AERIS ENVIRONMENTAL LTD
ANNUAL REPORT 2017
LTD
ACN 093977336
P A G E 2
C O N T E N T S
Chairman and CEO Report
Review of Operations
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Australian Securities Exchange Additional Information
Corporate Directory
1
4
6
20
22
23
24
25
26
60
62
69
73
ANNUAL REPORT 2017 P A G E 1
C H A I R M A N A N D C H I E F E X E C U T I V E
O F F I C E R R E P O R T
•
FY17 milestone year with ‘portfolio of key products completed, validated and launched’: proprietary technologies and
distribution footprint now in place
•
FY18 successfully scaling ‘accelerated growth’ strategy with sales pipeline 5 times last year’s revenue
•
Extensive trade, customer and industry acceptance of the need to implement Aeris’ ‘clean, green, protect’ solutions.
The 2017 financial year was a milestone year for Aeris Environmental Ltd (Aeris or the Company). It was pleasing to deliver
growth which demonstrates your Company’s strong momentum and significant potential. In FY17 we again doubled revenue,
and importantly we built a solid foundation for long term, sustainable and profitable growth.
Aeris develops, manufactures and markets patented, environmentally friendly technology solutions that address the global
megatrends of energy efficiency, long term materials protection, healthier air, food and water. With the core guiding principles
of environmentally friendly and safe to use products which are cost efficient and outperform conventional toxic chemicals.
Smart enzymes combined with hard surface treatments provide remediation and long-term protection from mould and
bacterial growth; improve hygiene, offer an array of consumer and technical applications.
Aeris’ anti-corrosion coatings are water based with single step easy application. The coatings are often the only available
option in high-profile challenging environments – from oil rigs to mines and underground pipes. The coatings are increasingly
being adopted by leading technical service groups and HVAC manufactures internationally.
SmartENERGY provides up to 33%, energy savings alongside with documented improvements in system efficiency (54- 289% in
airflow and up to 40% in coil efficiency). It also delivers independently-validated improvements in indoor air quality across all
air-conditioning and refrigeration systems.
Having directly invested over $40 million in R&D in developing and validation of its product portfolio, Aeris has now launched
the full spectrum of its products to customers around the world. The high profile, landmark validations have led Aeris to
leveraging the reference sites into multiple industry applications with sales of an expanded range of products to each customer.
Our focus is now firmly on commercialising our intellectual property with validated high profile solutions to rapidly grow our
revenues. In parallel, we are seeing growing demand for our Asset Upgrade Agreements, which produce long term, annuity
revenue underpinned by multi-year contracts which deliver both strong margins, customer retention and the uptake of a
broader range of Aeris solutions.
FY18 promises to be an exciting, productive and successful year for Aeris, with over 35 current and pending platinum partners,
each with a dedicated customer base, existing revenue and committed purchase volumes to maintain platinum status. Aeris
enjoys a growing base of international distributors, global direct customers and wholesale channels partners, who contribute
to our rising sales trajectory, with each product portfolio showing strong adoption, and importantly, an outstanding opportunity
for cross-selling of platform solutions. Our conservative sales pipeline is over five times the FY17 financial year revenue.
AERIS ENVIRONMENTAL LTD P A G E 2
In Calendar year 2018 the Company is targeting the achievement of a cash flow positive operation by driving sales and
increasing margins as a consequence of scaling up production. Our aim is to demonstrate that our material investments to date
in product development, regulatory approvals, customer validation and global branding will result in material inflection points
for the Company’s market capitalisation and sustainable growth in shareholder value.
Aeris is undertaking a spectrum of discussions with industry leaders, on a strategic level. This will facilitate the fast tracking
adoption of Aeris technologies across large customer bases, and accelerating access to to a number of large vertical markets.
The Company recognises the long standing support, and indeed patience, of our shareholders, the outstanding performance
of our dedicated employees and the efforts of our board. Our technologies are unquestionably on trend, our products are
exceeding customer expectations and all of our team are aligned with the purpose of delivering a business internationally which
will be successful by all metrics.
Maurie Stang
Non-Executive Chairman
Peter Bush
Chief Executive Officer
AerisGuard consumables for HVAC hygiene, and specialty
products for remediation and bacterial control.
SmartENERGY Ecosystem.
OEM advanced coatings for the prevention of corrosion,
mould and biofilm
ANNUAL REPORT 2017
P A G E 3
The Company’s AerisGuard portfolio of patented products were
developed for, and used in, professional healthcare globally
(hospital hard surface and central sterilisation) and its SMART
technology platform offers the world’s most advanced total
solution for HVAC and refrigeration efficiency.
AERIS ENVIRONMENTAL LTD P A G E 4
R E V I E W O F O P E R A T I O N S
The financial year ended 30 June 2017 has seen strong progress towards delivering all the objectives in the Company’s
business plan. Each of the major product groups are now enjoying demonstrable customer acceptance, distributor and trade
engagement. Aeris is currently investing in scaling-up its commercial production capabilities, particularly with a multi-region
focus on an optimal and cost-efficient supply chain.
HIGHLIGHTS
•
•
Successful manufacturing scale-up and commercial launch of the Company’s Smart HUB Ecosystem.
Core products for each business unit – AerisGuard consumables, AerisCoat Anti-Corrosion, and Smart HUB SmartENERGY
and control – now commercially launched and gaining traction in key global markets.
• Rapid growth of platinum programme, with 12 signed partnership, and multiple pending, agreements, each with minimum
annual purchase commitments.
• Acceleration of programme in key international markets and high value-added opportunities.
• Rapidly-increasing adoption of AerisCoat OEM corrosion prevention and protection, along with unique mould and odour
remediation product, AerisShield.
•
•
•
$1.8 million cash receipts for 2016-17 financial year, being a 120% increase from 2015-16 financial year. Sales accelerating as
Aeris moves firmly into commercialisation / monetising phase.
63% of 2016-17 financial year revenue received from new platinum partners and key accounts, demonstrating growing
opportunity, as activity is scaled up. Balance of revenue from existing accounts, which are both expanding and recurring.
Strong positive lead indicators, including a pipeline of over $15 million rolling into 2017-18 financial year. Known contracted
revenue in coming quarters underwriting sales growth.
• Aeris Smart HUB range is now launched, with successfully completed multiple high-profile installations.
•
Two major flagship Building Management Systems and control projects successfully completed, pointing at a strong forward
pipeline.
•
First large-volume sales of corrosion coatings into key global accounts.
• Growing strategic engagement with a cross section of high profile, multi-national industry leaders.
•
Increasing investment on core strategic markets in the USA, Europe and Asia Pacific, with several large-scale project
opportunities in each market.
ANNUAL REPORT 2017 P A G E 5
COMMENTARY
During the 2016-17 financial year, the Company successfully embedded its unique technologies into the workflow and processes
of a number of key and large-scale customers, targeting annuity revenue and an extension of the range of Aeris’ products that
each of these customers has adopted.
In this period the Company signed platinum partnership agreements, received orders and trained applicators in the following
territories – Australia, India, the USA, Malaysia and the United Arab Emirates, particularly Dubai. Aeris is in advanced
negotiations with additional partners in Vietnam, the Philippines, Hong Kong, New Zealand and Australia.
In each above mentioned territories, Aeris is developing wholesale and distribution relationships, with partners who have a
strong established customer base with sales and technical support capabilities. The Company believes that this is a scalable
model that will continue to provide attractive margins by minimising the downstream cost of end customer acquisition,
retention and servicing. In parallel, Aeris is continuing to build a base of direct global customers where the Company will be
managing strategic supply agreements.
Across Aeris’ key business units of hygiene consumables, corrosion resistant coatings and the Smart HUB Ecosystem, the
Company has, on top of its base business, a growing pipeline with over $15 million worth of proposals. Each division’s growth
is being driven by a business environment that is now prioritising environmental credentials, efficiency, safety, long term
protection and an understanding of the total cost of ownership.
AERIS ENVIRONMENTAL LTD P A G E 6
D I R E C T O R S ’ R E P O R T
The Directors of Aeris Environmental Ltd submit herewith the Annual Financial Report for the financial year ended
30 June 2017. In order to comply with the provisions of the Corporations Act 2001 , the Directors Report is as follows:
DIRECTORS
The names and details of the Directors and Company Secretary of the Company during or since the end of the financial year are:
MAURIE STANG
BERNARD STANG
Non-Executive Chairman
Non-Executive Director
Mr M Stang is a director of the Regional Health Care Group of
companies and of Novapharm Research. He has over 30 years
of experience building and managing successful companies
in the Australian healthcare market, and extensive networks
within the life-sciences and pharmaceutical sectors, both in
Australia and internationally. Since co-founding the Regional
Health Care Group, Mr M Stang has been instrumental in
building it into one of the region’s leading healthcare product
suppliers, with a key joint venture in the Australasian dental
market, and successful operating businesses across a range
of medical, pharmaceutical and consumer healthcare sectors.
Director since 2002 – appointed Chairman in 2002.
Directorship of other listed companies held in the last
three years:
• Non-executive Chairman of Nanosonics Limited
(ASX:NAN) since November 2000
• Non-Executive Deputy Chairman of Vectus
Biosystems Limited (ASX:VBS) since December 2005.
Mr B Stang (B.Arch) is a Co-Founder and Director of the
Regional Health Care Group of companies. He serves as the
Chief Executive Officer of Stangcorp Pty Ltd, Stoneville Ltd
and Brunswick Property Pty Ltd, which are key property
entities in the Stang Group. Mr B Stang manages a broad
portfolio of investments in the private and listed sectors,
and has enjoyed over 40 years of operational leadership in
successful healthcare businesses. He serves as a Director of
Novapharm Research. Mr B Stang is a Director of Weizmann
Australia, which represents the Weizmann Institute of Science
in Australia, and the Institute has recently established the
Garvan-Weizmann Centre of Cellular Genomics in Sydney,
in joint venture with the Garvan Institute. He served as a
Non-Executive Director of Nanosonics Limited (ASX:NAN)
until 2007.
Director since 2002.
Directorship of other listed companies held in the last
three years:
• Non-Executive Director of Vectus Biosystems
Limited from December 2005 until October 2016.
STEVEN KRITZLER
Non-Executive Director
ALEX SAVA
Mr Kritzler (M.Sc from UNSW in the field of Polymer
Chemistry) holds a number of international patents. He is the
Technical Director of Novapharm Research. He has over
40 years of experience in commercial R&D in the areas of
pharmaceutical, medical, cosmetic and specialty industrial
products. Under Mr Kritzler’s technical direction, Novapharm
Research has become a world-leader in infection control
science.
Non-Executive Director
Dr Sava (M.Sc, in Chemical Engineering, PhD in Physical
Chemistry) spent seven years earlier in his career with the
Institute of Semiconductors in Ukraine and four years as a Vice
President of New York-based MicroMax Computer Intelligence
Inc. He holds over 100 international patents and has authored
Director since 2002
Directorship of other listed companies held in the last
three years: None.
ANNUAL REPORT 2017 P A G E 7
over 50 scientific articles. Dr Sava was a Founder and Board
member of Nanosonics Pty Ltd from 14 November 2000 until
prior to its listing on ASX on 15 May 2007 as Nanosonics
Limited. He also made a substantial contribution to the later
success of Nanosonics Limited and has undertaken business
development activity across many international markets.
Dr Sava has scientific, regulatory and commercial experience.
Director since 3 October 2016.
Directorship of other listed companies held in the last
three years: None
PETER BUSH
COMPANY SECRETARY
Mr Robert J Waring (BEc, CA, FCIS, FFin, FAICD) was
appointed to the position of Company Secretary in 2002.
He has over 40 years experience in financial and corporate
roles, including over 25 years in company secretarial roles for
ASX listed companies and over 20 years as a Director of ASX
listed companies. Mr Waring has over 30 years experience
in industry and prior to that, spent nine years with an
international firm of chartered accountants. He is a Director
of Oakhill Hamilton Pty Ltd, which provides secretarial and
corporate advisory services to a range of listed and unlisted
companies. Mr Waring is also presently the Company
Secretary of ASX-listed companies Nanosonics Limited
(ASX:NAN), Vectus Biosystems Limited (ASX:VBS), Brain
Resource Limited (ASX:BRC) and Xref Limited (ASX:XF1).
Chief Executive Officer, Alternate Director
for M and B Stang and Chief Financial
Officer
Share Registry
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
GPO Box 2975, Melbourne
VIC 3001
Telephone: +61 3 9415 4000
Web: www.computershare.com
Mr Bush (B.Com, CA) is the Chief Financial Officer of the
Regional Health Care Group of companies (one of the
region’s leading diversified healthcare product suppliers,
with successful businesses across a range of medical,
pharmaceutical, consumer healthcare, and research and
development sectors) and of GryphonCapital (an independent
merchant bank that facilitates the financing and development
of emerging healthcare-related entities). He began his
career working for five years at BDO, a global accounting
and consulting firm, and has since spent a number of years
working in industry. Mr Bush holds a number of private
directorships and board positions.
