VECTION TECHNOLOGIES LTD - Annual Report 2020

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VECTION TECHNOLOGIES LIMITED ASX:VR1 ACN 614 814 041

ANNUAL REPORT

30 JUNE 2020

PAGE 3 2 5 20 21 22 23 25 24 59 60 66 4 26	CONTENTS *Copyright © 2020 Vection Technologies* Corporate Directory Directors' Report Auditor’s Independence Declaration Annual Financial Report Consolidated Statement of Proft or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Directors' Declaration Independent Auditor’s Report to the Members Additional ASX information Letter from Managing Director Notes to the Consolidated Financial Statement	CONTENTS *Copyright © 2020 Vection Technologies* Corporate Directory Directors' Report Auditor’s Independence Declaration Annual Financial Report Consolidated Statement of Proft or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Directors' Declaration Independent Auditor’s Report to the Members Additional ASX information Letter from Managing Director Notes to the Consolidated Financial Statement

DIRECTORS’ REPORT

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Directors	Mr Gianmarco Biagi – Managing Director Mr Gianmarco Orgnoni - Non-Executive Director Mr Lorenzo Biagi – Executive Director Mr Gabriele Sorrento - Non-Executive Director (Appointed 29/4/20) Mr Umberto (Bert) Mondello - Non-Executive Chairman Mr Derek Hall - Non-Executive Director (Resigned 25/11/19)
Company Secretary	Mr Derek Hall
Registered Ofce	Suite 1, Ground Floor 437 Roberts Road Subiaco WA 6008
Principal Place of Business	Suite 1, Ground Floor 437 Roberts Road Subiaco WA 6008 Phone: +61 8 6380 2555 Website: www.vection.com.au
Securities Exchange Listing	Australian Securities Exchange (ASX) ASX Code: VR1
Share Registry	Automic Registry Services Level 2, 267 St Georges Terrace PERTH WA 6000 Phone: +61 8 9324 2099 Email: [email protected]
Auditor	Criterion Audit Pty Ltd PO Box 2138 SUBIACO WA 6904
Solicitors	Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000

LETTER FROM MANAGING DIRECTOR

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Gianmarco Biagi Managing Director Vection Technologies Ltd

Dear Shareholders,

I am pleased to report on the progress of Vection Technologies Ltd for the year ended 30 June 2020.

heavily impacted by major disruptions directly linked to the COVID-19 pandemic.

This notwithstanding, the management team has performed strongly in a challenging environment, highlighting the validity and solidity of the Company, its people and its stakeholders, globally.

management team successfully adapted to the general market conditions, while implementing critical organisational and financial initiatives to position Vection Technologies for continued growth.

value accretive initiative for the benefit of our shareholders, aligned with the Company’s long-term overarching strategy within real-time CAD (Computer Aided Design), providing direct access to key proprietary technology, the U.S. market and to critical strategic partners and shareholders.

During the last 6-months, we have recognised strategic market opportunities for the achievement of long-term recurring revenue growth, specifically, within critical sectors including healthcare, automotive, education, tourism and defence, that we confidently believe will provide for strong growth during the second half of FY21 and into FY22.

Furthermore, rapidly emerging global market trends, including:

Real-time and XR (Extended Reality) technologies (i.e. virtual and augmented reality) evolving from nice-to-have to must-have solutions, essential for companies, organisation and governments globally.
More functional, wearable and affordable XR hardware coupled with 5G network development, supported by strong global investment in digitalisation for post-pandemic recovery plans.

are setting stronger foundations for the new industrial revolution, underpinned by real-time XR technology, that will sustain software companies’ growth, such as Vection Technologies, during 2021 and 2022.

The management team of Vection Technologies remains strongly committed to the delivery of its growth strategy, aligned with our goal of achieving 50% Annualised Recurring Revenue (ARR) by June 2022.

On behalf of Vection Technologies, its team and its stakeholders, I would like to thank you for your ongoing support and I look forward to an exciting next 12 months.

Gianmarco Biagi

DIRECTORS’ REPORT

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The Directors of Vection Technologies Limited (the Company, Group, Vection Technologies, or Vection ) present their report on the consolidated entity for the year ended 30 June 2020. The Company was incorporated on 14 September 2016. References to the results of the Group in this financial report for the year ended 30 June 2020 refer to the period 1 July 2019 to 30 June 2020. In it is noted that, on 28 April 2020, Vection Technologies acquired Mindesk Inc, hence the results of Mindesk are recorded from 28 April 2020 to 30 June 2020 in the consolidated financials statements. The terms “year” and “period” are used interchangeably in this report.

DIRECTORS

otherwise stated:

Mr Gianmarco Biagi

Managing Director

Mr Gianmarco Orgnoni

Non-Executive Director & Chief Operating Officer

Mr Lorenzo Biagi

Executive Director & Chief Sales Officer

Mr Gabriele Sorrento

Non-Executive Director & Head of Global Partnerships - Appointed: 29 April 2020

Mr Umberto (Bert) Mondello

Non-Executive Chairman

Mr Derek Hall

Non-Executive Director - Resigned: 25 November 2019

PRINCIPAL ACTIVITIES

During the period, the principal continuing activity of the Group consisted in developing real-time software for industrial companies’ digital transformation.Through a combination of 3D, Virtual Reality, Augmented Reality, Industrial IoT and CAD solutions, Vection Technologies helps companies and organisations to innovate, collaborate and create value.

REVIEW OF OPERATIONS

Real-time software company Vection Technologies Limited (ASX:VR1) (Vection Technologies, Vection or the Company) reports the following for the Financial Year ended 30 June 2020:

Overview

Vection Technologies achieved triple digit revenue growth, performance in the financial year ended 30 June 2020, despite the challenging global COVID-19 pandemic commencing in Q3 FY20.

Financial highlights include:

FY20 Total Revenue increased by 130% compared to FY19
FY20 Underlying EBITDA increased by 121% compared to FY19
Total Assets at 30 June 2020 increased by 91% compared to 30 June 2019
● Net Assets at 30 June 2020 increased by 31% compared to 30 June 2019 ● Cash and Cash Equivalents at 30 June 2020 increased by 99% compared to 30 June 2019 ● FY20 Net Cash inflow from Operating Activities increased by 79% compared to FY19 ● FY20 Net Cash inflow from Investing Activities increased by 278% compared to FY19 ● FY20 Net Cash inflow from Financing Activities decreased by 59% compared to FY19

FY20 Total Revenue was a record $3,138,948 (2019: $1,362,124) with record FY20 Underlying EBITDA of $182,826 (2019: -$876,715).

Vection’s balance sheet is strong, ending the year with a cash balance of $1,584,715 (2019: $796,569). The Company’s management is strategically focused on ensuring a continued strong cash position across all international subsidiaries to secure a robust framework for future growth during and following this uncertain time, for value creation for all of its stakeholders. Following period end the Company received circa $1.5M through the utilisation of the Controlled Placement Agreement and secured circa $1.6M from two grants from the E.U. and the Italian government (ASX: 7 September 2020).

DIRECTORS’ REPORT

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(continued)

Total Assets at 30 June 2020 were $16,227,711 (2019: $8,483,805) while Net Assets were $8,609,365 (2019: $6,564,440).

The Company reported a Net Cash Outflow from Operating activities of $-312,532 in FY20, compared to a Net Cash Outflow of -$1,518,923 in FY19.

Net Cash Inflow from Investing activities increased to $273,358 from -$72,388 in FY19, stating the positive strong financial impact of the Mindesk acquisition completed on 29 April 2020. Mindesk is the developer of the first Software as a Service ( SaaS ) real-time 3D design platform that combines Computer Aided Design ( CAD ) with Virtual Reality ( VR ) and graphic engines.

As part of the Mindesk acquisition, the Company also welcomed global institutional shareholders including HTC, the Italian Government (via its innovation fund CDP Ventures), Primomiglio SGR and A11 Ventures SGR.

Net Cash Inflow from Financing activities decreased to $776,099 representing a sharp decrease from 1,871,963 in FY19, as part of the Company’s overall increased ordinary commercial activities and the implementation of the Company’s smart capital strategy.

Vection Technologies posted an after-tax loss attributed to members of $1,163,640 for the financial year ended 30 June 2020, representing an improvement of 74% over the prior corresponding period (30 June 2019: loss $4,502,612). Several non-cash and one-off expenses were recorded in the Company’s accounts during the period, specifically for legacy assets related expenses and for costs incurred pursuant to the acquisition of Mindesk.

Full Year Ended Change 30-Jun-20 30-Jun-19 +/- $ $ Proft (Loss) after Income Tax *74%* (1,163,640) (4,502,612) Interest and Financing related Costs 62,647 38,217 Depreciation and Amortisation 507,851 146,249 One-Off Transaction Costs 535,491 321,548 Non-Cash Accounting charges 238,816 3,119,883 Income Tax 1,663 - Underlying EBITDA1 *121%* 182,826 (876,715)	Full Year Ended Change 30-Jun-20 30-Jun-19 +/- $ $ Proft (Loss) after Income Tax *74%* (1,163,640) (4,502,612) Interest and Financing related Costs 62,647 38,217 Depreciation and Amortisation 507,851 146,249 One-Off Transaction Costs 535,491 321,548 Non-Cash Accounting charges 238,816 3,119,883 Income Tax 1,663 - Underlying EBITDA1 *121%* 182,826 (876,715)	Full Year Ended Change 30-Jun-20 30-Jun-19 +/- $ $ Proft (Loss) after Income Tax *74%* (1,163,640) (4,502,612) Interest and Financing related Costs 62,647 38,217 Depreciation and Amortisation 507,851 146,249 One-Off Transaction Costs 535,491 321,548 Non-Cash Accounting charges 238,816 3,119,883 Income Tax 1,663 - Underlying EBITDA1 *121%* 182,826 (876,715)	Full Year Ended Change 30-Jun-20 30-Jun-19 +/- $ $ Proft (Loss) after Income Tax *74%* (1,163,640) (4,502,612) Interest and Financing related Costs 62,647 38,217 Depreciation and Amortisation 507,851 146,249 One-Off Transaction Costs 535,491 321,548 Non-Cash Accounting charges 238,816 3,119,883 Income Tax 1,663 - Underlying EBITDA1 *121%* 182,826 (876,715)
Change 30-Jun-20 +/- $ Proft (Loss) after Income Tax *74%* (1,163,640)
	Change	30-Jun-20	30-Jun-19
			$ (4,502,612) 38,217 146,249 321,548 3,119,883 - (876,715)
Interest and Financing related Costs 62,647 Depreciation and Amortisation 507,851 One-Off Transaction Costs 535,491 Non-Cash Accounting charges 238,816 Income Tax 1,663
Underlying EBITDA1 *121%* 182,826

1 Underlying EBITDA is an unaudited, non-AIFRS financial measure which is not prescribed by Australian Accounting Standards (‘AAS’)

Operational Highlights

software to industrial companies enabling the digital transformation of workflows, and continuously delivered on its growth strategy aligned with its three building blocks (Technology, Partnerships and Growth).

Technology

Vection made significant progress in the development and commercialisation of its 360° SaaS product suite for Industry 4.0, launching multiple software products and solutions:

● Design & Engineering : release of Mindesk Suite 2020.1

Manufacturing : continuous development of FrameS 1.7, bringing to market the highly anticipated AR features
● Training : development and early commercialisation of FrameS VR training and FrameS Dental
Marketing & Sales Events and eHealth app with Compugroup Medical (ETR:COP)
Maintenance : development and early commercialisation of Trainer Creator

across multiple sectors, including: Architecture Engineering and Construction ( AEC ), Machinery , Automotive , Naval , Fashion & Furniture , Education and Healthcare .

DIRECTORS’ REPORT

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(continued)

Partnerships

Vection progressed and gained access to additional technology and industrial partners, including:

OEM Segment : Logitech, Varjo, HP, HTC Vive, NVIDIA and Intel
CAD/CAM/CAE/PLM Software Segment : Autodesk, Solidworks, McNeel & Associates and Siemens
Network Segment : Epic Games and Microsoft BizSpark
Software Segment : Vodafone
Industrial Segment : MUNER and Bi-Rex

Growth

Europe, Middle East and Africa : 35 Partners
: 6 Partners
Americas : 5 Partners

NSA, V-Shapes and Volvo Car Italy.

Organisation & People

Aligned with its growth strategy, Vection further consolidated its sales infrastructure and expanded its operations internationally by appointing Mr Gabriele Sorrento as a Company director and Head of Global Partnerships based in San Francisco (U.S.), Mr Vittorio Bava as Head of SaaS and Mr Paolo Mossa as Sales Vice President Europe.

Furthermore, Vection successfully discontinued its South-East Asian operations and consolidated and relaunched its Indian subcontinent operations to ensure a robust software development framework aligned with its strong focus on recurring revenue generation across the group.

Financial Strategy

The Company advanced initiatives to access smart capital to secure a stronger cash position across each of the Company’s international subsidiaries, including:

Receipt of ~$0.6M in research and development (R&D) funding, including fiscal credits.
Execution of a ~$3.2M E.U. grant (Horizon 2020 Grant) for the PrismArch project, of which $0.5M will flow directly to the Company.
Commercial loans of ~$0.6M with ~44 months weighted average repayment period and ~4.4% weighted average interest rate per annum.
Strategic unsecured rolling facility of up to ~$0.4M, proposed to be expanded as the Company progresses it commercial strategy and platform adoption. The facility advances funds to the Company upon the issue of invoices to clients, based on requirements.
Italian government loan of up to $2M expected during September quarter (30% non-repayable and 70% repayable after 10 years at nil interest) (finalised following the end of reporting period) (ASX:7 September 2020).

Corporate Overview

Following the approval of Shareholders, the Company completed the acquisition of Mindesk Inc (ASX: 28 April 2020). In accordance with the terms of the acquisition, the Company issued 165,505,199 fully paid ordinary shares in the capital of the Company and up to 108,000,000 shares as deferred consideration subject to multiple revenue milestones.

Explanation of loss

The Company’s loss for the year of $1,163,640 (2019: loss of $4,502,612) is largely attributed to depreciation and amortisation non-cash expenses ($507,851) and one-off transaction costs attributable to the acquisition of Mindesk and several one-off costs relating to legacy assets ($535,491). There is no obligation to cover this losses in the future.

DIRECTORS’ REPORT

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(continued)

Cash Position

Cash at the end of the year was $1,584,715. The Company had significant receivables outstanding at 30 June 2020 of ~$2,149,552.

Outlook

During 1H FY21, Vection Technologies’ objectives will be:

Strong focus on advancing the Company’s solutions across the healthcare, education and automotive sectors and entry into new verticals including the defence industry.
Accelerating the North American and Australian market development.
Continued growth in the European market segment.
Executing commercial partnerships with existing and new Tier-1 global technology companies.
Focus on development of the existing technology suite, with renewed emphasis on cloud and LAN collaboration.
● Integration of Mindesk suite with leading CAD and BIM software.
Launching new products and third-parties software integrations towards the stated objective of building a 360° product suite.
● Further expanding and consolidating the global sales infrastructure and footprint to further advance the global client outreach.
Strong acceleration of recurring revenue sales initiatives aligned with the Company’s goal to achieve 50% Annualised Recurring Revenue (ARR) by June 2022.

