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Annual Report Pentanet Limited ABN 29 617 506 279

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PENTANET LTD ANNUAL REPORT 2021 2
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Chairman and Managing Director's Address	Chairman and Managing Director's Address	4
Overview and Financial Highlights		6
Operational	and Financial Review	8
Corporate Directory		14
Director’s Report		15
Remuneration Report (Audited)		22
Auditor's Independence Declaration		33
Financial Report		34
Directors’ Declaration		69
Independent Auditor’s Report		70
Shareholders Information		73
Corporate Governance Statement		75

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PENTANET LTD ANNUAL REPORT 2021

Dear Shareholder,

Significant growth investments have been committed to both the fixed wireless and cloud gaming services of the business. Our innovative wireless mesh network design continues to impress in testing and is expected to be rolled out during FY22 as neXus, Pentanet’s next-generation of gigabit wireless internet service for Perth. The Company was also successful in securing a 15-year licence for high band 5G spectrum in the 26 GHz auction conducted by the Australian Communications and Media Authority (ACMA), which will result in significant advantages for the network and an accelerated deployment of neXus.

Our ongoing strategy to achieve our vision centres around three complementary objectives:

On behalf of the Pentanet Board of Directors, we are delighted to present the Company’s 2021 Annual Report. This is our first annual report since listing on the Australian Securities Exchange (ASX) through our Initial Public Offer (IPO) in January this year, and we would like to extend a warm welcome to the numerous new shareholders who have joined us on our journey.

Growing our subscriber base

If the Company’s activity throughout FY21 has demonstrated anything, it is that Pentanet is far more than a fast-growing telecommunications provider.

Through targeted marketing, providing a competitive service offering, delivering a high-quality customer experience and network technology that limits customer churn and allows subscribers to become our advocates.

Capital expenditure during FY21 accelerated the deployment of Pentanet's neXus and enabled upgrades to the Pentanet Core. The upgrades to Pentanet’s routing, switching and server capacity around the country means that the Pentanet Core will be capable of terabits of traffic every second and able to support cloud gaming, 5G internet traffic, automation of subscriber provisioning, and enable a scaled deployment for Terragraph equipment across neXus.

On the telecommunications side of the business, the high network performance of our own fixed wireless infrastructure and a culture focused on excellent, local customer service continue to differentiate us from other nbn[TM] resellers.

The Company saw strong organic growth throughout the past 12 months, with internet subscriber numbers increasing by 77%, revenue by 118%, and gross profit by 153%. Since listing on the ASX, the Management Team’s focus has been on positioning the Company to continue its strong growth by developing critical network infrastructure and exciting new customer service offers.

Market interest in GeForce NOW Powered by Pentanet has far exceeded initial expectations since its announcement on 27 January 2021, with over 45,000 expressions of interest received. The Company significantly expanded its initial infrastructure rollout to meet this demand and successfully launched the service on 19 October this year.

Expanding our network and increasing our potential market

In June, the Company commenced the Beta Play program for GeForce NOW Powered by Pentanet, Australia’s first commercial cloud gaming service, as an NVIDIA GeForce NOW Alliance Partner. The establishment of GeForce NOW Powered by Pentanet puts the Company in a unique position to democratise gaming nationally and establish ourselves as a powerhouse in Australia’s currently untapped cloud gaming market. Data collected through complementary service offerings such as GeForce NOW Powered by Pentanet provides the Company with valuable insight that will inform future expansions of the Pentanet network.

Congratulations are due to Pentanet.GG, our professional esports team, who this year became the first team ever to represent Oceania in the group stage of an international League of Legends tournament at the League of Legends Mid-Season Invitational 2021 in Reykjavík, Iceland. The team has found success in the regional LCO circuit since returning from Iceland and continue to solidify Pentanet’s reputation as a business that is dedicated to paving the way for the next generation of Australian esports athletes, coaches, and professionals to build genuine career pathways.

Through the deployment of our fixed wireless network into new regions supported by customer demand, and through the deployment of mmWave Terragraph technology and our recently acquired 5G spectrum to increase network access, speed and performance to non-line of sight regions around our towers.

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STEPHEN CORNISH
Managing Director
19th October 2021
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Before closing, we would like to acknowledge the enormous effort of our dedicated team during the lockdowns caused by the COVID-19 pandemic. The provision of reliable and high-quality internet services has been essential for those working remotely, maintaining business operations, and for leisure activities. Our team ensured that our network supported our subscribers during these difficult times.

Increasing our margins

We would also like to thank our fellow Directors for their valuable contributions during the year and our Management Team for their efforts in growing Pentanet into one of the most exciting newcomers in the Australian telecommunications sector.

Through developing a premium brand for alignment to speed and quality, and attracting more off-net subscribers to our higher margin on-net services, and leveraging our high-performance network to bring cloud gaming and ultimately other services to our customers.

Finally, we would like to thank our shareholders for their ongoing support of Pentanet. We have entered the 2022 financial year with a very positive demand outlook and a strong net cash position of around $32.7 million to aggressively pursue our growth strategy. We look forward to the business delivering returns to shareholders as it achieves its growth ambitions.

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TO BE SIGNED
DAVID BUCKINGHAM STEPHEN CORNISH
Non-Executive Chairman Managing Director
19th October 2021 David Buckingham 19th October 2021
PENTANET LTD ANNUAL REPORT 2021 5
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PENTANET LTD ANNUAL REPORT 2021 4
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FINANCIAL HIGHLIGHTS

STRATEGY AND OUTLOOK

FINANCIAL PERFORMANCE

Pentanet has a clear strategy to grow the business through a focus on attracting and retaining subscribers, applying cuttingedge technology to grow our network and performance, and grow margins as more of our customers use our network infrastructure and we provide new and innovative services to them.

Pentanet showed consistent financial growth for the year ended 30 June 2021, with revenue increasing by 118% to $10.9 million for the period. Recurring revenue made up 87% of total revenue, which was an increase of 132% from FY20.

Gross profit improved by 153% to $4.7 million, reflecting the benefits of cost efficiencies as the Company continues to build scale. Gross profit margin for the period was 43%, an increase from 37% in FY20.

As our society continues to digitally connect in more ways and we consume more data, the outlook remains very positive for us as a differentiated internet and gaming services provider. We are gamers, we are internet users, and we are also shareholders. So we are very focused on delivering the best customer experience and network performance, and also on shareholder returns.

Net loss after tax for the year ended 30 June 2021 was $13.7 million, which includes one-off costs of $9.7 million relating to the Company's IPO in January 2021 and the retiring of pre-IPO funding. As is typical of other early stage, high growth companies, Pentanet’s after tax result is impacted by growth-related investments and costs.

OPERATIONAL PERFORMANCE

INTERNET SERVICES

Subscribers Driving Scale Improvements

mass deployment. Recent firmware deployment and testing have delivered last-mile speeds of 1-2 Gbps across multiple mesh points, reaching more than 3km from the nearest backhaul tower site.

Internet subscribers increased by 77% to 12,486 in the year ended 30 June 2021, with a total of 5,446 net new customers joining Pentanet. Importantly, Pentanet’s churn rate was only 0.82%, which is well below the industry average and indicative of the high quality network and customer service that sets us apart from other internet service providers.

Pentanet’s acquisition of a 15-year high band 5G spectrum licence in April 2021 will support its Terragraph deployment in Western Australia. The 26GHz band is optimal for delivering 5G wireless broadband services and will improve wireless network efficiencies, coverage, support backhaul cost savings, and provide the capability to roll out the network at a larger scale. The $8.0 million licence fee will be paid in equal instalments over five years.

The Company’s growth is also reflected in the increased market awareness of the Pentanet brand and its positioning around high-performance, speed, gaming, and next-generation technology. Pentanet maintains strong customer satisfaction results with a weighted average of 4.6 stars across Facebook, Google and Product Review for its internet services.

The total number of customers subscribed to Pentanet’s on-net Fixed Wireless network was 5,368, which accounted for 43% of total customers at the end of the period. The Fixed Wireless gross profit margin for on-net customers was 83%, increased from 69% in FY20. The Average Revenue Per User (ARPU) for Fixed Wireless was $87, which continues to track above the nbn[TM] Residential ARPU of between $70 to $80, reflecting the greater contribution of on-net plans to total revenue. Off-net customers represent a clear opportunity for margin growth, and increasing this number is a core element of Pentanet’s growth strategy going forward.

CLOUD GAMING AND ESPORTS

Pentanet has made significant progress in a very short space of time in its aim to bring cloud gaming to Australia.The Company announced an Alliance Partner Agreement with NASDAQ-listed NVIDIA in late January 2021 to bring their GeForce NOW technology to Australia, and is now rapidly progressing towards the Beta launch of the service in September and the commercial launch targeted for October this year.

The Company has taken a structured and controlled approach to launching the service, including assessing demand, securing the hardware, and conducting a detailed Beta phase to provide Pentanet with insights into usage patterns, infrastructure demand to manage and optimise its rollout, and determine the pricing structure in the Australian market.

Customer Acquisition Costs (CAC) trended downwards during the period, with marketing cost as a percentage of revenue decreasing from 24% in FY20 to 10% in FY21. The focused and disciplined execution of Pentanet’s marketing strategy in FY21 delivered a 25% decrease in the year on year CAC, from $231 in FY20 to $174 in FY21.

Market interest in GeForce NOW exceeded initial expectations with registrations of interest exceeding 45,000 by May. This allowed us to expand our hardware for an additional 18 RTX game servers (up from the original order of 12 servers).

Investment in Network Growth and Performance

Capital expenditure during the year ended 30 June 2021 focused on the accelerated deployment of the Terragraph network and investment in upgrading the Pentanet Core. The upgrades to Pentanet’s routing, switching and server capacity around the country means the Pentanet Core will be capable of terabits of traffic every second and able to support cloud gaming, 5G internet traffic, automation of subscriber provisioning, and enable a scaled deployment for Terragraph equipment across the Pentanet neXus.

Pentanet is committed to delivering the best gaming experience for its users, and will leverage its high performance network and partner relationships with NVIDIA and NEXTDC to successfully bring GeForce NOW to Australia.

The Pentanet.GG Esports team also achieved new heights in 2021, taking out first place in Split 1 of the League of Legends Circuit Oceania. The regional result won the team a place at the global Mid-Season Invitational tournament in Reykjavik, Iceland where they placed sixth in the world.

Accelerating the deployment and commercialisation of the Terragraph network remains a key business priority. In Q4 FY21, Pentanet successfully deployed the Terragraph trial mesh network and secured the hardware for

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EBITDA is a financial measure which is not prescribed by Australian Accounting Standard (‘AAS’) and represents the profit under AAS adjusted for depreciation, amortisation, interest and tax. Underlying EBITDA is EBITDA adjusted to exclude share-based payments, options exercised on behalf of employees and IPO cost. Gross Profit Margin is a measure of profitability that shows the percentage of revenue that exceeds the cost of goods sold (COGS). Cost of goods sold consist of network, carrier and hardware expenses.

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OPERATIONAL
TECH TREE
(Where we at)
What is this?
The new Pentanet Core consists of upgraded
routing, switching, and server capacity across
the country, allowing integration with cloud
gaming, 5G, automation, and enabling a scaled
Terragraph deployment. (This is our network’s
new evolved brain.)
Stay tuned for the announcement where we
will live stream the Core coming online.
Doing these remotely now, thanks Gladys.
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PENTANET LTD ANNUAL REPORT 2021

Pentanet is a Perth-based, growth-focused telecommunications company that delivers high-speed internet to a growing number of subscribers by providing next-generation internet speeds. This is achieved through Pentanet’s market-leading private fixed-wireless network, the largest in Perth, as well as reselling fixed-line services such as nbn[TM] , where its wireless network is not yet available.

Pentanet will also be part of the rollout of the next wave of subscription-based entertainment services – cloud gaming. The Company’s Alliance Partner Agreement with NASDAQ listed NVIDIA – one of the world’s largest producers of specialised graphic chips used in gaming – allows Pentanet to be the first to bring their GeForce NOW technology to Australia in 2021.

Pentanet’s flagship fixed wireless network benefits both customers and investors, offering an outstanding customer experience and a fixed-wireless product that is technically superior to most of the nbn[TM] . – with attractive margins for investors. This sets Pentanet apart from most broadband providers, which only resell the nbn[TM] .

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AUGUST 2020 Completion of two interconnecting dark fibre rings, strategically located in Perth metropolitan area

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SEPTEMBER 2020 Appointment of David Buckingham as Chair

NOVEMBER 2020 Pentanet entered into a binding commercial agreement with NVIDIA to collaboratively work on delivering a comercialised “GeForce NOW” (GFN) cloud-based gaming solution in Australia.

DECEMBER 2020 Lodged prospectus with ASIC.

JANUARY 2021 Pentanet successfully listed on the ASX, raising $22.5m (before costs). Funds raised from the IPO will be used to expand the fixed-wireless network, including plans to roll out the new faster Terragraph network technology that will increase customer coverage and enable Pentanet to offer even higher speed plans. Funds will also be used to rollout GeForce NOW subscription-based cloud gaming infrastructure under the Alliance Partner Agreement with NASDAQ listed company NVIDIA.

FEBRUARY 2021 Active telecommunications subscribers surpassed 10,000.

Registrations of interest for GeForce NOW exceeded 24,300. Expanded hardware order was placed with NVIDIA for 18 RTX game servers (up from 12 servers) with registrations of interest exceeding 45,000.

APRIL 2021 Secured a 15-year license for high band 5G spectrum in the 26GHz auction conducted by the Australian Communication and Media Authority (ACMA).

Active telecommunications subscribers surpassed 12,000.

MAY 2021

PGG made history as the first Australian esports team to progress past the Group stages in an international League of Legends tournament, placing sixth in the world at the recent Mid-Season Invitational tournament in Iceland.

JUNE 2021 Commenced the innovative beta program for GeForce NOW, NVIDIA’s premiere cloud-based game streaming services.

The Company raised a further $20.0m (before costs) via a share placement to institutional and sophisticated investors on 28 June 2021. Funds raised will be used to accelerate the planned growth in Cloud Gaming and Terragraph telecommunication infrastructure rollout (neXus), using the 5G wireless spectrum acquired for Western Australia in the recent national government spectrum auctions.

UNDERLYING RESULTS OVERVIEW:

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FY21 FY20
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$’000 $’000 % change
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Revenue	10,918	4,997	118%
Gross profit	4,742	1,871	153%
Operating expenses	(7,185)	(4,689)	(53%)
Underlying EBITDA1	(2,442)	(2,818)	13%
Depreciation and amortisation	(1,508)	(1,031)	(46%)
Underlying EBIT	(3,950)	(3,848)	(3%)
Net finance cost	(76)	(155)	51%
Underlying net loss before tax	(4,026)	(4,003)	(1%)

RECONCILIATION OF REPORTED UNDERLYING RESULTS:

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FY21 FY20
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$’000 $’000 % change
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Underlying EBITDA	(2,442)	(2,818)	13%
Significant items
Share-based payments	(4,500)	(1,108)	306%
IPO related cost	(293)	0
Cost of option exercise on behalf of staff	(1,055)	0
Reported EBITDA	(8,291)	(3,926)
Depreciation and amortisation	(1,508)	(1,031)	46%
Net finance cost	(3,898)	(155)	2,416%
Reported net profit after tax	(13,697)	(5,111)	168%

The loss of $13.7m includes significant items incurred as part of listing After adjusting for significant items, the loss after tax for the on the ASX, $4.5m share-based payments, $3.8m finance cost relating consolidated entity was $4.0m. The earnings before interest, tax, to the exercise of convertible note options, $1.1m of costs for options depreciation, and amortisation (EBITDA) after adjustments for significant exercise on behalf of staff pre-IPO and IPO related costs of $0.3m. items was ($2.4m) compared to ($2.8m) in the prior financial year.

1EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for depreciation, amortisation, interest and tax. Underlying EBITDA is EBITDA adjusted to exclude, share based expenses, cost of options exercised on behalf of staff and IPO related costs. The Directors consider that these measures are useful in gaining an understanding of the performance of the entity, consistent with internal reporting.

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PENTANET LTD ANNUAL REPORT 2021

SUBSCRIBERS, REVENUE AND GROSS PROFIT REVIEW

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FY21 FY20
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$’000 $’000 % change
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Revenue from contracts with customers	10,918	4,997	118%
Rendering a Service - Telecommunication Service	637	417	53%
Rendering a Service - Recurring network revenues	9,509	4,111	131%
Sale of goods	772	470	64%
Network, carrier and hardware expenses	6,175	3,126	98%
Gross Profit	4,742	1,871	153%
Gross Margin	43%	37%	16%

An 18% YoY improvement in the fixed wireless gross margin from 69% in FY20 to 83% in FY21 represents the true earnings power of Pentanet’s fixed wireless service offering, the strength of the company owned and operated fixed wireless infrastructure and growing brand in Western Australia. Conversion of subscribers from off-net to on-net remains a focus for the Company, with on-net subscribers representing 43% of total subscribers in FY21.

In line with Pentanet’s stated strategy, the Company increased its subscriber base by 77% YoY by adding 5,446 new subscribers to the network organically. Additionally, the Company maintained an average monthly churn rate of 0.82% for FY20 and FY21, indicating growing customer stickiness that speaks to the quality of the service offering. Consequently, Pentanet delivered solid results in revenue with a 118% YoY increase from $5m to $11m. In addition, YoY recurring network revenue increased by 131%, from $4.1m to $9.5m, highlighting the strength of the recurring revenue model. Off-net ARPU improved from $65 in FY20 to $71 in FY21, and on-net ARPU marginally decreased from $89 in FY20 to $87 in FY21.

Targeted operational and marketing strategies focusing on the fixed wireless service offering has yielded positive results, with YoY on-net subscribers growing by 68%, with an average monthly churn of 0.82% in FY21.

Gross profit increased from $1.9m to $4.7m, representing 153% YoY growth. Pentanet improved YoY gross margins by 16% to 43%, due to emphasis on higher-margin yielding service offerings and cost efficiencies on lower-margin yielding service offerings.

The current fixed wireless investment strategy entails directing significant resources to increase coverage to scale the network and strengthen the fixed wireless service offering and brand, positioning the Company well for organic on-net subscriber growth.

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MARKETING

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FY21 FY20
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$’000 $’000 % change
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Revenue	10,918	4,997	118%
Advertising and promotion	1,112	1,213	(8%)
Advertising as a % of Revenue	10%	24%

The Pentanet brand continues to build in-market, positioned around high-performance, speed, gaming, and next-generation technology. The Company maintains strong customer satisfaction results with a weighted AWARDS average of 4.6 stars across Facebook, Google and Product Review for telecommunications services.

Pentanet’s integrated marketing approach continues to engage residential and commercial subscribers, supported by a developing range of services designed to offer flexibility and value for Perth.

The Company reports a continuing reduction in telco customer acquisition cost, and customer growth metrics are trending favourably. As a percentage of revenue, marketing cost has decreased from 24% in FY20 to 10% in FY21 whilst expanding marketing resources for branding and lead-generation campaigns. The focused and disciplined execution of Pentanet’s marketing strategy in FY21 has delivered a 25% decrease in the YoY Customer Acquisition Cost (CAC) from $231 in FY20 to $174 in FY21.

CUSTOMER ACQUISITION COST

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25% FY19 $334
YOY
FY20 $231
FY21 $174
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PENTANET LTD ANNUAL REPORT 2021

NETWORK AND CLOUD GAMING

IMPACT OF COVID-19

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FY21 FY20
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	$’000	$’000	% change
Plant and equipment	9,230	3,829	141%
Intangible assets	9,0412	362	2,395%

Cloud gaming

Pentanet continues to invest in on-net infrastructure due to its attractive margin generating characteristics. Pentanet added more towers and additional capacity to existing towers across the Perth metro area during the year. In addition, works on the Northern fibre ring has been completed adding path diversity and redundancy to the network, ensuring our subscribers are never more than two wireless hops from fibre.

In late January 2021, Pentanet announced an Alliance Partner Agreement with NASDAQ-listed NVIDIA – one of the world’s largest producers of specialised graphic chips used in gaming – to bring their GeForce NOW technology to Australia this year. Pentanet opened online registrations of interest by allowing future Australian users of GeForce NOW to reserve their usernames and register for an invitation to the Beta Program, to capture a good understanding of potential market demand for the service across the country.

To capitalise on the growth and expansion opportunity that the accelerated deployment of the Terragraph network will bring to the business, during FY21, Pentanet secured a 15-year high band 5G spectrum license in the 26 GHz band auction conducted by the Australian Communication and Media Authority (ACMA). The 26GHz band is optimal for delivering 5G wireless broadband services. Additionally, the 26 GHz band will improve wireless network efficiencies, coverage, support backhaul cost savings, and provide the capability to roll out the network at a larger scale. The $8.0 million license fee will be paid in equal instalments over five years, with the first instalment of $1.3 million paid in June 2021.

Market interest in GeForce NOW exceeded initial expectations with registrations of interest exceeding 45,000 by May. As a result, an expanded hardware order was placed with NVIDIA for an additional 18 RTX game servers (up from the original order of 12 servers).

In June 2021, Pentanet launched its CloudGG portal, which is the first part of a three-stage rollout leading towards a national launch for the GeForce NOW service planned for October 2021. Across the months leading up to launch, players have completed Beta Quests designed to provide Pentanet with further insight into usage patterns and infrastructure demand to manage and optimise its hardware and infrastructure rollout. Pentanet is committed to delivering the best gaming experience for its users and has partnered with NEXTDC (ASX:NXT) for the cloud gaming infrastructure deployment via its Perth and Sydney data centre. Under the partnership the companies will work together to formulate a working commercial model within the data centre for GeForce NOW in Australia.

Accelerating the deployment and commercialisation of the Terragraph network remains a key business priority. In FY21, Pentanet successfully deployed the Terragraph trial mesh network and secured the hardware for mass deployment. Recent firmware deployment and testing have delivered last-mile speeds of 1-2Gbps across multiple mesh points reaching more than 3km from the nearest backhaul tower site.

Another critical investment area is the Pentanet Core. Consisting of upgraded routing, switching, and server capacity across the country, the upgraded Core will be capable of terabits of traffic every second, integration with cloud gaming, 5G, automation of subscriber provisioning, and enable a scaled deployment for Terragraph equipment across the Pentanet neXus.

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Clockwise from left: A Pentanet telecommunications tower, An NVIDIA RTX Blade Server, GeForce NOW Cloud Gaming platform shown on a mobile accessory.

The impact of the COVID-19 pandemic is ongoing. However, the effects of COVID-19 on the provision of internet and associated telecommunications products and services have not been materially detrimental to operations.

purchases ahead of the demand curve to minimise the potential impact of the chip shortages on network operations.

The Company has adapted quickly to a changing economic landscape with employees transitioning to working remotely during the pandemic and still delivering growth and ensuring minimal disruptions in business operations.

The demand for Pentanet's services increased during the pandemic's peak when COVID-19 restrictions were imposed. As a result, the Group continued to deliver growth despite the uncertainty arising from the pandemic.

Existing credit management policies have been reviewed in light of the pandemic, and the consolidated entity continues to monitor debtors' recoverability closely. In addition, no single customer relationship is material to the consolidated entity. Therefore, Pentanet will remain conservative in assessing current and forecast credit conditions when determining the default rates on debtors balances.

Due to the evolving nature of the COVID-19 pandemic and the corresponding impact on the Company's operations and future results, estimating the impact on operating and financial performance is impracticable.

The Company is actively monitoring the situation and its impact.

Telecommunication services remains an essential service, and the Company can continue to operate under and in accordance with any global or local restrictions imposed.

The global chip shortages increased lead times to deliver hardware secured for the core network capacity upgrades. However, the Company managed to navigate through the delays and increased hardware

ONGOING STRATEGY

The three pillars of Pentanet’s strategy remain unchanged.

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Grow the subscriber base:
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The introduction of new technology will increase on-net coverage to expand and grow the Company’s on-net subscriber base and deliver superior network performance to maintain a low churn rate and provide a competitive service offering, turning subscribers into brand advocates. Expand network increasing potential market:

The expansion of the existing Pentanet network with neXus, increasing available wireless speeds to over 1Gbps through the large scale mmWave wireless deployment. In addition, creating greater wireless coverage across the Perth metro area will increase potential market size and penetration.

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Increase margins:
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The company will continue directing resources to attract more off-net customers to higher-margin on-net services and diversify and bundle complementary product offerings, including GeForce NOW cloud gaming subscription services.

2 The group purchased a 15-year Spectrum license in the April 2021 auction conducted by the ACMA for $7,986,200 (Cost). The group elected to pay the license fee over five equal instalments per the ACMA’s allocation determination and paid the first instalment on 25 June 2021. The remainder of the four instalments is payable over four years.

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PENTANET LTD ANNUAL REPORT 2021

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DIRECTORS
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David Buckingham Stephen Cornish Timothy Cornish
Non-Executive Chairman Managing Director Executive Director
Dalton Gooding Craig Amos Patrick Holywell
Non-Executive Director Non-Executive Director Company Secretary
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Registered office

Unit 2 / 8 Corbusier Place, Balcatta 6021, WA Telephone number: (08) 9466 2670 Unit 2 / 8 Corbusier Place, Balcatta 6021, WA

Principal place of business

Principal banker

Bankwest

220 St Georges Terrace, Perth, 6000, WA. Automic Group Level 2, 267 St Georges Terrace, Perth, 6000, WA Telephone number: 1300 288 664 BDO Audit (WA) Pty Ltd Level 1, 38 Station Street, Subiaco WA 6008 Pentanet Ltd shares are listed on the Australian Securities Exchange (ASX code: 5GG)

Share register

Auditor

Stock exchange listing

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The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or group) consisting of Pentanet Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2021.

Company secretary

Patrick Holywell (appointed 20 November 2019)

Principal activities

Directors

The principal activities of the group consisted of the provision of internet and associated telecommunications products and services and gaming technology.

The following persons were directors of Pentanet Ltd during the whole of the financial year and up to the date of this report unless otherwise stated:

Dividends

David Buckingham (appointed 10 September 2020 – Non-Executive Chairman) Stephen Cornish (appointed 20 February 2017) Timothy Cornish (appointed 20 February 2017) Dalton Gooding (appointed 26 November 2018) Craig Amos (appointed 26 November 2018) Russell Kane (resigned 4 September 2020)

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

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PENTANET LTD ANNUAL REPORT 2021

OPERATING AND FINANCIAL REVIEW

Review of operations

Our business model and objective

The Company delivered a 118% increase in revenue from $5.0m in the prior year to $11.0min the year ended 30 June 2021. In addition, recurring network revenue increased by 131%, from $4.1m to $9.5m.

Pentanet is a Perth-based, growth-focused telecommunications Company delivering high-speed internet to a growing number of subscribers by providing them with next-generation internet speeds. This is achieved through Pentanet’s market-leading private fixed-wireless network, the largest in Perth, as well as reselling fixed-line services such as NBN, where its wireless network is not yet available.

At 30 June 2021, the consolidated entity had a cash balance of $32.7m.

Capital raising

Pentanet’s flagship fixed wireless network has benefits for both customers and investors, offering an outstanding customer experience and a fixed-wireless product that is technically superior to most of the nbn[TM] – with attractive margins for investors. This sets Pentanet apart from most broadband providers, which only resell the nbn[TM] .

The Group successfully listed on the ASX, raising $22.5m (before costs) on 7 January 2021. Funds raised from the IPO will be used to expand the fixed-wireless network, including plans to roll out the new faster Terragraph network technology that will increase customer coverage and enable Pentanet to offer even higher speed plans. Funds will also be used to rollout GeForce NOW subscription-based cloud gaming infrastructure under the Alliance Partner Agreement with NASDAQ listed company NVIDIA.

The group raised a further $20.0m (before costs) via a share placement to institutional and sophisticated investors on 28 June 2021. Funds raised will be used to accelerate the planned growth in Cloud gaming and Terragraph telecommunication infrastructure rollout, using the 5G wireless spectrum acquired for Western Australia in the recent national government spectrum auctions.

Operating results

The loss for the consolidated entity after providing for income tax amounted to $13,697,000 (30 June 2020: loss of $5,111,261).

Risk management

The loss of $13.7m includes significant items incurred as part of listing on the ASX, $4.5m share-based expenses, $3.8m finance costs relating to the exercise of convertible note options, $1.1m of cost for share options exercised on behalf of staff prior to the IPO and IPO related costs of 0.3m.

The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and opportunities identified by the Board.

The Group believes that it is crucial for all Board members to be part of this process, and as such the Board has not established a separate risk management committee. Instead, sub-committees are convened as appropriate in response to issues and risks identified by the Board as a whole and the sub-committee further examines the issue and reports back to the Board.

After adjusting for significant items, the loss after tax for the consolidated entity was $4.0m.

The earnings before interest, tax, depreciation, and amortisation (EBITDA)[[3]] after adjustments for $4.5m share-based expenses $1.1m of cost for options exercised on behalf of staff prior to the IPO and IPO related costs of $0.3m was -$2.4m compared to -$2.8m in the prior financial year.

The Board has several mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the Board. These include the following:

The net cash inflow of $31.4m was attributable to $41.4m received through capital raisings (net of share issue expenses), $0.5m received from the exercise of share options, offset by $3.2m in net operating cashflow outflows, $5.0m for the purchase of plant and equipment and $1.8m expended on payments for intangible assets (being the first instalment of licence payments for recently acquired 5G spectrum).

Implementation of Board approved budget and Board monitoring of progress against budget, including the establishment and monitoring of financial KPI’s; and

Further discussion on the Group’s operations is provided below. FY21 FY20

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The establishment of committees to report on specific business risks.

For more information on risk management please refer to: www.pentanet.com.au/investor-centre/ containing our latest risk disclosure in the Capital raise presentation on 18 June 2021 and Risk Management Policy under Corporate Governance.

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3EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for depreciation, amortisation, interest and tax. Underlying EBITDA is EBITDA adjusted to exclude, share based expenses, cost of options exercised on behalf of staff and IPO related costs. The Directors consider that these measures are useful in gaining an understanding of the performance of the entity, consistent with internal reporting.

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REVENUE
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Significant changes in the state of affairs

Matters subsequent to the end of the financial year

On 27 November 2020, prior to the Company’s IPO, all convertible notes on issue (plus interest accrued) were converted into 20,646,154 shares at $0.13 per share and 2,741,342 shares at $0.10 per share. Further to this, there were attaching options that were exercised into 6,256,410 shares at $0.13 per share.

No matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

Likely developments and expected results of operations

On 11 December 2020, Pentanet lodged its prospectus with ASIC.

In line with the Group’s stated strategy, Pentanet will focus on executing the Company’s Fixed Wireless and Cloud Gaming accelerated growth strategy. Central to this strategy is deploying Terragraph and GeForce NOW infrastructure to drive industry-leading performance capability and build a unique telecommunications and gaming platform in the Australian market.

On 7 January 2021, the Consolidated Entity issued 89,940,000 fully paid ordinary shares at an issue price of $0.25 (25 cents) per share under an initial public offer (IPO).

On 29 January 2021, Pentanet was listed on the ASX.

The Company has entered into a binding commercial agreement with NVIDIA (NVIDIA Agreement) on 25 November 2020, whereby NVIDIA and the Company will collaboratively work on delivering a commercialised “GeForce NOW” (GFN) cloud-based gaming solution in Australia.

Environmental regulation

The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.

NVIDIA Corporation is a NASDAQ-listed multinational technology Company and is one of the world’s largest manufacturers of graphics processing units for gaming and professional markets. GeForce NOW is the name of NVIDIA’s cloud gaming service, which is currently available in over 70 countries. GeForce NOW enables users to stream games from the cloud directly to a laptop, desktop, or compatible Android device. It is a subscription-based service that instantly turns nearly any laptop, desktop, Mac, or Android device into a powerful gaming computer, providing users with on-demand access to their game libraries, hosted on nearby servers for the life of the subscription.

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The Company issued 160,000 Shares and 29,610,000 Options to staff, Directors, and management of the Company (together, Employee Securities ). The Employee Securities have been offered by way of a secondary offer under the prospectus.

On 23 April 2021, Pentanet successfully secured a 15 year, $8m license for high band 5G spectrum in the 26Ghz auction conducted by the Australian Communication and Media Authority (ACMA).

On 10 June, the Company announced the commencement of the innovative beta program for GeForce NOW, NVIDIA’s premiere cloud-based game streaming services.

On 28 June 2021, the consolidated entity issued 27,777,778 fully paid ordinary shares at an issue price of $0.72 (72 cents) per share under a placement to institutional and sophisticated investors.

There were no other significant changes in the state of affairs of the consolidated entity during the financial year.

Share options

As at the date of this report, the Group has options over ordinary shares. These issues have been issued on the following terms.

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Number of unlisted options Exercise price Expiry date
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	1,000,000 9,870,000 9,870,000 9,870,000	$0.13 $0.30 $0.37 $0.50	28-Feb-22 30-Jun-24 30-Jun-24 30-Jun-24
	Total 30,610,000

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PENTANET LTD ANNUAL REPORT 2021

INFORMATION ON DIRECTORS

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DAVID BUCKINGHAM

Chairman

David Buckingham has over thirty years of experience as a corporate leader in telecommunications, media, technology, IT and education. Mr Buckingham began his career at Price Waterhouse Coopers in the UK and Australia. Most recently, Mr Buckingham served as both Chief Executive Officer and Chief Financial Officer of Navitas Limited (ASX:NVT), a global education provider with over 120 colleges and campuses across 31 countries. Prior to Navitas, David worked for Telewest Global as the Group Treasurer and Director of Financial Planning, for Virginmedia, as Finance Director, Business Division and for iiNet (ASX:IIN), where he held the roles of Chief Financial Officer and Chief Executive Officer between 2008 and 2015. He was the Chief Executive Officer of iiNet when the company was acquired by TPG Limited in September 2015. Mr Buckingham holds a Bachelor of Technology (Hons) from the Loughborough University of Technology and is a qualified ACA Chartered Accountant in England & Wales and a member of the Australian Institute of company Directors.

Other current directorships: Openlearning Ltd - appointed 9 September 2019 Nuheara Ltd - appointed 1 November 2019 Hiremii Ltd – appointed 3 May 2021

Former directorships (last 3 years): Navitas Limited – appointed 1 July 2018, resigned 5 July 2019

Ordinary shares: 200,000

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STEPHEN CORNISH Managing director and founder

Stephen Cornish founded Pentanet in 2017. Under his leadership, the company has continued to achieve impressive year-on-year growth, with nearly 12,000 customers connected under the Pentanet brand. In 2018, Stephen was a finalist in the Australian Young Entrepreneur Awards, and in 2019 was recognised as one of WA’s forty leading business entrepreneurs in the Business News 40Under40 Awards. In 2019, Mr Cornish founded Pentanet.GG, Western Australia’s own Esports league, and is actively championing the digitisation of Perth as the next global esports destination.

Other current directorships: None

Former directorships (last 3 years): None

Ordinary shares: 50,458,135

Options over ordinary shares: 9,900,000

Committee Membership: None

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TIMOTHY CORNISH Executive director and co-founder

Timothy Cornish is a founding director of Pentanet and has various interests in resources, mining technology and international trade. He is an experienced and successful business leader with extensive involvement in private enterprise for over 20 years. Having spent a significant amount of time in China and throughout Asia, Mr Cornish has built an extensive network of contacts, opportunities, and experience. Mr Cornish’s early career in accounting and finance involved roles with Grant Thornton as well as an international strategic sourcing specialist. He has built sales and distribution channels into Asia-Pacific and South American engineering and mining service industries as well as accompanying global supply chains including Europe, USA and Asia. Mr Cornish has completed a Bachelor of Commerce at UWA and a Graduate Diploma of Chartered Accounting with the Institute of Chartered Accountants Australia & New Zealand. In 2021 Mr Cornish was recognised as one of WA’s forty leading business entrepreneurs in the Business News 40Under40 Awards, as well as being awarded Start-Up Category winner.

Other current directorships: None

Former directorships (last 3 years): None

Ordinary shares: 13,471,135

Options over ordinary shares: 6,600,000 Committee Membership: None

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DALTON GOODING
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Non-executive director

Dalton Gooding has over 40 years’ experience and is currently the senior partner of DFK Gooding Partners, where he advises on a wide range of businesses with particular emphasis relating to accounting issues, taxation, due diligence, feasibilities and general business advice. He was a long-standing Partner at Ernst & Young and is a Fellow of the Institute of Chartered Accountants Australia & New Zealand. Mr Gooding also holds director positions on a number of public and private company boards in various sectors.

Other current directorships: Katana Capital Ltd – appointed 10 November 2005

Former directorships (last 3 years): None

Ordinary shares: 3,575,641

Options over ordinary shares: 2,400,000

Committee Membership: Member of the audit and risk committee and the remuneration and nomination committee

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CRAIG AMOS
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Non-executive director

Craig Amos is a Chartered Accountant with over 20 years of experience in finance, strategy, M&A, and commercial projects in corporate and professional services environments. He is currently a partner at RSM’s Perth office, specialising in corporate M&A and capital markets advisory services. He has a diverse background, having worked as a CFO in both public and private companies, Strategy & Corporate Development roles and at the Director level in Tier 1 Corporate Advisory. Mr Amos is the former CFO of Velrada and was previously CFO of ASX listed Decmil Group Limited, including in 2014 when it was part of the ASX200. Mr Amos is also an Advisory Board member at Curtin University School of Accounting. Before his corporate career, he held the position of Executive Director in the Corporate Finance Division of Ernst & Young, where he gained extensive experience leading teams on a range of strategic transactions. Mr Amos holds a Bachelor of Commerce (with Honours) and a Graduate Diploma in Applied Finance. He is also a fellow of the Financial Service Institute of Australasia.

Other current directorships: None

Former directorships (last 3 years): None

Ordinary shares : 1,051,283

Options over ordinary shares: 1,800,000

Committee Membership: Chairman of the audit and risk committee and member of the remuneration and nomination committee

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PATRICK HOLYWELL
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Company Secretary
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Patrick Holywell has over fifteen years of experience in accounting, finance and corporate governance, including employment at Deloitte and Patersons. He is a Chartered Accountant and a Fellow of the Governance Institute of Australia with the last ten years focused on Director/CFO/company Secretarial roles, particularly in the resources and technology space. Mr Holywell worked at Deloitte in the assurance and advisory division and was a founding member and investment analyst for Patersons Asset Management. Mr Holywell has completed a Bachelor of Commerce at UWA, a Graduate Diploma of Chartered Accounting with the Institute of Chartered Accountants and the Company Directors Course with the Australian Institute of Company Directors.

Other current directorships: Si6 Metals Ltd – appointed 25 November 2019 Transcendence Technologies Ltd – appointed 20 November 2019

Former directorships (last 3 years): None

Ordinary shares: 637,181

Options over ordinary shares : 600,000

Committee Membership: N/a

RUSSELL KANE

Non-executive director

Options over ordinary shares 3,000,000

Committee Membership: Chairman of the board and remuneration and nomination committee and member of the audit and risk committee

Russell Kane holds an Executive Director position at Euroz and has worked in the stock brokerage industry since 1994. He holds a Bachelor of Business from Edith Cowan University and is responsible for servicing both domestic institutions and high net worth clients, with a particular emphasis on WA based resources and industrials stocks.

Other current directorships: None

Former directorships (last 3 years): EurozLimited – appointed 5 November 2013, resigned 9 October 2020.

'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities unless otherwise stated.

'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities unless otherwise stated.

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Ordinary shares: 1,051,060

Options over ordinary shares : None

Committee Membership: None

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PENTANET LTD ANNUAL REPORT 2021

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Ringing the Perth Bell Tower bells to signal the start of
ASX trade on Pentanet's first day as a listed Company.
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MEETINGS OF DIRECTORS

The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2021, and the number of meetings attended by each director was:

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Remuneration and
Full Board Audit and Risk Committee
Nomination Committee
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Attended Held Attended Held Attended Held
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David Buckingham	6	6	1	1	1	1
Stephen Cornish	11	11	-	-	-	-
Timothy Cornish	11	11	-	-	-	-
Dalton Gooding	11	11	1	1	1	1
Craig Amos	11	11	1	1	1	1
Russell Kane	1	2	-	-	-	-

Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.

The Company recognises that a talented and diverse workforce is a key competitive advantage. The Company is committed to developing a workplace that promotes diversity through acting in fairness and without prejudice. The Company’s policy is to recruit and manage on the basis of competence and performance regardless of age, nationality, race, gender, religious beliefs, sexuality, physical ability or cultural background.

For the financial year ended 30 June 2021, the Company had 73 staff (which includes directors and executive management) and that number includes 12 females. The Company had nine Key Management Personnel of which two are female.

For the financial year ended 30 June 2021, the Company had not yet formalised a policy which outlines measurable objectives for achieving gender diversity. Due to the current size and composition of the organisation, the Board does not consider it appropriate to provide measurable objectives in relation to gender diversity. The Company is committed to ensuring that the appropriate mix of skills, expertise, and diversity are considered when employing staff at all levels of the organisation and when making new senior executive and Board appointments and is satisfied that the composition of employees, senior executives and members of the Board is appropriate.

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PENTANET LTD ANNUAL REPORT 2021

1. REMUNERATION GOVERNANCE

1.1 Remuneration and Nomination Committee

The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. This information has been audited as required by section 308(3C) of the Act.

This Remuneration Report sets out remuneration information for Pentanet’s Key Management Personnel (KMP) (as defined in AASB 124 Related Party Disclosures), including Non-Executive Directors, Executive Directors and other senior executives who have authority for planning, directing and controlling the activities of the Company.

For the year ended 30 June 2021, the following people were assessed to be KMP:

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Name Role Appointed
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David Buckingham	Non-Executive Chairman of the board and Remuneration and Nomination Committee	10-Sep-20
Dalton Gooding	Non-Executive Director	26-Nov-18
Craig Amos	Non-Executive Director of the board and chairman of the audit and risk committee	26-Nov-18
Stephen Cornish	Managing Director	20-Feb-17
Timothy Cornish	Executive Director	20-Feb-17
Patrick Holywell	Company Secretary	20-Nov-19
Mart-Marie Derman	Chief Financial Officer	11-Sep-20

The Remuneration report is designed to provide shareholders with comprehensive information on the structure of Pentanet’s remuneration framework and the basis on which it aligns with shareholders and other key stakeholders' interests while ensuring rewards are aligned with strategic objectives and value creation for Pentanet.

The remuneration report is set out under the following main headings:

Remuneration governance
1.1. Remuneration committee
1.2. Use of remuneration consultants
Executive remuneration approach and structure
2.1. Remuneration philosophy
2.2. Executive remuneration structure
2.3. Remuneration practices
2.4. Short term incentive plan
2.5. Long term incentive plan
Link between Company performance and executive remuneration
Employment contracts of directors and senior executives
Non-Executive Director fee arrangements

The key purpose of the Remuneration and Nomination Committee is to ensure that the level and composition of remuneration is appropriately balanced between the need to attract and retain high-quality directors and attract, retain and motivate senior executives and the need to ensure that the incentives for executive directors and senior executives encourage them to pursue growth and success of the entity without rewarding conduct that is contrary to the Company’s values or risk appetite. The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of directors and the executives on a periodic basis. The assessment is made with reference to the Group’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

1.2 Use of remuneration consultants

During the financial year ended 30 June 2021, the consolidated entity, through the Remuneration and Nomination Committee, engaged The Reward Practice, remuneration consultants to review its existing remuneration policies and provide recommendations on how to improve both the short-term incentives (‘STI”) and long-term incentives (‘LTI’) programs. This has resulted in share-based payments remuneration in the form of share options (LTI) being implemented at the Company’s IPO to drive long-term growth in shareholders’ value. The Rewards Practice was paid $19,140 for these services.

An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence from key management personnel. These protocols include requiring that the consultant does not communicate with affected key management personnel without a member of the Remuneration and Nomination Committee being present and that the consultant not provide any information relating to the outcome of the engagement with the affected key management personnel. The Board is also required to make inquiries of the consultant's processes at the conclusion of the engagement to ensure that they are satisfied that any recommendations made have been free from undue influence. The Board is satisfied that these protocols were followed, and as such, there was no undue influence.

For the purposes of the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2001 (the Act), any guidance provided by remuneration consultants throughout the financial year was not considered a remuneration recommendation in relation to KMP as defined by Division 1 of Part 1.2 of Chapter 1 of the Act.

2. EXECUTIVE REMUNERATION APPROACH AND STRUCTURE

2.1 Remuneration philosophy

The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of the reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices:

competitiveness and reasonableness
acceptability to shareholders
performance linkage/alignment of executive compensation
• transparency.

In consultation with external remuneration consultants (refer to the section 'Use of remuneration consultants' above), the Remuneration and Nomination Committee is in the process of structuring an executive remuneration framework that is market competitive and complementary to the reward strategy of the consolidated entity. Historically, remuneration has not been linked to performance.

The reward framework is designed to align executive rewards to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by:

having economic profit as a core component of plan design
• focusing on sustained growth in shareholder wealth, consisting of growth in share price, and delivering a constant or increasing return on assets, as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives.

Additionally, the reward framework should seek to enhance executives' interests by:

rewarding capability and experience
reflecting competitive reward for contribution to growth in
shareholder wealth
providing a clear structure for earning rewards.

In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate.

2.2 Executive remuneration structure

The remuneration structure for executive officers, including executive directors, is based on a number of factors, including experience, qualifications, job level and overall performance of the Company. The service agreements between the Company and specified directors and executives are on a continuing basis which is not expected to change in the immediate future.

The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components.

The combination of these comprises the executive's total remuneration.

