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CONNECTED IO LIMITED AND ITS CONTROLLED ENTITIES ABN 99 009 076 233

ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2021

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

Corporate Information ................................................................................................................................ 1 Directors’ Report ......................................................................................................................................... 2 Auditor’s Independence Declaration ....................................................................................................... 14 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June 2021 .................................................................................................... 15 Consolidated Statement of Financial Position as at 30 June 2021 ....................................................... 16 Consolidated Statement of Changes in Equity for the financial year ended 30 June 2021 ................ 17 Consolidated Statement of Cash Flows for the financial year ended 30 June 2021 ........................... 18 Notes to Financial Statements ................................................................................................................. 19 Directors’ Declaration ............................................................................................................................... 58 Independent Auditor’s Report .................................................................................................................. 59 ASX Additional Information...................................................................................................................... 63

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

CORPORATE INFORMATION

Directors

Mr Dougal Ferguson (Managing Director and Chief Executive Officer)

Mr Adam Sierakowski (Non-Executive Chairman)

Mr Davide Bosio (Non-Executive Director)

Company Secretary

Mr Simon Whybrow

Registered and Principal Office

Level 24 44 St Georges Terrace PERTH WA 6000

Auditors

HLB Mann Judd (WA Partnership) Level 4, 130 Stirling Street PERTH WA 6000

Share Registry & Register

Computershare Level 11, 172 St Georges Terrace PERTH WA 6000 Ph: +61 8 9323 2000

Stock Exchange Listing

Connected IO Limited is listed on the Australian Securities Exchange. ASX Code: CIO

Contact Information

Ph: 08 6211 5099 Fax: 08 9218 8875

Web Site

www.connectedio.com.au http://www.connectedio.com/

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

The directors of Connected IO Limited ("the Company" or "CIO") and its controlled entities (“the Group”) submit herewith the financial statements of the Group for the financial year ended 30 June 2021.

These financial statements cover the period from 1 July 2020 to 30 June 2021. In order to comply with the provision of the Corporations Act 2001, the directors’ report is as follows:

Directors

The names and particulars of the directors of the Group during or since the end of the financial year are:

are:
Mr Dougal Ferguson	Non-Executive Director (appointed 15 July 2020) then subsequently
	Chief Executive Officer and Executive Director (effective 1 January
	2021)

Mr Ferguson has a financial, commercial and business development background and has held senior management positions in listed companies with both domestic and international operations. Most recently, Mr Ferguson was Managing Director of XCD Energy Limited prior to its recent successful acquisition by 88 Energy Limited. Prior to that he was Managing Director of Elixir Energy Limited and has held executive director positions with a number of ASX listed companies. Mr Ferguson spent seven years in London with Premier Oil plc and Hess Corporation and has gained extensive international experience working in business development and commercial roles in small to medium sized enterprises. He has successfully raised and matched risk capital with value accretive opportunities creating tangible shareholder value in the process for a number of companies over his career and has over 25 years of capital markets, financial and commercial expertise and experience.

Interest in Shares 5,425,000 Interest in Options 5,000,000 Interest in Convertible Notes Nil. Directorships held in During the past three years Mr Ferguson has served as a Director of the other listed entities following other listed companies: (a) XCD Energy Limited (15 April 2019 – 22 July 2020); and (b) Elixir Energy Limited (4 September 2013 – 31 August 2019).

Mr Adam Sierakowski Non-Executive Chairman (appointed 3 December 2018)

Adam Sierakowski is a lawyer and co-founder of the legal firm Price Sierakowski and is the founder and managing director of Perth based corporate advisory business, Trident Capital. Mr Sierakowski has held a number of board positions with ASX listed companies. He is a member of the Australian Institute of Company Directors and the Association of Mining and Exploration Companies.

Adam has over 23 years, experience in legal practice, much of which he has spent advising on a range of commercial and corporate transactions to a variety of large private and listed public clients. He has supported and guided many companies undertaking fundraising activities in Australia and seeking to list on the Australian Stock Exchange (“ASX”).

He has specific experience in the areas of mergers and acquisitions, reverse takeovers, IPO’s, resources, energy, strategic corporate and structuring advice. He has worked extensively over the last 20 years acting as a nonexecutive director and advisor to many ASX listed companies in a diverse range of sectors, with particular skills in corporate compliance, governance and strategy.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Interest in Shares	8,158,064
Interest in Options	2,000,000
Interest in Convertible
Notes	Nil.
Directorships held in	During the past three years Mr Sierakowski has served as a Director of the
other listed entities	following other listed companies:
	(a) Kinetiko Energy Limited (8 December 2010 – present);
	(b) Rision Limited (Appointed 8 June 2018 – delisted 20 April 2020);
	(c) Coziron Resources Limited (21 October 2010 – 2 November 2020); and
	(d) Dragontail Systems Limited (14 September 2016 – present).
Mr Davide Bosio	Non-Executive Director (appointed 12 March 2019)
	Mr Bosio is a Corporate Adviser specialising in offering corporate services
	and strategic advice to private and public organisations, specifically in relation
	to capital raisings and M&A advice. He has over 19 years’ experience in the
	finance industry as an Investment Adviser, Responsible Manager, and
	through various Executive and Non-Executive Director Roles. Mr Bosio is the
	WA State Manager and Director of Corporate Finance of Shaw and Partners,
	having previously held the position of Managing Director, Chief Executive
	Officer and Head of Corporate Finance of DJ Carmichael.
	Mr Bosio is a Fellow member of the Financial Services Institute of Australia
	(Finsia) and a Graduate Member of the Australian Institute of Company
	Directors (GAICD). Davide holds a Bachelor of Commerce (Marketing)
	degree and a Graduate Diploma in Applied Finance and Investment.
Interest in Shares	5,460,000
Interest in Options	2,000,000
Interest in Convertible
Notes	Nil.
Directorships held in	During the past three years Mr Bosio has served as a Director of the following
other listed entities	other listed companies:
	(a) Shree Minerals Limited (4 October 2018 – present);
	(b) Spectrum Metals Limited (22 December 2017 – 15 November 2018);
	(c) De Grey Mining Limited (18 December 2015 – 26 October 2017); and
	(d) Caeneus Minerals Limited (24 May 2021 – present).
Mr Yakov Temov	Managing Director and Chief Executive Officer (appointed 18 January
	2016, resigned 2 December 2020)
	Mr Temov specialises in product development and executive leadership, with
	a long and consistent track record of successfully delivering innovative
	products on time and under budget, fast yet high quality roadmap evolutions,
	and building and growing world-class engineering teams. Most recently, Mr
	Temov was CEO and Founder of White Label Corporation. Prior to that, Mr
	Temov was VP of Engineering at U4EA Technologies, Inc. (acquired by Gos
	Networks, Ltd.) where he was responsible for all product design, engineering,
	and testing.
Directorships held in	During the past three years Mr Temov has not held directorship of any other
other listed entities	listed companies.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Company Secretary

Mr Simon Whybrow Company Secretary (appointed 2 December 2020)

Mr Simon Whybrow is a Certified Practising Accountant and Chartered Secretary with extensive experience and key strengths in financial administration and control, boardroom practices, corporate and business strategy, process improvement, and general management. He has over twenty-five (25) years corporate and commercial experience within both ASXlisted and unlisted companies.

Ms Nicki Farley Company Secretary (appointed 21 December 2015, resigned 2 December 2020)

Ms Farley has over 15 years’ experience working within the legal and corporate advisory sector providing advice in relation to capital raisings, corporate and securities laws, mergers and acquisitions and general commercial transactions. Ms Farley also holds a number of company secretarial roles for ASX listed companies. Ms Farley holds a Bachelor of Laws and Arts from the University of Western Australia.

Principal activities

The Group is focused on sales and marketing of the Group’s products and further product development.

Operating and Financial Review

The net loss for the year ended 30 June 2021 was $5,692,742 compared with a net loss of $2,392,816 for the previous year. The Group had a net deficiency of assets as at 30 June 2021 of $1,349,895 (2020: net assets of $1,098,017).

Dividends

No amounts have been paid or declared by way of dividend by the Group since the end of the previous financial year and the Directors do not recommend the payment of any dividend.

Review of operations

Operational Review

Connected IO (“CIO” or the “Company”) revenues from ordinary activities significantly reduced from $3.8m for FY2020 to $1.2m for FY2021, representing a 69% decrease which was primarily associated with the COVID-19 business interruptions and restrictions in the United States experienced throughout the FY21 financial year.

The net loss for the Group for the year ended 30 June 2021 was $5,692,742, after providing for share based payments totalling $1,252,272 (refer to Note 18) and impairment of goodwill on consolidation of $2,418,610 for the year (refer to Note 10).

The Group experienced a significant reduction in sales commencing in Q4 of FY2020 directly related to the COVID-19 restrictions that were in place in the United States. This sales trend continued throughout FY2021, and the Group has yet to return to sales levels that were being achieved prior to the pandemic. The Group has focused its efforts on keeping operating and administrative expenses at a minimum in the current environment.

Additional pressures on the supply chain have also had an effect on the Group as a result of the global chip shortage. This has meant that any sales orders of significance have been difficult to fill in a timely manner and the Group is now conducting a Strategic Review which is focussed on how best to manage the timeframes associated with manufacturing and the impact that is having on the business.

Accordingly, during the year ended 30 June 2021, based on the Group’s assessment of future cashflow forecasts at the cash-generating unit level, being CIO Technology, Inc., the Board resolved to impair the entire carrying value of goodwill, being $2,418,610.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Review of operations (continued)

Corporate Review

During the year ended 30 June 2021, the Group has undergone a major re-structure to reduce debt and raise additional capital to grow the business.

On 2 December 2020, Mr. Yakov Temov resigned as Managing Director to focus on recovery of the United States business. Additional loan funds were secured later in December of 2020 in addition to some monies from stimulus packages available to the Group. Mr. Dougal Ferguson (a non-executive director of the Group) was appointed Chief Executive Officer effective 1 January to oversee the restructure and assist with the Strategic Review process.

On 19 January 2021, the Group announced a placement and entitlement offer which together raised a total of approximately $570,000 (before costs). The Group then initiated a Small Shareholding Sale Facility to allow shareholders who held less than a marketable parcel of shares (<$500 in value) to sell their shares in an efficient and cost-effective manner.

Following the closing of the Small Shareholding Sale Facility process, on 28 May 2021, the Group announced a further placement, entitlement offer and debt re-structure. Some elements of the restructure was subject to shareholder approval which was received on 30 June 2021, with the restructure being fully implemented in July 2021.

Following the implementation of the re-structure (including a 1:10 consolidation of shares), the Group has significantly reduced its debt, including full repayment of the convertible notes, and has approximately $3 million in cash and 317,919,465 shares on issue.

Significant changes in the state of affairs

There have been no significant changes in the state of affairs of the Group to the date of this report other than as set out in this report.

Directors’ meetings

The following table sets out the number of directors’ meetings held during the financial year and the number of meetings attended by each director (while they were a director).

Directors	Board of Directors
	Eligible to Attend Attended
Mr Dougal Ferguson Mr Adam Sierakowski Mr Davide Bosio Mr Yakov Temov	10 10 10 10 10 10 5 5

The Board of Directors also approved eight (8) circular resolutions during the year ended 30 June 2021 which were signed by all Directors of the Group. The audit, compliance and corporate governance committee functions are performed by the Board of Directors.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Interests in shares and options of the Group

The following relevant interests in shares and options of the Group were held by the Directors as at the date of this report:

	Fully paid	Unlisted
	ordinary shares	options
	(post-consolidation)	(post-consolidation)
Directors	Number	Number
Mr Dougal Ferguson	5,425,000	5,000,000
Mr Adam Sierakowski	8,158,064	2,000,000
Mr Davide Bosio	5,460,000	2,000,000

Share options granted to Directors

During the financial year, the following options were approved by shareholders to be granted to Directors (30 June 2020: nil) as remuneration:

	Opening balance	Granted	Exercised	Closing balance
Directors	Number	Number1,2	Number	Number
Mr Dougal Ferguson	-	5,000,000	-	5,000,000
Mr Adam Sierakowski	-	2,000,000	-	2,000,000
Mr Davide Bosio	-	2,000,000	-	2,000,000

1 Refer to Note 18(c) for further details on the granting of options to Directors as remuneration. The options were granted to Directors (refer below) subject to a 12 month vesting period.
2 The options were issued to Directors subsequent to year end on 27 July 2021, following approval by shareholders received at a General Meeting held on 30 June 2021.

