More annual reports from 1414 Degrees:
2021 ReportANNUAL REPORT
19/20
GAS-TESS at Glenelg Wastewater Treatment Plant
Concept for Aurora Solar Energy Project with TESS-GRID
CORPORATE DIRECTORY
CURRENT DIRECTORS
Kevin Moriarty - Executive Chairman
Richard Willson- Non Executive Director
Dana Larson - Non Executive Director
COMPANY SECRETARY
Richard Willson
REGISTERED OFFICE &
PRINCIPAL PLACE OF BUSINESS
1414 Degrees Limited
Ground Floor, 10 Greenhill Road
Wayville SA 5034
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 Degrees Limited shares are quoted
on the Australian Securities Exchange
(ASX:14D)
SOLICITORS
HWL Ebsworth Lawyers
Level 21, 91 King William Street
Adelaide SA 5000
Wallmans Lawyers
Level 5, 400 King William Street
Adelaide SA 5000
PATENT & TRADE MARK ATTORNEYS
Madderns
Level 4, 19 Gouger Street
Adelaide SA 5000
AUDITOR
BDO Advisory (SA) Pty Ltd
Level 7, 420 King William Street
Adelaide SA 5000
WEBSITE
www.1414degrees.com.au
1414 DEGREES LIMITED | ANNUAL REPORT 19/20
Chairman's Letter to Shareholders
Dear Shareholders,
The year brought a breakthrough in our silicon technology, advancing our core mission to deliver large
scale thermal energy storage to stabilise renewable energy supply and secure our energy future. Learning
from the scale up of its TESS units in the previous year, your Company reset its product development
schedule and enhanced its technical team. Following numerous assessments of projects for potential
customers in Australia and overseas, your Company acquired a significant solar energy project in order to
prove its electrically charged technology.
Dr Kevin Moriarty
Executive Chairman
1414 Degrees markets the benefits of a complete thermal energy storage system (TESS), however the Company’s core technology is its
efficient thermal energy storage (TES) which delivers thermal energy to an energy recovery system (ERS). Hence the key to successful
commercialisation of 1414 Degrees storage technology is delivering a TES that can efficiently charge from electricity or gas, coupled to an
ERS that is selected for the required application and is standard equipment available from many third-party manufacturers. Because turbines
become more efficient as they increase in size, it is also a significant advantage if energy storage is scalable such that the cost per unit of
energy reduces as the storage grows.
Scale and robustness have been our focus in the past 18 months and this year we announced the SiBox technology that will allow us to build
large TES units. SiBox uses a scalable solution for storing silicon latent heat energy in atmospheric conditions, potentially providing a
levelised cost of storage currently available only in pumped hydro storage. However, our system can be deployed wherever energy is needed
or generated. In a further breakthrough, the new technology uses air for energy transfer, making it robust and safe.
Throughout the year, the GAS-TESS validated our thermal energy storage technology within an industrial site, efficiently burning the biogas
without pre-treatment, storing the energy, providing hot water and powering the gas-turbine to specification. The TES has operated reliably
however a key component of the energy recovery system (ERS) could not sustain specified performance and the GAS-TESS did not meet
electrical efficiency requirements for early procurement. The ERS manufacturer is cooperating to design and supply a higher specification
heat exchanger.
In late 2019 we acquired the Aurora Solar Energy Project (ASEP) through the purchase of SiliconAurora Pty Ltd. This was undertaken in order
to accelerate the demonstration of the TESS-GRID and provide near term returns for shareholders. The Aurora project has development
approval for 70 MW of PV and 150 MW of generation from a concentrated solar plant (CSP) on the 1100 ha site. Two high voltage
transmission lines connect to the major Davenport substation on the site of a decommissioned coal fired power plant in Port Augusta.
Following the acquisition, we immediately set about revising the Aurora Project development plan, asking our engineers to design a large
TESS-GRID incorporating SiBox storage and to progress technical cooperation with an international ERS manufacturer to meet electrical
efficiency targets. Consultants were commissioned to update the engineering and regulatory requirements for transmission connection. This
process highlighted that it is necessary to include a battery until the TESS is operational. Financial modelling revealed that a battery energy
storage system (BESS) could generate significant revenues and fast payback from the sale of frequency support services to the National
Electricity Market (NEM) based on the past five years of data. While the future of Frequency Control Ancillary Services (FCAS), revenue
cannot be predicted with certainty, it is also known that FCAS demand is growing with the increasing proportion of distributed renewable
generation. At the date of this letter, consultants are optimising the PV and battery sizing for maximum returns from the fast response hybrid
power plant. The modelling is being extended to include a TESS-GRID providing long duration power to firm the intermittent renewable
supply.
Your Company now has highly competent leadership and teams cooperating to deliver revenue and technology. Recently the board approved
the appointment of Dr Jordan Parham as interim CEO to lead 1414 Degrees’ focus on technology development and commercialisation. Marie
Pavlik, CEO of SiliconAurora is focussing on development of the Aurora project to generate early returns for shareholders. The R&D team,
now led by Dr Mahesh Venkataraman, is developing SiBox with support from highly skilled partners relevant to the key TES components. The
Business Development team led by Maretta Layton, is liaising with several international companies interested in participating in TESS
development with a view to future requirements for emission reduction.
I am confident of the future for your Company and its technology and look forward to reporting major progress in the coming year.
Dr Kevin Moriarty
Executive Chairman
1414 DEGREES LIMITED | ANNUAL REPORT 19/20
1414 DEGREES LIMITED | ANNUAL REPORT 19/20
Corporate
Governance
1414 Degrees Limited and the Board are
committed to achieving and
demonstrating the highest standards of
corporate governance.
The Company has reviewed its
corporate governance practices against
the Corporate Governance Principles
and Recommendations (3rd edition)
published by the ASX Corporate
Governance Council.
The 2020 Corporate Governance
Statement is dated as at 30 June 2020
and reflects the corporate governance
practices in place throughout the 2020
financial year.