EVENTS OCCURRING AFTER THE REPORTING PERIOD

Following the end of the period, in accordance with the terms of the acquisition of Vection Italy (ASX:12 April 2019) the Company will issue 50,000,000 shares as the business of Vection Italy has achieved a minimum of $1.5m in revenue under the terms and conditions of the performance rights.

Following the end of the period, the Company announced ~$2.6M in non-dilutive funding, including a ~$1.1M interest-free working capital facility from the Italian Government’s National Agency for Investment Attraction and Business Development ( Invitalia ) and ~$1.5M raised through the utilisation of the Controlled Placement Agreement ( CPA ) (ASX:24 June 2019) (ASX:7 September 2020).

significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2020.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

● On 28 April 2020, the Company completed the Acquisition of Mindesk Inc;

Successful discontinuation of South-East Asian operations and consolidation and relaunch of Indian subcontinent operations.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Other than information disclosed elsewhere in this annual report, information on likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this Directors' Report because the Directors believe, on reasonable grounds, that to include such information would be likely to result in unreasonable prejudice to the Group.

ENVIRONMENTAL REGULATION

DIRECTORS’ REPORT

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(continued)

INFORMATION ON CURRENT DIRECTORS AND COMPANY SECRETARY

Mr Gianmarco Biagi – MEng

Managing Director

Experience and expertise

Mr Gianmarco Biagi is a former CEO of important multinational manufacturing groups and General manager of an important Italian group leader in luxury furniture. He has been President of Settepuntonove Srl since 2018, a holding company of industrial investments in the sector of new technologies, furniture, automotive and of services. He holds institutional roles as President of AICQ, UMIQ Board President at CONFINDUSTRIA Emilia and National Councilor at AISOM. Previously he held the position of President of the furniture and wood sector at Unindustria Bologna and of Media Industry President at Unindustria Bologna and President of the EXO consortium.

Other current directorships: Nil

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

a) Officine 8k Srl (Director related entity): 292,556,186 Ordinary Shares and 150,000,000 Performance Rights (Class A). b) Settepuntonove Srl (Director related entity): 9,000,000 Ordinary Shares.

Mr Gianmarco Orgnoni – BBus

Non-Executive Director & Chief Operating Officer

Experience and expertise

experience in offering corporate advisory and finance analysis across European and Australian private and publicly listed companies. Mr Orgnoni has worked closely with and has provided adversarial services to a number of companies spanning from civil engineering, education, technology, biotechnology and real estate. Mr Orgnoni holds a bachelor’s degree in economics and Business Administration from the Catholic University of the Sacred Heart of Milan, Italy.

Other current directorships: Non-Executive Director of TikForce Limited (ASX: TKF)

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

a) Torg Advisors Pty Ltd (Director related entity): 4,500,000 Ordinary Shares.

Mr Lorenzo Biagi

Non-Executive Director & Chief Sales Officer

Experience and expertise

Mr Lorenzo Biagi is an experienced company manager in the private sector, with extensive knowledge in virtual reality technology, sales and cost control management. While managing corporate development processes for more than 10 years, Mr Biagi has implemented new procedures and technologies helping make the companies he worked for and with, leaders in innovation.

Other current directorships: Nil

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

a) Officine 8k Srl (Director related entity): 292,556,186 Ordinary Shares and 150,000,000 Performance Rights (Class A). b) Settepuntonove Srl (Director related entity): 9,000,000 Ordinary Shares.

DIRECTORS’ REPORT

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(continued)

Mr Gabriele Sorrento – M.Arch/M.Eng.

Non-Executive Director & Head of Global Partnerships (Appointed 29 April 2020)

Experience and expertise

Mr Gabriele Sorrento is the CEO and co-founder of Mindesk, acquired by Vection Technologies in April 2020. He is passionate about computational design, having obtained a Master's Degree in Architectural Engineering at the Polytechnic University of Milan and studied entrepreneurship at Santa Clara University as a Fulbright fellow. He has over 13 years of experience in 3D CAD, having worked with renowned architectural brands including Renzo Piano Building Workshop and Heller Manus Architects. Today Mr Sorrento is part of the AIASF Design Technology Commission and is a board member of Vection Technologies Limited.

Other current directorships: Nil

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

a) 22,257,873 Ordinary Shares.

b) 2,867,529 Deferred Consideration A; 7,168,822 Deferred Consideration B; 14,337,644 Deferred Consideration C; 1,792,206 Deferred Consideration D; 1,792,206 Deferred Consideration E; 5,376,617 Deferred Consideration F; and 5,376,617 Deferred Consideration G.

Mr Umberto (Bert) Mondello – LLB

Non-Executive Chairman

Experience and expertise

Mr Bert Mondello is an experienced Public Company Director, Corporate Advisor and Technology Expert with 20 years experience across both the private and public sectors. Mr Mondello has widespread experience spanning across retail and institutional sectors and an extensive knowledge of marketing communications and investor relations. With deep rooted expertise across multiple technology sectors, Mr Mondello has provided strategic corporate advice and mentoring to a number of private and public organisations internationally across multiple industries. He holds a Bachelor of Laws from the University of Notre Dame, Australia.

Other current directorships: ZipTel Limited, Emerge Gaming Limited, Sinetech Limited and WestStar Industrial Limited Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

a) Indomain Enterprises Pty Ltd (Director related entity): 4,500,000 Ordinary Shares.

Mr Derek Hall – BCom, CA, FFin, AGIA

Non-Executive Director (Resigned: 25 November 2019) & Company Secretary

Experience and expertise

drivers and bringing cost control and process improvement into sharp focus. Mr Hall has been involved as a Chief Financial Officer and Company Secretary for a number of publicly listed and unlisted companies involving transactions in technology, mining, oil and gas and construction. Mr Hall is a Chartered Accountant, Chartered Secretary and Fellow of the Financial Services Institute.

Other current directorships: Non-Executive Director Sinetech Limited Former ASX directorships in past 3 years: Nil Interests in the Company’s securities: Nil

DIRECTORS’ REPORT

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(continued)

MEETINGS OF DIRECTORS

The number of meetings of the board of directors (including board committees) held during the year ended 30 June 2020, and the number of meetings attended by each director are set out below:

Directors	Board Meetings	Eligible to Attend
	Eligible	Attended
Mr Gianmarco Biagi	8	8
Mr Lorenzo Biagi	8	8
Mr Bert Mondello	8	8
Mr Gianmarco Orgnoni	8	8
Mr Gabriele Sorrento (Appointed: 29/04/2020)	2	2
Mr Derek Hall (Resigned: 25/11/2019)	3	3

SHARE OPTIONS

year as a result of exercise of options.

PERFORMANCE RIGHTS

During the year, 22,500,000 performance rights were issued, of which 18,000,000 were issued to directors. The performance rights were issued in three equal tranches (of 7,500,000) with conversion subject to achievement of Company share price targets. in addition, in relation the acquisition of Mindesk, the Company issued deferred 108,000,000 deferred consideration performance rights with various milestones over seven tranches (largely tied to revenue) for performance in periods up to FY2024. Further details are provided in the remuneration report.

In the prior period, the Company issued 150,000,000 performance rights to an entity related to Mr Gianmarco Biagi and Mr Lorenzo Biagi in relation to the acquisition of Vection Italy. Conversion of the performance rights, which were issued in three tranches were subject to various milestones detailed in the remuneration report.

DIRECTORS’ REPORT

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AUDITED REMUNERATION REPORT (continued)

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

The Directors present the Vection Technologies’ 2020 remuneration report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year.

The report is structured as follows:

A) Key management personnel covered in this report
B) Principles used to determine the nature and amount of remuneration
C) Non-executive directors’ remuneration
D) Executive director and senior management remuneration
E) Details of remuneration

A) Key management personnel covered in this report

Directors	Position
Mr Gianmarco Biagi	Managing Director
Mr Lorenzo Biagi	Executive Director
Mr Bert Mondello	Non-Executive Chairman
Mr Gianmarco Orgnoni	Non-Executive Director
Mr Gabriele Sorrento (Appointed: 29/04/2020)	Non-Executive Director
Mr Derek Hall (Resigned: 25/11/2019)	Non-Executive Director

B) Principles used to determine the nature and amount of remuneration

The Board adheres to the Remuneration Policy detailed in the Company’s Prospectus issued in December 2016. The Remuneration Policy of the Board is designed to ensure that the level and composition of remuneration is competitive, reasonable and appropriate for the results delivered and to attract and maintain desirable Directors, Company Secretaries and senior executives.

The Board are mindful that where possible the remuneration structures reward the achievement of strategic objectives to achieve the broader outcome of creation of value for shareholders.

The remuneration committee is responsible for assessing performance against key performance indicators and determining the short-term incentives and long-term incentives to be paid. To assist in this assessment, the committee receives detailed reports on performance from management which are based on independently verifiable data such as financial measures, market share and data from independently run surveys.

or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous financial years.

C) Non-executive directors’ remuneration

Fees

The Board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. In the current year, no advice was sought.

Upon appointment to the Board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the policies and terms, including compensation, relevant to the office of the director.

DIRECTORS’ REPORT

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AUDITED REMUNERATION REPORT (continued)

The key terms of the non-executive director service agreements are as follows:

Term of Agreement – ongoing subject to annual review and the Company’s constitution
● Non-Executive Directors’ Fees of up to $72,000 per annum plus an amount equivalent to statutory superannuation (if applicable) ● There is a 6-month notice period stipulated to terminate the contract by either party The maximum aggregate amount of fees that can be paid to non-executive directors is currently fixed at $300,000 with any change in this amount subject to approval by shareholders at the Annual General Meeting. The Company does not have a Director’s Retirement Scheme in place at present.

D) Executive director and senior management remuneration

Service Contracts

It is the Company’s policy that service contracts for executive directors and senior executives be entered into. A service contract with an executive director or senior executive would provide for the payment of benefits where the contract is terminated by the entity or the individual.

The executive directors and senior executives would also be entitled to receive on termination of employment their statutory entitlements of accrued annual and long service leave, together with any superannuation benefits. An executive director or senior executive would have no entitlement to termination payment in the event of removal for misconduct.

Major provisions of the agreements existing at reporting date relating to executive remuneration are set out below:

Mr Gianmarco Biagi – Managing Director

Term of agreement: Until terminated in accordance with the agreement.
Remuneration: $15,000 per month, for the first 12 months of the agreement, then $16,667 per month.
Period of notice for termination/resignation: Three month’s written notice by the consultant. Three month’s written notice by the Company.
● Details of remuneration entitlement on termination: Payment of fees up to the date of termination or payment of three month’s fees in lieu of notice.

Mr Lorenzo Biagi – Executive Director

Term of agreement: Until terminated in accordance with the agreement.
Remuneration: $10,600 per month, for the first 12 months of the agreement, then $13,100 per month for the next 12 months, then $15,600 per month.
● Period of notice for termination/resignation: Three month’s written notice by the consultant. Three month’s written notice by the Company.
● Details of remuneration entitlement on termination: Payment of fees up to the date of termination or payment of three month’s fees in lieu of notice.
Share-based payment arrangements relating to key management personnel No options were issued to Directors or other key management personnel during the year.

The acquisition of Vection Italy included an offer of ordinary shares and performance shares to the vendors of Vection which included the directors Mr Gianmarco Biagi and Mr Lorenzo Biagi. Details of these securities are outlined in tables below.

No options were issued to Directors or other key management personnel during the year. The acquisition of Vection included an offer of ordinary shares and performance shares to the vendors of Vection which included the directors Mr Gianmarco Biagi and Mr Lorenzo Biagi. Details of these securities are outlined in tables below.

E) Details of remuneration

Details of the remuneration of the directors and key management personnel of the Group (as defined in AASB 124 Related Party Disclosures ) are set out in the following tables.

DIRECTORS’ REPORT AUDITED REMUNERATION REPORT (continued)

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Key management personnel of the Group and other executives of the Company and the Group:

2020	Short term employee benefts (paid or payable as at 30 June 2020)	Post-employment benefts	Post-employment benefts	Long-term benefts	Share-based payments	Total	Proportion of remuneration performance related
Name	Cash, salary & fees	Termination payments	Superannuation	Long service leave	Options/ Performance Rights
Directors	$	$	$	$	$	$	%
Mr Gianmarco Biagi	173,250	-	-	-	20,8734	194,123	11%
Mr Lorenzo Biagi	122,700	-	-	-	20,8734	143,573	15%
Mr Bert Mondello	69,300	-	-	-	20,873	90,173	23%
Mr Gianmarco Orgnoni	69,300	-	-	-	20,873	90,173	23%
Mr Derek Hall1	20,000	-	-	-	-	20,000	-
Mr Gabriele Sorrento2	21,165	-	-	-	-	21,165	-
Total Director Remuneration	475,715	-	-	-	83,492	559,207	15%

Total Key Management Personnel	475,715	-	-	-	83,492	559,207
Total	475,715	-	-	-	83,492	559,207

2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights	2019 Short term employee benefts (paid or payable as at 30 June 2019) Post-employment benefts Long-term benefts Share-based payments Total Proportion of remuneration performance related Name Cash, salary & fees Termination payments Superannuation Long service leave Options/ Performance Rights
	Short term emloee benefts						Proportion of remuneration performance related
2019	py (paid or payable as at 30 June 2019)	Post-employment benefts		Long-term benefts	Share-based payments	Total
Name	Cash, salary & fees	Termination payments	Superannuation	Long service leave	Options/ Performance Rights
Directors	$	$	$	$	$	$	%
Mr Gianmarco Biagi3	45,000	-	-	-	-	45,000	-
Mr Lorenzo Biagi3	31,800	-	-	-	-	31,800	-
Mr Bert Mondello	63,000	-	4,278	-	-	67,278	-
Mr Gianmarco Orgnoni	54,000	-	3,420	-	-	57,420	-
Mr Derek Hall	48,000	-	-	-	-	48,000	-
Total Director Remuneration	241,800	-	7,698	-	-	249,498	-

Total Key Management Personnel	241,800	-	7,698	-	-	249,498
Total	241,800	-	7,698	-	-	249,498

1 Resigned on 25 November 2019 2 Appointed on 29 April 2020

3 Appointed 12 April 2019

4 Does not include $2,550,000 value attributed to 150,000,000 Performance Rights, the conditions of which have been assessed as likely to be met, to be issued to director related entity Officine 8k S.r.l. For further information on the contingent consideration issued in relation to the acquisition of Vection Italy, refer to per Note 20A.

