More annual reports from 9Spokes :
2021 ReportPeers and competitors of 9Spokes :
NanoXploreANNUAL REPORT
31 MARCH 2017
9 Spokes International Limited
and subsidiary companies
www.9spokes.com
9 Spokes International Limited
ARBN 610 518 075
Contents
HIGHLIGHTS TIMELINE
CHAIRMAN AND CEO’S REPORT
INDEPENDENT AUDITORS’ REPORT
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
STATUTORY INFORMATION
ADDITIONAL INFORMATION FOR PUBLICLY LISTED COMPANIES
COMPANY DIRECTORY
2
4
9
16
17
18
19
20
21
42
46
53
1
ANNUAL REPORT 2017 Highlights
Timeline
NOVEMBER
Signed channel agreement
with Barclays Bank
JUNE
Raised A$25 million
from IPO on ASX
APRIL
Signed channel
agreement with
Suncorp
2016
V
O
N
C
E
D
N
A
J
B
E
F
R
A
M
R
P
A
Y
A
M
N
U
J
L
U
J
APRIL
Opened London office
JULY
Deloitte UK
partners with
9 Spokes
2
ANNUAL REPORT 2017 DECEMBER
Barclays dashboard live
AUGUST
Initiated business
development for North
American market
NOVEMBER
Deloitte UK
dashboard live
JANUARY
Successful
co-marketing campaign
with key App partner
G
U
A
P
E
S
T
C
O
V
O
N
C
E
D
N
A
J
B
E
F
R
A
M
2017
DECEMBER
Suncorp dashboard live
NOVEMBER
9 Spokes Direct Platform
live in UK
MARCH
First user adoption milestone
of more than 1,000 users
3
ANNUAL REPORT 2017 Chairman and
CEO’s Report
For the year ended 31 March 2017
PAUL REYNOLDS
Chairman
MARK ESTALL
CEO
4
ANNUAL REPORT 2017 THE DIRECTORS ARE PLEASED TO PRESENT THE ANNUAL REPORT FOR 9 SPOKES
INTERNATIONAL LIMITED (“THE COMPANY” OR “9 SPOKES”) AND ITS SUBSIDIARIES
(TOGETHER “THE GROUP”), INCORPORATING THE CONSOLIDATED FINANCIAL
STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017.
THE YEAR IN REVIEW
9 Spokes provides an online, Software-as-a-Service
application platform and store allowing businesses to access
a wide-range of third-party applications and online services
to meet their needs for core business activities such as
accounting, inventory management, booking and scheduling.
The 9 Spokes platform uses data from these applications to
present customers with at-a-glance metrics that monitor and
help manage business performance.
The global SME market for online applications is currently
worth in excess of US$40 billion and 9 Spokes has identified
a clear opportunity to simplify the buying approach and
greatly enhance the usefulness of online applications by
extracting and combining the data from multiple applications
to give customers better tools with which to run their
business.
The Company’s proposition has attracted strong interest from
major international financial institutions, such as Barclays
Bank in the United Kingdom, who have launched the service
as a white-label offering to their own small to medium
enterprise customer base (SME’s). Consequently, 9 Spokes
offers services direct to SME’s (9 Spokes Direct) and also
through white-label channel partners.
As an early stage company, 9 Spokes faces the normal
challenges of agility, innovation, competition and growth
but we also believe we are particularly characterised by
a maturity of approach in sales, technology, service and
operations that satisfies the demanding needs of major
corporate channel partners.
The Group’s major achievement over the past 12 months
has been to successfully transition from being a start-up with
a well-regarded – but still conceptual - proposition for our
target market to one supporting live operations in multiple
international markets and in partnership with leading, blue-
chip, organisations in their respective marketplaces. The two
key building blocks for this have been the IPO and successful
capital raise, and a disciplined growth in the company’s scale
and operations.
THE IPO
An Initial Public Offering (“IPO”) was undertaken successfully
on the Australian Stock Exchange (ASX), on 9 June 2016. The
decision to proceed with a public listing relatively early in the
Company’s life was made partly in order to better meet the
due diligence and compliance requirements of the potential
major channel partners, a strategic choice that we feel has
borne real benefits in the continuing strong interest being
shown in us by large institutions in Europe, The Americas and
Asia.
A total of 125 million new shares were issued at A$0.20 per
share, raising A$25 million. The work and due diligence to
complete the IPO dominated the first quarter of our financial
year, but was completed successfully and in a relatively short
space of time with minimum disruption to the core business.
Proceeds from the Offer are being used to undertake
software and technical development of the 9 Spokes
Platform, to conduct infrastructure development to support
the 9 Spokes databases, to engage in product development
by enhancing the functional features of the 9 Spokes
products, to engage in business and market development by
expanding the 9 Spokes business into new territories, and to
provide working capital.
BUILDING OPERATIONS AND COMMENCEMENT
OF MARKETING
The headline deliveries over the year have been:
•
•
•
•
•
•
•
Detailed build, development and launch – on time -
of white label platforms tailored to each of the three
channel partners; Barclays, Suncorp and Propel by
Deloitte.
Development, build and launch of 9 Spokes Direct in the
UK.
Creating a company and structure for live operations,
with a strong talent pool of skilled employees and
relocation to a new Auckland Head Office.
Establishing an office and customer operations in the
United Kingdom.
Live operations in the United Kingdom and Australasia.