The 2020 Corporate Governance
Statement has been approved by the
Board.
A description of the Company’s current
corporate governance practices is set
out in the Corporate Governance
Statement which can be viewed at
www.1414degrees.com.au
1414 DEGREES LIMITED
ACN 138 803 620
ANNUAL REPORT
FOR THE YEAR ENDED
30 JUNE 2020
1414 DEGREES LIMITED
ACN 138 803 620
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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
11
12
13
14
15
29
30
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Page 1
The directors of 1414 Degrees Limited present their report on the Group for the financial year ended 30 June 2020.
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 - Resigned 7 November 2019
Dana Larson
Penelope Bettison - Appointed 27 September 2019. Resigned 28 July 2020
Ian Little - Appointed 27 September 2019. Resigned 1 July 2020
Richard Willson - Appointed 2 July 2020
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 2020.
REVIEW OF OPERATIONS
The year has been transformative for the Company, with several significant achievements as well as technical and commercial developments. The Company has also
greatly increased its capability for technical management and development, appointing highly qualified materials and mechanical engineering specialists.
GAS-TESS
The GAS-TESS pilot device has now operated for more than a year at the Glenelg Wastewater Treatment Plant. The focus of activities on the GAS-TESS has been to
obtain experimental data to validate design models and to demonstrate its competitive advantages of time-shifting, no gas pre-treatment and lower operating costs
compared to reciprocating engines, including:
•Performance characterisation tests on the effect of biogas burner operation, charge-discharge cycling, heat store temperature, gas turbine and other variables on
system performance and mass and energy balance;
•Integration tests in which the GAS-TESS was operated in conjunction with the broader wastewater treatment operations;
•Operation characterisation including internal inspections to assess robustness and quantify operations and maintenance requirements and hence costs; and
•Improvement tests including the effect of a co-firing burner to enhance electrical energy efficiency of the gas turbine and hence GAS-TESS device.
A key learning from these operations is that the third-party energy recovery system (ERS) could not perform to the required efficiency specifications. 1414 Degrees is
working with external specialists and partners to deliver a commercially robust, high performance ERS.
SA Water remains supportive of the ongoing development of the GAS-TESS technology at the Glenelg site.
SILICON PHASE CHANGE MATERIAL
The Company’s core research and development to harness the high energy density of molten silicon has resulted in a new, robust, scalable and energy dense storage
technology. This breakthrough silicon phase change technology, arranged in a new internal heat exchanger design, is called ‘SiBox’. The technology was developed to
improve on the prototype silicon storage technology, which could not sustain many cycles without degrading in large-scale testing, particularly for the GAS-TESS
application and in particular has improved robustness, flexibility in geometry and scalability for heat transfer and storage.
The technical advantages of the SiBox technology could open new markets in high temperature industry and will be assessed as a commercialisation opportunity.
TESS-GRID
In December 2019, the Company acquired SolarReserve Australia II Pty Ltd, including the Aurora Solar Energy Project near Port Augusta in South Australia. The company
made the strategic acquisition to demonstrate the TESS-GRID technology as part of a large-scale, hybrid power plant able to supply reliable power on demand to the
national grid.
The Aurora Solar Energy Project has development approval for a 70 MW solar PV farm and 150 MW of generation from a concentrated solar thermal plant (CSP).
Technical and commercial development, including variations to approvals for the project, are progressing. The vision is to deploy a hybrid power station with a
sustainable business model generating revenues from renewable power generation, dispatchable power sales and grid stability services commencing in 2022.
Design and development work on the TESS-GRID for the Aurora site has focussed on optimising the heat transfer within the new SiBox storage technology. The ERS
design will focus on efficient long duration electrical generation for maximum revenue. The GAS-TESS site can also be used for scaling up the storage technology for the
TESS-GRID.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Page 2
COMMERCIALISATION / BUSINESS DEVELOPMENT
The business development team continued to evaluate potential customer sites for Thermal Energy Storage (TES) systems and have gained valuable insight into
commercialisation prospects for the technology. A key finding is that a fully developed electric charging TES is not currently competitive with fossil fuel heating in
most customer sites due to the higher input cost of electricity with transmission charges, even when the TES is configured in its most efficient mode of storing
electricity and supplying heat only. Based on wide-ranging customer assessments and surveys of growth markets the major commercial opportunities for TES devices
have been identified as well-funded markets for long duration grid scale storage, and hybrid power plants. In addition to preparing to service the utility market with
the GAS-TESS, the commercial priority is to partner with utilities on large scale innovative energy solutions.
INTELLECTUAL PROPERTY
Current status of patents and trade names
•Patent 2010282232– “Thermal Energy Storage Apparatus, Arrangement and Method” granted in US, NZL, AU, and EU. India still pending
•Patent 2012292959 – “Thermal Energy Storage Apparatus” joint ownership, but subject of appeal by co-owner
•PCT Application 2018239960 “Energy Storage and Retrieval System” (TESS-IND): Amended claims for EU submitted. Renewal due EU 23/3/21, 23/3/22 AU+NZ
•PCT Application PCT/AU2019/000113 “Energy Recovery System” (GAS-TESS): waiting on preliminary examination report
•PCT Application 2020900860 “Thermal Energy Recovery System” submitted 20/3
•SiBox trademark registered in AU, PRC, USA, EU.
COVID-19
The COVID-19 pandemic caused the Group to review its budgets and confirm to the ASX on 2 April 2020 that the entity had sufficient funds to maintain its technology
and project development.
The Group adapted to the capital market and business constraints by reducing hours, effecting redundancies and deferring the upgrade of the silicon storage in the GAS-
TESS. The board and senior management agreed to between 25% and 75% cut in fees and salaries, with the Executive Chairman taking a 50% pay cut.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
The Group purchased SiliconAurora Pty Ltd on 13 December 2019 for a consideration of $2.0M.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Nil.
