ANNUAL REPORT
18/19
CORPORATE DIRECTORY
CURRENT DIRECTORS
Kevin Moriarty - Executive Chairman
Robert Shepherd - Non Executive Director
Dana Larson - Non Executive Director
SOLICITORS
HWL Ebsworth Lawyers
Level 21, 91 Kin William Street
Adelaide SA 5000
COMPANY SECRETARY
Richard Willson
REGISTERED OFFICE &
PRINCIPAL PLACE OF BUSINESS
1414 De rees Limited
Level 4, 81 Flinders Street
Adelaide SA 5000
Telephone: +61 8 8357 8273
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Telephone: +61 3 9415 4000
Website: www.computershare.com.au
STOCK EXCHANGE
1414 De rees Limited shares are quoted
on the Australian Securities Exchan e
(ASX:14D)
Wallmans Lawyers
Level 5, 400 Kin William Street
Adelaide SA 5000
PATENT & TRADE MARK ATTORNEYS
Madderns
Level 4, 19 Gou er Street
Adelaide SA 5000
AUDITOR
BDO Advisory (SA) Pty Ltd
Level 7, 420 Kin William Street
Adelaide SA 5000
WEBSITE
www.1414de rees.com.au
We are deliverin . Thank you
for your support and commitment
to the rowth of our Company.
1414 DEGREES LIMITED | ANNUAL REPORT 18/19
Global opportunities continue to be
presented to us and we are rowin our
21 stron team on both a technical and
corporate level.
Thank you for your support and
commitment. Many shareholders have
assisted us to realise our potential with
referrals, notes of acknowled ement
and by sharin enthusiasm for the
rowth of 1414 De rees.
Your Company is well positioned to
enable and benefit from the transition
to a rowin renewable ener y market.
Our ener y solutions will lower costs
and carbon risk, providin positive
economic and environmental outcomes
for shareholders and the wider
community.
Yours sincerely,
DR KEVIN MORIARTY
EXECUTIVE CHAIRMAN
Chairman's Letter
to Shareholders
At the same time, increased lar e scale
renewable eneration comin onto
the electricity rid has led to fallin
prices for lon term power purchase
a reements (PPAs), and increased
opportunities for stora e to earn
revenues from arbitra e. The key
outcome for shareholders has been
your Company brin in forward the
plans outlined in the prospectus, to sell
ener y supply solutions for customers.
Our thermal ener y stora e will be at
the core of each tailored ener y supply
a reement for heat and electricity
customers. Renewable ener y will be
sourced either locally or throu h PPAs
over the electricity network, and
converted to heat for the customer or
traded on the rid creatin multiple
sources of revenue.
As also outlined in the prospectus, your
Company will partner with retail and
financin entities to deliver solutions to
these customers. Our recently
announced a reements with Enova
Ener y, Ampcontrol and BE Power are
intended to develop solutions for the
Stone and Wood brewery in New South
Wales, and a Nectar Farms reenhouse
in South Australia, followin feasibility
studies. Realisation of these projects or
others under consideration will provide
a stron foundation for
commercialisation of the electrically
char ed TESS up to i awatt hour
scale.
Our as fired ener y stora e
system (GAS-TESS) will enable a
different revenue model based on direct
sales to wastewater treatment utilities
and industries includin dairies and
food processors, backed by operation
and maintenance a reements.
Your Company continues to develop its
people and culture to deliver our vision.
Dr Kevin Moriarty
Executive Chairman
Dear Shareholders,
I am pleased to report that your
Company has continued its rowth
trajectory, focused on the inte ration of
stora e for a viable renewable ener y
future – both within Australia and
internationally. We have been deliverin
on the objectives outlined in the IPO
prospectus a year a o, adaptin them
where necessary to accommodate a
chan in ener y market.
The core focus for your Company is to
develop its ener y stora e technolo y
and prove it in operational sites. This is
pro ressin well, with the GAS-TESS
now operatin at SA Water’s Glenel
Wastewater Treatment Plant, and
the recently announced new pilot sites
and partnerships that will allow us to
prove viability of the TESS-IND and the
TESS-GRID.
Our revenue strate ies have been
adapted to accommodate
developments in the National Electricity
Market alon side the fallin market for
renewable ener y certificates. The latter
underpinned the economic model for
the installation of renewable eneration
on the sites of heat customers,
includin packa in manufacturers and
the poultry industry.
1414 DEGREES LIMITED | ANNUAL REPORT 18/19
Corporate
Governance
1414 De rees Limited and the Board are
committed to achievin and
demonstratin the hi hest standards of
corporate overnance.
The Company has reviewed its
corporate overnance practices a ainst
the Corporate Governance Principles
and Recommendations (3rd edition)
published by the ASX Corporate
Governance Council.
The 2019 Corporate Governance
Statement is dated as at 30 June 2019
and reflects the corporate overnance
practices in place throu hout the 2019
financial year.
The 2019 Corporate Governance
Statement has been approved by the
Board.
A description of the Company’s current
corporate overnance practices is set
out in the Corporate Governance
Statement which can be viewed at
www.1414de rees.com.au
1414 DEGREES LIMITED
ACN 138 803 620
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2019
CONTENTS
Directors' Report
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
Directors' Declaration
Independent Auditor's Report
Page
1
9
10
11
12
13
26
27
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 1
The directors of 1414 Degrees Limited present their report on the company for the financial year ended 30 June 2019.
DIRECTORS
The following persons were directors of 1414 Degrees Limited during the whole of the financial year and up to the date of this report, unless otherwise stated:
Kevin Charles Moriarty - Chairman
Robert John Keith Shepherd
Dana Larson
COMPANY SECRETARY
Richard Willson
PRINCIPAL ACTIVITIES
1414 Degrees Limited is commercialising bulk energy storage solutions to transform intermittent renewable generation into baseload electricity and decarbonise
heat supply. Its technology uses renewable electricity or biogas to provide combined heat and power solutions for consumers while stabilising electricity grids.
Its silicon-based thermal energy storage devices provide compact solutions with the advantages of scalability, low cost, long life and flexible placement.
DIVIDENDS
No dividends have been paid during or since the financial year ended 30 June 2019.
REVIEW OF OPERATIONS
A summary of economic revenues and results is set out below:
The Company’s technology continued to receive enquiries from Australian and global companies and utilities, attracted by the ability to provide a combination
of base load heat and electric power sourced from renewables. The future of the company as a provider of combined heat and power solutions to lower costs for
consumers came more sharply into focus. This contrasts with other storage that focus solely on electricity - a smaller market than heat. Large scale
electrification of heat energy could make this Company a market leader, reducing emissions for a much greater market segment than electricity generation and
consumption.
Preliminary commissioning of a full sized electrically charged TESS-IND prototype was completed in late 2018 at the Company’s facility at Southlink Industrial
Park. Two turbine runs of three and eight hours, powered from stored energy, were verified by Bureau Veritas Asset Integrity and Reliability Services Pty Ltd. A
full test of capability was deferred pending installation of a fully insulated, redesigned TESS-IND MkII at a commercial site with heat demand.
The Company continued to evaluate commercial sites for TESS, particularly those that are currently using LPG because of the favourable financials. It entered
into an arrangement with Austcor’s majority shareholder, ABBE Corrugated Pty Ltd to undertake studies for a pilot TESS at their Victorian plant. That plant uses
network gas and the project is still under consideration. The proposed TESS hot water supply for Pepe’s Ducks is still under consideration.
