of non-current assets. 2021 $ 3,888,885 (3,658,416) 230,469 5,575,939 5,806,408 2021 $ 18,506 3,067,212 2,092,030 - 5,177,748 2021 $ 14,602 3,904 - 18,506 2020 $ 3,181,665 (4,811,798) (1,630,133) 6,808,837 5,178,704 2020 $ 14,602 1,861,296 2,053,254 1,301,785 5,230,937 2020 $ 14,602 - - 14,602 Vonex Limited / Financial Report for the year ended 30 June 202151 Consolidated Notes to the Financial Statements Options Premium Reserve Balance at the beginning of the year Expense relating to options issued Options expired Balance at the end of the year Share-Based Payments Reserve 2021 $ 1,861,296 1,211,000 (5,084) 3,067,212 2020 $ 1,861,296 - - 1,861,296 2021 $ 2020 $ Balance at the beginning of the year 2,053,254 1,282,681 Expense related to performance rights issued 20 September 2016 Expense related to Vodia performance shares issued 14 July 2018 Expense related to performance rights issued 28 July 2017 Conversion of Vodia Performance Shares to ordinary shares - - 58,776 (20,000) 26,285 1,887 742,401 - Balance at the end of the year 2,092,030 2,053,254 The reserve records the valuation of performance shares and performance rights issued to vendors (shares) and key management personnel (rights). Capital Raising Reserve Balance at the beginning of the year Share capital received in advance Capital raising costs paid in advance Transfer to ordinary share capital Balance at the end of the year 2021 $ 1,301,785 - - (1,301,785) - 2020 $ - 1,400,000 (98,215) - 1,301,785 The reserve records fund received in advance for the issue of share capital (net of associated costs). Vonex Limited / Financial Report for the year ended 30 June 202152 Consolidated Notes to the Financial Statements Note 23 Contingent Liabilities and Contingent Assets Contingent Liabilities There were no known contingent liabilities at reporting date (2020: nil). Contingent Assets There are contingent assets at reporting date of $750,000 (2020: $750,000). Vonex Ltd may receive up to $750,000 in future years in relation to the disposal of its iron ore production royalties derived from the Koolyanobbing Iron Ore Project. The company may receive this in two tranches subject to the following milestones: • $250,000 cash payable upon three million dry metric tonnes of iron ore being produced and accounted for in royalty invoices from M77/1258 • $500,000 cash payable upon five million dry metric tonnes of iron ore being produced and accounted for in royalty invoices from M77/1258 Basis of accounting for purposes of report by operating segments Unless stated otherwise, all amounts reported within the operating segments are by determined in accordance with accounting standards adopted within the annual financial statements. Segment assets and liabilities Segment assets and liabilities have been identified based on where the direct relationship that exists in the provision of services within the two main operating segments. Unallocated items Items of revenue, expense, assets and liabilities that are not allocated to operating segments if they are considered part of the core operations of any segment. Note 25 Operating Segments Identification of reportable segments The Consolidated entity has identified its operating segments based its service offerings, which represents retail and wholesale services within the telecommunications industry. The three main operating segments are: Retail: engaged in the sale of hardware and the full suite of telecommunication services including the provision of data, internet, voice (including IP voice) and other services within Australia. Wholesale: provides wholesale customers access to the core Vonex PBX, call termination services, NBN and 4G mobile broadband at wholesale rates via a “white label” model. Corporate: engaged in managing the corporate affairs of the Group, including capital-raising its headquarters central functions as well as its risk management and self-insurance activities along with special development projects such as the Oper8tor App. Intercompany transactions: sales are made and receivables/payables recognised within the group which are removed via adjustment. Vonex Limited / Financial Report for the year ended 30 June 202153 Consolidated Notes to the Financial Statements Segment Information The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2021 and 30 June 2020 are as follows: 30 June 2021 Wholesale Retail Corporate Segment Performance $ $ External customer sales 10,416,583 9,510,901 $ - Other revenues Interest received 164,703 138,398 652,086 404 446 241 Intercompany transactions $ Total $ (1,668,241) 18,259,243 - - 955,187 1,091 Total segment revenues 10,581,690 9,649,745 652,327 (1,668,241) 19,215,521 EBITDA 148,961 511,549 (3,083,579) Depreciation and amortisation (109,431) (235,020) (513,678) Impairment charges Interest revenue Finance costs - 404 - 446 (771,319) 241 (22,589) (21,386) (14,982) Segment loss before income tax