ENVIRONMENTAL REGULATION
The Group 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 2020
Page 3
MEETINGS OF DIRECTORS
The number of meetings of the board of directors (including board committees) held during the year ended 30 June 2020, and the number of meetings attended by
each director are set out below:
Directors
Kevin Moriarty
Robert Shepherd
Dana Larson
Penelope Bettison
Ian Little
Board
Committee
Held
Attended
Held
Attended
6
2
6
5
5
6
1
6
5
5
0
0
0
0
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 - Resigned 7 November 2019
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
0 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
Name:
Title:
Qualifications:
Penelope Bettison - Appointed 27 September 2019. Resigned 28 July 2020.
Executive Director
BBus, GAICD, FAMI, CPM
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Interests in options:
Contractual rights to shares:
Penelope has 20 years' experience in marketing and business management and is the Company's Head of Corporate Services.
She founded and was a Director and Brand Strategist at Pitstop Marketing. Her experience spans a wide range of industries
including financial services, engineering, education, government, business events and tourism.
None
None
0 ordinary shares
None
None
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Page 4
Name:
Title:
Qualifications:
Ian Little - Appointed 27 September 2019. Resigned 1 July 2020.
Non-Executive Director
Bcom, MBA, FCA, FAICD
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Interests in options:
Contractual rights to shares:
Ian started work with Arthur Young & Co as a Chartered Accountant in New Zealand in the late 1970's. He then moved to the
oil industry, initially in Indonesia, and eventually with Shell, where he worked for over a decade in Australia, London and in
the Pacific Region. He was formerly the CFO for GPU GasNet in Victoria, before joining Envestra Ltd as Chief Financial Officer
in 2000, and became Managing Director in 2003. Envestra Ltd grew to become an ASX200 company and was eventually sold in a
contested takeover in 2014 for $2.5 billion.
None
None
0 ordinary shares
None
None
Name:
Title:
Qualifications:
Richard Willson - Appointed 2 July 2020.
Non-Executive Director & Company Secretary
BAcc, FCPA, FAICD
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Interests in shares:
Interests in options:
Contractual rights to shares:
Richard is an experienced Non-Executive Director, Company Secretary and CFO with more than 20 years’ experience with 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), 1414 Degrees Limited (ASX:14D),
Graphene Technology Solutions Limited, the not-for-profit Unity Housing Company 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.
Titomic Limited (ASX:TTT), AusTin Mining Limited (ASX:ANW), Thomson Resources Limited (ASX:TMZ)
None
0 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.
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 has been Company Secretary and/or CFO of a number of ASX Listed Companies.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Page 5
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 Group 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 Group.
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. Non-executive directors do
not receive share Performance Rights or other incentives. The chairman's fees are determined independently to the fees of non-executive directors based on
comparative roles in the external market.
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 2020
Page 6
Executive remuneration
The Group 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 Group 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 Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors of 1414 Degrees Ltd:
●
●
●
●
●
Robert Shepherd - Non-Executive Director - Resigned 7 November 2019
Dana Larson - Non-Executive Director
Ian Little - Non-Executive Director - Appointed 27 September 2019. Resigned 1 July 2020
Penelope Bettison - Executive Director (Appointed 27 September 2019. Resigned 28 July 2020) and Head of Corporate Services (Resigned 28 August 2020)
Kevin Moriarty – Executive Chairman and Chief Executive Officer
And the following persons:
●
●
●
Richard Willson - Non-Executive Director and Company Secretary - Appointed as director on 1 July 2020.
Jordan Parham - Chief Operating Officer
Marie Pavlik - Chief Executive Officer (SiliconAurora) and Business Development Manager - Appointed 14 January 2020
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Cash salary
and fees
Cash
bonus
Non-
monetary
Super-
annuation
Long service
leave
2020
$
$
$
$
$
Share-based payments
Equity-
settled
shares
$
Equity-
settled
Performance
Rights
$
Total
$
Non-Executive Directors:
Robert Shepherd *
Dana Larson
Ian Little **
Executive Directors:
Kevin Moriarty (Chairman)
Penelope Bettison ***
Other Key Management Personnel:
Richard Willson
Jordan Parham
Marie Pavlik ****
14,127
31,667
25,308
258,281
182,812
62,400
183,653
73,442
831,690
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,342
-
2,404
-
-
-
19,255
17,367
514
2,612
5,928
17,367
6,977
70,641
1,043
3,191
1,552
8,911
-
-
-
-
-
-
-
-
-
-
-
-
15,469
31,667
27,712
-
(8,696)
278,050
194,096
(737)
29,250
-
19,817
68,634
233,461
81,972
931,060
*
**
***
****
Represents remuneration from 1 July 2019 to 7 November 2019
Represents remuneration from 27 September 2019 to 30 June 2020
Moved from "Other Key Management Personnel" to "Executive Directors" due to appointment 27 September 2019
Represents remuneration from 14 January 2020 to 30 June 2020
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Cash salary
and fees
Cash
bonus
Non-
monetary
Super-
annuation
Long service
leave
2019
$
$
$
$
$
Page 7
Share-based payments
Equity-
settled
shares
$
Equity-
settled
Performance
Rights
$
Total
$
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
-
-
-
-
-
-
-
-
-
-
11,341
869
14,183
26,393
35,223
23,333
324,275
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
Employment agreements
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 - Resigned 7 November 2019
Non-Executive Director
11 September 2009
Ongoing
Director fee for the year ending 30 June 2020 of $40,000 plus superannuation.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Dana Larson
Non-Executive Director
1 December 2018; varied effective 1 April 2020
Ongoing
Director fee for the year ending 30 June 2020 of $10,000.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Ian Little - Appointed 27 September 2019. Resigned 1 July 2020.