In December the GAS-TESS components were moved from Southlink Industrial Park to the Company’s first commercial test site at SA Water’s Glenelg Wastewater
Treatment Plant. In March the GAS-TESS was commissioned and entered into an extended period of characterisation test runs. The GAS-TESS reached operating
temperature and started generating electricity and heat for the wastewater treatment plant very quickly considering it is the first build of the technology.
Augmentations to enhance performance will be determined following several months of operational testing.
The business development team continues to refine commercial revenue models for the electrically charged TESS, focusing on the conversion of intermittent
renewable electricity supply into on-demand heat and electricity for consumers. These indicate favourable revenue outcomes for the foreseeable future at
appropriate sites. The analysis is being extended to small and large sites that have been proposed to the company by consumers. The team has also been
developing business models and agreements for TESS units in conjunction with a community retailer, and progressed assessments of large heat consuming
industries located near sub stations on the national electricity network. High level modelling, based on low-cost power purchase agreements and energy trading,
projects positive revenues for the company and lower energy costs for the industrial consumers. This modelling continues to be refined and extended to
encompass future energy market scenarios.
Research and development activity focused on lower cost thermal storage and higher efficiency. The intention is to achieve very large-scale silicon storage with
decreasing cost per unit of stored energy.
During the financial year the company completed its IPO and listed on the Australian Securities Exchange (ASX).
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In the twelve month period ending 30 June 2019 the company issued 46,680,977 shares raising $16,143,155.00.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Nil.
ENVIRONMENTAL REGULATION
The company is not subject to significant environmental regulations and is not aware of any breaches of any environmental regulations during the year.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 2
MEETINGS OF DIRECTORS
The number of meetings of the board of directors (including board committees) held during the year ended 30 June 2018, and the number of meetings attended
by each director are set out below:
Directors
Kevin Moriarty
Robert Shepherd
Dana Larson
Board
Committee
Held
Attended
Held
Attended
7
7
7
7
7
7
0
0
0
0
0
0
INFORMATION ON DIRECTORS
Name:
Title:
Qualifications:
Kevin Moriarty
Executive Chairman
BSc (Hons), Ph.D., MAusIMM
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Interests in options:
Contractual rights to shares:
Kevin has over 40 years of mining and oil exploration and development experience and 29 years of corporate experience
in roles including Chairman and Managing Director of listed companies. He founded and led several companies to
develop mines in Australia and Africa. He has served as director and chairman of a number of ASX listed companies
guiding their restructure and relisting. He has researched deep sea sediments, cave and fossil deposits and published
papers on climate change as an honorary research fellow of Flinders University and the Australian National University.
None
None
12,403,000 ordinary shares
None
None
Name:
Title:
Qualifications:
Robert Shepherd
Non-Executive Director
FIPA, CTA, JP
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Interests in options:
Contractual rights to shares:
Robert is a qualified accountant who has practised for 49 years as a public accountant specialising in income tax
compliance and company administration. He has owned and managed his own practice with a clientele ranging from
primary producers, small business retail clients and medium sized businesses. He has had local Government experience
and held a senior executive position for several years in a national sporting body in addition to operating his accounting
practice. He is a founding investor and director of 1414 Degrees from its incorporation, involved in management,
administration and has provided significant funding through the development of the Company.
None
None
7,107,594 ordinary shares
None
None
Name:
Title:
Qualifications:
Dana Larson
Non-Executive Director
B.Sc Chemical and Petroleum Engineering
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Interests in options:
Contractual rights to shares:
Dana is an energy expert with 16 years’ of experience primarily focusing on acquisitions, reservoir engineering, financial
modelling, and engineering management. He has a passion for cultivating a culture of success and for leveraging
technical knowledge to create and optimise value for companies. He consults for hedge funds and wealthy individuals
on exploration & production, mining, and renewable energy and is currently running an energy acquisition and
divestiture consultancy.
None
None
250,000 ordinary shares
None
None
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless
otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of
entities, unless otherwise stated.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 3
COMPANY SECRETARY
Richard Willson is an experienced, Non-Executive Director, Company Secretary and CFO with more than 20 years’ experience predominantly within the mining
and agricultural sectors for both publicly listed and private companies. Richard has a Bachelor of Accounting from the University of South Australia, is a Fellow
of CPA Australia, and a Fellow of the Australian Institute of Company Directors. He is a Non-Executive Director of Titomic Limited (ASX:TTT), AusTin Mining
Limited (ASX:ANW), Thomson Resources Limited (ASX:TMZ), Graphene Technology Solutions Limited, Unity Housing Company Limited, and Variety SA; and
Company Secretary of a number of ASX Listed Companies. Richard is the Chairman of the Audit Committee of Titomic Limited, AusTin Mining Limited, and Unity
Housing Company, and is the Chairman of the Remuneration & Nomination Committee of Titomic Limited.
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of
the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Employment agreements
Share-based compensation
Additional disclosures relating to key management personnel
●
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results
delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered
to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key
criteria for good reward governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the Company depends
on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The Board has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the Company.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders'
interests by:
●
having economic profit as a core component of plan design
●
●
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return
on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate.
Non-executive directors’ remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. The Board may, from time to time, receive advice from
independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees
are determined independently to the fees of other non-executive directors based on comparative roles in the external market . Non-executive directors do not
receive share Performance Rights or other incentives.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. The maximum annual aggregate
remuneration for non-executive directors has been set at $300,000.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 4
Executive remuneration
The Company aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable
components.
The executive remuneration and reward framework has three components:
●
●
●
base pay and non-monetary benefits
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
The Company has a Performance Rights Plan under which it can issue Performance Rights to staff and executives.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Company are set out in the following tables.
The key management personnel of the Company consisted of the following directors of 1414 Degrees Ltd:
●
●
●
Robert Shepherd - Non-Executive Director
Dana Larson - Non-Executive Director
Kevin Moriarty – Executive Chairman and Chief Executive Officer
And the following persons:
●
●
●
Penelope Bettison - Head of Corporate Services
Richard Willson - Company Secretary
Jordan Parham - Chief Operating Officer (appointed on 14 January 2019)
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based payments
Cash salary
and fees
Cash
bonus
Non-
monetary
Super-
annuation
Long service
leave
Equity-
settled
shares
Equity-
settled
Performance
Rights
Total
2019
$
$
$
$
$
$
$
$
Non-Executive Directors:
Robert Shepherd
Dana Larson *
Executive Directors:
32,167
23,333
Kevin Moriarty (Chairman)
297,749
Other Key Management Personnel:
Penelope Bettison
Richard Willson
Jordan Parham **
195,750
106,400
99,000
754,399
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,056
-
-
-
20,479
6,046
18,525
9,386
8,716
60,162
3,795
954
1,891
12,686
-
-
-
-
-
-
-
-
-
-
35,223
23,333
324,275
11,341
869
14,183
26,393
229,412
117,609
123,790
853,641
*
**
Represents remuneration from 1 December 2018 to 30 June 2019
Represents remuneration from 14 January 2019 to 30 June 2019
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 5
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based payments
Cash salary
and fees
Cash
bonus
Non-
monetary
Super-
annuation
Long service
leave
Equity-
settled
shares
Equity-
settled
Performance
Rights
Total
2018
$
$
$
$
$
$
$
$
Non-Executive Directors:
Robert Shepherd
Dana Larson
Executive Directors:
Kevin Moriarty (Chairman)
Matthew Johnson
Other Key Management Personnel:
Penelope Bettison
Richard Willson
Employment agreements
-
-
80,710
79,575
160,024
91,557
411,866
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
6,938
-
13,991
8,177
29,105
315
-
410
262
987
-
-
-
-
50,000
-
-
-
-
-
-
-
-
50,000
87,963
79,575
174,424
99,996
491,957
Remuneration and other terms of employment for key management personnel are formalised in employment agreements. Details of these agreements are as
follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Robert Shepherd
Non-Executive Director
11 September 2009
Ongoing
Director fee for the year ending 30 June 2019 of $40,000 plus superannuation.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Dana Larson
Non-Executive Director
1 December 2018
Ongoing
Director fee for the year ending 30 June 2019 of $40,000.