expense 17,345 255,589 (4,383,317) Income tax benefit 125,595 Segment loss after income tax expense 17,345 255,589 (4,257,722) - - - - - (2,423,069) (858,129) (771,319) 1,091 (58,957) (4,110,383) 125,595 (3,984,788) Segment assets 3,253,349 3,795,398 5,190,608 (503,820) 11,735,534 Total assets 11,735,534 Segment liabilities 2,385,018 1,179,008 3,099,389 (503,820) 6,159,595 Total liabilities 6,159,595 Vonex Limited / Financial Report for the year ended 30 June 202154 Consolidated Notes to the Financial Statements 30 June 2020 Wholesale Retail Corporate Total Segment Performance $ $ External customer sales 4,002,791 8,767,513 $ - $ 12,770,304 Other revenues Interest received 118,095 63,470 2,447,349 2,628,914 171 - 6,645 6,816 Total segment revenues 4,121,057 8,830,983 2,453,994 15,406,034 EBITDA 336,014 433,500 (898,719) (129,205) Depreciation and amortisation (56,586) (122,993) (388,677) (568,256) Interest revenue Finance costs 171 - 6,645 (11,452) (21,986) (23,746) 6,816 (57,184) Segment loss before income tax expense 268,147 288,521 (1,304,497) (747,829) Income tax benefit 41,865 41,865 Segment loss after income tax expense 268,147 288,521 (1,262,632) (705,964) Segment assets 1,823,995 3,305,307 7,101,261 12,230,563 Total assets 12,230,563 Segment liabilities 1,244,692 1,016,563 3,160,471 5,421,726 Total liabilities 5,421,726 Vonex Limited / Financial Report for the year ended 30 June 202155 Consolidated Notes to the Financial Statements Note 26 Cash Flow Information (a) Reconciliation of cash flows from operations with loss after Income Tax Loss after income tax Non-cash items Depreciation and amortisation expense Share based payments Loss on disposal of assets/investments Bad debts Interest adjustments Debt forgiven Impairment expense Changes in assets and liabilities Trade and other receivables (current) Other assets Provisions Trade and other payables Deferred tax liability Cash flow used in operating activities Note 27 Accumulated Losses 2021 $ Restated 2020 $ (3,984,788) (705,964) 858,129 1,269,776 3,411 82,016 49,327 (13,975) 771,319 (203,831) 40,693 111,466 799,658 (125,595) (342,394) 568,256 770,573 2,541 11,623 52,393 (11,821) - (891,863) (110,621) 26,754 (399,248) (41,865) (729,242) 2021 $ 2020 $ Accumulated losses at beginning of financial year (46,064,265) (45,308,426) Net loss attributable to members of the company at end of financial year (3,984,788) Retained earnings adjustment – adoption of AASB 16 Retained earnings adjustment – reversal of options valuation expired 3 August 2020 - 5,084 (705,964) (49,875) - Accumulated losses at end of financial year (50,043,969) (46,064,265) Vonex Limited / Financial Report for the year ended 30 June 202156 Consolidated Notes to the Financial Statements Note 28 Events After the Reporting Period Subsequent to the reporting period on 30 July 2021 Vonex raised $2,475,000 in a share placement via the issue of 22,502,051 ordinary fully-paid shares at $0.11 per share, as part of the two-tranche placement announced 23 July 2021. On 30 August 2021, shareholders approved the issue of an additional 86,588,858 shares at $0.11 per shares pursuant to tranche 2, which will raise an additional $9.525m. Subsequent to the reporting period on 9 August 2021 Vonex has drawn down a $16m debt facility from Longreach Credit Investors to part fund the initial $20 million consideration payable by Vonex on completion of the acquisition of MNF Group’s Direct business. Subsequent to the reporting period on 18 August 2021 Vonex announced that its SPP received strong support and was heavily over-subscribed with in excess of $3.7 million of demand from eligible Vonex shareholders. On 19 August 2021, Vonex issued 18,181,485 shares to the SPP subscribers. COVID-19 On 31 January 2020, the World Health Organisation (‘WHO’) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The company is therefore uncertain as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operation during future years. Management is actively monitoring the global situation and its impact on the Company’s financial condition, liquidity, operations, supplier, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb the spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity in future years. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity in future years. Apart from the disclosures made within this report, no other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. Note 29 Related Party Transactions Parent Entity The parent entity within the Group is Vonex Ltd. Subsidiaries Interests in subsidiaries are set out in note 14. Key Management Personnel Disclosures relating to key management personnel are set out in note 6. Vonex Limited / Financial Report for the year ended 30 June 202157 Consolidated Notes to the Financial Statements Transactions with Related Parties The following transactions occurred with related parties: Services provided Company secretarial, corporate compliance, bookkeeping and accounting fees from Minerva Corporate (director-related entity of Nicholas Ong) Payments for legal fees from Bowen Buchbinder Vilensky (director-related entity of David Vilensky) Receivable from and Payable to Related Parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Current payables Trade payables to Minerva Corporate (director-related entity of Nicholas Ong) 2021 $ 56,788 26,033 2021 $ 9,900 2020 $ 74,161 37,378 2020 $ 4,950 Note 30 Financial Instruments The consolidated entity’s financial instruments consist mainly of deposits with banks, short term investments and accounts receivable and payable, loans to and from related parties and commercial loans. The main risks the consolidated entity is exposed to through its financial instruments are interest rate risk, credit risk, liquidity risk, price risk and foreign exchange risk. There are inter-company loans in place within the consolidated entity and these facilities currently attract no exposure to interest rate risk. The consolidated entity continues to manage its interest rate risk through a constant monitoring of interest rates, budgets and cash flows. (a) Interest Rate Risk The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument will fluctuate as a result of changes in market interest rates and effective average interest rates on those financial assets and liabilities. The majority of cash at bank held by the consolidated entity is in deposit accounts with one of the four large Australian Banks. Considering the amount of surplus working capital cash held by the consolidated entity during the last 12 months in these deposit accounts, the Board believes this was the most appropriate to ensure an adequate return being received on funds held. Vonex Limited / Financial Report for the year ended 30 June 202158 Consolidated Notes to the Financial Statements Weighted Average Interest Rate Floating Interest Rate Fixed Interest Rate Within 1 Year Fixed Interest Rate Within 1-5 Years Non-Interest Bearing Total 2021 % $ Financial Assets Cash 0.03 3,657,064 Receivables Total financial assets Financial Liabilities Payables Total financial liabilities - - - 3,657,064 - - Net financial assets 3,657,064 2020 Financial Assets Cash 0.05 4,810,446 Receivables Total financial assets Financial Liabilities Payables Total financial liabilities - - - 4,810,446 - - Net financial assets 4,810,446 $ - - - - - - - - - - - - $ - - - - - - - - - - - - $ $ 1,352 3,658,416 1,684,355 1,684,355 1,685,707 5,342,771 3,888,885 3,888,885 3,888,885 3,888,885 (2,203,178) 1,453,886 1,352 4,811,798 1,480,524 1,480,524 1,481,876 6,292,322 3,181,665 3,181,665 3,181,665 3,181,665 (1,699,789) 3,110,657 Sensitivity Analysis The effect on profit and equity as a result of changes in interest rates on net financial assets is immaterial. Vonex Limited / Financial Report for the year ended 30 June 202159 Consolidated Notes to the Financial Statements (b) Credit Risk Credit risk related to balances with banks and other financial institutions is managed by the board of directors in accordance with approved Board policy. Such policy requires that surplus funds are only invested with counterparties with a Standard & Poor’s rating of at least AA-. The following table provides information regarding the credit risk relating to cash and money market securities based on Standard & Poor’s counterparty credit ratings. Cash and cash equivalents AA Rated Note 2021 $ 2020 $ 9 3,658,416 4,811,798 The maximum exposure to credit risk is the carrying amount as disclosed in the consolidated statement of financial position and notes to the financial statements. The consolidated entity’s assets have been pledged to secure borrowings and guarantees are in place for certain borrowings and supplier agreements. All repayment obligations are up to date and within terms of the individual agreements in place at balance date. Trade and other receivables are within normal terms and appropriate provisions for doubtful debts have been made. Carrying value approximates fair value at 30 June 2021. (c) Net Fair Values The net fair value of financial assets and liabilities of the consolidated entity approximated their carrying amount. The consolidated entity has no financial assets and liabilities where the carrying amount exceeds the net fair value at reporting date. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and notes to the financial statements. (d) Liquidity Risk Liquidity risk arises from the possibility that the consolidated entity might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The consolidated entity manages this risk through the following mechanisms: • preparing forward looking cash flow analysis in relation to its operational, investing and financing activities • obtaining funding from a variety of sources • maintaining a reputable credit profile • managing credit risk related to financial assets • investing only in surplus cash with major financial institutions • comparing the maturity profile of financial liabilities with the realisation profile of financial assets The consolidated entity does not have a significant exposure in terms of financial liabilities or illiquid financial assets and is able to settle its debts or otherwise meet its obligations related to financial liabilities. Vonex Limited / Financial Report for the year ended 30 June 202160 Consolidated Notes to the Financial Statements Within 1 Year 1 to 5 Years Over 5 Years Total 2021 $ 2020 $ 2021 $ 2020 $ 2021 $ 2020 $ 2021 $ 2020 $ Financial Liabilities Payables Borrowings 3,888,885 3,181,665 - - - - - - Lease Liability 346,815 267,300 648,513 683,250 Total expected outflows 4,235,700 3,448,965 648,513 683,250 Financial assets Cash and cash equivalents 3,658,416 4,811,798 Receivables 1,684,355 1,480,524 Total anticipated inflows 5,342,771 6,292,322 - - - - - - Net inflow / (outflow) on financial instruments 1,107,071 2,843,357 (648,513) (683,250) - - - - - - - - - - - - - - - - 3,888,885 3,181,665 - - 995,328 950,550 4,884,213 4,132,215 3,658,416 4,811,798 1,684,355 1,480,524 5,342,771 6,292,322 458,558 2,160,107 (e) Foreign Exchange Risk The consolidated entity does have a minor exposure to fluctuations in foreign currencies between the US and Australian dollar. Some wholesale customers are based in the United States of America and monthly invoices are rendered in US dollars. When invoices are paid the proceeds are converted into Australian dollars. Depending on exchange rate fluctuations from the time the invoice is rendered and subsequently paid, the consolidated entity may have an associated exchange rate gain or loss. Management will continue to conduct monitoring reviews on an ongoing basis of its USA based customers. Vonex Limited / Financial Report for the year ended 30 June 202161 Consolidated Notes to the Financial Statements Note 31 Share Based Payments The total expense arising from share based payment transactions recognised during the year in relation to the performance rights, performance shares and options issued was $1,269,776 (2020: $770,573). Share Based Payment Expense Performance Rights – Key Management Personnel – 20 September 2016 Performance Rights – Other Personnel – 20 September 2016 Performance Rights – Vodia Networks Inc - 14 July 2018 Performance Rights – Key Management Personnel – 28 July 2017 Performance Rights – Other Personnel – 28 July 2017 Options – Key Management Personnel Total Share Based Payment Expense 2021 $ - - - 30,582 28,194 1,211,000 1,269,776 2020 $ 13,143 13,143 1,886 386,887 355,514 - 770,573 Movement in share rights and performance shares during the period Balance at beginning of period Vested during the period Balance at end of period Number of performance rights 27,560,000 (100,000) 27,460,000 Performance rights granted during the period Total performance rights granted during the period was $nil (2020: $nil). Performance Rights – Vodia Networks Inc - 14 July 2018 Vonex Ltd issued 328,000 performance rights to Vodia Networks Inc in four tranches. Each performance right will convert into 1 ordinary share of Vonex Ltd upon achievement of the performance milestone. These performance rights were valued at their issue dates at $65,600. Performance Milestones: • Tranche 1 has vested and converted on 30 April 2019. • Tranche 2 has vested and converted on 1 July 2018. • Tranche 3 has vested and converted on 1 July 2020. • Tranche 4 has vested and converted on 1 July 2020. Vonex Limited / Financial Report for the year ended 30 June 202162 Consolidated Notes to the Financial Statements Performance Rights – Key Management Personnel – 28 July 2017 On 28 July 2017, Vonex Ltd issued 16,940,000 performance rights to management. These performance rights were issued in three tranches, each with different performance milestones. Each performance right will convert into 1 ordinary share of Vonex Ltd upon achievement of the performance milestone. The company has assessed tranche 1,2 and 3 as being probable of being achieved and have therefore recognized an expense over the expected vesting period. The details of each class are tabled below: Trache Number Start Date Expected Date of Milestone Achievements Underlying Share Price Total Fair Value 1 2 3 7,260,000 28/07/17 Vested 4,840,000 28/07/17 Vested 4,840,000 28/07/17 28/07/2022 $0.20 $0.20 $0.20 $1,452,000 $968,000 $968,000 These performance rights were valued at their issue dates at $3,388,000. Performance Milestones: • On 29 January 2018, the performance rights relating to Tranche 1 were amended such that the 7,260,000 vest upon a successful listing on the Australia Securities Exchange. • Tranche 2 have vested on 31 August 2020 – Convertible upon company achieving audited gross revenue of $15 million in a financial year. The milestone has been achieved