DXN LIMITED — Annual Report 2023

Aug 27, 2023

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DXN Limited

ABN 46 620 888 548

Appendix 4E Preliminary Final Report - 30 June 2023

DXN Limited Contents 30 June 2023 Appendix 4E 2 Consolidated statement of profit or loss and other comprehensive income 4 Consolidated statement of financial position 6 Consolidated statement of changes in equity 7 Consolidated statement of cash flows 8 Notes to the consolidated financial statements 9

1

DXN Limited Appendix 4E Preliminary final report

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1. Company details

Name of entity: DXN Limited ABN: 46 620 888 548 Reporting period: For the year ended 30 June 2023 Previous period: For the year ended 30 June 2022

2. Results for announcement to the market

			$
Revenues from ordinary activities (Continuing operations)	down	64.6% to	5,047,674
Loss from ordinary activities after tax attributable to the owners of DXN Limited up		39.3% to	(9,612,620)
Loss for the year attributable to the owners of DXN Limited	up	39.3% to	(9,612,620)

Dividends

There were no dividends paid, recommended or declared during the current financial period.

Comments

The loss for the Group after providing for income tax amounted to $9,612,620 (30 June 2022: $6,902,449).

FY2023 sales to customers were down 64.6% from FY2022 mainly due to uncertainty during the period from customers around the proposed sale of the DXN business to Flow Digital and subsequent termination of the business sale agreement. As per the update to the market on 28 December 2022, many customers delayed discussions and decisions, and now that the uncertainty has been resolved customers have resumed engagement with DXN. This is evidenced by an increase in sales activity in 2H FY23 and subsequent ASX announcements during 2H FY23.

As reported above, following the uncertainty impacting sales in 1H FY23, DXN showed modular sales manufacturing results during 2H F23 namely:

• On 3 April 2023, DXN entered into a contract with global mining company AngloAmerican to fabricate and supply a modular data centre for a total value of AUD$1 million.

• On 3 May 2023, DXN received a purchase order for US$392,885 (approximately AUD$590,000) for the first DXN Module from Flow2Edge Holdings I Pte Ltd ('Flow2Edge') as part of its Exclusive Global Distribution Licence Agreement targeting the international export market (excluding Australia) for DXN data centre modules.

• DXN also entered into an additional sales support arrangement with Flow2Edge for an annualized value of AUD$362,400 as part of its Exclusive Global Distribution Licence Agreement to support Flow2Edge edge data centre expansion across Asia Pacific (excluding Australia).

• On 30 June 2023, DXN announced that it has executed a contract for 2 x Modular data centres with Pilbara Minerals Ltd (ASX: PLS) totalling AUD$1.8 million.

3. Dividends

Current period

There were no dividends paid, recommended or declared during the current financial period.

Previous period

There were no dividends paid, recommended or declared during the previous financial period.

2

DXN Limited Appendix 4E Preliminary final report

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4. Net tangible assets

Net tangible assets per ordinary security	Reporting period Cents (0.02)	Previous period Cents 0.25

5. Control gained over entities

Not applicable.

6. Loss of control over entities

Not applicable.

7. Details of associates and joint venture entities

Not applicable.

8. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements are in the process of being audited. The directors anticipate that the auditor's report will contain an unqualified audit opinion with a paragraph addressing material uncertainty related to going concern.

9. Attachments

Details of attachments (if any):

The Appendix 4E Preliminary Final Report of DXN Limited for the year ended 30 June 2023 is attached.

