XPON TECHNOLOGIES GROUP LIMITED — Annual Report 2020

Dec 14, 2021

Xponential Technologies Ltd and Controlled Entities ABN: 37 635 810 258

Financial Statements

For the Year Ended 30 June 2020

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Contents

For the Year Ended 30 June 2020

	Page
Financial Statements
Directors' Report	1
Auditor's Independence Declaration under Section 307C of the Corporations Act 2001	5
Statement of Profit or Loss and Other Comprehensive Income	6
Statement of Financial Position	7
Statement of Changes in Equity	8
Statement of Cash Flows	9
Notes to the Financial Statements	10
Directors' Declaration	33
Independent Audit Report	34

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Directors' Report

30 June 2020

The directors present their report, together with the financial statements of the Group, being the Company and its controlled entities, for the financial year ended 30 June 2020.

1. General information

Information on directors

The names of each person who has been a director during the year and to the date of this report are: Phil Aris Non Executive Chairman Appointed 26 September 2019 Matt Forman Founder & Group Managing Director Tim Ebbeck Non Executive Director Appointed 26 July 2021

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Principal activities

Xponential Technologies Ltd is a technology company for the next generation of marketing and customer experience (CX). An era that is richly immersive, powered by data and made intelligent with AI.

The principal activities of the Group during the financial year were the provision of 1) software enabled managed services to help companies manage business critical marketing platforms, adtech, ML / AI and cloud technologies, 2) agile cloud native software solutions with our unique IP that helps corporate & enterprise clients build and modernise customer facing applications and products, and 3) a next generation data platform for marketer that centralises customer & marketing data, supercharging it with AI for automated activation.

No significant change in the nature of these activities occurred during the year.

2. Operating results and review of operations for the year

Operating results

The consolidated loss of the Group amounted to $ (1,933,842) (2019: $ (1,010,150)).

Dividends paid or recommended

No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.

Review of operations

A review of the operations of the Group during the financial year and the results of those operations show reported revenue of $1,715,669 (2019: $1,226,509).

The Group’s Net Profit/(Loss) after tax (NPAT) is ($1,933,842) (2019: $(1,010,150).

The Group’s cash and cash equivalents on 30 June 2020 was $1,016,514 (2019: $224,988).

1

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Directors' Report

30 June 2020

3. Other items

Significant changes in state of affairs

The following significant changes in the state of affairs of the parent entity occurred during the financial year:

1. Xponential Technologies Ltd (Xpon) was formed in August 2019 with 10 ordinary share at $1.00 per share.

2. Appointment of Phil Aris as Xpon Groups’ Non- executive Chairman – 26 September 2019.

3. Issue of ordinary shares – issuance of 7,553,642 ordinary shares to Founders at $ nil value bringing the total ordinary shares issued to 7,553,652 at 30 September 2019.

4. In November 2019 Xpon established a wholly owned subsidiary, Wondaris Pty Ltd (Wondaris).

5. Capital Raise - issuance of ordinary shares The Group raised additional capital of $1,775,003 through the issuance of 5,378,796 ordinary shares at $0.33 per share in November 2020 bring the total ordinary shares issued to 12,932,448 at the year ended 30 November 2019.

6. Appointment of Leanne Wolski as Xpon Group’s Company Secretary – 18 February 2020.

7. In March 2020, Xpon acquired 100% of the share capital in Maverick Data Group Pty Ltd and its subsidiaries (MDG) with the issuance of 20,000,000 ordinary shares at a value of $0.33 per share giving a total consideration of $6,600,000 at 31 March 2020 bringing the total ordinary shares issued to 32,932,448 at 31 March 2020.

The acquisition of MDG in March 2020 was not within the scope of AASB 3 since common control existed between Xpon and MDG prior to the acquisition. As such, this has been treated as a group restructure and the group has applied the pooling-of-interests' method with the restatement of comparatives from the earliest period presented.

The consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost.

Intragroup assets, liabilities, equity, income, expenses and cashflows relating to transactions between entities in the consolidated entity have been eliminated in full for the purpose of these financial statements.

Appropriate adjustments have been made to a controlled entity’s financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a June financial year end.

1. In April 2020, Xpon acquired 100% of the share capital in Focal Labs Limited UK and Holoscribe Limited UK on a cash-free debt-free basis with the issuance of 8,611,340 ordinary shares at a value of $0.33 per share giving a total consideration of $2,841,742 bringing the total ordinary shares issued to 41,543,788 at 30 April 2020.

2. Capital Raise - issuance of ordinary shares The Group raised additional capital of $ 702,463 through the issuance of 1,300,858 ordinary shares at $0.54 per share in May 2020 bring the total ordinary shares issued to 42,844,646 at the year ended 31 May 2020.

3. In May 2020 Xpon established a wholly owned subsidiary, Holoscribe Australia Pty Ltd.

4. Xpon Group introduced Employee Share Scheme as at 30 June 2020.

2

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Directors' Report

30 June 2020

3. Other items

Events after the reporting date

During April 2021, 2,872,143 shares were issued at an allotment price of $0.65, raising $1,866,893 in capital.

On June 5, 2021 Xponential Technologies Ltd acquired 100% of the shares in Internetrix Pty Ltd and Controlled Entities for total consideration of $1,575,950. This consideration included 258,240 shares at an allotment price of $0.54.

On 24 August 2021, the group issued two convertible notes totalling $1,110,000. The notes are convertible (at the option of the holder) into ordinary shares of the entity at the lower of:

• $0.687 per share; and

• the lowest price per share that was issued by the company between the date of issue of the notes and the conversion event.