but performance rights have not been converted to ordinary shares. • Tranche 3 performance rights are outstanding – Convertible upon company achieving audited net profit after tax of $1 million in a financial year. Oper8tor Rights – 28 July 2017 Performance Milestones: • 2,000,000 Performance Rights which shall vest and convert into ordinary fully paid shares in the issued share capital of the Assignee upon completion of the beta version of the Oper8tor App and commencement of the official Oper8tor launch in Europe, expiring 28 July 2022; • 5,000,000 Performance Rights which shall vest and convert into ordinary fully paid shares in the issued share capital of the Assignee when Oper8tor reaches 10 million Active Users, expiring 28 July 2022; and • 10,000,000 Performance Rights which shall vest and convert into ordinary fully paid shares in the issued share capital of the Assignee when Oper8tor reaches 50 million Active Users, expiring 28 July 2022. No value has been allocated to the performance rights due to significant uncertainty of the meeting the performance milestone which are based on future events. Vonex Limited / Financial Report for the year ended 30 June 202163 Consolidated Notes to the Financial Statements Performance Rights – Key Management Personnel – 20 September 2016 Vonex Ltd issued 2,340,000 performance rights to Executive Directors, management personnel, the Chairman and a non-executive director. These performance rights were issued in three tranches, each with different performance milestones. Each performance right will convert into 1 ordinary share of Vonex Ltd upon achievement of the performance milestone. These performance rights were valued at their issue dates at $1,053,000. Performance Milestones: • Tranche 1 performance rights were forfeited and amounts previously recorded was reversed during the 2018 financial year as the vesting conditions were not satisfied. • Tranche 2 has vested and coverted to ordinary shares on 14 June 2018. • Tranche 3 has vested - Convertible upon company reaching $10 million annualised revenue per annum in any quarter. The milestone has been achieved but performance rights have not been converted to ordinary shares. Options granted during the period On 27 November 2020, the Company issued 10,000,000 options to directors, each exercisable at $0.37 with a three- year expiry period. These options were valued using a Hoadley ESO2 valuation model and the expense recognised in full at their issue date is $1,211,000. For the options issued during the period, a Hoadley ESO2 valuation model was used with the valuation model inputs used to determine the fair value at the grant date as follows: Grant date Expiry date Share prince at grant date Exercise price Expected volatility Risk free rate Dividend yield Number of options Value per option Total value $ Vesting terms 27/11/2020 01/12/23 $0.26 $0.37 100% 0.11% 0% 10,000,000 $0.1211 1,211,000 Immediately The total options on issue at 30 June 2021 are as follows: Grant date Expiry date Exercise price Balance at the start of the year Granted Exercised Expired/ forfeited Balance at the end of the year 03/08/17 (i) 03/08/20 $0.90 133,750 07/06/18 (i) 07/06/23 $0.30 14,500,000 30/11/17 (ii) 30/11/22 05/06/2019 30/11/22 05/06/2019 30/11/22 27/11/2020 01/12/23 $0.20 $0.20 $0.20 $0.37 14,719,731 3,215,060 1,800,000 - - - - - - 10,000,000 34,368,541 10,000,000 - - - - - - - (133,750) - - - - - - 14,500,000 14,719,731 3,215,060 1,800,000 10,000,000 (133,750) 44,234,791 Weighted average exercise price: $0.2712 The weighted average remaining contractual life of options outstanding was 1.82 years (i) Options granted on 3 August 2017 and 7 June 2018 were free attaching options, the value of these options are not required to be valued separately, as they are part of the share issue, and all the shares issued have been valued in the issued capital account. (ii) Where applicable, amounts in the tables above, have been adjusted for the 5:1 and 2:1 share consolidation completed on 28 July 2017 and 29 January 2018 respectively. Vonex Limited / Financial Report for the year ended 30 June 202164 Consolidated Notes to the Financial Statements Note 32 Business Combinations 2SG Wholesale Pty Ltd On 28 February 2020 Vonex Ltd, acquired the business of 2SG Wholesale Pty Ltd (‘2SG’). 2SG Wholesale is a telecommunications and data wholesaler based in Brisbane, Queensland which provides Australian Managed Service Providers, ISPs and System Integrators with access to the latest in hardware and connectivity solutions from leading brands. 