DIRECTORS’ REPORT AUDITED REMUNERATION REPORT (continued)

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Other transactions with key management personnel

i. Transactions with directors and key management personnel The Group may enter into agreements for services rendered with individuals (or an entity that is associated with the individuals) during the ordinary course of business. A number of entities associated with the directors and key management personnel have consulting agreement in place which has resulted in transactions between the Group and those entities during the period. The terms and conditions of those transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis.

		Transaction Value	Transaction Value	Outstanding Balance	Outstanding Balance
Director	Transaction	2020	2019	2020	2019
Mr Bert Mondello	Corporate Advisory Fees (a)	-	101,710	-	1,710
	Contract Revenue (b)	215,000	388,700	-	45,760
	Technical Consultancy (c)	-	55,000	-	-
Mr Gianmarco Orgnoni	Interest (d)	-	12,169	-	-
Mr Gianmarco Biagi and Mr Lorenzo Biagi	Other revenue (e)	123,981	-	248,544	-
	Other service cost (f)	22,700	-	22,700	-
	Revenue from services (g)	6,034		7,039	-
	Professional, legal and tax services (h)	49,258	-	14,921	-

a) In the prior year, corporate advisory fees and administration services paid to Indomain Enterprises Pty Ltd (Indomain) under a Corporate Advisory Mandate. Invoices to the value of $88,000 were paid via Shares in the Company as approved by shareholders at the general meeting held on 11 April 2019; - an entity associated with Mr B Mondello
b) The Company’s subsidiary Vection Australia Pty Ltd (formerly known as (Technobrave Pty Ltd) entered into a contract to provide services to Emerge Gaming Solutions Pty Ltd a subsidiary of Emerge Gaming Limited. Mr B Mondello is a director of Emerge Gaming Limited. This contract was signed on a commercial, arm-length basis;
c) In the prior year, technical Consultancy fees paid to Indomain under a consultancy agreement. Invoices to the value of $5,500 were paid via Shares in the Company as approved by shareholders at the general meeting held on 11 April 2019; - An entity associated with Mr B Mondello
d) Interest payments to Servnote in relation to the $1 Million convertible loan facility; e) The company’s subsidiary Vection Italy SRL received services from Officine 8k S.r.l. As at 30 June 2020, the amount receivable is $248,544. This transaction was entered on a commercial, arm-length basis; - An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi
f) The company’s subsidiary Vection Italy SRL paid to Officine 8k S.r.l. for service provided. As at 30 June 2020, the amount payable is $22,700. This transaction was entered on a commercial, arm-length basis; - An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi
g) The company’s subsidiary Vection Italy SRL received services from Settepuntonove S.r.l. for service provided. As at 30 June 2020, the amount receivable is $7,039. This transaction was entered on a commercial, arm-length basis. ; - An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi
h) The company’s subsidiary Vection Italy SRL paid to Settepuntonove S.r.l. for service provided. As at 30 June 2020, the amount payable is $14,921. This transaction was entered on a commercial, arm-length basis; - An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi

In addition, each of the directors received director’s fees in accordance with the terms of their respective contracts.

ii. Loans to directors

DIRECTORS’ REPORT AUDITED REMUNERATION REPORT (continued)

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Equity instrument disclosures relating to key management personnel

i. Shareholdings

The numbers of shares in the Company held during the financial year by each director of Vection Technologies Limited (formerly known as ServTech Global Holdings Ltd) and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

2020 Balance at the start of the year	2020 Balance at the start of the year	Received during the year on exercise of options	Other changes during the year	Balance at the end of the year or date of resignation (if applicable)
Ordinary shares
Directors
Mr Gianmarco Biagi1,2	292,556,1863	-	-	292,556,1863
Mr Lorenzo Biagi1,2		-	-
Mr Bert Mondello	-	-	-	-
Mr Gianmarco Orgnoni	-	-	-	-
Mr Derek Hall	-	-	-	-
Mr Gabriele Sorrento4	-	-	22,257,873	22,257,873
Total	292,556,186		22,257,873	314,814,059

1 Appointed 12 April 2019 2 Indirect shareholding as a result of a relevant interest in VR Tech SRL which has a relevant interest in Officine8K, which is the registered holder of these securities

3 As a vendor of Vection, these shares were issued as part of the consideration for the Acquisition of Vection. 4 As a vendor of Mindesk, these shares were issued as part of the consideration for the Acquisition of Vection.

ii. Option holdings (ii) Option holdings During the year, no options were issued to key management personnel.

DIRECTORS’ REPORT

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AUDITED REMUNERATION REPORT (continued)

Performance-based remuneration

A) As part of the consideration for the Acquisition of Vection, Officine8K SRL, an entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi was granted 150,000,000 performance rights in three tranches with the following terms:
i) Tranche 1 Performance Rights: 50,000,000 Performance Rights each converting into Shares (on a one for one basis) upon Vection’s earnings before interest, tax, depreciation and amortisation at the end of a financial year being at least $500,000 (as verified by the Company’s auditors) within 24 months of the settlement of the Acquisition;
ii) Tranche 2 Performance Rights: 50,000,000 Performance Rights each converting into Shares (on a one for one basis) upon the revenue generated by the business of Vection achieving a minimum of $1,500,000 (as verified by the Company’s auditors) within 24 months of settlement of the Acquisition; and
iii) Tranche 3 Performance Rights: 50,000,000 Performance Rights each converting into Shares (on a one for one basis) upon:
a) the volume weighted average price for the Shares on twenty (20) consecutive days on which sales are recorded being no less than $0.03; and
b) the revenue generated by the business of Vection achieving a minimum of $2,500,000 (as verified by the Company auditors) within 36 months of settlement of the Acquisition.

In prior year, the group reports a provisional amounts for the items for which accounting is incomplete as the initial accounting for the business acquisition is incomplete by the end of the reporting period in which the combination occurs. This provisional amounts are adjusted during the measurement period (no longer than 12 months from the initial acquisition) on a retrospective basis by restating the comparative information presented in the financial statements. In April 2020, i.e. within the prescribed 12 months from the initial acquisition, the Company reassessed the intangible asset value of Vection Italy in particular the value of the IP, customer relationships and the expertise of the management and their potential to deliver significant positive cashflows from a strong forecast pipeline of work, thus, re-assessing the probability of meeting the non-market based conditions from 0% to 100%. In relation to each class of performance right, the Directors have re-assessed the probability of meeting the non-market based conditions from 0% to 100% in view of additional information. Accordingly, $2,550,000 has been recognised (Note 20A).

B) On 25 November 2019, the Company issued 18,000,000 performance rights in three tranches to Mr Gianmarco Biagi, Mr Lorenzo Biagi, Mr Bert Mondello and Mr Gianmarco Orgnomi with the following terms:
i) Tranche 1 Performance Rights: 6,000,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.035 per share on trading on ASX;
ii) Tranche 2 Performance Rights: 6,000,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.045 per share on trading on ASX;
iii) Tranche 1 Performance Rights: 6,000,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.065 per share on

trading on ASX;

The fair value at grant date of the performance rights issued has been determined using a Black-Scholes pricing model that takes into account the exercise price, the term of the performance rights, 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 performance rights. The total fair value of the performance rights was $106,293. The total share based payment expense recognised for the year ended 30 June 2020 of $83,490 (2019: $nil) has been recognised in the Statement of Profit or Loss and Other Comprehensive Income and in the remuneration disclosures for Directors and key management personnel.

C) As part of the consideration for the Acquisition of Mindesk, an entity associated with Mr Gabriele Sorrento was granted 38,711,641 performance rights in seven groups with the following terms:
i) Group A Performance Rights: 2,867,529 Performance Rights each converting into Shares (on a one for one basis) upon Mindesk revenues equal to, or exceed EUR920,00 for the year to 31 December 2020;
ii) Group B Performance Rights: 7,168,822 Performance Rights each converting into Shares (on a one for one basis) if technical specifications are met on a plugin for Mindesk to work with McNeel Rhinoceros 6 for the year to 31 December 2021;
iii) Group C Performance Rights: 14,337,644 Performance Rights each converting into Shares (on a one for one basis) upon Mindesk revenues equal to, or exceed, EUR2,950,00 for the year to 31 December 2021;
iv) Group D Performance Rights: 1,792,206 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc equal to, or exceed, EUR9,300,001 for the year to 31 December 2021;
v) Group E Performance Rights: 1,792,206 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc equal to, or exceed, EUR15,000,001 for the year to 31 December 2022;
vi) Group F Performance Rights: 5,376,617 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc for the year ending 31 December 2023 equal to at least 10% increase on the Combined Revenues for the year to 31 December 2022; and
vii) Group G Performance Rights: 5,376,617 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc for the year ending 31 December 2024 equal to at least 10% increase on the Combined Revenues for the year to 31 December 2023.

DIRECTORS’ REPORT

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AUDITED REMUNERATION REPORT (continued)

To value the above, a forecast is performed on the value of each of the Performance Rights. A probability distribution was assigned to each of the main assumptions and a Monte Carlo simulation was performed based on the assumed probability distributions. 3,000 samples were used. The mean of the 3,000 samples for each of the Performance Rights were calculated. The net present value of each of the performance rights as at 29 April 2020 were estimated by discounting the mean by the estimated weighted average cost of capital. The fair value of these performance rights is $1,434,737 at $0.04 per right (Note 20B).

Shares provided on exercise of remuneration options

During the reporting period, no shares were issued to key management personnel on the exercise of options previously granted as remuneration.

Loans to key management persons

Use of remuneration consultants

The Company has not engaged the services of remuneration consultants to review its Executive remuneration recommendations.

Company performance

The following table shows key performance indicators for the Group:

	2020	2019	2018	2017
Loss for the year	(1,165,870)	(4,420,102)	(3,872,777)	(5,973,508)
Closing share price ($)	0.04	0.014	0.012	0.091
Basic and diluted loss per share	(0.203)	(1.512)	(3.93)	(11.76)

Voting and comments made at the company's 2019 Annual General Meeting

Vection Technologies Ltd (formerly known as ServTech Global Holdings Limited) received 100% of “yes” votes on its remuneration report for the 2019 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

END OF AUDITED REMUNERATION REPORT

DIRECTORS’ REPORT

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(continued)

INSURANCE OF OFFICERS

The Company has entered into a deed of access, indemnity and insurance with each of its current and former directors, and the Company Secretary. Under the terms of the deed, the Company indemnifies the officer or former officer, to the extent by law, for the liabilities incurred as an officer of the Company.

directors and officers of the Company against liabilities incurred by them to the extent permitted by the Corporations Act 2001 . The contracts prohibit disclosure of the nature of the liability cover and the amount of the premium.

NON-AUDIT SERVICES

No non-audit services were provided by the Company’s auditor, Criterion Audit Pty Ltd.

CONFIRMATION UNDER ASX LISTING RULE 4.10.19

cash and assets in a form readily convertible to cash, that it had at the time of admission, in a way consistent with its business objectives.

PROCEEDINGS ON BEHALF OF THE COMPANY

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

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001 .

AUDITOR’S INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Criterion Audit Pty Ltd, to provide the Directors of the Company with an Independence Declaration in relation to the review of the annual financial report. This Independence Declaration is set out on page 20 and forms part of this Directors’ Report for the year ended 30 June 2020.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to section 306(3) of the Corporations Act 2001 .

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Mr Bert Mondello

Chairman

Perth, Western Australia 30 September 2020.

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VECTION TECHNOLOGIES LIMITED

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ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Consolidated
30 June 20
30 June 19
Notes
$
$
Revenue
Revenue
2(iii)
3,138,948
1,362,124
Expenses
Acquisition Costs
40,882
155,625
Employee benefts expense
1,807,079
974,922
Consulting and professional fees
799,087
608,559
Finance costs
2(i)
62,647
32,262
Depreciation and amortisation
507,851
146,249
Impairment
115,159
3,084,659
Other expenses
2(ii)
863,858
825,560
Share based payments
13
104,362
36,900
Total Expenditure
4,300,925
5,864,736
Loss before income tax expense
(1,161,977)
(4,502,612)
Income tax expense
3
1,663
-
Loss after income tax attributable to equity holders
(1,163,640)
(4,502,612)
Discontinued Operations
Proft (loss) for the year after income tax from discontinued operations
24
(2,230)
82,510
Loss after income tax attributable to equity holders of Vection
Technologies Limited
(1,165,870)
(4,420,102)
Other comprehensive loss
Items that may be reclassifed to proft or loss
Exchange differences on translation of foreign operations
127,339
2,163
Total comprehensive loss for the period
127,339
2,163
Total comprehensive loss attributable to equity holders of Vection
Technologies Limited
(1,038,531)
(4,417,939)
Loss per share for the year attributable to the members of Vection
Technologies Limited
Discontinued operations proft (loss) per share for the year (per share)
15
-
0.028
Continuing operations loss per share for the year (per share)
15
(0.203)
(1.540)
Overall basic loss per share
15
(0.203)
(1.512)
Overall diluted loss per share
15
(0.203)
(1.512)

VECTION TECHNOLOGIES LIMITED

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ANNUAL REPORT AS AT 30 JUNE 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		Consolidated 30 June 20 30 June 19 Notes $ $ Current Assets Cash and cash equivalents 4 1,584,715 796,569 Receivables 5 2,149,552 1,457,990 Total Current Assets 3,734,267 2,254,559 Non-Current Assets Property, plant & equipment 6 76,859 90,075 Intangible assets 7 12,364,455 6,139,171 Financial assets 22 52,130 - Total Non-Current Assets 12,493,444 6,229,246 Total Assets 16,227,711 8,483,805 Current Liabilities Payables 8 2,272,404 967,959 Provisions 9 3,321,031 2,750,644 Current tax liabilities 19,878 - Lease liabilities 10 94,322 45,441 Borrowings 11 427,606 - Total Current Liabilities 6,135,241 3,764,044 Non-Current Liabilities Provisions 9 2,518,969 95,029 Deferred tax liabilities 3 604,233 - Lease liabilities 10 487,713 610,292 Borrowings 11 422,190 - Total Non-Current Liabilities 4,033,105 705,321 Total Liabilities 10,168,346 4,469,365 Net Assets/(Liabilities) 6,059,365 4,014,440 Equity Issued capital 12 22,376,991 19,397,897 Reserves 13 230,858 271,657 Accumulated losses 14 (16,548,484) (15,655,114) Total Equity / (Defciency in Equity) 6,059,365 4,014,440*

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

Previous Year amounts restated refer to Note 20A

VECTION TECHNOLOGIES LIMITED ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF CASH FLOWS

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Consolidated
30 June 20
30 June 19
Notes
$
$
Cash fows from operating activities
Receipts from customers
2,422,484
1,450,452
Payments to suppliers and employees
(2,706,280)
(2,914,459)
Interest received
517
440
Interest paid / Finance costs
(40,179)
(39,710)
Tax incentives/ (Taxes paid)
(10,926)
(15,646)
Net cash infow (outfow) from operating activities
4
(312,532)
(1,518,923)
Cash fows from investing activities
Purchase of plant and equipment
(62,975)
(49,729)
Transaction cost in purchase of subsidiary
(40,882)
(324,412)
Cash acquired from subsidiary
20
1,137,866
56,154
Proceeds from sale of/ (Payments for) intangible assets
(761,902)
-
Proceeds (Payments) for disposal of discontinued operations
-
245,599
Proceeds from sale of investment
1,251
-
Net cash infow (outfow) from investing activities
273,358
(72,388)
Cash fow from fnancing activities
Proceeds from issues of fully paid shares
-
2,000,000
Payment of transaction costs
-
(128,037)
Proceeds/(Repayment) from borrowings
776,099
-
Net cash infow (outfow) from fnancing activities
776,099
1,871,963
Cash and cash equivalents at the beginning of the fnancial year
796,569
513,754
Net increase/(decrease) in cash and cash equivalents
736,925
280,652
Effect of movement in exchange rates on cash held
51,221
2,163
Cash and cash equivalents at the end of the fnancial year4
1,584,715
796,569

The above Consolidated Statement of Cash Flow should be read in conjunction with the accompanying notes.