The notes will automatically convert into ordinary shares immediately prior to the first to occur:

• Completion of a qualifying financing (the entry by the company into a binding agreement to raise $10,000,000 or more in aggregate through the issue of ordinary or preferred shares in one capital round and which is not an IPO);

• The company (or its ultimate holding company) lodging a prospectus with ASIC in connection with an IPO and receives conditional approval from the ASX to list its shares on the ASX;

• Completion of an exit (trade or share sale); or

• The maturity date which is 18 months from the date that the notes were first issued.

Except for the above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.

Future developments and results

The Group will continue to undertake its principal activities and will add resource capability during the next financial year focusing to accelerate the organic growth opportunities. The Directors do not anticipate any development in the operations of the Group that will negatively affect the result in subsequent years.

The Directors are not aware of other circumstances or matters that will significantly affect the operations and future results of the Group other than the developments that have been outlined in this report and Operating results and review of operations for the year.

Environmental issues

The Group's operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory of Australia.

Company secretary

The following person held the position of Company secretary at the end of the financial year:

Leanne Wolski holds bachelor’s degree with majors in Accounting and Finance with the Australian Catholic University, a member of the Institute of Chartered Accountants and is a graduate member of the Australian Institute of Company Directors has been the company secretary since 18 February 2020. Prior to this role, Leanne was formerly the CFO for amaysim (ASX:AYS).

3

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Directors' Report

30 June 2020

Meetings of directors

During the financial year, nine meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows:

==> picture [153 x 102] intentionally omitted <==

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

Directors'
Meetings
Number
eligible to Number
attend attended
Phil Aris 9 9
Matt Forman 9 9
Tim Ebbeck - -
----- End of picture text -----

Indemnification and insurance of officers and auditors

No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an officer or auditor of Xponential Technologies Ltd and Controlled Entities.

Auditor's independence declaration

The lead auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 , for the year ended 30 June 2020 has been received and can be found on page 5 of the financial report.

Signed in accordance with a resolution of the Board of Directors:

Director: ............................................................... Director: ................................................................

Dated this .............................. day of .............................. 20211st October

4

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Auditor's Independence Declaration

==> picture [78 x 30] intentionally omitted <==

Tel: +61 7 3237 5999 Level 10, 12 Creek St Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia

DECLARATION OF INDEPENDENCE BY L G MYLONAS TO THE DIRECTORS OF XPONENTIAL TECHNOLOGIES LTD

As lead auditor of Xponential Technologies Ltd for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been:

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

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

This declaration is in respect of Xponential Technologies Ltd and the entities it controlled during the period.

==> picture [111 x 30] intentionally omitted <==

L G Mylonas

Director

BDO Audit Pty Ltd

Brisbane, 1 October 2021

5

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2020

Revenue from contracts with customers Cost of sales Gross profit Other income IT and Facilities expense Sales and Marketing expense Employee expenses Superannuation expense Write-off of investment Depreciation and Amortisation Other expenses Finance expenses Loss before income tax Income tax expense / (benefit) Loss for the year Other comprehensive income, net of income tax Exchange differences on translating foreign controlled entities Other comprehensive income for the year, net of tax Total comprehensive loss for the year	Note 4 4	2020 $ 1,715,669 (731,583)	2019 $ 1,226,509 (357,789)
		984,086 87,952 (172,671) (216,224) (1,581,866) (148,693) - (61,485) (792,660) (68,176)	868,720 19,882 (120,052) (116,547) (795,848) (139,749) (303,259) (65,219) (356,520) -
		(1,969,737) 35,895	(1,008,592) (1,558)
		(1,933,842)	(1,010,150)
		22,207	-
		22,207	-
		(1,911,635)	(1,010,150)

The accompanying notes form part of these financial statements.

6

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Statement of Financial Position

As At 30 June 2020

Note ASSETS CURRENT ASSETS Cash and cash equivalents 5 Trade and other receivables 6 Current tax receivable Other assets 7 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment 8 Deferred tax assets Intangible assets 9 Right-of-use assets 10 Other assets 7 TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables 11 Borrowings 12 Lease liabilities 10 Employee benefits 14 Contract liabilities 13 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities Lease liabilities 10 Employee benefits 14 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 15 Reserves Retained earnings TOTAL EQUITY	2020 $ 2019 $ 1,016,514 224,988 509,641 341,542 33,663 39,726 - 19,732
	1,559,818 625,988
	42,293 23,889 51,192 17,060 3,243,299 76,627 372,859 - 63,499 -
	3,773,142 117,576
	5,332,960 743,564
	907,197 745,680 89,509 144,957 49,384 - 185,145 77,103 458,032 -
	1,689,267 967,740
	148,445 5,426 330,268 - 12,177 25,169
	490,890 30,595
	2,180,157 998,335
	3,152,803 (254,771)
	6,053,889 734,680 22,207 - (2,923,293) (989,451)
	3,152,803 (254,771)

The accompanying notes form part of these financial statements.