Alternate Director since 2011.
Directorship of other listed companies held in the last
three years:
• Non-Executive Director of Vectus Biosystems
Limited (ASX:VBS) since July 2015.
AERIS ENVIRONMENTAL LTD
P A G E 8
D I R E C T O R S ’ R E P O R T
DIRECTORS’ MEETINGS
The following tables set out the number of Directors’ meetings and Committee meetings held during the financial year and the
number of meetings attended by each Director (while they were a Director).
Board of Directors
Audit Committee
Corporate Governance
Remuneration and
Meetings
Meetings
Committee Meetings
Nomination Committee
Number of meetings held
Number of meetings attended
Maurie Stang
Steven Kritzler
Bernard Stang
Alex Sava *
7
7
6
6
4
4
4
-
4
-
1
1
-
1
-
Meetings
-
-
-
-
-
In addition to the above meetings the Board and senior executives conduct formal management meetings.
* Alex Sava was appointed a Director on 3 October 2016 and attended all Board meetings held while he was a Director
COMMITTEE MEMBERSHIP
As at the date of this report, the Company had an Audit Committee, a Corporate Governance Committee and a Remuneration and
Nomination Committee of the Board of Directors. Members acting on the Committees of the Board during the year were:
Audit Committee
Bernard Stang (Chairman)
Maurie Stang
Corporate Governance Committee
Maurie Stang (Chairman)
Bernard Stang
Remuneration & Nomination Committee
Maurie Stang (Chairman)
Bernard Stang
PRINCIPAL ACTIVITIES
The principal activities of the consolidated entity during the course of the financial year were:
• Research, development, commercialisation of proprietary technologies and global distribution of the AerisGuard range
of products;
• Provision of HVAC/R Hygiene and Remediation Technology; and
• Provision of Energy Efficiency services.
There is no significant change in the nature of activities performed by the Company during the year.
ANNUAL REPORT 2017
P A G E 9
REVIEW OF OPERATIONS
The results of the operations of the consolidated entity during the financial year were as follows:
Income
Expenses
Loss after income tax
2017 ($)
2,882,259
(6,634,524)
(3,752,265)
2016 ($)
1,961,488
(4,027,419)
(2,065,931)
For a comprehensive review of the Company’s operational performance please refer to the attached Review of
Operations Report.
AERIS ENVIRONMENTAL LTD P A G E 1 0
D I R E C T O R S ’ R E P O R T
DIVIDENDS
ENVIRONMENTAL REGULATIONS
The Directors do not recommend the payment of a dividend
in respect of the year ended 30 June 2017 (2016: Nil). No
dividends have been paid or declared since the start of the
financial year.
The economic entity is not subject to any significant
environmental Commonwealth or State regulation in respect
of its operating activities.
SIGNIFICANT CHANGES IN STATE
OF AFFAIRS
There have been no significant changes in the state of affairs
of the consolidated entity.
SIGNIFICANT EVENTS AFTER THE
BALANCE DATE
In the opinion of the Directors, no matters or circumstances
have arisen since the end of the financial year that have
significantly affected, or may significantly affect, the
operations of the consolidated entity, the results of those
operations or the state of affairs of the consolidated entity
in future financial years, other than the provision by three of
the Company’s Non-Executive Directors of financial support
to the Group through Loan Facility Agreements for a total
amount of up to $1,500,000, for up to 24 months from the
date of the signed Annual Financial Report.
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS
Disclosure of information other than that disclosed
elsewhere in this report regarding likely developments in
the operations of the consolidated entity in future financial
years and the expected results of those operations is likely
to result in unreasonable prejudice to the consolidated
entity. Accordingly, this information has not been disclosed
in this report.
INDEMNIFICATION OF OFFICERS
AND AUDITORS
Indemnification
The Company has Deeds of Access and Indemnity with each
of the Directors, by which the Company indemnifies each
Director in relation to any liability incurred as a result of
being a Director of the Company except where there is lack
of good faith.
During or since the financial year, the Company has not
indemnified or agreed to indemnify the auditor of the Company
or any related entity against a liability incurred by the auditor.
Insurance premiums
During the financial year, the Company paid a premium in
respect of a contract to insure its Directors and executives
against a liability to the extent permitted by the Corporations
Act 2001. The contract of insurance prohibits disclosure of
the nature of liability and the amount of the premium.
During the financial year, the Company has not paid a premium
in respect of a contract to insure the Auditor of the Company.
PROCEEDINGS ON BEHALF OF
THE COMPANY
No person has applied for leave of Court to bring proceedings
on behalf of the Company or 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.
The Company was not a party to any such proceedings during
the year.
ANNUAL REPORT 2017 P A G E 1 1
DIRECTORS’ INTERESTS
NON-AUDIT SERVICES
Equity Holdings
Ordinary shares
Options over
ordinary shares
Maurie Stang
20,621,822
Bernard Stang
17,003,664
Steven Kritzler
8,331,609
-
-
-
During the year UHY Haines Norton, the Company’s
auditor, performed certain other services in addition to
their statutory duties.
The Board has considered the non-audit services provided
during the year by the auditor and in accordance with written
advice provided by resolution of the audit committee, is
satisfied that the provision of those non-audit services
during the year by the auditor is compatible with, and did not
compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
Alex Sava
68,025
100,000
• All non-audit services were subject to the corporate
Peter Bush
750,000
-
Options granted to Directors and Officers
of the company
During or since the end of the 2016-17 financial year, the
Company granted options for no consideration over unissued
ordinary shares in Aeris Environmental Ltd to the following
Directors and Officers (2016: NIL).
Alex Sava (Non-Executive Director): 100,000 options
Robert Waring (Company Secretary): 50,000 options
governance procedures adopted by the Company and have
been reviewed by the audit committee to ensure they do not
impact the integrity and objectivity of the auditor.
• None of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the
Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work,
acting in a management or decision-making capacity for
the company, acting as advocate for the company or jointly
sharing economic risks and rewards.
PARTICULARS OF OPTIONS GRANTED
OVER UNISSUED SHARES:
2017
2016
Number of options on issue over
1,845,000
1,270,000
unissued ordinary shares
Shares issued in the period as the
900,000
-
result of the exercise of options
Options expired during the period
20,000
200,000
Options granted during the period
1,495,000
-
Full details of options on issue are shown in Note 18.
AERIS ENVIRONMENTAL LTD P A G E 1 2
D I R E C T O R S ’ R E P O R T
OFFICERS OF THE COMPANY WHO
ARE FORMER AUDIT PARTNERS OF
UHY HAINES NORTON
There are no officers of the company who are former audit
partners of UHY Haines Norton
AUDITORS
UHY Haines Norton continues in office in accordance with
section 327 of the Corporations Act 2001.
AUDITORS’ INDEPENDENCE
DECLARATION
The Auditors’ Declaration of Independence for the year ended
30 June 2017 is attached to this Directors’ Report on page 20.
CORPORATE GOVERNANCE
R E M U N E R A T I O N
R E P O R T ( A U D I T E D )
KEY MANAGEMENT PERSONNEL (KMP)
The key management personnel of the Company comprise the
Directors, Chief Executive Officer and Company Secretary only
as follows:
Non-Executive Directors
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava (appointed on 3 October 2016)
Aeris Environmental Ltd’s Corporate Governance Statement
and ASX Appendix 4G are released to ASX on the same day the
Annual Report is released.
Executive
Peter Bush (Chief Executive Officer and Alternate Director)
The Company’s Corporate Governance Statement, and its
Corporate Governance Compliance Manual, can be all found
on the Company’s website at: http://www.aeris.com.au/
investor-center/
Company Secretary
Robert Waring
Remuneration policies
Details of Aeris’ remuneration policies and practices, together
with details of Directors’ and Executives’ Remuneration, are
as follows:
(a) Overview of remuneration structure
The objective of the Company’s executive reward framework
is to ensure reward for performance is competitive and
appropriate for the results delivered. Processes have been
established to ensure that the levels of compensation and
remuneration are sufficient and reasonable, and explicitly
linked to the achievement of personal and corporate
objectives. The short and long-term incentive plans are
specifically aligned to shareholder interests.
Aeris’ Remuneration and Nomination Committee advises
the Board on remuneration policies and practices generally,
ANNUAL REPORT 2017 P A G E 1 3
D I R E C T O R S ’ R E P O R T
R E M U N E R A T I O N R E P O R T ( A U D I T E D )
and makes specific recommendations on remuneration
packages and other terms of employment for staff, including
Directors, the Company Secretary and Senior Managers
of the Company. The Committee has access to the advice
of independent remuneration consultants to ensure the
remuneration and incentive schemes are consistent with its
philosophy as well as current market practices
(b) Non-executive directors
During the 2017 financial year, 100,000 share options were
issued to Alex Sava, Non-Executive Director, with an
exercise price of $0.42 and having a vesting period of
three years. Payments to Non-Executive Directors are
reviewed annually.
(c) Executives
The objective of Aeris’ executive reward system is to
ensure that remuneration for performance is competitive
and appropriate for the results delivered. Executive pay
structures include a base salary and superannuation.
In addition, executives and senior managers can participate
in the Employee Share Option Plan.
(d) Short-term incentive (STI) scheme
During the financial year ended 30 June 2017, STIs were
paid to Peter Bush, Chief Executive Officer, in cash for the
achievements against annual performance targets set by the
Board at the beginning of the performance period.
The performance objectives of Aeris are currently directed
to achieving financial targets (sales) complemented by
achievement of individual performance goals. All targets
are set having regard to prior year performance, market
conditions and the Board-approved budgets. Specific targets
are not provided in detail due to their commercial sensitivity.
The STI arrangement is reviewed annually by the Board.
(e) Long-term incentives (LTI)
The LTI provide an annual opportunity for selected
executives to receive awards in cash and equity. The equity
portion, being performance rights, vest over three years and
is intended to align a significant portion of an executive’s
overall remuneration to shareholder value over a longer
term. Equity grants are subject to performance conditions
(revenue and / or earnings per share) and are tested against
the performance hurdles set at the end of three financial
years. If performance hurdles are not met at the vesting
date, the rights and options lapse. In addition, performance
rights and options will only vest if the executive KMP
member remains in continuous employment with Aeris in
their current or equivalent position from the date of grant to
the respective vesting date of each grant.
(f) Share option based compensation
In February 2005, Aeris established an Employee Share Option
Plan (ESOP). The plan was approved by shareholders at the
Annual General Meeting held on 25 November 2004. The
plan was re-approved by shareholders at the Annual General
Meeting held on 27 November 2014.
The terms of the Employee Share Option Plan provides for the
following conditions :
(i) Vesting
33.33% vest on the first anniversary of grant of options
33.33% vest on the second anniversary of grant of options
33.34% vest on the third anniversary of grant of options
(ii) The contractual life of the options issued ranges from
three to five years.
(iii) The exercise price determined in accordance with the
Rules of the plan is based on the weighted average price
of the Company’s shares for the 20 trading days prior to
the offer.
(iv) Each option is convertible to one ordinary share.
(v) All options expire on the earlier of their expiry date
or 90 days after voluntary termination of the
participant’s employment.
(vi) There are no voting or dividend rights attached to the
options. There are no voting rights attached to the
unissued ordinary shares. Voting rights will be attached to
the ordinary shares which will be issued when the options
have been exercised.
(vii) The options issued are on an equity settled basis.
There are no cash settlement alternatives.
EQUITY HOLDINGS TRANSACTIONS
The movement during the reporting period in the number
of ordinary shares in Aeris Environmental Ltd held directly,
indirectly, or beneficially by each specified Director and
specified executive including their personally-related entities,
are on the following page.
