Multistack International : Annual Report to shareholders

MULTISTACK INTERNATIONAL LIMITED

AND CONTROLLED ENTITIES

ABN: 54 007 254 346

CONSOLIDATED FINANCIAL REPORT

FOR THE YEAR ENDED 31 DECEMBER 2021

MULTISTACK INTERNATIONAL LIMITED AND CONTROLLED ENTITIES ABN: 54 007 254 346

DIRECTORS

A. Yu (Chairman and Non-executive Director)

CONTENTS	PAGE
Directors' Report	2
Auditor's Independence Declaration	9
Consolidated Statement of Profit or Loss and Other Comprehensive Income	10
Consolidated Statement of Financial Position	11
Consolidated Statement of Changes in Equity	12
Consolidated Statement of Cash Flows	13
Notes to the Financial Statements	14
Directors' Declaration	39
Independent Auditors' Report	40
Australian Securities Exchange additional information	44

S. Leung (Chief Executive Officer)

S. Yan (Executive Director)

N. Chan (Executive Director)

T. Chu (Non-executive Director)

COMPANY SECRETARY

Y. Wong

REGISTERED OFFICE

17 Friars Road Moorabbin, Victoria 3189 Australia

Tel: [phone] Fax: [phone]

SOLICITORS

Minter Ellison

PRINCIPAL BANKERS

National Australia Bank Limited

SHARE REGISTER

Computershare Investor Services Pty Limited GPO Box 2975, Melbourne, Vic 3001 Phone: [phone]

AUDITORS

Nexia Melbourne Audit Pty Ltd

STOCK EXCHANGE

The company is listed on the Australian Securities Exchange. The home exchange is Melbourne.

1

DIRECTORS' REPORT

The Directors present their report with the financial report of Multistack International Limited ("Company") and the consolidated financial report of the Group, being the Company and its controlled entities ("Group"), for the year ended 31 December 2021 and auditor's report thereon.

DIRECTORS

The names and details of the Directors of the company in office during the financial year and until the date of this report, including the qualifications, experience and special responsibilities of each person are provided below, together with details of the company secretary.

Mr. A. Yu

Chairman and Non-executive and Independent Director Member of Audit Committee and Remuneration Committee

A graduate in Accountancy from Hong Kong Polytechnic University, Mr. Yu is a senior consultant of a CPA firm based in Hong Kong with a multi-national client base. His expertise is in mergers and acquisitions particularly in multi-national courier and air-cargo businesses. Mr Yu was appointed as a member of the Board on 16 February 2004 and was elected as Chairman of the Board on 23 May 2013.

Mr. S. Leung

Chief Executive Officer and Executive Director Member of Nomination Committee

A graduate in Electrical Engineering (Hong Kong Polytechnic), Mr. Leung was a co-founder of the Super Link Group. He has built up substantial manufacturing and distribution resources in the People's Republic of China since 1981. Mr Leung was appointed as a member of the Board on 10 October 1991 and has been Chief Executive Officer since 1997.

Mr. S. Yan

Executive Director

Member of Nomination Committee

A graduate in Production Engineering, Master of Industrial Engineering (Hong Kong Polytechnic University) and a member of the American Institute of Industrial Engineers, Mr. Yan was a co-founder of the Super Link Group. He has over 30 years' experience in manufacturing and marketing industrial air conditioning products in the People's Republic of China. Mr Yan was appointed as a member of the Board on 10 October 1991 and was Chairman between August 1999 and May 2004.

Ms. N. Chan

Executive Director

Bachelor of Business (Swinburne University of Technology), Graduate Diploma in Business Systems (RMIT). Ms Chan has substantial experience in the banking industry. She currently oversees all administration for the Multistack Chiller Division in Australia. Ms Chan was appointed as a member of the Board on 26 November 2002.

Mr. T. Chu

Non-executive and Independent Director

Member of Audit Committee and Remuneration Committee

Bachelor of Laws (University of London), Master of Laws (City University of Hong Kong), Mr. Chu is a solicitor admitted in England and Wales, Hong Kong, Australian Capital Territory and Singapore. Mr. Chu was appointed as a member of the Board on 19 March 1999 and was Chairman of the Board from 17 May 2004 to 23 May 2013.

Directors were in office from the beginning of the financial year until the date of this report, unless otherwise stated.

COMPANY SECRETARY

Ms Y. Wong

Chief Financial Officer and Company Secretary

Bachelor of Business (Victoria University of Technology) and Masters in Finance (RMIT). Ms Wong is a CPA and has prior experience in the banking industry. Ms Wong was appointed Company Secretary on 13 September 2002.

INTERESTS IN THE SHARES OF THE COMPANY AND RELATED BODIES CORPORATE

As at the date of this report, the interests of the Directors in the shares of the Company and related bodies corporate were:

Multistack International Ltd.

Ordinary shares

A. Yu	-
S. Leung	28,405,454
S. Yan	34,567,498
N. Chan	20,000
T. Chu	-

DIRECTORS' REPORT - CONTINUED

PRINCIPAL ACTIVITIES

The principal activities during the year of entities within the Group were:

• • marketing of industrial air conditioning equipment, primarily in Australia;

• • distribution of Multistack water-cooled and air-cooled water chillers;

• • marketing and distribution of Organic Rankine Cycle (ORC) technologies and products, and

• • distribution of heat exchangers.