7

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Statement of Changes in Equity For the Year Ended 30 June 2020

2020

2020
		Ordinary Shares $	Retained Earnings $	Foreign Currency Translation Reserve $	Total $
Balance at 1 July 2019		734,680 5,319,209 - -	(989,451) - (1,933,842) -	- - - 22,207	(254,771) 5,319,209 (1,933,842) 22,207
Shares issued during the year
Loss for the year
Transactions with owners in their capacity as owners Total other comprehensive income for the period Balance at 30 June 2020 2019
		6,053,889	(2,923,293)	22,207	3,152,803
		Ordinary Shares $ Retained Earnings $ Foreign Currency Translation Reserve $ Total $
Balance at 1 July 2018		734,680 -	20,699 (1,010,150)	- -	755,379 (1,010,150)
Loss for the year
Balance at 30 June 2019		734,680	(989,451)	-	(254,771)

The accompanying notes form part of these financial statements.

8

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Statement of Cash Flows

For the Year Ended 30 June 2020

Note CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Income taxes (paid) / received Net cash provided by/(used in) operating activities 19 CASH FLOWS FROM INVESTING ACTIVITIES: Payment for intangible asset Purchase of property, plant and equipment Payment of subsidiary, net of cash acquired Net cash provided by/(used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Payment of lease liabilities Net cash provided by/(used in) financing activities Effects of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of year Cash and cash equivalents at end of financial year 5	2020 $ 2019 $ 2,386,565 1,337,483 (3,965,952) (1,481,382) 6,065 (60,370)
	(1,573,322) (204,269)
	(36,106) (9,094) (25,195) - 41,000 -
	(20,301) (9,094)
	2,477,466 - - 67,633 (55,448) - (39,414) -
	2,382,604 67,633
	2,545 -
	791,526 (145,730) 224,988 370,718
	1,016,514 224,988

The accompanying notes form part of these financial statements.

9

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements

For the Year Ended 30 June 2020

The financial report covers Xponential Technologies Ltd and its controlled entities ('the Group'). Xponential Technologies Ltd and Controlled Entities is a for-profit Company limited by shares, incorporated and domiciled in Australia.

Each of the entities within the Group prepare their financial statements based on the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

The financial report was authorised for issue by the Directors on 01 October 2021.

1 Basis of Preparation

In the Directors' opinion, the Company is not a reporting entity since there are unlikely to exist users of the financial statements who are not able to command the preparation of reports tailored so as to satisfy specifically all of their information needs. This special purpose financial report has been prepared to meet the reporting requirements of the Corporations Act 2001.

The financial statements have been prepared in accordance with the recognition and measurement requirements of the Australian Accounting Standards and Accounting Interpretations, and the disclosure requirements of AASB 101 Presentation of Financial Statements , AASB 107 Statement of Cash Flows , AASB 108 Accounting Policies , Changes in Accounting Estimates and Errors and AASB 1054 Australian Additional Disclosures .

2 Summary of Significant Accounting Policies

(a) Basis for consolidation

During the financial year ended 30 June 2020 the following group transactions occurred:

• Xponential Technologies Ltd (Xpon) was formed in August 2019

• In November 2019 Xpon established a wholly owned sub, Wondaris Pty Ltd (Wondaris)

• In March 2020, Xpon acquired 100% of the share capital in Maverick Data Group Pty Ltd and its subsidiaries (MDG).

The acquisition of MDG in March 2020 was not within the scope of AASB 3 since common control existed between Xpon and MDG prior to the acquisition. As such, this has been treated as a group restructure and the group has applied the pooling-of-interests method with the restatement of comparatives from the earliest period presented.

The consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost.

Intragroup assets, liabilities, equity, income, expenses and cashflows relating to transactions between entities in the consolidated entity have been eliminated in full for the purpose of these financial statements.

Appropriate adjustments have been made to a controlled entity’s financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a June financial year end.

A list of controlled entities is contained in Note 17 to the financial statements.

10

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(a) Basis for consolidation

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the parent has control. Control is established when the parent 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 relevant activities of the entity.

(b) Revenue and other income

Revenue from contracts with customers

The core principle of AASB 15 is that revenue is recognised on a basis that reflects the transfer of promised goods or services to customers at an amount that reflects the consideration the Group expects to receive in exchange for those goods or services. Revenue is recognised by applying a five-step model as follows:

1. Identify the contract with the customer

2. Identify the performance obligations

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations

5. Recognise revenue as and when control of the performance obligations is transferred

The Group often enters into customer contracts to supply a bundle of products and services. The contract is then assessed to determine whether it contains a single combined performance obligation or multiple performance obligations. If applicable the total transaction price is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers.

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in its consolidated statement of financial position.

Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its consolidated statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

None of the revenue streams of the Group have any significant financing terms as there is less than 12 months between receipt of funds and satisfaction of performance obligations.

11

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(b) Revenue and other income

Specific revenue streams

The revenue recognition policies for the principal revenue streams of the Group are:

Licenses, managed services and project services

Licences typically provide the customer with a right of access to IP and the performance obligation is satisfied over time.

Managed or project services provide clients with design, implementation and support services.

Often the Group also provides a significant service of integrating licenses with managed or project services to deliver a working solution such that, in the context of the actual contract, there is a single performance obligation to provide that solution. The Group has assessed that control of these solutions transfers to the customer over time. This is because each solution is unique to the customer (has no alternative use) and the terms of the contract state that the Group is entitled to a right to payment for the work completed to date.

Revenue for these performance obligations is recognised as the customisation or integration work is performed, using the cost-to-cost method to estimate progress towards completion. Costs are generally incurred are considered to be proportionate to the entity’s performance, so the cost-to-cost method provides a faithful depiction of the transfer of goods and services to the customer.

Where a performance obligation is satisfied over time an appropriate method is selected for measuring progress towards complete satisfaction of the performance obligation. Performance is measured using an input method or an output method as deemed appropriate by management.