AERIS ENVIRONMENTAL LTD
P A G E 1 4
D I R E C T O R S ’ R E P O R T
R E M U N E R A T I O N R E P O R T ( A U D I T E D )
2017
Shares
Specified directors
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava (appointed on 3 October 2016)
Specified executives
Peter Bush
Robert Waring
Number held
Acquired during year
Sold during year
Issued on exercise
Number held
30 June 2016
of options
30 June 2017
19,816,267
15,928,109
8,331,609
58,025
-
103,000
44,237,010
805,555
1,075,555
-
10,000
-
70,000
1,961,110
-
-
-
-
-
-
-
-
-
-
-
20,621,822
17,003,664
8,331,609
68,025
750,000
-
750,000
173,000
750,000
46,948,120
Options
Number held
Granted during year
Lapsed
Exercised
Number held
30 June 2016
during year
during year
30 June 2017
Specified directors
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava (appointed on 3 October 2016)
Specified executives
Peter Bush
Robert Waring
2016
Shares
Specified directors
Maurie Stang
Bernard Stang
Steven Kritzler
-
-
-
-
-
750,000
-
750,000
-
-
-
-
100,000
-
50,000
150,000
-
-
-
-
-
-
-
-
-
-
-
-
-
(750,000)
-
(750,000)
-
-
-
-
100,000
-
50,000
150,000
Number held
Acquired during year
Sold during year
Issued on exercise
Number held
30 June 2015
18,816,267
14,928,109
7,331,609
1,000,000
1,000,000
1,000,000
-
-
-
Alex Sava (appointed on 3 October 2016)
60,000
31,025
(33,000)
Specified executives
Peter Bush
Robert Waring
-
103,000
41,238,985
-
-
-
-
3,031,025
(33,000)
of options
30 June 2016
-
-
-
-
-
-
-
19,816,267
15,928,109
8,331,609
58,025
-
103,000
44,237,010
Options
Number held
Granted during year
Lapsed
Exercised
Number held
30 June 2015
during year
during year
30 June 2016
Specified directors
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava (appointed on 3 October 2016)
Specified executives
Peter Bush
Robert Waring
-
-
-
-
750,000
-
750,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750,000
-
750,000
ANNUAL REPORT 2017
P A G E 1 5
TRANSACTIONS WITH DIRECTORS AND DIRECTOR RELATED ENTITIES
A number of specified directors, or their personally-related entities, hold positions in other entities that result in them having
control or significant influence over the financial or operating policies of those entities.
A number of these entities transacted with the Company in the reporting 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 arms length basis.
Details of these transactions are shown below:
Regional Healthcare Group Pty Ltd
The company and its controlled entities paid for services provided by Regional Healthcare Group Pty Ltd.
Office and administration expenses
Rent
Distribution expenses
Corporate services
Mr M Stang and Mr B Stang are Directors and shareholders of Regional Healthcare Group Pty Ltd.
Novapharm Research (Australia) Pty Ltd
The company and its controlled entities paid for services provided by Novapharm Research (Australia) Pty Ltd.
Research and Development
Patent and other expenses
Mr M Stang, S Kritzler and B Stang are Directors and shareholders of Novapharm Research (Australia) Pty Ltd.
Ramlist Pty Ltd
The Company and its controlled entities paid rent and utility outgoings to Ramlist Pty Ltd.
Mr M Stang and Mr B Stang are Directors and shareholders of Ramlist Pty Ltd.
Ensol Systems Pty Ltd
The Company and its controlled entities paid for marketing and other operational services to Ensol Systems Pty Ltd
Mr M Stang is shareholder of Ensol Systems Pty Ltd.
Bright Accountants
The Company and its controlled entities paid for accounting services to Bright Accountants
Mr P Bush is a related party to Bright Accountants
Loan from Directors (contributed equally by M Stang, B Stang and S Kritzler)
Interest on loans
Loan borrowings
Loan repaid
Mr M Stang, S Kritzler and B Stang are Non-Executive Directors and shareholders of the Company.
Outstanding balances payable from purchases of services
Regional Healthcare Group Pty Ltd
Novapharm Research (Australia) Pty Ltd
Ramlist Pty Ltd
Bright Accountants
Ensol Systems
Outstanding balances at year end are unsecured, interest free and settlement occurs in cash
Outstanding loan balances
Directors' loan
Interest is charged on these loans at 5.45% per annum (ATO benchmark rates)
2017 ($)
2016 ($)
246,489
56,758
43,570
81,033
140,016
36,775
29,295
69,602
304,666
224,478
140,231
116,166
39,853
13,625
86,500
11,907
52,770
-
27,630
-
94,961
-
1,015,000
1,500,000
26,487
119,538
2,989
4,500
84,165
746
(6,010)
289
-
-
-
1,015,000
AERIS ENVIRONMENTAL LTD
P A G E 1 6
D I R E C T O R S ’ R E P O R T
R E M U N E R A T I O N R E P O R T ( A U D I T E D )
DETAILS OF DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION FOR THE
YEAR ENDED 30 JUNE 2017
Short term benefits
Post employment
benefits
Salary and
Director's Fees
STI Cash
bonus
Non-monetary
benefits
Superannuation
Other long-
term benefits
Equity based benefits
Shares
Options
(Note (ii))
Total
Performance
Related
$
$
$
$
$
$
$
$
%
Non-Executive
Directors
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava
(appointed 3 October 2016)
Total Non-Executive
Directors
Executive Directors
Total Directors
Executives (Note (i))
Peter Bush
Robert Waring
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
211,711
65,043
71,994
-
283,705
65,043
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,292
-
26,292
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,705
4,705
0.0%
0.0%
0.0%
0.0%
4,705
4,705
-
-
0.0%
4,705
4,705
-
303,046
2,357
7,062
74,351
382,102
21.5%
0.0%
ANNUAL REPORT 2017 P A G E 1 7
DETAILS OF DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION FOR THE
YEAR ENDED 30 JUNE 2016
Short term benefits
Post employment
benefits
Salary and
Director's Fees
STI Cash
bonus
Non-monetary
benefits
Superannuation
Other long-
term benefits
Equity based benefits
Shares
Options
(Note (ii))
Total
Performance
Related
$
$
$
$
$
$
$
$
%
Non-Executive
Directors
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava
(appointed 3 October 2016)
Total Non-Executive
Directors
Executive Directors
Total Directors
Executives (Note (i))
Peter Bush
Robert Waring
Total
-
-
-
-
-
-
-
195,506
53,164
248,670
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,573
-
18,573
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
925
215,004
-
53,164
925
268,168
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Notes to the tables of details of directors' and executive officers' remuneration.
(i)
“Executive Officers” are officers who are or were involved in, concerned in, or who take part in, the management of the
affairs of Aeris and/or related bodies corporate.
(ii) The fair value of the options is calculated at the date of grant using a Black-Scholes model and allocated to each reporting
period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the
options allocated to this reporting period. In valuing the options, market conditions have been taken into account in both
the current and prior periods. Comparative information was not restated as market conditions were already included in
the valuation.
The following factors and assumptions were used in determining the fair value of options on grant date.
Grant Date
Expiry Date
Fair value at grant
date
Exercise price
Price of shares on
grant date
Estimated volatility
Risk free interest
rate
17-Nov-11
17-Nov-16
08-Jan-15
31-Jul-16
23-Dec-16
14-Oct-21
23-Dec-16
23-Oct-21
$0.0869
$0.0031
$0.2823
$0.2828
$0.17
$0.31
$0.42
$0.42
$0.21
$0.28
$0.37
$0.37
20.5%
5.7%
108.3%
108.3%
5.00%
3.00%
2.34%
2.34%
AERIS ENVIRONMENTAL LTD P A G E 1 8
D I R E C T O R S ’ R E P O R T
R E M U N E R A T I O N R E P O R T ( A U D I T E D )
EMPLOYMENT CONTRACTS
Chief Executive Officer (CEO) :
The following sets out the key terms of the employment for the CEO, Peter Bush.
Contract term:
Continuous employment until notice is given by either party
Fixed remuneration:
$247,375
This is reviewed annually.
Notice period:
To terminate the employment, Mr Bush is required to provide Aeris with 3 months written notice.
Aeris must provide 3 months written notice.
Resignation or termination:
On resignation, unless the Board determines otherwise:
All unvested short term or long term benefits are forfeited.
All vested but unexercised benefits are forfeited after 90 days following cessation
of employment.
Statutory entitlements:
Annual leave applies in all cases of separation. Long Service applies unless service is under
10 years and he is dismissed for misconduct.
Termination for serious misconduct:
Aeris may immediately terminate employment at any time in case of serious misconduct,
and Mr Bush will only be entitled to payment of fixed remuneration until termination date.
Such termination will result in all unvested benefits being forfeited. Treatment of any vested
but unexercised benefits will be at the discretion of the Board.
Post-Termination Restraint of Trade:
For a period of 6 months or, if that period is unenforceable, 3 months after termination of
employment, Mr Bush must not in the area of Australia or, if that area is unenforceable,
New South Wales:
i. solicit, canvass, approach or accept any approach from any person who was at any time during his
last 12 months with the Company a client of the Company in that part or parts of the business carried
on by the Company in which he was employed with a view to obtaining the custom of that person in a
business that is the same or similar to the business conducted by the Company; or
ii. interfere with the relationship between the Company and its customers, employees or suppliers; or
iii. induce or assist in the inducement of any employee of the Company to leave their employment.
There are no other contracts to which a Director is a party or under which a Director is entitled to a benefit other than as
disclosed above and in note 26 to the financial statements.
ANNUAL REPORT 2017 P A G E 1 9
LINK BETWEEN REMUNERATION AND PERFORMANCE AND STATUTORY
PERFORMANCE INDICATORS
The table below shows measures of the group’s financial performance over the last five years as required by the
Corporations Act 2001. However, these are not necessarily consistent with the measures used in determining the variable
amounts of remuneration to be awarded to KMPs. As a consequence, there may not always be a direct correlation between
the statutory key performance measures and the variable remuneration awarded.
Loss for the year attributable to owners of Aeris
Environmental Ltd
Basic loss per share (cents per share)
Dividend payments
Increase/(decrease) in share price (%)
Total KMP remuneration as percentage of loss for the year (%)
2017
2016
2015
2014
2013
(3,747,555)
(2,062,727)
(2,016,912)
(1,067,893)
(1,132,159)
(2.40)
-
(33.33%)
(10.20%)
(1.35)
-
(6.67%)
(13.00%)
(1.55)
-
309.09%
(15.01%)
(0.91)
-
(31.25%)
(3.63%)
(0.99)
-
(5.88%)
(9.65%)
The Group’s sales revenue in the 2017 financial year recorded an increase by 99% and gross profit by 66%.
Company is also in discussions with management and remuneration consultants to structure and align KMP remuneration
to strategic business objectives with an aim of creation of shareholder wealth.
SHARE OPTIONS
150,000 options to take up ordinary shares in Aeris Environmental Ltd issued to key management personnel remain
unexercised at 30 June 2017 (2016: 750,000 options).
Following options were issued to key management personnel during the year:
Alex Sava (Non-Executive Director)
Robert Waring (Company Secretary)
2017
100,000
50,000
2016
-
-
Number of Options
There were no options issued to key management personnel which expired or were forfeited during the years 2017 and 2016.
Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body
corporate or in the interest of any other registered scheme.
Signed in accordance with a resolution of the directors made pursuant to s. 298(2) of the Corporations Act 2001.
On behalf of the Directors
M STANG
Director
Sydney, 29 September 2017
AERIS ENVIRONMENTAL LTD P A G E 2 0
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
ANNUAL REPORT 2017 P A G E 2 1
AERIS ENVIRONMENTAL LTD P A G E 2 2
C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R
L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Continuing Operations
Revenue
Cost of sales
Gross profit
Other revenue
Administration expenses
Depreciation and amortisation expense
Distribution expense
Employee benefits expense
Financial expenses
Impairment of receivables
Research and development expense
Occupancy expenses
Sales, Marketing and Travel expenses
Loss before income tax from continuing operations
Income tax benefit
Net loss for the year
Other Comprehensive Income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences
Total comprehensive loss for the year, net of tax
Loss for the year attributable to:
Owners of Aeris Environmental Ltd
Non-controlling interest
Total comprehensive loss for the year attributable to:
Owners of Aeris Environmental Ltd
Non-controlling interest
Earnings per share
Basic loss per share (cents per share)
Loss from continuing operations
Diluted loss per share (cents per share)
Loss from continuing operations
Note
2017
$
2016
$
4
4
5
5
5
5
5
5
2,746,816
1,378,086
(1,038,362)
(350,272)
1,708,454
1,027,814
135,443
583,402
(1,070,426)
(820,233)
(58,294)
(184,451)
(33,788)
(85,282)
(2,238,206)
(1,669,153)
(37,848)
(674,624)
(97,788)
(30,957)
(508,725)
(449,688)
(248,173)
(225,982)
(1,000,416)
(687,469)
(4,177,265)
(2,489,126)
6a
425,000
423,195
(3,752,265)
(2,065,931)
21
21
7
30,688
(6,810)
(3,721,577)
(2,072,741)
(3,747,555)
(2,062,727)
(4,710)
(3,204)
(3,752,265)
(2,065,931)
(3,716,867)
(2,069,537)
(4,710)
(3,204)
(3,721,577)
(2,072,741)
(2.40)
(1.35)
(2.40)
(1.35)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2017 C O N S O L I D A T E D S T A T E M E N T
O F F I N A N C I A L P O S I T I O N
AS AT 30 JUNE 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Interest bearing liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Non-controlling interest
TOTAL EQUITY
P A G E 2 3
2017
$
2016
$
1,519,941
5,415,664
1,363,571
1,192,045
256,724
116,059
170,933
135,634
3,256,295
6,914,276
434,663
156,190
590,853
-
151,281
151,281
3,847,148
7,065,557
496,795
219,383
447,997
114,275
1,015,000
716,178
1,577,272
19,159
19,159
10,764
10,764
735,337
1,588,036
3,111,811
5,477,521
41,312,862
40,100,112
1,354,514
1,180,709
(39,560,112)
(35,812,557)
4,547
9,257
3,111,811
5,477,521
Note
9
10A
11
12
10B
13
14A
14B
15
16
17
19
20
21
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
AERIS ENVIRONMENTAL LTD
P A G E 2 4
C O N S O L I D A T E D S T A T E M E N T
O F C H A N G E S I N E Q U I T Y
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Balance at 1 July 2015
38,600,112
1,186,581
(33,749,830)
-
6,036,863
Equity
Reserves
$
$
Accumulated
Non-controlling
Total attributable to equity
losses
$
interest
holders of the entity
$
$
Loss for the year
Other comprehensive income / (loss)
Total comprehensive loss for the year
Non-controlling interest
Transactions with owners in their capacity as owners:
Shares issued during year
Share issue cost
Value of employee services under ESOP
Shares issued as consideration for business
combinations
Balance at 30 June 2016
Balance at 1 July 2016
Loss for the year
Other comprehensive income / (loss)
Total comprehensive loss for the year
Non-controlling interest shareholding
-
-
-
-
1,500,000
-
-
-
-
(2,062,727)
(3,204)
(6,810)
(6,810)
-
(2,062,727)
-
-
-
938
-
-
.