10. Signed

Signed _________

Date: 28 August 2023

Peter McGrath Non-Executive Chairman

3

DXN Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023

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Note Revenue from continuing operations Sales to customers 2 Cost of goods sold Gross margin Other income 3 Interest revenue calculated using the effective interest method Expenses Acquisition expenses Administration expenses Compliance and legal expenses Consultants and contractors Depreciation and amortisation expenses 4 Employee benefits expenses Impairment of non-financial assets 4 Impairment of inventories Impairment of receivables 8 Loss on disposal of assets Marketing expenses Occupancy expenses Research and development expenses Telecommunication and technology expenses Travel expenses Finance costs 4 Loss before income tax expense from continuing operations Income tax expense Loss after income tax expense from continuing operations Profit after income tax expense from discontinued operations 5 Loss after income tax expense for the year attributable to the owners of DXN Limited Other comprehensive income for the year, net of tax Total comprehensive loss for the year attributable to the owners of DXN Limited Total comprehensive loss for the year is attributable to: Continuing operations Discontinued operations	Consolidated 2023 2022 $ $ 5,047,674 14,263,007 (2,467,702) (10,474,955)	Consolidated 2023 2022 $ $ 5,047,674 14,263,007 (2,467,702) (10,474,955)
	2,579,972 1,119,998 - - (420,616) (398,865) (212,894) (2,652,225) (3,254,300) (3,561,289) (494,760) (18,311) (37,198) (23,714) (641,498) (38,970) (157,530) (65,378) (1,417,744)	3,788,052 960,032 650 (10,615) (341,201) (556,821) (172,245) (3,375,701) (4,496,488) - - - - (17,834) (878,007) (504,971) (143,526) (76,481) (1,187,646)
	(9,695,322) -	(7,012,802) -
	(9,695,322) 82,702	(7,012,802) 110,353
	(9,612,620) -	(6,902,449) -
	(9,612,620)	(6,902,449)
	(9,695,322) 82,702	(7,012,802) 110,353
	(9,612,620)	(6,902,449)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

4

DXN Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023

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		2023	2022
	Note	Cents	Cents
Earnings per share for loss from continuing operations attributable to the
owners of DXN Limited
Basic earnings per share	6	(0.57)	(0.51)
Diluted earnings per share	6	(0.57)	(0.51)
Earnings per share for profit from discontinued operations attributable to the
owners of DXN Limited
Basic earnings per share	6	-	0.01
Diluted earnings per share	6	-	0.01
Earnings per share for loss attributable to the owners of DXN Limited
Basic earnings per share	6	(0.57)	(0.50)
Diluted earnings per share	6	(0.57)	(0.50)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

5

DXN Limited Consolidated statement of financial position As at 30 June 2023

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Note Assets Current assets Cash and cash equivalents 7 Trade and other receivables 8 Inventories/work in progress 9 Other assets 11 Assets of disposal groups classified as held for sale 15 Total current assets Non-current assets Property, plant and equipment 12 Right-of-use assets 13 Intangibles 14 Bank guarantees and deposits 10 Other assets 11 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 16 Contract liabilities 17 Borrowings 18 Lease liabilities 19 Employee benefits 20 Income in advance 21 Other financial liabilities 22 Liabilities directly associated with assets classified as held for sale 23 Total current liabilities Non-current liabilities Borrowings 18 Lease liabilities 19 Employee benefits 20 Other financial liabilities 22 Total non-current liabilities Total liabilities Net (liabilities)/assets Equity Issued capital 24 Reserves 25 Accumulated losses Total (deficiency)/equity	Consolidated 2023 2022 $ $ 710,209 1,924,767 221,316 649,672 375,705 1,248,380 141,436 134,460	Consolidated 2023 2022 $ $ 710,209 1,924,767 221,316 649,672 375,705 1,248,380 141,436 134,460
	1,448,666 6,588,989	3,957,279 -
	8,037,655	3,957,279
	1,159,693 8,358,447 236,942 265,302 423,333	7,193,482 11,184,958 3,796,859 528,917 608,333
	10,443,717	23,312,549
	18,481,372	27,269,828
	976,154 698,271 143,844 716,011 148,343 416,667 910,315	2,503,210 332,507 58,971 728,679 156,743 - 850,000
	4,009,605 1,928,973	4,630,110 -
	5,938,578	4,630,110
	4,113,450 8,190,144 14,344 400,000	4,000,000 10,775,981 16,038 400,000
	12,717,938	15,192,019
	18,656,516	19,822,129
	(175,144)	7,447,699
	45,424,949 1,428,566 (47,028,659)	43,471,842 1,391,896 (37,416,039)
	(175,144)	7,447,699