Fixed remuneration, consisting of base salary, superannuation, and non-monetary benefits, are reviewed annually by the Remuneration and Nomination Committee based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remunerations.

Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example, motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive.

Details of remuneration

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PENTANET LTD ANNUAL REPORT 2021

The following table illustrates the executive remuneration elements, including how each element aligns to the Company’s remuneration strategy and links remuneration outcomes to performance.

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Remuneration Link to
Vehicle Purpose
component performance
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Remuneration component	Vehicle	Purpose	Link to performance
Fixed	Comprise base salary,	To provide competitive fixed	Company and individual performance
remuneration	superannuation contributions and	remuneration for senior executives as	are considered during the annual
	other benefits.	determined by the scope of their	remuneration review.
		position and the knowledge, skill and experience required to perform the role.
STI	The STI component of the KMP	Reward executives for short term	Examples of key performance indicators
	remuneration is paid in cash.	achievement of:	include:
		• Financial and operational key	• Achievementoffinancialtargets
		performance indicators.	such as revenue, gross profit, and
			operational targets such as
		• Progress with the delivery of the	subscriber growth.
		Company’s business plan and
		strategic objectives.	• Achievement of network expansion
			targets to ensure capacity ahead of
		• Specific goals in relation to the	the demand curve.
		development of people within the
		Company and its profile within the	• Overheads and cost control targets.
		business community.
LTI	Executives are entitled to	To better align executives to the	Retains key staff to help grow long term
	participate in the employee	interests of shareholders and provide a	value for shareholders. Pre-IPO awards
	securities incentive plan. Options	reward based on long term growth in	were based on continued employment.
	issued under the plan do not	share price and earnings.	In the 2022 financial year, the Board
	attract dividends or voting rights.		intend to introduce a new LTI scheme
			appropriate for the next stage of the
			Company’s development.

2.3 Remuneration practices

The Company aims to reward executives with a level and mix of remuneration appropriate to their position, responsibilities and performance within the business and aligned with market practice.

Through a balance scorecard of financial, operational and organisation development KPI’s set prior to the commencement of each financial year. Financial measures are assessed based on the Group’s audited financial results

The Board exercise its discretion in relation to approving incentives, bonuses, rights and shares.

When is it paid?

Where applicable, executive directors and executives receive a superannuation guarantee contribution required by the Government, which during the year was 9.5% (subject to the statutory cap), and do not receive any other retirement benefits.

In October or November of the financial year after the target year.

What happens if an executive leaves or there is a change of control?

Upon retirement, specified directors and executives are paid employee entitlements and incentives accrued to the date of their retirement. All remuneration paid to directors and executives is valued at cost to the Company and expensed. Where performance rights and shares are given to directors and executives, they are valued according to the accounting standards.

The payment of any accrued or part STI benefit in these circumstances is at the discretion of the Board.

The STI award opportunity is based on a percentage of an individual’s base salary. For the MD, a maximum award opportunity of 30% of total fixed remuneration is available. The STI is based on the previous financial year’s base salary earnings to 30 June before performance-based remuneration reviews.

2.4 Short term incentive plan (‘STI’)

2.5 Long term incentive plan (‘LTI’)

The STI program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include revenue and gross profit growth, subscriber growth and new product launches, customer satisfaction, leadership contribution and network capacity and capability.

The LTI program offered to key executives forms a key part of their remuneration and assists to align their interests with the long-term interests of shareholders. The purpose of the LTI Scheme is to reward key executives for attaining results over a long measurable period and for staying with the organisation. The LTI Scheme is currently a share-based incentive plan consisting of share options.

General terms of the STI plan

The LTI include long service leave and share-based payments.

How is it paid?

In the 2022 financial year, the Board intend to introduce a new post-IPO LTI scheme appropriate for the stage of the Company’s development.

Generally, in cash.

How much can executives earn?

Executives can earn up to a maximum of 30% of their total fixed remuneration as an STI incentive. The Board has discretion for potential overperformance.

3.LINK BETWEEN COMPANY

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PERFORMANCE AND EXECUTIVE REMUNERATION

Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of a cash bonus and incentive payments are dependent on defined earnings per financial and operational targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the Remuneration and Nomination Committee.

The remuneration policy has been tailored to increase goal congruence between shareholders, directors, and executives.There have been two methods applied in achieving this aim, the first being a performance-based short term incentive based on key performance indicators, and the second being the issue of options to executive directors and executives to encourage the alignment of personal and shareholder interests.

Additional information

The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below:

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2021 2020 2019 2018 2017
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Revenue	$’000 10,918	$’000 4,997	$’000 1,772	$’000 261	$’000 -
EBITDA3	(8,291)	(3,926)	(1,664)	(414)	(13)
EBIT	(9,798)	(4,956)	(2,130)	(462)	(14)
Loss after income tax	(13,697)	(5,111)	(2,185)	(463)	(14)
	2021 $	2020 $	2019 $	2018 $	2017 $
Share price at financial year end	0.675	0.135	0.105	0.105	1.004
Basic loss per share (cents per share)	(0.07)	(0.04)	(0.02)	(0.01)	(0.39)

4 EBITDA is a financial measure that is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for depreciation, amortisation, interest and tax 4 The share price for the year ending 30 June 2017 relates to first-time equity financing.

5 The share price in subsequent financial years ending 30 June 2018 to 30 June 2020 relate to seed round fundings raised prior to the IPO.

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How is performance measured?

PENTANET LTD ANNUAL REPORT 2021

4. EMPLOYMENT CONTRACTS OF DIRECTORS

Name:

Stephen Cornish Managing Director

Title:

Agreement commenced: 1-Nov-17

Details:

The Company has entered into an executive services agreement with Mr Stephen Cornish effective from 1 November 2017, pursuant to which Mr Cornish will serve as Managing Director of the Company on a full-time basis (MD Agreement).

Base salary for the year ending 30 June 2021 of $275,000 plus superannuation, to be reviewed annually by the Remuneration and Nomination Committee.

The MD agreement is for an indefinite term, continuing until terminated by either Mr. Stephen Cornish giving not less than 2 months’ notice or the Company giving not less than 6 months’ written notice of termination (or shorter periods in limited circumstances).

On termination of the MD Agreement, however occurring, Mr Stephen Cornish is required to resign without claim for compensation from any office held by Mr Stephen Cornish in the Company or any member of the Group. Mr Stephen Cornish is entitled to participate in bonus and/or other incentive schemes as determined by the Remuneration and Nomination Committee approval and KPI achievement.

The service agreement contains standard non-solicitation and non-compete clauses.

Name:

Timothy Cornish

Title:

Executive Director

Agreement commenced: 1-Jul-18 Details: The Company has entered into an executive services agreement with Mr Timothy Cornish, effective from 1 July 2018, pursuant to which Mr Timothy Cornish will serve as an Executive Director of the Company on a full-time basis (ED Agreement).

Base salary for the year ending 30 June 2021 of $175,000 plus superannuation, to be reviewed annually by the Remuneration and Nomination Committee.

The ED Agreement is for an indefinite term, continuing until terminated by either Mr Timothy Cornish giving not less than 2 months’ notice or the Company giving not less than 6 months’ written notice of termination (or shorter periods in limited circumstances).

On termination of the ED Agreement, however occurring, Mr Timothy Cornish is required to resign without claim for compensation from any office held by Mr Timothy Cornish in the Company or any member of the Group.

Mr Timothy Cornish is entitled to participate in bonus and/or other incentive schemes as determined by the Remuneration and Nomination Committee approval and KPI achievement.

The service agreement contains standard non-solicitation and non-compete clauses.

Name:

David Buckingham

Title:

Non-Executive Chairman Agreement commenced: 10-Sep-20 Term of agreement: Ongoing until terminated

Details: Base salary for the year ending 30 June 2021 of $75,000 plus superannuation. The terms of the appointment are subject to the provision of the constitution relating to retirement by rotation and re-election of directors and will automatically cease at the end of any meeting at which the non-executive director is not re-elected by shareholders.

Name:

Craig Amos

Title:

Non-Executive Director

Agreement commenced: 26-Nov-18 Term of agreement: Ongoing until terminated Details: Base salary for the year ending 30 June 2021 of $50,000 plus superannuation. The terms of the appointment are subject to the provision of the constitution relating to retirement by rotation and re-election of directors and will automatically cease at the end of any meeting at which the non-executive director is not re-elected by shareholders.

Name: Dalton Gooding

Title: Non-Executive Director

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PENTANET LTD ANNUAL REPORT 2021

5. NON-EXECUTIVE DIRECTOR

FEE ARRANGEMENTS

The Board’s policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment, and responsibilities. The Board approves payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties, and accountability.

Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders during a general meeting and currently stands at a maximum pool of $300,000.

Fees for Non-Executive Directors are not linked to the performance of the consolidated entity; however, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company.

6. DETAILS OF REMUNERATION

Amounts of remuneration:

Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables:

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Post %
Share-based
Short-term benefits -employment Performance
payments [1]
benefits related
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Cash salary and fees Cash bonus Non-monetary 2021 $ $ $ Non-Executive Director2		Super-annuation Equity-settled Total $ $ $
David Buckingham 62,500 - -		5,938 439,550 - 507,988
Dalton Gooding 38,541 - -		3,266 368,417 - 410,224
Craig Amos 30,625 - -		2,909 266,310 - 299,844
Russell Kane 2,083 - -		- - - 2,083

Executive Directors:
Stephen Cornish 228,689 125,000 -		19,233 1,463,419 7% 1,836,341
Timothy Cornish 145,641 80,000 -		14,783 979,915 7% 1,220,339

Other Key Management Personnel:
Patrick Holywell 82,335 - -		- 87,910 - 170,245
Mart-Marie Derman 115,770 - 89,355 706,184 205,000 89,355 For 30 June 2021, no remuneration besides the bonuses granted to	1	14,120 219,775 - 439,020 60,249 3,825,296 - 4,886,084 In the 2022 financial year, the Board intend to introduce a
executive directors was performance-based.		new post-IPO LTI scheme appropriate for the stage of the
		Company’s development.
On 2 June 2021, the Board approved cash bonuses be awarded to
executive directors for their strong performance and contribution to	2	The aggregate Non-Executive Directors remuneration includes
the Company’s results through the financial year ending 30 June 2020		$1,074,277 share-based payments approved by shareholders
and 30 June 2021 and the successful fundraising during 2020 and the		prior to the IPO.

On 2 June 2021, the Board approved cash bonuses be awarded to executive directors for their strong performance and contribution to the Company’s results through the financial year ending 30 June 2020 and 30 June 2021 and the successful fundraising during 2020 and the subsequent IPO.

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%
Post-employment Share-based
Short-term benefits Performance
benefits payments
related
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Cash
Cash Non
salary Super-annuation Equity-settled Total
bonus -monetary
and fees
2020 $ $ $ $ $ $
Non-Executive Directors:
Dalton Gooding 26,109 - - 3,109 83,884 - 113,102
Craig Amos 10,938 - - 1,039 12,905 - 24,882
Russell Kane 10,938 - - - - - 10,938
Executive Directors:
Stephen Cornish 146,329 - - 13,901 64,526 - 224,756
Timothy Cornish 101,407 - - 9,634 87,111 - 198,152
Other Key Management
Personnel:
Patrick Holywell 12,810 12,810
Mart-Marie Derman 90,718 - - 8,618 - - 99,336
399,249 - - 36,301 248,426 - 683,976
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Additional disclosures relating to key management personnel

Shareholding*

The number of shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below:

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Balance at Received
Disposals/ Balance at the
the start of the as part of Additions
Other end of the year
year remuneration
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Ordinary shares
David Buckingham - - 200,000 - 200,000
Dalton Gooding 2,000,000 - 1,575,641 - 3,575,641
Craig Amos 100,000 - 951,283 - 1,051,283
Stephen Cornish 44,355,385 - 6,102,750 - 50,458,135
Timothy Cornish 7,555,385 - 5,915,750 - 13,471,135
Patrick Holywell 326,923 - 310,258 - 637,181
Mart-Marie Derman 100,000 1,050,000 20,000 - 1,170,000
54,437,693 1,050,000 15,075,682 - 70,563,375
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*Includes shares held directly, indirectly and beneficially by KMP

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PENTANET LTD ANNUAL REPORT 2021

Option holding*

The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below:

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Balance at Expired/ Balance at
the start of Granted Exercised forfeited/ the end of
the year other the year
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Options over ordinary shares
David Buckingham - 3,000,000 - - 3,000,000
Dalton Gooding 1,814,103 2,400,000 (1,364,103) (450,000) 2,400,000
Craig Amos 628,205 1,800,000 (328,205) (300,000) 1,800,000
Stephen Cornish 5,346,026 9,900,000 (2,246,026) (3,100,000) 9,900,000
Timothy Cornish 3,641,026 6,600,000 (1,991,026) (1,650,000) 6,600,000
Patrick Holywell 25,642 600,000 (25,642) - 600,000
Mart-Marie Derman 1,150,000 1,500,000 (1,050,000) (100,000) 1,500,000
12,605,002 25,800,000 (7,005,002) (5,600,000) 25,800,000 [1]
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Total fair
Fair value at Fair value at Fair value at
Key management value of
Capacity grant date: grant date: grant date:
personnel option
Tranche 1 Tranche 2 Tranche 3
granted
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$ $ $ $
David Buckingham Non-executive chairman 157,490 148,130 134,000 439,620
Stephen Cornish Managing director 519,717 488,829 442,200 1,450,746
Timothy Cornish Executive director 346,478 325,886 294,800 967,164
Dalton Gooding Non-executive director 125,992 118,504 107,200 351,696
Craig Amos Non-executive director 94,494 88,878 80,400 263,772
Patrick Holywell Company secretary 31,498 29,626 26,800 87,924
Mart-Marie Derman Chief financial officer 78,745 74,065 67,000 219,810
1,354,414 1,273,918 1,152,400 3,780,732
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*Includes options held directly, indirectly and beneficially by KMP 1 All options held at year end are vested and exercisable.

On the 27th of November 2020, Pentanet Ltd issued the following options to directors and key management:

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Key management Total option
Capacity Tranche 1 Tranche 2 Tranche 3
personnel granted
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David Buckingham	Non-executive chairman	1,000,000	1,000,000	1,000,000	3,000,000
Stephen Cornish	Managing director	3,300,000	3,300,000	3,300,000	9,900,000
Timothy Cornish	Executive director	2,200,000	2,200,000	2,200,000	6,600,000
Dalton Gooding	Non-executive director	800,000	800,000	800,000	2,400,000
Craig Amos	Non-executive director	600,000	600,000	600,000	1,800,000
Patrick Holywell	Company secretary	200,000	200,000	200,000	600,000
Mart-Marie Derman	Chief financial officer	500,000	500,000	500,000	1,500,000
		8,600,000	8,600,000	8,600,000	25,800,000

For the options granted during the reporting period ending 30 June 2021, the valuation model inputs used to determine the fair value at the grant date are as follows:

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Share price at Expected Dividend Risk-free Fair value at
Grant date Expiry date Exercise price $
grant date $ volatility yield interest rate grant date $
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Tranche	1	27/11/2020	30/06/2024	0.250	0.300	100%	0	0.81%	0.1575
Tranche	2	27/11/2020	30/06/2024	0.250	0.370	100%	0	0.81%	0.1480
Tranche	3	27/11/2020	30/06/2024	0.250	0.500	100%	0	0.81%	0.1340

Each Option (unless otherwise specified) will have an exercise price as set out below (Exercise Price) and will expire at 5.00pm (AWST) on 30 June 2024 (Expiry Date). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

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PENTANET LTD ANNUAL REPORT 2021

Other transactions with key management personnel and their related parties:

Pentanet Ltd spent $69,106 with DFK Gooding Partners for accounting and tax advisory services during the year, on commercial terms and market rates, which is a director related entity (Dalton Gooding), with a $55,129 balance relating to this fee outstanding as at 30 June 2021.

