REMSENSE TECHNOLOGIES LIMITED — Annual Report 2022

Aug 30, 2022

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REMSENSE TECHNOLOGIES LIMITED ABN 50 648 834 771

ANNUAL FINANCIAL REPORT For the year ended 30 June 2022

RemSense Technologies Limited

CONTENTS

DIRECTORS’ REPORT ............................................................................................................................................ 1 AUDITOR’S INDEPENDENCE DECLARATION ............................................................................................... 21 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ... 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ......................................................................... 23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .......................................................................... 24 CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................................ 25 NOTES TO THE CONSOLIDATED FINANCIAL REPORT ............................................................................. 26 DIRECTORS’ DECLARATION ............................................................................................................................. 69 INDEPENDENT AUDITOR’S REPORT ............................................................................................................... 70 SECURITIES EXCHANGE INFORMATION ....................................................................................................... 73 CORPORATE DIRECTORY .................................................................................................................................. 76

RemSense Technologies Limited

For the year ended 30 June 2022

DIRECTORS’ REPORT

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of RemSense Technologies Limited (referred to hereafter as the ‘Company’ or ‘RemSense”) and the entity it controlled at the end of, or during, the year ended 30 June 2022.

DIRECTORS

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

Steve Brown Managing Director Chris Sutherland Non-executive Chairman Ross Taylor Non-executive Director Nicole O’Connor Non-executive Director

PRINCIPAL ACTIVITIES

During the course of the financial year, the Company engaged in the following activities:

• Provided data and analytics services to clients through both aerial and terrestrial scanning and imaging. Clients include BV, Anglo Gold and BHP and WSP Golder. RemSense provides a broad spectrum of services such as photogrammetry/surveying, inspection of assets and environmental and rehabilitation impact studies.

• Continued to develop and enhance our virtualplant technology. Virtualplant is a productive and scalable photogrammic digital twin that enables visual information from remote or distributed assets to be securely available to all users on existing hardware. At the end of April 2022 RemSense successfully launched version 1.5 of virtualplant as the first AWS enterprise release and made significant progress toward the release of virtualplant version 2.0.

• RemSense developed and secured its first Software as a Service (SaaS) style contracts with Woodside.

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RemSense Technologies Limited

For the year ended 30 June 2022

OPERATING HIGHLIGHTS

Operation highlights for the 2022 financial year include the following:

• Key Agreements signed with Global Partners, including IBM and SAP who dominate the global Enterprise Asset Management market with approximately 40% of the market.

• AWS agreement signed - enabling access to AWS microservices, support and their Global Marketplace sales channel and ensuring full compatibility with Matterport development architecture.

• Established collaboration agreement with Integrated IP - to increase participation in the early-stage development of technically engaging concepts requiring Remsense engineering and innovation expertise.

• Strengthened relationship with Matterport - further integration with Matterport environment enabling enterprise grade access. Promoted as a leading industrial solution on Matterport Marketplace sales channel.

• Completed first Chevron site - integrated virtualplant scans into Kongsberg’s Kognitwin Energy platform and submitted proposals for further sites.

• Signed memorandum of understanding with Qteq to develop first reseller agreement targeting coal seam gas and utilities customers in Queensland.

FINANCIAL RESULTS FOR THE YEAR:

• Revenue of $3,961,304 (FY21: $4,311,664), impacted by reduced engineering work, as the Company focused its efforts on the further development of its virtualplant technology. RemSense recorded virtualplant revenue of $414,868 during the financial year.

• A net loss of $2,451,102 (FY21: $728,623), arising from the following extra costs compared with the prior period

• Additional costs incurred as an ASX listed entity.

• Establishment of new additional virtualplant development and sales capability.

• As at 30 June 2022, the Company’s cash position was $2,140,174 (FY21: $533,304). The IPO raising funds of $5,000,000. Cash expenditure invested/incurred during the period included:

• Capital raising costs ($368k).

• Costs associated with being an ASX listed entity.

• New expenses for virtualplant development and sales activities

• Purchase of new scanning and digital printing equipment ($268k).

• Investment in product development/software intangibles ($376k)

• Repayment of Company loans ($320k)

DIVIDENDS

The Directors recommend that no dividend be provided for the year ended 30 June 2022 (2021: Nil).

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RemSense Technologies Limited

For the year ended 30 June 2022

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

RemSense launched its prospectus on 10 September 2021. The prospectus was well received by the market and fully subscribed on the first day after launch. RemSense commenced trading on the ASX on 2 November 2021 under the ticker code REM and commenced implementation of its growth plan, using IPO funds raised, as outlined in the IPO Prospectus.

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

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Other than as disclosed in note 6.7 of the notes to the financial statements, there have been no matters or circumstances that have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations of the Group, the results of these operations, or the state of affairs of the Group in future financial years.

LIKELY DEVELOPMENTS

The Group has a comprehensive growth plan for the business that will be funded using capital raised in the IPO.

The prospectus issued by RemSense Technologies Limited provides all related information. The Group is on track to meet its business objectives that sit behind the “use of funds” statement as presented in that document.

ENVIRONMENTAL REGULATIONS

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

CORPORATE GOVERNANCE DISCLOSURE

The Group’s Corporate Governance Statement for the year ended 30 June 2022 can be found at https://remsense.com.au/investors/corporate-governance/. The statement also summarises the extent to which the Group has complied with the Corporate Governance Council’s recommendations.

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RemSense Technologies Limited

For the year ended 30 June 2022

INFORMATION ON DIRECTORS

‘Other current directorships’ are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated.

‘Former directorships’ are directorships held in the last three years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated.

	Experience, qualifications and other directorships
Name:	Chris Sutherland
Title:	Non-Executive Chairman
Qualifications:	BEng., AICD.
Experience and expertise:	Mr Sutherland has significant executive leadership expertise spanning
	more than 20 years, encompassing a wide array of sectors in Australia;
	including oil and gas, resources, infrastructure, and manufacturing. Most
	notably he was Managing Director and Chief Executive Officer of
	Programmed Maintenance Services Limited (formerly Integrated Group), a
	leading staffing, maintenance, and facility management services provider,
	from January 2008 to September 2019. This included leading Programmed
	during its acquisition by Japanese-based group Persol in 2017.
	Chris was also APAC Region Managing Director of subsea contracting firm,
	Sonsub Services and has held various executive and management roles
	with major multidisciplinary engineering companies including Clough and
	WorleyParsons.
	Chris completed an Advanced Management Program at Harvard Business
	School, was a co-founder and Chair of a Perth-based group of CEOs for
	Gender Equality and was awarded the Australian Human Resources
	Institute CEO Diversity Champion Award (AHRI) in 2017.
Other current directorships:	Non-Executive Chairman of CopperSearch Ltd Appointed 21 June 2021 /
	ASX Listing 14 September 2021
	Non-Executive Director of Matrix Composites & Engineering Limited
	Appointed: 10 December 2020
Former directorships (past 3 years):	Non-Executive Director of MACA Limited
	From 26 February 2020 to 10 September 2020
Special responsibilities:	Member of the Audit and Risk Committee
	Member of the People and Nomination Committee
Interests in shares:	146,795
Interests in options:	1,747,861

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RemSense Technologies Limited

For the year ended 30 June 2022

INFORMATION ON DIRECTORS (continued)

Experience, qualifications and other directorships Name: Steve Brown Title: Managing Director Experience and expertise: Mr Brown is a commercially astute, results driven and focused strategic leader with a proven track record in orchestrating strong organisational and revenue growth. He has extensive expertise in establishing and articulating company direction, high level strategy, evaluating complex operating environments, emerging market trends, and aligning corporate culture. Steve has repeated success in building outstanding professional teams to support high growth organisations. Steve has over 20 years’ experience as CEO with Covus Corporation (a subsidiary of Clough) and European company DOF Subsea from 2005 until 2013 where he was responsible for the global business based in Europe and Executive Vice President responsible for Australia and Asia, with directorships on all group companies in Australia, Singapore, Indonesia, Malaysia, and Brunei.

	Steve has over 20 years’ experience as CEO with Covus Corporation (a subsidiary of Clough) and European company DOF Subsea from 2005 until 2013 where he was responsible for the global business based in Europe and Executive Vice President responsible for Australia and Asia, with directorships on all group companies in Australia, Singapore, Indonesia, Malaysia, and Brunei.
Other current directorships:	None
Former directorships (past 3 years):	None
Special responsibilities:	None
Interests in shares:	12,597,363
Interests in options:	2,074,499
Name:	Ross Taylor
Title:	Non-Executive Director
Qualifications:	BCom (UQ), SIA, ACA.
Experience and expertise:	Mr Taylor is a Chartered Accountant and an investment banking consultant
	with a thorough knowledge of international financial markets gained whilst
	working in Australia, London, New York, and Tokyo. Ross has extensive
	experience in the global investment banking sector and has held senior
	positions with Deutsche Bank, Bankers Trust and Barclays Capital.
Other current directorships:	Non-Executive Chairman of Lodestar Minerals Limited
	Appointed: 30 June 2014
Former directorships (past 3 years):	None
Special responsibilities:	Chair of the Audit and Risk Committee
	Member of the People and Nomination Committee
Interests in shares:	146,795
Interests in options:	1,747,861

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RemSense Technologies Limited

For the year ended 30 June 2022

INFORMATION ON DIRECTORS (continued)

	Experience, qualifications and other directorships
Name:	Nicole O’Connor
Title:	Non-Executive Director
Experience and expertise:	Accomplished executive with proven strategic, digital and transformational
	capability, Nicole has broad experience across many industries including
	technology software services, utilities, tertiary education, and resources.
	Currently serving as the AWS Manager for Public Sector in Amazon Web
	Services (AWS), she is passionate about leveraging digital innovation to
	drive improved citizen outcomes, and sustainable professional and
	workplace practices.
	Prior roles include the Director of Research at Curtin University, WA
	General Manager for SAP in WA, and a range of roles at IBM, including
	leadership of the infrastructure business across WA, SA and NT.
	Nicole holds a B.A, a Higher Diploma in Education, a Master of Literature,
	and is a graduate of the AICD. She currently serves as a Non-Executive
	Director on the Telethon Kid’s Institute Board, where she chairs the Risk
	and Compliance Committee.
Other current directorships:	None
Former directorships (past 3 years):	None
Special responsibilities:	Member of the Audit and Risk Committee
	Chair of the People and Nomination Committee
Interests in shares:	Nil
Interests in options:	250,000

COMPANY SECRETARY

David McArthur is a Chartered Accountant and was appointed to the position of Company Secretary on 19 March 2021. David has a Bachelor of Commerce Degree from the University of Western Australia. He is a Chartered Accountant, having spent four years with a major international accounting firm, and has over 30 years’ experience in the accounting profession. David has been actively involved in the financial and corporate management of numerous public listed companies over the past 30 years.

David has substantial experience in capital raisings, company re-organisations and restructuring, mergers and takeovers, and asset acquisitions by public companies.