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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Consolidated
Issued
Capital
Accumulated
Losses
Reserves
Foreign
Currency
Translation
Reserve
Total
$
$
$
$
$
Balance at 1 July 2019
19,397,897
(15,655,114)
272,500
(843)
4,034,440
Loss for the period
-
(1,165,870)
-
-
(1,165,870)
Other comprehensive (loss) / income
-
-
-
127,339
127,339
Total comprehensive loss for the period
-
(1,165,870)
-
127,339
(1,038,531)
Transactions with owners in their capacity as
owners
Share based payments
-
-
104,362
-
104,362
Expiry of options
-
272,500
(272,500)
-
-
Issue of share capital
2,979,094
-
-
-
2,979,094
Balance at 30 June 2020
22,376,991
(16,548,484)
104,362
126,496
6,059,365
Balance at 1 July 2018
10,404,332
(11,235,012)
272,500
(3,006)
(561,186)
Loss for the period
-
(4,420,102)
-
-
(4,420,102)
Other comprehensive (loss) / income
-
-
-
2,163
2,163
Total comprehensive loss for the period
-
(4,420,102)
-
2,163
(4,417,939)
Transactions with owners in their capacity as
owners
Share based payments
36,900
-
-
-
36,900
Issue of share capital
8,956,665
-
-
-
8,956,665
Balance at 30 June 2019
19,397,897
(15,655,114)
272,500
(843)
4,034,440

The above Consolidated Statement of Changes of Equity should be read in conjunction with the accompanying notes.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The annual financial report of Vection Technologies Limited (formerly known as ServTech Global Holdings Limited) ( Vection Technologies , Vection , the Company or Group ) for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of directors on 30 September 2020.

The Company is a public company limited by shares incorporated on 14 September 2016 and domiciled in Australia.

The nature of the operations and principal activities of the Company are described in the Directors’ report.

(a) Basis of preparation

have been applied consistently to all periods presented unless otherwise stated.

(i) Statement of compliance

accordance with the Australian Accounting Standards (AASBs), including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 .

(ii) Basis of measurement and reporting convention

in Australian dollars and all values are rounded to the nearest dollar unless otherwise stated.

(b) Segment Information

Operating Segments – AASB 8 requires a management approach under which segment information is presented on the same basis as that used for internal reporting purposes. This is consistent to the approach used for the comparative period. Operating segments are reported in a uniform manner to which is internally provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors.

An operating segment is a component of the Group that engages in business activity from which it may earn revenues or incur expenditure, including those that relate to transactions with other Group components. Each operating segment’s results are reviewed regularly by the Board to make decisions about resources to be allocated to the segments and assess its performance, and for which discrete financial information is available.

The Board monitors the operations of the Company based on 2 segments; its IT development division and its outsourced services division.

strategic decision making is facilitated by evaluation of the operations of the legal parent and subsidiaries which represent the operational performance of the Group’s revenues and the research and development activities as well as the finance, treasury, compliance and funding elements of the Group.

(c) Estimates and judgements

equal the actual results. This note provides an overview of the areas that involve a degree of judgement or complexity in the preparing the annual financial report. Facts and circumstances may come to light after the event which may have significantly varied the assessment used which result in a materially different value being recorded at the time of preparing this annual financial report.

Deferred tax assets - The Group has not recognised deferred tax assets relating to carried forward tax losses or timing differences. These amounts have not been recognised given the recognition requirements of AASB 112 Income Taxes .

Share-based payments - The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black- Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to notes 12 and 13 for details of inputs utilised in calculating the fair value of the equity instrument.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred considerations - The Group measures the value of the deferred considerations by performing a forecast on the value of each of the Performance Rights. A probability distribution was assigned to each of the main assumptions and a Monte Carlo simulation was performed based on the assumed probability distributions. 3,000 samples were used. The mean of the 3,000 samples for each of the Performance Rights were calculated. The net present value of each of the performance rights as at 29 April 2020 has been estimated by discounting the mean by an assumed weighted average cost of capital of 16.50%. Refer to note 20 for details of inputs utilised in calculating the fair value of the deferred considerations for the Mindesk acquisition.

In relation to the Vection Italy acquisition, 150,000,000 Performance Rights issued were initially valued at $nil as the probability of conversion was remote. In the 12 month period since the acquisition, the Company reassessed this probability to 100% and recognised a value of $2,550,000 being the value of the Shares if the Performance RIghts were converted at reassessment date.

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

The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1 (r). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated pre-tax discount rates based on the current cost of capital and growth rates of the estimated future cash flows.

(d) Principles of consolidation

Subsidiaries

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

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Business Combinations

The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.

designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.

Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss.

Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration

(e) Standards and Interpretations applicable to 30 June 2020

In the year ended 30 June 2020, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and, therefore, no material change is necessary to Group accounting policies.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Standards and Interpretations in issue not yet adopted

The Directors have also reviewed all Standards and Interpretations in issue but not yet adopted for the year ended 30 June 2020. These standards are not expected to have a material impact on the Group in the current annual reporting period.

(g) Cash and cash equivalents

For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Statement of Financial Position.

(h) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

(i) Trade and other payables

amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

(j) Property, plant and equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Increases in the carrying amounts arising on revaluation of land and buildings are recognised, net of tax, in other comprehensive income and accumulated in reserves in shareholders’ equity. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to profit or loss. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged to profit or loss and depreciation based on the asset’s original cost, net of tax, is reclassified from the property, plant and equipment revaluation surplus to retained earnings.

Land is not depreciated. Depreciation on other assets is calculated using the methods shown in the table below to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(j) Property, plant and equipment (continued)

The depreciation rates used for each class of depreciable assets are as follows:

Class of fxed asset	Depreciation method	Depreciation rate
Ofce and computer equipment	Diminishing value	20% - 67%
Leasehold improvements	Straight-line	2.5%
Software development	Straight-line	4%–25%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings.

(k) Contributed equity

a deduction, net of tax, from the proceeds.

Where any group company purchases the Company’s equity instruments, for example as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of Vection Technologies Ltd (formerly known as ServTech Global Holdings Limited) as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of the Group.

(l) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

(m) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing:

shares issued during the year and excluding treasury shares.

(ii) Diluted earnings per share

the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(n) Income taxes

for each jurisdiction, adjusted by 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 apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
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 probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed 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 assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity's which intend to settle simultaneously.

(o) Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(p) Intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. The intellectual property acquired as part of the Vection Italy business combination (Note 20) have been treated as indefinite life intangible assets as they are expected to contribute to the Group’s cashflows for the foreseeable future. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

The amortisation rates used for each class of depreciable intangible assets are as follows:

Class of intangible asset	Amortisation method	Amortisation rate
Rights of use of intangible asset	Straight-line	20%

Other intangible assets (patents and development costs)	Straight-line	20%

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Foreign currency translation

(i) Functional and presentation currency

environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollar ($), which is Vection Technologies Ltd’s (formerly known as ServTech Global Holdings Limited) functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Income, within finance costs.

basis within other income or other expenses.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.

(iii) Group companies

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position
rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale where applicable.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(r) Impairment of assets

frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(s) Revenue recognition

transferring goods or 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 good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability.

Interest revenue is recognised using the effective interest rate method. All revenue is stated net of the amount of goods and services tax (GST).

Government Incentives Received

Incentives received for research and development are recognised as revenue in the period in which they are received. The incentives received in the current period are for R&D tax incentives for the 2018 and 2019 financial years and fulfil all the necessary attached conditions.

(t) Leases

The group leases offices which are made for fixed periods of up to five years. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
amounts expected to be payable by the group under residual value guarantees
the exercise price of a purchase option if the group is reasonably certain to exercise that option, and · payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(t) Leases (continued)

Right-of-use assets are measured at cost comprising the following: · the amount of the initial measurement of lease liability · any lease payments made at or before the commencement date less any lease incentives received

any initial direct costs, and
restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. While the group revalues its land and buildings that are presented within property, plant and equipment, it has chosen not to do so for the right-of-use buildings held by the group.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without a purchase option. Low-value assets comprise IT equipment and small items of office furniture.

(u)

(i) Short-term obligations

settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities for annual leave and accumulating sick leave are presented as employee provisions in the Statement of Financial Position while all other short-term employee obligations are presented as payables in the Statement of Financial Position.

(ii) Other long-term employee benefit obligations

The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period 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 end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.

Obligations are presented as current in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

(iii) Retirement benefit obligations

All Australian-resident employees of the Group are entitled to receive a superannuation guarantee contribution required by the government, which is currently 9.5%, and do not receive any other retirement benefits. Some individuals have chosen to sacrifice part of their salary to increase payments towards superannuation.

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

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u)

expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

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

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

accepts voluntary redundancy in exchange for these benefits.

The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets and involves the payment of terminations benefits.

expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.

(v) Goods and Services Tax (GST)

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

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position.

recoverable from, or payable to the taxation 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.

(w) Compound Financial Instruments

of the holder, when the number of shares to be issued is fixed. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest related to the financial liability is recognised in the Statement of Profit or Loss and Other Comprehensive Income. On conversion the financial liability is reclassified to equity and no gain or loss is recognised.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(x) Financial instruments

Financial assets recognised by the Company are subsequently measured in their entirety at either amortised cost or fair value, subject to their classification and whether the Company irrevocably designates the financial asset on initial recognition at fair value through other comprehensive income (FVtOCI) in accordance with the relevant criteria in AASB 9.

financial liabilities designated at fair value through profit and loss (FVtPL), are subsequently measured at fair value.

(ii) Initial recognition and measurement

For financial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

value through profit or loss, in which case transaction costs are immediately recognised as expenses in profit or loss.

Trade and other receivables

Trade and other receivables arise from the Group’s transactions with its customers and are normally settled within 30 days.

assets, trade and other receivables are subsequently measured at amortised cost.

(iii) Impairment

a. debt instruments measured at amortised cost;
c. receivables from contracts with customers and contract assets.

contracts with customers and contract assets. Under the AASB 9 simplified approach, the Company determines the allowance for credit losses for receivables from contracts with customers and contract assets on the basis of the lifetime expected credit losses of the financial asset. Lifetime expected credit losses represent the expected credit losses that are expected to result from default events over the expected life of the financial asset.

The Company determines expected credit losses based on the company’s historical credit loss experience, adjusted for factors that are specific to the financial asset as well as current and future expected economic conditions relevant to the financial asset. When material, the time value of money is incorporated into the measurement of expected credit losses. There has been no change in the estimation techniques or significant assumptions made during the reporting period.

credit losses.

(y)

financial year.

(z) Going concern

realisation of assets and the settlement of liabilities in the ordinary course of business. For the year ended 30 June 2020 the Group recorded a loss from continuing operations of $1,165,870 (2019: $4,420,102) and had negative cash flows from operating activities of $312,532 (2019: $1,518,923).

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(z) Going concern (continued)

and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors are satisfied they will be able to raise additional working capital as required and thus it is appropriate to prepare the financial statements on a going concern basis. In arriving at this position, the Directors have considered the following matters:

● Cash on hand of $1,584,715 at 30 June 2020 in addition to $1.485M collected post period end;

● The historical growth of revenue and increased underlying results. The Group is continually assessing its ongoing cash requirements. As part of this process the Group maintains a strict internal cash flow management process which is based on numerous revenue and other assumptions. Should these assumptions not be achieved the directors believe the Group will reduce the cost base in line with revenue as required and raise additional capital as required. The Group has the support of its creditors and employees in relation to its obligations and has agreed payment arrangements in respect of taxation liabilities. 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 reasons outlined above. Should the Group not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements and that the financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the Group not continue as a going concern.

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||||
|---|---|---|
|2.|LOSS FOR THE PERIOD|
|Consolidated|
|Loss for the year included the following items:|
|30 June 20|30 June 19|
|$|$|
|i) Finance Costs|
|Convertible notes|-|12,169|
|Interest costs|38,644|20,093|
|Other finance costs|24,003|-|
|Total finance costs|62,647|32,262|
|ii) Other expenses|
|Advertising expenses|180,130|116,222|
|Rent expenses|129,526|283,622|
|Travel|115,635|66,777|
|Other administrative expenses|438,567|358,939|
|Total other expenses|863,858|825,560|
|iii) Revenue|
|Software technology development services|2,123,879|539,509|
|Outsourced services|423,000|457,409|
|Interest received|16,857|21,374|
|R&D tax refund|355,706|149,442|
|Foreign exchange gain|88,102|-|
|Other revenue|131,404|194,390|
|Total revenue|3,138,948|1,362,124|

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VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.
INCOME TAX EXPENSE
30 June 20
30 June 19
$
$
a) Income tax expense
Current tax
7,474
-
Deferred tax
(5,811)
-
Income tax expense reported in Consolidated Statement of Proft or
Loss and Other Comprehensive Income
1,663
-
b) Numerical reconciliation of income tax expense to prima facie tax
payable
Loss from continuing operations before income tax expense
(1,164,206)
(4,420,102)
Tax at the Australian tax rate of 27.5% (2019:27.5%)
(320,157)
(1,215,528)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income
12,622
(2,543)
Tax losses and other timing differences for which no DTA is recognised
309,198
1,218,071
Income tax expense
1,663
-
(c) Recognised deferred tax liabilities
Other intangible assets (patents and development costs)
611,521
-
Rights of use intangible asset
(7,288)
-
604,233
-
(d) Unrecognised deferred tax assets and liabilities
The directors estimate that the potential future income tax benefts
carried forward but not brought to account at year end at the Australian
corporate tax rate of 26% (2019: 27.5%) are made up as follows:
Australian tax losses
3,097,733
2,780,868
Australian capital losses
100,442
106,236
Australian CGT assets
59,101
57,268
Australian taxable temporary differences
92,678
276,275
Unrecognised net deferred tax assets
3,349,954
3,220,647

(i) the Company derives future assessable income of a nature and amount sufficient to enable the benefits to be utilised;

(ii) the Company complies with the conditions for deductibility imposed by law; and

(iii) no changes in income tax legislation adversely affecting the Company in utilising the benefits.