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

6

DXN Limited

Consolidated statement of changes in equity For the year ended 30 June 2023

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Consolidated Balance at 1 July 2021 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 24) Capital raising costs Share-based payments (note 25) Balance at 30 June 2022 Consolidated Balance at 1 July 2022 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Issue of shares (note 24) Capital raising costs Share-based payments (note 25) Balance at 30 June 2023	Issued capital $ 40,345,107 - -	Reserves $ 1,176,956 - -	Accumulated losses $ (30,513,590) (6,902,449) -	Total equity $ 11,008,473 (6,902,449) -
	- 3,343,967 (217,232) -	- - 32,667 182,273	(6,902,449) - - -	(6,902,449) 3,343,967 (184,565) 182,273
	43,471,842	1,391,896	(37,416,039)	7,447,699
	Issued capital $ 43,471,842 - -	Reserves $ 1,391,896 - -	Accumulated losses $ (37,416,039) (9,612,620) -	Total deficiency in equity $ 7,447,699 (9,612,620) -
	- 2,125,000 (171,893) -	- - - 36,670	(9,612,620) - - -	(9,612,620) 2,125,000 (171,893) 36,670
	45,424,949	1,428,566	(47,028,659)	(175,144)

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

7

DXN Limited Consolidated statement of cash flows For the year ended 30 June 2023

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Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees R&D tax incentive claim Government grants Interest received Interest paid Other income Net cash (used in) operating activities Cash flows from investing activities Payments associated with the acquisition of business Payments for plant and equipment Payments for intangible assets Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares and options 24 Payment of capital raising costs 24 Finance facility drawn down Repayment of finance facility Transaction costs related to loans and borrowings Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 7	Consolidated 2023 2022 $ $ 8,850,520 16,630,159 (11,475,230) (17,888,368) 1,029,786 826,741 67,567 66,162 9,356 650 (453,677) (16,353) - 2,034	Consolidated 2023 2022 $ $ 8,850,520 16,630,159 (11,475,230) (17,888,368) 1,029,786 826,741 67,567 66,162 9,356 650 (453,677) (16,353) - 2,034
	(1,971,678)	(378,975)
	- (136,278) (197,786)	(3,816,574) (24,334) (25,272)
	(334,064)	(3,866,180)
	2,125,000 (171,893) - (287,464) -	3,143,967 (202,230) 4,000,000 (1,867,716) (567,210)
	1,665,643	4,506,811
	(640,099) 1,924,767 (16,375)	261,656 1,663,955 (844)
	1,268,293	1,924,767

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

8

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 1. Operating segments

Identification of reportable operating segments

The Group is organised into two operating segments: Data centre manufacturing and Data centre operations. These operating segments are based on the internal reports that are reviewed and used by the Chief Executive Officer ('CEO') and the Group's Executive Leadership Team (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments.

The information reported to the CODM on a monthly basis is the segment profit that represents the profit earned by each segment without allocation of the share of central administration costs including directors' salaries, finance income, nonoperating gains and losses in respect of financial instruments and finance costs, and income tax expense.

Operating segment information

Major customers

The Group has a number of customers to which it provides services and products.

Data centre manufacturing

The Group supplies a number of customers, of which during the year ended 30 June 2023 one accounted for 49.8% of revenue (2022: main customer was 33%). The next most significant contributed 16.02% (2022: 25%).

Data centre operations

The Group supplies a number of customers, of which during the year ended 30 June 2023 one accounted for 75.6% of revenue (2022: main customer was 42%).

The data centre operations of Secure Data Centre in Darwin have been disclosed in this report as ‘Discontinued operations’ – see note 5.

There were no intersegment sales during the reporting periods.

Operating segment information

Consolidated - 2023 Revenue Revenue from external customers Other income Total revenue Results Loss before income tax Income tax Loss after income tax Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities	Data centre manufacturing $ 3,838,743 1,107,097	Data centre operations $ 2,737,448 41,195	Other (Corporate) $ - 26,887	Total $ 6,576,191 1,175,179
	4,945,840	2,778,643	26,887	7,751,370
	(375,371)	(6,592,192)	(2,645,057)	(9,612,620)
	-	-	-	-
	(375,371)	(6,592,192)	(2,645,057)	(9,612,620)
	1,949,774	9,592,075	6,939,523	18,481,372
	2,724,339	10,038,917	5,893,260	18,481,372
				18,656,516
				18,656,516

9

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 1. Operating segments (continued)

Consolidated - 2022 Revenue Revenue from external customers Other income Total revenue Results Profit/(loss) before income tax Profit/(loss) after income tax Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities	Data centre manufacturing $ 13,131,413 17,237	Data centre operations $ 2,255,040 36,733	Other (Corporate) $ - 941,775	Total $ 15,386,453 995,745
	13,148,650	2,291,773	941,775	16,382,198
	1,083,518	(4,102,686)	(3,883,281)	(6,902,449)
	1,083,518	(4,102,686)	(3,883,281)	(6,902,449)
	3,320,218	21,697,912	2,251,698	27,269,828
	3,599,571	11,394,313	4,828,245	27,269,828
				19,822,129
				19,822,129

Assets used jointly by reportable segments are allocated on the basis of the revenues earned by the individual reportable segments.