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RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

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 2022, and the number of meetings attended by each director were:

	Full Board		Audit & Risk		People &	Remuneration
			Committee		Committee
	Attended	Held	Attended	Held	Attended	Held
Chris Sutherland	10	10	3	3	2	2
Steve Brown	10	10	3	3	2	2
Ross Taylor	10	10	3	3	2	2
Nicole O’Connor	10	10	3	3	2	2

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

In addition to the meetings held above, a number of decisions of the Board were undertaken via four circular resolutions issued during the financial year.

INDEMNITY AND INSURANCE OF OFFICERS

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

During the financial year, the Group insured the directors and executives of the Group against any liability to the extent permitted by the Corporations Act 2001 . The current premium is $67,011 (2021: $3,595).

INDEMNITY AND INSURANCE OF AUDITOR

The Group 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 Group 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 Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings.

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RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

SHARES UNDER OPTION

Unissued ordinary shares of RemSense Technologies Limited under option at the date of this report are as follows:

Option Class Grant date Expiry date Exercise price (cents)	Number under option
A 19-Mar-2021 30-Jun-2023 25 C 20-Apr-2021 30-Jun-2024 30 C 02-Aug-2021 30-Jun-2024 30 C 17-Sep-2021 30-Jun-2024 30 A 29-Oct-2021 30-Jun-2023 25 C 16-Feb-2022 30-Jun-2024 30 C 02-Sep-2021 Cancelled 16-Feb-2022	8,718,622 1,250,000 750,000 250,000 4,800,000 250,000
	16,018,622 250,000

Each exercised C option entitles the holder to one share in the Company. The options do not confer voting rights to the holder unless converted to shares.

Each exercised A option entitles the holder to one share in the Company. Additionally, on conversion of A options, 1 B option will be issued for each 1 A option exercised. Each new B option is exercisable at 40 cents on or before 30 June 2025. The options do not confer voting rights to the holder unless converted to shares.

No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate.

The options previously issued to Darren Shanahan on the 2[nd] of September 2021, were cancelled as a result of his resignation.

SHARES ISSUED ON THE EXERCISE OF OPTIONS

No ordinary shares of RemSense were issued during the year ended 30 June 2022. On 20 July 2022, the Company acquired the virtualplant background Intellectual Property (IP) previously owned by Woodside Energy Technologies Pty Ltd (“Woodside”). The acquisition was funded though the conversion of certain A options held by current and past directors of the Company. The conversion of the A option resulted in the issue of an additional 1,609,881 of shares in RemSense. The Company received a total of $402,470 on the exercise of those options. Under the terms of the A options, on conversion, an equal number of B options were issued to the holders of those options.

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 in note 6.6 to the financial statements. The amount paid or payable to the auditor for non-audit services is $57,619 (2021: Nil).

The directors are satisfied that the provision of non-audit services during the financial year, by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

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RemSense Technologies Limited

For the year ended 30 June 2022

The directors are of the opinion that the services as disclosed in note 6.6 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:

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

• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards) 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.

AUDITOR INDEPENDENCE

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 21.

AUDITOR

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

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RemSense Technologies Limited

For the year ended 30 June 2022

AUDITED REMUNERATION REPORT

This report, which forms part of the Directors’ Report, outlines the remuneration arrangements in place for the Directors of RemSense Technologies Limited for the year ended 30 June 2022. Since the interim report was issued there has been one significant change to the Executive Management team. On the 11[th] of March 2022, Darren Shanahan, who had been employed as the Group’s Chief Operating Officer, resigned his position.

The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001 and its Regulations.

The Remuneration Report details the remuneration arrangements for the Directors who are defined as those persons having authority and responsibility for planning, directing, and controlling the major activities of the Group, directly or indirectly, whether executive or otherwise.

Remuneration philosophy

The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results achieved. 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 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

The People and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its executive directors, non-executive directors, and other key executives. The performance of the Group depends on the quality of its key management personnel. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel.

The reward framework is designed to align executive reward to shareholders’ interest. The Board has considered that it should seek to enhance shareholders’ interests by:

• rewarding capability and experience

• reflecting competitive reward for contribution to growth in shareholder wealth

• providing a clear structure for earning rewards

Remuneration structure

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

Non-Executive Directors’ Remuneration

Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors’ fees and payment are reviewed annually by the People and Remuneration Committee. The People and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of his own remuneration.

ASX Listing Rules require the aggregate non-executive directors’ remuneration be determined periodically by a general meeting. The most recent determination is in the Company’s Constitution, where shareholders approved a maximum annual aggregate remuneration of $500,000.

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RemSense Technologies Limited

For the year ended 30 June 2022

Remuneration structure

Non-Executive Directors’ Remuneration

The Board resolved that non-executive director fees would be reduced by 50% up until the date of admission to trading on the ASX which was 2[nd] of November 2021. All fees are exclusive of superannuation and include membership of subcommittees:

• Chris Sutherland’s remuneration as non-executive Chair was $50,000 for 1st July 2021 to 1[st] November 2021 when it increased back to $100,000.

• Ross Taylor’s remuneration as non-executive director was $37,500 for 1st July 2021 to 1[st] November 2021 when it increased back to $75,000.

• Nicole O’Connor’s remuneration as non-executive director was $37,500 for 1st July 2021 to 1[st] November 2021 when it increased back to $75,000.

Non-executive directors do not receive cash performance related compensation.

Executive Director & Senior Executive Remuneration

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

There are three components to the executive remuneration and reward framework:

• base pay and non-monetary benefits

• share-based payments

• other remuneration such as superannuation and long-service leave

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

Fixed remuneration

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

Executives may receive their fixed remuneration in the form of cash or other fringe benefits where it does not create any additional costs to the Group and provides additional value to the executive.

Short-term incentive scheme

The short-term incentives (“STI”) program is designed to align the targets of the business units with the performance hurdles of key management. STI payments are granted to executives based on specific annual targets and key performance indicators (“KPIs”) being achieved. At this stage, the Group has not awarded any STIs.

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RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Remuneration structure (continued)

Long-term incentive scheme

The long-term incentives (“LTIs”) include long-service leave and share-based payments. Share options are awarded to executives over a period of three years based on long-term incentive measures. The People and Remuneration Committee reviewed the long-term equity-linked performance incentives for executives during the year ended 30 June 2022.

The Group has adopted an Employee Incentive Option Plan (Plan). Under the Plan, the Company may grant options to Group eligible employees to attract, motivate and retain key employees over a period of three years up to a maximum of 10% of the Company’s total issued ordinary shares at the date of the grant. Director options are granted at the discretion of the Board and approved by shareholders. Performance hurdles are not attached to vesting periods however the Board determines appropriate vesting periods to provide rewards over time.

Options granted as compensation

The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows:

					Vesting
	Number		Value per	Value of	and first	Exercise
	of options	Grant	option at	options at	exercise	Price	Expiry
	granted	date	grant date	grant date	date	Per option	date
			cents	$		cents
Jillian Rosich	250,000	02-Aug-21	7.175	17,937	30-Jun-23	30.0	30-Jun-24
Darren Shanahan	250,000	02-Sep-21	7.035	17,588	30-Jun-23	30.0	30-Jun-24
Anthony Roe	250,000	17-Sep-21	9.691	24,228	30-Jun-23	30.0	30-Jun-24
Anthony Roe	250,000	16-Feb-22	24.278	60,695	30-Jun-23	30.0	30-Jun-24

All options were granted over unissued fully paid shares in the Company. Options vest based on the provision of service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder as from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise.

250,000 options granted as compensation to Darren Shanahan were cancelled on his resignation from the Company. (2021: Nil).

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RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Remuneration structure (continued)

Group performance and link to remuneration (continued)

	2022	2021	2020	2019
Revenue from ordinary activities ($)	3,961,304	4,311,664	2,171,550	1,117,757
Other income ($)	80,559	373,088	226,073	17,100
Loss before income tax ($)	(2,451,102)	(728,623)	(247,975)	(71,036)
Net loss attributable to equity holders ($)	(2,451,102)	(728,623)	(247,975)	(71,036)
Share price at year end (cents)	15.5	n/a	n/a	n/a
Number of unlisted ordinary shares	79,593,751	54,593,751	3,453,390	160
Weighted average number of shares	48,090,267	31,309,445	14,230,731	160
Basic loss per share EPS (cents)	(5.10)	(2.33)	(1.74)	n/a
Unlisted options	16,018,622	9,968,622	-	-
Net tangible assets / (liabilities) (NTA) ($)	2,076,590	191,946	(273,184)	(86,724)
NTA Backing (cents)	2.61	0.35	(7.91)	(54,202.50)

During the financial years noted above, there were no dividends paid or other returns of capital made by the Company to shareholders.

Use of remuneration consultants

No remuneration consultants provided services during the year.

Employment contracts

Remuneration and other terms of employment for key management personnel are formalised in employment contracts. Details for these agreements are as follows:

	Position	Terms of	Employee	Employer		Termination
Name		Agreement	notice period	notice period	**Base salary ***	Benefit ***
Steve Brown	Managing Director	Ongoing from 15 October 2012	Twelve months	Twelve months	$275,000**	Twelve months’ base salary
	Chief Financial
Jillian Rosich	Officer	Ongoing from 9 August 2021	Three months	Three months	$140,000 (80% FTE) plus 250,000	Three months’ base salary
					options
Anthony Roe	Chief Digital Officer	Ongoing from 6 December 2021	Three months	Three months	$300,000 plus 500,000	Three months’ base salary
					options
Darren Shanahan	Chief Operating Officer	Resigned 11 March 2022

• Base salary is exclusive of the superannuation guarantee charge rate applicable at the time, currently 10% (2021: 9.50%). Base salary is fixed and not at risk/subject to performance.

** From the date of official listing, base salary increased from $250,000 p.a. to $275,000 p.a. plus superannuation.

*** Termination benefits are payable upon early termination by the Group, other than for gross misconduct. They are equal to base salary for the notice period.

In addition to base salary, the Company issued 250,000 options to both Jillian Rosich and Anthony Roe, vesting on 30 June 2023, exercisable at 30 cents on or before 30 June 2024 to each senior executive as part of their remuneration package. The terms of the issue of the options, require the holder to remain an employee at the vesting date of 30 June 2023. In February 2022, Anthony Roe received a second parcel of 250,000 options on the same terms.

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RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Details of remuneration

Details of the remuneration of key management personnel of the Group are set out in the following tables.