-
-
-
-
-
(3,204)
12,461
-
-
-
-
40,100,112
1,180,709
(35,812,557)
40,100,112
1,180,709
(35,812,557)
9,257
9,257
-
(3,747,555)
(4,710)
30,688
30,688
-
-
(3,747,555)
(4,710)
-
-
-
-
-
-
-
-
-
-
-
-
(2,065,931)
(6,810)
(2,072,741)
12,461
1,500,000
-
938
-
5,477,521
5,477,521
(3,752,265)
30,688
(3,721,577)
-
1,212,750
143,117
Transactions with owners in their capacity as owners:
Shares issued during year
1,212,750
Value of employee services under ESOP
-
143,117
Balance at 30 June 2017
41,312,862
1,354,514
(39,560,112)
4,547
3,111,811
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2017 C O N S O L I D A T E D S T A T E M E N T
O F C A S H F L O W S
P A G E 2 5
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
R&D tax offset rebate received
Interest and other income received
Interest paid
Note
2017
$
2016
$
1,810,167
819,277
(6,317,344)
(4,450,469)
351,960
71,235
135,443
583,402
(38,307)
(97,788)
Net cash used in operating activities
33 (b)
(4,058,081)
(3,074,345)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in term deposits
Purchase of property, plant and equipment
Net cash (used in) / provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shares issue
Loans repaid*
Net cash provided by financing activities
-
4,800,000
(65,080)
(158,755)
(65,080)
4,641,245
196,750
-
196,750
-
-
-
NET INCREASE IN CASH AND CASH EQUIVALENTS
(3,926,411)
1,566,900
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR
5,415,664
3,855,574
Effects of exchange rate changes on cash and cash equivalents
30,688
(6,810)
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
9A
1,519,941
5,415,664
*During the 2017 financial year Directors’ loan amounting to $1,015,000 was repaid by issuing 2,416,665 company’s ordinary shares.
During the 2016 financial year Directors’ loan amounting to $1,500,000 was repaid by issuing 3,000,000 company’s ordinary shares.
These transactions did not have any effect on the group’s cash flow.
The above consolidated statment of cash flows should be read in conjunction with the accompanying notes.
AERIS ENVIRONMENTAL LTD P A G E 2 6
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
NOTE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
Summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgments
Revenue
Expenses
Income tax
Loss per share attributable to the ordinary equity
-holders of the Company
Auditors’ remuneration
Cash and other financial assets
Current trade and other receivables
Inventories
Other current assets
Non-current assets
Current trade and other payables and provisions
Current interest bearing payables
Non current provisions
Contributed equity
Options
Reserves
Accumulated losses
Non-controlling interests
Particulars relating to controlled entities
Commitments for expenditure
Key management personnel disclosures
Share based payments
Related party disclosures
Financial instruments disclosures
Contingent liabilities
Additional company information
Subsequent events
Operating Segments
Information relating to Parent Entity
Notes to cash flow statements
ANNUAL REPORT 2017
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T M E N T S
P A G E 2 7
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Corporate information
The financial report of Aeris Environmental Ltd (the Company) for the
year ended 30 June 2017 was authorised for issue in accordance with
a resolution of the Directors on 27 September 2017.
Aeris Environmental Ltd (the parent) is a company limited by shares
incorporated in Australia whose shares are publicly listed on the
relevant and reliable information about transactions, events and
conditions. Compliance with Australian Accounting Standards
ensures that the financial statements and notes also comply with
International Financial Reporting Standards.
New, revised or amending Accounting
Standards and Interpretations adopted
Australian Stock Exchange (ASX code: AEI).
The consolidated entity has adopted all of the new, revised or
The nature of the operations and principal activities of the Group are
Australian Accounting Standards Board (‘AASB’) that are mandatory
described in the Directors’ Report.
for the current reporting period. Any new, revised or amending
Accounting Standards or Interpretations that are not yet mandatory
Basis of preparation
have not been early adopted.
amending Accounting Standards and Interpretations issued by the
This financial report is a general purpose financial report that
Any significant impact on the accounting policies of the consolidated
has been prepared in accordance with Australian Accounting
entity from the adoption of these Accounting Standards and
Standards, Australian Accounting Interpretations, other authoritative
Interpretations are disclosed below.
pronouncements of the Australian Accounting Standards Board and
the Corporations Act 2001.
• AASB 2014-4 - Amendments to Australian Accounting Standards
- Clarification of Acceptable Methods of Depreciation and
The financial report has been prepared on an accruals basis and
Amortisation.
is based on historical costs, modified where applicable, by the
measurement at fair value of selected non-current assets, financial
• AASB 2014-9 - Amendments to Australian Accounting Standards
assets and financial liabilities.
– Equity Method in Separate Financial Statements.
Going Concern
• AASB 2015-3 - Amendments to Australian Accounting Standards
arising from the Withdrawal of AASB 1031 Materiality. The Standard
The Group has incurred an operating loss of $3,752,265 for
completes the AASB’s project to remove Australian guidance on
the year ended 30 June 2017 and has a net asset balance of
materiality from Australian Accounting Standards.
$3,111,811 as at 30 June 2017. Thecash balance as at 30 June 2017
aggregated to $1,519,941.
• AASB 2015-1 - Amendments to Australian Accounting Standards
– Annual Improvements to Australian Accounting Standards 2012-
Subsequent to the end of the financial year, three of the
Company’s Non-Executive Directors have provided financial
2014 Cycle, which include:
support to the Group through Loan Facility Agreements for a total
AASB 5 – Non-current Assets Held for Sale
amount of up to $1,500,000, for up to 24 months from the date of
and Discontinued Operations
the signed Annual Financial Report. In addition, implementation
of product marketing measures are expected to improve the cash
AASB 7 – Financial Instruments: Disclosure
burn rate significantly.
As a consequence of the above, the Directors are of the opinion
that the Group will have adequate resources to continue to be
AASB 134 – Interim Financial Reporting
able to meet its obligations as and when they fall due.
AASB 119 – Employee Benefits
For this reason they continue to adopt the going concern basis
• AASB 2015-2 - Amendments to Australian Accounting Standards
in preparing the Annual Financial Report.
– Disclosure Initiative: Amendments to AASB 101
Statement of Compliance
The adoption of the above standards did not have any material impact
Australian Accounting Standards set out accounting policies that the
AASB has concluded would result in a financial report containing
on the group.
AERIS ENVIRONMENTAL LTD P A G E 2 8
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies
iii. Cash and cash equivalents
Accounting policies are selected and applied in a manner
which ensures that the resultant financial information
satisfies the concepts of relevance and reliability, thereby
ensuring that the substance of the underlying transactions
and other events are reported.
Cash and cash equivalents comprise cash on hand, cash in
banks, investments in money market instruments and short-
term deposits with a maturity of three months or less, net of
outstanding bank overdrafts.
iv. Comparative amounts
The following significant accounting policies have been adopted
in the preparation and presentation of the financial report and
have been consistently applied unless otherwise stated.
Where necessary, comparative amounts have been changed
to reflect changes in disclosures in the current year.
i. Business Combinations
v. Depreciation
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.
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
transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the
fair value of the identifiable net assets acquired, being a
bargain purchase to the acquirer, the difference is recognised
as a gain directly in profit or loss by the acquirer on the
acquisition-date, but only after a reassessment of the
identification and measurement of the net assets acquired,
the non-controlling interest in the acquiree, if any, the
consideration transferred and the acquirer’s previously held
equity interest in the acquirer.
ii. Borrowing costs
All assets have limited useful lives and are depreciated/
amortised using the straight line method over their estimated
useful lives, taking into account residual values. Depreciation
and amortisation rates and methods are reviewed annually for
appropriateness. Depreciation and amortisation are expensed.
Depreciation and amortisation are calculated on a straight
line basis so as to write off the net cost or other revalued
amount of each asset over its expected useful life.
The following estimated useful lives are used in the
calculation of depreciation.
- Computer equipment
- Computer software
- Field equipment
- Office furniture
- Plant and equipment
- Leasehold improvements
- Field equipment under finance lease
2-3 years
3 years
2-3 years
5 years
2-3 years
6 years
2-3 years
vi. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the company, excluding any
costs of servicing equity other than ordinary shares, by the
weighted average number of ordinary shares outstanding
during the year, adjusted for bonus elements in ordinary
shares issued during the year.
Borrowing costs include interest or finance charges in
respect of finance leases. Interest payments in respect of
financial instruments classified as liabilities are included in
borrowing costs. Borrowing costs are expensed as incurred.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
ANNUAL REPORT 2017
P A G E 2 9
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares
and the weighted average number of shares assumed to
have been issued for no consideration in relation to dilutive
potential ordinary shares.
vii. Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected to be
settled within 12 months of the reporting date are recognised
in current liabilities in respect of employees’ services up to the
reporting date and are measured at the amounts expected to
be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be settled within 12 months of the reporting date
are recognised in non-current liabilities, provided there is
an unconditional right to defer settlement of the liability. The
liability is measured as the present value of expected future
payments to be made in respect of services provided by
employees up to the reporting date using the projected unit
credit method. Consideration is given to expected future wage
and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted
using market yields at the reporting date on national
government bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash
outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans
are expensed in the period in which they are incurred.
Share-based payment
Share-based compensation benefits are provided to employees
via the Aeris Environmental Ltd Employee Option Plan.
Information relating to these schemes is set out in Note 25.
The fair value of options granted under the Employee Option
Plan is recognised as an employee benefit expenses with a
corresponding increase in equity. The fair value is measured
at grant date and recognised over the period during which the
employees become unconditionally entitled to the options.
The fair value at grant date is independently determined
using a Black-Scholes option pricing model. At each balance
sheet date, the entity revises its estimate of the number
of options that are expected to become exercisable. The
employee benefit expense recognised each period takes into
account the most recent estimate. The impact of the revision
to original estimates, if any, is recognised in the income
statement with a corresponding adjustment to equity.
viii. Financial Assets
Financial assets are initially measured at fair value.
Transaction costs are included as part of the initial
measurement, except for financial assets at fair value
through profit or loss. They are subsequently measured
at either amortised cost or fair value depending on their
classification. Classification is determined based on the
purpose of the acquisition and subsequent reclassification to
other categories is restricted.
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred
substantially all the risks and rewards of ownership.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are either:
i) held for trading, where they are acquired for the purpose
of selling in the short-term with an intention of making a
profit; or ii) designated as such upon initial recognition,
where they are managed on a fair value basis or to eliminate
or significantly reduce an accounting mismatch. Except
for effective hedging instruments, derivatives are also
categorised as fair value through profit or loss. Fair value
movements are recognised in profit or loss.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative
financial assets, principally equity securities, that are
either designated as available-for-sale or not classified
as any other category. After initial recognition, fair value
movements are recognised in other comprehensive income
through the available-for-sale reserve in equity. Cumulative
gain or loss previously reported in the available-for-sale
reserve is recognised in profit or loss when the asset is
derecognised or impaired.
AERIS ENVIRONMENTAL LTD
P A G E 3 0
N O T E S T O T H E C O N S O L I D A T E D
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1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ix. Financial Instruments issued by the company
Debt and Equity Instruments
Debt and equity instruments are classified as either
liabilities or as equity in accordance with the substance of
the contractual agreement.
Interest
Interest is classified as an expense consistent with the
balance sheet classification of the related debt or equity
instruments.
x. Financial liabilities
Group companies
The results and financial positions of all the Group
entities that have a functional currency different from the
presentation currency are translated into the presentation
currency as follows:
• Assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
Income and expenses for each income statement are
translated at average exchange rates; and
•
• All resulting exchange differences are recognised as a
separate component of equity.