The Group also provides managed or project services independent of licenses. Revenue from providing services is recognised in the accounting period in which the services are rendered. Revenue is recognised over time where the Group is entitled to payment for its performance to date throughout the contract period (including a profit margin that, in percentage terms, is equal to or more than the final expected profit margin).

Revenue for over-time contracts is determined based on the actual labour hours spent relative to the total expected labour hours and costs are expensed as incurred. Amounts remaining unbilled at the end of a reporting period are presented in the consolidated statement of financial position as accounts receivable if only the passage of time is required before payment of these amounts will be due or as contract assets if payment is conditional on future performance.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

If the contract includes an hourly fee, revenue is recognised in the amount to which the Group has a right to invoice.

Usage fees and commissions

Revenue is recognised in the amount to which the Group has a right to invoice based on either actual usage or sales. The Group acts as an agent in these transactions and only recognises revenue on a net basis.

12

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(b) Revenue and other income

Statement of financial position balances relating to revenue recognition

Contract assets and liabilities

Where the amounts billed to customers are based on the achievement of various milestones established in the contract, the amounts recognised as revenue in a given period do not necessarily coincide with the amounts billed to or certified by the customer.

When a performance obligation is satisfied by transferring a promised good or service to the customer before the customer pays consideration or the before payment is due, the Group presents the contract as a contract asset, unless the Group's rights to that amount of consideration are unconditional, in which case the Group recognises a receivable.

When an amount of consideration is received from a customer prior to the entity transferring a good or service to the customer, the Group presents the contract as a contract liability.

Other income

Other income is recognised on an accruals basis when the Group is entitled to it.

Government grants, including Research & Development, are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis.

(c) Income Tax

The tax expense recognised in the statement of profit or loss and other comprehensive income comprises current income tax expense plus deferred tax expense.

Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

(i) Deferred tax assets and liabilities

Deferred tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of assets and liabilities to the carrying amounts in the consolidated financial statements.

Deferred tax is not provided for the following:

• The initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

13

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(c) Income Tax

(i) Deferred tax assets and liabilities

• Taxable temporary differences arising on the initial recognition of goodwill.

• Temporary differences related to investment in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised.

Current and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively.

(d) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

(e) Goods and services tax (GST)

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payable are stated inclusive of GST.

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

(f) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment.

Depreciation

Property, plant and equipment, excluding freehold land, is depreciated on a straight-line basis over the assets useful life to the Group, commencing when the asset is ready for use.

14

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(f) Property, plant and equipment

Depreciation

Leased assets and leasehold improvements are amortised over the shorter of either the unexpired period of the lease or their estimated useful life.

The depreciation rates used for each class of depreciable asset are shown below:

Fixed asset class Computer Equipment Leasehold improvements	Depreciation rate
	20 - 50%
	2.5%

At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate.

(g) Financial instruments

Financial instruments are recognised initially on the date that the Group becomes party to the contractual provisions of the instrument.

On initial recognition, all financial instruments are measured at fair value plus transaction costs (except for instruments measured at fair value through profit or loss where transaction costs are expensed as incurred).

Financial assets

All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification

On initial recognition, the Group classifies its financial assets into the following categories, those measured at:

• amortised cost

• fair value through profit or loss - FVTPL

• fair value through other comprehensive income - equity instrument (FVOCI - equity)

• fair value through other comprehensive income - debt investments (FVOCI - debt)

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets.

15

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(g) Financial instruments

Financial assets

Amortised cost

Assets measured at amortised cost are financial assets where:

• the business model is to hold assets to collect contractual cash flows; and

• the contractual terms give rise on specified dates to cash flows are solely payments of principal and interest on the principal amount outstanding.

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the statement of financial position.

Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest rate method less provision for impairment.

Interest income, foreign exchange gains or losses and impairment are recognised in profit or loss. Gain or loss on derecognition is recognised in profit or loss.

Financial assets through profit or loss

All financial assets not classified as measured at amortised cost or fair value through other comprehensive income as described above are measured at FVTPL.

Net gains or losses, including any interest or dividend income are recognised in profit or loss (refer to hedging accounting policy for derivatives designated as hedging instruments.)

Impairment of financial assets

Impairment of financial assets is recognised on an expected credit loss (ECL) basis for the following assets:

• financial assets measured at amortised cost

• debt investments measured at FVOCI

When determining whether the credit risk of a financial assets has increased significant since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group's historical experience and informed credit assessment and including forward looking information.

The Group uses the presumption that an asset which is more than 30 days past due has seen a significant increase in credit risk.

16

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(g) Financial instruments

Financial assets

The Group uses the presumption that a financial asset is in default when:

• the other party is unlikely to pay its credit obligations to the Group in full, without recourse to the Group to actions such as realising security (if any is held); or

• the financial assets is more than 90 days past due.

Credit losses are measured as the present value of the difference between the cash flows due to the Group in accordance with the contract and the cash flows expected to be received. This is applied using a probability weighted approach.

Trade receivables

Impairment of trade receivableshave been determined using the simplified approach in AASB 9 which uses an estimation of lifetime expected credit losses. The Group has determined the probability of non-payment of the receivableand multiplied this by the amount of the expected loss arising from default.

The amount of the impairment is recorded in a separate allowance account with the loss being recognised in finance expense. Once the receivable is determined to be uncollectable then the gross carrying amount is written off against the associated allowance.