Unissued shares under option

At the date of this report, the unissued ordinary shares of the Group under option is as follows:

Grant date	Expiry date	Exercise price	Number under option
Other Options
28 November 2018	20 December 2022	$1.00	750,000
30 June 2021	1 July 2024	$0.03	62,000,000
Director Options
30 June 2021	1 July 2024	$0.03	9,000,000

Shares issued during or since the end of the year as a result of exercise

As at the date of this report no shares have been issued during or since the end of year as a result of the exercising of options.

Subsequent events

(a) On 8 July 2021, following shareholder approval granted at the General Meeting held on 30 June 2021, the Group completed a consolidation of its issued capital on the basis that every ten (10) shares be consolidated into one (1) share. The total shares on issue post consolidation was 106,615,835.
(b) On 26 and 27 July 2021, following shareholder approval received at the General Meeting on 30 June 2021, the Group successfully completed the restructuring of its debts through the issue of the following securities, on a post consolidation basis:

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Subsequent events (continued)

20,000,000 shares at a deemed issue price of $0.02 per share and 20,000,000 options to A.C.N. 627 852 797 Pty Ltd in lieu of repayment of $400,000 advanced to the Group. The options are exercisable at $0.03 per share and expire on 1 July 2024. The financial effect of this transaction has been brought to account as at 30 June 2021 (refer to Note 18(b));
5,378,630 shares to Tyche Investments Pty Ltd at an issue price of $0.02 per share in lieu of repayment of accrued interest of approximately $107,573;
10,925,000 shares to Directors at an issue price of $0.02 per share in lieu of outstanding director and company secretarial fees accrued of approximately $218,500; and
9,000,000 options, exercisable at $0.03 per share and expiring 1 July 2024, in relation to services provided by each Director to the Group. The options are subject to a vesting period of 12 months.
(c) In July and August 2021, the Group successfully completed a capital raising of approximately $3.5 million (before costs) through the issue of 175,000,000 shares, on a post consolidation basis, at an issue price of $0.02 per share to sophisticated and institutional investors. In addition, 42,000,000 options, exercisable at $0.03 per share and expiring 1 July 2024, were issued in relation to the underwriting of the rights issue and placement.
(d) Subsequent to the Group’s successful capital raising, the Group repaid approximately $1.3 million of convertible notes that matured on 30 June 2021 plus any applicable accrued interest.

No other matters or circumstance has arisen since 30 June 2021 that has affected, or may significantly affect the Group’s operations, the result of those operations, or the Group’s state of affairs in future financial years.

Future developments

The Group will continue to develop, sell and market the Group’s products.

Environmental issues

The Group’s operations are not subject to significant environmental regulations under the law of the Commonwealth or of a State or Territory.

Indemnification of officers and auditors

The Group has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor.

Remuneration Report (Audited)

This report outlines the remuneration arrangements in place for the key management personnel of Connected IO Limited (the “Company”) for the financial year ended 30 June 2021. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001.

The remuneration report details the remuneration arrangements for key management personnel (“KMP”) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company.

The board policy is to remunerate non-executive directors at a level which provides the Group with the ability to attract and retain directors with the experience and qualification appropriate to the development strategy of the Group. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at a General Meeting. The current maximum amount of remuneration that may be paid to all non-executive Directors has been set at $500,000 per annum at the Group’s General Meeting held on 14 March 2014.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Remuneration Report (continued)

Directors’ fees are reviewed annually. As announced on 22 August 2018, non-executive director fees were reduced from $60,000 to $36,000 per annum. Non-executive director fees are not linked to the performance of the Group. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the Group.

In addition, in order to align Directors’ interests with shareholder interests, on 30 June 2021 shareholders approved the issue of 9,000,000 (post-consolidation) options to Directors which were subsequently issued on 27 July 2021. Further details are contained below.

During the financial year, the Group did not employ the use of remuneration consultants.

Key management personnel

The key management personnel of the Group are considered to be the Directors of the Group and Mr Yakov Temov. There are no other individuals who have the authority and responsibility for planning, directing and controlling the activities of the Group.

The following table discloses the contractual arrangements with the Group’s key management personnel that were in place as at 30 June 2021.

Component	Managing Director and Chief Executive Officer – Mr Dougal Ferguson
Fixed remuneration	$120,000 per annum inclusive of superannuation.
Contract duration	12 months commencing effective 1 January 2021.
Termination notice by the individual/company	2 months.
Component	Director and Chief Executive Officer of CIO Technology, Inc. – Mr Yakov Temov
Fixed remuneration	USD$120,000 per annum.
Contract duration	Periodical.
Termination notice by the individual/company	12 months.

Relationship between the remuneration policy and group performance

No Director held or holds any contract for performance-based remuneration with the Group.

Remuneration expense details for the year ended 30 June 2021

The directors were paid the following amounts as compensation for their services as key management personnel of the Group during the year:

2021	Short-term employee benefits Post employment benefits Share- based payment Total $ Performance based remuneration % Salary & fees $ Bonus $ Other $ Superannuation $ Rights & Options $
Dougal Ferguson1 Adam Sierakowski2 Davide Bosio3 Yakov Temov4 Total	76,500 - - - 5565 77,056 - 36,000 - - - 2225 36,222 - 36,000 - - - 2225 36,222 - 227,650 - - - (142,528)6 85,122 -
	376,150 - - - (141,528) 234,622 -

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Remuneration Report (continued)

Remuneration expense details for the year ended 30 June 2021 (continued)

1 Mr Ferguson’s director fees were paid to Shenton James Pty Ltd, a company of which he is a Director and Shareholder.
2 Mr Sierakowski's director fees were paid to Trident Capital Pty Ltd, a company of which he is a Director and Shareholder.
3 Mr Bosio’s director fees were paid to himself and to Pareto Capital Pty Ltd, a company of which he is a Director and Shareholder.
4 Mr Temov’s executive fees were paid to himself, and he resigned as a Director on 2 December 2020.
5 Following shareholder approval granted on 30 June 2021, the Group issued 9,000,000 unlisted options to Mr Ferguson, Mr Sierakowski and Mr Bosio in consideration of services provided to the Group.

The total fair value of the options granted to the Directors was $357,300. Based on the vesting conditions of the options, $1,000 has been recognised as a share based payment as at 30 June 2021, being the date that the options were granted. Refer to Note 18(c) for further details.

6 Amounts previously expended as share based payments to Mr Temov where reversed as vesting conditions are not going to be met. Refer to Note 18(a) for further details.

2020	Short-term employee benefits Post employment benefits Share- based payment Total $ Performance based remuneration % Salary & fees $ Bonus $ Other5 $ Superannuation $ Shares & rights6 $
Yakov Temov1 Adam Sierakowski2 Davide Bosio3 Dougal Ferguson4 Total	178,744 - - - 742,528 921,272 15% 36,000 - 9,935 - - 45,935 - 36,000 - 6,500 - - 42,500 - - - - - - - -
	250,744 - 16,435 - 742,528 1,009,707 15%

1 Mr Temov’s executive fees were paid to himself.
2 Mr Sierakowski's director fees were paid to Trident Capital Pty Ltd, a company of which he is a Director and Shareholder.
3 Mr Bosio’s director fees were paid to himself.
4 Mr Ferguson was appointed as a Non-Executive Director on 15 July 2020. No director fees were paid to him for the year ended 30 June 2020.
5 On 20 December 2019, following shareholder approval granted at the 2019 Annual General Meeting held on 27 November 2019, Mr Sierakowski and Mr Bosio’s outstanding director fees up to 30 September 2019 of $29,806 and $19,500 respectively were satisfied via the issue of 993,533 and 650,000 fully paid ordinary shares (post consolidation) respectively at an issue price of $0.03 per share. For accounting purposes, the shares issued have been valued at $39,741 and $26,000 respectively, being the Group’s closing share price of $0.04 (post consolidation) as at the date of the Annual General Meeting, with the difference recognised as an expense.
6 Of the share based payment expense recognised during the year, the shares granted to Mr Temov was valued at $600,000 with the balance of $142,528 relating to the fair value of the performance rights which were amortised over the respective vesting periods (refer to Note 18(a) for further details).

Securities received that are not performance-related

Pursuant to a General Meeting held on 30 June 2021, shareholders approved the issue of 9,000,000 (post-consolidation) options to Directors which were subsequently issued on 27 July 2021. Further details are contained below.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Remuneration Report (continued)

Options/rights issued as remuneration

Mr Yakov

Following shareholder approval granted at the 2019 Annual General Meeting, the Group issued 15,000,000 ordinary shares (post consolidation), 10,000,000 Class A Performance Rights (post consolidation) and 10,000,000 Class B Performance Rights (post consolidation) to Mr Temov in recognition of his efforts to date and as part of an incentive for him to provide ongoing dedicated services to the Group.

Based on the Group’s closing share price as at the date of the Group’s 2019 Annual General Meeting, the shares granted to Mr Temov were valued at $600,000.

The Performance Rights were granted at nil consideration, do not have an exercise price and will expire on 31 December 2023. Each Performance Right will vest and convert to one fully paid ordinary share subject to the satisfaction of certain Performance Milestones, completion of a vesting period of 12 months and Mr Temov’s continued engagement as Managing Director.

The total fair value of the rights granted to Mr Temov was $800,000 based on the Group’s closing share price of $0.04 (post consolidation) as at the date of the Group’s 2019 Annual General Meeting. This amount is to be amortised over the respective vesting periods. An amount of $142,528 is included in the Statement of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity for the year ended 30 June 2020. In the year ended 30 June 2021, Mr Yakov resigned as a Director and therefore an amount of $142,528 was reversed as an expense.

Director options

On 30 June 2021, the Group obtained shareholder approval to issue 9,000,000 unlisted options (on a post-consolidation basis) to Mr Ferguson, Mr Sierakowski and Mr Bosio, in consideration of services provided to the Group.

The fair value of the equity-settled share options granted is estimated as at the date of grant using the Black-Scholes option valuation model taking into account the terms and conditions upon which the options were granted.

es option valuation model taking into account granted.	the terms and conditions upon
Weighted average exercise price	$0.03
Weighted average life of the options	3.01 years
Weighted average underlying share price	$0.05 (post-consolidation)
Expected share price volatility	127%
Risk-free interest rate	0.20%
Grant date	30 June 2021
Expiry date	1 July 2024
Value per option	$0.0397

The following table summarises the equity-settled share options issued to Directors:

Number Issued Grant Date Expected Vesting Date Vesting Period (days) Value per Option Total Value per Option Amount Expensed in Current Year Amount to be Expensed in Future Years if Vesting Conditions are met	Mr Ferguson Mr Sierakowski Mr Bosio Total
	5,000,000 2,000,000 2,000,000 9,000,000 30 June 2021 30 June 2021 30 June 2021 30 June 2022 30 June 2022 30 June 2022 365 365 365 $0.0397 $0.0397 $0.0397 $198,500 $79,400 $79,400 $357,300 $556 $222 $222 $1,000 $197,944 $79,178 $79,178 $356,300

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Remuneration Report (continued)

Key management personnel shareholdings

The number of ordinary shares in Connected IO Limited held by each key management personnel of the Group during the financial year is as follows:

Ordinary Shares 2021	Balance at 1 July 2020 or on date of appointment Granted as remuneration during the year Net other changes during the year1 Balance at 30 June 2021 or on date of resignation (pre-consolidation)
Dougal Ferguson Adam Sierakowski Davide Bosio Yakov Temov (resigned 2 Dec 2020)	4,000,000 - 12,000,000 16,000,000 5,645,160 - 16,935,480 22,580,640 650,000 - 1,950,000 2,600,000 23,668,333 - - 23,668,333
	33,963,493 - 30,885,480 64,848,973

1 Net other changes during the year was due to the Director’s participation in the Group’s two nonrenounceable pro-rata entitlements issue, both on a 1:1 basis as announced by the Group on 19 January 2021 and 28 May 2021.