Non-Executive Director
27 September 2019; varied effective 1 April 2020
Ongoing
Director fee for the year ending 30 June 2020 of $20,000.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Kevin Moriarty
Executive Chairman and Chief Executive Officer
1 January 2020; varied effective 1 April 2020
2 years
Base salary for the year ending 30 June 2020 of $147,500 plus superannuation. 3 month termination notice by either party.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Penelope Bettison
Executive Director (Appointed 27 September 2019, Resigned 28 July 2020) & Head of Corporate Services
1 March 2019; varied effective 1 April 2020
Ongoing
Base salary for the year ending 30 June 2020 of $146,250 plus superannuation. 3 month termination notice by either party.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Richard Willson
Company Secretary
19 October 2017
Ongoing
Base salary for the year ending 30 June 2020 of $62,400 plus superannuation. 3 month termination notice by either party.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Page 8
Employment agreements (Continued)
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Jordan Parham
Chief Operating Officer
14 January 2019; varied effective 1 April 2020
Ongoing
Base salary for the year ending 30 June 2020 of $146,500 plus superannuation. 3 month termination notice by either party.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Marie Pavlik
Chief Executive Officer (SiliconAurora) & Business Development Manager
14 January 2020; varied effective 1 April 2020
Ongoing
Base salary for the year ending 30 June 2020 of $135,000 plus superannuation. 4 week termination notice by either party.
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 2020
Performance Rights
There were no Performance Rights ("PR") issued to directors and other key management personnel as part of compensation during the year ended 30 June 2020.
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 2020 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
$
-
-
-
-
-
-
29,250
29,250
(6,051)
(605)
-
(6,656)
-4%
-1%
13%
7%
The remuneration of key management personnel is linked to the development of the Group’s intangible assets, the continued progress towards developing the TESS
technology and progress on the Aurora site at Port Augusta.
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Page 9
Other transactions with key management personnel and their related parties
Merchant Accounting, a company related to Robert Shepherd, charged fees of $8,690 during the year and no balance relating to these charges was outstanding at 30
June 2020. All transactions were made on normal commercial terms and conditions and at market rates. These fees 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 Group held during the financial year by each director and other members of key management personnel of the Group, including their
personally related parties, is set out below:
Ordinary shares
Robert Shepherd*
Dana Larson
Ian Little
Kevin Moriarty
Penelope Bettison**
Richard Willson
Jordan Parham
Marie Pavlik***
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
-
150,000
(7,107,594)
-
-
-
(1,000,000)
-
-
5,564
(8,102,030)
Balance at
the date of
this report
-
250,000
-
12,403,000
-
-
150,000
5,564
12,808,564
*
**
***
Disposals/other' is to recognise resignation on 7 November 2019 and hence removal of shareholding from disclosure at the date of this report.
Disposals/other' is to recognise resignation from KMP on 28 August 2020 and hence removal of shareholding from disclosure at the date of this report.
Appointed 14 January 2020. 'Disposals/Other' denotes balance held prior to joining the group.
Performance Rights holding
The number of PR over ordinary shares in the Group held during the financial year by each director and other members of key management personnel of the Group,
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
750,000
50,000
200,000
1,000,000
Granted
Exercised
Expired/
forfeited/
other
Balance at
the date of
this report
-
-
-
-
-
-
(150,000)
(150,000)
(750,000)
(25,000)
(50,000)
(825,000)
-
25,000
-
25,000
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 2020
Page 10
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 Group has indemnified (fully insured) each director and the secretary of the Group for a premium of $65,000. 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 Group 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 Group.
PROCEEDINGS ON BEHALF OF THE GROUP
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any
proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group 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 amount is
nil during the financial year as no non-audit services were provided (2019: $nil).
OFFICERS OF THE GROUP WHO ARE FORMER PARTNERS OF ACCOUNTING FIRM BDO
There are no officers of the Group who are former partners of Accounting Firm BDO.
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report.
AUDITOR
Accounting Firm BDO continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
Kevin Moriarty
Executive Chairman
Adelaide
Dated this 12th day of October 2020
1414 DEGREES LIMITED
ACN 138 803 620
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Other Income
Administration and Professional Expenses
Occupancy Expenses
Marketing Expenses
Depreciation and Amortisation
Employee Benefits Expense
Share Based Payments (Equity-settled)
Directors Fees
Other Expenses
Finance Costs
IPO Expense
(Loss) before income tax
Income tax benefit / (expense)
(Loss) for the year
Other comprehensive income for the year
Items that will be reclassified subsequently to profit
or loss:
Total comprehensive (loss) for the year
Basic loss per share
Diluted loss per share
Note
5
6
8
16
16
Page 11
2020
AUD$
2019
AUD$
411,054
298,820
906,889
37,042
76,521
342,076
1,451,631
93,932
71,935
253,098
29,555
-
(2,851,625)
-
(2,851,625)
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)
-
-
-
-
-
-
(2,851,625)
(4,270,815)
(1.65) cents
(1.65) cents
(2.58) cents
(2.58) cents
The above consolidated 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
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Note
9
10
11
12
13
14
15
17
Page 12
2020
AUD$
2019
AUD$
4,395,479
1,436,805
142,882
5,975,166
9,721,192
2,448,344
216,215
12,385,751
204,155
8,359,688
2,674,765
11,238,608
17,213,774
135,487
5,109,045
-
5,244,532
17,630,283
355,139
90,628
129,938
575,705
14,906
2,489,643
2,504,549
3,080,254
485,316
126,031
-
611,347
93,005
-
93,005
704,352
14,133,520
16,925,931
29,197,369
116,968
(15,180,817)
14,133,520
29,097,294
123,111
(12,294,474)
16,925,931
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
Right-of-use assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provision for employee benefits
Lease liabilities
Total current liabilities
Non-current liabilities
Provision for employee benefits
Lease liabilities (NC)
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Share Based Payments Reserve
Accumulated losses
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
1414 DEGREES LIMITED
ACN 138 803 620
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Cash received from customers
Cash paid to suppliers and employees
Government grants
Interest received
Interest paid
Interest paid on lease liabilities
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of entities
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
Repayment of lease liabilities
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
Page 13
2020
AUD$
2019
AUD$
24,991
(2,981,431)
233,636
148,623
(9,500)
(23,533)
(2,607,214)
8,250
(4,291,809)
60,273
163,770
(74,507)
-
(4,134,023)
(36,263)
(2,000,000)
(3,278,550)
236,000
2,743,782
(2,335,031)
(29,531)
-
(6,068,625)
430,930
2,568,476
(3,098,750)
-
-
(398,868)
-
-
-
(398,868)
1,335,493
(1,335,493)
-
(315,839)
31,657
16,306,690
16,022,508
(5,341,113)
15,400
9,721,192
4,395,479
8,789,735
3,215
928,242
9,721,192
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
1414 DEGREES LIMITED
ACN 138 803 620
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Page 14
Contributed
equity
$
Share Based
Payments
Reserve
$
Accumulated
Losses
$
Total equity
$
At 1 July 2018