All revenue is derived in Australia.

Note 2. Revenue

From continuing operations Revenue from contracts with customers Sales to customers	Consolidated 2023 2022 $ $ 5,047,674 14,263,007

100% of the Group's revenue from external customers is recognised over time.

All revenue is derived in Australia.

Note 3. Other income

From continuing operations

Research and development tax incentive claim Export marketing development grant Government wage subsidies Net foreign exchange gain Other Other income	Consolidated 2023 2022 $ $ 1,029,786 826,741 36,600 50,959 30,967 17,237 118 63,475 22,527 1,620	Consolidated 2023 2022 $ $ 1,029,786 826,741 36,600 50,959 30,967 17,237 118 63,475 22,527 1,620
	1,119,998	960,032

10

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 4. Expenses

Loss before income tax from continuing operations includes the following specific expenses: Depreciation Depreciation - property, plant and equipment Depreciation - right-of-use assets Total depreciation Amortisation Amortisation - intangibles Total depreciation and amortisation Impairment of non-financial assets Plant and equipment Intangibles Total impairment Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Leases Short-term lease payments Superannuation expense Defined contribution superannuation expense Employee benefits expense excluding superannuation Employee benefits expense excluding superannuation	Consolidated 2023 2022 $ $ 1,269,203 2,121,831 938,325 755,367	Consolidated 2023 2022 $ $ 1,269,203 2,121,831 938,325 755,367
	2,207,528	2,877,198
	444,697	498,503
	2,652,225	3,375,701
	3,536,377 24,912	- -
	3,561,289	-
	710,446 707,298	491,562 696,084
	1,417,744	1,187,646
	-	140,874
	311,646	302,074
	2,942,654	4,194,414

Note 5. Discontinued operations

Description

DXN’s Secure Data Centre in Darwin has been classified in these financial statements as 'discontinued operations’ as the Board continues to consider all strategic options to sell its data centre operations assets. DXN has received non-binding indicative offers to acquire its data centre assets and negotiations are in advanced stages.

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DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 5. Discontinued operations (continued)

Financial performance information

Sales to customers Cost of goods sold Gross margin Other income Administration expenses Compliance and legal expenses Consultants and contractors Depreciation and amortisation expenses Employee benefits expenses Loss on disposal of assets Marketing expenses Occupancy expenses Telecommunication and technology expenses Travel expenses Finance costs Total expenses Profit before income tax expense Income tax expense Profit after income tax expense from discontinued operations Cash flow information Net cash from operating activities Net cash (used in) investing activities Net cash from financing activities Net increase in cash and cash equivalents from discontinued operations Note 6. Earnings per share Earnings per share for loss from continuing operations Loss after income tax attributable to the owners of DXN Limited Basic earnings per share Diluted earnings per share	Consolidated 2023 2022 $ $ 1,528,516 1,123,446 (377,170) (260,250)	Consolidated 2023 2022 $ $ 1,528,516 1,123,446 (377,170) (260,250)
	1,151,346	863,196
	55,182 (12,338) (8,050) (250,800) (465,774) (102,262) (13,987) (1,819) (135,371) (19,813) - (113,612)	35,713 (11,411) (2,500) (167,200) (328,678) (90,646) - (1,091) (95,122) (12,763) (1,821) (77,324)
	(1,123,826)	(788,556)
	82,702 -	110,353 -
	82,702	110,353
	Consolidated 2023 2022 $ $ 283,369 84,353 (1,900) (4,505) - -
	281,469	79,848
	Consolidated 2023 2022 $ $ (9,695,322) (7,012,802)
	Cents (0.57) (0.57)	Cents (0.51) (0.51)

12

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 6. Earnings per share (continued)