The number of performance rights in Connected IO Limited held by each key management personnel of the Group during the financial year is as follows:

Performance Rights 2021	Balance at 1 July 2020 or on date of appointment Granted as remuneration during the year Net other changes during the year Balance at 30 June 2021 or on date of resignation (pre-consolidation)
Dougal Ferguson Adam Sierakowski Davide Bosio Yakov Temov (resigned 2 Dec 2020)	- - - - - - - - - - - - 20,000,000 - - 20,000,000
	20,000,000 - - 20,000,000

Options

Unlisted Options 2021	Balance at 1 July 2020 or on date of appointment Granted as remuneration during the year1 Net other changes during the year Balance at 30 June 2021 or on date of resignation (post-consolidation)
Dougal Ferguson Adam Sierakowski Davide Bosio Yakov Temov (resigned 2 Dec 2020)	- 5,000,000 - 5,000,000 - 2,000,000 - 2,000,000 - 2,000,000 - 2,000,000 - - - -
	- 9,000,000 - 9,000,000

1 The options granted as remuneration during the year were approved by shareholders on 30 June 2021 and issued on a post-consolidation basis on 27 July 2021. The options were issued in consideration of services provided by the Directors to the Group. Refer to Note 18(c) for further details.

Other equity-related key management personnel transactions

There have been no other transactions involving equity instruments apart from those describe in the tables above relating to options, rights and shareholdings.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Remuneration Report (continued)

Key management personnel shareholdings (continued)

Other transactions with key management personnel

Transactions with key management personnel related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

(i) Payments to Trident Management Services Pty Ltd, a company of which Adam Sierakowski is a Director and shareholder, for accounting and company secretarial services provided. (ii) Payments to Price Sierakowski Pty Ltd, a company of which Adam Sierakowski is a Director and shareholder, for legal services provided. (iii) Payments to Trident Capital Pty Ltd, a company of which Adam Sierakowski is a Director and Shareholder, for consultancy services provided. Amounts outstanding at reporting date Aggregates amount payable to key management personnel and their related entities at reporting date. (i) Director remuneration (ii) Other transactions	2021 $ 48,000 46,373 100,000 231,291 289,913 521,204	2020 $ 61,580 11,769 - 37,000 49,255
		86,255

End of Remuneration Report (Audited)

Voting and comments made at the Group’s 2020 Annual General Meeting (AGM)

The approval of the remuneration report was passed as indicated in the results of the Annual General Meeting dated 27 November 2020. The Group did not receive specific feedback at the AGM or throughout the year on its remuneration practices.

Proceedings on behalf of the Group

No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings.

The Group was not a party to any such proceedings during the year.

Non-audit services

During the year $395 was paid to the auditor for the provision of non-audit services (2020: $4,123).

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 22 to the financial statements. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 .

The Directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been reviewed to ensure that they do not impact the impartiality and objectivity of the auditor and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS’ REPORT

Auditor’s independence declaration

The auditor’s independence declaration is included on page 14 of the annual report.

Signed in accordance with a resolution of the directors.

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Dougal Ferguson Director

Perth, Western Australia 8 October 2021

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the consolidated financial report of Connected IO 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:

a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) any applicable code of professional conduct in relation to the audit.

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Perth, Western Australia 8 October 2021

B G McVeigh Partner

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Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

Note Sales revenue 3 Cost of goods sold Gross profit Interest received 3 Other income 3 Debts forgiven 15 Director fees, salary and wages expense Professional fees Depreciation and amortisation expense 8,9,11 Administration expense Interest and facility fee expenses Impairment of goodwill 10 Impairment of right-of-use assets 9 Impairment of other intangibles 11 Share based payments 18 Loss before tax Income tax expense 4 Loss for the year from continuing operations Other comprehensive income for the year, net of tax Items that may be reclassified to profit or loss Exchange differences on translation of foreign balances Total comprehensive loss for the year Earnings per share for loss attributable to the ordinary equity holders of the group Basic and diluted loss per share from continuing operations 19	Consolidated 2021 $ Consolidated 2020 $ 1,196,657 3,817,964 (691,908) (2,331,466)
	504,749 1,486,498
	54 869 174 132,399 199,529 - (1,247,119) (1,826,867) (466,902) (227,240) (128,776) (119,554) (640,670) (777,869) (112,943) (318,524) (2,418,610) - (86,625) - (43,331) - (1,252,272) (742,528)
	(5,692,742) (2,392,816) - -
	(5,692,742) (2,392,816) - - (160,078) 38,219
	(5,852,820) (2,354,597)
	Cents Cents
	(1.60) (1.12)

The accompanying notes form an integral part of this consolidated statement of profit or loss and other comprehensive income.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

Note Current Assets Cash and cash equivalents 5 Trade and other receivables 6 Inventory 7 Total current assets Non-current Assets Plant and equipment 8 Right-of-use assets 9 Goodwill 10 Other intangibles 11 Other assets Total non-current assets Total Assets Current Liabilities Trade and other payables 12 Lease liabilities 9 Borrowings 13 Convertible notes 14 Other payables 15 Total current liabilities Non-current Liabilities Lease liabilities 9 Other payables 15 Total non-current liabilities Total Liabilities Net (Liabilities) / Assets Equity Issued capital 16 Reserves Accumulated losses Total (Deficit) / Equity	Consolidated 2021 $ Consolidated 2020 $ 1,550,376 713,079 140,171 286,770 331,709 615,050
	2,022,256 1,614,899
	11,094 18,878 - 136,147 - 2,418,610 - 138,198 10,143 10,079
	21,237 2,721,912
	2,043,493 4,336,811
	1,251,885 1,072,013 39,418 39,338 498,397 450,000 1,321,000 1,321,000 29,529 -
	3,140,229 2,882,351
	54,526 102,910 198,633 253,533
	253,159 356,443
	3,393,388 3,238,794
	(1,349,895) 1,098,017
	73,530,158 70,777,722 1,995,832 1,503,438 (76,875,885) (71,183,143)
	(1,349,895) 1,098,017

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The accompanying notes form an integral part of this consolidated statement of financial position.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

Consolidated Note Balance at 1 July 2019 Net loss for the year Other comprehensive income for the year Total comprehensive loss Shares issued 16(a) Share issue costs 16(a) Convertible notes issued Share-based payments 18 Balance at 30 June 2020 Balance at 1 July 2020 Net loss for the year Other comprehensive income for the year Total comprehensive loss Shares issued 16(a) Share issue costs 16(a) Unissued capital 16(a) / 18(b) Share-based payments 18 Balance at 30 June 2021	Issued Capital Convertible Notes Share-Based Payments Reserve Foreign Currency Translation Reserve Accumulated Losses Total $ $ $ $ $ $
	68,827,796 96,456 1,081,349 144,886 (68,790,327) 1,360,160 - - - - (2,392,816) (2,392,816) - - - 38,219 - 38,219
	- - - 38,219 (2,392,816) (2,354,597)
	2,015,926 - - - - 2,015,926 (66,000) - - - - (66,000) - - - - - - - - 142,528 - - 142,528
	70,777,722 96,456 1,223,877 183,105 (71,183,143) 1,098,017
	70,777,722 96,456 1,223,877 183,105 (71,183,143) 1,098,017 - - - - (5,692,742) (5,692,742) - - - (160,078) - (160,078)
	- - - (160,078) (5,692,742) (5,852,820)
	1,786,652 - - - - 1,786,652 (34,216) - - - - (34,216) 1,000,000 - - - - 1,000,000 - - 652,4721 - - 652,472
	73,530,158 96,456 1,876,349 23,027 (76,875,885) (1,349,895)

1 This represents the fair value of options issued to A.C.N. 627 852 797 Pty Ltd and Directors during the year, being $794,000 and $1,000 respectively, less the fair value of the performance rights, being ($142,528), which were reversed during the year. Refer to Note 18 for further details.

The accompanying notes form an integral part of this consolidated statement of changes in equity.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Finance costs Income tax paid Net cash used in operating activities 20(b) Cash flows from investing activities Payments for plant and equipment Payments for other intangibles Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payments for share issue costs Proceeds from borrowings 13 Repayment of borrowings 13 US Federal funding assistance 15 Payments of lease liabilities 9 Net cash provided by financing activities Net change in cash and cash equivalents held Cash and cash equivalents at beginning of the financial year Effect of exchange rate fluctuation on cash held Cash and cash equivalents at end of financial year 20(a)	Consolidated 2021 $ Consolidated 2020 $ 1,308,926 3,514,172 (2,624,893) (4,701,391) 54 869 (41,855) (116,460) (19,324) (1,856)
	(1,377,092) (1,304,666)
	(1,080) (3,940) - (64,721)
	(1,080) (68,661)
	1,637,048 1,250,000 (34,216) - 502,986 820,000 (54,589) (656,705) 193,767 253,533 (29,527) (25,415)
	2,215,469 1,641,413
	837,297 268,086 713,079 435,524 - 9,469
	1,550,376 713,079

The accompanying notes form an integral part of this consolidated statement of cash flows.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and Interpretations and complies with other requirements of the law.

The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise stated. The financial statements are for the Group consisting of Connected IO Limited and its controlled entities. For the purpose of preparing the consolidated financial statements, the Group is a for-profit entity.

The financial report has been prepared on an accruals basis and is based on historical costs.

The financial report is presented in Australian dollars.

Connected IO Limited is incorporated in Australia and its shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are marketing and product development.

(b) Adoption of new and revised standards

Standards and Interpretations applicable to 30 June 2021

For the year ended 30 June 2021, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group and effective for the current reporting periods beginning on or after 1 July 2020.

As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and therefore no material change is necessary to the Group’s accounting policies.

Standards and Interpretations in issue not yet effective

The Directors have also reviewed all of the new and revised Standards and Interpretations in issue not yet effective for the year ended 30 June 2021.

As a result of this review the Directors have determined that there are no new and revised Standards and Interpretations that may have a material effect on the application in future periods and therefore, no material change is necessary to the Group’s accounting policies.

(c) Statement of compliance

The financial report was authorised for issue on 8 October 2021.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

(d) Going concern

This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business.

For the year ended 30 June 2021 the Group recorded a loss of $5,692,742 (2020: $2,392,816) and had net cash outflows from operating and investing activities of $1,378,172 (2020: $1,373,327). At 30 June 2021, the Group had a working capital deficit of $1,117,973 (2020: deficit of $1,267,452).

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Going concern (continued)

Furthermore, the full impact of the COVID-19 pandemic continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact that the pandemic will have on its financial condition, liquidity and future results of operations during 2021. Management continues to actively monitor the global situation and its impact on the Group’s financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition or liquidity for the 2021 financial year.

In context of this operating environment, the ability of the Group to continue as a going concern is dependent on securing additional funding through debt or equity to continue to fund its operational activities.

These conditions indicate a material uncertainty that may cast a significant doubt about the Group’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The financial statements have been prepared on the basis that the Group is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for the following reasons:

Subsequent to year end, an amount of $3.5 million (before costs) was raised to fund working capital (refer to Note 26);
The Group believe they can raise additional funding through debt or equity which is actively pursued;
The Group has a recent proven history of successfully raising capital; and
Cash spending can be reduced or slowed below its current rate if required in order to minimise capital raising requirements.