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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4. CASH

	Consolidated	Consolidated
	30 June 20	30 June 19
	$ $ 1,584,715 796,569
Cash at bank	1,584,715
Balance per statement of cash fows	1,584,715	796,569

Refer note 23 for the risk exposure analysis for cash and cash equivalents.

a. Reconciliation of loss after income tax to net cash fows from operating activities
Loss for the period	(1,165,870)	(4,420,102)
Non-cash items: Depreciation (including discontinued operations) Accrued Interest Finance costs Credit loss allowances Share based payments - Note 13 Consulting fees settled via equity Impairment expenses Gain on disposal Movements in assets/liabilities: (increase)/decrease in other receivables Increase/(decrease) in tax liability increase/(decrease) in other payable and provisions
	507,851	146,848
	(16,340)	(20,392)
	24,003	-
	36,581	13,790
	104,362	36,900
	-	93,500
	78,579	3,084,659
	19,294	-
		196,433 - (650,559)

	(685,867)
	(7,288)
	792,163
Net cash outfow from operating activities	(312,532)	(1,518,923)

b.

i) Share based payments

The Company issued Shares in lieu of services rendered during the year (Note 13).

ii) Vection consideration securities

The Company issued securities in consideration for the Acquisition of Vection (Note 12, 13 and 20A) in the prior year.

iii) Mindesk consideration securities

The Company issued securities in consideration for the Acquisition of Mindesk (Note 9, 12 and 20B) in the current year.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. RECEIVABLES - CURRENT

5. RECEIVABLES - CURRENT
	Consolidated
	30 June 20	30 June 19
	$ $ 2,084,596 1,028,212 92,021 514,250
Trade and other receivables (i)	2,084,596
Trade and other receivables due from sale of business (ii)	92,021
Credit loss allowances	(32,971)	(100,058)
	2,143,646	1,442,404

Prepayments	5,906	15,586
	2,149,552	1,457,990

Refer to Note 23 for the risk exposure analysis for receivables.

i) All receivables apart from the balance detailed below in (ii) are non-interest bearing. There are no receivables where the fair value would be materially different from the current carrying value. The Group reviews all receivables for impairment. Any receivables which are doubtful have been provided for. Based on past experience all receivables where no impairment has been recognised are not considered to be impaired. No other class of financial asset is past due.

ii) Trade and other receivables due from sale of business

The Company entered into an agreement with The Agency whereby amounts outstanding from The Agency to the Company will accrue interest at a rate of 8% per annum.

6. PROPERTY, PLANT & EQUIPMENT

Ofce and computer equipment		115,259
Ofce & computer equipment at cost	198,681
Less accumulated depreciation	(126,047)	(33,454)
Leasehold improvements	72,634	81,805
		186,969
Leasehold improvements at cost	185,735
Less accumulated depreciation	(181,510)	(178,699)
	4,225	8,270
Total plant and equipment	76,859	90,075

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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7. INTANGIBLE ASSETS

Consolidated 30 June 20 30 June 19 $ $ GOODWILL Opening balance 2,550,000 - Acquisition - Vection Italy Srl - Note 20 (A) - 5,634,659 Less impairment expenses - (3,084,659) Acquisition - Mindesk Group - Note 20 (B) 3,587,687 - Closing balance 6,137,687 2,550,000 INTELLECTUAL PROPERTY Opening balance 2,811,417 - Acquisition - Vection Italy Srl - Note 20(A) - 2,811,417 Closing balance 2,811,417 2,811,417 RIGHTS OF USE OF INTANGIBLE ASSET Opening balance 666,064 - Acquisition - Vection Italy Srl - Note 20(A) - 666,064 Additions 26,058 - Less amortisation (162,767) - Exchange differences 42,054 - Closing balance 571,409 666,064 OTHER INTANGIBLE ASSETS (PATENTS AND DEVELOPMENT COSTS) Opening balance 111,690 - Acquisition - Vection Italy Srl - Note 20(A) - 111,690 Acquisition - Mindesk Group - Note 20(B) 2,307,269 Additions 585,290 - Less amortisation (143,617) - Exchange differences (16,690) - Closing balance 2,843,942 111,690 TOTAL INTANGIBLE ASSETS 12,364,455 3,589,171	Consolidated	Consolidated	Consolidated	Consolidated
	30 June 20			30 June 19
	$ $

Goodwill Impairment Testing

The Group tests whether goodwill has suffered any impairment on an annual basis. For the 2020 and 2019 reporting periods, the recoverable amount of the cash-generating units (CGUs) was determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. These growth rates are consistent with forecasts included in industry reports specific to the industry in which each CGU operates.

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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8. PAYABLES - CURRENT

8. PAYABLES - CURRENT
	Consolidated
	30 June 20	30 June 19
	$ $ 694,544 560,167
Unsecured liabilities:
Trade payables	694,544
Sundry creditors and accruals	1,577,860	407,792
	2,272,404	967,959

Payables (current and non-current) are non-interest bearing. There are no payables where the fair value would be materially different from the current carrying value.

9. PROVISIONS - CURRENT	9. PROVISIONS - CURRENT	9. PROVISIONS - CURRENT
Provision for onerous lease commitments (i)	-	200,644
Deferred Consideration - Note 20	3,321,031	2,550,000
	3,321,031	2,750,644

PROVISIONS - NON-CURRENT

	Provision for onerous lease commitments (i)	Provision for onerous lease commitments (i)	-		95,029
	Deferred Consideration - Note 20		2,518,969		-
			2,518,969		95,029

i) Due to the Company’s change in direction, some of the leased offices have not been used for the operations of the Company. As a result, a provision for an onerous lease had been recognised to reflect the present value of future lease costs which are required to be made in respect of these offices. The benefits expected to be generated by the lease contract are outweighed by the future costs.

10. LEASE LIABILITIES - CURRENT

Current portion lease liabilities (i)	94,322	45,441
LEASE LIABILITIES - NON-CURRENT 94,322 45,441	94,322	45,441
Non-current portion lease liabilities (i)	487,713	610,292
	487,713	610,292

i) The lease liabilities are related to the Rights of Use for assets acquired by the Company through lease agreements for its Italian office. In calculating these amounts, the Company applied to the lease contract an Incremental Borrowing Rate within a range of 1.26% to 2.14%.

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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11. BORROWINGS - CURRENT

11. BORROWINGS - CURRENT
	Consolidated
	30 June 20	30 June 19
	$ $ 83,333 - 344,273 -
Bank loan (i)	83,333
Other borrowings (ii)	344,273
BORROWINGS - NON-CURRENT 427,606 -	427,606	-
Bank loan (i)	166,667	- -
Other borrowings (ii)	255,523
	422,190	-

Terms of the borrowings:

(i) The bank loan is unsecured, has a 3 years term with an expiry date of 27 April 2023. The loan has a variable interest rate of 4.5% (2019: Nil). No repayment is required for the first 6 months,
(ii) Two new bank financial debts agreement was stipulated during the year by Vection Italy. Both agreements will expire in 2026.

12. ISSUED CAPITAL

Share Capital	30 June 20	30 June 19	30 June 20	30 June 19
	Shares No. Shares No. $ $
Ordinary Shares	822,676,875	657,171,676	22,376,991	19,397,897
Movement in share capital
Date	Details		Number of shares	$
1 July 2019	Opening balance 657,171,676 19,397,897 Issue of shares - Acquisition of Mindesk (i) 165,505,199 2,979,094
29 April 2020
30 June 2020	Closing balance 822,676,875 22,376,991

i) Consideration shares issued to the vendors of Mindesk – refer Note 20B

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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13. RESERVES

13. RESERVES
	Consolidated
	30 June 20	30 June 19
	$ $ 104,362 272,500 126,496 (843)
Share based payment reserve (i)	104,362
Foreign currency translation reserve	126,496
	230,858	271,657

i) In the prior period, share based payments related to 3,000,000 shares issued to a consultant in return for services to the value of $36,900

i) Options	30 June 20	30 June 19	30 June 20	30 June 19
	Options/Rights No. Options No. $ $
Options ($0.30 ex, 3 yrs)	-	2,500,000	-	272,500
	-	2,500,000	-	272,500

Date	Details		Options #	$
1 July 2019	Opening balance 2,500,000 272,500 Expiry of options (2,500,000) (272,500)
14 March 2020
30 June 2020	Closing balance - -

ii) Fair value of options

year as a result of exercise of options.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. RESERVES (continued)

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

30 June 20 30 June 19 30 June 20 30 June 19
ii) Performance rights Performance Rights No. Performance Rights No. $ $
Performance rights -
Directors and corporate 22,500,000 22,500,000 104,362 -
advisor (ii)
22,500,000 22,500,000 104,362 -
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Date	Details	Performance Rights	$
1 July 2019	Opening balance - - Performance rights to Directors and corporate advisor 22,500,000 104,362
29 November 2019
30 June 2020	Closing balance 22,500,000 104,362

(ii) Fair value of performance rights – Directors and Corporate Advisor

During the year, the Company issued 22,500,000 performance rights in three tranches at 7,500,000 per tranche to the directors and advisor for services rendered with the following terms: ● Tranche 1 Performance Rights: 7,500,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.035 per share on trading on ASX;
● Tranche 2 Performance Rights: 7,500,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.045 per share on trading on ASX;
Tranche 1 Performance Rights: 7,500,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.065 per share on trading on ASX;

The fair value at grant date of the performance rights issued has been determined using a Black-Scholes pricing model that takes into account the exercise price, the term of the performance rights, 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 performance rights. The total fair value of the performance rights was $132,866. The total share based payment expense recognised was $104,362 (2019: $nil).

The details of the variables utilised to determine the valuation under the Black Scholes model were as follows:

Date	Tranche 1	Tranche 2	Tranche 3
Consideration Exercise price Grant date Expiry date Share price Expected volatility Dividend yield Risk free rate	Nil $0.035 25 November 2019 NIL	Nil $0.045 25 November 2019 NIL	Nil $0.065 25 November 2019 NIL
	$0.017 90% 0% 0.74%	$0.017 90% 0% 0.74%	$0.017 90% 0% 0.74%

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. ACCUMULATED LOSSES

4. ACCUMULATED LOSSES
	Consolidated
	30 June 20	30 June 19
	$ $ (15,655,114) (11,235,012) 272,500 - (1,165,870) (4,420,102)
Opening balance	(15,655,114)
Transfer of lapsed performance rights value - Note 13	272,500
Loss for the period	(1,165,870)
Closing balance	(16,548,484)	15,655,114

15. EARNINGS PER SHARE
Loss attributable to shareholders (overall)	(1,165,870)	(4,420,102)
Loss attributable to shareholders (continuing operations)	(1,163,640)	(4,502,612)
Proft (Loss) attributable to shareholders (discontinuing operations)	(2,230)		82,510
Weighted average number of ordinary shares	573,655,276	292,390,105

Basic loss per share calculation (loss/weighted average shares)	(0.203)		(1,512)
Basic loss per share calculation (continuing operations)	(0.203)		(1,540)
Basic proft/(loss) per share calculation (discontinuing operations)	-		0.028

15. EARNINGS PER SHARE

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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16. SEGMENT REPORTING