			Post		Share-
			employment	Long-term	based
	Short-term benefits		benefits	Benefits	payments	Total
	Cash salary	D&O		Long	Equity-
	and fees	insurance	Super-	service	settled
		premiums	annuation	leave	options
					(A)
2022	$	$	$	$	$	$
Non-executive Directors
Chris Sutherland	83,017	8,339	8,303	-	8,678	108,337
Ross Taylor	62,342	8,339	6,235	-	8,677	85,593
Nicole O’Connor	62,500	8,339	6,250	-	8,677	85,766
Executive Director
Steve Brown	268,118	8,339	26,785	8,212	17,355	328,809
Senior Executives
Jillian Rosich(G)	131,297	7,425	12,487	2,706	8,544	162,459
Darren Shanahan(H)	117,825	3,336	11,783	-	-	132,944
Anthony Roe(I)	184,793	4,707	17,192	2,788	26,943	236,423
	909,892	48,824	89,035	13,706	78,874	1,140,331
2021
Non-executive Directors
Chris Sutherland(B)	55,909	586	5,311	-	1,688	63,494
Ross Taylor(B)	44,455	586	4,223	-	1,688	50,952
Nicole O’Connor(C)	9,680	132	920	-	1,688	12,420
Executive Director
Steve Brown	250,463	700	23,595	27,757	3,375	305,890
Former Directors
Richard Pace(D)	-	592	-	-	-	592
John Clegg(E)	-	21	-	-	-	21
Robert Stanley(F)	12,525	489	1,190	-	-	14,204
David Endersby (F)	18,150	489	948	-	-	19,587
	391,182	3,595	36,187	27,757	8,439	467,160

(A) The fair value of options granted was determined using the Black-Scholes option pricing model

(C) Represents remuneration from 22 April 2021 to 30 June 2021

(E) Represents remuneration from 1 July 2020 to 11 July 2020

(B) Represents remuneration from 28 August 2020 to 30 June 2021

(D) Represents remuneration from 1 July 2020 to 5 May 2021

(F) Represents remuneration from 1 July 2020 to 12 March 2021

(G) Represents remuneration from 9 August 2021 to 30 June 2022

(H) Represents remuneration from 18 October 2021 to 11 March 2022

(I) Represents remuneration from 6 December 2021 to 30 June 2022

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RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

No part of Directors’ remuneration was linked to performance for the year ended 30 June 2022 (2021: Nil).

No cash bonuses were granted during the year (2021: Nil).

Additional disclosures relating to key management personnel

Shareholdings

The number of shares in the Company held during the financial year by each director, including their personally related parties, is set out below:

	Balance at the start of the year Purchases Held on appointment/ (resignation) Balance at the end of the year*
Chris Sutherland Steve Brown Ross Taylor Nicole O’Connor Jillian Rosich Darren Shanahan Anthony Roe	146,795 - - 146,795 12,597,363 - - 12,597,363 146,795 - - 146,795 - - - - - 50,000 - 50,000 - 100,000 (100,000) - - 25,000 - 25,000
	12,890,953 175,000 (100,000) 12,965,953

• All purchases were on market and not received as remuneration. No KMP remuneration, either shares, options or base salary, is linked to performance.

Page | 15

RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Additional disclosures relating to key management personnel (continued)

Option holdings

The number of options over ordinary shares in the Company held during the financial year by each director, including their personally related parties, is set out below. No options issued are dependent on KMP performance.

	Balance at the start of the year Received as part of remuneration (post acquisition) Held on resignation Balance at the end of the year Vested and exercisable at the end of the year
Chris Sutherland Steve Brown Ross Taylor Nicole O’Connor Jillian Rosich Darren Shanahan Anthony Roe	1,747,861 - - 1,747,861 1,497,861 2,074,499 - - 2,074,499 1,574,499 1,747,861 - - 1,747,861 1,497,861 250,000 - - 250,000 - - 250,000 - 250,000 - - 250,000 (250,000) - - - 500,000 - 500,000 -
	5,820,221 1,000,000 (250,000) 6,570,221 4,570,221

Share-based remuneration granted as compensation

The Company has adopted an Employee Share Option Scheme (“ESOS”). Under the ESOS, once issued, the Company may grant options and rights to Group eligible employees and consultants to acquire securities to a maximum of 10% of the Company’s total issued ordinary shares at the date of the grant. The fair value of share options granted is measured using the Black Scholes option pricing model.

The options and rights vest on a time scale as specified in the ESOS and are granted for no consideration. Options and rights granted under the plan carry no dividend or voting rights. When exercisable, each option is converted into one ordinary share. The maximum term of an option is five years from grant date and the exercise price is settled in cash. Options will not be transferable and will not be listed on the ASX unless the offer provides otherwise or the Board in its absolute discretion approves.

Page | 16

RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Additional disclosures relating to key management personnel (continued)

Options

On 30 June 2022, a summary of the Group options issued and not exercised under the share-based payment programme are as follows. Options are settled by the physical delivery of shares:

								Expired /		Vested and
				Exercise	Balance at the	Granted	Exercised	forfeited	Balance at	exercisable
Option	Grant	Vesting	Expiry	Price	start of the year	during	during	during	the end of	at the end
Class	date	date	date	(cents)		the year	the year	the year	the year	of
										the year
A	19-Mar-21	19-Mar-21	30-Jun-23	25	4,450,000	-	-	-	4,450,000	4,450,000
C	20-Apr-21	30-Jun-23	30-Jun-24	30	1,250,000	-	-	-	1,250,000	-
C	2-Aug-21	30-Jun-23	30-Jun-24	30	-	750,000	-	-	750,000	-
C	2-Sep-21	30-Jun-23	30-Jun-24	30	-	250,000		250,000	-	-
A	10-Sep-21	29-Oct-21	30-Jun-23	25	-	4,800,000	-	-	4,800,000	4,800,000
C	17-Sep-21	30-Jun-23	30-Jun-24	30	-	250,000	-	-	250,000	-
C	16-Feb-22	30-Jun-23	30-Jun-24	30	-	250,000	-	-	250,000	-
	Total				5,700,000	6,300,000	-	250,000	11,750,000	9,250,000
	Weighted average exercise price (cents)				26.10	26.19	-	30.00	26.06	25.00

At the exercise date, the weighted average remaining contractual life of options outstanding at year end was 1.21 years.

Page | 17

RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Additional disclosures relating to key management personnel (continued)

Key valuation assumptions made at valuation date under the Black & Scholes option pricing model are summarised below:

		Number of	Exercise	Grant	Expiry	Life of the	Volatility	Risk free	Fair value	Share price
		Options	Price	date	Date	Options		Rate	at grant	at grant
									date	date
			(cents)			(years)			(cents)	(cents)
Tranche	1	4,450,000	25	19-Mar-21	30-Jun-23	2.28	95%	0.10%	7.476	16
Tranche	2	1,250,000	30	20-Apr-21	30-Jun-24	3.20	95%	0.10%	7.617	16
Tranche	3	750,000	30	02-Aug-21	30-Jun-24	2.91	95%	0.16%	7.175	16
Tranche	4	250,000	30	02-Sep-21	16-Feb-22	N/A	95%	0.15%	7.035	16
Tranche	5	4,800,000	25	10-Sep-21	30-Jun-23	1.80	95%	0.01%	8.361	20
Tranche	6	250,000	30	17-Sep-21	30-Jun-24	2.79	95%	0.15%	9.691	20
Tranche	7	250,000	30	16-Feb-22	30-Jun-24	2.37	90%	1.02%	24.278	41

During the reporting period, no options expired and no shares were issued following the exercise of options. However, 250,000 options issued to Darren Shanahan were cancelled on his resignation from the Company.

At the reporting date, there are a total of 16,018,622 options on issue in RemSense Technologies Limited (11,750,000 options relating to KMP), exercisable between 25 and 30 cents per share, and expiring between 30 June 2023 and 30 June 2024.

After year end, on 20 July 2022, the acquisition of the virtualplant IP was funded though the conversion of certain A options held by current and past directors of the Company.

Loans to Directors and other key management personnel

RemSense Pty Ltd negotiated a three years’ interest only Business Loan secured against the business, its assets, and personal guarantees from Steve Brown, John Clegg and Richard Pace, directors of RemSense Pty Ltd. During the period, all outstanding loans were repaid in full by the Company.

Other transactions with key management personnel

Several key management personnel, or their related parties, hold positions in other companies that result in them having control or significant influence over these companies.

Page | 18

RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

Additional disclosures relating to key management personnel (continued)

Only one KMP had any transaction with the Company during this financial year as detailed below. The terms and conditions of this transaction were no more favourable than those available, or which might reasonably be expected to be available, in similar transactions to non-key management personnel related companies on an arm’s length basis.

Steve Brown

Imaging Properties Pty Ltd, a company for which Steve Brown is a Director, received $33,267 (2021: $43,336) in payment for lease and variable outgoing of the Gibberd Road, Balcatta, premises. This was obtained at arm’s length and under normal commercial terms. RemSense terminated their lease on the property at the end of March 2022 and there are no amounts owed on 30 June 2022 (2021: $3,848).

Fiona Brown (relation to Steve) received $10,651 (2021: $40,986) in salary and on-costs for her role as Administration and Finance Officer.

END OF AUDITED REMUNERATION REPORT

Page | 19

RemSense Technologies Limited

Directors’ Report For the year ended 30 June 2022

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

On behalf of the Directors.

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STEVE BROWN

Managing Director

31 August 2022 Perth, WA

Page | 20

Tel: +61 8 6382 4600 Level 9, Mia Yellagonga Tower 2 Fax: +61 8 6382 4601 5 Spring Street www.bdo.com.au Perth WA 6000 PO Box 700 West Perth WA 6872 Australia

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DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF REMSENSE TECHNOLOGIES LIMITED

As lead auditor of RemSense Technologies Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

2. No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of RemSense Technologies Limited and the entity it controlled during the period.

==> picture [73 x 59] intentionally omitted <==

Dean Just

Director

BDO Audit (WA) Pty Ltd

Perth

31 August 2022

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

RemSense Technologies Limited

Financial Report For the year ended 30 June 2022

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022

NCOME or the year ended 30 June 2022
Note Revenue 2.2 Government grants 2.3 Other income Cost of sales Other operating expenses Marketing and business development Personnel expenses 2.5 General and administration Professional fees Depreciation 3.1 Amortisation Amortisation – right of use assets 3.2 Research and development costs Other gains Results from operating activities Finance income Finance costs 2.4 Net finance costs Loss before income tax Income tax expense 2.6 Loss for the year Other comprehensive income Total comprehensive loss for the year Total comprehensive loss attributable to owners of the Company Loss per share (cents per share) Basic and diluted 2.7	2022 2021 $ $
	3,961,304 4,311,664 80,559 370,463 - 2,625 (2,914,581) (3,509,703) - (7,456) (139,851) (218,529) (2,413,636) (1,031,925) (454,011) (209,950) (369,330) (155,517) (77,351) (146,924) (8,056) (729) (91,663) (82,640) (21,737) - 2,194 23
	(2,446,159) (678,598)
	1,849 127 (6,792) (50,152)
	(4,943) (50,025)
	(2,451,102) (728,623)
	- -
	(2,451,102) (728,623)
	- -
	(2,451,102) (728,623)
	(2,451,102) (728,623)
	(5.10) (2.33)