2SG ’s mobile broadband capability provides Australian ISPs the opportunity to sell a wireless broadband solution via the Optus 4G Network. Integration with Australia’s premier carriers facilitates the delivery of the latest fixed line, mobile connectivity and hardware solutions country-wide. The intangible assets of $2,908,977 and goodwill of $524,140 represents the expansion of Vonex’s diversified wholesale service offerings commencement as it expands its brand and exposure within the Australia telecommunications market along with extensive cross-sell opportunities within 2SG’s customer base acquired as part of the total consideration. The purchase price allocation was recalculated during the year and the comparative balances restated (see below). The recalculation of the acquisition gave rise to a deferred tax liability of $799,969 in respect of this acquisition. The contract is being amortised on a straight-line basis over two periods dependent on contract terms (5 years and 10 years). Details of the acquisition are as follows: Other Assets Employee benefits Net liabilities acquired Customer and supplier contracts Deferred tax liability Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid or payable to vendor Shares issued Acquisition costs capitalised Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: employee benefits Net cash used Fair Value $ 24,747 (55,820) (31,073) 2,908,977 (799,969) 524,140 2,602,075 444,180 2,157,895 2,602,075 500,000 (55,820) 444,180 Vonex Limited / Financial Report for the year ended 30 June 202165 Consolidated Notes to the Financial Statements Nextel Pty Ltd On 2 February 2021, Vonex Ltd acquired the business of Nextel Pty Ltd (‘Nextel’). Nextel is a Sydney, NSW based business providing telecommunications services to business customers and is recognised as an industry leader in the design, installation and maintenance of voice, data and communications networks. It is an established single-source provider to small-to-medium enterprise (SME) businesses with expertise in rolling out wireless, fibre and RFID networks, as well as delivering structured cabling, telephony systems and electrical fit outs to large-scale projects. The intangible assets of $1,542,326 represents a substantial enhancement of Vonex’s presence in the Sydney and NSW markets for telco services to small-to-medium enterprises (SMEs), adding market-leading products and services will create opportunities for cross-selling and product expansion through a growing national SME customer. The acquired business contributed revenues of $577,600 to the consolidated entity for the period from 2 February 2021 to 30 June 2021. If the acquisition occurred on 1 July 2020, the revenue would be approximately $1,525,000. The values identified in relation to the acquisition of Nextel are provisional as at 30 June 2021. Details of the acquisition are as follows: Other Assets Employee benefits Net assets acquired Intangible assets Acquisition-date fair value of the total consideration transferred Representing: Cash paid or payable to vendor Shares issued (refer to Note 21) Acquisition costs capitalised Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Add: other assets Less: employee benefits Net cash used Fair Value $ 43,775 (13,604) 30,170 1,542,326 1,572,496 334,367 1,238,129 1,572,496 315,000 32,971 (13,604) 334,367 The fair values of Nextel business assets and liabilities have been measured provisionally. If new information is obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the amounts above, the accounting for the acquisition will be revised. Vonex Limited / Financial Report for the year ended 30 June 202166 Consolidated Notes to the Financial Statements Measurement period adjustment and comparative information restatement The company was able to finalise its assessment of the assets and liabilities obtained upon the acquisition of 2SG Wholesale Pty Ltd (‘2SG’) on 28 February 2020 which included provisionally recognised as intangible assets as at 30 June 2020. This balance is related to future revenue in various telecommunications and data contracts provided to various wholesaler customers of varying contract periods and key supply contract acquired. This restatement within the statement of financial position as at 30 June 2020 has resulted in an increase in Intangibles and Goodwill, an increase in deferred tax liability, amortisation of intangible assets during the period and an increase in income tax benefit. Extracts (being only those line items affected) are disclosed below. Extract Expenses Amortisation Loss before income tax Income tax expense Net loss for the year 2020 $ 2020 $ Reported Adjustment Restated (86,590) (151,591) (238,181) (596,238) (151,591) (747,829) - 41,865 41,865 (596,238) (109,726) (705,964) Other comprehensive income for the year - - - Total comprehensive loss for the year (596,238) (109,726) (705,964) Basic and diluted earnings per share of loss attributable to the owners of Vonex Limited (cents per share) (0.38) (0.07) (0.45) Statement of financial position Non-current Assets Intangible assets Total non-current assets Total assets Non-current liabilities Deferred tax liability 3,585,039 648,378 4,233,417 4,793,100 648,378 5,441,478 11,582,185 648,378 