Name:
Title:
Agreement commenced:
Term of agreement:
Kevin Moriarty
Executive Chairman and Chief Executive Officer
1 January 2018
2 years
Details:
Base salary for the year ending 30 June 2019 of $150,000 plus superannuation before IPO and 295,000 plus superannuation after IPO.
6-month termination notice by either party.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Penelope Bettison
Head of Corporate Services
1 March 2019; varied from previous fixed term agreement
Ongoing
Base salary for the year ending 30 June 2019 of $195,000 plus superannuation. 3 month termination notice by either party. Issue of
Performance Rights to the value of $101,995, vesting after 12 months subject to meeting performance criteria 1 : 14D Shares
achieving a 30 Day VWAP of $0.70 by 31/12/2019 and criteria 2 : 14D Shares achieving a 30 day VWAP of $1.00 by 31/12/2020.
Richard Willson
Company Secretary
19 October 2017; varied effective 1 February 2019
Ongoing
Base salary for the year ending 30 June 2019 of $62,400 plus superannuation,. 3 month termination notice by either party. Issue of
Performance Rights to the value of $7, 261, vesting after 12 months subject to meeting performance criteria 1 : 14D Shares achieving
a 30 Day VWAP of $0.70 by 31/12/2019 and criteria 2 : 14D Shares achieving a 30 day VWAP of $1.00 by 31/12/2020.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 6
Employment agreements (Continued)
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Jordan Parham
Chief Operating Officer
14 January 2019
Ongoing
Base salary for the year ending 30 June 2019 of $195,000 plus superannuation. 3 month termination notice by either party. Issue of
Performance Rights to the value of $45,750, vesting after 12 months subject to meeting performance criteria 1 : Successful
performance review on 15/01/2020 and criteria 2 : Successful test of specific R&D activities by 31/12/2019.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2019
Performance Rights
The terms and conditions of each grant of Performance Rights ("PR") over ordinary shares affecting remuneration of directors and other key management
personnel in this financial year or future reporting years are as follows:
Name
Penelope Bettison
Richard Willson
Jordan Parham
Number of
PR granted
250,000
500,000
25,000
25,000
100,000
100,000
Grant date
Vesting date
Expiry date Exercise price
2-Apr-19
2-Apr-19
2-Apr-19
2-Apr-19
2-Apr-19
2-Apr-19
15-Jan-21
15-Jan-22
15-Jan-21
15-Jan-22
14-Jan-20
14-Jan-20
15-Jan-21
15-Jan-22
15-Jan-21
15-Jan-22
14-Jan-20
14-Jan-20
-
-
-
-
-
-
Fair value
per PR at
grant date
$0.2161
$0.2351
$0.2161
$0.2351
$0.3050
$0.3050
PR granted carry no dividend or voting rights. None of the performance rights in the table are currently vested and therefore cannot be exercised.
All PR were granted over unissued fully paid ordinary shares in the company. The number of PR granted was determined having regard to the satisfaction of
performance measures and weightings as described above in the section 'Company performance and link to remuneration'. PR vest based on the provision of
service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date. PR are exercisable by the holder as from the
vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no amounts paid or payable by the
recipient in relation to the granting of such PR other than on their potential exercise.
Values of PR over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation during the year
ended 30 June 2019 are set out below:
Name
Penelope Bettison
Richard Willson
Jordan Parham
Company performance link to remuneration
Value of PR
granted
during the
year
$
Value of PR
exercised
during the
year
$
Value of PR Remuneration
consisting of
PR for the
year
%
lapsed
during the
year
$
101,995
7,261
45,750
155,006
-
-
-
-
-
-
-
-
5%
1%
11%
17%
The remuneration of key management personnel is linked to the development of the company’s intangible assets, the company completing its IPO and the
continued progress towards developing the pilot TESS plants as described in the review of operations.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 7
Other transactions with key management personnel and their related parties
Merchant Accounting, a company related to Robert Shepherd, charged accounting fees of $6,000 during the year and no balance relating to these charges was
outstanding at 30 June 2019. All transactions were made on normal commercial terms and conditions and at market rates. This Accounting fee was recognised as
an expense in the period.
This concludes the remuneration report, which has been Audited.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management personnel of the Company,
including their personally related parties, is set out below:
Ordinary shares
Robert Shepherd
Dana Larson
Kevin Moriarty
Penelope Bettison
Richard Willson
Jordan Parham
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
7,107,594
250,000
12,403,000
1,000,000
-
-
20,760,594
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
the date of
this report
7,107,594
250,000
12,403,000
1,000,000
-
-
20,760,594
Performance Rights holding
The number of PR over ordinary shares in the company held during the financial year by each director and other members of key management personnel of the
Company, including their personally related parties, is set out below:
PR over ordinary shares
Penelope Bettison
Richard Willson
Jordan Parham
Balance at
the start of
the year
Granted
Exercised
-
-
-
-
750,000
50,000
200,000
1,000,000
Expired/
forfeited/
other
Balance at
the date of
this report
-
-
-
-
-
-
-
-
750,000
50,000
200,000
1,000,000
None of the performance rights in the table above are currently vested and therefore cannot be exercised.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Page 8
INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an auditor of 1414
Degrees Limited.
To the extent permitted by law, the Company has indemnified (fully insured) each director and the secretary of the Company for a premium of $56,000. The
liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings (that may be brought) against the officers in their
capacity as officers of the Company or a related body, and any other payments arising from liabilities incurred by the officers in connection with such
proceedings, other than where such liabilities arise out of conduct involving a willful breach of duty by the officers or the improper use by the officers of their
position or of information to gain advantage for themselves or someone else or to cause detriment to the Company.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in
any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit services provided by the auditor are outlined in note 7 to the financial statements. The
amounts is Nil during the financial year.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf),
is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 49 to the financial statements do not compromise the external auditor's independence
●
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional
Accountants 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.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF ACCOUNTING FIRM BDO
There are no officers of the company who are former partners of Accounting Firm BDO.
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report.