The Group classifies its financial liabilities as measured at
amortised cost. The Group does not use derivative financial
instruments in economic hedges of currency or interest
rate risk.
These financial liabilities include the following items:
Trade payables and other short-term monetary
liabilities, which are initially recognised at fair value
and subsequently carried at amortised cost using the
effective interest method.
Lease liabilities are initially recognised at fair value net of
any transaction costs directly attributable to the issue of the
instrument and subsequently carried at amortised cost using
the effective interest method.
xi. Foreign currency
Foreign currency transactions
All foreign currency transactions during the financial year are
brought to account using the exchange rate in effect at the
date of the transaction. Foreign currency monetary items at
reporting date are translated at the exchange rate existing at
reporting date. Non-monetary assets and liabilities carried
at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair
value was determined.
On consolidation, exchange difference 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 the foreign
currency translation reserve. When a foreign operation is
sold or any borrowings forming part of the net investment are
repaid, a proportionate share of such exchange differences
are recognised in the statement of profit or loss and other
comprehensive income as part of the gain or loss on sale
where applicable.
xii. Functional and presentation currency
The functional and presentation currency of Aeris
Environmental Ltd and its Australian subsidiaries is
Australian dollars (A$). Overseas subsidiaries use the
currency of the primary economic environment in which
the entity operates, which is translated to the presentation
currency upon consolidation.
xiii. Goods and services tax
Revenues, 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 taxation authority. In these
circumstances, it is recognised as part of the cost of acquisition of
an asset or as part of an item of expense.
Receivables and payables are recognised inclusive of GST.
Exchange differences are recognised in statement of profit or
loss and other comprehensive income in the period in which
they arise.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a
ANNUAL REPORT 2017
P A G E 3 1
Deferred tax is accounted for using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: goodwill
not deductible for tax purposes, the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit, and
differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
Tax consolidation
The company and all its wholly-owned Australian resident
entities have entered into a tax consolidated group under
Australian taxation law.
The company is the head entity in the tax-consolidated group
comprising all the Australian wholly-owned subsidiaries set
out in Note 22. The head entity recognises all of the current and
deferred tax assets and liabilities of the tax consolidated group
(after elimination of intragroup transactions).
xvi. Inventories
Inventories and raw materials are carried at the lower of cost
and net realisable value. Costs are assigned on first in first
out basis.
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
gross basis. 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.
xiv. Impairment of assets
At each reporting date, the company reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from
other assets, the company estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately, unless the relevant
asset is carried at fair value, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount,
but only to the extent that the increased carrying amount
does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised in profit or loss immediately,
unless the relevant asset is carried at fair value, in which
case the reversal of the impairment loss is treated as a
revaluation increase.
xv. Income tax
Income tax on the profit or loss for the year comprises
current and deferred tax. Income tax is recognised in the
income statement except to the extent that it relates to
items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect
of previous years.
AERIS ENVIRONMENTAL LTD
P A G E 3 2
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
xvii. Leases
The determination of whether an arrangement is or contains
a lease is based on the substance of the arrangement and
requires anassessment of whether the fulfilment of the
arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively
transfer from the lessor to the lessee substantially all the risks
and benefits incidental to ownership of leased assets, and
operating leases, under which the lessor effectively retains
substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability
are established at the fair value of the leased assets, or if
lower, the present value of minimum lease payments. Lease
payments are allocated between the principal component of
the lease liability and the finance costs, so as to achieve a
constant rate of interest on the remaining balance of
the liability.
Leased assets acquired under a finance lease are depreciated
over the asset’s useful life or over the shorter of the asset’s
useful life and the lease term if there is no reasonable
certainty that the consolidated entity will obtain ownership at
the end of the lease term.
Operating lease payments, net of any incentives received from
the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
xviii. Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Aeris Environmental Limited
(‘company’ or ‘parent entity’) as at 30 June 2017 and the results
of all subsidiaries for the year then ended. Aeris Environmental
Limited and its subsidiaries together are referred to in these
financial statements as the ‘consolidated entity’. Subsidiaries
are all those entities over which the consolidated entity has
control. The consolidated entity controls an entity when the
consolidated entity is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability
to affect those returns through its power to direct the activities
of the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the consolidated entity. They
are de-consolidated from the date that control.
Intercompany transactions, balances and unrealised gains on
transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share of
the non-controlling interest acquired is recognised directly
in equity attributable to the parent. Non-controlling interest
in the results and equity of subsidiaries are shown separately
in the statement of profit or loss and other comprehensive
income, statement of financial position and statement of
changes in equity of the consolidated entity. Losses incurred
by the consolidated entity are attributed to the non-controlling
interest in full, even if that results in a deficit balance.
Where the consolidated entity loses control over a subsidiary,
it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any
cumulative translation differences recognised in equity.
The consolidated entity recognises the fair value of the
consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
Subsidiaries are accounted for at cost in the separate
financial statements of Aeris Environmental Ltd less any
impairment charges.
xix. Provisions
Provisions are recognised when the consolidated entity has
a present obligation, the future sacrifice of economic benefits
is probable, and the amount of the provision can be
measured reliably.
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognised as an asset if it is probable that
recovery will be received and the amount of the receivable can
be measured reliably.
ANNUAL REPORT 2017
P A G E 3 3
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows.
xx. Research and development
Research and development expenditure is expensed as
incurred except to the extent that development expenditure
recoverability is assured beyond reasonable doubt, in which
case it is capitalised. Deferred development expenditure
is amortised on a straight line basis over the period during
which the related benefits are expected to be realised once
commercial production has commenced.
xxi. Recoverable amount of non-current assets
The carrying amounts of non-current assets valued on
the cost basis are reviewed to determine whether they are
in excess of their recoverable amount at reporting date.
If the carrying amount of a non-current asset exceeds its
recoverable amount, the asset is written down to the lower
amount. The write-down is expensed in the reporting period
in which it occurs.
Where a group of assets working together supports the
generation of cash inflows, recoverable amount is assessed
in relation to that group of assets. In assessing recoverable
amounts of non-current assets, the relevant cash flows have
been discounted to their present value.
xxii. Revenue recognition
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the Group and the revenue
can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
incurred to date as a percentage of total estimated labour
hours for each contract. When the contract outcome cannot be
measured reliably, revenue is recognised only to the extent that
the expenses incurred are eligible to be recovered.
Government grants
Grants from the government are recognised at their fair
value where there is a reasonable assurance that the
grant will be received and the Group will comply with all
attached conditions.
Government grants related to costs are deferred and
recognised in the income statement over the period
necessary to match them with the costs that they are
intended to compensate.
Interest income
Interest income is recognised as it is accrued using the effective
interest rate method.
Other income
Other income is recognised as it is earned.
xxiii. Share capital
Financial instruments issued by the Group are treated as
equity only to the extent that they do not meet the definition of a
financial liability. The Group’s ordinary shares are classified as
equity instruments. Any transaction costs associated with the
issuing of shares are deducted from share capital.
The Group is not subject to any externally imposed
capital requirements.
xxiv. Borrowings and Convertible notes
Loans and borrowings are initially recognised at the fair
value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using
the effective interest method if the impact is material to the
financial report.
Sale of goods and disposal of assets
Revenue from the sale of goods and disposal of assets is
recognised when the consolidated entity has passed the risks
and rewards of the goods or assets to the buyer.
Where there is an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date,
the loans or borrowings are classified as non-current.
Revenue from services
Revenue from consultancy and engineering services is
recognised by reference to the stage of completion. Stage
of completion is measured by reference to labour hours
Convertible notes are separated into liability and equity
components based on the terms of the contract.
AERIS ENVIRONMENTAL LTD
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F I N A N C I A L S T A T E M E N T S
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On issuance of the convertible notes, the fair value of the
liability component is determined using a market rate for
an equivalent non-convertible bond. This amount is
classified as a financial liability measured at amortised
cost (net of transaction costs) until it is extinguished on
conversion or redemption.
The remainder of the proceeds is allocated to the conversion
option that is recognised and included in equity. Transaction
costs are deducted from equity, net of associated income
tax. The carrying amount of the conversion option is not
remeasured in subsequent years.
Transaction costs are apportioned between the liability and
equity components of the convertible notes based on the
allocation of proceeds to the liability and equity components
when the instruments are initially recognised.
xxv. Trade and other payables
Trade payables and other accounts payable are recognised
when the consolidated entity becomes obliged to make future
payments resulting from the purchase of goods and services.
Trade accounts payable are normally settled within 30 days.
xxvi. Trade and other receivables
Trade and other receivables are recognised initially at fair
value and generally due for settlement within 60 days.
The collectability of debts is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off.
A provision for impairment of receivables is established 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. The amount of the provision is recognised in the
income statement as financial expenses.
xxvii. Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the consolidated entity
only. Supplementary information about the parent entity is
disclosed in note 32.
xxviii. Fair value measurement
When an asset or liability, financial or non-financial,
is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date; and assumes that the transaction will
take place either: in the principle market; or in the absence of
a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient data
are available to measure fair value, are used, maximising the
use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified,
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed each reporting date and
transfers between levels are determined based on a
reassessment of the lowest level input that is significant to
the fair value measurement.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise is
either not available or when the valuation is deemed to be
significant. External valuers are selected based on market
knowledge and reputation. Where there is a significant
change in fair value of an asset or liability from one period
to another, an analysis is undertaken, which includes a
verification of the major inputs applied in the latest valuation
and a comparison, where applicable, with external sources
of data.
ANNUAL REPORT 2017
P A G E 3 5
2. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks;
market risk (including currency risk, credit risk, fair value
interest rate risk and price risk), credit risk, liquidity risk
and cash flow interest rate risk. The Group’s overall risk
management programme focuses on the unpredictability
of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group.
(a) Foreign exchange risk
Foreign exchange risk arises when future commercial
transactions and recognised assets and liabilities are
denominated in a currency that is not the entity’s functional
currency. The Group is exposed to foreign exchange risk
predominantly arising from currency exposures to the US
dollar on its loans to its overseas subsidiaries. Currency
protection measures may be deemed appropriate in specific
commercial circumstances and are subject to strict limits
laid down by the Board. The Group has not entered into any
foreign currency hedging contracts during the year.
(b) Credit risk
Credit risk arises from the potential failure of counterparties
to meet their obligations under the respective contracts at
maturity. There is negligible credit risk on financial assets
of the Group since there is limited exposure to individual
customers and the economic entity’s exposure is limited to
the amount of cash, short term deposits and receivables
which have been recognised in the balance sheet.
(c) Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets, the
Group’s income and operating cash flows are not materially
exposed to changes in market interest rates.
The Group had a significant interest-bearing liability of
$1,015,000 (loan from Directors). Interest is charged on this
loan @ 5.45% (ATO benchmark rates).
This loan was fully repaid by issue of ordinary shares in
Aeris Environmental Ltd.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining
sufficient cash and the availability of funding to enable the
company to operate as a going concern. The Board monitors
liquidity on a monthly basis and management monitors
liquidity on a daily basis.
AERIS ENVIRONMENTAL LTD
P A G E 3 6
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
3 . CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
(b) Recovery of deferred tax assets
Deferred tax assets are not recognised for deductible
temporary differences until management considers that it is
probable that future taxable profits will be available to utilise
those temporary differences.
(c) Share-based payment transactions
The Group measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The
fair value is determined using the Black & Scholes model,
with the assumptions detailed in Note 25. 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 expenses and equity.
(d) Fair value of financial instruments
When the fair value of financial assets and financial liabilities
recorded in the statement of financial position cannot be
derived from active markets, their fair value is determined
using valuation techniques including the discounted cash
flow model. The inputs to these models are taken from
observable markets where possible, but where this is not
feasible, a degree of judgement is required in establishing
fair values. The judgements include considerations of inputs
such as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors could affect the reported
fair value of financial instruments.
The preparation of the financial statements requires
management to make judgments, estimates and assumptions
that affect the reported amounts in the financial statements.
Management continually evaluates its judgments and
estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its
judgments and estimates on historical experience and on
other various factors it believes to be reasonable under the
circumstances, the result of which form the basis of the
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from
these estimates under different assumptions and conditions.
Management has identified the following critical accounting
policies for which significant judgments, estimates and
assumptions are made. Actual results may differ from these
estimates under different assumptions and conditions and
may materially affect financial results or the financial position
reported in future periods.
Further details of the nature of these assumptions
and conditions may be found in the relevant notes to
the financial statements.
The following critical estimates and judgments have been
made in respect of the following items:
(a) Impairment of non-financial assets other than goodwill
The Group assesses impairment of all assets at each
reporting date by evaluating conditions specific to the Group
and to the particular asset that may lead to impairment.