Initial business development traction in the North
American and Asian markets.
Initial direct and partner marketing campaigns and good
early signs of customer adoption.
The Company delivered on its implementation milestones
with Barclays, Suncorp and Propel by Deloitte Channels as
well as our UK 9 Spokes Direct Platform, all four platforms
5
ANNUAL REPORT 2017 going live by 2nd January 2017. Each Channel represented
lengthy, complex technology projects with large, established
enterprise partners. Pleasingly, Channel partners have
been complimentary of the Group’s professionalism and
expertise. 9 Spokes is now well-established for future channel
engagements.
During the financial year, we signalled our intention to enter
the North American market and as deployment for the
existing channels neared completion we moved our focus
to business development mainly in North America. We
have again set the bar high by targeting the largest banks
in the region and we are encouraged by the reception and
positive engagement experienced to date from banks in
North America. Some of these opportunities have entered
promising deep-engagement discussions. We are also
pursuing further opportunities in the Australasian and Asian
markets with detailed engagement also taking place.
During February 2017, the Company was pleased to
announce it had passed a milestone of more than 1,000
users. We were encouraged by this early adoption and by the
trajectory subsequently, and we look forward to updating the
market during the June quarter. We have been introducing
a new technology proposition to our small business users
with little awareness of the 9 Spokes brand and limited
promotional activity to date. Marketing has focused strongly
on online channels and social media for lead generation,
coupled with more traditional activities targeting small
businesses at trade and App Partner shows and events. We
have also begun assisting our Channel Partners with their go-
to-market tactics and collateral, and assisting in developing
digital campaigns.
9 Spokes is proud to be working with a collection of world-
class online software applications on the platform. The 9
Spokes smart dashboard allows management and advisors
to access a wide range of data and metrics across key areas,
from any device at any time. This gives a clear overview of
their business and with these insights it’s easier to make the
big decisions to either manage or grow a business. 9 Spokes
is working with a collection of strong global and regional
brands. In addition to accounting applications, the platform
offers point of sale, human resources, customer management,
inventory and productivity apps. The international reach of
many of these applications allows 9 Spokes to leverage off
existing partnerships when launching into new territories,
such as the North American market.
This year 9 Spokes attended its first events; QuickBooks
Connect, Accountex, The Business Show and Sage Summit in
the United Kingdom, with further events planned for coming
quarters. The Company has also undertaken a number of co-
marketing activities including those with accounting software,
QuickBooks, and global expense management application,
Expensify. 9 Spokes is planning co-marketing activities
with several of its other App partners from within its digital
ecosystem. The imminent launch of a new Partner Marketing
feature set, will greatly enhance the Company’s ability to
conduct co-marketing initiatives with its App partners.
There has been a substantial investment in operations this
year with the growth in in-house capability and knowledge
pool. We have looked to build in-house capability replacing
outsourced contractual resources so we build and control
the development of business intellectual property. We have
created a cross functional multi skilled technology resource
that enabled the build and implementation of the 4 platforms
during the year. This gives significant technical capacity to
serve existing channels, enhance the platform further and
deploy to additional channels.
With multiple channels now online, the company has put
in place a robust technology infrastructure including the
deployment of 4 datacentres, provided through partner IBM/
Softlayer to support our channels and operations in the
United Kingdom and Australia. These centres function as
a global network, providing security of data, scalability and
effective redundancy.
The transition to live operations during the year has required
the company to more than treble in size. Anticipating the
stresses and changes that such growth can bring we have
worked hard to create a set of scalable and agile company
structures and processes which we feel will bring strong
benefits to our operations in the months and years ahead.
We have focused on hiring internationally experienced
and highly capable executives, managers and staff, to
create a world class talent pool who we feel will be able to
support future strong growth. Average headcount during
the year ended 31 March 2017 was 76 staff compared to
20 staff during the previous financial year. Of this number,
approximately 60% were engaged in operations and research
and development (2016: 54%).
At the beginning of the year we established an office in
London to support Channel Partners in the United Kingdom
and the launch of 9 Spokes Direct in the UK.
In February 2017, the Company moved to a new Head Office
in Auckland having reached capacity of its existing offices.
These modern offices provide a base to meet current
requirements and allow flexibility to expand over the coming
years. The improved working environment has led to a
noticeable enhancement in the vibrancy and dynamic of
operations.
FINANCIAL RESULTS
The Group’s total operating loss after tax for the year ended
31 March 2017 was $14.0 million (2016: $5.4 million). These
6
ANNUAL REPORT 2017 financial statements are presented in New Zealand dollars
unless otherwise stated.
REVENUE
Total revenue for the year recognised in the Statement of
Comprehensive Income was $1.2 million (2016: $0.7 million).
This amount excludes $2.1 million (2016: $1.5 million) of
implementation revenue deferred to future accounting
periods, which when included means the Group invoiced $3.3
million (2016: $2.2 million), an increase of 50% year on year.
Implementation revenue
The Group invoiced $2.4 million of third party channel
implementation revenue during the year ended 31 March 2017
(2016: $1.9 million). The Group’s policy is to defer recognition
of implementation revenue until a channel goes live, after
which revenue will be released on a straight-line basis over
the term of the channel agreements. During the second
half of the financial year, all existing channel deployments
(Barclays, Suncorp and Propel by Deloitte) went live so
accordingly $0.3 million of implementation revenue has been
recognised in the Statement of Comprehensive Income.