AUDITOR
Accounting Firm BDO continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
Kevin Moriarty
Executive Chairman
Adelaide
Dated this 30th day of August 2019
1414 DEGREES LIMITED
ACN 138 803 620
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Other Income
Administration and Professional Expenses
Occupancy Expenses
Marketing Expenses
Depreciation and Amortisation
Employee Benefits Expense
Share Based Payments (Equity-settled)
Directors Fees
Other Expenses
Finance Costs
IPO Expense
(Loss) before income tax
Income tax benefit / (expense)
(Loss) for the year
Other comprehensive income for the year
Items that will be reclassified subsequently to profit
Total comprehensive (loss) for the year
Basic loss per share
Diluted loss per share
Note
5
6
6
8
16
16
Page 9
2019
AUD$
2018
AUD$
298,820
63,387
926,439
365,709
218,528
33,658
1,567,347
103,339
53,333
700,113
74,507
526,662
(4,270,815)
-
(4,270,815)
566,136
419,547
165,142
24,533
1,311,411
2,173,765
79,575
808,137
-
-
(5,484,860)
-
(5,484,860)
-
-
-
-
-
-
(4,270,815)
(5,484,860)
(2.58) cents
(2.58) cents
(5.03) cents
(5.03) cents
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
1414 DEGREES LIMITED
ACN 138 803 620
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Note
9
10
11
12
13
14
15
17
Page 10
2019
AUD$
2018
AUD$
9,721,192
2,448,344
216,215
12,385,751
928,242
2,480,610
406,015
3,814,867
135,487
5,109,045
5,244,532
17,630,283
139,614
2,174,579
2,314,193
6,129,060
485,316
126,031
611,347
1,115,303
63,505
1,178,808
93,005
93,005
704,352
-
-
1,178,808
16,925,931
4,950,252
29,097,294
123,111
(12,294,474)
16,925,931
12,954,139
19,772
(8,023,659)
4,950,252
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible Assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provision for employee benefits
Total current liabilities
Non-current liabilities
Provision for employee benefits
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Share Based Payments Reserve
Accumulated losses
Total equity
The above statement of financial position should be read in conjunction with the accompanying notes.
1414 DEGREES LIMITED
ACN 138 803 620
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Cash received from customers
Cash paid to suppliers and employees
Government grants
Interest received
Interest paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for product development activities
Government grant received and used for intangible asset
Research and development tax offset received and used for intangible asset
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs related to issues of shares or options
Proceeds from exercise of share options
Proceeds from the issue of shares
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Note
18
9
The above statement of cash flows should be read in conjunction with the accompanying notes.
Page 11
2019
AUD$
2018
AUD$
8,250
(4,291,809)
60,273
163,770
(74,507)
(4,134,023)
51,257
(3,182,962)
9,290
-
(3,122,416)
(29,531)
(6,068,625)
430,930
2,568,476
(3,098,750)
(164,146)
(5,161,873)
1,461,070
459,748
(3,405,201)
1,335,493
(1,335,493)
(315,839)
31,657
16,306,690
16,022,508
8,789,735
3,215
928,242
9,721,192
-
-
-
-
5,847,854
5,847,854
(679,763)
-
1,608,005
928,242
1414 DEGREES LIMITED
ACN 138 803 620
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Page 12
Contributed
equity
$
Share Based
Payments
Reserve
$
Accumulated
Losses
$
Total equity
$
At 1 July 2017
5,066,285
386,007
(3,038,799)
2,413,493
Loss for the year
Other comprehensive income
Total comprehensive income for the year
-
-
-
-
-
-
(5,484,860)
-
(5,484,860)
(5,484,860)
-
(5,484,860)
Transactions with owners in their capacity as owners
Share Based Payments - shares granted and issued in the year
Share Based Payments - annual expense for pre-existing arrangements
Share Based Payment - cancellation without replacement
Share Based Payment - cancellation with replacement shares
Contributions of equity net of transaction costs
At 30 June 2018
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Dividends paid
Employee Share Scheme - Performance Rights Issue
Contributions of equity net of transaction costs
At 30 June 2019
90,000
-
-
1,950,000
5,847,854
7,887,854
-
8,402
(116,541)
(258,096)
-
(366,235)
-
-
500,000
-
-
500,000
90,000
8,402
383,459
1,691,904
5,847,854
8,021,619
12,954,139
19,772
(8,023,659)
4,950,252
-
-
-
-
-
-
(4,270,815)
-
(4,270,815)
(4,270,815)
-
(4,270,815)
-
-
16,143,155
16,143,155
-
103,339
-
103,339
-
-
-
-
-
103,339
16,143,155
16,246,494
29,097,294
123,111
(12,294,474)
16,925,931
The above statement of changes in equity should be read in conjunction with the accompanying notes.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 13
NOTE 1
CORPORATE INFORMATION
The financial statements of 1414 Degrees Limited for the year ended 30 June 2019 were authorised for issue in accordance with a resolution of the directors on
20 August 2019 and cover the company as required by Australian Accounting Standards.
The financial statements are presented in the Australian currency.
1414 Degrees Limited is a company limited by shares incorporated and domiciled in Australia.
The address of the company's registered office and principal place of business is Level 4, 81 Flinders Street, Adelaide SA 5000.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
These financial statements are general purpose financial statements prepared in accordance with Australian Accounting Standards, Australian Interpretations
and other authoritative pronouncements of the Australian Accounting Standards Board. The company is a for-profit company for financial reporting purposes
under Australian Accounting Standards.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing 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.
The financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets,
financial assets and financial liabilities for which the fair value basis of accounting has been applied. Amounts have been rounded to whole dollars.
The following significant accounting policies have been adopted in the preparation and presentation of the financial statements.
The accounting policies have been consistently applied, unless otherwise stated.
(b) Other Income Recognition
All revenue is stated net of the amount of goods and services tax (GST).
Grant
Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the company will comply
with all the attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with
the costs that they are intended to compensate. Government grants relating to intangible assets are deducted from the cost of the asset.
Interest
Interest is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate
that exactly discounts the estimated future cash receipts over the expected life of the financial asset.
(c) Goods and Services Tax (GST)
Revenues and expenses are recognised net of GST except where GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is
included as part of receivables or payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities,
which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 14
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Income Tax
The income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting
purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled. Exceptions are made for certain
temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of
the transaction did not affect either accounting profit or taxable profit.
Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available
to utilise those temporary differences and losses.
Current and deferred tax balances relating to amounts recognised directly in other comprehensive income are also recognised in other comprehensive income.
(e) Impairment of Assets
At the end of each reporting period, the company assesses whether there is any indication that individual assets are impaired. Where impairment indicators
exist, recoverable amount is determined and impairment losses are recognised in profit or loss where the asset's carrying value exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. The intangible asset that is not yet ready for use is also tested for impairment annually.
Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the
asset belongs.
(f) Cash and Cash Equivalents
For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank, deposits held at call with financial institutions,
other short term, highly liquid investments, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value and bank overdrafts.
(g) Property, Plant and Equipment
Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management, less depreciation and any impairments.
The carrying amount of plant and equipment is reviewed annually by the directors to ensure it is not in excess of the recoverable amount from these assets. The
recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets' employment and subsequent disposal. The
expected net cash flows have been discounted to their present values in determining recoverable amounts.
The depreciable amount of all fixed assets is depreciated on a straight line or diminishing value basis over the asset’s useful life to the company commencing
from the time the asset is held ready for use. The following estimated useful lives will be used in the calculation of depreciation:
- Plant and equipment
2 - 15 years
The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset's carrying amount and are included in profit or
loss in the year that the item is derecognised.
(h) Intangible Assets
Product Development
Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility
studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Expenditure capitalised comprises costs of
materials and services. The carrying value of development costs is reviewed annually when the asset is not yet available for use, or when events or
circumstances indicate that the carrying value may be impaired. As the asset is not yet available for use, the useful life has not yet been determined.
The R&D refund is recognised on an accrual basis, calculated using actual costs incurred on eligible activities and is subject to potential review by Government
for up to 5 years.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 15
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Leases
Leases of property, plant and equipment where the company has substantially all the risks and rewards of ownership are classified as finance leases and
capitalised at inception of the lease at the fair value of the leased property, or if lower, at the present value of the minimum lease payments. Lease payments
are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
Leases where the lessor retains substantially all the risks and rewards of ownership of the net asset are classified as operating leases. Payments made under
operating leases (net of incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Lease income from operating leases is recognised in profit or loss on a straight-line basis over the lease term.