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

Page | 22

RemSense Technologies Limited

Financial Report

For the year ended 30 June 2022

CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2022

Note Assets Cash and cash equivalents 4.1 Trade and other receivables 4.2 Inventory Contract assets 2.2 Prepayments 4.3 Other financial assets 4.4 Total current assets Property, plant, and equipment 3.1 Right of use assets 3.2 Intangible assets 3.3 Other financial assets 4.4 Total non-current assets Total assets Liabilities Trade and other payables 4.5 Borrowings 5.2 Lease liabilities 5.3 Employee benefits 2.5 Contract liabilities 2.2 Total current liabilities Borrowings 5.2 Lease liabilities 5.3 Employee benefits 2.5 Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital 5.1 Reserves 5.1 Accumulated losses Total equity	2022 2021 $ $
	2,140,174 533,304 568,367 526,475 - 5,000 6,058 - 97,179 41,721 131,624 -
	2,943,402 1,106,500
	300,889 93,833 106,244 201,726 398,616 6,201 - 18,581
	805,749 320,341
	3,749,151 1,426,841
	646,869 463,055 - 57,552 102,835 113,058 275,547 181,865 146,138 -
	1,171,389 815,530
	- 262,745 - 98,960 90,556 51,459 12,000 -
	102,556 413,164
	1,273,945 1,228,694
	2,475,206 198,147
	5,652,655 1,421,784 497,055 (235) (3,674,504) (1,223,402)
	2,475,206 198,147

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

Page | 23

RemSense Technologies Limited

Financial Report

For the year ended 30 June 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022

Balance on 1 July 2020 Loss after income tax expense for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners Contributions of equity (note 5.1) Share-based payment transactions (note 6.1) Transactions under common control Balance on 30 June 2021 Balance on 1 July 2021 Loss after income tax expense for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners Contributions of equity (note 5.1) Share-based payment transactions (note 6.1) Balance on 30 June 2022	Issued capital $ Predecessor accounting reserve $ Options reserve $ Accumulated losses $ 226,995 - - (494,779) - - - (728,623)	Total equity $
		(267,784)
		(728,623)
	- - - (728,623)	(728,623)
	1,194,789 - - - - - 8,439 - - (8,674) - -
		1,194,789
		8,439
		(8,674)
	1,421,784 (8,674) 8,439 (1,223,402)	198,147
	1,421,784 (8,674) 8,439 (1,223,402) - - - (2,451,102)
		198,147
		(2,451,102)
	- - - (2,451,102)	(2,451,102)
	4,230,871 - - - - - 497,290 -
		4,230,871
		497,290
	5,652,655 (8,674) 505,729 (3,674,504)	2,475,206

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

Page | 24

RemSense Technologies Limited

Financial Report

For the year ended 30 June 2022

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2022

Note Cash flows from operating activities Receipts from customers Government grants 2.3 Payments to suppliers and employees Interest received Interest paid Payments for research and development Net cash used in operating activities 4.1(b) Cash flows from investing activities Proceeds from sale of property, plant, and equipment Payments for property, plant, and equipment Payments for intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares and options Proceeds from loans Repayment of loans Repayment of premium funding facilities Repayment of chattels and mortgages Payment of lease liabilities Payment of capital raising costs Payment of transaction costs related to loans Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 4.1(a)	2022 2021 $ $
	4,458,660 4,116,638 80,559 370,963 (6,480,564) (4,678,077) 1,849 127 (6,792) (49,873) (21,737) -
	(1,968,025) (240,222)
	2,334 - (270,145) (12,399) (375,831) (1,530)
	(643,642) (13,929)
	5,000,000 1,005,170 100,000 68,124 (350,000) (25,000) - (73,851) (70,297) (105,491) (93,364) (77,425) (367,801) (44,100) - (2,367)
	4,218,538 745,060
	1,606,870 490,909 533,304 42,395
	2,140,174 533,304

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

Page | 25

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

NOTES TO THE CONSOLIDATED FINANCIAL REPORT For the year ended 30 June 2022

SECTION 1 ABOUT THE FINANCIAL STATEMENTS

The financial statements of RemSense Technologies Limited (“the Company”) and it’s controlled entity (collectively known as “the Group”) for the year ended 30 June 2022 were authorised for issue on 26 August 2022 in accordance with a resolution of the Directors.

The Company is:

• a company limited by shares.

• incorporated and domiciled in Australia.

• a listed public company (ASX code: REM).

• a for-profit entity for the purpose of preparing the financial statements.

A description of the nature of the Group’s operations and its principal activities are included in the Directors’ Report, which is not part of the financial statements.

Its registered office and principal place of business is located at Suite 173, 580 Hay Street, Perth, WA, 6000.

The financial report is a general-purpose financial report, which:

• has been prepared in accordance, and complies, with the requirements of the Corporations Act 2001, Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

• has been prepared on a historical cost basis, except for, where applicable, certain classes of property, plant and equipment.

• is presented in Australian dollars ($), which is the functional and presentation currency.

Accounting policies

The Group has adopted all new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are relevant to its operations and effective for an accounting period on or after 1 July 2021.

All new and revised Standards have been assessed and the Group has determined that there is no material impact on the new and revised Standards and Interpretations on the Group and, therefore, no material change is necessary to the Group accounting policies.

At the date of authorisation of these consolidated financial statements, the Group has not applied the new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. Based on a preliminary review of the standards and amendments, the Directors do not anticipate a material change to the Group’s accounting policies, however, further analysis will be performed when the relevant standards are effective.

Page | 26

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

1.1 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Company and entity controlled by the Company (its subsidiary) made up to 30 June each year.

Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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 over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

1.2 PARENT ENTITY INFORMATION

In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 6.5.

1.3 GOING CONCERN

The consolidated financial statements have been prepared on a going concern basis which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. On 30 June 2022, the Group had net assets of $2,471,505 (30 June 2021: $198,147), a working capital surplus of $1,772,013 (30 June 2021: $290,970) and cash at bank of $2,140,174 (30 June 2021: $533,304). For the year ended 30 June 2022, the Group recorded a loss of $2,451,102 ($2021: $728,623) and cash outflows from operating and investing activities of $2,611,667 (2021: $254,151).

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

The financial statements have been prepared on the basis that the Group is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for the following reason. Given the recent successful listing of the Company on the ASX, the directors are of the opinion that they can raise funds as and when required.

The financial report does not contain any adjustments relating to the recoverability and classification of recorded asset amounts, nor to the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going concern.

1.4 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, revenue, and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. 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.

Page | 27

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

Determination of variable consideration

Judgement is exercised in estimating variable consideration where services have a variable component. Revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Impairment

The consolidated entity assesses impairment of non-financial 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-inuse calculations, which incorporate a number of key estimates and assumptions.

Government grants

Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received, and the Group will comply with the attached conditions. In respect of COVID related government grants, the Group was deemed to be eligible to receive the grants under the conditions attached to the grants and have complied with the relevant conditions in order to recognise them as income during the prior year.

Share-based payment transactions

Estimating fair value of share based payment transactions requires determination of the most appropriate valuation mode, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the volatility and risk free rate and making assumptions about them.

The Group 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 using a Black-Scholes model, using the assumptions detailed in note 6.1.

Employee benefits provision

The liability for employee benefits expected to be settled more than 12 months from the reporting date is 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 accounted for.

Page | 28

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

Coronavirus (COVID-19) pandemic

Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of business development and the geographic regions in which the Group operates particularly scanning for virtualplant jobs. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.

1.5 CURRENT AND NON-CURRENT CLASSIFICATION

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

An asset is classified as current when it is either expected to be realised or intended to be sold or consumed in the Group’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 date, 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 date. All other assets are classified as non-current.

A liability is classified as current when it is either expected to be settled in the Group’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 date, or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting date. All other liabilities are classified as non-current.

Page | 29

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

SECTION 2 RESULTS FOR THE YEAR

This section focuses on the results and performance of the Group, with disclosures including segment information, components of the operating loss, income tax, and loss per share.

2.1 OPERATING SEGMENTS

Accounting Policy

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, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of RemSense Technologies Limited.

The Group is organised into one operating segment, being technology development and systems engineering services across a range of markets and applications in Western Australia. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the CODM) in assessing performance and determining the allocation of resources.

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

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 30 June 2021.

2.2 REVENUE

Accounting Policy

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring services to a customer. For each contract with a customer, the Group: 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 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 services promised.

Rendering of services

Revenue from a contract to provide services is recognised over time as the services are rendered based on an hourly rate. For fixed priced jobs revenue is recognised at a point in time when the service is transferred to the customer. In the case of scanning work, this is the point at which the images are made available to the customer.

Methods for measuring progress towards satisfaction of a performance obligation

Output methods recognise revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. Output methods include methods such as surveys of performance completed to date, appraisals of results achieved, milestones reached and time elapsed. When an entity evaluates whether to apply an output method to measure its progress, the entity shall consider whether the output selected would faithfully depict the entity’s performance towards complete satisfaction of the performance obligation.

Page | 30

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

2.2 REVENUE (continued)

Input methods recognise revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labour hours expended, costs incurred) relative to the total expected inputs to the satisfaction of that performance obligation.

The input method is most appropriate for recognising revenue on the Group’s Engineering projects where invoices are issued at month-end based on hours worked and costs incurred until the job is complete.

The output method is most appropriate for recognising revenue on the Group’s remotely piloted aircraft system contracts. Revenue is booked when the asset, in this case the scanned images, are delivered to the customer.

During the year, RemSense secured its first two 12-month SaaS contracts with Woodside, covering the period from 1 January 2022 to 31 December 2022. The group has recognised revenue over the period as earned and therefore, at year end has recognised 6 months revenue on these two contracts.

Page | 31

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

2.2 REVENUE (continued)

Accounting Policy (continued)

Contract assets

Contract assets are recognised when the Group has transferred goods and services to the customer but where the Group is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes.

Contract liabilities

Contract liabilities are recognised when there is an obligation for the Group to transfer goods and services to the customer but where the Group has already received consideration from the customer. Revenue is recognised over the period it is earned. Contract liabilities are treated as financial liabilities for impairment purposes.

• (i) The Group’s disaggregation of revenue from contracts with customers is as follows:

Timing of revenue recognition Rendering of services transferred over time * Rendering of services transferred at a point in time **	2022 2021 $ $
	3,068,541 3,482,514 892,763 829,150
	3,961,304 4,311,664

• Revenue from engineering services is recognised over time.

• Revenue from scanning jobs and Software as a Service (SaaS) contracts are recognised at a point in time.

• (ii) The Group’s assets and liabilities related to contracts with customers is as follows:

Contract assets Accrued income Contract liabilities Unearned revenue *	2022 2021 $ $
	6,058 -
	6,058 -
	146,138 -
	146,138 -

• The balance of $146,138 relates to unearned revenue on three contracts. Revenue will be fully recognised and earned on these contracts by the end of February 2023.

Page | 32

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

2.3 GOVERNMENT GRANTS

Accounting Policy

Government grants

Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received, and the Group will comply with the terms and conditions.

All other income is recognised when the amount can be reliably measured and control of the right to receive the income be passed to the Group.

Note R&D tax incentive Job Keeper payments PAYG cash flow boost Business Events Grant program (i)	2022 2021 $ $
	80,559 - - 322,450 - 37,500 - 10,513
	80,559 370,463

2.4 FINANCE COSTS

Accounting Policy

Interest income

Interest income 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.

Finance costs

Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs, including interest expense, are expensed in the period in which they are incurred.