These include product and manufacturing performance,
technology, economic and political environments and future
product expectations. If an impairment trigger exists the
recoverable amount of the asset is determined. Given the
current uncertain economic environment management
considered that the indicators of impairment were significant
enough and as such these assets have been tested for
impairment in this financial period.
ANNUAL REPORT 2017
4 . REVENUE
Revenue
Revenue from sales
Revenue from services
Other Revenue
Interest - other entities
Miscellaneous
5 . EXPENSES
Loss before income tax includes the following items of expense:
Depreciation and amortisation expense
Depreciation of leasehold plant and equipment
Depreciation of plant and equipment
Total depreciation and amortisation expense
Employee benefit expenses
Base salary and fees
Superannuation & statutory oncosts
Share based payment expense (Note 25(a) )
Other employee expenses
Total employee benefit expenses
Financial expenses
Interest paid
Other Expenses
Impairment of receivables
Rental & occupancy expenses
Research and development expenses
P A G E 3 7
2017
$
2016
$
1,564,323
1,182,493
635,714
742,372
2,746,816
1,378,086
92,790
42,653
205,130
378,272
135,443
583,402
2017
$
6,332
51,962
58,294
2016
$
5,277
28,511
33,788
1,728,921
1,396,024
349,709
252,555
143,117
16,459
938
19,636
2,238,206
1,669,153
37,848
37,848
674,624
248,173
508,725
97,788
97,788
30,957
225,982
449,688
AERIS ENVIRONMENTAL LTD P A G E 3 8
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
6 . INCOME TAX
(a) Income tax benefit
The prima facie income tax benefit on pre-tax accounting loss reconciles to the income tax benefit in the financial statements
as follows:
Loss for year
Income tax benefit calculated at 30%
2017
$
2016
$
(4,177,265)
(2,489,126)
(1,253,180)
(746,738)
Temporary differences and tax losses not recognised
1,562,205
746,456
- non deductible expenses
- Share based payments
R&D tax offset rebate received
R&D tax offset rebate recevable
Income tax benefit attributable to loss
(b) Deferred tax balances not recognised
Calculated at 30% not brought to account as assets:
Interest receivable
Deferred tax liabilities
Deferred tax assets
Tax losses
42,935
281
(351,960)
(425,000)
(71,235)
(351,960)
(425,000)
(423,195)
2017
$
-
-
2016
$
10,744
10,744
Revenue tax losses available for offset against future tax income
6,951,832
6,302,941
Temporary differences
Provision for doubtful debts
Provision for employee entitlements
Difference between book and tax values of fixed assets
Accruals
Total deferred tax assets
Net deferred tax asset not recognised
84,000
71,563
48,096
7,950
84,107
32,050
49,569
7,200
211,609
172,926
7,163,441
6,475,867
7,163,441
6,465,122
ANNUAL REPORT 2017
P A G E 3 9
(c) Tax consolidation
iiMethod of measurement of tax amounts
iRelevance of tax consolidation to the consolidated entity
Legislation to allow groups comprising a parent entity and
its Australian resident wholly-owned entities, to elect to
consolidate and be treated as a single entity for income tax
purposes (‘the tax consolidation system’) was substantively
enacted on 21 October 2002. The Company, its wholly-
owned Australian resident entities and its sister entities
within Australia are eligible to consolidate for tax purposes
under this legislation and have elected to implement the tax
consolidation system from 1 July 2005.
The tax consolidated group has adopted the “stand-alone”
method of measuring current and deferred tax amounts
applicable to each company.
iiiTax sharing agreements
There are no tax sharing or funding agreements in place.
ivTax consolidation contributions
There were no amounts recognised for the period as tax
consolidations contributions by (or distributions to) equity
participants of the tax consolidated group.
7. LOSS PER SHARE AT TRIBUTABLE TO THE ORDINARY EQUIT Y-HOLDERS OF THE COMPANY
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Net loss used to calculate basic EPS
Net loss used to calculate diluted EPS
Weighted average number of ordinary shares used to calculate basic EPS
Convertible share options
Weighted average number of ordinary shares used to calculate diluted EPS
8 . AUDITORS’ REMUNER ATION
Remuneration of UHY Haines Norton for :
Audit of the annual financial report
Review of the half yearly financial report
Other services
2017
$
(2.40)
2016
$
(1.35)
(2.40)
(1.35)
(3,747,555)
(2,062,727)
(3,747,555)
(2,062,727)
156,329,954
152,977,902
-
-
156,329,954
152,977,902
2017
$
25,000
12,500
4,330
2016
$
22,000
11,000
4,200
Total auditors remuneration
41,830
37,200
AERIS ENVIRONMENTAL LTD
P A G E 4 0
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
9. CASH AND OTHER FINANCIAL ASSETS
Cash and cash equivalents
Cash at bank and on hand
Term Deposits
Deposits on call
The carrying amounts of the Group’s cash are a reasonable approximation of their fair values.
1 0 . CURRENT TR ADE AND OTHER RECEIVABLES
(a) Current trade and other receivables
Trade receivables
Less provision for doubtful debts
R&D tax offset rebate receivable
The carrying amounts of the Group’s current trade and other receivables are a reasonable approximation of their fair values.
Impairment of receivables
Less than 6 months overdue
More than 6 months overdue
Movements in provision for impairment of receivables
Opening balance
Additional provisions recognised
Foreign exchange difference
Closing balance
Amounts recognised in profit or loss
During the year, the following losses were recognised in profit or loss in relation to impaired receivables.
Impairment losses
Individually impaired receivables
Movement in provision for impairment
2017
$
2016
$
514,514
59,508
1,000,000
5,350,000
5,427
6,156
1,519,941
5,415,664
2017
$
2016
$
1,247,126
1,120,443
(308,555)
(280,358)
425,000
351,960
1,363,571
1,192,045
-
-
308,555
280,358
280,358
278,669
30,000
(1,803)
-
1,689
308,555
280,358
(644,624)
(30,957)
(30,000)
-
(674,624)
(30,957)
(b) Non-current trade and other receivables
434,663
-
The carrying amounts of non-current trade and other receivables represent amount due from customers for SmartENERGY® projects completed during 2017
financial year which are receivable over 60 months and accounted at fair values. The fair values were calculated based on cash flows discounted using rate
appropriate to credit rating of customers.
ANNUAL REPORT 2017
P A G E 4 1
2017
$
256,724
256,724
2016
$
170,933
170,933
2017
$
71,144
3,829
41,086
2016
$
92,086
35,813
7,735
116,059
135,634
11 . INVENTORIES
Inventories - at cost
12. OTHER CURRENT ASSETS
Prepayments
Accrued income
Deposits and bonds
The carrying amounts of the Group’s other current assets are a reasonable approximation of their fair values.
AERIS ENVIRONMENTAL LTD
P A G E 4 2
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
13 . NON- CURRENT ASSETS
Carrying Values
2017
Property, plant and equipment
R & D equipment
Computer equipment
Field equipment
Leasehold improvements
Office furniture
Plant and equipment
2016
Property, plant and equipment
R & D equipment
Computer equipment
Field equipment
Leasehold improvements
Office furniture
Plant and equipment
Reconciliations
2017
R & D equipment
Computer equipment
Leasehold improvements
Office furniture
Plant and equipment
2016
R & D equipment
Computer equipment
Leasehold improvements
Office furniture
Plant and equipment
Cost
$
Accumulated
depreciation /
impairment
Net carrying
value
$
$
25,011
187,964
58,747
130,228
175,566
106,079
(24,824)
(151,340)
(58,747)
(103,919)
(101,237)
(87,338)
187
36,624
-
26,309
74,329
18,741
683,595
(527,405)
156,190
25,011
(23,764)
159,236
(127,556)
58,747
130,228
165,091
82,079
(58,747)
(97,587)
(80,130)
(81,328)
1,247
31,680
-
32,641
84,961
752
620,392
(469,112)
151,281
Opening net
carrying value
Additions
Disposals
Depreciation /
Exchange
Closing net
Impairment
movements
carrying value
$
$
$
$
$
$
1,247
31,680
32,641
84,961
752
151,281
3,007
13,617
-
9,690
-
-
28,728
-
10,475
24,000
63,203
-
31,301
37,918
88,510
1,025
26,314
158,754
-
-
-
-
-
-
-
-
-
-
-
-
(1,060)
(23,784)
(6,332)
(21,108)
(6,010)
(58,294)
(1,760)
(13,239)
(5,277)
(13,239)
(273)
(33,788)
-
-
-
-
-
-
-
-
-
-
-
-
187
36,624
26,309
74,329
18,741
156,190
1,247
31,680
32,641
84,961
752
151,281
ANNUAL REPORT 2017
14 . CURRENT TR ADE AND OTHER PAYABLES AND PROVISIONS
(a) Unsecured trade and other payables
Trade creditors
Other payables and accruals
GST payable
(b) Provisions
Annual leave
Long service leave
P A G E 4 3
2017
$
379,506
103,816
13,473
496,795
2016
$
217,111
215,028
15,858
447,997
199,103
20,280
96,068
18,207
219,383
114,275
The carrying amounts of the Group’s current trade and other payables and provisions are a reasonable approximation of their
fair values.
15 . CURRENT INTEREST BEARING PAYABLES
Unsecured loans from Directors and related entities
2017
$
-
-
2016
$
1,015,000
1,015,000
The carrying amounts of the Group’s current interest bearing payables are a reasonable approximation of their fair values.
Interest on loans from Directors and related entities is charged at 5.45% per annum (ATO benchmark rates).
AERIS ENVIRONMENTAL LTD
P A G E 4 4
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
16 . NON- CURRENT PROVISIONS
Long service leave
2017
$
19,159
19,159
2016
$
10,764
10,764
The carrying amounts of the Group’s non-current provisions are a reasonable approximation of their fair values.
17. CONTRIBUTED EQUIT Y
Share capital
157,745,387 fully paid ordinary shares - no par value
(2016: 154,428,722)
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Other contributed equity
Consideration for issue of share options
2017
$
2016
$
41,207,986
39,995,236
104,876
104,876
41,312,862
40,100,112
Movement in ordinary share capital of Aeris Environmental Ltd
Number of shares
2017
2017
$
2016
Number of shares
2016
$
Balance at beginning of year
Shares issued during year
154,428,722
39,995,236
151,428,722
38,495,236
Shares issued to Directors towards repayment of their loan
2,416,665
1,015,000
3,000,000
1,500,000
Shares issued to KMP on exercise of options
Shares issued to consultants on exercise of options
750,000
150,000
196,250
1,500
-
-
-
-
Balance at end of year
157,745,387
41,207,986
154,428,722
39,995,236
For the purposes of these disclosures, the Group considers its capital to comprise its ordinary share capital and accumulated
losses. Neither the share based payments reserve nor the translation reserve is considered as capital.
ANNUAL REPORT 2017
P A G E 4 5
18 . OPTIONS
Grant Date
Expiry Date
Exercise Price
Number on issue
30 June 2016
Granted
during year
Expired
during year
Exercised
during year
Number on issue
30 June 2017
2017
Unlisted
*
**
*
*
*
17-Nov-11
17-Nov-16
26-Jul-12
23-Feb-17
31-Jul-14
08-Jan-15
31-Jul-19
31-Jul-16
23-Dec-16
14-Oct-21
23-Dec-16
23-Oct-21
23-Dec-16
01-Aug-20
Total options on issue
2016
Unlisted
*
*
**
*
07-Mar-11
09-Jan-16
31-Mar-11
17-Mar-16
17-Nov-11
17-Nov-16
26-Jul-12
23-Feb-17
31-Jul-14
08-Jan-15
31-Jul-19
31-Jul-16
Total options on issue
0.17
0.22
0.20
0.31
0.42
0.42
0.42
0.25
0.15
0.17
0.22
0.20
0.31
250,000
20,000
500,000
500,000
-
-
-
.
-
-
-
-
100,000
945,000
450,000
-
(250,000)
(20,000)
-
-
-
-
-
-
-
(500,000)
-
-
(150,000)
-
-
500,000
-
100,000
945,000
300,000
1,270,000
1,495,000
(20,000)
(900,000)
1,845,000
150,000
50,000
250,000
20,000
500,000
500,000
1,470,000
-
-
-
-
-
-
-
(150,000)
(50,000)
-
-
-
-
(200,000)
-
-
-
-
-
-
-
-
-
250,000
20,000
500,000
500,000
1,270,000
These options do not entitle the holder to participate in any share issue of the Company or any other body corporate unless the
options are exercised prior to the new share issue entitlement date.