Based on these facts, the Directors consider the going concern basis of preparation to be appropriate for this financial report. Should the Group be unsuccessful in obtaining additional loan financing or raising additional funds through the issue of new equity, there is a material uncertainty which may cast significant doubt on whether the entity will be able to continue as a going concern and therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

The financial statements do not include any adjustments relative to the recoverability and classification of recorded asset amounts or, to the amounts and classification of liabilities that might be necessary should the entity not continue as a going concern.

(e) Basis of consolidation

The consolidated financial statements comprise of the financial statements of Connected IO Limited (“the Company”) and its controlled entities (“the Group”) as at 30 June 2021.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-Group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing when the Group controls another entity.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Basis of consolidation (continued)

Unrealised gains or transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group has directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

(f) Revenue recognition

The Group is in the business of providing certain hardware including routers, cellular enabled products and other related hardware products.

The Group generates revenue largely in the United States of America.

The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer.

In determining the amount of revenue and profits to record, and related statement of financial position items (such as contract fulfilment assets, capitalisation of costs to obtain a contract, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. This includes an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised.

Revenue is recognised either when the performance obligation in the contract has been performed ('point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the present contract.

The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed.

Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied.

For each performance obligation, the Group determines if revenue will be recognised over time or at a point in time. Where the Group recognises revenue over time for long term contracts, this is in general due to the Group performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Revenue recognition (continued)

For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group’s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts.

When using the output method the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. Where the output method is used, in particular for long term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long term contracts use output methods based upon estimation of number of users, level of service activity or fees collected.

If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point in time. This may be at the point of physical delivery of goods and acceptance by a customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria.

The Group disaggregates revenue from contracts with customers by type of good or service as management believe this best depicts how the nature, amount, timing and uncertainty of the Group’s revenue and cash flows.

The nature of contracts or performance obligations categorised within this revenue type includes sales of hardware. The service contracts in this category include contracts with either a single or multiple performance obligations.

The Group considers that the services provided meet the definition of a series of distinct goods and services as they are (i) substantially the same and (ii) have the same pattern of transfer as the series constitutes services provided in distinct time increments and therefore treats the series as one performance obligation.

Sale of goods

The Group’s contracts with customers for the sale of hardware generally include one performance obligation. The Group has concluded that revenue from sale of equipment should be recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment. Therefore, the adoption of AASB 15 did not have an impact on the timing of revenue recognition.

Interest income

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

(g) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Cash and cash equivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as described above, net of outstanding bank overdrafts.

(i) Trade and other receivables

Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for expected credit loss. Trade receivables are generally due for settlement within 30 days.

The Group has applied the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance. To measure the expected credit loss, trade receivables have been grouped based on days overdue.

Other receivables are recognised at amortised cost less any allowance for expected credit losses.

(j) Foreign currency translation

The presentation currency of the Group and its controlled entities in these financial statements is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date.

All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss.

Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

As at the reporting date the assets and liabilities of these subsidiaries are translated into the presentation currency of the Group at the rate of exchange ruling at the balance date and their statements of comprehensive income are translated at the weighted average exchange rate for the year.

The exchange differences arising on the translation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(k) Income tax

The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date.

Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(m) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition is accounted for as follows:

Raw materials – purchase cost on a first-in, first-out basis; and
Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
(n) Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is calculated on a diminishing value basis over the estimated useful life of the assets as follows:

Plant and equipment – over 3 to 50 years

The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.

(i) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(n) Plant and equipment (continuted)

An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

For plant and equipment, impairment losses are recognised in the Statement of Profit or Loss and Other Comprehensive Income in the cost of sales line item.

(ii) Derecognition and disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(o) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cashgenerating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Each unit or group of units to which the goodwill is so allocated:

represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with AASB 8 Operating Segments .

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. When the recoverable amount of the cashgenerating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment losses recognised for goodwill are not subsequently reversed.

(p) Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes in these accounting estimates being accounted for on a prospective basis.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(p) Intangible assets (continued)

Internally generated intangible assets – research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

The technical feasibility of completing the intangible asset so that it will be available for use or sale;
The intention to complete the intangible asset and use or sell it;
The ability to use or sell the intangible asset;
How the intangible asset will generate probable future economic benefits;
The availability of adequate technical, financial and other resources to complete development and to use or sell the intangible asset; and
The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.

The following useful lives are used in the calculation of amortisation:

Certifications – 3 years Tooling costs – 3 years

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.

(q) Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred.

A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Financial instruments (continued)

For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:

amortised cost;
fair value through profit or loss (FVTPL);
equity instruments at fair value through other comprehensive income (FVOCI); or
debt instruments at fair value through other comprehensive income (FVOCI).

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.

The classification is determined by both:

the entity’s business model for managing the financial asset; and
the contractual cash flow characteristics of the financial asset.

Subsequent measurement of financial assets Financial assets at amortised cost

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

they are held within a business model whose objective is to hold the financial assets to collect its contractual cash flows; and
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under IAS 39.

Financial assets at fair value through profit or loss (FVTPL)

Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit or loss. Further, irrespective of business model, financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply.

The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in unlisted and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost.

Assets in this category are measured at fair value with gains or losses recognised in profit or loss.

The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

Equity instruments at fair value through other comprehensive income (Equity FVOCI) Investments in equity instruments that are not held for trading are eligible for an irrevocable election at inception to be measured at FVOCI.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Financial instruments (continued)

Under Equity FVOCI, subsequent movements in fair value are recognised in other comprehensive income and are never reclassified to profit or loss.

Dividends from these investments continue to be recorded as other income within the profit or loss unless the dividend clearly represents return of capital.

This category includes unlisted equity securities that were previously classified as ‘available-forsale’ under AASB 139.

Any gains or losses recognised in other comprehensive income (OCI) are not recycled upon derecognition of the asset.

Debt instruments at fair value through other comprehensive income (Debt FVOCI) Financial assets with contractual cash flows representing solely payments of principal and interest and held within a business model of collecting the contractual cash flows and selling the assets are accounted for at debt FVOCI.

The Group accounts for financial assets at FVOCI if the assets meet the following conditions:

they are held under a business model whose objective it is to “hold to collect” the associated cash flows and sell financial assets; and
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset.

Impairment of financial assets

AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced AASB 139’s ‘incurred loss model’.

Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15, loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.

Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

In applying this forward-looking approach, a distinction is made between:

financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Level 1’);
financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Level 2’); and
‘Level 3’ would cover financial assets that have objective evidence of impairment at the reporting date.

‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Financial instruments (continued)

Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.

Trade and other receivables and contract assets

The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The Group assess impairment of trade receivables on a collective basis and as they possess shared credit risk characteristics they have been grouped based on the days past due.

Classification and measurement of financial liabilities

The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.

Financial liabilities are initially measured at fair value, and where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).

All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income.

(r) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

The fair value of the liability portion of a convertible note is determined using a market interest rate for an equivalent non-convertible note. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the note. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholder’s equity, net of income tax effects.

Borrowings are removed from the Statement of Financial Position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(s) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Profit or Loss and Other Comprehensive Income net of any reimbursement.

Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.

Warranties

Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products, at the Directors’ best estimate of the expenditure required to settle the Group’s obligation.

(t) Employee leave benefits

Wages, salaries, annual leave and sick leave

Liabilities accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave expected to be settled within 12 months of the balance date are recognised in other payables in respect of employees’ services up to the balance date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

Liabilities accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave not expected to be settled within 12 months of the balance date are recognised in non-current other payables in respect of employees’ services up to the balance date. They are measured as the present value of the estimated future outflows to be made by the Group.

Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the balance date. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the balance date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(v) Leases

The Group assesses at the start of a contract whether or not it contains a lease, by deciding if the contract provides the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group currently uses a single recognition and measurement approach for all leases, except for short-term leases and leases of low value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use underlying assets.

i) Right-of-use assets

The Group recognises right-of-use assets at the start of the lease and are measured at costs, less accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

ii) Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives received, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(v) Leases (continued)

the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such payments) or a change in the assessment of an option to purchase the underlying asset.

iii) Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

(w) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months.

(x) Share-based payment transactions

Equity settled transactions:

The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees and consultants render services in exchange for shares or rights over shares (equity-settled transactions).

When provided, the cost of these equity-settled transactions with employees and consultants, where the fair value of the services is not readily determinable, is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Connected IO Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(x) Share-based payment transactions (continued)

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The Statement of Profit or Loss and Other Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 19).

(y) 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.

(z) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Group.

(aa) Parent entity financial information

The financial information for the parent entity, Connected IO Limited, disclosed in Note 27 has been prepared on the same basis as the consolidated financial statements, except as set out below.

Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the parent entity’s financial statements. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments.

Share-based payments

The grant by the Group of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(bb) Earnings/loss per share

Basic earnings/loss per share is calculated as net profit/loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings/loss per share is calculated as net profit/loss attributable to members of the parent, adjusted for:

costs of servicing equity (other than dividends) and preference share dividends; • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(cc) Critical accounting estimates and judgments

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it effects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Impairment of intangibles with indefinite useful lives and goodwill

The Group determines whether intangibles with indefinite useful lives and goodwill are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are allocated.

Impairment

In assessing impairment, management estimates the recoverable amount of each asset or cashgenerating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate.

Inventories

Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices.

Capitalisation of internally developed assets

Distinguishing the research and development phases of new equipment certifications and tooling costs and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.

Useful lives of certifications and tooling costs

Management reviews its estimate of the useful lives of certifications and tooling costs at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain software and IT equipment.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(cc) Critical accounting estimates and judgments (continued)

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees and consultants, where the fair value of the services is not readily determinable, by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black-Scholes model, using the assumptions detailed in Note 18.

The Group measures the cost of cash-settled share-based payments at fair value at the grant date using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted.

Right-of-use assets and lease liabilities – lease term

The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated entity's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances.

Right-of-use assets and lease liabilities – incremental borrowing rate

Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

2. INVESTMENTS

The consolidated financial statements include financial statements of Connected IO Limited and the following subsidiaries:

following subsidiaries:
	Country of	% Equity Interest
Name	Incorporation	2021	2020
CIO Technology, Inc	Texas, USA	100%	100%

Connected IO Limited is the ultimate Australian parent entity and ultimate parent of the Group.

Balances between the Group and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and not disclosed in this note.

3. REVENUE

. REVENUE
Revenue from contracts with customers Interest received Other income Debt forgiven	Consolidated 2021 Consolidated 2020 $ $ 1,196,657 3,817,964 54 869 174 132,399 199,529 -
	1,396,414 3,951,232

Disaggregation of Revenue

The Group derives its revenue from the sale of goods at a point in time. This is consistent with the revenue information that is disclosed for each reportable segment under AASB 8, refer Note 24.