Where the Group renegotiates the terms of trade receivables due from certain customers, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in profit or loss.

Other financial assets measured at amortised cost

Impairment of other financial assets measured at amortised cost are determined using the expected credit loss model in AASB 9. On initial recognition of the asset, an estimate of the expected credit losses for the next 12 months is recognised. Where the asset has experienced significant increase in credit risk then the lifetime losses are estimated and recognised.

Financial liabilities

The Group measures all financial liabilities initially at fair value less transaction costs, subsequently financial liabilities are measured at amortised cost using the effective interest rate method.

The financial liabilities of the Group comprise trade payables, bank and other loans and lease liabilities.

(h) Impairment of non-financial assets

At the end of each reporting period the Group determines whether there is an evidence of an impairment indicator for non-financial assets.

Where an indicator exists and regardless for goodwill, indefinite life intangible assets and intangible assets not yet available for use, the recoverable amount of the asset is estimated.

17

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(h) Impairment of non-financial assets

Where assets do not operate independently of other assets, the recoverable amount of the relevant cashgenerating unit (CGU) is estimated.

The recoverable amount of an asset or CGU is the higher of the fair value less costs of disposal and the value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cashgenerating unit.

Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in profit or loss.

Reversal indicators are considered in subsequent periods for all assets which have suffered an impairment loss, except for goodwill.

(i) Intangible assets

Goodwill

Goodwill is calculated as the excess of the sum of:

• i) the consideration transferred;

ii) any non-controlling interest; and

iii) the acquisition date fair value of any previously held equity interest;

over the acquisition date fair value of net identifiable assets acquired in a business combination.

The value of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the aforementioned non-controlling interest. The Group can elect to measure the non-controlling interest in the acquiree either at fair value ('full goodwill method') or at the non-controlling interest's proportionate share of the subsidiary's identifiable net assets ('proportionate interest method'). The Group determines which method to adopt for each acquisition.

Under the 'full goodwill method', the fair values of the non-controlling interests are determined using valuation techniques which make the maximum use of market information where available.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates

Goodwill is not amortised but is tested for impairment annually and is allocated to the Group's cash generating units or groups of cash generating units, which represent the lowest level at which goodwill is monitored but where such level is not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold.

18

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(i) Intangible assets

Patents and Trademarks

Trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life ranging from 1 to 5 years.

Software

Software has a finite life and is carried at cost less any accumulated amortisation and impairment losses. It has an estimated useful life of between three and five years.

Customer Contracts

The customer contracts were acquired as part of a business combination. They are recognised at their fair value at the date of acquisition and are subsequently amortised on a straight-line based on the timing of projected cash flows of the contracts over their estimated useful lives. Customer contracts have an estimated useful life of between three and five years.

Amortisation

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

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

(j) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term highly liquid deposits with a maturity of three months of less which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

(k) Leases

At inception of a contract, the Group assesses whether a lease exists - i.e. does the contract convey the right to control the use of an identified asset for a period of time in exchange for consideration.

This involves an assessment of whether:

• The contract involves the use of an identified asset - this may be explicitly or implicitly identified within the agreement. If the supplier has a substantive substitution right then there is no identified asset.

• The Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use.

• The Group has the right to direct the use of the asset i.e. decision making rights in relation to changing how and for what purpose the asset is used.

19

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(k) Leases

Lessee accounting

The non-lease components included in the lease agreement have been separated and are recognised as an expense as incurred.

At the lease commencement, the Group recognises a right-of-use asset and associated lease liability for the lease term. The lease term includes extension periods where the Group believes it is reasonably certain that the option will be exercised.

The right-of-use asset is measured using the cost model where cost on initial recognition comprises of the lease liability, initial direct costs, prepaid lease payments, estimated cost of removal and restoration less any lease incentives received.

The right-of-use asset is depreciated over the lease term on a straight line basis and assessed for impairment in accordance with the impairment of assets accounting policy.

The lease liability is initially measured at the present value of the remaining lease payments at the commencement of the lease. The discount rate is the rate implicit in the lease, however where this cannot be readily determined then the Group's incremental borrowing rate is used.

Subsequent to initial recognition, the lease liability is measured at amortised cost using the effective interest rate method. The lease liability is remeasured whether there is a lease modification, change in estimate of the lease term or index upon which the lease payments are based (e.g. CPI) or a change in the Group's assessment of lease term.

Where the lease liability is remeasured, the right-of-use asset is adjusted to reflect the remeasurement or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Exceptions to lease accounting

The Group has elected to apply the exceptions to lease accounting for both short-term leases (i.e. leases with a term of less than or equal to 12 months) and leases of low-value assets. The Group recognises the payments associated with these leases as an expense on a straight-line basis over the lease term.

(l) Employee benefits

Provision is made for the Group's liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be wholly settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs.

Employee benefits expected to be settled more than one year after the end of the reporting period have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. Cashflows are discounted using market yields on high quality corporate bond rates incorporating bonds rated AAA or AA by credit agencies, with terms to maturity that match the expected timing of cashflows. Changes in the measurement of the liability are recognised in profit or loss.

20

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(l) Employee benefits

Defined contribution schemes

Obligations for contributions to defined contribution superannuation plans are recognised as an employee benefit expense in profit or loss in the periods in which services are provided by employees.

(m) Foreign currency transactions and balances

Transaction and balances

Foreign currency transactions are recorded at the spot rate on the date of the transaction.