Consolidated 2023 2022 $ $ Earnings per share for profit from discontinued operations Profit after income tax attributable to the owners of DXN Limited 82,702 110,353 Cents Cents Basic earnings per share - 0.01 Diluted earnings per share - 0.01 Consolidated 2023 2022 $ $ Earnings per share for loss Loss after income tax attributable to the owners of DXN Limited (9,612,620) (6,902,449) Cents Cents Basic earnings per share (0.57) (0.50) Diluted earnings per share (0.57) (0.50) Number Number Weighted average number of ordinary shares Weighted average number of ordinary shares used in calculating basic earnings per share 1,693,232,645 1,385,110,998 Weighted average number of ordinary shares used in calculating diluted earnings per share 1,693,232,645 1,385,110,998 At 30 June 2023 and 30 June 2022, options,warrants and performance rights over ordinary shares were excluded from the calculation of the weighted average number of ordinary shares used in calculating diluted earnings per share due to being anti-dilutive, as the Group reported a loss for the period. Note 7. Cash and cash equivalents Consolidated 2023 2022 $ $ Current assets Cash at bank and on hand 710,209 1,924,767 Reconciliation to cash and cash equivalents at the end of the financial year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows: Balances as above 710,209 1,924,767 Cash and cash equivalents - classified as held for sale (note 15) 558,084 - Balance as per statement of cash flows 1,268,293 1,924,767	Consolidated 2023 2022 $ $ 82,702 110,353	Consolidated 2023 2022 $ $ 82,702 110,353
	Cents Cents - 0.01 - 0.01 Consolidated 2023 2022 $ $ (9,612,620) (6,902,449)
	Cents (0.57) (0.57) Number 1,693,232,645	Cents (0.50) (0.50) Number 1,385,110,998
	1,693,232,645	1,385,110,998
	710,209 558,084	1,924,767 -
	1,268,293	1,924,767

At 30 June 2023 and 30 June 2022, options,warrants and performance rights over ordinary shares were excluded from the calculation of the weighted average number of ordinary shares used in calculating diluted earnings per share due to being anti-dilutive, as the Group reported a loss for the period.

13

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 8. Trade and other receivables

Current assets Trade receivables Less: Allowance for expected credit losses GST receivable	Consolidated 2023 2022 $ $ 239,627 635,390 (18,311) -	Consolidated 2023 2022 $ $ 239,627 635,390 (18,311) -
	221,316	635,390
	-	14,282
	221,316	649,672

Allowance for expected credit losses

The Group has recognised a loss of $18,311 in the profit or loss in respect of the expected credit losses for the year ended 30 June 2023 (2022: $nil).

The ageing of the receivables and allowance for expected credit losses provided for above are as follows:

Expected credit loss rate 2023 2022 Consolidated % % 0 to 30 days 7.922% - 30 to 60 days - - 60 to 90 days - - over 90 days - -	Carrying amount 2023 2022 $ $ 231,125 314,975 982 8,416 - - 7,520 311,999	Carrying amount 2023 2022 $ $ 231,125 314,975 982 8,416 - - 7,520 311,999	Allowance for expected credit losses 2023 2022 $ $ 18,311 - - - - - - -	Allowance for expected credit losses 2023 2022 $ $ 18,311 - - - - - - -
	239,627	635,390	18,311	-

Movements in the allowance for expected credit losses are as follows:

Opening balance Additional provisions recognised Receivables written off during the year as uncollectable Closing balance	Consolidated 2023 2022 $ $ - - 18,311 - - -	Consolidated 2023 2022 $ $ - - 18,311 - - -
	18,311	-

Note 9. Inventories/work in progress

Current assets Materials and consumables Work in progress - Customers (contract asset)1	Consolidated 2023 2022 $ $ 234,151 467,366 141,554 781,014	Consolidated 2023 2022 $ $ 234,151 467,366 141,554 781,014
	375,705	1,248,380

1 Relates to external customers.

14

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 10. Bank guarantees and deposits

5 Parkview Drive, Olympic Park, Sydney NSW1 3 Dampier Road, Welshpool, WA1	Consolidated 2023 2022 $ $ 231,385 495,000 33,917 33,917	Consolidated 2023 2022 $ $ 231,385 495,000 33,917 33,917
	265,302	528,917

1 Relates to deposits given to landlords' legal representatives at 30 June 2022 over leased premises. These deposits are held in solicitor trust accounts and are classified as restricted cash.