Page | 33

Notes to the Consolidated Financial Report

RemSense Technologies Limited

For the year ended 30 June 2022

Note Interest expense on financial liabilities measured at amortised cost Interest expense on bank loans 5.2 Interest expense on loans received from related parties 5.2 Interest expense on loans received from shareholders 5.2 Interest expense on chattels and mortgages 5.2 Interest expense on premium funding 5.2 Interest expense on lease liabilities 5.3 Other finance charges Total finance costs	2022 2021 $ $
	4,617 13,802 - 3,817 - 3,511 1,795 6,358 - 5,273 380 15,024 - 2,367
	6,792 50,152

2.5 PERSONNEL EXPENSES AND EMPLOYEE BENEFITS

Accounting Policy

Short-term employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

Other long-term employee benefits

The liabilities for annual leave and long service leave not expected to settle within 12 months of the reporting date is 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, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Defined contribution superannuation expense

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

Page | 34

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

2.5 PERSONNEL EXPENSES AND EMPLOYEE BENEFITS (continued)

The table below sets out personnel costs expensed during the year.

Note Directors’ and key management personnel remuneration 6.3 Staff salaries Superannuation expense Employee benefits Payroll and fringe benefits tax Worker’s compensation Share-based payment options issued to employees 6.1 Recruitment expenses Other associated personnel expenses Expensed in cost of sales Capitalised in intangible assets Personnel expenses	2022 2021 $ $
	1,140,331 467,160 2,335,684 1,461,608 226,247 135,822 77,865 49,215 191,689 45,548 - 10,770 17,088 - 46,185 - 65,631 7,587
	4,100,720 2,177,710
	(1,388,853) (1,145,785) (298,231) -
	2,413,636 1,031,925

The table below sets out employee benefits at the reporting date.

he table below sets out employee benefits at the reporting date.
Current Statutory superannuation contributions Salary accrual Liability for annual leave Liability for time off in lieu leave Liability for long service leave Non-current Liability for long service leave	2022 2021 $ $
	5,060 12,281 50,595 21,890 161,819 111,411 13,580 - 44,493 36,283
	275,547 181,865
	90,556 51,459

Page | 35

Notes to the Consolidated Financial Report

RemSense Technologies Limited

For the year ended 30 June 2022

2.6 INCOME TAX EXPENSE

Accounting Policy

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 in Australia, 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.

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 as transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits, or

• • 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.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probably 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. Deferred tax 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.

Page | 36

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

2.6 INCOME TAX EXPENSE (continued)

Accounting Policy (continued)

Goods and Services Tax (‘GST’) and other similar taxes

Revenues, expenses, and assets are recognised net of the amount of, 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 exclusive 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 which 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 taxation authority.

(a) Amounts recognised directly in equity

a) Amounts recognised directly in equity
	2022	2021
	$	$
Net deferred tax	192,282	-
Net deferred tax	192,282	-
(b) Reconciliation of income tax expense to prima facie
tax payable:
Loss from continuing operations before income tax	(2,451,102)	(728,623)
Tax at the Australian tax rate of 25% (2021: 27.5%)	(612,775)	(200,371)	(200,371
Non-deductible expenses	28,767	31,804
Non-assessable income	(20,140)	(10,428)
Adjustment for prior periods	-	(23,207)
Timing differences	(1,216)	39,323
Change in corporate tax rate for small business enterprise	27,240	-
Tax losses not brought to account	578,124	162,879
Income tax expense	-	-

Page | 37

Notes to the Consolidated Financial Report

RemSense Technologies Limited

For the year ended 30 June 2022

2.6 INCOME TAX EXPENSE (continued)

All unused tax losses were incurred by Australian entities.

Potential future income tax benefits of up to $830,623 (2021: $224,989) attributed to revenue tax losses have not been brought to account.

The benefit of these tax losses will only be obtained if:

• i) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised, ii) the conditions for deductibility imposed by tax legalisation continue to be complied with,

• iii) no changes in tax legislation adversely affect the Group in realising the benefit, and

• iv) satisfaction of either the continuity of ownership or the same business test.

(c) Unrecognised deferred tax assets and liabilities

Deferred tax assets and liabilities have not been recognised in respect of the following items:

Deferred tax liabilities Prepaid expenditure Property, plant and equipment Intangible assets Right of Use Assets Deferred tax assets Capital raising costs – S40-880 Right of use assets Trade and other payables Employee benefits Carry forward tax losses – revenue Carry forward tax losses - capital Net unrecognised deferred tax assets	2022 2021 $ $
	- (11,474) (596) (25,804) - (75) (26,561) (75)
	(27,157) (37,353)
	160,441 10,605 25,709 34,691 17,276 8,559 75,482 58,145 830,623 224,989 53,706 -
	1,163,237 336,989
	1,136,080 299,636

Page | 38

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

2.7 LOSS PER SHARE

Accounting Policy

Basic earnings/(loss) per share

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

Diluted earnings/(loss) 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.

Potential ordinary shares are not considered dilutive, thus diluted gain/(loss) per share is the same as basis gain/(loss) per share.

==> picture [506 x 292] intentionally omitted <==

----- Start of picture text -----

2022 2021
$ $
Basic and diluted loss per share from continuing operations
Loss after income tax attributable to owners of the Company (2,451,102) (728,623)
Cents Cents
Basic loss and diluted loss per share (5.10) (2.33)
Number Number
Weighted average number of ordinary shares
Issued ordinary shares on 1 July 31,309,445 3,453,390
Effect of shares issued 16,780,822 27,856,055
Weighted average number of ordinary shares used in
calculating basic and diluted loss per share 48,090,267 31,309,445
----- End of picture text -----

(i) The weighted average number of ordinary shares outstanding (the denominator of the EPS calculation) for the years ended 30 June 2022 and 30 June 2021 have been adjusted to reflect the capital reorganisation.

Page | 39

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

SECTION 3 ASSETS AND LIABILITIES SUPPORTING OPERATIONS

This section focuses on the assets and liabilities which form the core of the ongoing business as well as capital and other commitments existing at the year end.

3.1 PROPERTY, PLANT AND EQUIPMENT

Accounting Policy

Plant and equipment are 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 diminishing balance basis to write off the net cost of each item of property, plant, and equipment (excluding land) over their expected useful lives as follows:

Plant and equipment	2 – 5 years
Furniture and office equipment	5 – 10 years
Mobile equipment and motor vehicles	8 years
Communication and computer equipment	2 – 6 years

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

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

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained earnings / accumulated losses.

Page | 40

Notes to the Consolidated Financial Report

RemSense Technologies Limited

For the year ended 30 June 2022

3.1 PROPERTY, PLANT AND EQUIPMENT (continued)

.1 PROPERTY, PLANT AND EQUIPMENT (continued)
Plant and equipment – at cost Less: accumulated depreciation Furniture and office equipment – at cost Less: accumulated depreciation Communication and computer equipment – at cost Less: accumulated depreciation Mobile equipment and motor vehicles – at costs Less: accumulated depreciation Leasehold improvements – at costs Less: accumulated depreciation	2022 2021 $ $
	538,929 329,807 (309,465) (268,194)
	229,464 61,613
	39,185 2,062 (2,631) (1,045)
	36,554 1,017
	49,183 17,939 (27,766) (8,619)
	21,417 9,320
	58,409 58,409 (45,227) (40,792)
	13,182 17,617
	6,426 4,266 (6,154) -
	272 4,266
	300,889 93,833

Reconciliation

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

	Plant & equipment $ Furniture & office Equipment $ Computer & comms Equipment $ Mobile Equipment & motor Vehicles $ Leasehold Improvements $ Total $
Balance on 1 July 2020 Additions Disposals Depreciation on disposals Depreciation expense Balance on 30 June 2021 Additions Disposals Depreciation on disposals Depreciation expense Balance on 30 June 2022	172,772 1,695 - 23,530 - 197,997 22,223 - 17,939 - 4,266 44,428 (1,690) - - - - (1,690) 22 - - - - 22 (131,714) (678) (8,619) (5,913) - (146,924)
	61,613 1,017 9,320 17,617 4,266 93,833 206,788 37,123 31,244 - 2,159 277,314 2,334 - - - - 2,334 4,759 - - - - 4,759 (46,030) (1,586) (19,147) (4,435) (6,153) (77,351)
	229,464 36,554 21,417 13,182 272 300,889

Page | 41

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

3.2 RIGHT-OF-USE ASSETS

Accounting Policy

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 an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

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

The Group 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.

Land and buildings – right of use Less: accumulated amortisation	2022 2021 $ $
	236,975 327,874 (130,731) (126,148)
	106,244 201,726

Reconciliation

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

	Buildings – Office Leases $
Balance on 1 July 2020 Additions Amortisation expense Balance on 30 June 2021 Additions Abatement adjustment Disposals Amortisation on disposals Amortisation expense Balance on 30 June 2022	225,026 59,340 (82,640)
	201,726 65,161 (40,807) (115,253) 87,080 (91,663)
	106,244

The Group leases land and buildings for its offices and aerial imaging operations, under agreements of between three and five years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.

Page | 42

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

3.3 INTANGIBLE ASSETS

Accounting Policy

Internally generated intangible assets are measured at cost. Cost includes expenditure that is directly attributable to the development of the asset. For the year ended 30 June 2022, the Company capitalised $400,471 of product development cost as an intangible asset. Software development Costs that are directly associated with the development of software are recognised as intangible assets where the following criteria are met: – It is technically feasible to complete the software product so that it will be available for use – Management intends to complete the software product and use or sell it – There is an ability to use or sell the software product – It can be demonstrated how the software product will generate probable future economic benefits – Adequate technical, financial, and other resources to complete the development and to use or sell the software product are available and – The expenditure attributable to the software product during its development can be reliably measured. Other development expenditure that does not meet the above criteria is recognised as an expense when incurred. Development costs previously recognised as expenses are not recognised as assets in a subsequent period. Research costs, and costs associated with maintenance, are recognised as an expense when incurred The useful life of intangible assets are assessed when capitalised. Intangible assets are amortised over their estimated useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period. The following estimated useful lives are used in the calculation of amortisation for intangible assets with finite lives: Software − 5 years An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are recognised in profit or loss when the asset is derecognised. At each reporting date, Management will review the carrying amount of the development expenditure and consider whether there is any indication that those assets have suffered an impairment loss in line with the requirements of AASB 136. At reporting date of 30 June 2022, impairment indicators specified under AASB136 para 12, were considered in relation to the value of virtualplant version 1.5. With those indicators in mind, we do not consider there to be any indication that the asset may be impaired.