Total deferred implementation revenue disclosed in the
Statement of Financial Position at 31 March 2017 was $4.0
million (2016: $1.9 million).
Total research and development expenditure for the year
including salaries, operational costs and overheads amounts
to $3.8 million (2016: $2.8 million). Of this, $0.9 million of
spend, relating to channel implementation, has been deferred
as capital work in progress (2016: $0.3 million), resulting in a
net expense recorded in the Statement of Comprehensive
Income of $2.9 million (2016: $2.5 million). Deferred capital
work in progress is being expensed on a systematic basis
from the channels go live date.
The other main item of operational expenditure which has
increased this financial year is data-hosting costs of $1.4
million (2016: $0.3 million). New data-hosting environments
were launched during the year in Australia and Europe to host
our channel and small business customers.
Administrative expenses for the year ended 31 March 2017
were $8.1 million (2016: $2.3 million). Employee benefit
expenses relating to the growth in marketing, customer
and channel services, administration and the executives
amount to $4.1 million (2016: $1.2 million). There was also a
considerable increase in marketing activity during the year of
$0.9 million (2016: $0.03 million) primarily following the launch
of the 9 Spokes Direct and Channel platforms.
The total cost of the IPO was $3.5 million (predominantly
broker fees and commissions, legal and accounting fees, and
the fair value of share options issued to advisors). Of this total,
$3.2 million was incurred in the year to 31 March 2017, with
$2.8 million of the total IPO costs being offset against share
capital.
Licensing revenue
Licensing revenue charged to third party channels is derived
from the right to access 9 Spokes systems developed for
the channel. Licensing revenue of $0.8 million (2016: Nil) has
been charged since the Barclays, Suncorp and Propel by
Deloitte channels went live.
CASH FLOW
Net cash outflows from operating activities for the year ended
31 March 2017 were $13.2 million (2016: $3.4 million) and at 31
March 2017, the Group had $13.4 million of cash equivalents
and term deposits (2016: $3.4 million).
EXPENSES
The Group presents expenses under the categories of
operational expenditure, research and development (R&D)
expenditure, and administrative expenditure.
Reflected in operational and R&D expenses is the Group’s
continuing investment in technical and related staff including
software developers, architects, analysts, infrastructure
engineers and data experts to support the technical,
infrastructure and new product developments mentioned in
the IPO Prospectus. There has been a substantial growth
of technical talent in these areas, with total employee costs
for the year ended 31 March 2017 amounting to $5.4 million
(2016: $2.4 million) and accounting for around 57% of total
staff employment costs.
OUTLOOK
This year has been one of major milestones, particularly
achieving the deployment of four platforms into the market
and the acquisition of new small business users to these
platforms.
With the start of the new financial year we are seeing
encouraging development with our new business activities
in North America, Australasia and Asia. Recent progress
with North American opportunities indicates the potential for
formalisation of one or more of these channel deals. One of
our Asia based opportunities has already progressed in a
short period to an accelerated proof of concept. We have
also seen an acceleration of user adoption supported by
an increasing number of marketing campaigns with both 9
Spokes Direct and Channels Partners.
7
ANNUAL REPORT 2017 We would like to thank our fellow Directors, management,
staff, Channel Partners, App Partners and suppliers for their
significant contribution in helping the business achieve its
milestones over the past year and establishing the business
for ongoing growth. Finally, we would like to thank our
shareholders for their ongoing support over the past 12
months. We believe that following the successful deployment
and corresponding user adoption, the next financial year will
be the most exciting yet with growth from existing channel
partners and the promise of significant new channel partners
to come.
Approved for and on behalf of the Board of Directors on 31
May 2017.
PAUL REYNOLDS
Chairman
MARK ESTALL
CEO
8
ANNUAL REPORT 2017 Independent
Auditors’ Report
For the year ended 31 March 2017
9
ANNUAL REPORT 2017 10
ANNUAL REPORT 2017 11
ANNUAL REPORT 2017 12
ANNUAL REPORT 2017 13
ANNUAL REPORT 2017 14
ANNUAL REPORT 2017 15
ANNUAL REPORT 2017 Financial
Statements
16
ANNUAL REPORT 2017 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2017
Revenue
Expenses:
Operational expenses
Research and development expenses
Administrative expenses
Operating loss
Net finance income
Net loss before income tax
Income tax benefit
Notes
4
5
5
5
8
2017
$’000
1,163
2016
$’000
710
(4,516)
(1,483)
(2,894)
(2,450)
(8,137)
(2,342)
(14,384)
(5,565)
344
13
(14,040)
(5,552)
4
140
(5,412)
Net loss from continuing operations
(14,036)
Other comprehensive income
Translation of international subsidiaries
(25)
-
Total comprehensive loss attributable to
shareholders
Earnings per share
(14,061)
(5,412)
Basic and diluted loss per share
15
($0.04)
($0.02)
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes to the financial
statements.