Note 11. Other assets

Current assets Prepayments Other deposits Non-current assets Other non-current assets (Borrowing costs capitalised net of amortisation)	Consolidated 2023 2022 $ $ 127,880 120,904 13,556 13,556	Consolidated 2023 2022 $ $ 127,880 120,904 13,556 13,556
	141,436	134,460
	423,333	608,333
	564,769	742,793

15

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 12. Property, plant and equipment

Non-current assets Leasehold improvements - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation Motor vehicles - at cost Less: Accumulated depreciation Office equipment - at cost Less: Accumulated depreciation DC modules - at cost Less: Accumulated depreciation ICT hardware - at cost Less: Accumulated depreciation	Consolidated 2023 2022 $ $ 2,384 3,045,118 (2,384) (693,259)	Consolidated 2023 2022 $ $ 2,384 3,045,118 (2,384) (693,259)
	-	2,351,859
	417,220 (190,805)	286,054 (151,425)
	226,415	134,629
	26,016 (15,302)	26,016 (12,050)
	10,714	13,966
	28,798 (28,158)	61,126 (50,558)
	640	10,568
	1,348,388 (427,149)	10,415,688 (5,768,198)
	921,239	4,647,490
	86,962 (86,277)	340,736 (305,766)
	685	34,970
	1,159,693	7,193,482

Note 13. Right-of-use assets

Non-current assets Land and buildings - right-of-use Less: Accumulated depreciation	Consolidated 2023 2022 $ $ 10,222,419 12,178,466 (1,863,972) (993,508)	Consolidated 2023 2022 $ $ 10,222,419 12,178,466 (1,863,972) (993,508)
	8,358,447	11,184,958

Additions to the right-of-use assets during the year were $nil (30 June 2022: $3,125,008).

Right-of-use assets relate to leased properties in Perth, Sydney and Hobart.

The Group leases land and buildings under agreements of between three to fifteen years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.

For AASB 16 Lease disclosures refer to:

• note 4 for depreciation on right-of-use assets, interest on lease liabilities and short term leases;

• note 19 for lease liabilities; and

• consolidated statement of cash flows for repayment of lease liabilities.

16

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 14. Intangibles

Non-current assets Goodwill - at cost Module development - at cost Patents and trademarks - at cost Less: Accumulated amortisation Software - at cost Less: Accumulated amortisation Customer contracts - at cost Less: Accumulated amortisation	Consolidated 2023 2022 $ $ 25,541 1,986,421	Consolidated 2023 2022 $ $ 25,541 1,986,421
	195,951	38,970
	- -	36,480 (8,390)
	-	28,090
	112,729 (97,279)	232,167 (141,443)
	15,450	90,724
	1,342,104 (1,342,104)	2,703,418 (1,050,764)
	-	1,652,654
	236,942	3,796,859

Note 15. Assets of disposal groups classified as held for sale

Current assets Cash and cash equivalents Trade and other receivables Property, plant and equipment Right-of-use assets Intangibles	Consolidated 2023 2022 $ $ 558,084 - 38,897 - 1,119,257 - 1,786,396 - 3,086,355 -	Consolidated 2023 2022 $ $ 558,084 - 38,897 - 1,119,257 - 1,786,396 - 3,086,355 -
	6,588,989	-

Assets classified as held for sale relate to the Secure Data Centre (Darwin DC facility) which the DXN Board determined during the financial year as a facility to be sold as part of a decision to streamline data centre operations.

17

DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 16. Trade and other payables

Current liabilities Trade payables1 GST payable Payroll liabilities Other payables and accruals2	Consolidated 2023 2022 $ $ 450,374 2,152,202 65,999 - 81,481 162,552 378,300 188,456	Consolidated 2023 2022 $ $ 450,374 2,152,202 65,999 - 81,481 162,552 378,300 188,456
	976,154	2,503,210

Terms and conditions relating to the above financial instruments.

1 Trade payables are non-interest bearing and generally on 30 day terms.

2 Other payables are non-interest bearing have no fixed repayment terms.

Note 17. Contract liabilities

Current liabilities Contract liabilities1	Consolidated 2023 2022 $ $ 698,271 332,507

1 Relates to amounts received in advance from external customers for the custom-built DXN data centre and cable landing station modules.