At a point in time Product sales Total revenue	Consolidated 2021 $ 1,196,657
	1,196,657

Reconciliation of revenue from contracts with customers with the amounts disclosed in segment information

Segment revenue Inter-segment adjustments and eliminations Total revenue from contracts with customers	Consolidated 2021 $ 1,196,657 -
	1,196,657

(i) Segment revenues represent revenue generated from external customers. There were no intersegment revenues in the current period.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

4. INCOME TAX

4. INCOME TAX
(a) Income tax recognised in profit or loss Tax expense comprises: Current tax expense Deferred tax expense Total tax expense relating to continuing operations The prima face income tax expense on pre-tax accounting loss from operations reconciles to the income tax expense in the financial statements as follows: Loss from continuing operations Income tax benefit calculated at 26% (2020: 27.5%) Add/(Less): - Non-deductible items - Unused tax losses and tax offset not recognised as deferred tax assets - Other deferred tax assets and tax liabilities not recognised - Difference in tax rate of subsidiaries - Change in tax rate Income Tax Expense (b) Unrecognised deferred tax balances The following deferred tax assets and liabilities have not been brought to account (2021: 26%, 2020: 27.5%): Deferred tax assets comprise: Accrued expenses and liabilities Share issue expenses Depreciation timing differences Foreign exchange Losses available for offset against future taxable income – revenue Losses available for offset against future taxable income – capital Total deferred tax assets	Consolidated 2021 Consolidated 2020 $ $ - - - -
	- -
	(5,692,742) (2,392,816)
	(1,480,113) (658,024) 986,714 245,685 198,842 (995,087) 294,077 1,551,752 61,555 55,412 (61,075) (199,738)
	- -
	10,400 22,939 22,988 39,379 12,873 15,173 - - 3,598,104 3,399,261 - -
	3,644,365 3,476,752

Deferred tax assets have not been recognised in respect of the above items because it is not considered probable that future taxable profit will be available against which the Group can utilise the benefits thereof. Deferred tax liabilities have not been recognised in respect of these taxable temporary differences as the entity is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

(c) Income tax expense not recognised directly in equity during the year: Share issue costs	Consolidated 2021 Consolidated 2020 $ $ 8,896 1,881
	8,896 1,881

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

5. CASH AND CASH EQUIVALENTS

Cash at bank Closing balance	Consolidated 2021 Consolidated 2020 $ $ 1,550,376 713,079 1,550,376 713,079

6. TRADE AND OTHER RECEIVABLES

. TRADE AND OTHER RECEIVABLES
Current Trade receivables Prepaid inventory Other receivables Closing balance	Consolidated 2021 Consolidated 2020 $ $ 1,805 115,112 84,215 141,058 54,151 30,600
	140,171 286,770

Trade receivables are non-interest bearing and are generally on 30 day terms. All amounts are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.

No trade and other receivables which are overdue are impaired.

Expected credit losses

The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component.

In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due.

The current expected loss rates are based on the payment profile for sales over the past 24 months before 30 June 2021 and 30 June 2020 respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forwarding looking factors affecting the customer’s ability to settle the amount outstanding. The expected credit loss at 30 June 2021 and 2020 was nil.

7. INVENTORY

Finished goods – at cost Closing balance 8. PLANT AND EQUIPMENT	Consolidated 2021 Consolidated 2020 $ $ 331,709 615,050
	331,709 615,050

. PLANT AND EQUIPMENT
Opening balance – at cost Additions Impairment Depreciation Foreign currency differences Closing balance – at cost	Consolidated 2021 Consolidated 2020 $ $ 18,878 21,845 1,080 3,940 - - (7,268) (6,907) (1,596) -
	11,094 18,878

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

9. LEASES – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

This note provides information for leases where the Group is a lessee.

(i) Amounts recognised in the statement of financial position

The statement of financial position shows the following amounts relating to leases:

Right-of-use assets Premises Accumulated amortisation Impairment Net carrying value of right-of-use assets Lease liabilities Current Non-current Total lease liabilities econciliation of right-of-use assets: Opening balance Initial adoption Foreign currency differences Acquisitions through business combinations Disposals Disposals – discontinued operation Disposals or classified as held for sale Impairment expense Depreciation expense Closing balance ecognition of lease liabilities: Opening balance Initial adoption Foreign currency differences Principal repayments Interest expense Disposals Disposals – discontinued operation Disposals or classified as held for sale Closing balance	Consolidated 30 June 2021 $ Consolidated 30 June 2020 $ 162,527 178,039 (76,484) (41,892) (86,043) -
	- 136,147
	39,418 39,338 54,526 102,910
	93,944 142,248
	Consolidated 30 June 2021 $ Consolidated 30 June 2020 $ 136,147 - - 174,405 (11,022) 4,566 - - - - - - - - (86,625) - (38,500) (42,824)
	- 136,147
	Consolidated 30 June 2021 $ Consolidated 30 June 2020 $ 142,248 - - 174,405 (11,022) 4,566 (29,527) (25,415) (7,755) (11,308) - - - - - -
	93,944 142,248

Reconciliation of right-of-use assets:

Recognition of lease liabilities:

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

9. LEASES – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)

(ii) Amounts recognised in the statement of profit or loss

The statement of profit or loss shows the following amounts relating to leases:

Depreciation charge of right-of-use assets Buildings Total Interest expense (included in interest and facility fee expenses) Impairment expense	Consolidated 30 June 2021 $ Consolidated 30 June 2020 $ (38,500) (42,824) (38,500) (42,824) (7,755) (11,308) (86,625) -

During the year ended 30 June 2021, as a result of the Board resolving to impair the entire carrying value of the Group’s recorded goodwill (refer to Note 10), the Board further determined that the remaining assets included in the cash-generating unit, being the right-of-use and other intangible assets, are not considered recoverable and have therefore been impaired.

10. GOODWILL

0. GOODWILL
Opening balance Impairment Closing balance	Consolidated 2021 Consolidated 2020 $ $ 2,418,610 2,418,610 (2,418,610) -
	- 2,418,610

Goodwill represents an acquisition via a business combination.

During the year ended 30 June 2021, the Group conducted an impairment assessment in relation to goodwill. Due to the on-going COVID-19 pandemic which continues to significantly impact upon the operations of the subsidiary, the Group has been unable to accurately forecast the future cashflows of the cash-generating unit (CIO Technology Inc.).

As a result, the Group has been unable to support the recoverability of the assets included in the cashgenerating unit and therefore, the Board has resolved to impair the entire carrying value of the goodwill for the year ended 30 June 2021.

11. OTHER INTANGIBLES

Certifications Opening balance Additions Amortisation Impairment Foreign currency differences Closing balance	Consolidated 2021 Consolidated 2020 $ $ 101,140 143,300 - 16,839 (68,412) (58,999) (23,869) - (8,859) -
	- 101,140

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

11. OTHER INTANGIBLES (continued)

Tooling costs Opening balance New tooling costs incurred Amortisation Impairment Foreign currency differences Closing balance Total other intangibles	37,058 - - 47,882 (14,596) (10,824) (19,462) - (3,000) -
	- 37,058
	- 138,198

Certifications represent costs incurred in obtaining certification that the Group's products conform to the regulations of the Federal Communications Commission (USA). Costs of obtaining a certification are amortised over the useful life of the certification, which management has assessed as being 3 years.

Tooling costs represent costs incurred by the Group in relation to the mould that is installed within the manufacturers’ machines so as to produce routers that are to the Group’s specifications. Tooling costs are amortised over the useful life of 3 years based on Management’s assessment.

12. TRADE AND OTHER PAYABLES

Current Payables1 Other payables Accruals – director fees Accruals – other Accrued interest – borrowings and convertible notes Closing balance	Consolidated 2021 Consolidated 2020 $ $ 66,589 392,832 361,999 144,016 304,448 184,982 279,425 40,000 239,424 310,183
	1,251,885 1,072,013

1 Payables are non-interest bearing and are normally settled on 30 day terms. All amounts are short term.

13. BORROWINGS

Australia Loan – Tyche Investments Pty Ltd Loan – A.C.N. 627 852 797 Pty Ltd United States Loan – Other unrelated parties Closing balance Opening balance Advances Repayments - cash Repayments - issue of shares and options post year end Closing balance	Consolidated 2021 Consolidated 2020 $ $ 400,000 450,000 - - 98,397 -
	498,397 450,000
	450,000 286,706 502,986 820,000 (54,589) (656,706) (400,000) -
	498,397 450,000

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

13. BORROWINGS (continued)

Tyche Investments Pty Ltd

During the year ended 30 June 2020, the Group secured a line of credit facility of $500,000 with Tyche Investments Pty Ltd to drive manufacturing acceleration. This facility was increased to an available limit of $700,000 on 21 November 2019. The facility is debt-only and does not dilute the existing shareholders. Interest is calculated at 5% p.a. from the date that funds are initially drawn down. Additional interest of 1% per month is payable on funds which remain outstanding in excess of 90 days from the date of initial drawdown. Any outstanding accrued interest on the facility will be required to be repaid in cash.

On 31 July 2020, the Group repaid $50,000 of the facility. On 30 June 2021, the Group obtained shareholder approval to convert accrued interest of approximately $107,573 into fully paid ordinary shares at $0.02 per share. Subsequent to year end, 5,378,630 fully paid ordinary shares were issued to Tyche Investments Pty Ltd in satisfaction of the accrued interest on the loan to 31 March 2021.

A.C.N. 627 852 797 Pty Ltd

On 3 December 2020, the Group entered into a loan agreement with A.C.N. 627 852 797 Pty Ltd (A.C.N.) for the provision of a loan facility to advance funds of up to $400,000 to be used for assisting in the payment of the Group’s inventory production.

The interest free loan was provided in three tranches with the final drawdown date on or around 28 February 2021.

On 28 May 2021, the Group issued a Notice of General Meeting seeking shareholder approval to repay the loan via the issue of 200,000,000 shares and 200,000,000 options. On 30 June 2021, the Group obtained shareholder approval and subsequent to year end, issued the shares and options to A.C.N. in satisfaction of repayment of the loan.

Although the administrative process of issuing the shares and options occurred subsequent to year end, as the Group had obtained shareholder approval and the Directors had agreed to issue the shares and options to A.C.N. prior to year end, the Group had a contractual obligation and therefore the Directors have resolved to recognise the transaction in the Group’s accounts for the year ended 30 June 2021. Refer to Note 18(b) for further details.

Other Unrelated Parties

During the year ended 30 June 2021, the Group’s wholly owned subsidiary, CIO Technology, Inc., received an advance from an unrelated party of approximately USD $77,000. There is currently no commercial terms agreed for the advance received by the subsidiary and the advance is repayable by the subsidiary.

14. CONVERTIBLE NOTES

At the 2018 Annual General Meeting, shareholders approved the conversion of the Group’s $1.37m loan facility with Gorilla Pit Pty Ltd into convertible notes. On 28 February 2019 the Group issued convertible notes with a face value of $1,351,000. Each note entitled the holder to convert to ordinary shares at $0.003 per share. Since 28 February 2019, the Group has undertaken two 1:10 consolidations, making the effective conversion price as at the date of this report, $0.30 per share.

During the year ended 30 June 2020, convertible notes with a face value of $30,000 plus accrued interest of $4,185 were converted into ordinary shares.

On 30 June 2021, all but three (3) convertible noteholders elected to waive their interest entitlements for the year ended 30 June 2021. As such, total interest expense recognised by the Group for the year ended 30 June 2021 was $10,560. Subsequent to the year ended 30 June 2021, all the outstanding convertible notes (plus accrued interest) was paid out in cash (refer below).

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

14. CONVERTIBLE NOTES (continued)

On 31 July 2020, accrued interest of $149,604 (relating to the period ending 30 June 2020) was converted into 4,986,811 ordinary shares at a conversion price of $0.03 per share (pre-July 2021 consolidation). A further amount of accrued interest of $23,873 was paid in cash in March 2021.

The net proceeds received from the issue of the convertible notes have been split between the financial liability and an equity component, representing the residual attributable to the option to convert the financial liability into equity of the Group. The convertible notes had an original maturity date of 30 June 2019 which was extended to 30 June 2020. On or about 30 June 2020, the Group again successfully extended the maturity date of the convertible notes to 30 June 2021 under a letter of amendment. On 28 May 2021, the Group issued a Notice of General Meeting seeking shareholder approval to utilise funds raised under a share placement to repay the convertible notes on issue plus any accrued interest owing on the convertible notes. The repayment of the convertible notes and any accrued interest was subject to the Group raising the full amount prescribed by the share placement and the obtaining of shareholder approval which was granted on 30 June 2021. Subsequent to year end, the convertible notes and accrued interest was repaid in full.

The allocation between financial liability and equity has been undertaken by the Group in relation to both the issue of the convertible notes and their subsequent extensions as follows.