(j) Trade and Other Payables
Trade and other payables represent liabilities for goods and services provided to the company prior to the year end and which are unpaid. These amounts are
unsecured and are usually paid within 30 days of recognition.
All trade and other payables are non interest bearing.
(k) 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 wholly within 12 months of the
reporting date are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated
future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the American or Black-
Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-
vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is
taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to
profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired
portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts
already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective
of whether or not that market condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised,
over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of
modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the
condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is
recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a
new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 16
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Contributed Equity
Ordinary shares are classified as equity.
Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit.
(m) 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. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined
based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the entity has transferred substantially all the
risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit
or loss. Typically, such financial assets will be 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 a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the entity intends to hold for the foreseeable future and has
irrevocably elected to classify them as such upon initial recognition.
Impairment of financial assets
The entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other
comprehensive income. The measurement of the loss allowance depends upon the entity's assessment at the end of each reporting period as to whether the
financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This
represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a
financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's
lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated
cash shortfalls over the life of the instrument discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all
other cases, the loss allowance is recognised in profit or loss.
(n) Accounting Standards Issued But Not Yet Effective
Certain new accounting standards and interpretations have been published that are not mandatory for reporting periods ending 30 June 2019.
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective or adopted.
Standards and Interpretations in issue not yet adopted
AASB 16 'Leases'
Effective for annual
1-Jan-19
Expected to be initially
30-Jun-20
The company has not assessed the impact of adoption.
(o) Application of new and revised Accounting Standards
The company has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
('AASB') that are mandatory for the current reporting period.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the company.
AASB 9 Financial Instruments
The entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on
specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held
within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal
and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss
unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 17
NOTE 2
(o) Application of new and revised Accounting Standards (continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
AASB 9 Financial Instruments (Continued)
contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be
irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities
designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be
presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the
accounting treatment with the risk management activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL') model to recognise an
allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial
recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime
expected loss allowance is available.
Impact of adoption
AASB 9 was adopted using the modified retrospective approach and as such comparatives have not been restated. The impact of adoption on opening retained
profits as at 1 July 2018 was nil.
AASB 15 Revenue from Contracts with Customers
The entity has adopted AASB 15 from 1 July 2018. There was no impact because the entity has not recognised revenue.
NOTE 3
ACCOUNTING ESTIMATES AND JUDGEMENTS
The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current
information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and
within the company.
Key Estimates - Impairment
The company assesses impairment at the end of each reporting period by evaluating conditions and events specific to the company that may be indicative of
impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions.
With respect to cash flow projections for intangible assets and those with a finite useful life but not yet considered ready for use, relevant inputs have been
factored into valuation models for the next 5 years on the basis of management’s expectations regarding the growth of the market and the company’s ability to
capture market share. Pre-tax discount rates of 5% have been used in all models.
The intangible asset is tested for impairment at the end of the reporting period.
Key Judgements - Product Development
Included within intangible assets at the end of the reporting period is Product Development with a net carrying value of $5,109,045 (2018: $2,174,579 ) being
the carrying value of the Product Development intangible asset of $13,017,713 (2018: $6,949,088) less the associated Government Grant funding of $2,332,000
(2018: $1,901,070) and the R&D refundable tax offsets applied of $5,576,668 (2018: $2,873,439). The directors believe that while the development and
commercialisation of the technology remains in-progress and the asset is not yet generating economic benefits (beyond customer trials), it is not considered
ready for use. A reliable estimate for the useful life of the asset will only be capable of being determined once the asset is assessed as ready for use, after which
point, amortisation will commence. The directors are satisfied that it is probable that the intangible asset will generate future economic benefits based on
internal financial models and potential project scenario analysis.
NOTE 4
SEGMENT REPORTING
There is only one segment which is the entire business, which operates entirely within Australia.
OTHER INCOME
NOTE 5
Interest Received
Rent & Office Recoveries
Provision of services
Government grants
NOTE 6
Profit(loss) before income tax includes the following specific expenses:
EXPENSES
Depreciation expense
Furniture and fixtures
Office equipment
Superannuation expense
Defined contribution superannuation expense
2019
AUD$
2018
AUD$
238,547
-
-
60,273
298,820
9,290
39,097
15,000
-
63,387
17,282
16,376
33,658
13,145
11,387
24,533
121,533
121,533
105,383
105,383
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
EXPENSES (continued)
NOTE 6
Share based payment expense
Employee Share Scheme - Performance Rights
Shares issued during the period - new arrangements
Amortisation of pre-existing agreements still on hand at respective balance date
Expense of cancelling pre-existing arrangement and issuing replacement shares
Expense of cancelling pre-existing arrangement without replacement
NOTE 7
Audit services
AUDITORS' REMUNERATION
Amounts paid/payable to BDO for audit of the financial statements of the company
Amounts paid/payable to a related practice of the auditor for corporate finance services
NOTE 8
INCOME TAX EXPENSE
Income Tax expense/(benefit) comprises:
Current tax expense
Current tax expense/(benefit)
Adjustments for previous years
Total current income tax expense
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense/(benefit) in profit or loss
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax
expense/(benefit) in the financial statements as follows:
Profit/(Loss) from operations before tax
Income tax calculated at 27.5%
Tax effect of amounts which are not deductible (taxable) in calculating taxable income
Non-deductible expenses
Assessable income not included in profit/loss
Other reconciling items
Timing differences on deferred tax assets not recognised
Tax losses not recognised
The amount of gross tax losses relating to Australian operations that are carried forward is $5,388,118 (2018: $2,160,039).
NOTE 9
CASH AND CASH EQUIVALENTS
Cash at bank
Cash term deposits
An amount of $215,582 included as cash has been set aside to support a bank guarantee issued to the landlord of the rented premises.
NOTE 10
TRADE AND OTHER RECEIVABLES
Trade receivables
R&D refundable tax offset
Other receivables
Page 18
2019
AUD$
2018
AUD$
103,339
-
-
-
-
103,339
-
90,000
8,042
1,691,904
383,459
2,173,405
32,105
-
32,105
19,413
27,000
46,413
-
-
-
-
-
-
-
-
-
-
-
-
(4,270,815)
(5,484,860)
(1,174,474)
(1,508,336)
172,984
118,506
599,405
402,253
(48,789)
(31,241)
44,051
887,722
-
17,464
520,456
-
1,588,487
928,242
8,132,705
-
9,721,192
928,242
-
8,250
2,448,344
2,313,591
-
158,769
2,448,344
2,480,610
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 11
OTHER CURRENT ASSETS
Prepayments
Prepaid IPO Costs
Accrued Interests Receivable
NOTE 12
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment
At cost
Accumulated depreciation
Reconciliation of Plant and equipment
Balance at the beginning of the year
Additions
Disposals
Depreciation expense
Closing carrying value
Total Property, Plant and Equipment
INTANGIBLE ASSETS
NOTE 13
Product Development - Intellectual Property
Intangible assets under development - at cost
Government Grants applied
R&D Refundable Tax Offset applied
Accumulated amortisation
Reconciliation of Product Development - Intellectual Property
Balance at the beginning of the year
Additions
Government Grants applied
R&D Refundable Tax Offset applied
Closing carrying value
Total Intangible Assets
Page 19
2019
AUD$
2018
AUD$
141,438
-
-
406,015
74,777
216,215
-
406,015
193,678
(58,191)
135,487
139,614
29,532
-
(33,658)
135,487
164,146
(24,533)
139,614
-
164,146
-
(24,533)
139,614
135,487
139,614
13,017,713
(2,332,000)
(5,576,668)
-
5,109,045
2,174,579
6,068,625
(430,930)
(2,703,229)
5,109,045
5,109,045
6,949,088
(1,901,070)
(2,873,439)
-
2,174,579
787,367
5,161,873
(1,461,070)
(2,313,591)
2,174,579
2,174,579
Intellectual property consists of TESS (thermal energy storage system) development of bulk energy storage solutions.