Page | 43

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

3.3 INTANGIBLE ASSETS (continued)

.3 INTANGIBLE ASSETS (continued)
Patents and Trademarks – at cost Less: accumulated depreciation Software – at cost Less: accumulated depreciation Construction in progress – at cost Less: accumulated depreciation virtualplant V1.5 – at cost Less: accumulated depreciation virtualplant V2.0 – at cost Less: accumulated depreciation	2022 2021 $ $
	5,930 5,400 - -
	5,930 5,400
	- 1,000 - (729)
	- 271
	- 530 - -
	- 530
	232,917 - (7,785) -
	225,132 -
	167,554 - - -
	167,554 -
	398,616 6,201

Reconciliation

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

	Patents & Trademarks $ Software $ Construction in Progress $ virtualplant V1.5 $ virtualplant V2.0 $ Total $
Balance on 1 July 2020 Additions Disposals Depreciation expense Balance on 30 June 2021 Additions Disposals Depreciation expense Balance on 30 June 2022	5,000 - 400 - - 5,400 400 1,000 530 - - 1,930 - - (400) - - (400) - (729) - - - (729)
	5,400 271 530 - - 6,201 530 - - 232,917 167,554 401,001 - - (530) - - (530) - (271) - (7,785) - (8,056)
	5,930 - - 225,132 167,554 398,616

Page | 44

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

SECTION 4 WORKING CAPITAL DISCLOSURES

This section focuses on the cash funding available to the Group and working capital position at year end.

4.1 CASH AND CASH EQUIVALENTS

Accounting Policy

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions. For the statement of cash flows presentation purposes, cash and cash equivalent also includes, bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position.

(a) Reconciliation of cash recorded in Statement of Financial Position to Statement of Cash Flows

Cash at bank Cash on deposit Other Cash and cash equivalents in the statement of cash flows	2022 2021 $ $
	637,061 435,902 1,500,000 97,352 3,113 50
	2,140,174 533,304

(b) Reconciliation of cash flows from operating activities

Cash flows from operating activities Loss for the period Adjustments for: Finance expense Depreciation and amortisation Equity-settled share-based payments Annual and long service leave expense Gain on sale of property, plant, and equipment Change in trade and other receivables Change in prepayments Change in inventories Change in contract assets Change in other operating assets Change in trade and other payables Change in interest bearing liabilities Change in contract liabilities Change in employee benefits provision Net cash used in operating activities c) Non-cash investing and financing activities Additions to the right-of-use assets Additions to property, plant, and equipment by means of leases	(2,451,102) (728,623) - 2,367 177,070 230,293 95,962 8,439 111,296 - (2,334) (23) (35,176) (327,787) (55,458) (16,923) 5,000 - (6,058) 78,300 (113,043) (18,581) 138,196 367,088 - 52,186 146,138 - 21,484 113,042
	(1,968,025) (240,222)
	(15,819) 59,340 - 32,029

(c) Non-cash investing and financing activities

Page | 45

Notes to the Consolidated Financial Report

RemSense Technologies Limited

For the year ended 30 June 2022

4.1 CASH AND CASH EQUIVALENTS (continued)

(d) Changes in liabilities arising from financing activities

Balance on 1 July 2020 Net cash from / (used in) financing activities Premium funding facility Acquisition of property, plant, and equipment Interest on related party and shareholder loans Right of use lease liabilities Supplier invoice to extinguish a debt Shares issued to extinguish a debt Balance on 30 June 2021 Net cash from / (used in) financing activities Right of use lease liabilities Balance on 30 June 2022	Bank loans Director loans Shareholder loans Chattels & mortgages Premium funding Right of use assets Related entity loans $ $ $ $ $ $ $	Total
		$
	250,000 127,147 85,113 143,760 - 230,102 - - 19,579 23,546 (105,492) (73,851) (77,424) - - - - - 73,851 - - - - - 32,029 - - - - (988) (1,100) - - - - - - - - - 59,340 - - (19,578) - - - - - - (126,160) (107,559) - - - -
		836,122
		(213,642)
		73,851
		32,029
		(2,088)
		59,340
		(19,578)
		(233,719)
	250,000 - - 70,297 - 212,018 - (250,000) - - (70,297) - (93,364) - - - - - - (15,819) -	532,315
		(413,661)
		(15,819)
	- - - - - 102,835 -	102,835

Page | 46

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

4.2 TRADE AND OTHER RECEIVABLES

Accounting Policy

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.

The Group 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.

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

Current Trade receivables Other receivables	2022 2021 $ $
	559,138 514,475 9,229 12,000
	568,367 526,475

Provision for expected credit losses

The Group has not recognised a provision for expected credit losses for the year ended 30 June 2022 as credit risk has not increased significantly since initial recognition. Payment of invoices takes on average 33 days (2021: 30 days).

There were no trade receivable impairment losses for the year ending 30 June 2022 (2021: Nil).

The ageing of trade receivables is as follows:

Not overdue 0 to 3 months overdue	2022 2021 $ $
	468,766 513,430 90,372 1,045
	559,138 514,475

Note 6.2 includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected credit losses.

Page | 47

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

4.3 PREPAYMENTS

Current Prepaid insurance Prepaid rent and outgoings Other prepayments .4 OTHER FINANCIAL ASSETS Current Bank Guarantee Term Deposits Term Deposits Non-current Bank Guarantee Term Deposits	2022 2021 $ $
	47,693 20,476 4,915 3,922 44,571 17,323
	97,179 41,721
	2022 2021 $ $
	71,624 - 60,000 -
	131,624 -
	- 18,581
	- 18,581

4.4 OTHER FINANCIAL ASSETS

Other financial assets include $71,624 of bank guarantees held over the Company’s leased premises. The $60,000 term deposit is held against a corporate credit card facility.

Page | 48

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

4.5 TRADE AND OTHER PAYABLES

Accounting Policy

These amounts represent liabilities for goods and services provided to the Group 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 days of recognition.

Current Trade payables Other payables Authorised government agencies	2022 2021 $ $
	426,708 266,614 94,599 122,291 125,562 74,150
	646,869 463,055

Refer to note 6.2 for further information on financial instruments.

SECTION 5 EQUITY AND FUNDING

This section focuses on the debt and equity funding available to the Group at year end, most notably covering share capital and loans and borrowings.

5.1 CAPITAL AND RESERVES

Accounting Policy

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.

Page | 49

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

Share capital

hare capital
Balance on 1 July Issue of fully paid shares for cash Issue of fully paid shares in satisfaction of shareholder loans(1) Less: adjustment for predecessor accounting(2) Issue of shares to RPL shareholders(3) Issue of fully paid shares for cash Share issued on incorporation of REM Capital raising costs Balance on 30 June		Ordinary shares Number of shares Amount in $ 2022 2021 2022 2021 54,593,751 3,453,390 1,421,784 226,995 25,000,000 127,155 5,000,000 270,170 - 89,965 - 233,719 - (3,670,510) - - - 50,000,000 - - - 4,593,750 - 735,000 - 1 - - - - (769,129) (44,100)
		79,593,751 54,593,751	5,652,655 1,421,784

(1) As disclosed in note 5.2, related parties and shareholders provided cash loans to the RPL which were extinguished via the issue of fully paid shares.

(2) The application predecessor accounting for the acquisition and consolidation of the common controlled entity: RemSense Technologies Limited required the value of the RemSense Pty Ltd shares on issued as at 13 April 2021.

(3) The Company issued 50,000,000 fully paid ordinary shares to RemSense Pty Ltd shareholders.

Page | 50

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

Reserves

The following table shows the movement in reserves during the year.

(a) Predecessor accounting reserve

• (b) Options reserve

2022	2021
$	$
(8,674)	(8,674)
505,729	8,439
497,055	(235)

• (a) The predecessor accounting reserve arises from the capital reorganisation and records the net liabilities of RemSense Technologies Limited as at the acquisition date of 14 April 2021.

• (b) Options reserve

Balance on 1 July

Issue of options (exercisable at 25 cents), expiring on 30-Jun-23 as part of broker consideration Issue of series-A options (exercisable at 30 cents), expiring on 30-Jun- 24 to Directors & Consultants Issue of series-C options (exercisable at 30 cents), expiring on 30-Jun- 24 to Directors & KMP Issue of series-C options (exercisable at 30 cents), expiring on 30-Jun- 24 to employees

Balance on 30 June

	Options Number of options Amount in $ 2022 2021 2022 2021 9,968,622 4,268,622 8,439 - 4,800,000 - 401,329 - - 4,450,000 - - 750,000 1,250,000 78,873 8,439 500,000 - 17,088 -	Options Number of options Amount in $ 2022 2021 2022 2021 9,968,622 4,268,622 8,439 - 4,800,000 - 401,329 - - 4,450,000 - - 750,000 1,250,000 78,873 8,439 500,000 - 17,088 -
	16,018,622 9,968,622	505,729 8,439

Page | 51

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

5.2 LOANS AND BORROWINGS

Accounting Policy

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.

Current Chattel mortgage Balance Non-current Bank loans Chattel mortgage Balance		Book value 2022 $ Fair value 2022 $ - -	Book value 2021 $ Fair value 2021 $ 57,552 57,552
		- -	57,552 57,552
			250,000 250,000 12,745 12,745
		- - - -
		- -	262,745 262,745

During the period, all outstanding loans were repaid in full by the Company.

Financing arrangements

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

Note Total facilities Bank loans (i) Used at the reporting date Bank loans	2022 2021 $ $
	- 250,000 - 250,000

(i) RPL negotiated a three years’ interest only Business Loan secured against the business, its assets, and personal guarantees from Steve Brown, John Clegg and Richard Pace, directors of RPL. Interest expense to 30 June 2022 was $4,617 (2021: $13,802) and the balance outstanding at 30 June 2022 was Nil (2021: $250,000).

Page | 52

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

5.2 LOANS AND BORROWINGS (continued)

Balance on 1 July 2020 Loans and borrowings received Financing of chattel mortgage Financing of premium funding facility Transfer of loans on resignation of a director Extinguish loan through issue of shares Extinguish loan through issue of supplier invoice Interest charged Less: repaid(1) Balance on 30 June 2021 Interest charged Less repaid(1) Balance on 30 June 2022	Bank loans $ Loans from directors(2) $ Loans from shareholders $ Chattel mortgage $ Premium funding $ Total $
	250,000 127,148 85,113 143,759 - 606,020 - 44,578 23,545 - - 68,123 - - - 32,029 - 32,029 - - - - 73,851 73,851 - (26,716) 26,716 - - - - (99,444) (134,275) - - (233,719) - (19,578) - - - (19,578) 13,802 3,817 3,511 6,358 5,273 32,761 (13,802) (29,805) (4,610) (111,849) (79,124) (239,190)
	250,000 - - 70,297 - 320,297 4,617 - - 1,795 - 6,412 (254,617) - - (72,092) - (326,709)
	- - - - - -

(1) amounts repaid include interest and loan establishment costs

Page | 53

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

5.3 LEASE LIABILITIES

Accounting Policy

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 Group’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 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, or

• 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.

Incremental borrowing rate (IBR)

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-use asset, with similar terms, security, and economic environment. As at 30 June 2022, the Group uses a IBR of between 40% and 7.0%.

Opening balance Additions Abatement adjustment Disposals Interest charged Less principal and interest repayments Lease liabilities included in the statement of financial position Current Non-current	2022 2021 $ $
	212,018 230,102 53,161 59,340 (21,907) - (28,173) - 380 15,024 (112,644) (92,448)
	102,835 212,018
	102,835 113,058 - 98,960
	102,835 212,018

Refer to note 6.2 for further information on financial instruments.