Discontinued Operations IT Development Outsourced Services Corporate Total $ $ $ $ $ Year ended 30 June 2020 Segment Revenue 2,615,487 423,000 100,461 3,138,948 Signifcant items - (995,399) (547,303) (264,377) (1,807,079) Employee benefts expense (694) (386,623) (7,986) (422,470) (817,773) Consulting and professional fees (1,535) (44,691) (112) (16,309) (62,647) Financing costs - (21,430) (81,961) (404,460) (507,851) Depreciation and amortisation - (508,099) (219,829) (379,877) (1,107,806) Other administrative expenses - (1,663) - - (1,663) Segment operating loss after tax (2,229) 657,582 (434,191) (1,387,032) (1,165,870) Year ended 30 June 2019 Segment Revenue 263,395 789,999 457,409 114,716 1,625,519 Signifcant items Employee benefts expense (47,327) (397,941) (213,037) (363,944) (1,022,249) Consulting and professional fees (4,987) (218,450) (7,717) (382,392) (613,546) Financing costs (7,447) (2,798) (1,154) (28,311) (39,710) Depreciation and amortisation (599) (37,132) (109,117) - (146,848) Other administrative expenses (120,525) (89,820) (250,701) (3,762,222) (4,223,268) Segment operating loss after tax 82,510 43,858 (124,317) (4,422,153) (4,420,102) Segments assets At 30 June 2020 - 3,140,625 182,128 12,904,958 16,227,711 At 30 June 2019 - 1,646,376 196,272 6,641,157 8,483,805 Segment liabilities At 30 June 2020 19,907 2,596,050 47,399 7,504,990 10,168,346 At 30 June 2019 - 1,169,537 54,327 3,245,401 4,469,365	Discontinued Operations IT Development Outsourced Services Corporate Total $ $ $ $ $ Year ended 30 June 2020 Segment Revenue 2,615,487 423,000 100,461 3,138,948 Signifcant items - (995,399) (547,303) (264,377) (1,807,079) Employee benefts expense (694) (386,623) (7,986) (422,470) (817,773) Consulting and professional fees (1,535) (44,691) (112) (16,309) (62,647) Financing costs - (21,430) (81,961) (404,460) (507,851) Depreciation and amortisation - (508,099) (219,829) (379,877) (1,107,806) Other administrative expenses - (1,663) - - (1,663) Segment operating loss after tax (2,229) 657,582 (434,191) (1,387,032) (1,165,870) Year ended 30 June 2019 Segment Revenue 263,395 789,999 457,409 114,716 1,625,519 Signifcant items Employee benefts expense (47,327) (397,941) (213,037) (363,944) (1,022,249) Consulting and professional fees (4,987) (218,450) (7,717) (382,392) (613,546) Financing costs (7,447) (2,798) (1,154) (28,311) (39,710) Depreciation and amortisation (599) (37,132) (109,117) - (146,848) Other administrative expenses (120,525) (89,820) (250,701) (3,762,222) (4,223,268) Segment operating loss after tax 82,510 43,858 (124,317) (4,422,153) (4,420,102) Segments assets At 30 June 2020 - 3,140,625 182,128 12,904,958 16,227,711 At 30 June 2019 - 1,646,376 196,272 6,641,157 8,483,805 Segment liabilities At 30 June 2020 19,907 2,596,050 47,399 7,504,990 10,168,346 At 30 June 2019 - 1,169,537 54,327 3,245,401 4,469,365	Discontinued Operations IT Development Outsourced Services Corporate Total $ $ $ $ $ Year ended 30 June 2020 Segment Revenue 2,615,487 423,000 100,461 3,138,948 Signifcant items - (995,399) (547,303) (264,377) (1,807,079) Employee benefts expense (694) (386,623) (7,986) (422,470) (817,773) Consulting and professional fees (1,535) (44,691) (112) (16,309) (62,647) Financing costs - (21,430) (81,961) (404,460) (507,851) Depreciation and amortisation - (508,099) (219,829) (379,877) (1,107,806) Other administrative expenses - (1,663) - - (1,663) Segment operating loss after tax (2,229) 657,582 (434,191) (1,387,032) (1,165,870) Year ended 30 June 2019 Segment Revenue 263,395 789,999 457,409 114,716 1,625,519 Signifcant items Employee benefts expense (47,327) (397,941) (213,037) (363,944) (1,022,249) Consulting and professional fees (4,987) (218,450) (7,717) (382,392) (613,546) Financing costs (7,447) (2,798) (1,154) (28,311) (39,710) Depreciation and amortisation (599) (37,132) (109,117) - (146,848) Other administrative expenses (120,525) (89,820) (250,701) (3,762,222) (4,223,268) Segment operating loss after tax 82,510 43,858 (124,317) (4,422,153) (4,420,102) Segments assets At 30 June 2020 - 3,140,625 182,128 12,904,958 16,227,711 At 30 June 2019 - 1,646,376 196,272 6,641,157 8,483,805 Segment liabilities At 30 June 2020 19,907 2,596,050 47,399 7,504,990 10,168,346 At 30 June 2019 - 1,169,537 54,327 3,245,401 4,469,365	Discontinued Operations IT Development Outsourced Services Corporate Total $ $ $ $ $ Year ended 30 June 2020 Segment Revenue 2,615,487 423,000 100,461 3,138,948 Signifcant items - (995,399) (547,303) (264,377) (1,807,079) Employee benefts expense (694) (386,623) (7,986) (422,470) (817,773) Consulting and professional fees (1,535) (44,691) (112) (16,309) (62,647) Financing costs - (21,430) (81,961) (404,460) (507,851) Depreciation and amortisation - (508,099) (219,829) (379,877) (1,107,806) Other administrative expenses - (1,663) - - (1,663) Segment operating loss after tax (2,229) 657,582 (434,191) (1,387,032) (1,165,870) Year ended 30 June 2019 Segment Revenue 263,395 789,999 457,409 114,716 1,625,519 Signifcant items Employee benefts expense (47,327) (397,941) (213,037) (363,944) (1,022,249) Consulting and professional fees (4,987) (218,450) (7,717) (382,392) (613,546) Financing costs (7,447) (2,798) (1,154) (28,311) (39,710) Depreciation and amortisation (599) (37,132) (109,117) - (146,848) Other administrative expenses (120,525) (89,820) (250,701) (3,762,222) (4,223,268) Segment operating loss after tax 82,510 43,858 (124,317) (4,422,153) (4,420,102) Segments assets At 30 June 2020 - 3,140,625 182,128 12,904,958 16,227,711 At 30 June 2019 - 1,646,376 196,272 6,641,157 8,483,805 Segment liabilities At 30 June 2020 19,907 2,596,050 47,399 7,504,990 10,168,346 At 30 June 2019 - 1,169,537 54,327 3,245,401 4,469,365	Discontinued Operations IT Development Outsourced Services Corporate Total $ $ $ $ $ Year ended 30 June 2020 Segment Revenue 2,615,487 423,000 100,461 3,138,948 Signifcant items - (995,399) (547,303) (264,377) (1,807,079) Employee benefts expense (694) (386,623) (7,986) (422,470) (817,773) Consulting and professional fees (1,535) (44,691) (112) (16,309) (62,647) Financing costs - (21,430) (81,961) (404,460) (507,851) Depreciation and amortisation - (508,099) (219,829) (379,877) (1,107,806) Other administrative expenses - (1,663) - - (1,663) Segment operating loss after tax (2,229) 657,582 (434,191) (1,387,032) (1,165,870) Year ended 30 June 2019 Segment Revenue 263,395 789,999 457,409 114,716 1,625,519 Signifcant items Employee benefts expense (47,327) (397,941) (213,037) (363,944) (1,022,249) Consulting and professional fees (4,987) (218,450) (7,717) (382,392) (613,546) Financing costs (7,447) (2,798) (1,154) (28,311) (39,710) Depreciation and amortisation (599) (37,132) (109,117) - (146,848) Other administrative expenses (120,525) (89,820) (250,701) (3,762,222) (4,223,268) Segment operating loss after tax 82,510 43,858 (124,317) (4,422,153) (4,420,102) Segments assets At 30 June 2020 - 3,140,625 182,128 12,904,958 16,227,711 At 30 June 2019 - 1,646,376 196,272 6,641,157 8,483,805 Segment liabilities At 30 June 2020 19,907 2,596,050 47,399 7,504,990 10,168,346 At 30 June 2019 - 1,169,537 54,327 3,245,401 4,469,365	Discontinued Operations IT Development Outsourced Services Corporate Total $ $ $ $ $ Year ended 30 June 2020 Segment Revenue 2,615,487 423,000 100,461 3,138,948 Signifcant items - (995,399) (547,303) (264,377) (1,807,079) Employee benefts expense (694) (386,623) (7,986) (422,470) (817,773) Consulting and professional fees (1,535) (44,691) (112) (16,309) (62,647) Financing costs - (21,430) (81,961) (404,460) (507,851) Depreciation and amortisation - (508,099) (219,829) (379,877) (1,107,806) Other administrative expenses - (1,663) - - (1,663) Segment operating loss after tax (2,229) 657,582 (434,191) (1,387,032) (1,165,870) Year ended 30 June 2019 Segment Revenue 263,395 789,999 457,409 114,716 1,625,519 Signifcant items Employee benefts expense (47,327) (397,941) (213,037) (363,944) (1,022,249) Consulting and professional fees (4,987) (218,450) (7,717) (382,392) (613,546) Financing costs (7,447) (2,798) (1,154) (28,311) (39,710) Depreciation and amortisation (599) (37,132) (109,117) - (146,848) Other administrative expenses (120,525) (89,820) (250,701) (3,762,222) (4,223,268) Segment operating loss after tax 82,510 43,858 (124,317) (4,422,153) (4,420,102) Segments assets At 30 June 2020 - 3,140,625 182,128 12,904,958 16,227,711 At 30 June 2019 - 1,646,376 196,272 6,641,157 8,483,805 Segment liabilities At 30 June 2020 19,907 2,596,050 47,399 7,504,990 10,168,346 At 30 June 2019 - 1,169,537 54,327 3,245,401 4,469,365
Segments assets
At 30 June 2020	-	3,140,625	182,128	12,904,958	16,227,711
At 30 June 2019	-	1,646,376	196,272	6,641,157	8,483,805
Segment liabilities
At 30 June 2020	19,907	2,596,050	47,399	7,504,990	10,168,346
At 30 June 2019	-	1,169,537	54,327	3,245,401	4,469,365

1) Descriptions of assets

The Group’s executive directors examine the Group’s performance from a core operations perspective and two reportable segments of its continuing business, being IT development and outsourced services.

2) Segment revenue and results

Segment revenue reported above represents revenue generated from external customers. The accounting policies of the reportable segments are the same as the Group’s accounting policies describes in note 1. Segment profit represents the profit before tax earned by each segment without allocation of central corporate and administration costs, employee benefits, depreciation and amortisation, and finance costs. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

3) Segment assets and liabilities

All assets are allocated to reportable segments other than cash, GST receivables, office equipment, and certain other receivables. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments. All liabilities are allocated to reportable segments other than borrowings, and corporate creditors. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. AUDITOR’S REMUNERATION Criterion Audit Pty Ltd 18. SUBSIDIARIES Consolidated 30 June 20 30 June 19 $ $ Audit and other assurance services Audit and review of fnancial statements 35,000 26,000 Total remuneration for audit and other assurances services 35,000 26,000 Date of the Gain of Control Country of Incorporation Class of Shares Equity Holding 2020 (%) 2019 (%) Parent Entity: Vection Technologies Ltd Australia Ordinary Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Australia Ordinary 100 100 Value Finance Pty Ltd1 16/9/2016 Australia Ordinary - 100 Complete Settlements Pty Ltd1 16/9/2016 Australia Ordinary - 100 Capitol Asset Management Pty Ltd1 16/9/2016 Australia Ordinary - 100 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Critical Success Pty Ltd1 16/9/2016 Australia Ordinary - 100 ServTech Global PH Inc 8/12/2016 Philippines Ordinary 100 100 SVT India Private Limited 23/3/2017 India Equity 100 100 Vection Italy SRL 12/4/2019 Italy Ordinary 100 100 Mindesk Inc 29/4/2020 USA Ordinary 100 - Mindesk SRL 29/4/2020 USA Ordinary 100 -	17. AUDITOR’S REMUNERATION Criterion Audit Pty Ltd 18. SUBSIDIARIES Consolidated 30 June 20 30 June 19 $ $ Audit and other assurance services Audit and review of fnancial statements 35,000 26,000 Total remuneration for audit and other assurances services 35,000 26,000 Date of the Gain of Control Country of Incorporation Class of Shares Equity Holding 2020 (%) 2019 (%) Parent Entity: Vection Technologies Ltd Australia Ordinary Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Australia Ordinary 100 100 Value Finance Pty Ltd1 16/9/2016 Australia Ordinary - 100 Complete Settlements Pty Ltd1 16/9/2016 Australia Ordinary - 100 Capitol Asset Management Pty Ltd1 16/9/2016 Australia Ordinary - 100 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Critical Success Pty Ltd1 16/9/2016 Australia Ordinary - 100 ServTech Global PH Inc 8/12/2016 Philippines Ordinary 100 100 SVT India Private Limited 23/3/2017 India Equity 100 100 Vection Italy SRL 12/4/2019 Italy Ordinary 100 100 Mindesk Inc 29/4/2020 USA Ordinary 100 - Mindesk SRL 29/4/2020 USA Ordinary 100 -	17. AUDITOR’S REMUNERATION Criterion Audit Pty Ltd 18. SUBSIDIARIES Consolidated 30 June 20 30 June 19 $ $ Audit and other assurance services Audit and review of fnancial statements 35,000 26,000 Total remuneration for audit and other assurances services 35,000 26,000 Date of the Gain of Control Country of Incorporation Class of Shares Equity Holding 2020 (%) 2019 (%) Parent Entity: Vection Technologies Ltd Australia Ordinary Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Australia Ordinary 100 100 Value Finance Pty Ltd1 16/9/2016 Australia Ordinary - 100 Complete Settlements Pty Ltd1 16/9/2016 Australia Ordinary - 100 Capitol Asset Management Pty Ltd1 16/9/2016 Australia Ordinary - 100 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Critical Success Pty Ltd1 16/9/2016 Australia Ordinary - 100 ServTech Global PH Inc 8/12/2016 Philippines Ordinary 100 100 SVT India Private Limited 23/3/2017 India Equity 100 100 Vection Italy SRL 12/4/2019 Italy Ordinary 100 100 Mindesk Inc 29/4/2020 USA Ordinary 100 - Mindesk SRL 29/4/2020 USA Ordinary 100 -	17. AUDITOR’S REMUNERATION Criterion Audit Pty Ltd 18. SUBSIDIARIES Consolidated 30 June 20 30 June 19 $ $ Audit and other assurance services Audit and review of fnancial statements 35,000 26,000 Total remuneration for audit and other assurances services 35,000 26,000 Date of the Gain of Control Country of Incorporation Class of Shares Equity Holding 2020 (%) 2019 (%) Parent Entity: Vection Technologies Ltd Australia Ordinary Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Australia Ordinary 100 100 Value Finance Pty Ltd1 16/9/2016 Australia Ordinary - 100 Complete Settlements Pty Ltd1 16/9/2016 Australia Ordinary - 100 Capitol Asset Management Pty Ltd1 16/9/2016 Australia Ordinary - 100 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Critical Success Pty Ltd1 16/9/2016 Australia Ordinary - 100 ServTech Global PH Inc 8/12/2016 Philippines Ordinary 100 100 SVT India Private Limited 23/3/2017 India Equity 100 100 Vection Italy SRL 12/4/2019 Italy Ordinary 100 100 Mindesk Inc 29/4/2020 USA Ordinary 100 - Mindesk SRL 29/4/2020 USA Ordinary 100 -	17. AUDITOR’S REMUNERATION Criterion Audit Pty Ltd 18. SUBSIDIARIES Consolidated 30 June 20 30 June 19 $ $ Audit and other assurance services Audit and review of fnancial statements 35,000 26,000 Total remuneration for audit and other assurances services 35,000 26,000 Date of the Gain of Control Country of Incorporation Class of Shares Equity Holding 2020 (%) 2019 (%) Parent Entity: Vection Technologies Ltd Australia Ordinary Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Australia Ordinary 100 100 Value Finance Pty Ltd1 16/9/2016 Australia Ordinary - 100 Complete Settlements Pty Ltd1 16/9/2016 Australia Ordinary - 100 Capitol Asset Management Pty Ltd1 16/9/2016 Australia Ordinary - 100 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Critical Success Pty Ltd1 16/9/2016 Australia Ordinary - 100 ServTech Global PH Inc 8/12/2016 Philippines Ordinary 100 100 SVT India Private Limited 23/3/2017 India Equity 100 100 Vection Italy SRL 12/4/2019 Italy Ordinary 100 100 Mindesk Inc 29/4/2020 USA Ordinary 100 - Mindesk SRL 29/4/2020 USA Ordinary 100 -	17. AUDITOR’S REMUNERATION Criterion Audit Pty Ltd 18. SUBSIDIARIES Consolidated 30 June 20 30 June 19 $ $ Audit and other assurance services Audit and review of fnancial statements 35,000 26,000 Total remuneration for audit and other assurances services 35,000 26,000 Date of the Gain of Control Country of Incorporation Class of Shares Equity Holding 2020 (%) 2019 (%) Parent Entity: Vection Technologies Ltd Australia Ordinary Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Australia Ordinary 100 100 Value Finance Pty Ltd1 16/9/2016 Australia Ordinary - 100 Complete Settlements Pty Ltd1 16/9/2016 Australia Ordinary - 100 Capitol Asset Management Pty Ltd1 16/9/2016 Australia Ordinary - 100 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Australia Ordinary 100 100 Critical Success Pty Ltd1 16/9/2016 Australia Ordinary - 100 ServTech Global PH Inc 8/12/2016 Philippines Ordinary 100 100 SVT India Private Limited 23/3/2017 India Equity 100 100 Vection Italy SRL 12/4/2019 Italy Ordinary 100 100 Mindesk Inc 29/4/2020 USA Ordinary 100 - Mindesk SRL 29/4/2020 USA Ordinary 100 -
	Date of the Gain of Control	Country of Incorporation	Class of Shares	Equity Holding
				2020 (%)	2019 (%)
Parent Entity: Vection Technologies Ltd Subsidiaries of Vection Technologies Ltd Sell Lease Property Pty Ltd 16/9/2016 Value Finance Pty Ltd1 16/9/2016 Complete Settlements Pty Ltd1 16/9/2016 Capitol Asset Management Pty Ltd1 16/9/2016 Vection Consulting Pty Ltd (formerly known as Real Estate Agent Performance Pty Ltd) 16/9/2016 Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) 16/9/2016 Critical Success Pty Ltd1 16/9/2016 ServTech Global PH Inc 8/12/2016 SVT India Private Limited 23/3/2017 Vection Italy SRL 12/4/2019 Mindesk Inc 29/4/2020 Mindesk SRL 29/4/2020		Australia Australia Australia Australia Australia Australia Australia Australia Philippines India Italy USA USA	Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Equity Ordinary Ordinary Ordinary	100 - - - 100 100 - 100 100 100 100 100	100 100 100 100 100 100 100 100 100 100 - -

18. SUBSIDIARIES

These entities were deregistered during the period

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. RELATED PARTY TRANSACTIONS

i) Transactions with directors and key management personnel

The Group may enter into agreements for services rendered with individuals (or an entity that is associated with the individuals) during the ordinary course of business.