17
ANNUAL REPORT 2017 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2017
Notes
Share
based
payments
reserve
Foreign
currency
translation
reserve
Accumulated
losses
$’000
$’000
$’000
Share
capital
$’000
Total
$’000
Balance as at 1 April 2015
6,562
468
Proceeds from shares issued
13
6,342
-
Share issue costs
13, 14
(161)
(230)
Share based payments
Net loss for the year
Share option expense
Balance as at 31 March 2016
Proceeds from shares issued
Capitalised IPO costs
Reserve arising on conversion of
foreign currency subsidiary
Net loss for the year
Share option expense
14
14
13
13
14
-
702
-
-
-
31
12,743
971
26,169
-
(2,767)
-
-
-
-
-
-
687
-
-
-
-
-
-
-
-
-
(25)
(7,400)
(370)
-
-
-
6,342
(391)
702
(5,412)
(5,412)
-
31
(12,812)
902
-
-
-
26,169
(2,767)
(25)
-
-
(14,036)
(14,036)
-
687
Balance as at 31 March 2017
36,145
1,658
(25)
(26,848)
10,930
The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to the
financial statements.
18
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2017
Notes
2017
$’000
2016
$’000
Assets
Non-current assets
Property, plant and equipment
9
535
96
Total non-current assets
535
96
Current assets
Cash and cash equivalents
10
7,484
3,381
Term deposits with maturities of more than three months
5,900
-
Trade, other receivables and prepayments
Capital work in progress
Total current assets
Total assets
Equity
Share capital
Share based payments reserve
11
11
13
14
1,278
443
1,073
301
15,735
4,125
16,270
4,221
36,145
12,743
1,658
971
Foreign currency translation reserve
(25)
-
Accumulated losses
(26,848)
(12,812)
Equity attributable to the owners of the company
10,930
902
Total equity
10,930
902
Current liabilities
Trade and other payables
Deferred revenue
Total current liabilities
Total liabilities
12
4
1,377
1,458
3,963
1,861
5,340
3,319
5,340
3,319
Total equity and liabilities
16,270
4,221
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes to the financial statements.
19
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2017
Cash flows from operating activities
Cash receipts from customers
Cash payments to employees and suppliers
Interest received
Income tax credit received
Notes
2017
$’000
2016
$’000
2,595
2,260
(16,212)
(5,693)
(13,617)
(3,433)
293
144
13
-
Net cash flows from operating activities
16
(13,180)
(3,420)
Cash flows from investing activities
Purchase of property, plant and equipment
Transfer to term deposits
(442)
(97)
(5,900)
-
Net cash flows from investing activities
(6,342)
(97)
Cash flows from financing activities
Net proceeds from the issue of share capital
26,542
6,180
IPO costs
(2,767)
-
Net cash flows from financing activities
23,775
6,180
Net change in cash and cash equivalents
4,253
2,663
Cash and cash equivalents at beginning of the year
3,381
718
Foreign exchange loss on cash and cash equivalents
(150)
-
Cash and cash equivalents at end of the year
10
7,484
3,381
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes to the financial statements.
20
ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements 31 March 2017
1. GENERAL INFORMATION
These financial statements are for 9 Spokes International
Limited (“the Company” or “9 Spokes”) and its subsidiaries
(together “the Group”).
9 Spokes is a limited liability company incorporated in
New Zealand. The registered office of the Company is
Level 4, AECOM House, 8 Mahuhu Crescent, Auckland 1010,
New Zealand.
The financial statements were authorised for use by the
Board of Directors on 31 May 2017.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
These are the financial statements for the Group for the year
ended 31 March 2017.
The principal accounting policies applied in the preparation
of these financial statements are set out below. These
policies have been consistently applied to all the periods
presented, unless otherwise stated.
(a) Basis of preparation
These financial statements have been prepared in
accordance with Generally Accepted Accounting
Practice (“GAAP”). They comply with New Zealand
equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting
Standards (IFRS), as appropriate for for-profit entities.
The Group has adopted External Reporting Board
Standard A1 “Accounting Standards Framework (For-
profit Entities Update)” (“XRB A1”). XRB A1 establishes
a for-profit tier structure and outlines which suite of
accounting standards entities in different tiers must
follow. The Group is a Tier 1 for-profit entity.
(b) Going concern
The financial statements have been prepared on the
going concern basis, which assumes that the Group will
continue to be able to meet its liabilities as they fall due
for the foreseeable future.
The Group incurred a net loss of $14.0 million and net
cash outflows from operating activities of $13.2 million
during the year ended 31 March 2017. Management are
forecasting losses to continue for the foreseeable future,
which the Group will be unable to fund from the current
cash position without additional capital or an increase in
revenue.
This position indicates the existence of a material
uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern and
therefore, the Group may be unable to realise its assets
and discharge its liabilities in the normal course of business.
In order to fund the continuing development and growth
of the business, the Group needs to raise additional
funds in the next 12 months. The Company is listed on
the Australian Stock Exchange (ASX:9SP) which greatly
enhances the Company’s access to capital and is
expected to be the source of additional funds.
The Board and Management maintain regular
communications with the investing community through
written and face to face communications and based on
feedback from market participants we are of the view
that there is sufficient support for the Company to enable
it to raise further capital to meet its funding needs.
Detailed monthly forecast cash flows are maintained
by management on a rolling twelve month basis to
enable the Board to continually determine the funding
needs sufficient to meet the Group’s future operating
requirements and to plan for additional fund raising.
The Company is currently engaged in several new
business opportunities in North America, Australasia and
Asia. The Board recognises there is no certainty that
business development projects will come to fruition, but
recent progress suggests there is potential for one or
more of these opportunities to become formal channel
partners in the future. In addition, user adoption is
accelerating with a number of marketing campaigns with
both 9 Spokes Direct and third party channels underway
during the first quarter of the new financial year.