No amortisation has been recognised as the intellectual property is not available for use as at 30 June 2019. The intangible asset is tested for impairment
annually. The government grant relates to accelerating the commercialisation of the company's intellectual property.
The recoverable amount of the entity's intangible assets has been determined by a value-in-use calculation using a discounted cash flow model, based on a 4
year projection period approved by management and extrapolated for a further 4 years using a steady rate.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model:
● 10% pre-tax discount rate;
● No revenue earned until 2021;
● 50% per annum projected revenue growth rate from 2021 to 2023;
● 20% per annum projected revenue growth rate from 2024 to 2027;
● 10% per annum increase in operating costs and overheads from 2021 to 2027.
The discount rate of 10% pre-tax reflects management’s estimate of the time value of money and the consolidated entity’s weighted average cost of capital, the
risk free rate and the volatility of the share price relative to market movements.
Management believes the projected revenue growth rate is justified, based on the potential indicated in the market.
There were no other key assumptions.
TRADE AND OTHER PAYABLES
NOTE 14
Trade and other payables
Other payables and accruals
424,013
61,303
485,316
1,015,540
99,763
1,115,303
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 15
CONTRIBUTED EQUITY
Share capital
Ordinary shares - authorised, issued and fully paid opening balance
Shares issued
Exercise of share options
Costs of issue
Ordinary shares - authorised, issued and fully paid closing balance
Page 20
2019
No. of Shares
2019
AUD$
125,708,946
12,954,139
46,590,528
16,306,690
90,449
31,657
-
(195,192)
172,389,923
29,097,294
Ordinary shareholders are entitled to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid
on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll.
Ordinary shares have no par value.
Capital Management
Management controls the capital of the company in order to ensure that the company can fund its operations and continue as a going concern.
The company's capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital
requirements.
Management effectively manages the company’s capital by assessing the company’s financial risks and adjusting its capital structure in response to changes in
these risks and in the market. There have been no changes in the strategy adopted by management to control the capital of the company since the prior year
and the objectives for managing capital have been met.
NOTE 16
EARNINGS PER SHARE
Earnings per share for profit (loss)
Profit (loss) after income tax
Profit (loss) after income tax attributable to the owners of 1414 Degrees Ltd
2019
AUD$
2018
AUD$
(4,270,815)
(5,484,860)
(4,270,815)
(5,484,860)
Profit (loss) after income tax attributable to the owners of 1414 Degrees Ltd used in calculating diluted earnings per share
(4,270,815)
(5,484,860)
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares if dilutive
Convertible notes
Cents
Cents
(2.58)
(2.58)
(5.03)
(5.03)
Number
Number
165,823,930
109,097,161
-
-
-
-
-
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
165,823,930
109,097,161
The performance rights have not been taken into account when calculating diluted earnings per share as they are anti dilutive.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 21
NOTE 17
SHARE BASED PAYMENTS
No shares were issued to key management personnel in this financial year. In the year ended 30 June 2018 former key management personnel were issued
3,600,000 ordinary shares as a result of the cancellation and replacement of share based payment contracts.
A share option plan has been established by the company, whereby the company may, at the discretion of the board, grant Performance Rights (PR) over
ordinary shares in the company to certain employees of the company. The PR are issued for nil consideration and are granted in accordance with performance
guidelines established by the board.
Set out below are summaries of PR granted under the plan:
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
1/07/2019
14/01/2020
15/01/2020
1/07/2020
15/01/2021
15/01/2022
15/01/2023
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
-
-
-
-
-
-
-
-
75,000
200,000
925,000
350,000
925,000
2,225,000
1,100,000
5,800,000
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
(200,000)
-
-
(1,250,000)
-
75,000
200,000
725,000
350,000
925,000
975,000
1,100,000
(1,450,000)
4,350,000
Weighted average exercise price
$0.00
$0.00
$0.00
$0.00
$0.00
There is no Performance Rights exercisable at the end of the financial year and no Performance Rights granted during 2018 financial year.
The weighted average share price during the financial year was $0.30.
The weighted average remaining contractual life of Performance Rights outstanding at the end of the financial year was 2.01 years (2018: Nil).
For the PR granted during the current financial year, the valuation model used for PR with market performance conditions is The American model while The
Black Scholes model is used for PR with non-market performance conditions. The risk-free interest rates are based on the government bond yield for relevant
periods. The expected volatility is based on the actual market volatility between 12/09/2018 and 2/04/2019 for the shares of the company. The valuation model
inputs used to determine the fair value at the grant date are as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
2/04/2019
1/07/2019
14/01/2020
15/01/2020
1/07/2020
15/01/2021
15/01/2022
15/01/2023
15/01/2021
15/01/2022
$0.305
$0.305
$0.305
$0.305
$0.305
$0.305
$0.305
$0.305
$0.305
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
99.50%
99.50%
99.50%
99.50%
99.50%
99.50%
99.50%
99.50%
99.50%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
1.46%
1.46%
1.46%
1.46%
1.46%
1.40%
1.40%
1.46%
1.46%
$0.3050
$0.3050
$0.3050
$0.3050
$0.3050
$0.3050
$0.3050
$0.2161
$0.2351
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 18
Reconciliation of profit after income tax to net cash flow from operating activities
CASH FLOW INFORMATION
Loss for the year
Non-cash flows in profit/(loss):
- Depreciation and Amortisation
- Share Based Payments
- Foreign exchange differences
- IPO Cost Expensed
Change in operating assets and liabilities
- (increase)/decrease in trade and other receivables
- (increase)/decrease in other current assets
- increase/(decrease) in trade and other payables
- increase/(decrease) in employee benefits
Net cash flow from operating activities
CONTINGENCIES
NOTE 19
Contingent Liabilities
At 30 June 2019 those charged with governance of the company note that there are no known contingent liabilities (2018: nil).
Page 22
2019
AUD$
2018
AUD$
(4,270,815)
(5,484,860)
33,658
103,339
(3,215)
526,662
24,533
2,173,765
-
-
167,019
(216,215)
(629,987)
155,531
(4,134,023)
(143,541)
(406,015)
713,702
-
(3,122,416)
NOTE 20
(a)
RELATED PARTY
Related Party Transactions
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless
otherwise stated.
Transactions with related parties:
i.
- Merchant Accounting, a company related to Robert Shepherd, charged accounting fees of $6,000 during the year and no balance relating to these
charges was outstanding at 30 June 2019.
(b)
Director and Director-related Interests in the Company
Ordinary shares
Robert Shepherd
Dana Larson
Kevin Moriarty
NOTE 21
The totals of remuneration paid to KMP of the company during the year are as follows:
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Other long term benefits
Share-based payments
Total KMP compensation
These amounts represent the company's employee benefits expense for the year.