12,954,139
19,772
(8,023,659)
4,950,252
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Employee Share Scheme - Performance Rights Issue
Contributions of equity net of transaction costs
At 30 June 2019
Adjustment for change in accounting policy (note 1)
Balance at 1 July 2019 - Restated
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Employee Share Scheme - Performance Rights Valuation
Employee Share Scheme - Conversion of Performance Rights
Contributions of equity net of transaction costs
-
-
-
-
-
-
(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
29,097,294
123,111
(12,294,474)
(34,718)
(12,329,192)
16,925,931
(34,718)
16,891,213
-
-
-
-
-
-
(2,851,625)
-
(2,851,625)
(2,851,625)
-
(2,851,625)
-
100,075
-
100,075
93,932
(100,075)
-
(6,143)
-
-
-
-
93,932
-
-
93,932
At 30 June 2020
29,197,369
116,968
(15,180,817)
14,133,520
The above consolidated 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 2020
Page 15
NOTE 1
CORPORATE INFORMATION
The financial statements of 1414 Degrees Limited for the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the directors on 12
October 2020 and cover the group as required by Australian Accounting Standards.
The financial statements are presented in the Australian currency.
1414 Degrees Limited is a group limited by shares incorporated and domiciled in Australia.
The address of the group's registered office and principal place of business is Level 1, 10 Greenhill Road, Wayville SA 5034.
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 group is a for-profit group 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 group 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 2020
Page 16
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 group 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. Goodwill on
business acquisition and the intangible asset that is not yet ready for use is tested for impairment annually, or more frequently if events or changes in circumstances
indicated that they might be impaired.
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 group 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.
Goodwill
Goodwill is calculated as the excess of the:
●
●
●
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
consideration transferred,
amount of any non-controlling interests in the acquired entity, and
acquisition-date fair value of any previous equity interest in the acquired entity
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Page 17
NOTE 2
(h) Intangible Assets (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events
or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating
units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at
the lowest level at which goodwill is monitored for internal management purposes.
(i) Leases
Refer Note 2 (q) below.
(j) Trade and Other Payables
Trade and other payables represent liabilities for goods and services provided to the group 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 2020
Page 18
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) Principles of Consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity where the group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the group.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive
income, statement of changes in equity and balance sheet respectively.
(o) Business Combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The
consideration transferred for the acquisition of a subsidiary comprises the:
- fair values of the assets transferred
- liabilities incurred to the former owners of the acquired business
- equity interests issued by the group
- fair value of any asset or liability resulting from a contingent consideration arrangement, and
- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair
values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at
the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Page 19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NOTE 2
(o) Business Combinations (continued)
The excess of the:
- consideration transferred,
- amount of any non-controlling interest in the acquired entity, and
- acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If
those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange.
The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under
comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with
changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to
fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
(p) Accounting Standards Issued But Not Yet Effective
There are no accounting standards that have not been early adopted for the year ended 30 June 2020 but will be applicable to the group in future reporting periods
which are expected to have a material impact on the financial statements.
(q) Application of new and revised Accounting Standards
The group 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 group.
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance
leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial
position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an
interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16
will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as
the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion
is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities.
Impact of Adoption
AASB 16 was adopted using the modified retrospective approach as as such the comparitives have not been restated. The impact of adoption on opening accumulated
losses as at 1 July 2019 was as follows:
Operating lease commitments as at 1 January 2019 (AASB 16)
Accumulated Depreciation as at 1 July 2019
Right-of-use assets
Lease liabilities - current
Reduction in opening retained earnings as at 1 July 2019
1-Jul-19
AUD$
974,688
(686,677)
288,011
(322,729)
(34,718)
Right-of-use Assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease
liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs
incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter.
Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are
subject to impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases
of low-value assets.
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made
over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing
rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to
be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated
termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Page 20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NOTE 2
(q) Application of new and revised Accounting Standards (continued)
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future
lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease
liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written
down.
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 group.
Key Estimates - Impairment
The group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the group 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 on the basis of management’s expectations regarding the growth of the market and the group’s ability to capture market share. Pre-tax discount
rates of 11% have been used in all models.
With respect to cash flow projections for the goodwill on business acquistion, the calculations use cash flow projections based on the most readily available modelling
work performed for/by the entity. Relevant inputs have been factored into models on the basis of management’s expectations regarding potential revenues and the
group’s ability to capture market share. Pre-tax discount rates of 10% have been used in all models.
The goodwill on business acquistion and intangible asset is tested for impairment annually 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 $6,488,220 (2019: $5,109,045 ) being the
carrying value of the Product Development intangible asset of $16,296,263 (2019: $13,017,713) less the associated Government Grant funding of $2,568,000 (2019:
$2,332,000) and the R&D refundable tax offsets applied of $7,240,043 (2019: $5,576,668). 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
There is only one segment which is the entire business, which operates entirely within Australia.