Key management personnel compensation

	Consolidated	Consolidated
	30 June 20	30 June 19
	$ $ 475,715 241,800 - - - 7,698 83,492 -
Short-term employee benefts	475,715
Post-employment benefts	-
Long-term benefts	-
Share-based payments	83,492
Total remuneration for audit and other assurances services	559,207	249,498

A number of entities associated with the directors and key management personnel have consulting agreement in place which has resulted in transactions between the Group and those entities during the period. The terms and conditions of those transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis.

Transaction Value Outstanding Balance 2020 2019 2020 2019 $ $ $ $	Transaction Value Outstanding Balance 2020 2019 2020 2019 $ $ $ $	Transaction Value	Transaction Value	Outstanding Balance	Outstanding Balance
		2020	2019	2020	2019
Mr Bert Mondello	Corporate advisory fees (a)	-	101,710	-	1,710
	Contract revenue (b)	215,000	388,700	-	45,760
	Technical consultancy (c)	-	55,000	-	-
Mr Gianmarco Orgnoni	Interest (d)	-	12,169	-	-
Mr Gianmarco Biagi and Mr Lorenzo Biagi	Other revenue (e)	123,981	-	248,544	-
	Other service costs (f)	22,700	-	22,700	-
	Revenue from services (g)	6,034	-	7,039	-
	Professional, legal and tax services (h)	49,258	-	49,258	-

a) Corporate advisory fees and administration services paid to Indomain Enterprises Pty Ltd (Indomain) under a Corporate Advisory Mandate. Invoices to the value of $88,000 were paid via Shares in the Company as approved by shareholders at the general meeting held on 11 April 2019;

An entity associated with Mr B Mondello

b) The Company’s subsidiary Vection Australia Pty Ltd (formerly known as Technobrave Pty Ltd) entered into a contract to provide services to Emerge Gaming Solutions Pty Ltd a subsidiary of Emerge Gaming Limited. Mr B Mondello is a director of Emerge Gaming Limited. This contract was signed on a commercial, arm-length basis;

c) Technical Consultancy fees paid to Indomain under a consultancy agreement. Invoices to the value of $5,500 were paid via Shares in the Company as approved by shareholders at the general meeting held on 11 April 2019; - An entity associated with Mr B Mondello
d) Interest payments to Servnote in relation to the $1 Million convertible loan facility;

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. RELATED PARTY TRANSACTIONS (continued)

e) The company’s subsidiary Vection Italy SRL received services from Officine 8k S.r.l. As at 30 June 2020, the amount receivable is $248,544. This transaction was entered on a commercial, arm-length basis;
An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi
f) The company’s subsidiary Vection Italy SRL paid to Officine 8k S.r.l. for service provided. As at 30 June 2020, the amount payable is $22,700. This transaction was entered on a commercial, arm-length basis;
An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi
g) The company’s subsidiary Vection Italy SRL received services from Settepuntonove S.r.l. for service provided. As at 30 June 2020, the amount receivable is $7,039. This transaction was entered on a commercial, arm-length basis. ; - An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi
h) The company’s subsidiary Vection Italy SRL paid to Settepuntonove S.r.l. for service provided. As at 30 June 2020, the amount payable is $14,921. This transaction was entered on a commercial, arm-length basis; - An entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi

ii) Loans to directors

There were no loans outstanding to directors at year end.

(iii) Performance Rights

A) As part of the consideration for the Acquisition of Vection, Officine8K SRL, an entity associated with Mr Gianmarco Biagi and Mr Lorenzo Biagi was granted 150,000,000 performance rights in three tranches with the following terms:
(a) Tranche 1 Performance Rights: 50,000,000 Performance Rights each converting into Shares (on a one for one basis) upon Vection Italy’s earnings before interest, tax, depreciation and amortisation at the end of a financial year being at least $500,000 (as verified by the Company’s auditors) within 24 months of the settlement of the Acquisition;
(b) Tranche 2 Performance Rights: 50,000,000 Performance Rights each converting into Shares (on a one for one basis) upon the revenue generated by the business of Vection Italy achieving a minimum of $1,500,000 (as verified by the Company’s auditors) within 24 months of settlement of the Acquisition; and
(c) Tranche 3 Performance Rights: 50,000,000 Performance Rights each converting into Shares (on a one for one basis) upon:
- a. the volume weighted average price for the Shares on twenty (20) consecutive days on which sales are recorded being no less than $0.03; and
- b. the revenue generated by the business of Vection Italy achieving a minimum of $2,500,000 (as verified by the Company auditors) within 36 months of settlement of the Acquisition.

B) During the year, the Company issued 18,000,000 performance rights in three tranches to Mr Gianmarco Biagi, Mr Lorenzo Biagi, Mr Bert Mondello and Mr Gianmarco Orgnomi with the following terms:
(a) Tranche 1 Performance Rights: 6,000,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.035 per share on trading on ASX;
(b) Tranche 2 Performance Rights: 6,000,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.045 per share on trading on ASX;
(c) Tranche 3 Performance Rights: 6,000,000 Performance Rights each converting into Shares (on a one for one basis) will vest on the date that the Company's 14 day volume weighted average (VWAP) share price is equal or exceeds $0.065 per share on trading on ASX;

The fair value at grant date of the performance rights issued has been determined using a Black-Scholes pricing model that takes into account the exercise price, the term of the performance rights, 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 performance rights. The total fair value of the performance rights was $106,293. The total share based payment expense recognised for the year ended 30 June 2020 of $83,490 (2019: $nil) has been recognised in the Statement of Profit or Loss and Other Comprehensive Income or in the remuneration disclosures for Directors and key management personnel.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. RELATED PARTY TRANSACTIONS (continued)

C) As part of the consideration for the Acquisition of Mindesk, an entity associated with Mr Gabriele Sorrento was granted 38,711,641 performance rights in seven groups with the following terms:
(a) Group A Performance Rights: 2,867,529 Performance Rights each converting into Shares (on a one for one basis) upon Mindesk revenues equal to, or exceed EUR920,001 for the year to 31 December 2020;
(b) Group B Performance Rights: 7,168,822 Performance Rights each converting into Shares (on a one for one basis) if technical specifications are met on a plugin for Mindesk to work with McNeel Rhinoceros 6 for the year to 31 December 2021;
(c) Group C Performance Rights: 14,337,644 Performance Rights each converting into Shares (on a one for one basis) upon Mindesk revenues equal to, or exceed, EUR2,950,001 for the year to 31 December 2021;
(d) Group D Performance Rights: 1,792,206 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc equal to, or exceed, EUR9,300,001 for the year to 31 December 2021;
(e) Group E Performance Rights: 1,792,206 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc equal to, or exceed, EUR15,000,001 for the year to 31 December 2022;
(f) Group F Performance Rights: 5,376,617 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc for the year ending 31 December 2023 equal to at least 10% increase on the Combined Revenues for the year to 31 December 2022; and
(g) Group G Performance Rights: 5,376,617 Performance Rights each converting into Shares (on a one for one basis) if the combined revenues of Vection and Mindesk Inc for the year ending 31 December 2024 equal to at least 10% increase on the Combined Revenues for the year to 31 December 2023.

20. BUSINESS COMBINATION

(A) VECTION ITALY ACQUISITION

On 12 April 2019, the Group completed the acquisition (“Acquisition”) of 100% issued capital and voting rights in Officine 8K SRL renamed Vection Italy SRL (“Vection”)

(i) Acquisition Consideration

The consideration for the Acquisition comprised the issue to the Vection vendors of:

292.5 million fully paid ordinary shares to the Vection vendors
150 million performance rights to the Vection vendors

Under the principles of AASB 3, the assets and liabilities of Vection are measured at fair value on the date of Acquisition.

(ii) Goodwill Goodwill is calculated as the difference between the fair value of consideration transferred less the fair value of the identified net assets of Vection. Details of the transaction are as follows:

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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20. BUSINESS COMBINATION (continued)

(A) VECTION ITALY ACQUISITION (continued)

						Fair Value 30 June 2020	Fair Value 30 June 2020
						$

Consideration

292.5 million fully paid ordinary shares							5,851,124

150 million performance			rights 1				2,550,000

Total consideration							8,401,124

Fair value of assets		and liabilities at acquisition date:

Cash							56,154

Trade and other receivables							494,018

Property, plant and equipment							25,888

Trade and other payables							(1,398,766)



Intellectual property							2,811,417
Rights of use intangible asset							666,064
Other intangible assets (patents and development					costs)		111,690
Intangible assets (subtotal)							3,589,171
Fair value of identifable			assets and liabilities acquired				2,766,465



Consideration	paid						8,401,124
Less: Fair value of identifable				assets and liabilities assumed			(2,766,465)

A ssessment of goodwill							5,634,659

Less provision of impairment 2							(3,084,659)
							2,550,000

statements, the valuation of the performance rights was incomplete. The Company used $nil as the provisional fair value of the performance rights. The Company appropriately disclosed in its 30 June 2019 financial statements that the intangible was measured at a provisional amount. On 12 April 2020, the valuation of the performance rights was finalised. The fair value at the acquisition date amounted to $8,401,124. The Company has made retrospective adjustments to the accounting for business combination in the comparative amounts for 2020 as follows: ● the carrying amount of goodwill as of 30 June 2019 is increased by $2,550,000; ● deferred consideration as of 30 June 2019 is increased by $2,550,000.

The recoverable amount of the Vection Italy cash generating unit (CGU) has been calculated based on the following key assumptions:

● Growth rate of 0% ● Pre-tax discount rate 15.0% ● Cash flow forecast – Board approved reforecasts

respective CGU’s weighted average cost of capital as determined by prevailing or benchmarked market inputs, risk adjusted, where necessary.

Management conducted a provisional impairment assessment of the intangible assets resulting from the acquisition of Vection Italy at 30 June 2019. Based on impairment indicators and relevant information such as Company’s market capitalisation, the above impairment expense was recognised.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20. BUSINESS COMBINATION (continued)

(B) MINDESK ACQUISITION

On 29 April 2020, the Group completed the acquisition (“Acquisition”) of 100% issued capital and voting rights in Mindesk Inc and its controlled entity (“Mindesk Group”).

(a) Acquisition Consideration

The consideration for the Acquisition comprised the issue to the Mindesk vendors:

(a) 165,505,199 fully paid ordinary shares;
(b) Group A Performance Rights: 9m shares if the Mindesk revenues equal to, or exceed, €920,001 for the year to 31 December 2020 or 20m shares if the Mindesk revenues equal to, or exceed, €1,300,001 for the year to 31 December 2020;
(c) Group B Performance Rights: 8m shares if technical specifications are met on a plugin for Mindesk to work with McNeel Rhinoceros 6;
(d) Group C Performance Rights: 18m shares if the Mindesk revenues equal to, or exceed, €2,950,001 for the year to 31 December 2021 or 40m shares if the Mindesk revenues equal to, or exceed, €4,400,001 for the year to 31 December 2021;
(e) Group D Performance Rights: 2m shares if the combined revenues of Vection Technologies Limited and Mindesk Inc (the “Combined Revenues”) equal to, or exceed, €9,300,001 for the year to 31 December 2021 or 5m shares if the Combined Revenues equal to, or exceed, €20,000,001 for the year to 31 December 2021;
(f) Group E Performance Rights: 2m shares if the Combined Revenues equal to, or exceed, €15,000,001 for the year to 31 December 2021 or 5m shares if the Combined Revenues equal to, or exceed, €20,000,001 for the year to 31 December 2022;
(g) Group F Performance Rights: 15m shares if the Combined Revenues for the year ending 31 December 2023 equal to at least a 10% increase on the Combined Revenues for the year ending 31 December 2022; and
(h) Group G Performance Rights: 15m shares if the Combined Revenues for the year ending 31 December 2024 equal to at least a 10% increase on the Combined Revenues for the year ending 31 December 2023.

Under the principles of AASB 3, the assets and liabilities of Mindesk are measured at fair value on the date of Acquisition

(b) Goodwill Goodwill is calculated as the difference between the fair value of consideration transferred less the fair value of the identified net assets of Mindesk. Details of the transaction are as follows:

Fair Value	Fair Value	Fair Value
30 June 2020
$
Consideration 165,505,199 fully paid ordinary shares 2,979,094 108,000,000 performance rights (i) (ii) 3,280,000 Total consideration 6,259,094 Fair value of assets and liabilities at acquisition date: Cash 1,137,866 Trade and other receivables 25,936 Property, plant and equipment 10,646 Software 2,307,269 Trade and other payables (810,310) Fair value of identifable assets and liabilities acquired 2,671,407 Consideration paid 6,259,094 Less: Fair value of identifable assets and liabilities assumed (2,671,407) Provisional a ssessment of goodwill 3,587,687
		6,259,094


		1,137,866
		25,936
		10,646
		2,307,269
		(810,310)
		2,671,407


		6,259,094
		(2,671,407)
		3,587,687

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20. BUSINESS COMBINATION (continued)

(B) MINDESK ACQUISITION (continued)

(i) The Group measures the value of the deferred considerations by performing a forecast on the value of each of the Performance Rights. A probability distribution was assigned to each of the main assumptions and a Monte Carlo simulation was performed based on the assumed probability distributions. 3,000 samples were used. The mean of the 3,000 samples for each of the Performance Rights were calculated. The net present value of each of the performance rights as at 29 April 2020 has been estimated by discounting the mean by an assumed weighted average cost of capital of 16.50%. The key assumptions used are:

(a) Probability of achieving each level of the deferred consideration;
(b) Combined revenue of Vection and Mindesk 2020 – 2024;
(c) Market capitalisation/ sales multiple
(d) Revenue probability distributions 2020-2024
(ii) Finance expenses of $10,000 were attributed in relation to this value as per revaluation of deferred consideration as per Note 1(d).

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21. PARENT ENTITY INFORMATION

The following details information related to the Parent entity, Vection Technologies Limited, at 30 June 2020. The information presented here has been prepared using consistent accounting policies as presented in note 1.