Page | 54

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

SECTION 6 OTHER DISCLOSURES

The disclosures in this section focus on share schemes in operation and financial risk management of the Group. Other mandatory disclosures, such as details of related party transactions, can also be found here.

6.1 SHARE-BASED PAYMENTS

Accounting Policy

Equity-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.

The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model that considers 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 Group 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 is recognised as an expense with a corresponding increase inequity 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.

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 Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group 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.

Page | 55

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.1 SHARE-BASED PAYMENTS (continued)

The share-based payment expense included within the consolidated financial statements can be broken down as follows:

Expensed in personnel expenses Options issued to directors and key management personnel Options issued to employees Capital raising costs within equity Options issued to broker	2022 2021 $ $
	78,873 8,439 17,088 - 401,329 -

Share-based payment programme

The Company has adopted an Employee Share Option Scheme (“ESOS”). Under the ESOS, once issued, the Company may grant options and rights to Group eligible employees and consultants to acquire securities to a maximum of 10% of the Company’s total issued ordinary shares at the date of the grant. The fair value of share options granted is measured using the Black Scholes option pricing model.

The options and rights vest on a time scale as specified in the ESOS and are granted for no consideration. Options and rights granted under the plan carry no dividend or voting rights. When exercisable, each option is converted into one ordinary share. The maximum term of an option is five years from grant date and the exercise price is settled in cash.

Options will not be transferable and will not be listed on the ASX unless the offer provides otherwise or the Board in its absolute discretion approves.

Page | 56

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.1 SHARE-BASED PAYMENT PLANS (continued)

Options

On 30 June 2022, a summary of the Group options issued and not exercised under the share-based payment programme are as follows. Options are settled by the physical delivery of shares:

								Expired /		Vested and
				Exercise	Balance at the	Granted	Exercised	forfeited	Balance at	exercisable
Option	Grant	Vesting	Expiry	Price	start of the year	during	during	during	the end of	at the end
Class	date	date	date	(cents)		the year	the year	the year	the year	of
										the year
A	19-Mar-21	19-Mar-21	30-Jun-23	25	4,450,000	-	-	-	4,450,000	4,450,000
C	20-Apr-21	30-Jun-23	30-Jun-24	30	1,250,000	-	-	-	1,250,000	-
C	2-Aug-21	30-Jun-23	30-Jun-24	30	-	750,000	-	-	750,000	-
C	2-Sep-21	30-Jun-23	30-Jun-24	30	-	250,000		250,000	-	-
A	10-Sep-21	29-Oct-21	30-Jun-23	25	-	4,800,000	-	-	4,800,000	4,800,000
C	17-Sep-21	30-Jun-23	30-Jun-24	30	-	250,000	-	-	250,000	-
C	16-Feb-22	30-Jun-23	30-Jun-24	30	-	250,000	-	-	250,000	-
	Total				5,700,000	6,300,000	-	250,000	11,750,000	9,250,000
	Weighted average exercise price (cents)				26.10	26.19	-	30.00	26.06	25.00

At the exercise date, the weighted average remaining contractual life of options outstanding at year end was 1.21 years.

Page | 57

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.1 SHARE-BASED PAYMENT PLANS (continued)

Key valuation assumptions made at valuation date under the Black & Scholes option pricing model are summarised below:

		Number of	Exercise	Grant	Expiry	Life of the	Volatility	Risk free	Fair value	Share price
		Options	Price	date	Date	Options		Rate	at grant	at grant
									date	date
			(cents)			(years)			(cents)	(cents)
Tranche	1	4,450,000	25	19-Mar-21	30-Jun-23	2.28	95%	0.10%	7.476	16
Tranche	2	1,250,000	30	20-Apr-21	30-Jun-24	3.20	95%	0.10%	7.617	16
Tranche	3	750,000	30	02-Aug-21	30-Jun-24	2.91	95%	0.16%	7.175	16
Tranche	4	250,000	30	02-Sep-21	16-Feb-22	N/A	95%	0.15%	7.035	16
Tranche	5	4,800,000	25	10-Sep-21	30-Jun-23	1.80	95%	0.01%	8.361	20
Tranche	6	250,000	30	17-Sep-21	30-Jun-24	2.79	95%	0.15%	9.691	20
Tranche	7	250,000	30	16-Feb-22	30-Jun-24	2.37	90%	1.02%	24.278	41

During the reporting period, no options expired and no shares were issued following the exercise of options. However, 250,000 options issued to Darren Shanahan were cancelled on his resignation from the Company.

At the reporting date, there are a total of 16,018,622 options on issue in RemSense Technologies Limited (11,750,000 options relating to KMP), exercisable between 25 and 30 cents per share, and expiring between 30 June 2023 and 30 June 2024.

After year end, on 20 July 2022, the acquisition of the virtualplant IP was funded though the conversion of certain A options held by current and past directors of the Company.

Page | 58

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.2 FINANCIAL INSTRUMENTS

Accounting Policy

Recognition and derecognition Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled, or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For subsequent measurement, financial assets, other than those designated are classified into the following categories: • amortised cost • fair value through profit or loss (FVTPL) All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. The classification is determined by both: • the entity’s business model for managing the financial asset; and • the contractual cash flow characteristics of the financial asset. Subsequent remeasurement of financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): • they are held within a business model whose objective is to hold the financial assets to collect its contractual cash flows, • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised costs using the effective interest method.

Page | 59

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.2 FINANCIAL INSTRUMENTS (continued)

Accounting Policy (continued)

Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under AASB 139.

Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’.

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

Classification and measurement of financial liabilities

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

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

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

Page | 60

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.2 FINANCIAL INSTRUMENTS (continued)

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. Since the last financial year end, RemSense has become a listed company, which has significantly expanded its ability to raise capital through equity markets.

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

The Group is not subject to externally imposed capital requirements.

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

Financial risk management objectives

The Group is exposed to market risk (interest rate risk), credit risk and liquidity risk.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed on a continuous basis to reflect changes in market conditions and the Group’s activities. The Group does not trade financial instruments, including derivative financial instruments, for speculative purposes.

Market risk

The Group’s activities expose it primarily to the financial risks of changes in interest rates.

There has been no change to the Group’s exposure to market risks or the manner it manages and measures the risk from the previous period.

Interest rate risk management

The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings.

The Group’s exposure to interest rate on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

Interest rate risk sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the balance date.

The Group’s sensitivity to interest rates has decreased during the year mainly due to the reduction in variable rate debt instruments.

At balance date, if interest rates had been 100 points higher or lower and all other variables were held constant, the Group’s profit or loss would increase / (decrease) by $1,028 as shown below.

Page | 61

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.2 FINANCIAL INSTRUMENTS (continued)

Weighted average interest rate Financial liabilities (right of use lease liabilities) Increase in interest rates by 100 basis points (decrease in profit) Decrease in Interest rates by 100 basis points (increase in profit)	2022
	$
	5.05%
	102,835
	(1,028)
	1,028

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties, confirming references, and setting appropriate credit limits. The maximum exposure to credit risk at the reporting date to recognise 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 the financial statements. The Group does not hold any collateral.

The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected credit loss allowance for trade receivables.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

The expected credit loss rates are based on the payment profiles of sales over a period of 24 months before 30 June 2022 and the corresponding historical credit losses experienced within this period.

The loss allowance on all financial assets is measured by considering the probability of default. Receivables are considered to be in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates the Group is unlikely to receive the outstanding contractual amounts in full before considering any credit enhancements held by the Group.

The historical loss rates are adjusted to reflect current and forward-looking information has adopted a lifetime expected credit loss allowance in estimating expected credit losses to trade receivables through a matrix using overdue days. This provision is considered representative across all customers based on recent sales experience, historical collection rates and forward-looking information that is available. As disclosed in note 4.2, no provision for expected credit loss has been made.

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 one year.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium, and long-term funding and liquidity management requirements.

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

Page | 62

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.2 FINANCIAL INSTRUMENTS (continued)

Liquidity risk management (continued)

Non-derivative financial liabilities

The following table details the Group’s expected contractual maturities for its non-derivative financial liabilities.

These have been drawn up based on undiscounted contractual maturities of the financial liabilities based on the earliest date the Group can be required to repay.

The table include both interest and principal cash flows.

Weighted average interest rate %	Less than 6 months $ 6 months to 1 year $ 1 – 5 years $
30 June 2022 Trade and other payables (including salary and superannuation liabilities) n/a Fixed interest rate instruments (including right of use lease liabilities) 6.13 Variable interest rate instruments (based on scheduled repayments) - 30 June 2021 Trade and other payables (including salary and superannuation liabilities) n/a Fixed interest rate instruments (including right of use lease liabilities) 3.33 Variable interest rate instruments (based on scheduled repayments) 2.70	848,662 - - - 102,835 - - - -
	848,662 102,835 -
	503,762 - - 98,357 72,252 111,706 - - 250,000
	602,119 72,252 361,706

Page | 63

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.2 FINANCIAL INSTRUMENTS (continued)

Not measured at fair value

The Group has various financial instruments which are not measured at fair value in the statement of financial position.

The Directors consider that the carrying amounts of current receivables, current payables and current borrowings are a reasonable approximation to their fair values.

The methods and valuation techniques used for the purposes of measuring fair values are unchanged compared to the previous reporting period.

6.3 RELATED PARTIES

Accounting Policy

Key management personnel compensation

Directors’ remuneration is expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount because of past service provided by the employee and the obligation can be estimated reliably.

(a) Key management personnel compensation

During the period two new KMPs were employed, Darren Shanahan as Chief Operating Officer and Anthony Roe as Chief Digital Officer. Darren Shanahan resigned on 11 March 2022. Jillian Rosich, originally employed by RemSense Pty Ltd, was also appointed as key management personnel in August 2021. The terms of their appointment and the share-based payments they received during the period are disclosed under Director’s Remuneration on page 14 of this report. None of these KMP had any related party transactions with the Group over this reporting period.

There were no further changes to Key Management personnel after the reporting date and before the date the financial report was authorised for issue.

Additional disclosures relating to Key Management personnel are set out in the Directors’ Report and includes Directors.

Key management personnel compensation comprises the following:

Short-term employee benefits Long-term employee benefits Post-employment benefits Share-based payments – options	2022 2021 $ $
	958,716 394,777 13,706 27,757 89,035 36,187 78,874 8,439
	1,140,331 467,160

Page | 64

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.3 RELATED PARTIES (continued)

(b) Other key management personnel transactions

Several key management personnel, or their related parties, hold positions in other companies that result in them having control or significant influence over these companies.

Only one KMP had any transaction with the Company during this financial year as detailed below. The terms and conditions of this transaction were no more favourable than those available, or which might reasonably be expected to be available, in similar transactions to non-key management personnel related companies on an arm’s length basis.

Steve Brown

Imaging Properties Pty Ltd, a company for which Steve Brown is a Director, received $33,267 (2021: $43,336) in payment for lease and variable outgoing of the Gibberd Road, Balcatta, premises. This was obtained at arm’s length and under normal commercial terms. RemSense terminated their lease on the property at the end of March 2022 and there are no amounts owed on 30 June 2022 (2021: $3,848).