SEGMENT REPORTING
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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
Superannuation expense
Defined contribution superannuation expense
AUDITORS' REMUNERATION
NOTE 7
Audit services
Amounts paid/payable to BDO for audit/review of the financial statements of the group
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
Tax expense
The amount of gross tax losses relating to Australian operations that are carried forward is $8,197,403 (2019: $5,388,118).
NOTE 9
CASH AND CASH EQUIVALENTS
Cash at bank
Cash term deposits
An amount of $215,582 included as cash has been set aside to support a bank guarantee issued to the landlord of the rented premises.
NOTE 10
TRADE AND OTHER RECEIVABLES
Trade receivables
R&D refundable tax offset
Other receivables
Page 21
2020
AUD$
2019
AUD$
79,198
22,720
-
309,136
411,054
238,547
-
-
60,273
298,820
123,987
123,987
121,533
121,533
37,000
-
37,000
32,105
-
32,105
-
-
-
-
-
-
-
-
-
-
-
-
(2,851,625)
(4,270,815)
(784,197)
(1,174,474)
784,197
29,862
64,900
(48,893)
(34,226)
772,554
-
1,174,474
172,984
118,506
(48,789)
44,051
887,722
-
4,395,479
1,588,487
-
8,132,705
4,395,479
9,721,192
63,000
-
1,367,937
2,448,344
5,868
-
1,436,805
2,448,344
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
INTANGIBLE ASSETS
NOTE 11
Product Development
Product Development - Intellectual Property
Intangible assets under development - at cost
Government Grants applied
R&D Refundable Tax Offset applied
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
Page 22
2020
AUD$
2019
AUD$
16,296,263
(2,568,000)
(7,240,043)
6,488,220
13,017,713
(2,332,000)
(5,576,668)
5,109,045
5,109,045
3,278,550
(236,000)
(1,663,375)
6,488,220
2,174,579
6,068,625
(430,930)
(2,703,229)
5,109,045
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 2020. The intangible asset is tested for impairment annually.
The government grant relates to accelerating the commercialisation of the group's intellectual property.
The recoverable amount of the group's Product Development intangible asset has been determined by a value-in-use calculation using a discounted cash flow model,
based on an 8 year projection period approved by management.
The following key assumptions were used in the discounted cash flow model:
● 11% pre-tax discount rate;
● No revenue earned until 2022;
● Consistent sales from 2022 to 2023; and from 2024 to 2025;
● Increasing sales from 2026 to 2028;
The discount rate of 11% 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 revenue presented in the model is justified, based on the potential indicated in the market.
There were no other key assumptions.
Goodwill on business acquisition
Goodwill on business acquisition
(Note 19)
Reconciliation of goodwill on business acquisition
Balance at the beginning of the year
Purchase of SiliconAurora Pty Ltd
Closing carrying value
Goodwill is tested for impairment annually.
1,871,468
1,871,468
-
1,871,468
1,871,468
The recoverable amount of the group's goodwill intangible asset has been determined by a value-in-use calculation using a discounted cash flow model, based on a 5
year projection period approved by management.
The following key assumptions were used in the discounted cash flow model:
● 11% pre-tax discount rate;
● Consistent revenue beginning in FY2023
● Revenue and CAPEX based on modelling recently performed for the Group;
● Financing mix unknown, however model based on 100% debt in order to consider impacts of interest and debt repayments
The discount rate of 11% 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 revenue presented in the model is justified, based on modelling work referred to above.
There were no other key assumptions.
NON-CURRENT ASSETS - RIGHT-OF-USE ASSETS
NOTE 12
Land and buildings - right-of-use
Less: Accumulated depreciation
Additions to the right-of-use assets during the year were $2,728,842.
TRADE AND OTHER PAYABLES
NOTE 13
Trade and other payables
Other payables and accruals
-
-
-
-
-
-
-
-
3,847,152
(1,172,387)
2,674,765
297,339
57,800
355,139
424,013
61,303
485,316
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 14
Lease liabilities
NON-CURRENT LIABILITIES - LEASE LIABILITIES
NOTE 15
CONTRIBUTED EQUITY
Share capital
Ordinary shares - authorised, issued and fully paid opening balance
Employee Share Scheme - Conversion of Performance Rights
Ordinary shares - authorised, issued and fully paid closing balance
Page 23
2020
AUD$
2019
AUD$
2,489,643
-
2020
No. of Shares
2020
AUD$
172,389,923
515,000
172,904,923
29,097,294
100,075
29,197,369
Ordinary shareholders are entitled to participate in dividends and the proceeds on winding up of the group 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 group in order to ensure that the group can fund its operations and continue as a going concern.
The group's capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements.
Management effectively manages the group’s capital by assessing the group’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 group 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
2020
AUD$
2019
AUD$
(2,851,625)
(4,270,815)
(2,851,625)
(4,270,815)
Profit (loss) after income tax attributable to the owners of 1414 Degrees Ltd used in calculating diluted earnings per share
(2,851,625)
(4,270,815)
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
(1.65)
(1.65)
(2.58)
(2.58)
Number
Number
172,612,635
165,823,930
-
-
-
-
-
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
172,612,635
165,823,930
The 2,650,000 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 2020
Page 24
NOTE 17
SHARE BASED PAYMENTS
150,000 shares were issued to key management personnel in this financial year as part of the group's Performance Rights plan. In the year ended 30 June 2019 no shares
were issued to key management personnel in this financial year.
A Performance Rights plan was established by the group in the 2019 financial year, whereby the group may, at the discretion of the board, grant Performance Rights
(PR) over ordinary shares in the group to certain employees of the group. 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's outstanding at the of the financial year:
Grant date
Expiry date
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
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
75,000
200,000
725,000
350,000
925,000
975,000
1,100,000
4,350,000
-
-
-
-
-
-
-
-
(70,000)
(150,000)
(295,000)
-
-
-
-
(515,000)
(5,000)
(50,000)
(430,000)
(100,000)
(150,000)
(100,000)
(350,000)
(1,185,000)
-
-
-
250,000
775,000
875,000
750,000
2,650,000
Weighted average exercise price
$0.00
$0.00
$0.00
$0.00
$0.00
2020
2019
Grant date
Expiry date
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
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$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)
-
(1,450,000)
75,000
200,000
725,000
350,000
925,000
975,000
1,100,000
4,350,000
Weighted average exercise price
$0.00
$0.00
$0.00
$0.00
$0.00
There are no Performance Rights exercisable at the end of the financial year and no Performance Rights granted during 2020 financial year.