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
Balance at
the date of
this report
7,107,594
250,000
12,403,000
19,760,594
-
-
-
-
-
-
-
-
-
-
-
-
7,107,594
250,000
12,403,000
19,760,594
2019
AUD$
2018
AUD$
754,399
60,162
12,686
26,393
411,866
29,105
987
50,000
853,641 491,957
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 23
NOTE 22
FINANCIAL RISK MANAGEMENT
The company's financial instruments consist mainly of deposits with banks, accounts receivable and payable.
The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these financial statements,
are as follows:
Financial Assets
Financial Assets at amortised cost:
Cash and cash equivalents
Trade and other receivables - R&D tax refund
Total financial assets
Financial Liabilities
Financial Liabilities at amortised cost:
Trade and other payables
Total financial liabilities
General objectives, policies and processes
Note
9
10
14
2019
AUD$
2018
AUD$
9,721,192
2,448,344
12,169,536
928,242
2,480,610
3,408,852
485,316
485,316
1,115,303
1,115,303
In common with all other businesses, the company is exposed to risks that arise from its use of financial instruments. This note describes the company’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 company’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.
Market Risk
The company’s activities have no material exposure to financial risks of changes in interest rates. The company analyses it’s risk by considering sensitivity on its
interest rate exposures and determining the potential impact on it’s effected expenses and revenue of movements in these rates. If the potential variance is
material then management may seek to minimise this exposure but it does not consider this to be the case at this time.
The company undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate
fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not
the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
In order to protect against exchange rate movements, the company is holding deposits of foreign currency to cover major commercial cost in foreign currency.
The foreign currency amounts were purchased around the time the future commitments were entered into to secure the costs in Australian Dollar.
Credit Risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The company does not have any material credit risk exposure to any single debtor or company of debtors under financial instruments entered into by the
company, except for the Australian Taxation Office which is the counterparty to the R&D refundable tax offset shown in note 10. Trade receivables represent
the maximum exposure to credit risk, credit quality is considered good.
Liquidity Risk
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The directors manage liquidity risk by monitoring
forecast cash flows and ensuring that the company's operations are adequate to meet liabilities due.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Page 24
NOTE 22
FINANCIAL RISK MANAGEMENT (continued)
Financial liability and financial asset maturity analysis
Within 1 year
1 to 5 years
Over 5 years
AUD$
2019
AU$
2018
AU$
2019
AU$
2018
AUD$
2019
AUD$
2018
Total
AUD$
2019
AUD$
2018
Financial liabilities due
for settlement
Trade and other payables
Total expected outflows
485,316
485,316
1,115,303
1,115,303
Financial assets - cash
flows realisable
Cash at bank
Trade and other
receivables
Cash term deposits
Sensitivity Analysis
1,588,487
928,242
2,448,344
8,132,705
12,169,536
2,480,610
-
3,408,852
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
485,316
485,316
1,115,303
1,115,303
1,588,487
928,242
2,448,344
8,132,705
12,169,536
2,480,610
-
3,408,852
Interest rate risk
At 30th June 2019 investment in Cash, Fixed Interest and Floating Interest rate deposits amounted to $9,721,192. A +/-1% change in interest rates during the
year ended 30th June 2019 will result in a +/- change in net interest income of $97,212.
At 30th June 2018 investment in Cash, Fixed Interest and Floating Interest rate deposits amounted to $928,242. A +/-1% change in interest rates during the year
ended 30th June 2018 will result in a +/- change in net interest income of $9,280.
Management has considered that both a positive and negative 1% variance is sufficient to illustrate the potential variations in interest income.
Foreign currency risk
Cash at bank held in or trade payables denominated in
US dollars
Euros
Assets
Liabilities
2019
AUD$
2018
AUD$
2019
AUD$
2018
AUD$
356,053
-
356,053
-
-
-
-
8,989
8,989
513
36,549
37,062
The company had net assets denominated in foreign currencies of $347,064 as at 30 June 2019 (2018: net liabilities $37,062).
Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 5% (2018: weakened by 5%/strengthened by 5%) against these foreign
currencies with all other variables held constant, the company's profit before tax for the year would have been $34,706 higher/$17,352 lower (2018: $1,853
lower/$1,853 higher) and equity would have been $34,706 higher/$17,352 lower (2018: $1,853 lower/$1,853 higher).
The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible
fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date.
The actual foreign exchange gain for the year ended 30 June 2019 was $2,951 (2018: loss of $43,410).
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 23
COMMITMENTS FOR EXPENDITURE
Operating leases commitments - minimum lease payment due:
Within 1 Year
Greater than 1 year and not greater than 5 years
Greater than 5 years
Terms of lease arrangements
The Company has in place an operating underlease for its principal place of business which expires on 29/02/2020
The Company has in place an operating lease for its industrial facilities which expires on 31/08/2020
NOTE 24
SUBSEQUENT EVENTS
Nil.
Page 25
2019
AUD$
2018
AUD$
312,401
20,093
-
332,495
398,571
322,741
-
721,312
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' DECLARATION
Page 26
In accordance with a resolution of the directors of 1414 Degrees Limited, the directors of the company declare that:
1
2
3
The financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of cash
flows, statement of changes in equity and accompanying notes are prepared in accordance with Australian Accounting Standards and present fairly the
company's financial position as at 30 June 2019 and its performance for the year ended on that date.
The company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial
Reporting Standards.
In the directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:
Kevin Moriarty
Executive Chairman
Adelaide
Dated this 30th day of August 2019
Tel: +61 8 7324 6000
Fax: +61 8 7324 6111
www.bdo.com.au
Level 7, BDO Centre
420 King William St
Adelaide SA 5000
GPO Box 2018, Adelaide SA 5001
AUSTRALIA
DECLARATION OF INDEPENDENCE
BY ANDREW TICKLE
TO THE DIRECTORS OF 1414 DEGREES LIMTIED
As lead auditor of 1414 Degrees Limited for the year ended 30 June 2019, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
Andrew Tickle
Director
BDO Audit (SA) Pty Ltd
Adelaide, 30 August 2019
BDO Audit (SA) Pty Ltd ABN 33 161 379 086 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (SA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
Tel: +61 8 7324 6000
Fax: +61 8 7324 6111
www.bdo.com.au
Level 7, BDO Centre
420 King William St
Adelaide SA 5000
GPO Box 2018, Adelaide SA 5001
AUSTRALIA
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF 1414 DEGREES LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of 1414 Degrees Limited (the Company), which comprises
the statement of financial position as at 30 June 2019, the statement of profit or loss and other
comprehensive income, the statement of changes in equity and the statement of cash flows for
the year then ended, and notes to the financial report, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion the accompanying financial report of 1414 Degrees Limited, is in accordance with
the Corporations Act 2001, including:
(i)
Giving a true and fair view of the Company’s financial position as at 30 June 2019 and of
its financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the
Financial Report section of our report. We are independent of the Company in accordance with
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that
are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors
as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
BDO Audit (SA) Pty Ltd ABN 33 161 379 086 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (SA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
Intangible Asset
Key audit matter
How the matter was addressed in our audit
The carrying value of the intangible asset
Our audit procedures included, but were not limited to:
product development – intellectual property as
set out in note 13 is a key audit matter due to:
Assessing the composition of development costs and the
capitalisation criteria against the requirements of AASB
The significance of the total balance (29%
138 – Intangible Assets.
of total assets)
The level of audit procedures undertaken
to evaluate management’s application of
the recognition criteria for internally
generated intangible assets required by
AASB 138 Intangible Assets.
The level of judgment applied by
management and inherent subjectivity in
their assessment of the potential
impairment of the asset and compliance
with the requirements of AASB 136
Impairment of Assets.