Fiona Brown (relation to Steve) received $10,651 (2021: $40,986) in salary and on-costs for her role as Administration and Finance Officer.

6.4 SUBSIDIARIES

The consolidated financial statements incorporate the assets, liabilities, and results of the following wholly owned subsidiary in accordance with the accounting policy described in note 1.1:

Name of subsidiary Place of incorporation	Equity Interest
RemSense Pty Ltd Australia	2022 2021 % %
	100 100

Balances and transactions between the Company and its subsidiary, which is a related party of the Company, have been eliminated on consolidation.

Page | 65

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.5 PARENT COMPANY DISCLOSURES

Accounting Policy

The accounting policies of the parent entity, which has been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements.

The parent entity of the Group was RemSense Technologies Limited. Set out below is the supplementary information about the parent entity. The comparative information for the 2021 year includes information from incorporation on 19 March 2021 until 30 June 2021:

Result of the parent entity Loss for the year Total comprehensive loss for the year Financial position of parent entity at year end Current assets Total assets Current liabilities Total liabilities Total equity of the parent entity comprising of: Share capital Equity-settled benefits reserve Accumulated losses Total equity	2022 2021 $ $
	(2,783,139) (304,644) (2,783,139) (304,644) 1,761,090 454,707 2,729,246 536,082 (248,546) (119,835) (254,040) (150,060) 4,921,771 690,900 838,411 341,122 (3,284,976) (646,000)
	2,475,206 386,022

RemSense Technologies Limited has no commitments for expenditure at 30 June 2022 (2021: Nil) and has no guarantees (2021: Nil).

Page | 66

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.6 AUDITORS’ REMUNERATION

The auditor of RemSense Technologies Limited is BDO Audit (WA) Pty Ltd. During the financial year the following fees were paid or payable for services provided by BDO Australia, the auditor of the Company and its network firms:

BDO Australia Audit and other assurance services Audit and review of financial reports Other assurance services Independent Limited Assurance Report for IPO Total remuneration for audit and other assurances services Non-Audit services Taxation services Total Non-Audit services Total remuneration services of BDO Australia*	2022 2021 $ $
	89,488 55,000 19,629 -
	109,117 55,000
	57,619 -
	57,619 -
	166,736 55,000

• On 25 May 2021, BDO Corporate Finance were engaged to perform an Independent Limited Assurance Report (“ILAR”) to assist with the Company in listing on the ASX. The fee was $19,629 with expenses incurred during the current year.

6.7 MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

On 20 July 2022, the Company acquired the virtualplant background Intellectual Property (IP) previously owned by Woodside Energy Technologies Pty Ltd (“Woodside”). RemSense previously had a licence agreement with Woodside that enabled this IP developed for Woodside to be used across the virtualplant platform. Pursuant to that licence agreement, RemSense had an unrestricted five-year licence to use the IP owned by Woodside in return for a 5% licence fee. RemSense entered into an agreement to acquire the IP for a total sum of AU$400,000 and settlement was on 20 July 2022.

The acquisition was funded though the conversion of certain A options held by current and past directors of the Company.

Other than as disclosed above, there have been no matters or circumstances that have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations of the Group, the results of these operations, or the state of affairs of the Group in future financial years.

Page | 67

Notes to the Consolidated Financial Report For the year ended 30 June 2022

RemSense Technologies Limited

6.8 NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED

The Group has adopted all new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are relevant to its operations and effective for an accounting period on or after 1 July 2021.

All new and revised Standards have been assessed and the Group has determined that there is no material impact on the new and revised Standards and Interpretations on the Group and, therefore, no material change is necessary to the Group accounting policies.

6.9 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

At the date of authorisation of these consolidated financial statements, the Group has not applied the new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. Based on a preliminary review of the standards and amendments, the Directors do not anticipate a material change to the Group’s accounting policies, however, further analysis will be performed when the relevant standards are effective.

Page | 68

RemSense Technologies Limited

Directors’ Declaration For the year ended 30 June 2022

DIRECTORS’ DECLARATION

In the opinion of the Directors of RemSense Technologies Limited (the ‘Group’):

• (a) the financial statements and notes set out on pages 22 to 68 are in accordance with the Corporations Act 2001 including:

• (i) complying with Accounting standards, the Corporations Regulations 2001, and other mandatory professional reporting requirements; and

• (ii) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date, and

• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors.

==> picture [171 x 44] intentionally omitted <==

STEVE BROWN

Managing Director

31 August 2022 Perth

Page | 69

Tel: +61 8 6382 4600 Level 9, Mia Yellagonga Tower 2 Fax: +61 8 6382 4601 5 Spring Street www.bdo.com.au Perth WA 6000 PO Box 700 West Perth WA 6872 Australia

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INDEPENDENT AUDITOR’S REPORT

To the members of RemSense Technologies Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of RemSense Technologies Limited (the Company) and its subsidiary (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, 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 2022 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.

Material uncertainty related to going concern

We draw attention to Note 1.3 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter.

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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Key audit matters

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

Revenue recognition

Key audit matter

The Group has several material revenue streams in the form of engineering services, scanning jobs and Software as a Service (SaaS) contracts.

The revenue streams are material to the financial report. Management focuses on revenue as the key driver by which the performance of the Group is measured.

Refer to Note 2.2 in the financial report for disclosures relating to the Group’s revenue accounting policy and judgements applied in revenue recognition.

The core principle of AASB 15 Revenue from contracts with customers, is that an entity should recognise revenue to depict the transfer of promised services to customers that reflects the consideration to which the entity expects to be entitled for those services.

In our view, revenue recognition is significant to our audit due to the significance of revenue to the financial report and the complex nature of accounting for the appropriate timing of revenue related to the individual revenue streams.

How the matter was addressed in our audit Our procedures included, but were not limited to the following:

• Assessing the appropriateness of management’s revenue recognition policy, ensuring that the policy is in accordance with the five step model adopted by the relevant Australian Accounting Standards, AASB 15;

• Understanding and documenting the process and controls used by the group in recording revenue;

• Checking a sample of revenue transactions to evaluate whether they were appropriately recorded as revenue ensuring the amounts recorded agrees to supporting evidence;

• Testing a sample of outstanding customer contracts at year end and agreeing to supporting records to ensure that contract assets and contract liabilities have been recognised in accordance with the accounting standard and the Group’s accounting policy;

• Performing cut-off procedures to ensure that all revenue was captured in the appropriate financial year; and

• • Assessing the adequacy of the related disclosures in note 2.2 of the financial report.

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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 2022, 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.

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.

Auditor’s responsibilities for the audit of the Financial Report

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

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at:

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

This description forms part of our auditor’s report.

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Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 10 to 19 of the directors’ report for the year ended 30 June 2022.

In our opinion, the Remuneration Report of Remsense Technologies Limited, for the year ended 30 June 2022, 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

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Dean Just

Director

Perth

31 August 2022

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Securities Exchange Information

RemSense Technologies Limited

SECURITIES EXCHANGE INFORMATION

The shareholder information set out below was applicable at 24 August 2022:

1. Distribution of ordinary shares

Range	Number of holders Number of ordinary shares % of issued capital
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total	52 30,462 0.04 461 1,199,729 1.48 193 1,564,169 1.93 340 11,367,789 14.00 55 67,041,483 82.56
	1,101 81,203,632 100.00

There were 401 holders of less than a marketable parcel of ordinary shares.

2. Distribution of listed options

The company has no listed options.

3. Voting rights

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

Ordinary shares

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

Options and rights

No voting rights.

4. Corporate Governance Statement

In accordance with Listing Rule 4.10.3, the Company’s Corporate Governance Statement can be found on the Company’s website. Refer to https://remsense.com.au/investors/corporate-governance/.

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Securities Exchange Information

RemSense Technologies Limited

5. Escrowed securities

Security	Number Released from Escrow
Ordinary Shares Unlisted Series A Options Unlisted Series B Options Unlisted Series C Options	48,304,559 2/11/2023 9,003,990 2/11/2023 1,609,881 2/11/2023 1,750,000 2/11/2023
	60,668,430

6. Twenty largest shareholders of ordinary shares on 24 August 2022

Shareholders Name	Number of	% of issued shares
	ordinary
	shares held
VALRICH SUPERANNUATION PTY LTD	14,811,653	18.24
TRENCH SUPER PTY LTD	13,197,362	16.25
ADRIAN JOHN HOLLIS	12,753,867	15.71
OMNIVEST PTY LTD	7,519,786	9.26
EGMONT PTY LTD	2,260,112	2.78
CHRISTIAN OGENESKI	1,174,317	1.45
LOBSTER POT INVESTMENTS PTE LTD	1,163,986	1.43
MR RICHARD ANTHONY BENNETT & MRS SONIA MAREE BENNETT	1,062,500	1.31
MR DENNIS JONES & MRS JENNIFER ANNE JONES	1,010,837	1.24
AUSTRAL CAPITAL PTY LTD	1,000,000	1.23
SUTHO ONE PTY LTD	546,795	0.67
MITZIM PTY LTD	509,977	0.63
ENDEAVOUR RIVER PTY LTD	500,000	0.62
127 VICTORIA PTY LTD	462,500	0.57
SYSTEMIC PTY LTD	437,500	0.54
ROSHERVILLE PTY LTD	425,000	0.52
MBA INVESTMENTS PTY LTD	425,000	0.52
ADRIAN HOLLIS SUPER FUND PTY LTD FUND A/C>	406,449	0.50
OTIUM SUPERANNUATION PTY LTD	400,000	0.49
MR KELVIN GAVINE COOPER & MRS HAZEL JOSEPHINE COOPER	375,000	0.46
	60,442,641	74.42

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Securities Exchange Information

RemSense Technologies Limited

7. Substantial shareholders

Shareholders Name	Number of ordinary	% of issued shares
	shares held
VALRICH SUPERANNUATION PTY LTD	14,811,653	18.24
TRENCH SUPER PTY LTD	13,197,362	16.25
ADRIAN JOHN HOLLIS	12,753,867	15.71
ADRIAN JOHN HOLLIS OMNIVEST PTY LTD <THE CLEGG SUPER FUN	7,519,786	9.26

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Corporate Directory

RemSense Technologies Limited

CORPORATE DIRECTORY

Directors

Mr Chris Sutherland Mr Steve Brown Mr Ross Taylor Ms Nicole O’Connor

Secretary

Mr David McArthur

Registered and Principal Office

Suite 173, 580 Hay Street Perth WA 6000

Telephone: +61 8 6118 5610

Auditor

BDO Audit (WA) Pty Ltd Level 9 Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000

Banker

National Australia Bank 100 St Georges Terrace Perth WA 6000

Solicitor

Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000

Share Registry

Automic Group Pty Ltd Level 2, 267 St Georges Terrace Perth WA 6000

Stock Exchange

Australian Securities Exchange Limited (ASX) ASX code: REM

Website and Email

Website: www.remsense.com.au Email: info@remsense.com.au

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