28 February 2019 issue of convertible notes Proceeds of issue Liability component at date of issue Unwinding – interest expense Liability component at repayment date of 30 June 2019 Equity component at date of issue Extension of repayment date to 30 June 2020 Liability at date of extension Liability component at date of extension Equity component at date of extension Total equity component at balance date Extension of repayment date to 30 June 2021 Liability at date of extension Liability component at date of extension Equity component at date of extension	Consolidated 2021 Consolidated 2020 $ $ 1,351,000 1,351,000
	1,325,199 1,325,199 25,801 25,801 1,351,000 1,351,000
	25,801 25,801
	1,351,000 1,351,000
	1,280,345 1,280,345
	70,655 70,655
	96,456 96,456
	1,321,000 1,321,000
	1,321,000 1,321,000
	- -

As at 30 June 2021, the fair value of the outstanding convertible notes was the equivalent to its face value of $1,321,000. Therefore there were no adjustments to the equity component of $96,456 that was previously credited to equity. Total interest accrued on the convertible notes as at 30 June 2021 was $75,990.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

15. OTHER PAYABLES

Current Other payables – Tranche 1 Non-current Other payables – Tranche 2 Opening balance Advances Repayments Debt forgiveness Foreign currency differences Closing balance	Consolidated 2021 Consolidated 2020 $ $ 29,529 - 198,633 253,533
	228,162 253,533
	253,533 - 198,633 253,533 (4,866) - (199,529) - (19,609) -
	228,162 253,533

The other payables of USD $171,532 (AUD $228,162) at 30 June 2021 (2020: USD $174,000 (AUD $253,533)) represents funding assistance provided by the US Department of Treasury to CIO Technology, Inc. as a result of COVID-19 to assist with meeting employee wages, rent and general costs associated with the subsidiary.

Tranche 1

During the year ended 30 June 2020, the US Department of Treasury provided funding assistance of USD $174,000 to the subsidiary in the form of a promissory note (i.e. short term loan) of which there is an initial interest free period of 6 months before interest is charged at a fixed rate of 1% p.a. on any unpaid principal balance. The promissory note has a term of 2 years from the date that funding was provided before full repayment is required.

During the year ended 30 June 2021, the US Department of Treasury forgave USD $149,000 (AUD $199,529) of the Tranche 1 promissory note as part of its COVID-19 incentives and the subsidiary repaid USD $2,800 (AUD $4,866).

Tranche 2

In February 2021, the US Department of Treasury provided further funding assistance of USD $149,332 to the subsidiary in the form of a promissory note of which interest is to be charged at a fixed rate of 1% p.a. The promissory note has a term of 5 years from the date that funding was provided before full repayment is required.

16. ISSUED CAPITAL

Issued and paid up capital Ordinary shares fully paid (a)	Consolidated 2021 Consolidated 2020 $ $ 73,530,158 70,777,722 73,530,158 70,777,722

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

16. ISSUED CAPITAL (continued)

Movements in issued and paid up capital

(a)Ordinary shares fully paid Balance as at 1 July 2019 Conversion of convertible notes (20 Sep 2019, $0.003 per share) Director shares – in lieu of fees (20 Dec 2019, $0.004 per share) Director shares – reward compensation (20 Dec 2019, $0.004 per share) (refer to Note 18(a)) Placement of fully paid ordinary shares (20 Dec 2019, $0.003 per share) Consolidation on a 1:10 basis (23 Apr 2020) Placement broker fee shares (5 May 2020, $0.03 per share) Costs directly attributable to issue of share capital Balance as at 30 June 2020 Balance as at 1 July 2020 Conversion of convertible notes accrued interest (31 Jul 2020, $0.003 per share) Placement (Stage 1) (25 Jan 2021, $0.002 per share) Rights Offer (Stage 1) (18 Feb 2021, $0.002 per share) Rights Offer – Shortfall Shares (Stage 1) (18 Feb 2021, $0.002 per share) Rights Offer – Shortfall Shares (Stage 1) (26 Feb 2021, $0.002 per share) Rights Offer (Stage 2) (28 Jun 2021, $0.002 per share) Rights Offer – Shortfall Shares (Stage 2) (29 Jun 2021, $0.002 per share) Costs directly attributable to issue of share capital Unissued capital Repayment of loan subject to shareholder approval1 Balance as at 30 June 2021	Number Consolidated $ 1,813,085,059 68,827,796 11,394,998 34,185 16,435,333 65,741 150,000,000 600,000 416,666,667 1,250,000 (2,166,824,839) - 2,200,000 66,000 - (66,000)
	242,957,218 70,777,722
	242,957,218 70,777,722 4,986,811 149,604 37,191,604 75,000 128,597,018 257,194 31,423,381 62,847 87,923,630 175,847 355,366,115 710,732 177,713,547 355,428 - (34,216)
	1,066,159,3242 72,530,158 200,000,000 1,000,000
	1,266,159,324 73,530,158

1 On 30 June 2021, at a General Meeting of the Group, shareholders approved the issue of 200,000,000 shares and 200,0000,000 options (pre-July 2021 consolidation) in satisfaction of repayment of the loan owing to A.C.N. 627 852 797 Pty Ltd which were issued subsequent to year end. Refer to Note 18(b) for further details.

2 In July 2021, the issued capital was consolidated on a 1:10 basis. The number of shares on issue immediately after the consolidation was 106,615,835.

(b) Options

As at 30 June 2021, 7,500,000 unlisted options were on issue. The options are exercisable at $0.10 and expire on 20 December 2022.

On 30 June 2021, at a General Meeting of the Group, shareholders approved the issue of 200,000,000 shares and 200,0000,000 options (pre-July 2021 consolidation) in satisfaction of repayment of the loan owing to A.C.N. 627 852 797 Pty Ltd which were issued subsequent to year end. The options are exercisable at $0.003 and expire on 1 July 2024. Refer to Note 18(b) for further details.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

16. ISSUED CAPITAL (continued)

(c) Performance Rights

Balance as at 1 July 2019 Additions during the year Consolidation on a 1:10 basis Balance as at 30 June 2020 Balance as at 1 July 2020 Additions during the year Reversal of expense previously recognised Balance as at 30 June 2021	Number Consolidated $
	- - 200,000,000 142,528 (180,000,000) -
	20,000,000 142,528
	20,000,000 142,528 - - - (142,528)
	20,000,000 -

As at 30 June 2021, 10,000,000 Class A Performance Rights and 10,000,000 Class B Performance Rights (pre-July 2021 consolidation) were on issue, which were granted to Mr Temov as an incentive to provide ongoing dedicated services to the Group. Refer to Note 18(a) for further details.

17. RESERVES

Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operation.

Share-based payments reserve

This reserve is used to record the value of equity benefits provided to employees and Directors as part of their remuneration. Refer to Note 18 for further details of these plans.

Equity component of convertible note

The option premium on convertible notes represents the equity component (conversion rights) of the $1,351,000 of convertible notes issued during the year ended 30 June 2019.

18. SHARE-BASED PAYMENTS

During the year ended 30 June 2021, the following transactions were recognised as shares based payments by the Group:

Performance incentive (Note 18(a)) Loan repayment (Note 18(b)) Director options (Note 18(c))	Value $
	(142,528) 1,393,800 1,000
	1,252,272

(a) In December 2019, following shareholder approval granted at the Group’s 2019 Annual General Meeting, 100,000,000 Class A Performance Rights and 100,000,000 Class B Performance Rights were granted to Mr Temov as an incentive to provide ongoing dedicated services to the Group. The performance rights were subsequently consolidated on a 1:10 basis during the year ended 30 June 2020.

The Performance Rights were granted at nil consideration, did not have an exercise price, expire on 31 December 2023, and were subject to the satisfaction of certain Performance Milestones, completion of a vesting period of 12 months and Mr Temov’s continued engagement as Managing Director.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

18. SHARE-BASED PAYMENTS (continued)

The total fair value of the rights granted to Mr Temov was $800,000 based on the Group’s closing share price of $0.04 as at the date of the Group’s 2019 Annual General Meeting. Based on the vesting conditions of the rights, $142,528 had been recognised as a share based payment for the period of 27 November 2019, being the date that the rights were granted, to 30 June 2020.

During the year ended 30 June 2021, Mr Temov resigned as Managing Director of the Group. As a result of his resignation, the conditions associated with the Performance Rights have not been satisfied and therefore the Performance Rights will not vest to Mr Temov. Therefore, an amount of $142,528 previously expensed in respect of these rights were reversed.

Number Issued Grant Date Expected Vesting Date Vesting Period (days) Value per Right Total Value of Rights Amount Expensed in Prior Year Amount Reversed in Current Year	Class A Performance Rights Class B Performance Rights Total
	10,000,000 10,000,000 27 November 2019 27 November 2019 31 December 2022 31 December 2023 1,130 1,495 $0.04 $0.04 $400,000 $400,000 $800,000 $81,173 $61,355 $142,528 ($81,173) ($61,353) ($142,528)

(b) On 3 December 2020, the Group entered into a loan agreement with A.C.N. 627 852 797 Pty Ltd (A.C.N.) for the provision of a loan facility to advance funds of up to $400,000 to be used for assisting in the payment of the Group’s inventory production.

The interest free loan was provided in three tranches with the final drawdown date on or around 28 February 2021.

On 28 May 2021, the Group issued a Notice of General Meeting seeking shareholder approval to repay the loan via the issue of 200,000,000 shares and 200,000,000 options (pre-July 2021 consolidation). On 30 June 2021, the Group obtained shareholder approval and subsequent to year end, issued the shares and options to A.C.N. in satisfaction of repayment of the loan.

The total fair value of the shares and options granted to A.C.N. was $1,794,000 of which $1,000,000 and $794,000 represented the fair value of the shares and options granted respectively.

The fair value of the equity-settled shares granted is based on the Group’s closing share price of $0.005 as at the date of the Group’s General Meeting. The fair value of the equity-settled share options granted is estimated as at the date of grant using the Black-Scholes option valuation model taking into account the terms and conditions upon which the options were granted.

Weighted average exercise price $0.003 (pre-consolidation) Weighted average life of the options 3.01 years Weighted average underlying share price $0.005 (pre-consolidation) Expected share price volatility 127% Risk-free interest rate 0.20% Grant date 30 June 2021 Expiry date 1 July 2024 Value per option $0.00397 (pre-consolidation)

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

18. SHARE-BASED PAYMENTS (continued)

The following table summarises the equity-settled securities approved to be issued in lieu of repayment of the loan to A.C.N. on 30 June 2021:

epayment of the loan to A.C.N.	on 30 June 2021:
Number Issued Grant Date Issue Date Value per Security Total Value of Securities Less: Carrying Value of Loan Less: Issue Price of Options Total Share Based Payment	Shares Options	Total
	200,000,000 200,000,000 30 June 2021 30 June 2021 26 July 2021 27 July 2021 $0.005 $0.00397 $1,000,000 $794,000	$1,794,000 ($400,000) ($200)
		$1,393,800

The fair value of the shares granted was capitalised to issued capital as at 30 June 2021. Refer to Note 16(a).

(c) On 30 June 2021, the Group obtained shareholder approval to issue 90,000,000 unlisted options (pre-July 2021 consolidation) to Mr Ferguson, Mr Sierakowski and Mr Bosio, in consideration of services provided to the Group.

ions were granted.
Weighted average exercise price	$0.003 (pre-consolidation)
Weighted average life of the options	3.01 years
Weighted average underlying share price	$0.005 (pre-consolidation)
Expected share price volatility	127%
Risk-free interest rate	0.20%
Grant date	30 June 2021
Expiry date	1 July 2024
Value per option	$0.00397 (pre-consolidation)

The following table summarises the equity-settled share options approved to be issued to Directors on 30 June 2021:

n 30 June 2021:
Number Issued Grant Date Expected Vesting Date Vesting Period (days) Value per Option Total Value per Option Amount Expensed in Current Year Amount to be Expensed in Future Years if Vesting Conditions are met	Mr Ferguson Mr Sierakowski Mr Bosio Total
	50,000,000 20,000,000 20,000,000 90,000,000 30 June 2021 30 June 2021 30 June 2021 30 June 2022 30 June 2022 30 June 2022 365 365 365 $0.00397 $0.00397 $0.00397 $198,500 $79,400 $79,400 $357,300 $556 $222 $222 $1,000 $197,944 $79,178 $79,178 $356,300

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

18. SHARE-BASED PAYMENTS (continued)

(d) The following share-based payment arrangements were in place during the current and prior periods:

periods:
				Exercise	Fair value at	Vesting
	Number1	Grant date	Expiry date	price	grant date	date
				$	$
Options 10 cents	7,500,000	28-11-2018	20-12-2022	$0.10	$0.015	28-11-2018
Director Options 0.3 cents	90,000,000	30-06-2021	01-07-2024	$0.003	$0.00397	30-06-2022
A.C.N. Options 0.3 cents	200,000,000	30-06-2021	01-07-2024	$0.003	$0.00397	30-06-2021

1 The number of options are pre-July 2021 consolidation on a 1:10 basis.

There has been no alteration of the terms and conditions of the above share-based payment arrangement since grant date.