Note 18. Borrowings

Current liabilities Insurance premium funding FlexiCommercial Pty Ltd1 Less: Unexpired charges Non-current liabilities FlexiCommercial Pty Ltd1 Pure Asset Management Pty Ltd2 Less: Unexpired charges	Consolidated 2023 2022 $ $ 118,265 60,855 42,888 - (17,309) (1,884)	Consolidated 2023 2022 $ $ 118,265 60,855 42,888 - (17,309) (1,884)
	143,844	58,971
	132,238 4,000,000 (18,788)	- 4,000,000 -
	4,113,450	4,000,000
	4,257,294	4,058,971

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DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 18. Borrowings (continued)

• 1 This is a Chattel Mortgage Facility with FlexiCommercial Pty Ltd for a Pressbrake Machine in use in the Perth factory. The interest rate on this facility is 9.996% and is repayable over 5 years (60 months) with no balloon payment.

• 2 $4,000,000 secured facility with Pure Asset Management Pty Ltd ('Pure') is to finance working capital and acquisitions. The interest rate on this facility (including line fee) is 11.25% per annum. In addition, there was a 2.5% establishment fee. This facility is due to mature on 14 October 2025 and is secured by a General Security Agreement over the assets of the Company. Financial covenants were fully complied with at 30 June 2022.

As previously disclosed, DXN reported a breach of a financial covenant to Pure, where the Group’s cash balance had fallen below $1,250,000. On 5 August 2022, Pure provided a waiver for the breach of the covenant, subject to DXN executing the following agreements:

i) a business purchase agreement in relation to the main assets and undertaking of the Group; and

ii) an underwriting agreement between the Borrower and the Lender in connection with the proposed $2,125,000 share placement by the Borrower, each in a form satisfactory to the Lender.

As announced to the market on 5 August 2022, both agreements were successfully executed. Additionally, Pure amended the Facility Agreement by increasing the level of cash required under its financial covenant to $1,600,000.

On 20 March 2023, Pure provided DXN with a letter of forbearance whereby the key covenant has been agreed as a minimum cash balance of $1,250,000 during the forbearance period ended 15 May 2023. On 30 June 2023, Pure provided another letter of forbearance whereby the key covenant has been agreed as a minimum cash balance of $500,000 during the forbearance period due to end on 1 September 2023. Amended financial covenants were fully complied with at 30 June 2023.

Financing arrangements

Unrestricted access was available at the reporting date to the following lines of credit:

Total facilities Insurance premium funding FlexiCommercial Pty Ltd Pure Asset Management Pty Ltd Used at the reporting date Insurance premium funding FlexiCommercial Pty Ltd Pure Asset Management Pty Ltd Unused at the reporting date Insurance premium funding FlexiCommercial Pty Ltd Pure Asset Management Pty Ltd	Consolidated 2023 2022 $ $ 118,265 60,855 162,180 - 4,000,000 4,000,000	Consolidated 2023 2022 $ $ 118,265 60,855 162,180 - 4,000,000 4,000,000
	4,280,445	4,060,855
	118,265 162,180 4,000,000	60,855 - 4,000,000
	4,280,445	4,060,855
	- - -	- - -
	-	-

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DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 19. Lease liabilities

Current liabilities Lease liability Non-current liabilities Lease liability	Consolidated 2023 2022 $ $ 716,011 728,679	Consolidated 2023 2022 $ $ 716,011 728,679
	8,190,144	10,775,981
	8,906,155	11,504,660

Note 20. Employee benefits

Current liabilities Annual leave Non-current liabilities Long service leave	Consolidated 2023 2022 $ $ 148,343 156,743	Consolidated 2023 2022 $ $ 148,343 156,743
	14,344	16,038
	162,687	172,781

Amounts not expected to be settled within the next 12 months

The current provision for employee benefits includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the Group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.

The following amounts reflect leave that is not expected to be taken within the next 12 months:

Employee benefits obligation expected to be settled after 12 months Note 21. Income in advance Current liabilities Income in advance	Consolidated 2023 2022 $ $ 14,344 16,038
	Consolidated 2023 2022 $ $ 416,667 -

As per the Exclusive Global Distribution License Agreement (‘EGDLA’) signed with Flow2Edge Holdings I Pte Ltd (‘Flow’), and announced to the market on 28 November 2022, DXN received an upfront $2 million exclusivity fee for an initial 10-year agreement for worldwide (excluding Australia) exclusivity for the marketing and distribution of DXN Modules. During the first 12 months of the EGDLA, commencing 180 days from the date of signing, FLOW2Edge must place orders with DXN for a minimum of 10 DXN Modules. The first $1 million of this exclusivity fee has been immediately recognised upon receipt, whilst the remaining $1 million will be recognised over the first twelve months of the agreement.