At the end of the reporting period:

• Foreign currency monetary items are translated using the closing rate;

• Non-monetary items that are measured at historical cost are translated using the exchange rate at the date of the transaction; and

• Non-monetary items that are measured at fair value are translated using the rate at the date when fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition or in prior reporting periods are recognised through profit or loss, except where they relate to an item of other comprehensive income or whether they are deferred in equity as qualifying hedges.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group's presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

• income and expenses are translated at average exchange rates for the period where the average rate approximates the rate at the date of the transaction; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Group's foreign currency translation reserve in the statement of financial position. These differences are recognised in the statement of profit or loss and other comprehensive income in the period in which the operation is disposed.

(n) Adoption of new and revised accounting standards

The Group has adopted all standards which became effective for the first time at 30 June 2020, the adoption of these standards has not caused any material adjustments to the reported financial position, performance or cash flow of the Group.

21

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

2 Summary of Significant Accounting Policies

(o) New Accounting Standards and Interpretations

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The Group has decided not to early adopt these Standards. The following table summarises those future requirements, and their impact on the Group where the standard is relevant:

Effective date Standard Name for entity Requirements Impact AASB 2020-2 Amendments to Annual To move from preparing Special Additional disclosures Australia Accounting Standards reporting Purpose Financial Statements to will be required in the - Removal of Special Purpose period preparing General Purpose Financial financial statements Financial Statements for beginning on Statements Certain For-Profit Private or after 1 July Sector Entities 2021 AASB 1060 General Purpose Annual To comply with new Tier 2 simplified Additional disclosures Financial Statements - reporting disclosure regime will be required in the Simplified Disclsoures for Forperiod financial statements Profit and Not-for-Profit Tier 2 beginning on given the present Entities or after 1 July preparation of Special 2021 Purpose Financial Statements

3 Critical Accounting Estimates and Judgments

The directors make estimates and judgements during the preparation of these financial statements regarding assumptions about current and future events affecting transactions and balances.

These estimates and judgements are based on the best information available at the time of preparing the financial statements, however as additional information is known then the actual results may differ from the estimates.

The significant estimates and judgements made have been described below.

Key estimates - receivables

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

22

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

3 Critical Accounting Estimates and Judgments

Key estimates - goodwill

In accordance with AASB 136 Impairment of Assets, the Group is required to estimate the recoverable amount of goodwill at each reporting period.

Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate and using a terminal value to incorporate expectations of growth thereafter.

In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management’s expectations of:

• growth in EBITDA, calculated as adjusted operating profit before depreciation and amortisation;

• timing and quantum of future capital expenditure;

• long-term growth rates; and

• the selection of discount rates to reflect the risks involved.

The Group prepares and approves formal five year management plans for its operations, which are used in the value in use calculations.

Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group’s impairment evaluation and hence results.

Key judgments - taxes

Deferred tax assets

Determining income tax provisions involves judgment on the tax treatment of certain transactions. Deferred tax is recognised on tax losses not yet used and on temporary differences where it is probable that there will be taxable revenue against which these can be offset. Management has made judgments as to the probability of future taxable revenues being generated against which tax losses will be available for offset based on budgets, current and future expected economic conditions.

Different jurisdictions

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Key judgments - COVID-19

There has not been a significant impact of COVID-19 on the Australia operations of the business. The United Kingdom has seen some deferring of expenditure by clients in FY20, with a general pick-up in sales orders in FY21.

23

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

3 Critical Accounting Estimates and Judgments

Key judgments - Going Concern

The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business.

For the financial year ended 30 June 2020 the Group generated total revenue and other income of $1,803,621 (PY: $1,246,391), reported a consolidated loss of $1,933,842 (PY: consolidated loss of $1,010,150) and reported operating cash outflows of $1,573,322 (PY: $204,269 operating cash outflow). As at 30 June 2020 the Group has cash and cash equivalents of $1,016,514 (PY: $224,988),and net assets of $3,152,803 (PY: $(254,771)).

As the Group is currently loss making, the Group’s ability to continue to adopt the going concern assumption will depend upon a number of matters including successful capital raisings in the future of necessary funding and the continuous increase in sales and/or commercialisation of the Group’s intellectual property.

The Directors have concluded as a result of the requirement to raise funds in the future there exists a material uncertainty that may cast significant doubt regarding the Group's ability to continue as a going concern and therefore, the Group may be unable to realise their assets and discharge their liabilities in the normal course of business.

The Directors have a reasonable expectation that the Group will have adequate resources to fund its operational requirements, based on the following factors:

• The net asset and cash and cash equivalents reserved at 30 June 2020 indicate immediate obligations can be satisfied as required;

• Recent history of capital raisings, including $2,477,466 (before costs) during the 2020 financial year;

• Post year-end capital raisings, including $1,866,893 capital in June 2021 (before costs), and $1,110,000 convertible notes (before costs) in August 2021; and

• The continued progress made in exploiting the Group's intellectual property to drive incresed sales growth.

Based on the above, the Directors continue to adopt the going concern basis in preparing the financial report.

Should the Group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the Group be unable to continue as a going concern.