Pentanet Ltd spent $74,778 with The Cornish Property Trust for rent of commercial property during the year, on commercial terms and market rates, which is a related party of a director related entity (Stephen Cornish and Timothy Cornish), with no balance relating to this fee outstanding as at 30 June 2021.

This concludes the remuneration report, which has been audited.

Indemnity and insurance of officers

The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith.

During the financial year, the Company paid a premium in respect of a contract to ensure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

Indemnity and insurance of auditor

The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

Proceedings on behalf of the Company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined below:

Non-audit services

Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined below:

PENTANET LTD

[Auditor's independence declaration ]

Tel: +61 8 6382 4600 38 Station Street Fax: +61 8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF PENTANET LIMITED

As lead auditor of Pentanet Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been:

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Consolidated
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	2021 $	2020 $
Audit services - BDO Audit (WA) Pty Ltd Audit or review of the financial statements	74,777	28,500
Other services - BDO Corporate Finance (WA) Pty Ltd Independent limited assurance report	13,596	-
	88,373	28,500

No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Pentanet Limited and the entities it controlled during the period.

Glyn O'Brien

The directors are satisfied that the provision of non-audit services during the financial year by the auditor (or by another person or firm on the auditor's behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report.

The directors are of the opinion that the services as disclosed in note 27 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:

Auditor

BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.

all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and

This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.

none of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

On behalf of the directors

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Rounding of amounts

The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

_________ David Buckingham Non-executive chairman

25 August 2021 Perth

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Director

BDO Audit (WA) Pty Ltd Perth, 25 August 2021

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PENTANET LTD ANNUAL REPORT 2021

Consolidated statement of profit or loss and other comprehensive income 35 Consolidated statement of financial position 36 Consolidated statement of changes in equity 37 Consolidated statement of cash flows 38 Notes to the consolidated financial statements 39 Directors' declaration 69 Independent auditor's report to the members of Pentanet Ltd 70

GENERAL INFORMATION

The financial statements cover Pentanet Ltd as a consolidated entity consisting of Pentanet Ltd and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Pentanet Ltd's functional and presentation currency.

A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 August 2021. The directors have the power to amend and reissue the financial statements.

Pentanet Ltd is a listed public Company limited by shares, incorporated, and domiciled in Australia. Its registered office and principal place of business are:

Registered office

Unit 2 / 8 Corbusier Place, Balcatta 6021, WA

Principal place of business Unit 2 / 8 Corbusier Place, Balcatta 6021, WA

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

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Consolidated
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Note 2021 2020
$'000 $'000
Revenue 4 10,917 4,997
Other income 5 166 100
Total revenue 11,083 5,097
Expenses 6
Network, carrier, and hardware expenses (6,175) (3,126)
Employee benefits expense (5,569) (2,660)
Share-based payments (4,500) (1,108)
Other expenses (3,129) (2,128)
Earnings before finance cost, tax, depreciation, and amortisa-
(8,290) (3,925)
tion expenses
Finance costs (3,899) (155)
Depreciation and amortisation expense (1,508) (1,031)
Loss before income tax expense (13,697) (5,111)
Income tax expense 7 - -
Loss after income tax expense for the year
29 (13,697) (5,111)
attributable to the owners of Pentanet Ltd
Other comprehensive income for the year, net of tax - -
Total comprehensive income for the year attributable to the
(13,697) (5,111)
owners of Pentanet Ltd
Cents Cents
Basic and diluted (loss) per share attributable to owners of
(0.07) (0.04)
Pentanet Ltd
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The above-consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

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PENTANET LTD ANNUAL REPORT 2021

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

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Consolidated
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Note 2021 2020
$'000 $'000
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ASSETS
Current assets
Cash and cash equivalents	8	32,705	1,273
Trade and other receivables	9	116	133
Inventories	10	163	78
Deposits and prepayments	11	397	255
Total current assets		33,381	1,739
Non-current assets
Property, plant, and equipment	12	9,229	3,829
Right-of-use assets	13	1,546	1,669
Intangibles	14	9,041	362
Total non-current assets		19,816	5,860
Total assets		53,197	7,599
LIABILITIES
Current liabilities
Trade and other payables	15	2,636	1,271
Contract liabilities	16	80	149
Employeebenefts	17	227	102
Other liabilities	18	380	82
Lease liabilities	19	479	413
Borrowings	20	-	2,775
Total current liabilities		3,802	4,792
Non-current liabilities
Contract liabilities	16	23	27
Employeebenefts	17	53	2
Other liabilities	18	6,959	118
Lease liabilities	19	1,008	1,146
Total non-current liabilities		8,043	1,293
Total liabilities		11,845	6,085
NET ASSETS EQUITY		41,352	1,514
Reserves	21	5,568	1,108
Issued capital	22	57,214	8,139
Accumulated losses	23	(21,430)	(7,733)
Total equity		41,352	1,514

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

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

ENDED 30 JUNE 2021
Consolidated	Issued capital $’000	Reserves $’000	Accumulated losses $’000	Total $’000
Balance at 1 July 2019	5,182	-	(2,622)	2,560
Loss after income tax expense for the year	-	-	(5,111)	(5,111)
Other comprehensive income for the year, net of tax	-	-	-	-
Total comprehensive loss for the year	-	-	(5,111)	(5,111)
Transactions with owners in their capacity as
owners:
Issue of shares	3,120	-	-	3,120
Share issue costs	(163)	-	-	(163)
Share-based payment expense	-	1,108	-	1,108
Balance at 30 June 2020	8,139	1,108	(7,733)	1,514
Consolidated	Issued capital $’000	Reserves $’000	Accumulated losses $’000	Total $’000

Balance at 1 July 2020	8,139	1,108	(7,733)	1,514
Loss after income tax expense for the year	-	-	(13,697)	(13,697)
Other comprehensive income for the year, net of tax	-	-	-	-
Total comprehensive income for the year	-	-	(13,697)	(13,697)
Transactions with owners in their capacity as
owners:
Issue of shares	51,3815	-	-	51,381
Share issue costs	(2,306)	-	-	(2,306)
Share-based payment expense	-	4,460	-	4,460
Balance at 30 June 2021	57,214	5,568	(21,430)	41,352

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

5Issue of shares include the following shares that were issued for no consideration:

On 11 December 2020, 23,387,509 Shares were issued upon the conversion of Convertible Notes and accrued interest.

On 11 December 2020, 5,215,000 shares were issued on the conversion of unlisted employee share options with an exercise price of $0.028 each, expiring on 31 December 2020 as part of employee’s remuneration. On 11 December 2020, 3,060,000 shares were issued on the conversion of unlisted employee share options with an exercise price of $0.13 each, expiring on 30 June 2021 as part of employee’s remuneration.

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PENTANET LTD ANNUAL REPORT 2021

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

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Consolidated
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	Note	2021 $'000	2020 $'000
Cash fows from operating activities Receipts from customers (inclusive of GST)		10,863	5,062
Payments to suppliers and employees (inclusive of GST)		(14,172)	(7,153)
		(3,309)	(2,091)
Other income		166	-
Interestandotherfnancecostspaid		(76)	(155)
Net cash used in operating activities	8	(3,219)	(2,246)
Cash fows from investing activities
Payments for property, plant, and equipment		(5,064)	(2,053)
Payments for intangibles Net cash used in investing activities Cash fows from fnancing activities		(1,828) (6,892)	(182) (2,235)
Proceeds from issue of shares	22	43,698	3,120
Share issue transaction costs		(2,305)	(163)
Proceeds from the exercise of options		501	-
Repayment of borrowings		-	2,661
Payment of lease liabilities		(351)	(445)
Netcashfromfnancingactivities		41,543	5,173
Net increase in cash and cash equivalents		31,432	692
Cashandcashequivalentsatthebeginningofthefnancialyear		1,273	581
Cashandcashequivalentsattheendofthefnancialyear	8	32,705	1,273

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NOTE ONE SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Pentanet Ltd ('Company' or 'parent entity') as at 30 June 2021, and the results of all subsidiaries for the year then ended. Pentanet Ltd and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.

New or amended Accounting Standards and Interpretations adopted

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity.

Inter-company transactions, balances, and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

The following Accounting Standards and Interpretations are most relevant to the consolidated entity:

Basis of preparation

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').

Where the consolidated entity loses control over a subsidiary, it derecognises the assets, including goodwill, liabilities, and non-controlling interest in the subsidiary, together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

The financial statements have been prepared in accordance with the mandatory Australian Accounting Standards applicable to entities reporting under the Corporations Act 2001 and the significant accounting policies disclosed below, which the directors have determined are appropriate to meet the needs of members.

Operating segments

The financial statements, except for the cash flow information, have been prepared on an accruals basis and are based on historical costs unless otherwise stated in the notes.

Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.

The group operates in two segments: internet and telecommunication services and gaming technology within Australia.

Historical cost convention

The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss.

Foreign currency translation

The financial statements are presented in Australian dollars, which is Pentanet Ltd's functional and presentation currency.

Critical accounting estimates

Foreign currency transactions

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.

Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Parent entity information

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The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.

In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 29

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

PENTANET LTD ANNUAL REPORT 2021

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition

Interest

The consolidated entity recognises revenue as follows:

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price, which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered, and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

Other revenue

Other revenue is recognised when it is received or when the right to receive payment is established.

Government grants

Government grants are recognised when there is reasonable certainty that the grant will be received, and all grant conditions are met.

The consolidated entity principally generates revenue from providing wireless and fibre broadband services. The provision of wireless communication services includes initial installation of associated network infrastructure. The typical length of a contract for wireless broadband services is 12-24 months. The provision of fibre communication services does not require the installation of network infrastructure.

Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating.

Grants relating to depreciable assets are credited to deferred income and are recognised in profit or loss over the period and in the proportions in which depreciation expense on those assets is recognised.

Sale of goods

Income tax

Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery.

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

For bundled packages, the group accounts for individual products and services separately if they are distinct - i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it. The consideration is allocated between separate products and services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the list prices at which the group sells the devices and services. For items that are not sold separately, the group estimates stand-alone selling prices using the adjusted market assessment approach.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

Rendering of services

Revenue from a contract to provide services is recognised over time as the services are rendered based on a fixed price.

When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future.

Revenue from the provision of wireless broadband services is recognised monthly over the expected life of the contract, including any expected extensions of the service. Installation of the internet service is not distinct from the provision of internet service as the customer cannot benefit from either the broadband service or installation alone. The installation and broadband service are therefore identified as a single performance obligation, and the associated revenue is recognised over time.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Revenue from the provision of fibre broadband services is recognised each month the service is made available to the consumer.

Revenue from the provision of telecommunication services relating to nbn[TM] service is recognised each month the service is made available to the customer.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities, and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

All revenue is stated net of the amount of goods and services tax (GST).

Research and Development/Grants

Research and Development incentives and other grant incentives are recognised when grant criteria are met.

Disposal of assets

Revenue from the disposal of other assets is recognised when the group has transferred the risks and rewards of ownership to the buyer.

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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Current and non-current classification

The residual values, useful lives and depreciation methods are reviewed and adjusted if appropriate at each reporting date.

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.

Right-of-use assets

A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

At the inception of a contract, the Group assesses whether the contract is or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

Deferred tax assets and liabilities are always classified as non-current.

the contract involves the use of an identified asset - this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

the group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use;
and

Trade and other receivables

the group has the right to direct the use of the asset. The group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used.

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.

At inception or on a reassessment of a contract that contains a lease component, the group allocates the consideration in the contract to each lease and non-lease component on the basis of relative stand-alone prices.

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

Measurement

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset, less any lease incentives received.

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

Inventories

Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to an impairment or adjusted for any remeasurement of lease liabilities.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Property, plant, and equipment

In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows:

Class of right of use asset: Network infrastructure Useful life: 2-10 years Depreciation method: straight-line basis

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Network infrastructure 2-10 years
Leasehold improvements 5 years
Plant and equipment 5-10 years
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The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

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PENTANET LTD ANNUAL REPORT 2021

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Trademarks

Significant costs associated with trademarks are deferred and amortised on a straight-line basis over the period of their expected benefit.

Software

Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 1 - 10 years

Intellectual Property

Intellectual Property acquired through a separate acquisition is recorded at cost. Intangible assets with indefinite lives are measured at cost less any accumulated impairment, where applicable, as indicated during annual impairment testing.

Licenses

Significant costs associated with licenses are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 1 - 15 years.

Other Intangible Assets

Other intangible assets that have finite lives are stated at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets with indefinite lives are measured at cost less any accumulated impairment, where applicable, as indicated during annual impairment testing.

Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30-60 days of recognition.

Borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs.

On the issue of the convertible notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond, and this amount is carried as a current liability at fair value until extinguished on conversion or redemption. Changes in the fair value of the liability are recognised as a finance cost.

Lease liabilities

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

Lease payments included in the measurement of the lease liability comprise:

fixed payments, including in-substance fixed payments
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the group is reasonably certain to exercise, lease payments in an optional renewal period if the group is reasonably certain to exercise an extension option, and penalties for early termination of the lease unless the group is reasonably certain not to terminate early.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

Finance costs

Finance costs are expensed in the period in which they are incurred.

Provisions

Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.

Employee benefits

Short-term employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave, long service leave and accumulating sick leave expected to be settled wholly within 12 months of the reporting date, are measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is expensed to profit or loss when incurred.

Other long-term employee benefits

The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, the experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high-quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Defined contribution superannuation expense

Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.

Share-based payments

Equity-settled and cash-settled share-based compensation benefits are provided to employees.

Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price.

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date, less amounts already recognised in previous periods.

The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:

during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date.

All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability.

If equity-settled awards are modified, as a minimum, an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date, and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.

For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.

Issued capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends

Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.

Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

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PENTANET LTD ANNUAL REPORT 2021

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Pentanet Ltd, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case, it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities that are recoverable from or payable to the tax authority are presented as operating cash flows.

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

Rounding of amounts

New Accounting Standards and Interpretations not yet mandatory or early adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2021. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.

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NOTE TWO CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, which management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.

Share-based payment transactions

The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled sharebased payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.

Estimation of useful lives of assets

The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

Other indefinite life intangible assets

The consolidated entity tests annually, or more frequently, if events or changes in circumstances indicate impairment, whether other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1.

Impairment of non-financial assets other than goodwill and other indefinite life intangible assets

The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.

Income tax

The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

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NOTE 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)

NOTE THREE

OPERATING SEGMENTS

Identification of reportable operating segments

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The consolidated entity is organised into two operating segments: provision of internet and telecommunication services and gaming technology within Australia. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments.

Employee benefits provision

As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account.

The CODM reviews EBITDA (earnings before interest, tax, depreciation, and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.

Major customers

Lease term

There were no major customers in 2021 or 2020 that contributed more than 5% of revenue.