12,230,563 - 758,104 758,104 Total non-current liabilities 758,386 758,104 1,516,490 Total liabilities Net assets Equity Accumulated losses Total Equity 4,663,622 758,104 5,421,726 6,918,563 (109,726) 6,808,837 (45,954,539) (109,726) (46,064,265) 6,918,563 (109,726) 6,808,837 Vonex Limited / Financial Report for the year ended 30 June 202167 Consolidated Notes to the Financial Statements Note 33 Company Details Registered Office Level 8, 99 St Georges Terrace, Perth, WA, 6000 Principal Place of Business Level 6, 303 Coronation Drvie, Milton, QLD, 4064 Vonex Limited / Financial Report for the year ended 30 June 202168 Directors’ Declaration In the directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; • the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and • there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Board of Directors. Nicholas Ong Chairman 31 August 2021 Vonex Limited / Financial Report for the year ended 30 June 2021RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VONEX LIMITED Opinion We have audited the financial report of Vonex Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year then ended; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter Intangible Assets Refer to Note 13 in the financial statements The Group has goodwill of $524,140 and other intangible assets of $3,983,260 at the reporting date. For the year ended 30 June 2021, the Group recognised an impairment expense of $771,319 in relation to its intangible assets. How our audit addressed this matter Our audit procedures in relation to Goodwill included:  Assessing management’s determination of the CGU;  Assessing the valuation methodology of the value- in-use model; Management is required to perform an annual impairment test on the recoverability of the Group’s goodwill by using a value-in-use model. In addition, management to assess whether indicators of impairment are present in relation to the Group’s other intangible assets. required is We determined this to be a key audit matter due to the size of the balance and because management judgement is involved in: - - - preparing a value-in-use model of the cash generating unit (CGU) which requires estimates of the future underlying cash flows of the CGU and the discount rate applied; assessing whether indicators of impairment are present the Group’s other to relation in intangible assets; and determining the impairment expense to be recognised, if required.  Checking the mathematical accuracy of the model;  Challenging key reasonableness the assumptions used in the model; of  Reviewing sensitivity analysis over assumptions used in the model; and the key  Reviewing the adequacy and accuracy of the relevant disclosures in the financial statements. Our audit procedures in relation to the other intangible assets included:  Critically evaluating management’s assessment of whether impairment indicators were present at 30 June 2021;  Assessing management’s determination of the useful life of the intangible assets;  Checking the mathematical accuracy of the amortisation expense of the intangible assets; and  Assessing the appropriateness of the impairment expense against the intangible assets in relation to Oper8tor, patents and trademarks. Business Combination - Acquisition of Nextel Pty Ltd Refer to Note 32 in the financial statements The Group acquired the business of Nextel Pty Ltd on 2 February 2021. Our audit procedures included: transaction was treated as a business The combination in accordance with AASB 3 Business Combinations. The provisional purchase price allocation has resulted in intangible assets of $1,542,326 being recognised.   Obtaining the purchase agreement and other associated documents to obtain an understanding of the transaction and the related accounting considerations; Determination that the acquisition met the definition of a business in accordance with Accounting Standards; This was considered a key audit matter because the accounting for the transaction is complex and involves significant judgments. These include the recognition and valuation of consideration paid and the determination of the fair value of the assets acquired and liabilities assumed.  