The weighted average remaining contractual life of Performance Rights outstanding at the end of the financial year was 1.12 years (2019: 2.01).
During the year the expense recognised in relation to the valuation of these Performance Rights was $94k.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
NOTE 18
Reconciliation of profit after income tax to net cash flow from operating activities
CASH FLOW INFORMATION
Loss for the year
Non-cash flows in profit/(loss):
- Depreciation and Amortisation
- Share Based Payments
- Foreign exchange differences
- IPO Cost Expensed
Change in operating assets and liabilities
- (increase)/decrease in trade and other receivables
- (increase)/decrease in other current assets
- increase/(decrease) in trade and other payables
- increase/(decrease) in employee benefits
Net cash flow from operating activities
NOTE
19
BUSINESS COMBINATION
Page 25
2020
AUD$
2019
AUD$
(2,851,625)
(4,270,815)
342,076
93,932
(15,400)
-
33,658
103,339
(3,215)
526,662
(5,851)
73,333
(130,177)
(113,502)
(2,607,214)
167,019
(216,215)
(629,987)
155,531
(4,134,023)
On 13 December 2019 1414 Degrees Ltd acquired 100% of the issued shares in SolarReserve II Pty Ltd (Renamed to SiliconAurora Pty Ltd). SiliconAurora owns the
advanced Aurora Solar Energy Project ("Aurora Project") near Port Augusta in South Australia. The group proposes to develop the Aurora Project, which has approval for
70MW of solar photovoltaic (PV) and 150MW of concentrated solar thermal plant (CSP) systems, and intends to demonstrate its world leading TESS-GRID technology.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Cash paid
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash
GST Receivable
Property, plant and equipment
Right-of-use assets
Lease liabilities - Current
Lease liabilities - Non-Current
Net identifiable assets acquired
Add: Goodwill (Note 11)
AUD$
2,000,000
2,000,000
Fair Value
AUD$
1,000
8,809
85,601
2,728,842
(110,000)
(2,585,720)
128,532
1,871,468
2,000,000
The goodwill is attributable to SiliconAurora's approval for the development of 70MW of PV and 150MW of CSP systems and access to land resources to demonstrate the
Group's TESS-GRID technology. Documentation and contracts were obtained as part of the purchase, however these do not qualify for seperate recognition.
CONTINGENCIES
NOTE 20
Contingent Liabilities
At 30 June 2020 those charged with governance of the group note that there are no known contingent liabilities (2019: nil).
As the market is aware however, the Group recently moved its corporate office from Flinders Street, Adelaide to its current premises at Greenhill Road. Before doing
so, the Group received a leasing proposal in relation to a separate premises and took some steps to transition its operations to that premises. It was ultimately decided
not to enter into a lease on the property. The Group has received notice of legal action from the landlord claiming that a binding lease agreement had been entered
into. The Group does not consider that a binding lease was ever formed and will defend its position.
NOTE 21
(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 fees of $8,690 during the year and no balance relating to these charges was
outstanding at 30 June 2020.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Page 26
RELATED PARTY (continued)
Director and Director-related Interests in the group
NOTE 21
(b)
Disclosures relating to director and director-related interests, as well as key management personnel are set out in Note 22 below and the remuneration report included
in the director's report.
NOTE 22
The totals of remuneration paid to KMP of the group during the year are as follows:
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Other long term benefits
Share-based payments
Total KMP compensation
2020
AUD$
2019
AUD$
831,690
70,641
8,911
19,817
754,399
60,162
12,686
26,393
931,060 853,641
These amounts represent the group's employee benefits and shared-based-payments expense for the year.
NOTE 23
The group's financial instruments consist mainly of deposits with banks, accounts receivable and payable.
FINANCIAL RISK MANAGEMENT
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
Note
9
10
13
2020
AUD$
2019
AUD$
4,395,479
1,367,937
5,763,416
9,721,192
2,448,344
12,169,536
355,139
355,139
485,316
485,316
General objectives, policies and processes
In common with all other businesses, the group is exposed to risks that arise from its use of financial instruments. This note describes the group’s objectives, policies
and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout
these financial statements.
There have been no substantive changes in the group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the
methods used to measure them from previous periods unless otherwise stated in this note.
Market Risk
The group’s activities have no material exposure to financial risks of changes in interest rates. The group 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 group 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 group 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 group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the group, 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.
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Page 27
NOTE 23
FINANCIAL RISK MANAGEMENT (continued)
Liquidity Risk
Liquidity risk is the risk that the group 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 group's operations are adequate to meet liabilities due.
Financial liability and financial asset maturity analysis
Within 1 year
1 to 5 years
Over 5 years
AUD$
2020
AU$
2019
AU$
2020
AU$
2019
AUD$
2020
AUD$
2019
Total
AUD$
2020
AUD$
2019
Financial liabilities due
for settlement
Trade and other payables
Lease Liabilities
Financial assets - cash
flows realisable
Cash at bank
Trade and other
receivables
Cash term deposits
Sensitivity Analysis
Interest rate risk
355,139
129,938
485,077
485,316
-
485,316
-
326,227
326,227
-
-
-
-
2,163,416
2,163,416
4,395,479
1,588,487
1,367,937
-
5,763,416
2,448,344
8,132,705
12,169,536
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
355,139
2,619,581
2,974,720
485,316
-
485,316
4,395,479
1,588,487
1,367,937
-
5,763,416
2,448,344
8,132,705
12,169,536
At 30th June 2020 investment in Cash, Fixed Interest and Floating Interest rate deposits amounted to $4,395,479. A +/-1% change in interest rates during the year
ended 30th June 2020 will result in a +/- change in net interest income of $43,955.