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

Operating segments

The directors have chosen to organise the group around the three main business units in which the group operates. Specifically, the group’s reportable segments under AASB 8 are as follows:

Internet and related services Gaming subscription services

I ncremental 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 group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-us asset, with similar terms, security and economic environment.

The reportable segments represent the group’s cash-generating units for impairment testing purposes, with other income and costs being allocated to the two cash-generating units.

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NOTE 3 OPERATING SEGMENT INFORMATION Internet services Gaming subscription services Total
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Consolidated - 2021 $’000 $’000 $’000
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Revenue
Revenue	10,917	-	10,917
Total revenue	10,917	-	10,917
EBITDA5	(8,035)	(255)	(8,290)
Depreciation and amortisation	(1,508)	-	(1,508)
Finance costs	(3,899)	-	(3,899)
Loss before income tax expense	(13,442)	(255)	(13,697)
Income tax expense	-	-	-
Loss after income tax expense	(13,442)	(255)	(13,697)
Assets
Segment assets	50,119	3,078	53,197
Total assets	50,119	3,078	53,197

5EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for depreciation, amortisation, interest and tax. Underlying EBITDA is EBITDA adjusted to exclude, share based expenses, cost of options exercised on behalf of staff and IPO related costs. The Directors consider that these measures are useful in gaining an understanding of the performance of the entity, consistent with internal reporting.

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PENTANET LTD ANNUAL REPORT 2021

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NOTE FOUR REVENUE

NOTE SIX EXPENSES

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Consolidated
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Consolidated
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||||
|---|---|---|
|2021|2020|
|$'000|$'000|
|Rendering of services - telecommunication services|616|417|
|Rendering of services - recurring network revenue|9,511|4,110|
|Sale of goods|790|470|
|Revenue|10,917|4,997|

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2021 2020
$'000 $'000
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||||
|---|---|---|
|Loss�before�income�tax�includes�the�following�specific�expenses:|
|Network, carrier and hardware expenses|6,175|3,126|
|Depreciation|
|Leasehold Improvements|28|5|
|Plant and Equipment|176|105|
|Network Infrastructure|684|432|
|Right of use assets|495|412|
|1,383|954|
|Total depreciation|
|Amortisation|
|Amortisation|125|77|
|1,508|1,031|
|Total depreciation and amortisation|
|Finance costs|
|Finance cost on loans|23|38|
|Finance cost on leases|53|56|
|Finance cost on convertible notes|3,823|61|
|Finance costs expensed|3,899|155|
|Superannuation expense|
|Defined�contribution�superannuation�expense|323|218|
|Share-based payments expense|
|Share-based payments expense|4,500|1,108|
|Employee benefits expense excluding superannuation|
|Employee�benefits�expense�excluding�superannuation|5,2466|2,422|
|1,112|1,213|
|Advertising and promotion|
|Legal and professional services|228|128|
|IPO related cost|293|-|
|Other operating expenses|1,496|787|
|3,129|2,128|
|Other expenses|

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Revenue from contracts with customers is recognised over time, excluding the sale of goods.

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NOTE FIVE OTHER INCOME

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Consolidated
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||||
|---|---|---|
|2021|2020|
|$'000|$'000|
|Australian�tax�office�-�COVID-19�grants|166|100|

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6Included in employee benefit expense is $977,313 and $66,494 relating to 8,275,000 options exercised on behalf of staff as remuneration.

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PENTANET LTD ANNUAL REPORT 2021

NOTE EIGHT CASH AND CASH EQUIVALENTS

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NOTE SEVEN INCOME TAX EXPENSE

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Consolidated
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2021 2020
$'000 $'000
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Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense	(13,697)	(5,111)

Tax at the statutory tax rate of 26% (2020: 27.5%)	(3,561)	(1,406)

Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Add: other non-allowable items	1,203	329
Less: Current net deferred tax asset not recognised	(2,358)	(1,077)

	(4,716)	(2,153)
Current year tax losses not recognised	6,489	2,847

Unrecognised deferred tax relating to tax losses	(2,358)	(1,076)
Unrecognised deferred tax relating to temporary differences	585	382
Total deferred tax asset not brought to account	(1,773)	(694)

Income tax expense	-	-
The applicable weighted average effective tax rates are as follow	0%	0%

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Consolidated
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	2021 $'000	2020 $'000
Cash at bank	32,705	1,273

RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH USED IN OPERATING ACTIVITIES:

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Consolidated
2021 2020
$'000 $'000
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Loss after income tax expense for the year	(13,697)	(5,111)

Adjustments for:
Depreciation and amortisation	1,508	1,031
Interest expense	3,823	-
Share-based payments	4,500	1,108

Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables	19	(69)
Increase in inventories	(85)	(50)
Increase in prepayments	(142)	(81)
Increase in trade and other payables	752	835
Increase/(decrease) in contract liabilities	(73)	35
Increase in employee benefits	176	56

Net cash used in operating activities	(3,219)	(2,246)

Non-cash investing and financing activities

Additions to the right-of use assets	502	531
Exercise of employee share options	544	-
Conversion of convertible notes and exercise of options	5,161	-
Conversion of convertible notes	685	-
	6,892	531

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PENTANET LTD ANNUAL REPORT 2021

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NOTE NINE

CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

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Consolidated
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	2021 $'000	2020 $'000
Trade receivables	117	133
Less: Allowance for expected credit losses	(5)	(15)
	112	118
Other receivables	4	15
	116	133

Allowance for expected credit losses

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

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Allowance for
Expected credit loss rate Carrying amount
expected credit losses
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2021 2020 2021 2020 2021 2020
Consolidated
% % $’000 $’000 $’000 $’000
Not past due 1% 1% 96 108 1 1
0-30 days past due 1% 1% 13 18 - -
31-60 days past due 9% 11% 5 (8) - (1)
61-90 days past due 61% 60% 6 15 4 9
More than 90 days past due 31% 43% 1 15 - 6
121 148 5 15
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Movements in the allowance for expected credit losses are as follows:

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Consolidated
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	2021 $'000	2020 $'000
Opening balance	15	5
Additional provisions recognised	21	26
Receivables written off during the year as uncollectable	(31)	(16)
Closing balance	5	15

Impact of COVID-19 on the allowance for expected credit losses calculation:

Allowance for expected credit losses:

The Consolidated Entity has recognised a loss of $4,542 ($15,429 as at 30 June 2020) in profit or loss in respect of the expected credit losses for the year ended 30 June 2021.

Management is aware that COVID-19 is likely to disrupt and negatively impact economic activity, and we expect financial markets to continue being volatile. However, the telecommunication services sector is classified as an essential service that is, to an extent, insulated from the impact of the COVID-19 restrictions. Accordingly, the management approach will remain conservative in assessing current and forecast credit conditions and determining default rates on debtors' balances.

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NOTE TEN

CURRENT ASSETS - INVENTORIES

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Consolidated
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	2021 $'000	2020 $'000
Finished goods - at cost	163	78

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NOTE ELEVEN CURRENT ASSETS - DEPOSITS AND PREPAYMENTS

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Consolidated
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	2021 $'000	2020 $'000
Prepayments	359	217
Security deposits	38	38
	397	255

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NOTE TWELVE

NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT

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Consolidated
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2021 2020
$'000 $'000
Leasehold improvements - at cost
124 30
Less: Accumulated depreciation
(34) (6)
90 24
Plant and equipment - at cost
1,251 784
Less: Accumulated depreciation
(334) (158)
917 626
Network infrastructure - at cost
9,483 3,838
Less: Accumulated depreciation
(1,261) (659)
8,222 3,179
9,229 3,829
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PENTANET LTD ANNUAL REPORT 2021

NOTE 12. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

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Leasehold Plant and Network
Total
improvements equipment infrastructure
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Consolidated $’000 $’000 $’000 $’000
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Balance at 1 July 2019	15	292	2,093	2,400
Additions	14	466	1,606	2,086
Disposals	-	(27)	(88)	(115)
Depreciation expense	(5)	(105)	(432)	(542)

Balance at 30 June 2020	24	626	3,179	3,829
Additions	94	467	6,155	6,716
Disposals	-	-	(428)	(428)
Depreciation expense	(28)	(176)	(684)	(888)

Balance at 30 June 2021	90	917	8,222	9,229

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NOTE THIRTEEN NON-CURRENT ASSETS - RIGHT-OF-USE ASSETS

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Consolidated
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2021 2020
$'000 $'000
Office lease - right-of-use 279 279
Less: Accumulated depreciation (179) (119)
100 160
Network infrastructure - right-of-use 2,295 1,971
Less: Accumulated depreciation (849) (462)
1,446 1,509
1,546 1,669
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Network Office
Total
infrastructure lease
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Consolidated $’000 $’000 $’000
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Balance at 1 July 2019	1,325	220	1,545
Additions	531	-	531
Depreciation expense	(347)	(60)	(407)

Balance at 30 June 2020	1,509	160	1,669
Additions	502	-	502
Disposals	(130)	-	(130)
Depreciation expense	(435)	(60)	(495)

Balance at 30 June 2021	1,446	100	1,546

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NOTE FOURTEEN

NON-CURRENT ASSETS – INTANGIBLES

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Consolidated
2021 2020
$'000 $'000
Trademarks and design - at cost 47 22
Less: Accumulated amortisation (1) -
46 22
Software - at cost 241 154
Less: Accumulated amortisation (149) (68)
92 86
Other intangible assets - at cost 273 270
Less: Accumulated amortisation and impairment (29) (16)
244 254
Licenses - at cost [1] 8,689 -
Less: Accumulated amortisation (30) -
8,659 -
9,041 362
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PENTANET LTD ANNUAL REPORT 2021

NOTE 14. NON-CURRENT ASSETS - INTANGIBLES (CONTINUED)

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

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Trademark
Software Licenses Other Total
and design
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Consolidated $’000 $’000 $’000 $’000 $’000
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Balance at 1 July 2019	13	6	-	162	181
Additions	9	148	-	108	265
Amortisation expense	-	(68)	-	(9)	(77)
Impairment			-	(7)	(7)

Balance at 30 June 2020	22	86	-	254	362
Additions	25	87	8,6891	3	8,804
Amortisation expense	(1)	(81)	(30)	(13)	(125)

Balance at 30 June 2021	46	92	8,659	244	9,041

(1) Included in $8.7m additions to licenses is a 15-year Spectrum license Pentanet secured in the April 2021 auction conducted by the ACMA. The winning price that Pentanet paid for the license is $7,986,200 AUD (cost)

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NOTE FIFTEEN

CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

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Consolidated
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2021 2020
$'000 $'000
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Trade payables	2,030	759
BAS payable	163	-
Other payables	443	512

	2,636	1,271

The carrying amounts of trade and other payables are the same as their fair values due to their short-term nature. Refer to note 25 for further information on financial instruments.

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NOTE SIXTEEN CONTRACT LIABILITIES

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Consolidated
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	2021 $'000	2020 $'000
Current liabilities - contract liabilities	80	149
Non-current liabilities - contract liabilities	23	27

Total	103	176

Reconciliation

Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below:

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Consolidated
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	2021 $'000	2020 $'000
Opening balance	177	142
Payments received in advance	203	212
Transfer to revenue - included in the opening balance	(277)	(178)
Closing balance	103	176

For the internet service revenue stream, there are two performance obligations, the delivery of hardware to facilitate connection and internet service. Payments are received as part of the delivery and installation process, and then services are settled monthly. Amounts received in relation to installations is combined with expected monthly payments for the total transaction price. Installation is not considered to be a separate performance obligation as the customer does not obtain any benefit at the point of installation and is therefore not distinct and bundled with the provision of wireless broadband.

Unsatisfied performance obligations

The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $103,000 as at 30 June 2021 ($176,174 as at 30 June 2020) and is expected to be recognised as revenue in future periods as follows:

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Consolidated
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	2021 $'000	2020 $'000
Within one year	80	62
Between One and Two years	18	92
Between Two and Five years	5	22

	103	176

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PENTANET LTD ANNUAL REPORT 2021

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NOTE SEVENTEEN EMPLOYEE BENEFITS

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Consolidated
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	2021 $'000	2020 $'000
Current liabilities – employee benefits	227	102
Non-current liabilities – employee benefits	53	2

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NOTE NINETEEN LEASE LIABILITIES

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Consolidated
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	2021 $'000	2020 $'000
Current Lease liability	479	413
Non-current lease liabilities	1,008	1,146

Total lease liabilities	1,487	1,559

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 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 experience, the group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.

Description of Lease Arrangements

The group leases land and buildings for its office spaces as well as network infrastructure. The typical lease period of these leases is summarised below. Where leases include an option to renew the lease after the end of the contract term, the Group assesses whether it is reasonably certain to

exercise the extension options at the lease commencement. In addition, it reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control.

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

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Consolidated
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			2021 $'000	2020 $'000
Employee benefits obligation to be settled after	12	months	53	2

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NOTE EIGHTEEN OTHER LIABILITIIES

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Consolidated
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2021 2020
$'000 $'000
Term purchase motor vehicle 256 82
Intangible asset finance 124 -
Total current other liabilities 380 82
Term purchase motor vehicle 225 118
Intangible asset finance1 6,734 -
Total non-current other liabilities 6,959 118
7,339 200
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¹ Description of Intangible asset finance

The group purchased a 15-year Spectrum license in the April 2021 auction conducted by the ACMA for $7,986,200 (Cost). (Ref. Note 14. Non-current assets – Licenses). The group elected to pay the license fee over five equal instalments per the ACMA’s allocation determination. The group paid the first instalment on 25 June 2021. The remainder of the four instalments is payable over four years.

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Lease category Term of lease Renewal option available
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Building	5 Years	2 Years
Network infrastructure	2-10 Years	5 Years

Refer to note 25 for further information on financial instruments.

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NOTE TWENTY

CURRENT LIABILITIES - BORROWINGS

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Consolidated
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	2021 $'000	2020 $'000
Convertible notes payable	-	2,775

CONVERTIBLE NOTES

Noteholders may elect to convert Notes and any capitalised or accrued interest due and payable to Noteholders into Shares prior to or on the Maturity date at a conversion rate of $0.13. However, if the Group offers to issue Shares at a price less than $0.13 per Share prior to the Maturity Date (Subsequent Capital Raising), subject to all necessary approvals, the Conversion Price is 90% of the issue price of Share offered by the Group under the Subsequent Capital Raising.

Convertible notes held by various lenders were converted to shares prior to the Company’s admission to the ASX. As a result, 23,387,509 Shares were issued at $0.25 upon the conversion of Convertible Notes (and accrued interest), and 6,256,427 Shares were issued at $0.25 upon exercise of all Convertible Note Options.

On 9 April 2020, the Group issued 2,440,000 convertible notes convertible into fully paid ordinary shares in the capital of the Group with a combined face value of $2,440,000 and 6,256,427 free-attaching options to acquire Shares on the basis of 1 Option for every 3 Shares. Each Note has an individual face value of $1 and is redeemable 1 year after the date of their issue unless converted into shares beforehand. Interest is payable on the Individual Face Value of each Note on Maturity Date, at the interest rate of 10% per annum.

On 31 July 2018, the Group issued 2,741,342 convertible notes convertible into fully paid ordinary shares in the capital of the Group with a combined face value of $274,134.