** Share options issued as consideration for business combinations
* These options expire on the earlier of their expiry date or the date of termination of the employee’s employment, or, in the case of voluntary termination, 90 days
after voluntary termination of the employee’s employment
AERIS ENVIRONMENTAL LTD
P A G E 4 6
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
19. RESERVES
Foreign currency translation reserve
Share based payments reserve
Foreign currency translation reserve
Balance at beginning of financial year
Foreign exchange translation difference
Balance at end of financial year
Nature and purpose of reserve
2017
$
2016
$
(51,877)
(82,565)
1,406,391
1,263,274
1,354,514
1,180,709
(82,565)
30,688
(75,755)
(6,810)
(51,877)
(82,565)
The foreign currency translation reserve records the impact of the movement of the exchange rate as it
relates to the company’s investment in overseas subsidiaries.
Share based payments reserve
Balance at beginning of financial year
1,263,274
1,262,336
Share based payments during the year allocated to:
Employees and consultant
Key Management Personnel
Balance at end of financial year
Nature and purpose of reserve
The share based payments reserve records the value of options issued to employees,
consultants and Directors, as part of the remuneration for their services and issued in
consideration for business combinations.
20 . ACCUMULATED LOSSES
Balance at beginning of financial year
Net loss for year
Balance at end of financial year
136,055
7,062
938
-
1,406,391
1,263,274
2017
$
2016
$
(35,812,557)
(33,749,830)
(3,747,555)
(2,062,727)
(39,560,112)
(35,812,557)
ANNUAL REPORT 2017
P A G E 4 7
2017
$
9,257
-
(4,710)
2016
$
-
12,461
(3,204)
4,547
9,257
21 . NON- CONTROLLING INTERESTS
Balance at beginning of financial year
12,500 shares held by non-controlling interest in Aeris Cleantech Pte Ltd, Singapore
Net loss for year
Balance at end of financial year
2 2. PARTICULARS RELATING TO CONTROLLED ENTITIES
Name of entity
Controlled entities
Aeris Pty Ltd
Aeris Biological Systems Pty Ltd
Aeris Hygiene Services Pty Ltd
Aeris Environmental LLC
Aeris Cleantech Pte Ltd
Aeris Cleantech Europe Ltd
Country of incorporation
Ownership interest
Ownership interest
Australia
Australia
Australia
USA
Singapore
Malta
2017
%
100
100
100
100
75
100
2016
%
100
100
100
100
75
100
23 . COMMITMENTS FOR EXPENDITURE
Lease commitments
Operating leases
Commitments on operating leases that relate to below office facilities:
Thailand operations branch - up to 1 year
Registered office in Sydney - up to 1 year
Branch office in Brisbane - up to 1 year
- 1 to 3 years
- 3 to 5 years
2017
$
2016
$
3,768
53,645
106,240
212,480
172,312
548,445
-
57,631
33,945
-
-
91,576
AERIS ENVIRONMENTAL LTD
P A G E 4 8
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
24 . KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) The Directors of Aeris Environmental Ltd during the year were:
Maurie Stang
Bernard Stang
Steven Kritzler
Alex Sava (appointed 3 October 2016)
(b) Other key management personnel
Peter Bush (Chief Executive Officer and Alternate Director)
Robert Waring (Company Secretary)
(c) Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is
set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
2017
$
2016
$
348,748
248,670
26,292
7,062
18,573
925
382,102
268,168
Further, disclosures relating to key management personnel are set out in remuneration report in the Directors’ Report.
25 . SHARE BASED PAYMENTS
(a) Recognised share-based payment expenses
The expense recognised for employee services received during the year is shown in the table below:
Employee Share Option Plan
Employees and consultant
Key Management Personnel
Total amount arising from share-based payment transactions
2017
$
136,055
7,062
143,117
2016
$
938
-
938
ANNUAL REPORT 2017
P A G E 4 9
(b) Details of share-based payment plan
The share-based payment plan is described in the remuneration report in Directors’ Report. There have been no cancellations
or modifications to the plan during 2017 and 2016.
Fair value of options issued
The fair value of the options granted under the plan is estimated using the Black & Scholes valuation methodology taking into
account the terms and conditions under which the options are granted.
The weighted average remaining contractual life for the share options outstanding as at 30 June 2017 is 3.51 years
(2016: 1.33 years).
The range of exercise prices for options outstanding at the end of the year was $0.20 to $0.42 (2016: $0.17 to $0.31).
Following options were issued during the year.
To employees and consultants
To Key Management Personnel
Number of options
2017
2016
1,345,000
150,000
1,495,000
-
-
-
The following table shows the inputs to the Black & Scholes model in respect of options granted during 2017 financial year.
Value of Underlying Stock
Exercise Price
Dividend Yield
Volatility (per Year)
Risk free rate
Maturity
Pricing Date
Value of Option
To Employees and Consultants
To Key Management Personnel
Options issued
0.370
0.420
0.00%
108.29%
2.34%
1/08/2020
23/12/2016
0.3620
0.370
0.420
0.00%
108.29%
2.34%
0.370
0.420
0.00%
108.29%
2.34%
0.370
0.420
0.00%
108.29%
2.34%
23/10/2021
23/10/2021
14/10/2021
23/12/2016
23/12/2016
23/12/2016
0.2828
0.2828
0.2823
AERIS ENVIRONMENTAL LTD
P A G E 5 0
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
26 . RELATED PART Y DISCLOSURES
(a) Parent Entity
Aeris Environment Ltd. is the parent entity
Subsidiaries
Interests in subsidiaries are set out in note 22.
(b) Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report in the Directors’ Report.
(c) Transactions with Directors and Director related entities
Disclosures relating to transactions with Directors and Director related entities are set out in the remuneration report in the
Directors’ Report.
27. FINANCIAL INSTRUMENTS DISCLOSURES
(a) Capital
The Group considers its capital to comprise its ordinary share capital and accumulated retained earnings. In managing its
capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders
through a combination of capital growth and distributions. In order to achieve this objective, the Group seeks to maintain a
sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions
to adjust its capital structure to achieve these aims, either through new share issues or debt, the Group considers not only its
short-term position but also its long-term operational and strategic objectives.
(b) Financial instrument risk exposure and management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated
in this note.
(c) Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risks arise, are as follows:
cash at bank;
other receivables;
deposits and bonds; and
trade and other payables.
ANNUAL REPORT 2017
P A G E 5 1
(d) General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and has the
responsibility for designing and operating processes that ensure the effective implementation of the objectives and policies to
the Group’s finance function. The Board receives monthly reports through which it reviews the effectiveness of the processes
put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility. Further details regarding these policies are set out below:
i. Credit risk
Credit risk arises principally from the Group’s trade receivables, cash and term deposits. It is the risk that the counterparty
fails to discharge its obligation in respect of the instrument.
The maximum exposure to credit risk at balance sheet date is as follows :
Without external credit rating
Trade receivables
R&D tax offset rebate receivable
Deposits and bonds
With external credit rating (Moody’s)
Deposits with Bankwest (credit rating Aa2)
Deposits with Wells Fargo, USA (credit rating Aa1)
Deposits with ANZ Bank (credit rating Aa2)
ii Liquidity risk
2017
$
1,247,126
425,000
48,518
2016
$
1,120,443
351,960
7,735
1,000,812
5,356,156
3,440
493,888
2,851
56,657
3,218,784
6,895,802
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at
least 45 days.
The Board receives cash flow projections on a monthly basis as well as information regarding cash balances. At the balance
sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under
all reasonably expected circumstances.
The Group does not have a financing facility in place.
AERIS ENVIRONMENTAL LTD
P A G E 5 2
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
Maturity analysis of financial assets and liability based on management’s expectations
The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows. Trade
payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such
as property, plant, equipment and investments in working capital (e.g. trade receivables and inventories). These assets are
considered in the Group’s overall liquidity risk.
Maturity analysis - 2017
Financial assets
Cash and cash equivalents
Other receivables
Security deposits
TOTAL
Financial liabilities
Trade Creditors
Other payables and accruals
Loans
TOTAL
Cash flows
< 6 mths
6 - 12 mths
1 - 3 years
> 3 years
$
$
$
$
$
1,523,770
1,523,770
-
-
-
1,877,762
1,346,405
61,720
246,882
222,755
41,086
29,300
-
-
11,786
3,442,618
2,899,475
61,720
246,882
234,541
379,506
117,289
-
379,506
117,289
-
496,795
496,795
-
-
-
-
-
-
-
-
-
-
-
-
NET MATURITY
2,945,823
2,402,679
61,720
246,882
234,541
Maturity analysis - 2016
Financial assets
Cash and cash equivalents
Other receivables
Security deposits
TOTAL
Financial liabilities
Trade Creditors
Other payables and accruals
Loans
TOTAL
5,463,779
5,463,123
1,192,045
1,192,045
7,735
-
6,663,559
6,655,168
217,111
217,111
230,886
230,886
657
-
-
657
-
-
1,070,318
27,659
1,042,659
1,518,314
475,656
1,042,659
NET MATURITY
5,145,245
6,179,512
(1,042,002)
-
-
-
-
-
-
-
-
-
-
-
7,735
7,735
-
-
-
-
7,735
ANNUAL REPORT 2017
P A G E 5 3
iii Market risk
(a) Interest rate risk
The Group’s exposure to fluctuations in interest rates that are inherent in financial markets arise predominantly from assets
and liabilities bearing variable interest rates.
The company’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and
financial liabilities is set out below :
Note
Weighted Average
Interest Rates
Floating Interest
Rates
Fixed Interest
Rates
Non-Interest
Bearing
Total
2017
Financial assets
Cash and cash equivalents
Deposits
Receivables
Total Assets
Financial liabilities
Payables
Total Liabilities
Net financial assets
2016
Financial assets
Cash and cash equivalents
Deposits
Receivables
Total Assets
Financial liabilities
Payables
Loans
Total Liabilities
Net financial assets
9
9
10
14
9
9
10
14
15
1.00%
2.20%
5.50%
0.00%
2.00%
2.70%
0.00%
0.00%
5.45%
5,427
-
514,514
519,941
-
-
1,000,000
41,086
1,041,086
612,945
1,185,289
1,798,234
5,427
1,612,945
1,740,889
3,359,261
-
-
-
-
496,795
496,795
496,795
496,795
5,427
1,612,945
1,244,094
2,862,466
6,156
-
59,508
65,664
-
-
5,350,000
7,735
5,357,735
-
1,192,045
1,192,045
6,156
5,350,000
1,259,289
6,615,444
-
-
-
-
447,997
447,997
1,015,000
1,015,000
-
1,015,000
447,997
1,462,997
6,156
4,335,000
811,292
5,152,448
The following sensitivity analysis is based on the interest rate risk exposure in existence at the balance sheet date. The analysis
assumes all other variables remain constant.
AERIS ENVIRONMENTAL LTD
P A G E 5 4
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
Sensitivity analysis
2017
Deposits on call
Tax charge of 30%
Post tax profit increase / (decrease)
2016
Deposits on call
Tax charge of 30%
Post tax profit increase / (decrease)
(b) Currency risk
Carrying amount
+3% interest rate
Profit & Loss
-3% interest rate
Profit & Loss
$
$
$
5,427
5,427
6,156
6,156
163
163
(49)
114
185
185
(55)
130
(163)
(163)
49
(114)
(185)
(185)
55
(130)
The Group’s policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency with
the cash generated from their own operations in that currency. Where group entities have liabilities denominated in a currency
other than their functional currency (and have insufficient reserves of that currency to settle them) cash already denominated
in that currency will, where possible, be transferred from elsewhere within the Group.
The Group’s exposure to foreign currency risk is as follows:
Cash at bank
Trade and other receivables
Trade and other payables
Net Exposure
2017
US$
2,644
11,672
(2,162)
12,154
2016
US$
2,061
800
(1,336)
1,525
2017
SGD
9,684
12,500
-
22,184
2016
SGD
-
-
(10,700)
(10,700)
2017
Euro
2016
Euro
5,000
5,000
-
-
-
-
5,000
5,000
Sensitivity analysis on the foreign currency exposure risk is not disclosed as the foreign currency balances are not material
and the impact of any change in exchange rates would be immaterial.
(e) Fair value measurement
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
Therefore, table detailing the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement is not required.
ANNUAL REPORT 2017
P A G E 5 5
28 . CONTINGENT LIABILITIES
There are no contingent liabilities of the company or the Group other than commitments disclosed in note 23 (2016: NIL)
29. ADDITIONAL COMPANY INFORMATION
Aeris Environmental Ltd is a listed public company, incorporated in Australia.
Principal registered office and principal place of business
5/26-34 Dunning Avenue
ROSEBERY
NSW 2018
3 0 . SUBSEQUENT EVENTS
There have been no matters or circumstances, which have arisen since 30 June 2017 that have significantly affected or may
significantly affect:
(a) the operations, in financial years subsequent to 30 June 2017, of the consolidated entity; or
(b) the results of those operations;
(c) the state of affairs, in the financial years subsequent to 30 June 2017, of the consolidated entity; other than:
the provision by three of the Company’s Non-Executive Directors of financial support to the Group through
Loan Facility Agreements for a total amount of up to $1,500,000 for up to 24 months from the date of
the signed Annual Financial Report.