The following table illustrates the number and weighted average exercise prices of and movements in share options issued during the period:

Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Expired during the year Consolidation on a 1:10 basis Outstanding at the end of the period Exercisable at the end of the period	2021 2020 Number Weighted average exercise price Number Weighted average exercise price $ $ 7,500,000 0.10 75,000,000 0.01 290,000,000 0.003 - - - - - - - - - - - - - - - - (67,500,000) 0.09
	297,500,000 0.0054 7,500,000 0.10
	297,500,000 0.0054 7,500,000 0.10

The share options outstanding at the end of the year had a weighted average exercise price of $0.0054 (2020: $0.10) and a weighted average remaining contractual life of 3 years (2020: 2.5 years).

The weighted average fair value of options granted during the year was $0.004 (2020: $nil).

No options were exercised during the year (2020: nil).

19. EARNINGS/LOSS PER SHARE (EPS)

Basic and diluted loss per share	Consolidated 2021 Consolidated 2020 cents cents (1.60) (1.12)

The loss and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share is as follows :

Loss for the year Weighted average number of ordinary shares	Consolidated 2021 Consolidated 2020 $ $ (5,692,742) (2,392,816)
	Number Number 355,845,864 213,445,049

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

20. NOTES TO THE CASH FLOW STATEMENT

(a) Reconciliation of cash and cash equivalents

For the purpose of the cash flow statement, cash includes cash on hand and in banks and deposits at call, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the balance sheet as follows:

Cash at bank Balance at 30 June	Consolidated 2021 Consolidated 2020 $ $ 1,550,376 713,079
	1,550,376 713,079

(b) Reconciliation of loss for the period to net cash flows from operating activities

Loss after income tax
Non-Cash Items:
Depreciation and amortisation
Impairment of goodwill (refer Note 10)
Impairment of right-of-use assets (refer Note 9)
Impairment of other intangibles (refer Note 11)
Share based payments (refer Note 18)
Debt forgiven (refer Note 15)
Changes in Assets and Liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventory
(Increase)/decrease in other assets
(Decrease)/increase in trade and other payables
Net cash used in operating activities

Consolidated
2021
Consolidated
2020
$
$
(5,692,742)
(2,392,816)
128,776
119,554
2,418,610
-
86,625
-
43,331
-
1,252,272
874,269
(199,529)
-
157,792
93,224
283,341
(349,757)
(63)
13,045
144,495
337,815

(1,377,092)
(1,304,666)

(c) Non-cash financing and investing activities

Year ended 30 June 2021

During the year the Group engaged in the following non-cash financing and investing activities:

On 31 July 2020, 4,986,811 ordinary shares were issued upon the conversion of convertible notes accrued interest of $149,604 at a conversion price of $0.03 per share (pre-July 2021 consolidation).
On 30 June 2021, the Group obtained shareholder approval to repay the loan from A.C.N. 627 852 797 Pty Ltd of $400,000 via the issue of shares and options. Refer to Note 18(b) for further details.
On 30 June 2021, the Group obtained shareholder approval to issue 90,000,000 unlisted options (pre-July 2021 consolidation) to Mr Ferguson, Mr Sierakowski and Mr Bosio in consideration of services provided to the Group. Refer to Note 18(c) for further details.

Year ended 30 June 2020

During the year the Group engaged in the following non-cash financing and investing activities:

On 20 September 2019, 1,139,499 ordinary shares (post-consolidation) were issued upon the conversion of convertible notes with a face value of $30,000 plus accrued interest of $4,185.
On 5 May 2020, broker fees of $66,000 associated with the Group’s share placement were satisfied via the issue of 2,200,000 ordinary shares.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

21. RELATED PARTY TRANSACTIONS

Transactions with key management personnel

Key management personnel compensation

The aggregate compensation made to key management personnel of the Group is set out below:

Short term employee benefits Post-employment benefits Share based payments (Note 18(a) & 18(c))	Consolidated 2021 $ 376,150 - (141,528) 234,622	Consolidated 2020 $ 267,179 - 742,528
		1,009,707

Transactions with key management personnel and related parties

Transactions with key management personnel related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

(i) Payments to Trident Management Services Pty Ltd, a company of which Adam Sierakowski is a Director and shareholder, for accounting and company secretarial services provided. (ii) Payments to Price Sierakowski Pty Ltd, a company of which Adam Sierakowski is a Director and shareholder, for legal services provided. (iii) Payments to Trident Capital Pty Ltd, a company of which Adam Sierakowski is a Director and Shareholder, for consultancy services provided. Amounts outstanding at reporting date Aggregates amount payable to key management personnel and their related entities at reporting date. (i) Director remuneration (ii) Other transactions 22. AUDITORS’ REMUNERATION	2021 $ 48,000 46,373 100,000 231,291 289,913 521,204	2020 $
		61,580 11,769 - 37,000 49,255
		86,255

2. AUDITORS’ REMUNERATION
Remuneration of the auditor of the Group (HLB Mann Judd) for: - auditing or reviewing the financial report - taxation compliance - ASIC industry funding levy	Consolidated 2021 $ 56,642 - 1,563 58,205	Consolidated 2020 $ 112,942 2,750 1,373
		117,065

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

23. FINANCIAL INSTRUMENTS

(a) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2020.

The capital structure of the Group consists of cash and cash equivalents, borrowings and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

None of the Group’s entities are subject to externally imposed capital requirements.

Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as tax, dividends and general administrative outgoings.

Gearing levels are reviewed by the Board on a regular basis in line with its target gearing ratio, the cost of capital and the risks associated with each class of capital.

(b) Financial risk management policies

The Group is exposed to market risk (which includes interest rate risk and foreign currency risk) credit risk and liquidity risk. The main purpose of these financial instruments is to manage the working capital needs of the Group’s operations. It is the Group’s policy that no trading in financial instruments shall be undertaken. The board reviews and agrees policies for managing this risk is summarised below.

(i) Credit risk management

Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The group is exposed to credit risk from financial assets including cash and cash equivalents held at banks and trade and other receivables.

The credit risk is managed on a group basis based on the Group’s credit risk management policies and procedures.

The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits and are only with major reputable financial institutions.

The Group continuously monitors the credit quality of customers. Where available, external credit ratings and/or reports on customers are obtained and used. The group’s policy is to deal only with credit worthy counterparties. The credit terms range between 30 and 90 days. The credit terms for customers as negotiated with customers are subject to an internal approval process. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits per customer.

Trade receivables consist of multiple customers in the technology industry, primarily in the United States of America.

(ii) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

23. FINANCIAL INSTRUMENTS (continued)

Consolidated 30 June 2021 Financial assets Cash and cash equivalents Trade and other receivables Total financial assets Financial liabilities Trade and other payables Borrowings Convertible notes Total financial liabilities Consolidated 30 June 2020 Financial assets Cash and cash equivalents Trade and other receivables Total financial assets Financial liabilities Trade and other payables Borrowings Convertible notes Total financial liabilities	Interest Rate	1 year or less $ 1 to 5 years $ Total $
	0.00% 18.49% 0.80% Interest Rate	1,550,376 - 1,550,376 140,171 - 140,171
		1,690,547 - 1,690,547
		(1,251,885) - (1,251,885) (498,397) - (498,397) (1,321,000) - (1,321,000)
		(3,071,282) - (3,071,282)
		1 year or less $ 1 to 5 years $ Total $
	0.07% 35.80% 9.0%	713,079 - 713,079 286,770 - 286,770
		999,849 - 999,849
		(1,072,013) - (1,072,013) (450,000) - (450,000) (1,321,000) - (1,321,000)
		(2,843,013) - (2,843,013)

(iii) Interest rate risk

The financial instruments which primarily expose the Group to interest rate risk are cash and cash equivalents, borrowings and convertible notes. The Group’s exposure to interest rate risk and the effective interest rate for classes of financial assets and financial liabilities are detailed in the table above.

Sensitivity Analysis

The Group does not consider this to be material to the Group, as interest rates on financial liabilities are subject to fixed interest rates, and have therefore not undertaken any further analysis.

(iv) Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from exposures to the US dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency.

Sensitivity Analysis

The sensitivity analyses below detail the Group’s sensitivity to an increase/decrease in the Australian dollar against the United States dollar. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation balance date for a 25 basis point change in foreign currency rates.

At balance date, if foreign exchange rates had been 25 basis points higher or lower and all other variables were held constant, the Group’s:

Profit or loss would increase/decrease by $1,159 (2020: $1,082); and
Equity reserves would increase/decrease by $1,159 (2020: $1,082).

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

23. FINANCIAL INSTRUMENTS (continued)

(v) Fair value of financial instruments

AASB 7 Financial Instruments requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly ( derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes.

The carrying value less impairment allowance of trade receivables and payables are assumed to approximate their fair values due to their short term nature.

The Group’s principal financial instruments consist of cash and deposits with banks (Level 1), accounts receivable, trade payables and loans payable (Level 2). The main purpose of these non-derivative financial instruments is to finance the Group’s operations.

24. OPERATING SEGMENTS

AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Group’s operating segments have been determined with reference to the monthly management accounts used by the Chief Operating Decision Maker to make decisions regarding the Group’s operations and allocation of working capital. Due to the size and nature of the Group, the Board as a whole has been determined as the Chief Operating Decision Maker.

Based on the quantitative thresholds included in AASB 8, there is only one reportable segment, being the development and manufacture of wireless technologies in the United States of America.

The revenues and results of this segment are those of the Group as a whole and are set out in the consolidated statement of profit and loss and other comprehensive income. The segment assets and liabilities of this segment are those of the Group and are set out in the consolidated statement of financial position.

Revenues from major customers which each account for 10% or more of total revenues as reported in the financial statements:

US Customers Customer A Customer B Customer C Customer D	Consolidated 2021 Consolidated 2020 $ $ 267,811 1,191,565 441,864 - - 1,229,868 141,947 546,868
	851,622 2,968,301

25. CONTINGENT LIABILITIES

The Directors of the Group are not aware of any contingent liabilities which require disclosure in the financial year ended 30 June 2021.

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

26. SUBSEQUENT EVENTS

(a) On 8 July 2021, following shareholder approval granted at the General Meeting held on 30 June 2021, the Group completed a consolidation of its issued capital on the basis that every ten (10) shares be consolidated into one (1) share. The total shares on issue post consolidation was 106,615,835.
(b) On 26 and 27 July 2021, following shareholder approval granted at the General Meeting on 30 June 2021, the Group successfully completed the restructuring of its debts through the issue of the following securities, on a post consolidation basis:
20,000,000 shares at a deemed issue price of $0.02 per share and 20,000,000 options to A.C.N. 627 852 797 Pty Ltd in lieu of repayment of $400,000 advanced to the Group. The options are exercisable at $0.03 per share and expire on 1 July 2024. The financial effect of this transaction has been brought to account as at 30 June 2021 (refer to Note 18(b));
5,378,630 shares to Tyche Investments Pty Ltd at an issue price of $0.02 per share in lieu of repayment of accrued interest of approximately $107,573;
10,925,000 shares to Directors at an issue price of $0.02 per share in lieu of outstanding director and company secretarial fees accrued of approximately $218,500; and
9,000,000 options, exercisable at $0.03 per share and expiring 1 July 2024, in relation to services provided by each Director to the Group. The options are subject to a vesting period of 12 months.
(c) In July and August 2021, the Group successfully completed a capital raising of approximately $3.5 million (before costs) through the issue of 175,000,000 shares, on a post consolidation basis, at an issue price of $0.02 per share to sophisticated and institutional investors. In addition, 42,000,000 options, exercisable at $0.03 per share and expiring 1 July 2024, were issued in relation to the underwriting of the rights issue and placement.
(d) Subsequent to the Group’s successful capital raising, the Group repaid approximately $1.3 million of convertible notes that matured on 30 June 2021 plus any accrued interest.