If, in the unlikely circumstance, additional equity cannot
be raised in the market, the Group would be required
to raise further capital through alternative sources and
depending on the amount raised, review the extent
of its development plan, reduce costs and focus on
existing business.
The Board and Management believe the Group will be
able to raise sufficient funds to support its growth and
consider it appropriate to continue to adopt the going
concern basis in preparing these financial statements.
(c) Statutory base
9 Spokes International Limited is a company registered
under the New Zealand Companies Act 1993. The
financial statements have been prepared in accordance
with the requirements of the Financial Reporting Act 2013
and the Companies Act 1993.
(d) Historical cost convention
The financial statements have been prepared on the
historical cost basis.
(e) Use of estimates and judgements
The preparation of the financial statements in conformity
with NZ IFRS requires management to make judgements,
estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are
revised and in any future periods affected.
Critical accounting policies and estimates in the year
include the expensing of research and development costs
(refer to note 5 and for the non-recognition of deferred
tax, see note 8).
21
ANNUAL REPORT 2017 NZ IFRS 9, ‘Financial instruments’, was issued in
September 2014 as a complete version of the standard.
NZ IFRS 9 replaces the parts of NZ IAS 39 that relate
to the classification and measurement of financial
instruments, hedge accounting and impairment. This
standard will be effective for the Group from 1 April 2018.
The Group is yet to assess the full impact of NZ IFRS 9.
NZ IFRS 15 – Revenue from contracts with customers
(effective for the Group from 1 April 2018)
NZ IFRS 15 addresses recognition of revenue from
contracts with customers. It replaces the current revenue
recognition guidance in NZ IAS 18 Revenue and NZ IAS
11 Construction Contracts and is applicable to all entities
with revenue. It sets out a 5 step model for revenue
recognition to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled
in exchange for those goods or services. The Group has
considered the treatment of its current material revenue
contracts under NZ IFRS 15. There will be no material
change to the current accounting treatment for these
contracts when NZ IFRS 15 is adopted.
NZ IFRS 16: Leases (effective for the Group from 1 April
2019)
NZ IFRS 16, ‘Leases’, replaces the current guidance in
NZ IAS 17. Under NZ IFRS 16, a contract is, or contains, a
lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. Under NZ IAS 17, a lessee was required to
make a distinction between a finance lease (on balance
sheet) and an operating lease (off balance sheet). NZ IFRS
16 now requires a lessee to recognise a lease liability
reflecting future lease payments and a ‘right-of-use asset’
for virtually all lease contracts. Included is an optional
exemption for certain short-term leases and leases of low-
value assets; however, this exemption can only be applied
by lessees. The Group is yet to assess the full impact of
NZ IFRS 16.
At balance date the Group has no other significant
estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amount of
assets and liabilities within the next financial year.
(f) Change in accounting policies
There have been no changes in accounting policies.
There has been a reclassification of expenses from
research and development to administrative expenses
for the year ended 31 March 2016 to align with the
current presentation. The amount of the reclassification is
$957,000. This has not affected the reported loss or any
other aspect of the financial statements for that year.
(g) Foreign currency
Functional and presentation currency
Items included in the financial statements are measured
using the currency of the primary economic environment
in which the entity operates (“the functional currency”).
The financial statements are presented in New Zealand
dollars, which is the Group’s presentation and functional
currency.
Foreign currency transactions
Transactions in foreign currencies are translated to the
functional currency of the Group at exchange rates at the
dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting
date are retranslated to the functional currency at the
exchange rate at that date.
The foreign currency gains or losses on monetary
items is the difference between amortised cost in the
functional currency at the beginning of the year, adjusted
for effective interest and payments during the year, and
the amortised cost in foreign currency translated at the
exchange rate at the end of the year.
(h) Standards, interpretations and amendments
to published standards
There are no new accounting standards or amendments
to existing standards that have been adopted by the
Group for the year ended 31 March 2017.
The following accounting standards and amendments to
existing standards are not yet effective and have not been
early adopted by the Group:
NZ IFRS 9 – Financial instruments (effective for annual
periods beginning on or after 1 January 2018)
22
ANNUAL REPORT 2017 3. SEGMENT INFORMATION
Operating segment information
The Group operates in one business operating segment, providing an online, Software-as-a-Service application platform
and store allowing a business to access a range of online services.
The Chief Executive Officer and members of the executive team are the Group’s chief operating decision makers.
They have determined that based on the information they use for the purposes of allocating resources and assessing
performance, the Group itself forms a single operating segment.
Geographical segment information
Revenue was sourced from the following geographical locations:
United Kingdom
Australia
Total revenue
2017
$’000
969
194
1,163
2016
$’000
351
359
710
4. REVENUE
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for
services rendered, excluding sales taxes, GST, VAT, rebates and discounts. The Group recognises revenue when the amount of
revenue can be reliably measured; when it is probable that future economic benefits will flow to the Group; and when specific
criteria have been met for each of the Group’s activities, as described below:
Sales of services – implementation and licensing revenue
Implementation fees are received from third parties for the deployment of bespoke 9 Spokes systems. As the Group maintains
ownership of the developed system, and the Group has an obligation to provide continuing services to the third party related to
the completed bespoke 9 Spokes system, these fees are recognised as revenue over the expected period that the Group will
provide the services.
Implementation fees received prior to the commencement of the continuing services are treated as deferred revenue, and
released as revenue on a straight-line basis over the expected initial term of the service.