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DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 22. Other financial liabilities

Current liabilities Other financial liabilities1 Non-current liabilities Other financial liabilities2	Consolidated 2023 2022 $ $ 910,315 850,000	Consolidated 2023 2022 $ $ 910,315 850,000
	400,000	400,000
	1,310,315	1,250,000

• 1 This amount was withheld from the purchase price of SDC to cover any warranty claims associated with the acquisition, which is yet to be paid by the Company and is currently accruing agreed default interest until paid.

• 2 200 million warrants were issued to Pure Asset Management Pty Ltd as part of the New Debt Facility arrangement, as announced to the market on 9 September 2021. These warrants have a 48 month term and expire on 15 October 2025.

Note 23. Liabilities directly associated with assets classified as held for sale

Current liabilities Trade payables Payroll liabilities GST payable Lease liability Employee benefits Note 24. Issued capital 2023 Shares Ordinary shares - fully paid 1,721,314,836 Movements in ordinary share capital Details Date Balance 1 July 2021 Issue of shares - placement 10 September 2021 Issue of shares - share purchase plan 6 October 2021 Issue of shares - purchase consideration 18 October 2021 Issue of shares - share purchase plan shortfall 22 October 2021 Capital raising costs Capital raising costs - share-based payments Balance 30 June 2022 Issue of shares - placement 11 August 2022 Capital raising costs Balance 30 June 2023	2023 Shares 1,721,314,836		Consolidated 2023 2022 $ $ 12,168 - 2,110 - 13,307 - 1,869,826 - 31,562 - 1,928,973 - Consolidated 2022 2023 2022 Shares $ $ 1,471,314,836 45,424,949 43,471,842	Consolidated 2023 2022 $ $ 12,168 - 2,110 - 13,307 - 1,869,826 - 31,562 -	Consolidated 2023 2022 $ $ 12,168 - 2,110 - 13,307 - 1,869,826 - 31,562 -
				1,928,973	-
					2022 $ 43,471,842
			Shares 1,105,318,536 182,662,966 134,666,622 16,666,667 32,000,045 - -	Issue price $0.0090 $0.0090 $0.0120 $0.0090 $0.0085	$ 40,345,107 1,643,967 1,212,000 200,000 288,000 (184,565) (32,667) 43,471,842 2,125,000 (171,893) 45,424,949
			1,471,314,836 250,000,000 -
			1,721,314,836

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DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 24. Issued capital (continued)

Ordinary shares

Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should the Company be wound up in proportions that consider both the number of shares held and the extent to which those shares are paid up. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Share buy-back

There is no current on-market share buy-back.

Capital risk management

Management controls the capital of the Group in order to maintain a prudent debt to equity ratio, provide the shareholders with adequate returns and ensure the Group can fund its operations and continue as a going concern.

The Group’s debt and capital includes ordinary share capital and financial liabilities supported by financial assets.

Management effectively manages the Group’s capital by assessing the Groups financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

There are no externally imposed capital requirements other than as disclosed in note 18.

The capital risk management policy remains unchanged from the 2022 Annual Report.

Note 25. Reserves

Share-based payments reserve Option reserve	Consolidated 2023 2022 $ $ 1,118,264 1,081,594 310,302 310,302	Consolidated 2023 2022 $ $ 1,118,264 1,081,594 310,302 310,302
	1,428,566	1,391,896

Share-based payments reserve

The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration.

Option reserve

The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration.

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DXN Limited Notes to the consolidated financial statements 30 June 2023

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Note 25. Reserves (continued)

Movements in reserves

Movements in each class of reserve during the current and previous financial year are set out below:

Consolidated Balance at 1 July 2021 Capital raising costs Share-based payments Balance at 30 June 2022 Share-based payments Balance at 30 June 2023	Share-based payments $ 866,654 32,667 182,273	Option $ 310,302 - -	Total $ 1,176,956 32,667 182,273
	1,081,594 36,670	310,302 -	1,391,896 36,670
	1,118,264	310,302	1,428,566

23