24

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements

For the Year Ended 30 June 2020

4 Revenue from contracts with customers and Other Income

Revenue contracts with customers

- Licences - Managed Services - Project Services Total Revenue from licences, managed services and project services - Commission Reseller Total Revenue from usage fees and commissions Total Revenue from contracts with customers Other Income - R&D refund - Interest and other income Total Other Income 5 Cash and Cash Equivalents Cash at bank and in hand Total Cash and Cash Equivalents 6 Trade and Other Receivables CURRENT Trade receivables Other receivables Total current trade and other receivables	2020 $ 2019 $ 574,210 640,927 654,546 264,978 485,538 320,604
	1,714,294 1,226,509
	1,375 -
	1,375 -
	1,715,669 1,226,509
	2020 $ 2019 $ - 17,414 87,952 2,468
	87,952 19,882
	2020 $ 2019 $ 1,016,514 224,988
	1,016,514 224,988
	2020 $ 2019 $ 449,241 330,865 60,400 10,677
	509,641 341,542

The carrying value of trade receivables is considered a reasonable approximation of fair value due to the short-term nature of the balances.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable in the financial statements.

25

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements

For the Year Ended 30 June 2020

7 Other assets

CURRENT Contract assets Total Current Other Assets NON-CURRENT Deposits Total Non-Current Other Assets 8 Property, plant and equipment PLANT AND EQUIPMENT Computer equipment At cost Accumulated depreciation Total plant and equipment Leasehold Improvements At cost Accumulated amortisation Total leasehold improvements Total plant and equipment Total property, plant and equipment	2020 $ 2019 $ - 19,732
	- 19,732
	63,499 -
	63,499 -
	2020 $ 2019 $ 36,722 - (18,318) -
	18,404 -
	36,825 36,825 (12,936) (12,936)
	23,889 23,889
	42,293 23,889
	42,293 23,889

26

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

9 Intangible Assets

Intangible assets Goodwill Cost Patents and Trademarks Cost Accumulated amortisation Net carrying value Software Cost Accumulated amortisation Net carrying value Customer Contracts Cost Total Intangible assets	2020 $ 2019 $ 2,317,477 - 12,542 12,542 (7,464) (7,464)
	5,078 5,078
	266,662 194,510 (132,918) (122,961)
	133,744 71,549
	787,000 - 3,243,299 76,627

10 Leases

The Group has a lease over an office space.

The Group has chosen not to apply AASB 16 to leases of intangible assets.

Terms and conditions of leases

The Group leases a corporate office. The lease term is 5 years.

The corporate office lease contains an annual pricing mechanism based on CPI movements at each anniversary of the lease inception.

Right-of-use assets

Year ended 30 June 2020 Additions to right-of-use assets Reductions in right-of-use assets due to changes in lease liability Balance at end of year	Office Lease $ 409,620 (36,761)	Total $ 409,620 (36,761)
	372,859	372,859

27

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

10 Leases

Lease liabilities

The maturity analysis of lease liabilities based on contractual undiscounted cash flows is shown in the table below:

2020 Lease liabilities	< 1 year $ 68,343	1 - 5 years $ 360,903	> 5 years $ -	Total undiscounted lease liabilities $ 429,246	Lease liabilities included in this Statement Of Financial Position $ 379,652

Extension options

The Group includes options in the leases to provide flexibility and certainty to the Group operations and reduce costs of moving premises and the extension options are at the Group's discretion.

At commencement date and each subsequent reporting date, the Group assesses where it is reasonably certain that the extension options will be exercised.

11 Trade and Other Payables

CURRENT Trade payables GST payable Accruals and other payables Total Trade and Other Payables	Note	2020 $ 708,388 28,245 170,564	2019 $ 665,352 49,211 31,117
		907,197	745,680

Trade and other payables are unsecured, non-interest bearing and are normally settled within 30 days. The carrying value of trade and other payables is considered a reasonable approximation of fair value due to the short-term nature of the balances.

12 Borrowings

CURRENT Unsecured liabilities: Related party payables Total current borrowings	2020 $ 2019 $ 89,509 144,957
	89,509 144,957

28

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements

For the Year Ended 30 June 2020

13 Contract Liabilities CURRENT Contract liabilities Total contract liabilities 14 Employee Benefits Current liabilities Provision for employee benefits Total Current Employee Benefits Non-current liabilities Provision for employee benefits Total Non-Current Employee Benefits 15 Issued Capital 42,844,646 (2019: 20,000,000) Ordinary shares (a) Ordinary shares At the beginning of the reporting period Shares issued during the year - Ordinary Shares September 2019 ($0.00) September 2019 ($0.33) April 2020 - non-cash ($0.33) April 2020 - non-cash ($0.33) April 2020 ($0.54) At the end of the reporting period	2020 $ 2019 $ 458,032 (19,732)
	458,032 (19,732)
	2020 $ 2019 $ 185,145 77,103
	185,145 77,103
	2020 $ 2019 $ 12,177 25,169
	12,177 25,169
	2020 $ 2019 $ 6,053,889 734,680 2020 No. 2019 No. 20,000,000 20,000,000 7,553,642 - 5,378,800 - 6,611,340 - 2,000,000 - 1,300,864 -
	42,844,646 20,000,000

29

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

15 Issued Capital

(a) Ordinary shares

The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On a show of hands at meetings of the Company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote.

The Company does not have authorised capital or par value in respect of its shares.

16 Auditors' Remuneration

Remuneration of the auditor BDO, for: - auditing or reviewing the financial statements - taxation services Total	2020 $ 37,500 31,900	2019 $ 20,000 20,100
	69,400	40,100

17 Interests in Subsidiaries

(a) Composition of the Group

Subsidiaries: Maverick Data Group Pty Ltd Datisan Pty Ltd Holoscribe Australia Pty Ltd Wondaris Pty Ltd Xpon Digital Limited Holoscribe Limited	Principal place of business / Country of Incorporation Percentage Owned (%) 2020 Australia 100 Australia 100 Australia 100 Australia 100 United Kingdom 100 United Kingdom 100*	Percentage Owned (%) 2019* 100 100 - - - -

*The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries.