Licensing revenue from the right to access 9 Spokes systems (software as a service) is recognised monthly, on a straight-line
basis, over the expected licence period.
Sales of services - subscription revenue
Subscription revenue comprises the recurring monthly fees from customers who subscribe to online third party business software
applications less the portion of the fee payable to the third party. Subscription revenue is recognised as the services are provided
to the customers. Unbilled subscription revenue at year end is recognised in the Consolidated Statement of Financial Position as
accrued income and included within trade and other receivables.
Implementation revenue
339
353
2017
$’000
2016
$’000
Licence revenue
Other revenue
Total revenue
823
-
1
357
1,163
710
23
ANNUAL REPORT 2017 Deferred implementation revenue
Fees invoiced
Less amount deferred
Total revenue
2017
$’000
2016
$’000
2,441
1,888
(2,102)
(1,535)
339
353
The Group had deferred implementation revenue as at 31 March 2017 of $4.0 million (2016: $1.9 million).
5. EXPENSES BY NATURE
The Group operates in one business segment, providing online solutions for businesses, with costs predominately based in
New Zealand.
Operational expenditure
Employee benefit expenses
7
2,322
Note
2017
$’000
2016
$’000
1,030
Platform hosting
Other operational expenses
1,401
261
793
192
Total operational expenditure
4,516
1,483
Operational expenses are shown separately from administrative expenses, as these costs represent infrastructure and
technical support not relating to research and development.
24
ANNUAL REPORT 2017 Research and development expenditure
Research expenditure is recognised as the expense is incurred.
Development costs that are directly attributable to the design and testing of an identifiable product are recognised as
intangible assets if they meet the recognition criteria:
a. it is technically feasible to complete the software product so that it will be available for use;
b. management intends to complete the software product and use or sell it;
c. there is an ability to use or sell the software product;
d. it can be demonstrated how the software product will generate probable future economic benefits;
e. adequate technical, financial and other resources to complete the development and to use or sell the software product
are available; and
f.
the expenditure attributable to the software product during its development can be reliably measured.
The expenditure capitalised includes direct labour, external contractors and overhead costs that are directly attributable to
preparing the asset for its intended use.
Development costs recognised as assets are amortised over their estimated useful lives.
Employee benefit expenses
Other research and development expenses
Capitalised work in progress
Notes
7
2017
$’000
3,116
664
(886)
2016
$’000
1,394
1,357
(301)
Total research and development expenditure
2,894
2,450
WIP is amortised on a systematic basis over the channels initial licence terms. Total WIP at 31 March 2017 was $1.1 million
(2016: $0.3 million).
Administrative expenditure
Depreciation expense
Directors’ fees
Directors’ consultancy services
Directors’ IPO services
Remuneration of auditors
Expensed IPO costs
Employee benefit expenses
Marketing expenses
Notes
2017
$’000
2016
$’000
9
79
18
301
134
115
180
296
-
6
7
275
123
454
252
4,078
1,215
878
32
Other administrative expenses
1,823
226
Total administrative expenditure
8,137
2,342
25
ANNUAL REPORT 2017 6. REMUNERATION OF AUDITORS
Audit and review of financial statements by PwC
Audit of the annual financial statements – current year
Audit of the annual financial statements – previous years
Review of the half year financial statements
One-off fees for the audit of the financial statements
Extended assurance controls testing
Other services performed by PwC
Tax compliance services
IPO Investigating Accountant’s role
Remuneration policy advice
Other tax advice
Total fees paid and payable to auditor
Administrative expenses
Capitalised IPO costs
Total fees paid and payable to auditor
2017
$’000
56
31
22
8
5
15
97
22
45
301
275
26
301
2016
$’000
56
-
-
30
-
16
21
-
-
123
123
-
123
The Audit and Risk Committee oversees the relationship with the Group’s auditor, PwC, and considers PwC’s independence
as part of this process. The Committee has considered the increase in non-audit fees in the current year and note that these
largely relate to the Investigating Accountant’s work performed as part of the IPO. This work is commonly performed by a
company’s audit firm and in this instance, it was performed by a team separate from the audit team.
The Committee also notes that the increase in audit fees in the current year include fees for the review of the half year
financial statements, which was not required in the previous year.
The Committee is satisfied that PwC is currently independent of the Group and the other non-audit services have not
impaired that independence.
26
ANNUAL REPORT 2017 7. EMPLOYEE BENEFIT EXPENSES
Liabilities for wages and salaries, including non-monetary benefits, annual leave, and accumulating sick leave expected to
be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to
the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-
accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.
The liability for employee entitlements is carried at the present value of the estimated future cash flows.
Wages and salaries
Third party contractors
Share option expense
Other benefits
Note
2017
$’000
2016
$’000
8,393
2,161
822
1,401
14
68
31
233
46
Total employee benefit expenses
9,516
3,639
Employee benefit expenses have been allocated between
operational, research and development and administrative
expenditure as follows:
Operational expenses
Research and development expenses
Research and development capitalised as work in progress
Administrative expenses
2,322
2,468
648
4,078
1,030
1,209
185
1,215
Total employee benefit expenses
9,516
3,639
8. INCOME AND DEFERRED TAX
The tax expense for the year comprises current and deferred tax. Current tax and deferred tax is recognised in the
statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or subsequently enacted at balance date.