AERIS ENVIRONMENTAL LTD
P A G E 5 6
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
31 . OPER ATING SEGMENTS
Identification of reportable segments
From Board of Directors’ (Chief Operating Decision Makers’ - CODM) perspective, the Group is organised into business units
based on its geographical area of operation. The Group has identified two reportable segments as mentioned below.
The reportable segments are based on aggregated operating segments determined by the similarity of the revenue stream and
products sold and/or the services provided in Australia and internationally, as these are the sources of the Group’s major risks
and have the most effect on the rates of return.
The CODM reviews revenue, COGS, operating expenses, profit before tax, assets & liabilities for the following segments:
(a) Australia - Sales and service on account of Australian operations
(b) International - Sales & service on account of international operations
Intersegment transactions
Intersegment transactions are made at arm’s length and are eliminated on consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received & are eliminated on consolidation.
Major Customer
The Group supplies to three of its major customers, through Australian sales segment, (who individually amount to 10% or more
of its total revenue) that combined account for 51% of external revenue (2016: Two major customers combined account for 56%).
During the year ended 30 June 2017 the most significant client accounts for approximately 21% (2016: 45%) of the consolidated
entity’s external revenue through Australian Sales operating segment.
ANNUAL REPORT 2017
P A G E 5 7
Operating segment information of the consolidated entity
2017
Revenue
Sales
Other Income
Total Revenue
Expenses
Cost of goods sold
Operating expenses
Total Expenses
Australia
International
Intersegment
eliminations
Consolidated
$
$
$
$
2,722,037
135,443
2,857,480
1,038,388
5,993,227
7,031,615
35,827
-
35,827
11,021
50,878
61,899
(11,048)
-
(11,048)
(11,047)
(22,943)
(33,990)
2,746,816
135,443
2,882,259
1,038,362
6,021,162
7,059,524
Loss before tax
(4,174,135)
(26,072)
22,942
(4,177,265)
2016
Revenue
Sales
Other Income
Total Revenue
Expenses
Cost of goods sold
Operating expenses
Total Expenses
1,378,086
583,402
1,961,488
350,272
4,088,856
4,439,128
-
-
-
-
-
-
-
-
46,398
46,398
(34,912)
(34,912)
1,378,086
583,402
1,961,488
350,272
4,100,342
4,450,614
Loss before tax
(2,477,640)
(46,398)
34,912
(2,489,126)
Segment assets and liabilities
Assets
Liabilities
Australia
International
Total
Intersegment elimination
Consolidated
2017
$
2016
$
2017
$
2016
$
3,935,420
59,002
3,994,422
(147,274)
3,847,148
7,177,670
62,834
7,240,504
(174,947)
7,065,557
2,551,084
1,926,205
4,477,289
3,400,066
2,021,036
5,421,102
(3,741,952)
(3,833,066)
735,337
1,588,036
AERIS ENVIRONMENTAL LTD P A G E 5 8
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
32. INFORMATION RELATING TO AERIS ENVIRONMENTAL LTD (“ THE PARENT ENTIT Y ” )
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Issued Capital (net of costs)
Accumulated losses
Share-based payment reserve
Net loss for the period
Total comprehensive loss for the period
2017
$
2016
$
3,295,751
6,977,382
3,931,642
7,173,701
712,367
565,508
731,526
1,580,508
41,312,861
40,100,111
(39,519,136)
(35,770,192)
1,406,391
1,263,274
3,200,116
5,593,193
(3,748,943)
(2,054,344)
(3,718,255)
(2,061,154)
Contractual Obligations / Commitments (Refer Note 23)
-
-
3 3 . NOTES TO CASH FLOW STATEMENTS
(a) Reconciliation of cash
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market
instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows
is reconciled in the related items in the statement of financial position as follows:
Cash at bank and on hand
Term Deposits
Deposits on call
2017
$
2016
$
514,514
59,508
1,000,000
5,350,000
5,427
6,156
1,519,941
5,415,664
ANNUAL REPORT 2017
P A G E 5 9
2017
$
2016
$
(3,752,265)
(2,065,931)
58,294
674,624
143,117
64,745
-
938
(1,280,813)
(1,048,579)
(85,790)
20,915
175,055
(124,721)
113,503
(124,172)
(58,223)
55,393
48,861
52,622
(b) Reconciliation of operating loss after income tax to net cash flows from operating activities
Operating loss after income tax
Non cash/non-operating items included in profit and loss
Depreciation and amortisation
Impairment of trade receivables
Share based payments
Changes in assets and liabilities
(Increase) in receivables
(Increase) in inventory
Decrease / (increase) in other assets
Increase in trade creditors
(Decrease) / Increase in other creditors and accruals
Increase in employee entitlement expense
Net cash used in operating activities
(4,058,081)
(3,074,345)
AERIS ENVIRONMENTAL LTD P A G E 6 0
D I R E C T O R S ’ D E C L A R A T I O N
In accordance with a resolution of directors, I state that:
1 In the opinion of the Directors:
(a) the financial statements and notes, as set out on pages 22 to 59, are in accordance with the Corporations Act
2001 and
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and its performance for
the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 1; and
(c) There are reasonable grounds to believe that the company and the consolidated entity will be able to pay its debts as
and when they become due and payable;
2 This declaration has been made after receiving the declarations required to be made to the directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ending 30 June 2017.
On behalf of the Board of Directors
M STANG
Director
Sydney, 29 September 2017
ANNUAL REPORT 2017
P A G E 6 1
AERIS ENVIRONMENTAL LTD P A G E 6 2
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
ANNUAL REPORT 2017 P A G E 6 3
AERIS ENVIRONMENTAL LTD P A G E 6 4
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
ANNUAL REPORT 2017 P A G E 6 5
AERIS ENVIRONMENTAL LTD P A G E 6 6
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
ANNUAL REPORT 2017 P A G E 6 7
AERIS ENVIRONMENTAL LTD P A G E 6 8
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
ANNUAL REPORT 2017 A U S T R A L I A N S E C U R I T I E S E X C H A N G E
A D D I T I O N A L I N F O R M A T I O N
P A G E 6 9
Additional information required by the Australian Securities Exchange (ASX) Listing Rule 4.10, and not disclosed elsewhere in
this Annual Report, is detailed below. This information was prepared based on the Company’s Share Registry information, its
option register, ASX releases and the Company’s Constitution.
SHAREHOLDING INFORMATION
Distribution of Shareholders
Analysis of the quoted fully paid ordinary shares by holding as at 18 September 2017:
Spread of Holdings
Number of Holders
Ordinary shares
% of Total Issue Capital
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,001 and over
Total
39
136
115
303
87
22
29
731
22,891
390,258
988,650
11,701,462
20,411,299
15,545,425
108,685,402
157,745,387
0.01
0.25
0.63
7.42
12.94
9.85
68.90
100.00
Based on the market price at 18 September 2017 there were 73 shareholders with less than a marketable parcel of $500 worth
of shares at a share price of $0.255. There are no restricted securities on issue.
AERIS ENVIRONMENTAL LTD P A G E 7 0
A U S T R A L I A N S E C U R I T I E S E X C H A N G E
A D D I T I O N A L I N F O R M A T I O N
Statement of Shareholdings as at 18 September 2017
The names of the 20 largest holders of fully paid ordinary shares are listed below:
Rank
Shareholder
Number of Shares
% Holding
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Maurie Stang
Bernard Stang
Link Traders (Aust) Pty Ltd
Steven Kritzler
J P Morgan Nominees Australia Limited
Pulitano Family Superannuation Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Australian Shareholder Nominees Pty Ltd
Bernard Stang + Maurie Stang
HSBC Custody Nominees (Australia) Limited
Henderson International Pty Ltd
Helensleigh Pty Ltd
Radley Investment Co Pty Ltd
Wakil Family Group Pty Ltd
Hillridge Pty Ltd
Citicorp Nominees Pty Limited
Jamber Investments Pty Ltd
Joshua Aaron Ehrlich
Paul Ehrlich + Lauren Ehrlich
Grizzley Holdings Pty Limited
Total of Top 20 Holdings
Other Holdings
Total Ordinary Shares
17,779,749
14,863,673
14,651,539
8,331,609
6,382,355
5,564,447
5,243,500
4,543,144
4,184,046
2,819,366
2,474,714
2,438,854
2,225,210
2,157,300
2,024,650
1,859,589
1,782,988
1,700,000
1,525,000
1,388,275
103,940,008
53,805,379
11.27
9.42
9.29
5.28
4.05
3.53
3.32
2.88
2.65
1.79
1.57
1.55
1.41
1.37
1.28
1.18
1.13
1.08
0.97
0.88
65.90
34.10
157,745,387
100.00
ANNUAL REPORT 2017 A U S T R A L I A N S E C U R I T I E S E X C H A N G E
A D D I T I O N A L I N F O R M A T I O N
P A G E 7 1
Unquoted Equity Securities
For details of the unissued ordinary shares the Company has under option, refer below and to the “Share Options” section of
the Directors’ Report.
Number
Class of Options
Number of Holders
500,000
100,000
725,000
250,000 Options held by each of Chris Rogerson and Scott Gregson, which expire on 31 July 2019 and have an
exercise price of 20 cents
Options held by Director Alex Sava, which expire on 14 October 2021 and have an exercise price of 42 cents,
issued under the Company’s Employee Incentive Plan (EIP)
Options held by ten staff members, which expire on 23 October 2021 and have an exercise price of 42 cents,
issued under the EIP
220,000
which includes 100,000 options held by Ian Braby, and 50,000 options held by each of Robert Waring and
Options held by five key consultants, which expire on 23 October 2021 and have an exercise price of 42 cents,
Ian Ernst
300,000
Options held by four consultants, which expire on 1 August 2020 and have an exercise price of 1 cent, which
includes 200,000 options held by Carl Henin, and 100,000 options held by each of Guy Picken and Rick Lazar
1,845,000
Total Options on Issue
2
1
10
5
4
22
AERIS ENVIRONMENTAL LTD P A G E 7 2
A U S T R A L I A N S E C U R I T I E S E X C H A N G E
A D D I T I O N A L I N F O R M A T I O N
Voting Rights
At general meetings of the Company, all fully paid ordinary shares carry one vote per share without restriction. On a show
of hands, every member present at such meetings, or by proxy, shall have one vote and, upon a poll, each share shall have
one vote. Option holders have no voting rights until the options are exercised.
Substantial Shareholders
Substantial shareholders in Aeris Environmental Ltd, based on Substantial Shareholder Notices received by the ASX and the
Company, are as follows:
Name
Maurie Stang
Bernard Stang
Link Traders (Aust) Pty Ltd
Link Enterprises International Pty Ltd
Link Enterprises International Pty Ltd
Steven Kritzler
On-Market Buy-Back
There is no current on-market buy-back of shares in the Company.
Number
19,816,267
15,928,109
13,659,371
Class
Voting Power
Ordinary fully paid shares
Ordinary fully paid shares
Ordinary fully paid shares
12.80%
10.30%
9.02%
8,331,609
Ordinary fully paid shares
5.40%
ANNUAL REPORT 2017 C O R P O R A T E D I R E C T O R Y
P A G E 7 3
AERIS ENVIRONMENTAL LTD
ACN:
ABN:
093 977 336
19 093 977 336
DIRECTORS
Non-Executive Chairman
Maurie Stang
Steven Kritzler Non-Executive Director
Bernard Stang Non-Executive Director
Non-Executive Director
Alex Sava
CHIEF EXECUTIVE OFFICER
Peter Bush
Chief Executive Officer, Chief Financial Officer and Alternate Director
COMPANY SECRETARY
Robert Waring
REGISTERED AND PRINCIPAL OFFICE
Unit 5, 26-34 Dunning Avenue
Rosebery NSW 2018 Australia
Telephone:
Facsimile:
Email:
Website:
+61 2 8344 1315
+61 2 9697 0944
info@aeris.com.au
www.aeris.com.au
SHARE REGISTRY
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street, Abbotsford VIC 3067
GPO Box 2975, Melbourne VIC 3001 Australia
Telephone:
Telephone:
Facsimile:
Website:
Investor Link:
+61 3 9415 4000
1300 850 505 (within Australia)
+61 3 9473 2500
www.computershare.com
www.investorcentre.com
AUDITOR
UHY Haines Norton Sydney
Level 11, 1 York Street, Sydney NSW 2000
GPO Box 4137, Sydney NSW 2001
Telephone:
Website:
+ 61 2 9256 6600
www.uhyhnsydney.com.au
STOCK EXCHANGE
The Company’s fully paid ordinary shares are quoted on the official list of the Australian Securities Exchange (ASX Limited).
ASX CODE
AEI
AERIS ENVIRONMENTAL LTD
AERIS ENVIRONMENTAL LTD
ACN 093977336