18 Contingencies

In the opinion of the Directors, the Company did not have any contingencies at 30 June 2020 (30 June 2019:None).

30

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements For the Year Ended 30 June 2020

19 Cash Flow Information

(a) Reconciliation of result for the year to cashflows from operating activities

Reconciliation of net income to net cash provided by operating activities:

Loss for the year Cash flows excluded from profit attributable to operating activities Non-cash flows in profit: - depreciation and amortisation - finance costs on leases - net exchange differences - write-off of investment Changes in operating assets and liabilities, net of effects from purchase of controlled entity: - (increase)/decrease in trade and other receivables - (increase)/decrease in other assets - (increase)/decrease in deferred tax asset - increase/(decrease) in trade and other payables - (increase)/decrease in other liabilities - increase/(decrease) in income taxes payable - increase/(decrease) in deferred tax liability - increase/(decrease) in provisions Cashflows from operations

2020 $ 2019 $ (1,933,842) (1,010,150) 65,990 65,219 9,446 - (2,545) - - 303,259 42,523 (33,546) (43,767) (19,732) (34,132) (3,868) (140,379) 447,221 364,032 - 6,063 (60,370) (1,761) 5,426 95,050 102,272

(1,573,322) (204,269)

31

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Notes to the Financial Statements

For the Year Ended 30 June 2020

20 Events after the end of the Reporting Period

During April 2021, 2,872,143 shares were issued at an allotment price of $0.65, raising $1,866,893 in capital.

On June 5, 2021 Xponential Technologies Ltd acquired 100% of the shares in Internetrix Pty Ltd and Controlled Entities for total consideration of $1,575,950. This consideration included 258,240 shares at an allotment price of $0.54.

On 24 August 2021, the group issued two convertible notes totalling $1,110,000. The notes are convertible (at the option of the holder) into ordinary shares of the entity at the lower of:

• $0.687 per share; and

• the lowest price per share that was issued by the company between the date of issue of the notes and the conversion event.

The notes will automatically convert into ordinary shares immediately prior to the first to occur:

• Completion of a qualifying financing (the entry by the company into a binding agreement to raise $10,000,000 or more in aggregate through the issue of ordinary or preferred shares in one capital round and which is not an IPO);

• The company (or its ultimate holding company) lodging a prospectus with ASIC in connection with an IPO and receives conditional approval from the ASX to list its shares on the ASX;

• Completion of an exit (trade or share sale); or

• The maturity date which is 18 months from the date that the notes were first issued.

On 26 July 2021, Tim Ebbeck was appointed as Non Executive Director.

Except for the above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.

21 Statutory Information

The registered office and principal place of business of the company is:

Xponential Technologies Ltd and Controlled Entities Level 2

33 Longland Street Newstead QLD 4006

32

Xponential Technologies Ltd and Controlled Entities

ABN: 37 635 810 258

Directors' Declaration

The directors have determined that the Company is not a reporting entity and that this special purpose financial report should be prepared in accordance with the accounting policies described in Note 2 to the financial statements.

The directors of the Company declare that:

1. The financial statements and notes, as set out on pages 6 to 32, are in accordance with the Corporations Act 2001 and:

2. (a) comply with Accounting Standards as stated in Note 2; and

3. (b) give a true and fair view of the Company's financial position as at 30 June 2020 and of its performance for the year ended on that date in accordance with the accounting policies described in Note 2 to the financial statements.

4. In the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

Director .................................................................. Director ..................................................................

Dated 1st October 2021

33

Tel: +61 7 3237 5999 Level 10, 12 Creek St Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia

==> picture [78 x 31] intentionally omitted <==

INDEPENDENT AUDITOR'S REPORT

To the members of Xponential Technologies Ltd

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Xponential Technologies Ltd (the Company) and its subsidiaries (the Group), which comprises the statement of financial position as at 30 June 2020, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies, and the directors’ declaration.

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

• (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and

• (ii) Complying with Australian Accounting Standards to the extent described in Note 2, and the Corporations Regulations 2001 .

Basis for opinion

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

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

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

Material uncertainty related to going concern

We draw attention to Note 3 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter.

Emphasis of matter – Basis of accounting

We draw attention to Note 1 to the financial report, which describes the basis of accounting. The financial report has been prepared for the purpose of fulfilling the directors’ financial reporting responsibilities under the Corporations Act 2001 . As a result, the financial report may not be suitable for another purpose. Our opinion is not modified in respect of this matter.

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

34

==> picture [78 x 31] intentionally omitted <==

Other information

The directors are responsible for the other information. The other information comprises the information in the Directors’ report for the year ended 30 June 2020, but does not include the financial report and the auditor’s report thereon.

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

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

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

Responsibilities of the directors for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view and have determined that the basis of preparation described in Note 1 to the financial report is appropriate to meet the requirements of the Corporations Act 2001 and is appropriate to meet the needs of the members. The directors’ responsibility also includes such internal control as the directors determine is necessary to enable the preparation of a financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

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

Auditor’s responsibilities for the audit of the Financial Report

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

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf

This description forms part of our auditor’s report.

BDO Audit Pty Ltd

==> picture [96 x 40] intentionally omitted <==

L G Mylonas

Director

Brisbane, 1 October 2021

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

35