Each Note has an individual face value of $1 and is redeemable after 4 years or 1 business day prior to any initial public offering date. Interest is payable on the Individual Face Value of each Note payable monthly in advance, at the interest rate of 10% per annum. Noteholders may elect to convert Notes and any capitalised or accrued interest due and payable to Noteholders into Shares prior to or on the Maturity date at a conversion rate of $0.10 per Share.

Noteholders were granted security over all of the Group's present and after-acquired property to secure all debts and monetary liabilities owed to Noteholders.

Refer to note 25 for further information on financial instruments.

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PENTANET LTD ANNUAL REPORT 2021

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NOTE TWENTY ONE

EQUITY - RESERVES

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Consolidated
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	2021 $'000	2020 $'000
Share-based payments reserve	5,568	1,108

Movements in reserves

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

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Issued
Reserves Total
capital
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Consolidated $’000 $’000 $’000
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Balance at 1 July 2019	5,182	-	5,182
Issue of shares	3,120	-	3,120
Share issue costs	(163)	-	(163)
Share-based payments expense	-	1,108	1,108

Balance at 30 June 2020	8,139	1,108	9,247
Issue of shares	51,381	-	51,381
Share issue costs	(2,306)	-	(2,306)
Share-based payments expense	-	4,460	4,460

Balance at 30 June 2021	57,214	5,568	62,782

NOTE 22. NON-ISSUED CAPITAL (CONTINUED)

Movements in ordinary share capital

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Details Date Shares Issue price $’000
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Balance	1 July 2019	107,751,000		5,182
Ordinary shares issued		23,999,999	$0.13	3,120
Share issue transaction cost				(163)

Balance	30 June 2020	131,750,999		8,139
Conversion of convertible notes and exercise of options	11 December 2020	26,902,594	$0.25	6,726
Conversion of convertible notes	11 December 2020	2,741,342	$0.25	685
Exercise of options	11 December 2020	1,500,000	$0.15	225
Exercise of employee share options	11 December 2020	2,000,000	$0.10	200
Exercise of employee share options	11 December 2020	5,215,000	$0.03	146
Exercise of employee share options	11 December 2020	3,060,000	$0.13	398
Ordinary shares issued under IPO offer	7 January 2021	89,840,000	$0.25	22,460
Ordinary shares issued to employees	7 January 2021	160,000	$0.25	40
Exercise of employee share options	12 March 2021	200,000	$0.13	26
Ordinary shares	18 June 2021	27,777,778	$0.72	20,000
Exercise of employee share options	29 June 2021	3,650,000	$0.13	475
Share issue transaction cost				(2,306)
Balance	30 June 2021	294,797,713		57,214

Ordinary shares

Nature and purpose of reserves

Share-based payments

The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personal, as part of their remuneration. Refer to Note 34 for further details of these plans.

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NOTE TWENTY TWO EQUITY - ISSUED CAPITAL

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Consolidated
2021 2020 2021 2020
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	Shares	Shares	$’000	$’000
Ordinary shares - fully paid	294,797,713	131,750,999	57,214	8,139

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In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value, and the Company does not have a limited amount of authorised capital.

The consolidated entity would look to raise capital when an opportunity to invest in a business or Company was seen as value-adding relative to the current Company's share price at the time of the investment. However, the consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.

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

The consolidated entity is subject to certain financing arrangements covenants, and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year.

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

Capital risk management

When managing capital, the consolidated entity's objectives are to safeguard its ability to continue as a going concern so that it can provide returns for shareholders and benefits for other stakeholders and maintain an optimum capital structure to reduce the cost of capital.

The capital risk management policy remains unchanged from the 26 August 2021 Annual Financial Statements.

Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents.

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PENTANET LTD ANNUAL REPORT 2021

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NOTE TWENTY THREE

EQUITY - ACCUMULATED LOSSES

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Consolidated
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	2021 $'000	2020 $'000
Accumulated losses at the beginning of the financial year	(7,733)	(2,622)
Loss after income tax expense for the year	(13,697)	(5,111)

Accumulated losses at the end of the financial year	(21,430)	(7,733)

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NOTE TWENTY FOUR EQUITY - DIVIDENDS There were no dividends paid, recommended or declared during the current or previous financial year.

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NOTE TWENTY FIVE FINANCIAL INSTRUMENTS

Financial risk management objectives

Interest rate risk

The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk.

The Consolidated Entity has limited Interest rate risk, with a fixed rate on loans.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral.

Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls, and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity's operating units. Finance reports to the Board monthly.

For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.

Market risk

Market risk The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use Foreign currency risk of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the The consolidated entity undertakes certain transactions denominated in consolidated entity based on recent sales experience, historical collection foreign currency and is exposed to foreign currency risk through foreign rates, and available forward-looking information.

The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations.

Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year.

Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency.

The consolidated entity does not have any material future commercial transactions not denominated in the entity’s functional currency.

Allowance for expected credit losses

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

Price risk

The consolidated entity is not exposed to any significant price risk. The majority of customers in each entity sign up to a contract term with an agreed price.

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NOTE 25. FINANCIAL INSTRUMENTS (CONTINUED)

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Allowance for
Expected credit loss rate Carrying amount
expected credit losses
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2021 2020 2021 2020 2021 2020
Consolidated % % $’000 $’000 $’000 $’000
Not past due 0.9% 1.0% 93 94 1 1
0-30 days past due 0.7% 0.9% 13 18 - 0
31-60 days past due 9.0% 10.5% 5 (8) - (1)
61-90 days past due 61.0% 59.7% 5 15 4 9
More than 90 days past due 31.5% 42.5% 1 15 - 6
117 134 5 15
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Movements in the allowance for expected credit losses are as follows:

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Consolidated
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	2021 $'000	2020 $'000
Opening balance	15	5
Additional provisions recognised	21	26
Receivables written off during the year as uncollectable	(31)	(16)
Closing balance	5	15

Remaining contractual maturities

Liquidity risk

The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities, and therefore these totals may differ from their carrying amount in the statement of financial position.

Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.

The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.

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Weighted
Remaining
average 1 year or Between 1 Between 2 Over 5
contractual
interest less and 2 years and 5 years years
maturities
rate
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Consolidated - 2021 % $’000 $’000 $’000 $’000 $’000
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Non-derivatives
Non-interest bearing
Trade payables	-	2,030	-	-	-	2,030
Other payables	-	605	-	-	-	605
Term purchase and other finance arrangements	2.88%	390	1,880	3,591	1,623	7,484
Lease liability	3.50%	503	496	447	87	1,533
Total non-derivatives		3,528	2,376	4,038	1,710	11,652

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PENTANET LTD ANNUAL REPORT 2021

NOTE 25. FINANCIAL INSTRUMENTS (CONTINUED)

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Weighted
average 1 year or Between 1 Between 2 Over 5 Remaining contractual
interest less and 2 years and 5 years years maturities
rate
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Consolidated - 2020 % $’000 $’000 $’000 $’000 $’000

Non-derivatives
Non-interest bearing
Trade payables	-	759	-	-	-	759
Other payables	-	511	-	-	-	511
Convertible notes payable	10.00%	2,775	-	-	-	2,775
Term purchase and other finance arrangements	4.90%	82	81	22	16	201
Lease liability	3.50%	314	327	542	-	1,183
Total non-derivatives		4,441	408	564	16	5,429

The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.

Fair value of financial instruments

Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.

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NOTE TWENTY SIX KEY MANAGEMENT PERSONNEL DISCLOSURES

Compensation

The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below:

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Consolidated
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2021 2020
$'000 $'000
Short-term employee benefits 1,000,539 386,439
Post-employment benefits 60,249 36,301
Share-based payments 3,825,296 248,426
4,886,084 671,166
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Post-employment benefits

Short-term Employee benefits

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NOTE TWENTY SEVEN REMUNERATION OF AUDITORS

During the financial year, the following fees were paid or payable for services provided by BDO Audit (WA) Pty Ltd, the auditor of the Company, and unrelated firms:

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Consolidated
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2021 2020
$'000 $'000
Audit services - BDO Audit (WA) Pty Ltd
Audit or review of the financial statements 74,777 28,500
Other services - BDO Corporate Finance (WA) Pty Ltd
Independent limited assurance report 13,596 -
88,373 28,500
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NOTE TWENTY EIGHT RELATED PARTY TRANSACTIONS

Parent entity Pentanet Ltd is the parent entity.

The consolidated financial statements incorporate the assets, liabilities, and results of the following wholly owned subsidiaries in accordance with the accounting policy described in Note 1:

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Name of subsidiary Principle place of business Ownership interest held by the group
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		2021 %	2020 %
Pentanet.GG Pty Ltd	Perth, Australia	100	100
Pentatech Pty Ltd	Perth, Australia	100	100
Pentacomm Pty Ltd	Perth, Australia	100	100

Transactions with related parties

Key management personnel

Disclosures relating to key management personnel are set out in note 26 The following transactions occurred with related parties and the remuneration report included in the directors' report.

Directors are listed in the directors’ report.

These amounts include all salary, paid leave benefits and fringe benefits These amounts are the superannuation payment made during the year. paid to directors and key management personnel.

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PENTANET LTD ANNUAL REPORT 2021

NOTE 28. RELATED PARTY TRANSACTIONS (CONTINUED)

		Consolidated
Transactions:	2021 $	2020 $
DFK Gooding Partners	69,106	4,675
The Cornish Property Trust	74,778 2021 $	74,778 Consolidated 2020 $
Current payables:
Trade payables to other related party	55,129	1,145

Loans to/from related parties

Pentanet Ltd spent $69,106 with DFK Gooding Partners during the year on commercial terms and market rates, which is a director related entity (Dalton Gooding), with a $55,129 balance relating to this fee outstanding as at 30 June 2021.

There were no loans to or from related parties at the current and previous reporting date.

Pentanet Ltd spent $74,778 with The Cornish Property Trust during the year on commercial terms and market rates, which is a related party of a director related entity (Stephen Cornish and Timothy Cornish), with no balance relating to this fee outstanding as at 30 June 2021.

Terms and conditions

All transactions were made on normal commercial terms and conditions and at market rates.

On the 27th of November 2020, Pentanet Ltd issued the following options to directors:

1 All options held at year end are vested and exercisable.

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Fair value at grant
Key management Fair value at grant Fair value at grant Total fair value of
Capacity date:
personnel date: Tranche 2 date: Tranche 3 option granted
Tranche 1
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$ $ $ $
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David Buckingham	Non-executive chairman	157,490	148,130	134,000	439,620
Stephen Cornish	Managing director	519,717	488,829	442,200	1,450,746
Timothy Cornish	Executive director	346,478	325,886	294,800	967,164
Dalton Gooding	Non-executive director	125,992	118,504	107,200	351,696
Craig Amos	Non-executive director	94,494	88,878	80,400	263,772
Patrick Holywell	Company secretary	31,498	29,626	26,800	87,924
Mart-Marie Derman	Chief financial officer	78,745	74,065	67,000	219,810
		1,354,414	1,273,918	1,152,400	3,780,732

For the options granted during the reporting period ending 30 June 2021, the valuation model inputs used to determine the fair value at grant date, are as follows:

1 All options held at year end are vested and exercisable.

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Share price at Expected Risk-free
Grant date Expiry date Exercise price $ Dividend yield
grant date $ volatility interest rate
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Total option
Key management personnel Capacity Tranche 1 Tranche 2 Tranche 3
granted
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ey management person	ne apacty	rance	rance	rance	granted
David Buckingham	Non-executive chairman	1,000,000	1,000,000	1,000,000	3,000,000
Stephen Cornish	Managing director	3,300,000	3,300,000	3,300,000	9,900,000
Timothy Cornish	Executive director	2,200,000	2,200,000	2,200,000	6,600,000
Dalton Gooding	Non-executive director	800,000	800,000	800,000	2,400,000
Craig Amos	Non-executive director	600,000	600,000	600,000	1,800,000
Patrick Holywell	Company secretary	200,000	200,000	200,000	600,000
Mart-Marie Derman	Chief financial officer	500,000	500,000	500,000	1,500,000
		8,600,000	8,600,000	8,600,000	25,800,0001

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		Grant date	Expiry date	Share price at grant date $	Exercise price $	Expected volatility	Risk-free interest rate
Tranche	1	27/11/2020	30/06/2024	0.250	0.300	100%	0.81%
Tranche	2	27/11/2020	30/06/2024	0.250	0.370	100%	0.81%
Tranche	3	27/11/2020	30/06/2024	0.250	0.500	100%	0.81%

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PENTANET LTD ANNUAL REPORT 2021

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NOTE TWENTY NINE PARENT ENTITY INFORMATION

Set out below is the supplementary information about the parent entity.

Statement of profit or loss and other comprehensive income

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Parent
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	2021 $’000	2020 $’000
Loss after income tax	(13,325)	(4,798)

Total comprehensive income	(13,325)	(4,798)

Statement of financial position
	2021 $’000	Parent 2020 $’000
Total current assets	33,357	1,733

Total assets	53,864	7,882

Total current liabilities	3,769	4,485

Total liabilities	11,824	6,050

Equity
Issued capital	57,214	8,139
Share-based payments reserve	5,568	1,108
Accumulated losses	(20,742)	(7,415)

Total equity	42,040	1,832

Guarantees entered into by the parent entity in relation to the debts of its subsidiaries. The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2021 and 30 June 2020.

Guarantees entered into by the parent entity in relation to the debts of its Significant accounting policies subsidiaries. The parent entity had no guarantees in relation to the debts The accounting policies of the parent entity are consistent with those of of its subsidiaries as at 30 June 2021 and 30 June 2020. the consolidated entity, as disclosed in note 1, except for the following: • Investments in subsidiaries are accounted for at cost, less any Contingent liabilities impairment, in the parent entity. The parent entity had no contingent liabilities as at 30 June 2021 and 30 • Investments in associates are accounted for at cost, less any June 2020. impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other Capital commitments - Property, plant and equipment income by the parent entity, and its receipt may be an indicator The parent entity had no capital commitments for property, plant and of an impairment of the investment. equipment as at 30 June 2021 and 30 June 2020.

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NOTE THIRTY EVENTS AFTER THE REPORTING PERIOD

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NOTE THIRTY ONE CONTINGENT ASSETS

There are no Contingent Assets as at 30 June 2021.

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NOTE THIRTY TWO CONTINGENT LIABILITIES

There are no Contingent Liabilities as at 30 June 2021.

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NOTE THIRTY THREE COMMITMENTS

The Company is a party to the NVIDIA GeForce NOW Alliance Partner Agreement (NVIDIA Agreement) with NVIDIA dated 25 November 2020 (and amended on 8 December 2020). GeForce NOW (GFN) is NVIDIA’s gaming PC in the cloud service (GFN Service) that streams a user’s game library to the user’s devices from the Company’s data centres. The NVIDIA Agreement covers Australia (Territory).

The Company will pay NVIDIA a percentage revenue share (in USD).

The NVIDIA Agreement is for an initial term of 3 years, and unless one party notifies the other at least 1 month prior to the end of this initial term or any renewal period in force of its intent for the NVIDIA Agreement to expire at the end of the current term, will automatically renew for further 1 year periods, indefinitely. The NVIDIA Agreement can be terminated by either party for the other’s (uncertifiable or notified but unrectified) material breach.

Pursuant to the terms of the NVIDIA Agreement, the Company has the right to purchase up to 72 GFN Game Servers from NVIDIA (or its approved third party vendors) in a staggered approach. 36 GFN Game Servers make up a GFN Pod. The NVIDIA Agreement does not restrict the Company from purchasing more than two GFN Pods from NVIDIA over the course of its term.