Deferred income tax is recognised on temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred income tax is determined using tax rates and laws that have been
enacted or subsequently enacted by the balance date and are expected to apply when the related deferred income tax
asset or liability is realised or settled. An exception is made for certain timing differences arising from the initial recognition
of an asset or liability. No deferred tax asset or liability is recognised in relation to these temporary differences 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 or loss.
Deferred income tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
27
ANNUAL REPORT 2017 Current tax benefit
R&D tax credit
2017
$’000
2016
$’000
-
140
Resident with-holding tax credit
4
-
Total current tax benefit
Deferred tax expense
4
140
Origination of temporary timing differences
(24)
(26)
Tax deduction of research and development expenditure deferred
(216)
(848)
Tax losses
(3,513)
(352)
Deferred tax assets not recognised
3,753
1,226
Total deferred tax
Total tax benefit
-
-
4
140
The Group has tax losses available to carry forward of $12.8 million (2016: $4.9 million) subject to shareholder continuity being
maintained. The Group has deferred research and development deductions of $7.2 million (2016: $6.4 million). The deferred
tax assets have not been recognised as it is uncertain whether the Group will maintain shareholder continuity or when it will
generate taxable profits.
At 31 March 2016, there were unrecognised tax losses of $4.9 million. As a result of the shareholding changes from the IPO
the shareholder continuity for the carry forward of tax losses was breached on 9 June 2016 and tax losses held at 31 March
2015 of $3.3 million were no longer available to the Group. The benefit of the tax losses had not previously been recognised
in the Group’s financial statements, therefore there is no balance sheet or profit or loss impact. The availability of the deferred
research and development deductions have not been affected by the change in shareholding.
The tax benefit of $140,000 arising in 2016 derives from the R&D tax loss credit regime, introduced into New Zealand tax
legislation in the previous financial year. This amount was paid to the Group in October 2016. The Group is no longer able to
qualify for this credit as a result of its listing on a public stock exchange.
There are no imputation credits available to the Group.
Reconciliation of effective tax rate
2017
$’000
2016
$’000
Loss before income tax
(14,040)
(5,552)
Prima facie taxation at 28% (2016: 28%)
(3,931)
(1,555)
Expenses not deductible for tax purposes
182
189
Deferred tax assets not recognised:
Temporary timing differences
24
26
Research and development expenditure
216
848
Total losses not recognised
3,513
632
Total tax benefit
4
140
28
ANNUAL REPORT 2017
9. PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Significant leasehold improvements undertaken over the term of the lease contract that are expected to have significant economic
benefit for the Group are recognised at cost and include decommissioning or similar costs if the lease contract requires the
property to be returned at the end of the lease in its original state. These costs are subsequently depreciated over the lease term.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net
proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Depreciation
For property, plant and equipment, depreciation is based on the cost of an asset less its residual value. Significant components
of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that
component is depreciated separately.
Depreciation is recognised in profit or loss on a diminishing value basis over the estimated useful lives of each component of
an item of property, plant and equipment, with the exception of leasehold improvements which are depreciated on a straight-
line basis over the term of the lease.
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:
Office and computer equipment
2-10 years
Leasehold improvements
Over the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Office and
computer
equipment
Leasehold
improvements
$’000
$’000
Total
$’000
Cost
Balance as at 1 April 2015
25
-
25
Additions
97
-
97
Cost as at 31 March 2016
122
-
122
Additions
Disposals
Cost as at 31 March 2017
Accumulated depreciation
Balance as at 1 April 2015
Depreciation for the year
204
328
532
(19)
-
(19)
307
328
635
(8)
(18)
-
-
(8)
(18)
Accumulated depreciation as at 31 March 2016
(26)
-
(26)
Depreciation for the year
Depreciation on disposals
(76)
(3)
(79)
5
-
5
Accumulated depreciation as at 31 March 2017
(97)
(3)
(100)
Carrying amount
As at 31 March 2016
As at 31 March 2017
96
-
96
210
325
535
29
ANNUAL REPORT 2017 10. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the
management of its short-term commitments.
Cash at bank
2017
$’000
866
2016
$’000
3,381
Term deposits with maturities of three months or less
6,618
-
Total cash and cash equivalents
7,484
3,381
11. TRADE, OTHER RECEIVABLES, CAPITAL WORK IN PROGRESS AND PREPAYMENTS
Capital work in progress
Identifiable costs incurred in fulfilling a contract with a customer are capitalised as an asset and amortised on a systematic
basis that is consistent with the provision of the services.
Trade receivables
IPO related costs deferred
Prepayments
Other receivables
2017
$’000
665
2016
$’000
6
-
83
406
112
207
242
Total trade, other receivables and prepayments
1,278
443
Capital work in progress
1,073
301
Total trade, other receivables, capital work in progress and
prepayments
2,351
744
12. TRADE AND OTHER PAYABLES
Trade and other payables due to related parties
Other trade payables
Other creditors and accruals
Employee entitlements
Note
22
2017
$’000
41
325
995
16
2016
$’000
142
564
482
270
Total trade and other payables
1,377
1,458
30
ANNUAL REPORT 2017
13. SHARE CAPITAL
Ordinary shares are the only class of share capital and are classified as equity. Incremental costs directly attributable to the
issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
Share options entitlements are outlined in Note 14.
Share options are classified as equity because the holder has the option to acquire a fixed number of shares in exchange.