Agreeing a sample of additions to supporting
documentation, and ensuring the amounts were
appropriately capitalised.
Obtaining an understanding of the key processes and
controls associated with the allocation of costs to the
product development category.
Assessing the results of trials of the prototype product and
the potential market size for similar applications of the
technology in future.
Assessing and evaluating management’s assumptions and
calculations of the value in use assessment of future cash
flows.
Considering key assumptions, including forecasted cash
flows against the latest board approved budgets and
assessing the discount rate using our own valuation
specialist.
Performing sensitivity analysis on the key financial
assumptions of forecasted cash flows and discount rate in
the model and considering the likelihood of such
movements in such key assumptions.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in the Company’s annual report for the year ended 30 June 2019, but does
not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this
regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 3 to 7 of the directors’ report for
the year ended 30 June 2019.
In our opinion, the Remuneration Report of 1414 Degrees Limited, for the year ended 30 June
2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
BDO Audit (SA) Pty Ltd
Andrew Tickle
Director
Adelaide, 30 August 2019
ASX additional information
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in
this report is as follows. The information is current as at 28 August 2019.
Share Capital
- 172,389,923 fully paid Ordinary Shares are held by 3,254 individual Shareholders.
- 32,015,865 Restricted Ordinary Shares (until 10-9-2020) are held by 12 individual Shareholders. FOCEM PTY LTD holds
12,403,000 (38.7%) of these Restricted Ordinary Shares.
- 15,826,839 Ordinary Shares are subject to Voluntary Escrow; 7,282,312 until 30-6-2020 held by one Shareholder, and 8,544,527 until 1-9-2019 held by
one Shareholder.
- 11,557,293 Listed Options with an exercise price of 35 cents per Option, expiring 21-8-2020 are held by 1,835 individual holders.
- 5,800,000 Unlisted Performance Rights with various performance hurdles are held by 16 individual holders. GRANT MATHIESON holds 1,450,000 (25%)
of these Performance Rights.
- All Ordinary Shares carry one vote per share.
- There is no current on-market buyback.
%
No. of holders
Securities
120,715,895
42,329,053
7,513,690
1,814,493
16,792
70.02%
24.55%
4.36%
1.05%
0.01%
172,389,923 100.00%
%
5.47%
42.99%
30.76%
19.76%
1.01%
100.00%
8.97%
178
1,399
1,001
643
33
3,254
292
Distribution of Equity Securities
The number of shareholders, by size of holding, in each class are:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels at 23.5 cents per share
Substantial Shareholders
(As disclosed in substantial holding notices given to the Company)
FOCEM PTY LTD
MR HAROLD TOMBLIN + MRS JUDITH JOHNSTON
MATTHEW JOHNSON / SUSAN JOHNSON
Twenty largest holders of Quoted Ordinary Shares
Rank
1
2
3
4
5
6
7
8
9
10
11
11
13
14
15
16
17
17
17
17
17
17
17
17
Name
MR HAROLD TOMBLIN + MRS JUDITH JOHNSTON
MR JOHN MOSS + MRS WENDY MOSS
MEWTWO GLOBAL INVESTMENTS LLC
MR JOHN LANGLEY HANCOCK
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
LHO LA PTY LTD
KNIGHTS VALLEY LTD
PACIFIC COMMUNICATION AND INVESTMENT CONSULTANTS PTY LTD
BENGER SUPERANNUATION PTY LTD
CITICORP NOMINEES PTY LIMITED
RANAT INVESTMENTS PTY LTD
MR PIERRE ANDRE VAN DER MERWE + MRS LOUISE VAN DER MERWE
MARHFEL PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
AMMJOHN PTY LTD
FRANK MARKERT PTY LTD
AMACHONG NOMINEES PTY LTD
MR IAN ROSS BURDON + MS CATHERINE LOUISE TAYLOR
MR IAN ROSS BURDON + MS CATHERINE LOUISE TAYLOR
MR JOHN YOK HONG CHONG + MRS ANNE CHONG
SEBALLIE PTY LTD
DR MICHAEL ROBERT SNOW
WICKS FAMILY SUPER PTY LTD
DR JOHN YANG
Total
Balance of register
Grand total
No. of Shares Held
%
12,403,000
10,814,527
9,973,487
7.20%
6.27%
5.80%
No. of Shares Held
10,514,670
8,567,427
4,333,333
3,438,333
3,150,789
2,000,000
1,666,500
1,583,558
1,450,000
1,385,877
1,250,000
1,250,000
1,125,000
1,078,973
1,026,171
1,015,299
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
52,835,930
87,538,128
140,374,058
%
7.49%
6.10%
3.09%
2.45%
2.24%
1.42%
1.19%
1.13%
1.03%
0.99%
0.89%
0.89%
0.80%
0.77%
0.73%
0.72%
0.71%
0.71%
0.71%
0.71%
0.71%
0.71%
0.71%
0.71%
37.64%
62.36%
100.00%
Twenty largest holders of Quoted Options
Rank
1
2
3
4
5
6
6
6
6
6
11
12
13
14
15
16
17
18
18
18
18
18
18
18
Name
MR PARAMJIT SINGH NAGRA + MRS SURINDER KAUR NAGRA
WILLIAM BAMBLING + JOYCE BAMBLING
AMIR KARLINER + TANIA KARLINER
MR IAN STUART FISHER
DARLING & CO PTY LTD
MR JOHN EDGAR FISHER
JOHN GRAHAM WARBURTON
MHK INVESTMENTS PTY LTD
MR MARK WILLIAM WILLIAMS + MRS KATRINA ANN WILLIAMS
MR SIMON JOHN MORAN + MRS CHRISTINE JOYCE MORAN
ENVIROMATTERS PTY LTD
MR ANDREW ROBERT RAMSDEN
CITICORP NOMINEES PTY LIMITED
RIVERSLEIGH ASSETS PTY LTD
MR JOHN EDGAR FISHER + MRS MARYANN FISHER
MR KIERAN MAURICE MORAN
MICHAEL MASON
AEROFEN PTY LTD
BROWNBOX PROPERTY PTY LTD
INVIA CUSTODIAN PTY LTD
MR MARTIN SULLIVAN
NAYLOR-STEWART INVESTMENTS PTY LTD
R & C SWANN PTY LTD
STEVEN CHRISTOPHER CONROY + MARGARET ANNE CONROY
Total
Balance of register
Grand total
No. of Options Held
208,732
150,000
125,000
100,000
88,375
75,000
75,000
75,000
75,000
75,000
72,500
71,429
71,411
71,250
68,750
63,685
53,100
50,000
50,000
50,000
50,000
50,000
50,000
50,000
1,869,232
9,688,061
11,557,293
%
1.81%
1.30%
1.08%
0.87%
0.76%
0.65%
0.65%
0.65%
0.65%
0.65%
0.63%
0.62%
0.62%
0.62%
0.59%
0.55%
0.46%
0.43%
0.43%
0.43%
0.43%
0.43%
0.43%
0.43%
16.17%
83.83%
100.00%
Business Objectives & Use of Cash
1414 Degrees Limited has used Cash and Cash Equivalents held at the time of listing in a manner consistent with its stated business objectives.
1414DEGREES.COM.AU
1414 DEGREES LTD
ADDRESS
POSTAL
EMAIL
PHONE
ABN 57 138 803 620
Level 4, 81 Flinders St
Adelaide SA 5000
GPO Box 2166,
Adelaide SA 5001
info@1414de reescom.au
+61 8 83.57 8273