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 $97,212.
Management has considered that both a positive and negative 1% variance is sufficient to illustrate the potential variations in interest income.
Foreign currency risk
Cash at bank held in or trade payables denominated in
US dollars
Euros
Assets
Liabilities
2020
AUD$
2019
AUD$
2020
AUD$
2019
AUD$
1,493
4,303
5,796
356,053
-
356,053
-
14,661
14,661
-
8,989
8,989
The group had net liabilities denominated in foreign currencies of $8,865 as at 30 June 2020 (2019: net assets $347,064).
Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 5% (2019: weakened by 10%/strengthened by 5%) against these foreign currencies
with all other variables held constant, the group's profit before tax for the year would have been $887 lower/$443 higher (2018: $34,706 higher/$17,352 lower) and
equity would have been $887 lower/$443 higher (2019: $34,706 higher/$17,352 lower).
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 loss for the year ended 30 June 2020 was $21,472 (2019: gain of $2,951).
1414 DEGREES LIMITED
ACN 138 803 620
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Page 28
NOTE 24
COMMITMENTS FOR EXPENDITURE
There are no capital commitments as at 30 June 2020 (2019: nil)
SUBSEQUENT EVENTS
NOTE 25
On 3 September 2020, the group announced that it was offering shareholders an opportunity to participate in a Share Purchase Plan (SPP) targeted to raise
approximately $3.0M. The SPP opened on 10 September 2020, with a closing date of 12 October 2020.
NOTE 26
Set out below is the supplementary information about the parent entity.
PARENT ENTITY INFORMATION
Statement of Profit or Loss and Other Comprehensive Income
Loss after income tax
Total comprehensive income
Statement of Financial Position
Total Current Assets
Total Assets
Total Current Liabilities
Total Liabilities
Equity
Contributed equity
Share Based Payments Reserve
Accumulated losses
Total Equity/(Deficiency)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020.
Contingent Liabilities
The parent entity had no contingent liabilities as at 30 June 2020.
Capital Commitments - Property, Plant and Equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020.
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 2.
2020
AUD$
(2,526,376)
(2,526,376)
2020
AUD$
5,974,166
14,604,064
130,388
145,294
29,197,369
116,968
(14,855,567)
14,458,770
1414 DEGREES LIMITED
ACN 138 803 620
DIRECTORS' DECLARATION
Page 29
In accordance with a resolution of the directors of 1414 Degrees Limited, the directors of the group declare that:
1
2
3
4
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 group's financial
position as at 30 June 2020 and its performance for the year ended on that date.
The group 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 group will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations as required by s295A of the Corporations Act.
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 12th day of October 2020
Tel: +61 8 7324 6000
Fax: +61 8 7324 6111
www.bdo.com.au
Level 7, BDO Centre
420 King William Street
Adelaide SA 5000
GPO Box 2018, Adelaide SA 5001
AUSTRALIA
DECLARATION OF INDEPENDENCE
BY PAUL GOSNOLD
TO THE DIRECTORS OF 1414 DEGREES LIMITED
As lead auditor of 1414 Degrees Limited for the year ended 30 June 2020, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of 1414 Degrees Limited and the entity it controlled during the period.
Paul Gosnold
Director
BDO Audit (SA) Pty Ltd
Adelaide, 12 October 2020
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 Street
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) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated 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 the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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 11 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.
138 – Intangible Assets.
The level of audit procedures undertaken
to evaluate management’s application of
Agreeing a sample of additions to supporting
documentation, and ensuring the amounts were
the recognition criteria for internally
appropriately capitalised.
generated intangible assets required by
AASB 138 Intangible Assets.
Obtaining an understanding of the key processes and
controls associated with the allocation of costs to the
The level of judgment applied by
product development category.
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.
Assessing the results of trials of the prototype product and
the potential market size for similar applications of the
technology.
Considering and evaluating assumptions contained within
management’s impairment assessment and assessing the
discount rate applied.
Performing a sensitivity analysis on the key financial
assumptions of the forecasted cash flows and discount rate
in the model and considering the likelihood of such
movements in these key assumptions.
Acquisition of SolarReserve Australia II Pty Ltd
Key audit matter
How the matter was addressed in our audit
As disclosed in note 19 of the financial report,
Our audit procedures included, but were not limited to:
1414 Degrees Limited acquired the business of
SolarReserve Australia II Pty Ltd during the
Reviewing the executed transaction documents to
understand the key terms and conditions of the
year.
acquisition;
The accounting for this business acquisition is a
Evaluating management’s determination of the accounting
key audit matter due to:
Estimation of the fair value of assets
acquired and liabilities assumed.
The amount of goodwill recognised on
acquirer and whether the transaction constituted a
business or an asset acquisition;
Challenging the methodology and assumptions utilised to
identify and determine the fair value of the assets and
acquisition relative to the value assigned to
liabilities acquired; and
other assets.
Assessing the adequacy of the group’s disclosures in Note
The significant judgements and assumptions
made by management in assessing whether
the acquired entity constituted a business.
19 of the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2020, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view 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 ability of the group 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 Group 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 5 to 9 of the directors’ report for the year
ended 30 June 2020.
In our opinion, the Remuneration Report of 1414 Degrees Limited, for the year ended 30 June 2020,
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
Paul Gosnold
Director
Adelaide, 12 October 2020
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 22 September 2020.
Share Capital
- 173,522,423 fully paid Ordinary Shares are held by 3,266 individual Shareholders.
- 4,300,000 Unlisted Performance Rights with various performance hurdles are held by 10 individual holders.
- All Ordinary Shares carry one vote per share.
- There is no current on-market buyback.
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 12.5 cents per share
Substantial Shareholders
(As disclosed in substantial holding notices given to the Company)
FOCEM PTY LTD
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