RESULTS, EARNINGS PER SHARE AND DIVIDENDS

Total revenue in 2021 increased by 7.16% to $643,851. Revenue from Other Income has decreased to loss of $146,326, due to foreign currency loss and cessation of government grants. The net loss for the period attributable to members was $1,132,977 (2020: $368,316).

Basic earnings per share for continuing operations was (loss $0.0083) (2020: loss $0.0033).

DIVIDENDS

No dividend has been declared or recommended for the financial year ended 31 December 2021, (2020: nil).

REVIEW OF OPERATIONS	Jan - Dec 2021	Jan - Dec 2020
A$	A$
Total revenue	643,851	600,819
Total comprehensive (loss) after tax attributable to members	(1,132,977)	(368,316)

The trading entity, Multistack Australia Pty Ltd, has incurred losses before income tax for the year ending 31 December 2021 of $473,952 (2020: $457,031).

The outbreak of COVID-19 and its variations have been threatening the lives of human beings around the world as well as affecting the global economies in two consecutive years. Due to the various restrictions and health concerns in the country, sales activities have not improved much and the cost of material and transportation was geared up to an unbelievable level. With all these impacts it was hard for our agents to sell many of our air-conditioning equipment. In fact we have to thank them for their effort to try, at least to keep the ball rolling with a marginal increase in our revenue. However we were more optimistic about the launch of the ORC power generation business in the market, after our acquisition of the Verdicorp assets in June 2020, which would allow us to develop the ORC equipment in line with the carbon reduction program of the country.

There was a learning curve for the Group to pick up the ORC technology and turn it into marketing and selling these ORC products in Australia as well as to the rest of the world. As reported in the last annual report the Company has been in negotiations with various interested parties for local and overseas distribution rights in their regions. Given the current pandemic environment, these negotiations may still take longer than expected, but the Directors trust that this will be no doubt the right direction because global warming is always a big issue threatening human generations around the world. The United Nations have made further warnings and urged all country leaders to take actions to reduce carbon emission without delay. This was a positive signal for promoting our ORC units and we were glad that we received increasing amount of enquiries from customers in different areas who showed their interest in our equipment.

On 19 November 2021, Multistack International Limited (ASX:MSI) announced that the Group has completed the issue of new shares to a Hong Kong based company for $1.20 million which has given the Group a viable cash flow for the development projects of the ORC product.

The MSI Board has good faith in our ORC technology and believes that it has great future growth potential. We are currently in negotiations with talented people about the development of new ORC concepts. We shall expect to see results in the coming year for practical progress in this direction. The board will expect that these new development projects will bring more value to the Company than its current carrying value of the book records.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There have been no significant changes during the financial year. As mentioned above, the Company is continuing to commercialise the ORC technology and its products, also in negotiations with various interested parties for local and overseas distribution rights in their regions. The Group believes the COVID-19 pandemic may continue to affect both the Company as well as the overall economy, in terms of sales and various sales activities.

SHARE OPTIONS

No options over un-issued shares or interests in the Company were issued during or since the end of the financial period and there were no options outstanding at the end of the financial year.

DIRECTORS' REPORT - CONTINUED

DIRECTORS' AND OTHER OFFICERS' EMOLUMENTS

REMUNERATION REPORT (AUDITED)

The directors present the Group's 2021 remuneration report which details the remuneration information for Multistack International Limited's executive directors, non-executive directors and other key management personnel.

Details of Key management personnel:

Directors	Period of Responsibility	Position
A. Yu	Appointed 16 February 2004	Chairman - Non-Executive
S. Leung	Appointed 10 October 1991	Director & Chief Executive Officer
S. Yan	Appointed 10 October 1991	Director - Executive
N. Chan	Appointed 26 November 2002	Director - Executive
T. Chu	Appointed 19 March 1999	Director - Non-Executive
Executives	Period of Responsibility	Position
Y. Wong	Appointed 13 September 2002	Company Secretary

The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for Directors and the Chief Executive Officer. There is no formal Board policy in place and the key management personnel are contracted to ongoing employment contracts with Notice Periods of 4 weeks and no termination payments provided for under the contracts. The Remuneration Committee determines and reviews compensation of the executive team by assessing the appropriateness of the nature and amount of emoluments of such officers by reference to relevant market conditions and the capacity to pay. There has been no bonus payments made to directors or other key management personnel. Further salaries for the key management personnel have remained the same or been adjusted in the current period due to CPI% increase only.

The Remuneration Committee did not meet during the year as no issue had arisen in the respective field during the relevant period.

Compensation Policy

The Remuneration Committee is responsible for determining and reviewing compensation arrangements for Directors, the Chief Executive Officer and all other key management personnel. The Board determines and reviews compensation of the executive team by assessing the appropriateness of the nature and amount of compensation of key management personnel by reference to relevant employment and market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. The Group has not utilised the services of a Remuneration Consultant during the year or up to the date of this report.