The NVIDIA Agreement otherwise contains terms and conditions that are considered standard for agreements of this nature.

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NOTE THIRTY FOUR EARNINGS PER SHARE

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Consolidated
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2021 2020
$'000 $'000
Loss after income tax attributable to the owners of Pentanet Ltd (13,697) (5,111)
Number Number
Weighted average number of ordinary shares used in calculating basic earnings per share 198,447,409 127,805,794
Adjusted for calculation of diluted earnings per share:
Options over ordinary shares 18,441,507 12,883,979
Weighted average number of ordinary shares used in calculating diluted earnings per share 216,888,916 140,689,773
Cents Cents
Basic (loss) per share attributable to owners of Pentanet group (0.07) (0.04)
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PENTANET LTD ANNUAL REPORT 2021

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NOTE THIRTY FIVE SHARE-BASED PAYMENTS

A share option plan has been established by the consolidated entity and approved by shareholders at a general meeting, whereby the consolidated entity may grant options over ordinary shares in the group to certain personnel of the consolidated entity. Options granted carry no dividend or voting rights, nor do they carry any rights to participate in any issues of shares of the group or any other entity.

All options were granted over unissued fully paid ordinary shares in the group. Options vest based on the provision of service over the vesting period whereby the employee becomes beneficially entitled to the option on the vesting date and non-performance vesting conditions. Options are exercisable by the holder from the vesting date.

Set out below are summaries of options granted under the plan:

2021

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Balance at
Exercise Balance at the Expired/
Grant date Expiry date Granted Exercised the end of the
price $ start of the year forfeited/ other
period
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		prce	start o te year			orete/ oter	period
27/09/2019	5/04/2020	0.100	2,000,000	-	(2,000,000)	-	-
27/09/2019	31/12/2020	0.028	5,215,000	-	(5,215,000)	-	-
27/09/2019	28/02/2022	0.130	3,555,000	-	(2,555,000)	-	1,000,000
27/09/2019	30/06/2021	0.130	6,955,000	-	-	(6,955,000)	-
27/09/2019	30/06/2021	0.130	4,355,000	-	(4,355,000)	-	-
27/11/2020	30/06/2024	0.300	-	9,870,000	-	-	9,870,000
27/11/2020	30/06/2024	0.370	-	9,870,000	-	-	9,870,000
27/11/2020	30/06/2024	0.500	-	9,870,000	-	-	9,870,000
Balance as at	30 June 2021		22,080,000	29,610,000	(14,125,000)	(6,955,000)	30,610,000

In the directors' opinion:

the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements:
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

The directors have been given the declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.

On behalf of the directors

______ DAVID BUCKINGHAM NON-EXECUTIVE CHAIRMAN

25 AUGUST 2021 PERTH

The weighted average options exercise price of all unexercised options For the options granted during the financial year ending 30 June 2021, on issue at the end of 30 June 2021 was $0.226 14,125,000 options the valuation model inputs used to determine the fair value at grant date were exercised, and 6,955,000 were cancelled during the year ending 30 are as follows: June 2021. The weighted average remaining contractual life of options outstanding at the end of the financial year was 3 years.

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Share price at Expected Risk-free Fair value at
Grant date Expiry date Exercise price $ Dividend yield
grant date $ volatility interest rate grant date $
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27/11/2020	30/06/2024	0.250	0.300	100%	0	0.81%	0.1575
27/11/2020	30/06/2024	0.250	0.370	100%	0	0.81%	0.1480
27/11/2020	30/06/2024	0.250	0.500	100%	0	0.81%	0.1340
						Consolidated
						2021 $’000	2020 $’000
Share-based payment expense reconciliation
Issue of share	options to directors and employees under incentive option scheme					4,500		995

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PENTANET LTD ANNUAL REPORT 2021

PENTANET LTD INDEPENDENT AUDITOR'S REPORT[for the year ended 30 June 2021]

PENTANET LTD INDEPENDENT AUDITOR'S REPORT[for the year ended 30 June 2021]

Tel: +61 8 6382 4600 Fax: +61 8 6382 4601	38 Station Street Subiaco, WA 6008
www.bdo.com.au	PO Box 700 West Perth WA 6872
	Australia

INDEPENDENT AUDITOR'S REPORT

To the members of Pentanet Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Pentanet Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001 , including:

(i) Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and

(ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

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

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. We have determined the matters described below to be the key audit matters to be communicated in our report.

Revenue Recognition

*Key audit matter*	*How*	*the matter was addressed in our audit*

Refer to Note 4 of the financial report and Note 1 of	Our procedures included, but were not limited to, the
the financial report for the accounting policy.	following:
Revenue recognition was determined to be a key audit		Assessing the Group's accounting policy for
matter due to the significance of revenue to the		revenue to ensure it has been correctly
financial report and involved judgements and estimates		formulated in accordance with the Australian
made by management including whether contracts		Accounting Standards;
contain multiple performance obligations which should be accounted for separately and determine the most appropriate methods of recognition of revenue for the identified performance obligations. This comprises		Understanding and documenting the processes and controls used by the Group in recording revenue;
allocation of consideration to the individual		Checking a sample of revenue transactions to
performance obligations based on standalone pricing		evaluate whether they were appropriately
and whether the performance obligation is satisfied at		recorded as revenue ensuring the amounts
a point in time or overtime.		recorded agreed to supporting evidence;
		Performing cut-off procedures to ensure that
		revenue was captured in the appropriate financial year; and
		Assessing the adequacy of the related
		disclosures in the financial report.

Other information

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

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

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

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

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6 4

PENTANET LTD ANNUAL REPORT 2021

PENTANET LTD INDEPENDENT AUDITOR'S REPORT[for the year ended 30 June 2021]

ADDITIONAL ASX INFORMATION

The following additional information is required by the Australian Securities Exchange. The information is current as at 30 September 2021.

SHAREHOLDING INFORMATION

The following information relates to fully paid ordinary shares in the Company. The Company has 294,797,713 fully paid ordinary shares on issue.

SHAREHOLDING DISTRIBUTION (INCLUDES ESCROWED SECURITIES)

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Holding Ranges Holders Total Shares % Issued Share Capital
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Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

above	0 up to and including 1,000	732	566,627	0.19%
above	1,000 up to and including 5,000	1,572	4,011,564	1.36%
above	5,000 up to and including 10,000	953	7,567,593	2.57%
above	10,000 up to and including 100,000	1,110	38,824,737	13.17%
above	100,000	236	243,827,192	82.71%
Totals		4,603	294,797,713	100.00%

The number of holders holding less than a marketable parcel is 321.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf

This description forms part of our auditor’s report.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included on pages 8 to 17 of the directors’ report for the year ended 30 June 2021.

In our opinion, the Remuneration Report of Pentanet 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.

BDO Audit (WA) Pty Ltd

Glyn O’Brien

Director

Perth, 25 August 2021

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TWENTY LARGEST SHAREHOLDERS (INCLUDES ESCROWED SECURITIES)

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% Issued
Position Holder Shares
Capital
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1	Stephen Cornish	43,205,000	14.66%
2	Zero Nominees Pty Ltd	34,751,262	11.79%
3	National Nominees Limited	14,159,358	4.80%
4	UBS Nominees Pty Ltd	8,673,867	2.94%

5	Peter & Susan Cornish	8,216,410	2.79%
6	J P Morgan Nominees Australia Pty Limited	7,303,612	2.48%
7	Timothy Cornish	6,218,000	2.11%
8	PRM Property Holdings Pty Ltd	5,512,821	1.87%
9	HSBC Custody Nominees (Australia) Limited	5,217,769	1.77%
10	Mr Peter John Cornish	4,135,267	1.40%
11	BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd	4,118,047	1.40%
12	CS Third Nominees Pty Limited	4,036,357	1.37%
13	Sharon Leonie White	4,000,000	1.36%
14	Hillboi Nominees Pty Ltd	3,453,671	1.17%
15	Mr Peter John Cornish	3,117,870	1.06%
16	Citicorp Nominees Pty Limited	2,609,873	0.89%
17	Ice Cold Investments Pty Ltd	2,500,000	0.85%
18	April Cove Pty Ltd	2,000,000	0.68%
19	FFF International Pty Ltd	1,800,000	0.61%
19	McWhite Pty Ltd	1,800,000	0.61%
21	Mr Andrew McKenzie & Mrs Catherine McKenzie	1,795,411	0.61%
	Total Top Twenty Shareholders	168,624,595	57.22%

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PENTANET LTD ANNUAL REPORT 2021

SUBSTANTIAL SHAREHOLDERS

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Shareholder Number % of Issued Share Capital Date of Notice
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Pentanet Limited	87,814,273	29.79%	29 January 2021
Stephen Cornish	50,458,137	17.12%	29 January 2021
Peter & Susan Cornish	18,269,547	6.20%	29 January 2021

UNQUOTED RESTRICTED OPTIONS OVER FULLY PAID ORDINARY SHARES

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Number of
Class Number Restriction expiry
holders
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Class				umer o holders	Number	Restriction expiry
Unlisted Options – exercisable at	13	cents each on or before	28/02/2022	5	1,000,000	29-Jan-23
Unlisted Options – exercisable at	30	cents each on or before	30/06/2024	5	7,900,000	29-Jan-23
Unlisted Options – exercisable at	37	cents each on or before	30/06/2024	5	7,900,000	29-Jan-23
Unlisted Options – exercisable at	50	cents each on or before	30/06/2024	5	7,900,000	29-Jan-23
					24,700,000

UNQUOTED RESTRICTED FULLY PAID ORDINARY SHARES

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Class Number of holders Number Restriction expiry
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Escrowed Shares	12m From Issue	39	12,043,571	11 December 2021
Escrowed Shares	24m From Quotation	27	79,620,702	29 January 2023

Holders of 20% or more, except for those acquired under an employee incentive scheme:

Stephen Cornish (9,900,000 options)
Timothy Cornish (6,600,000 options)

UNQUOTED OPTIONHOLDING INFORMATION

The following relates to options over fully paid ordinary shares in the Company. Options are exercisable at different amounts and have various expiry dates. The Company has 30,610,000 options on issue.

UNQUOTED OPTIONHOLDING DISTRIBUTION

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Holding Ranges Holders Total Options % Issued Option Capital
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Above	0 up to and including 1,000	-	-	-
Above	1,000 up to and including 5,000	-	-	-

Above	5,000 up to and including 10,000	-	-	-
Above	10,000 up to and including 100,000	40	1,560,000	5.10%
Above Totals	100,000	11 51	29,050,000 30,610,000	94.90% 100.00%

UNQUOTED OPTIONS OVER FULLY PAID ORDINARY SHARES

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Class Number of holders Number
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Unlisted Options – exercisable at	30	cents each on or before	30/06/2024	45	1,970,000
Unlisted Options – exercisable at	37	cents each on or before	30/06/2024	45	1,970,000
Unlisted Options – exercisable at	50	cents each on or before	30/06/2024	45	1,970,000
					5,910,000

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VOTING RIGHTS

APPLICATION OF FUNDS

The voting rights attaching to each class of equity securities are set out below:

During the financial year, in accordance with ASX Listing Rule 4.10.19, the Company confirms that it has used its cash and assets (in a form readily convertible to cash) in a manner which is consistent with the Company's business objectives, as outlined in the prospectus dated 11 December 2020.

(i) Fully paid ordinary shares

Subject to any rights or restrictions for the time being attached to any class or classes of shares, at general meetings of shareholders or

classes of shareholders:
each shareholder entitled to vote may vote in person or by proxy, attorney or representative;

OTHER

on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and

There is no current on-market buy-back.

on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares shall have such number of votes as bears the same proportion to the total of such shares registered in the shareholder’s name as the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited).

There are no securities approved for the purposes of item 7 section 611 of the Corporations Act which have not yet completed.

No securities were purchased on-market for the purposes of an employee incentive scheme during the reporting period.

Other than the Australian Securities Exchange, the Company is not listed on any other stock exchange.

(ii) Options over fully paid ordinary shares No voting rights.

CORPORATE GOVERNANCE

The Company and its Board of directors are committed to achieving and demonstrating the highest standards of corporate governance. The Board is responsible to its shareholders for the performance of the Company and seeks to communicate extensively with shareholders. The Board believes that sound corporate governance practices will assist in the creation of shareholder wealth and provide accountability. In accordance with ASX Listing Rule 4.10.3, the Company has elected to disclose its corporate governance policies and its compliance with them on its website, rather than in this Annual Report. Accordingly, information about the Company's corporate governance practices is set out on the Company's website at www.pentanet.com.au/investor-centre/.

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PENTANET LTD ANNUAL REPORT 2021

PENTANET LTD.

2/8 Corbusier Place, Balcatta WA 6021, Australia pentanet .com.au

ABN 29 617 506 279

ASX: 5GG

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AI assistant

PENTANET LIMITED — Annual Report 2021

64260_rns_2021-10-19_de319692-d35e-4bb1-911b-0476f14acc86.pdf

Annual Report Pentanet Limited ABN 29 617 506 279

CONTENTS

Dear Shareholder,

Growing our subscriber base

Increasing our margins

STRATEGY AND OUTLOOK

FINANCIAL PERFORMANCE

OPERATIONAL PERFORMANCE

INTERNET SERVICES

CLOUD GAMING AND ESPORTS

Investment in Network Growth and Performance

UNDERLYING RESULTS OVERVIEW:

RECONCILIATION OF REPORTED UNDERLYING RESULTS:

SUBSCRIBERS, REVENUE AND GROSS PROFIT REVIEW

MARKETING

CUSTOMER ACQUISITION COST

IMPACT OF COVID-19

Cloud gaming

ONGOING STRATEGY

Registered office

Principal place of business

Principal banker

Auditor

Company secretary

Principal activities

Directors

Dividends

OPERATING AND FINANCIAL REVIEW

Review of operations

Our business model and objective

Capital raising

Operating results

Risk management

Significant changes in the state of affairs

Matters subsequent to the end of the financial year

Likely developments and expected results of operations

Environmental regulation

Share options

DAVID BUCKINGHAM

RUSSELL KANE

MEETINGS OF DIRECTORS

1. REMUNERATION GOVERNANCE

1.1 Remuneration and Nomination Committee

1.2 Use of remuneration consultants

2. EXECUTIVE REMUNERATION APPROACH AND STRUCTURE

2.1 Remuneration philosophy

2.2 Executive remuneration structure

2.3 Remuneration practices

2.4 Short term incentive plan (‘STI’)

2.5 Long term incentive plan (‘LTI’)

General terms of the STI plan

3.LINK BETWEEN COMPANY

PERFORMANCE AND EXECUTIVE REMUNERATION

Additional information

4. EMPLOYMENT CONTRACTS OF DIRECTORS

5. NON-EXECUTIVE DIRECTOR

FEE ARRANGEMENTS

6. DETAILS OF REMUNERATION

Amounts of remuneration:

Additional disclosures relating to key management personnel

Shareholding*

Option holding*

Indemnity and insurance of officers

Indemnity and insurance of auditor

Proceedings on behalf of the Company

Non-audit services

PENTANET LTD

DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF PENTANET LIMITED

Glyn O'Brien

Auditor's independence declaration

Auditor

Rounding of amounts

GENERAL INFORMATION

Registered office

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

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

PENTANET LIMITED Annual Report 2021