27. PARENT ENTITY INFORMATION

The following detailed information is related to the parent entity, Connected IO Limited, as at 30 June 2020 and 30 June 2021.

Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Reserves Accumulated losses Total equity Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year	2021 $ 2020 $ 1,426,787 32,074 - 3,373,868
	1,426,787 3,405,942
	2,542,713 2,307,925 - -
	2,542,713 2,307,925
	73,530,158 70,777,722 1,972,805 1,327,996 (76,618,889) (71,007,701)
	(1,115,926) 1,098,017
	(5,611,188) (2,362,260) - -
	(5,611,188) (2,362,260)

Connected IO Limited and its Controlled Entities

2021 Annual Report ABN 99 009 076 233

NOTES TO THE FINANCIAL STATEMENTS

28. RECONCILIATION OF APPENDIX 4E

The loss for the year from continuing operations (after income tax) reported in the Appendix 4E Preliminary Final Report differs from the Statement of Profit or Loss and Other Comprehensive Income following completion of the audit.

The difference is reconciled as follows:

he difference is reconciled as follows:
Loss for the year from continuing operations reported in Appendix 4E Add/(Less): Impairment of right-of-use assets Impairment of other intangibles Adjustment to inventory Adjustment to share based payments Adjustment to trade and other payables Loss for the year from continuing operations reported in the Statement of Profit or Loss and Other Comprehensive Income	2021 $ (5,802,731) (86,625) (43,331) 60,163 (1,000) 180,782
	(5,692,742)

The net liabilities reported in the Appendix 4E Preliminary Final Report differs from the Statement of Financial Position following completion of the audit.

The difference is reconciled as follows:

Net liabilities reported in Appendix 4E Changes in assets and liabilities: Impairment of right-of-use assets Impairment of other intangibles Adjustment to trade and other receivables Adjustment to inventory Adjustment to trade and other payables Net liabilities reported in the Statement of Financial Position	2021 $ (1,460,140) (86,043) (43,041) 80,367 59,760 99,202
	(1,349,895)

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

DIRECTORS' DECLARATION

The Directors of the Company declare that:

in the Directors’ opinion, the financial statements and accompanying notes are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001 ; and
(b) give a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year ended on that date;
Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board;
in the directors’ opinion, 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 remuneration disclosures included in the directors’ report (as part of the audited Remuneration Report), for the year ended 30 June 2021, comply with section 300A of the Corporations Act 2001 ; and

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

Dougal Ferguson Director

Perth, Western Australia 8 October 2021

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INDEPENDENT AUDITOR’S REPORT

To the members of Connected IO Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Connected IO Limited (“the Company”) and its controlled entities (“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:

a) 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
b) 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1(d) in the financial report, which indicates that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern we have determined the matters described below to be the key audit matters to be communicated in our report.

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Key Audit Matter	How our audit addressed the key audit	How our audit addressed the key audit
	matter
Goodwill
Refer to Note 10 in the financial statements
As at 30 June 2021 the Group has fully impaired their	Out audit procedures included but were not
goodwill acquired as part of a business combination.	limited	to the following:
	•	Considering management’s
The Group is required to conduct an impairment		assessment of impairment on the
assessment in relation to goodwill annually.		cash-generating unit;
	•	Considering whether the assets
We consider this to be a key audit matter due to its		comprising the cash-generating
impact to the financial statements with it impacting		unit had been correctly allocated;
both the profit or loss and the statement of financial	•	Consideration of other indicators of
position.		recoverability around assets within
		the cash-generating unit;
	•	Assessing the appropriateness of
		the disclosures included in the
		relevant notes to the financial
		report.

Information other than the financial report and auditor’s report thereon

The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, 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 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.

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As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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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 Connected IO 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

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HLB Mann Judd Chartered Accountants

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B G McVeigh Partner

Perth, Western Australia 8 October 2021

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

ASX ADDITIONAL INFORMATION

Pursuant to the Listing Rules of the Australian Securities Exchange, the shareholder information set out below was applicable as at 15 September 2021.

A. Distribution of Equity Securities

Analysis of numbers of shareholders by size of holding:

Distribution 1 to 10,000 10,001 to 100,000 100,001 to 1,000,000 1,000,001 to 2,000,000 2,000,001 to 5,000,000 5,000,001 and Over	Number of Shareholders Number of Shares % Units
	317 1,152,168 0.36 322 11,525,472 3.63 149 51,149,620 16.09 15 20,722,233 6.52 31 95,888,435 30.16 12 137,481,537 43.24
	846 317,919,465 100.00

There were 317 shareholders holding less than a marketable parcel of ordinary shares.

B. Substantial Shareholders

An extract of the Group’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is set out below:

Shareholder Name 1 Australian Executor Trustees Limited	Issued Ordinary Shares Number %
	25,097,196 7.89

C. Twenty Largest Shareholders

The names of the twenty largest holders of quoted shares are listed below:

		Issued Ordinary	Shares
	Shareholder Name	Number	%
1	Australian Executor Trustees Limited	25,097,196	7.89
2	Ninety Three Pty Ltd	15,800,000	4.97
3	ACN 633 210 125 Pty Ltd <633 210 125 A/C>	13,932,124	4.38
4	Cesa Nominees Pty Ltd	12,900,000	4.06
5	Splendor Limited	12,600,000	3.96
6	Citicorp Nominees Pty Limited	11,304,594	3.56
7	Mrs Sharon Lumb	9,922,803	3.12
8	924 Pty Ltd	8,140,329	2.56
9	Bengal Capital Pty Ltd	7,740,329	2.43
10	IML Holdings Pty Ltd	7,168,064	2.25
11	Praha Nominees Pty Ltd	6,626,098	2.08
12	Sino Joy Group Limited	6,250,000	1.97
13	First Trustee Company (NZ) Limited	5,000,000	1.57
14	Ponderosa Investments (WA) Pty Ltd	5,000,000	1.57
15	Shenton James Pty Ltd	4,625,000	1.45
16	NYSA Pty Ltd	4,500,000	1.42
17	Mr Mark Lear Pollasky	4,000,000	1.26
18	Nr Andrew Macbride Price	4,000,000	1.26
19	ACN 161 604 315 Pty Ltd	3,750,000	1.18
20	Tyche Investments Pty Ltd	3,585,754	1.13
	TOTAL	171,942,291	54.07

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

ASX ADDITIONAL INFORMATION (CONTINUED)

D. Listed Options

As at the date of this report there were nil listed options on issue in the Group.

E. Voting Rights

In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have one vote.

F. Unquoted Securities

Class A Performance Rights
Number of Class A Performance Rights	1,000,000
Number of Holders	1
Holders with more than 20%	Yakov Temov – 100%
Class B Performance Rights
Number of Class B Performance Rights	1,000,000
Number of Holders	1
Holders with more than 20%	Yakov Temov – 100%
Unlisted Options($1.00; 20 Dec 2022)
Number of Unlisted Options	750,000
Number of Holders	1
Holders with more than 20%	708 Capital PtyLtd
Unlisted Options($0.03; 1 Jul 2024)
Number of Unlisted Options	62,000,000
Number of Holders	7
Holders with more than 20%	NinetyThree PtyLtd - 34%
Unlisted Options($0.03; 1 Jul 2024)
Number of Unlisted Options	9,000,000
Number of Holders	3
Holders with more than 20%	Shenton James PtyLtd – 56%

G. On Market Buy-Back

There is no current on market buy-back for any of the Group’s securities.

H. Restricted Securities

Options
Vesting period and completion of 12 months service to 30 June 2022	9,000,000
Total	9,000,000

Connected IO Limited and its Controlled Entities 2021 Annual Report ABN 99 009 076 233

ASX ADDITIONAL INFORMATION (CONTINUED)

I. Details of Performance Rights

In December 2019, following shareholder approval granted at the Group’s 2019 Annual General Meeting, 1,000,000 Class A Performance Rights and 1,000,000 Class B Performance Rights (post consolidation) were granted to Mr Temov as an incentive to provide ongoing dedicated services to the Group. The Performance Rights were granted at nil consideration, do not have an exercise price and will expire on 31 December 2023. Each Performance Right will vest and convert to one fully paid ordinary share subject to the satisfaction of certain Performance Milestones, completion of a vesting period of 12 months and Mr Temov’s continued engagement as Managing Director.

The Performance Milestones are:

(i) Class A Performance Rights – The Company and its subsidiaries achieve aggregate gross revenue of greater than AUD $4 million during any calendar year ending on or before 31 December 2022.
(ii) Class B Performance Rights – The Company and its subsidiaries achieve aggregate gross revenue of greater than AUD $8 million during any calendar year ending on or before 31 December 2022.

AI assistant

CONNECTED MINERALS LIMITED — Annual Report 2021

64669_rns_2021-10-07_59f893b0-a17f-4c10-ac65-2f6c161693e9.pdf

CONNECTED IO LIMITED AND ITS CONTROLLED ENTITIES ABN 99 009 076 233

CONTENTS

CORPORATE INFORMATION

Directors

Company Secretary

Registered and Principal Office

Auditors

Share Registry & Register

Stock Exchange Listing

Contact Information

Web Site

DIRECTORS’ REPORT

Directors

Mr Adam Sierakowski Non-Executive Chairman (appointed 3 December 2018)

DIRECTORS’ REPORT

DIRECTORS’ REPORT

Company Secretary

Mr Simon Whybrow Company Secretary (appointed 2 December 2020)

Ms Nicki Farley Company Secretary (appointed 21 December 2015, resigned 2 December 2020)

Principal activities

Operating and Financial Review

Dividends

Review of operations

Operational Review

DIRECTORS’ REPORT

Review of operations (continued)

Corporate Review

Significant changes in the state of affairs

Directors’ meetings

DIRECTORS’ REPORT

Interests in shares and options of the Group

Share options granted to Directors

Unissued shares under option

Shares issued during or since the end of the year as a result of exercise

Subsequent events

DIRECTORS’ REPORT

Subsequent events (continued)

Future developments

Environmental issues

Indemnification of officers and auditors

Remuneration Report (Audited)

DIRECTORS’ REPORT

Remuneration Report (continued)

Key management personnel

Relationship between the remuneration policy and group performance

Remuneration expense details for the year ended 30 June 2021

DIRECTORS’ REPORT

Remuneration Report (continued)

Remuneration expense details for the year ended 30 June 2021 (continued)

Securities received that are not performance-related

DIRECTORS’ REPORT

Remuneration Report (continued)

Options/rights issued as remuneration

Mr Yakov

Director options

DIRECTORS’ REPORT

Remuneration Report (continued)

Key management personnel shareholdings

Options

Other equity-related key management personnel transactions

DIRECTORS’ REPORT

Remuneration Report (continued)

Key management personnel shareholdings (continued)

Other transactions with key management personnel

End of Remuneration Report (Audited)

Voting and comments made at the Group’s 2020 Annual General Meeting (AGM)

Proceedings on behalf of the Group

Non-audit services

DIRECTORS’ REPORT

Auditor’s independence declaration

AUDITOR’S INDEPENDENCE DECLARATION

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

Connected IO Limited and its Controlled Entities

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

NOTES TO THE FINANCIAL STATEMENTS

CONNECTED MINERALS LIMITED Annual Report 2021