Assessing management’s determination of the acquisition date, fair value of consideration paid, assets acquired and liabilities assumed; and the disclosures  Reviewing financial the in statements. Key Audit Matter Share Based Payments – Options Refer to Note 31 in the financial statements During the year, the Company issued 10,000,000 options. The fair value of options granted during the year was $1,211,000. Management has performed the valuation of the options granted using a valuation model. We considered the valuation of these options to be a involved management’s it key audit matter as judgement in determining various inputs used in the valuation model. How our audit addressed this matter Our audit procedures included: Reviewing the key terms and conditions of the options issued;  Obtaining the valuation model prepared by management and assessing whether the model was appropriate for valuing the options issued during the year;  Challenging the key assumptions used by management in the model to calculate the fair value of the options; reasonableness of  Recalculating the value of the share-based payment expense to be recognised in profit or loss; and  Reviewing the adequacy of the disclosures in the financial statements. Other Information The directors are responsible for the other information. The other information comprises the directors’ report but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and 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, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or 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 this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the remuneration report We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Vonex Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS Perth, WA Dated: 31 August 2021 TUTU PHONG Partner 73 Additional Information Shareholder Information (as at 25 August 2021) (i) Number of shareholders: 2,991 (ii) Ordinary shares issued: 233,817,009 (iii) Distribution schedule of holdings of ordinary shares is set out below Category (size of holding) Holders 197 684 574 1,241 295 2,991 1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total Voting Rights Ordinary Shares Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. Options & Performance Rights There are no voting rights attached to any class of options, performance shares or performance rights that are on issue. Total Units 55,633 2,393,946 4,475,136 42,990,935 183,901,359 233,817,009 Vonex Limited / Financial Report for the year ended 30 June 202174 Additional Information Top 20 Holders of Ordinary Fully Paid Shares at 25 August 2021 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Rank Name 2SG INVESTMENTS PTY LTD BNP PARIBAS NOMS PTY LTD Units %Units 21,578,947 16,790,253 9.23 7.18 FINANCE WEST PTY LTD 10,532,430 4.50 JORSAVA PTY LTD MR MATTHEW BRIAN MICHAEL FAHEY JET CLUB PTY LTD GUAVA CAPITAL PTY LTD BNP PARIBAS NOMINEES PTY LTD CARMINE LION GROUP PTY LTD CONFADENT LIMITED 5,901,309 5,533,698 5,502,795 5,236,808 4,117,426 3,681,818 3,500,000 CS THIRD NOMINEES PTY LIMITED 3,492,939 STATE ONE STOCKBROKING LTD COILENS CORPORATION PTY LTD MS TOW LOY SUN LATERAL CONSULTING (WA) PTY LTD PULA HOLDINGS PTY LTD MR BRETT HOLTERMAN S3 CONSORTIUM PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 20 DR ROBERT POPOVIC 3,300,341 2,420,000 2,375,454 2,239,381 2,172,727 1,610,839 1,600,000 1,356,680 1,307,159 2.52 2.37 2.35 2.24 1.76 1.57 1.50 1.49 1.41 1.03 1.02 0.96 0.93 0.69 0.68 0.58 0.56 Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total) 104,251,004 44.59% Total Remaining Holders Balance Total Shares on Issue 129,566,005 55.41% 233,817,009 100% Vonex Limited / Financial Report for the year ended 30 June 202175 Additional Information Substantial Shareholder As at 30 August 2021, shareholders with a relevant interest in 5% or more of the Company’s securities are set out below: No. of Shares % Interest Holder 21,578,947 16,790,253 9.23 7.18 2SG INVESTMENTS PTY LTD BNP PARIBAS NOMS PTY LTD Unquoted Securities Set out below are the classes of unquoted securities currently on issue: Number Class 14,500,000 options exercisable at 30c expiring 7/6/2023 19,734,791 options exercisable at 20c expiring 30/11/2022 10,000,000 options exercisable at 37c expiring 30/11/2023 27,460,000 performance rights with various vesting milestones Unquoted Equity Security Holders with Greater than 20% of an Individual Class As at 30 August 2021 the following classes of unquoted securities had holders with greater than 20% of that class on issue is set out below. Options exercisable at 30c expiring 7/6/2023 CODE NOMINEES PTY LTD STATE ONE EQUITIES PTY LTD Performance Rights MR MATTHEW FAHEY Mr Angus Parker On-Market Buyback Currently there is no on-market buy-back of the Company’s securities. % Interest 64.83 28.74 % Interest 31.57 31.20 Vonex Limited / Financial Report for the year ended 30 June 202176 Additional Information Securities Subject to Escrow Set out below are securities currently subject to escrow: Number 5,502,795 Class Ordinary fully paid shares (Jet Club Pty Ltd) escrowed until 02/02/2022 Corporate Governance Pursuant to the ASX Listing Rules, the Company’s Corporate Governance Statement will be released in conjunction with this report. The Company’s Corporate Governance Statement is available on the Company’s website at: https://vonex.com.au/investors/corporate-governance Vonex Limited / Financial Report for the year ended 30 June 2021ABN: 39 063 074 635 Level 8, 99 Georges Tce Perth WA 6000 13 VONEX investor@vonex.com vonex.com.au 

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