	30 June 20	30 June 19
	$ $ 517,927 971,296 11,627,689 5,316,465
Current assets	517,927
Non-current assets	11,627,689
Total assets	12,145,616	6,287,761
		2,907,709 15,846
Current liabilities	4,499,752
Non-current liabilities	2,508,969
Total liabilities	7,008,721	2,923,555
		19,397,897 272,500 (16,306,191)
Contributed equity	22,376,991
Option reserve	104,362
Accumulated losses	(17,344,458)
Total equity/(defciency)	5,136,895	3,364,206
		(3,769,591) -
Loss for the year	(1,038,267)
Other comprehensive income / (loss) for the year	-
Total comprehensive (loss) for the year	(1,038,267)	(3,769,591)

Guarantees in relation to subsidiaries

Vection Technologies Limited does not have any guarantees in relation to subsidiaries (2019: nil).

Contingent liabilities

Vection Technologies Limited has no material contingent liabilities which are not disclosed in this report.

Commitments

Vection Technologies Limited has the following commitments:

	30 June 20	30 June 19
	$ $ 15,845 95,064 - 15,845
Within one year	15,845
After one year but not more than fve years	-
Total assets	15,845	119,909

These commitments do not form part of the group's capital commitments as detailed in Note 25, as they have been fully provided for under the onerous lease provision as detailed in Note 8.

22. FINANCIAL ASSETS

The financial assets are Australian listed equity shares held-for-trading at fair value through profit or loss $52,130 (2019: $nil). The fair has been determined directly by reference to published price quotations in an active market for identical securities. They are deemed to be Level 1 securities in accordance with the AASB 7 fair value measurement hierarchy and hence there is no subjectivity in relation to their value.

VECTION TECHNOLOGIES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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23. FINANCIAL RISK MANAGEMENT

risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed.

	Consolidated	Consolidated
	30 June 20	30 June 19
	$ $ 1,584,715 796,569 2,143,646 1,442,404
Financial assets
Cash and cash equivalents	1,584,715
Receivables (current)	2,143,646
	3,728,362	2,238,973
Financial liabilities		967,959
Payables (current)	2,272,404
Interest bearing liabilities	1,431,832	-
	3,704,236	967,959

a) Market Risk

i) Interest rate risk As at and during the year ended on reporting date, the Group had no significant interest bearing assets or liabilities other than liquid funds on deposit and an outstanding debt owed by The Agency. As such, the Group’s income and operating cash flows (other than interest income from funds on deposit and interest expense on the facility loan) are substantially independent of changes in market interest rates. The Group’s exposure to interest rate risk for each class of financial assets and liabilities is set out below:

	Financial assets		796,569 514,251 -
	Cash and cash equivalents at foating rate	1,584,715
	Receivables owing from The Agency at fxed rate	92,021

	Financial liabilities
	Interest bearing liabilities*	1,431,832

*Includes an unsecured bank loan with a 3 years term with an expiry date of 27 April 2023. The loan has a variable interest rate of 4.5% (2019: Nil). No repayment is required for the first 6 months; and two new bank financial debts agreement was stipulated during the year by Vection Italy. Both agreements will expire in 2026.

Group sensitivity

At 30 June 2020, if interest rates had changed by +/- 100 basis points from the year end with all other variables held constant, the loss for the year would have been $15,847 lower/higher (2019: $7,966 higher/lower), as a result of a lower/higher interest income from cash and cash equivalents.

ii) Commodity risk pricing The Group is not exposed to commodity risk price risk.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. FINANCIAL RISK MANAGEMENT (continued)

b) Credit risk

institutions, as well as credit exposures to customers. For banks and financial institutions, only independently rated parties with a minimum of ‘A’ are accepted. The Group trades only with recognised, trustworthy third parties. It is the Group’s policy to perform credit verification procedures in relation to any customer’s financial position and any past experience to set individual risk limits as determined by the Board.

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Consolidated
30 June 20 30 June 19
$ $
Cash and cash equivalents 1,584,715 796,569
Receivables (current) 2,143,646 1,442,404
3,728,362 2,238,973
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The Company’s main customer is The Agency Group Australia (The Agency). The Agency represents ~4% (2019: 35%) of the Company’s receivables as at 30 June 2020 and the Company has a material contract to provide services to this customer going forward. As a result, the Company has a degree of reliance on its continued relationship with The Agency. The Company intends to broaden its base on customers but in the interim is satisfied that The Agency, an ASX listed company, is not a credit risk.

Liquidity risk

Prudent liquidity risk management involves the maintenance of sufficient cash, marketable securities, committed credit facilities and access to capital markets. It is the policy of the Board to ensure that the Group is able to meet its financial obligations and maintain the flexibility to pursue attractive investment opportunities through keeping committed credit lines available where possible, ensuring the Group has sufficient working capital and preserving the 15% share issue limit available to the Company under the ASX Listing Rules. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

As at the reporting date the Group has total financial liabilities of $3,704,236 (2019: $967,959), comprised solely in the current year of trade creditors and accruals of $2,272,404 (2019: $967,959) with a maturity of 1 – 3 months and interest bearing liabilities of $1,431,832 (2019: NIL) with a maturity of 3-6 years.

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. FINANCIAL RISK MANAGEMENT (continued)

d) Fair value measurements

purposes.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair value due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The Company did not have any non-current financial assets or financial liabilities in the current year

e) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The capital structure of the Group consists of cash equivalents and equity attributable to equity holders of the Parent. The Group is not subject to externally imposed capital requirements.

f) Foreign exchange risk

As a result of operations in the Philippines, India and Italy, the Group's Statement of Financial Position can be affected by movements in the Philippine Peso (PHP)/AUD, Indian Rupee (INR)/AUD and Euro (EUR)/AUD exchange rates. The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating entity in currencies other than the functional currency. The Group had the following exposure to foreign currency:


		30 June 2020			30 June 2019
		EUR	PHP	INR	EUR	PHP	INR
		A$ A$ A$ A$ A$ A$
Financial a	ssets
Cash and c	ash equivalents 1,252,474 611 1,747 56,154 34,489 525
Receivable	s 1,093,320 1,541 18,962 468,891 - -
	2,345,794 2,152 20,709 525,045 34,489 525
Financial li	abilities
Payables	1,197,985 4,063 20,275 431,729 12,070 719
	1,197,985 4,063 20,275 431,729 12,070 719
1,147,809 (1,911) 434 93,316 22,419 (194)
The following sensitivity is based on a 10% movement of EUR, PHP and INR against the AUD and the effect on the net proft or loss and equity of the Group for the period to 30 June 2020, with all other variables held constant:

	30 June 20	30 June 20	30 June 19	30 June 19
	Proft	Equity	Proft	Equity
	$	$ $ $

EUR, USD, PHP, INR increasing 10% against AUD 114,633 114,633 11,554 11,554
EUR, USD, PHP, INR decreasing 10% against AUD (114,633) (114,633) (11,554) (11,554)

VECTION TECHNOLOGIES LIMITED

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ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. DISCONTINUED OPERATIONS

On 15 September 2017, the Company announced the sale of its property management and rent roll business. The property rent roll business was conducted through subsidiary Capitol Asset Management Pty Ltd (CAM). Following adjustments from the sale transition process, the rent roll was sold for consideration of ~$660,000.

On 21 February 2018, the Company announced the completion of binding sales agreements with The Agency Group Australia Limited. The agreements were executed between the Company’s subsidiaries (Sell Lease Property Pty Ltd, Complete Settlements Pty Ltd and Value Finance Pty Ltd) and wholly owned subsidiaries of The Agency. Under the agreements, The Agency’s subsidiaries acquire the assets of each of the Company’s subsidiaries. Consideration for these agreements was $950,000.

Each of these entities: Capitol Asset Management Pty Ltd, Sell Lease Property Pty Ltd, Complete Settlements Pty Ltd and Value Finance Pty Ltd are considered discontinued operations.

25. COMMITMENTS

The Group did not have any commitments as at Reporting Date.

26. CONTINGENT LIABILITIES

The Group did not have any contingent liabilities as at Reporting Date.

27. EVENTS OCCURING AFTER THE REPORTING PERIOD

significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June 2020.

DIRECTORS’ DECLARATION

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DIRECTORS’ DECLARATION

In the opinion of the directors of Vection Technologies Limited:

(a) the financial statements and notes are in accordance with the Corporations Act 2001 , including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the year ended on that date; and

(ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; 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.

This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporation Act 2001 for the financial year ending 30 June 2020.

Signed in accordance with a resolution of the directors.

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Mr Bert Mondello

Chairman Vection Technologies Limited

30 September 2020 Perth, Western Australia

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ADDITIONAL ASX INFORMATION

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NUMBER OF HOLDINGS OF EQUITY SECURITIES AS AT 31 AUGUST 2020

The fully paid issued capital of the Company consisted of 837,676,875 ordinary fully paid shares held by 985 shareholders. Each share entitles the holder to one vote.

DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES AS AT 31 AUGUST 2020

Holding Ranges	Holders	Total Units	% Issued Share Capital
above 0 up to and including 1,000	6	832	0.00%
above 1,000 up to and including 5,000	21	70,702	0.01%
above 5,000 up to and including 10,000	54	517,730	0.06%
above 10,000 up to and including 100,000	568	24,497,438	2.91%
above 100,000	336	812,590,173	97.01%
Totals	985	837,676,875	100.00%

Unmarketable parcels	Minimum parcel size	Holders	Units
Minimum $500 parcel at $0.064 per unit	7,813	30	91,645

SUBSTANTIAL SHAREHOLDERS AS AT 31 AUGUST 2020

Section 671B of the Corporations Act are:

Substantial shareholder	Number of shares	% held
OFFICINE 8K S R L	292,556,186	34.92%
PRIMOMIGLIO SGR	54,289,139	6.48%
CDP VENTURE CAPITAL SGR SPA	52,690,278	6.29%

ADDITIONAL ASX INFORMATION (continued)	ADDITIONAL ASX INFORMATION (continued)	ADDITIONAL ASX INFORMATION (continued)	ADDITIONAL ASX INFORMATION (continued)	ADDITIONAL ASX INFORMATION (continued)	ADDITIONAL ASX INFORMATION (continued)
TWENTY LARGEST SHAREHOLDERS		OF QUOTED	EQUITY SECURITIES
TOP 20 HOLDERS OF ORDINARY FULLY PAID SHARES AS AT 31 AUGUST 2020
POSITION		HOLDER NAME				HOLDING		% IC
1	OFFICINE 8K S R L						292,556,186		34.92%
2	PRIMOMIGLIO SGR						54,289,139		6.48%
3	CDP VENTURE CAPITAL SGR SPA						52,690,278		6.29%
4	MR GABRIELE SORRENTO						22,257,873		2.66%
5	CROSSBAY PTY LTD						20,390,000		2.43%
6	MR KEITH JAMES SCUDDS & MRS PATRICIA ANNE SCUDDS						16,100,117		1.92%
7	CITICORP NOMINEES PTY LIMITED						14,422,278		1.72%
8	SURF COAST CAPITAL	PTY LTD <MINNIE			P/F A/C>		14,400,000		1.72%
9	A11 VENTURE S R L						11,991,467		1.43%
10	HTC VIVE INVESTMENT (BVI) CORP						11,179,911		1.33%
11	TRADITIONAL SECURITIES GROUP		PTY LTD				8,990,041		1.07%
12	MRS TANIA MCKIERNAN						8,889,000		1.06%
13	GE EQUITY INVESTMENTS PTY LTD						8,375,000		1.00%
14	TYRRHENIAN HOLDINGS PTY LTD						7,938,323		0.95%
15	ACUITY CAPITAL INVESTMENT MANAGEMENT PTY LTD HOLDINGS A/C>						7,330,000		0.88%
16	MR SERGIO GIORGIO						7,019,500		0.84%
17	MR DAMIEN TERENCE	MICHAEL RHODES					7,000,000		0.84%
18	BNP PARIBAS NOMINEES PTY LTD						6,963,062		0.83%
19	MR DUNCAN GERARD GOWANS & MRS JODIE LOUISE GOWANS						6,500,000		0.78%
20	J P MORGAN NOMINEES AUSTRALIA			PTY LIMITED			6,368,957		0.76%
	Total					585,651,132			69.91%

AI assistant

VECTION TECHNOLOGIES LTD — Annual Report 2020

66017_rns_2020-09-29_0207d230-0e45-4d8f-bb4a-4706cb1b1bd7.pdf

Dear Shareholders,

Gianmarco Biagi

DIRECTORS’ REPORT

DIRECTORS

Mr Gianmarco Biagi

Mr Gianmarco Orgnoni

Mr Lorenzo Biagi

Mr Gabriele Sorrento

Mr Umberto (Bert) Mondello

Mr Derek Hall

PRINCIPAL ACTIVITIES

REVIEW OF OPERATIONS

Overview

Financial highlights include:

DIRECTORS’ REPORT

Operational Highlights

Technology

DIRECTORS’ REPORT

Partnerships

Growth

Organisation & People

Financial Strategy

Corporate Overview

Explanation of loss

DIRECTORS’ REPORT

Cash Position

Outlook

EVENTS OCCURRING AFTER THE REPORTING PERIOD

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

ENVIRONMENTAL REGULATION

DIRECTORS’ REPORT

Mr Gianmarco Biagi – MEng

Experience and expertise

Other current directorships: Nil

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

Mr Gianmarco Orgnoni – BBus

Experience and expertise

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

Mr Lorenzo Biagi

Experience and expertise

Other current directorships: Nil

Former ASX directorships in past 3 years: Nil

DIRECTORS’ REPORT

Mr Gabriele Sorrento – M.Arch/M.Eng.

Experience and expertise

Other current directorships: Nil

Former ASX directorships in past 3 years: Nil

Interests in the Company’s securities:

Mr Umberto (Bert) Mondello – LLB

Experience and expertise

Interests in the Company’s securities:

Experience and expertise

DIRECTORS’ REPORT

MEETINGS OF DIRECTORS

SHARE OPTIONS

PERFORMANCE RIGHTS

DIRECTORS’ REPORT

AUDITED REMUNERATION REPORT (continued)

A) Key management personnel covered in this report

B) Principles used to determine the nature and amount of remuneration

C) Non-executive directors’ remuneration

Fees

DIRECTORS’ REPORT

AUDITED REMUNERATION REPORT (continued)

D) Executive director and senior management remuneration

Service Contracts

E) Details of remuneration

DIRECTORS’ REPORT AUDITED REMUNERATION REPORT (continued)

Key management personnel of the Group and other executives of the Company and the Group:

DIRECTORS’ REPORT AUDITED REMUNERATION REPORT (continued)

DIRECTORS’ REPORT AUDITED REMUNERATION REPORT (continued)

i. Shareholdings

DIRECTORS’ REPORT

AUDITED REMUNERATION REPORT (continued)

VECTION TECHNOLOGIES LTD Annual Report 2020