2017
2017
2017
2016
2016
2016
$’000
Shares
’000’s
Options
‘000’s
$’000
Shares
’000’s
Options
’000’s
Share capital as at beginning of the year
12,743
266,744
39,866
6,562
30,328
5,242
Shares issued for cash at A$0.20 per share ($0.21)
26,169
125,000
-
Capitalised IPO costs
(2,767)
Shares issued for cash at 80 cents per share
Options issued for cash at $1 per share
Shares issued for cash at $1.20 per share
Effect of the share split
Shares issued for cash at A$0.15 per share ($0.16)
Shares issued for cash at $0.1606 per share
Share issue costs paid in cash
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200
13
-
-
250
-
3,779
3,149
-
-
-
94
-
-
218,285
34,530
2,340
14,667
10
(161)
65
-
-
-
-
Share capital at the end of the year
36,145
391,744
39,866
12,743
266,744
39,866
Share issue transaction costs during the year of $2.8 million (2016: $0.4 million) have been netted off against the amount
recognised in equity.
All shares rank equally with regard to the Group’s residual assets. The holders of ordinary shares are entitled to receive
dividends as declared from time to time, and are entitled to one vote per share at meetings of the Group. The shares have
no par value.
In December 2015, the Company undertook a share split. For each existing share and option, 6.472 additional shares and
options were issued for nil consideration. Accordingly, the exercise price of options was adjusted, the options originally
priced at NZ$1.35 are now priced at NZ$0.18 and the options originally price at NZ$1.65 are now priced at NZ$0.22 (ASX
Announcement August 2016).
The additional shares and options issued were:
Shares issued
for cash
Shares issued
from share
based payments
Shareholder
options from
shares issued
for cash
Shareholder
options from
shares issued
from share
based payments
Employee
options on issue
’000’s
33,727
’000’s
1,362
’000’s
5,336
’000’s
’000’s
404
251
218,285
8,816
34,530
2,618
1,625
Number of existing shares
and options before the split
Subdivision of shares and
options issued
31
ANNUAL REPORT 2017
The capital structure of the Group consists of equity, raised by the issue of ordinary shares in the Company. The Group
manages its capital to ensure the entities in the Group are able to continue as a going concern.
The Group’s aim is to maintain a sufficient capital base to sustain future growth and development of the business and to
maintain investor and creditor confidence.
The Group’s strategy in respect of capital management is reviewed regularly by the Board of Directors. There has been no
material change in the Group’s management of capital during the year.
14. SHARE OPTIONS
Share based payments reserve
Note
2017
2017
2017
2016
2016
2016
$’000
Shares
’000’s
Options
’000’s
$’000
Shares
’000’s
Options
’000’s
Share based payments at beginning of the year
971
11,219
4,898
468
904
350
Shares issued for services at 80 cents per share
Shares issued for services at $1 per share
Shares issued for services at $1.20 per share
Employee share options
IPO Advisor options
Effect of the share split
Shares issued for services at $0.1606 per share
Share option expense
Share issue costs
7
-
-
-
-
619
-
-
68
-
-
-
-
-
-
-
-
-
-
-
-
-
15
36
19
36
-
54
484
403
-
(90)
-
-
251
8,750
-
-
-
-
-
-
-
-
8,816
4,243
167
1,041
-
31
-
-
(230)
-
-
Share based payments at the end of the year
1,658
11,219
13,558
971
11,219
4,898
No share based payments were made during the year ended 31 March 2017.
During the previous year, the Group received services from directors and suppliers where payment was settled by the issue
of ordinary shares. The value of services was measured as the fair value of the shares issued. The fair value of the shares
was based on the prices paid for equivalent shares by non-employee third parties at around the same time.
32
ANNUAL REPORT 2017 Expenditure
$’000
$’000
$
’000’s
Value of
service
Settled in
shares
Share
price
Number of
shares
Suppliers and consultants
Share issue costs
Share issue costs
Share issue costs
Consultancy
Consultancy
Directors
Directors’ fees
Directors’ fees
Directors’ sign on bonus
Directors’ consultancy
Directors’ consultancy
5
109
117
15
31
82
30
120
173
20
5
109
117
15
31
82
30
120
173
20
1.00
1.20
0.16
0.80
1.00
1.20
0.16
1.20
1.20
0.16
5
91
729
19
31
68
187
100
144
125
Total share based payments
702
702
1,499
There were no restrictions or vesting conditions on shares or options issued for settlement.
Shareholder pre IPO share options
In 2014, the Group undertook an equity raise, designated Series A2, with shares offered at $1 per share. The offer also
included the following options to each subscriber of the Series A2 offer. For every two $1 ordinary shares subscribed for, the
investor received:
a) two options, each granting the right to acquire one ordinary share, at an exercise price of $1.35 per share on or before
30 September 2017; and
b) one option, granting the right to acquire one ordinary share, at an exercise price of $1.65 per share on or before 30
September 2017.
Contingent shareholder claim regarding pre IPO share options
In its Replacement Prospectus dated 17 May 2016, the Company advised in section 14.13 that an existing shareholder had made
a claim regarding their entitlement to acquire further unquoted options over ordinary shares (Options) in the capital of 9 Spokes.
Section 14.13 of the Replacement Prospectus highlighted that on the basis that this claim is assessed to have merit, the
Company may promptly thereafter issue up to 2,942,100 new Options with an exercise price of A$0.20 to that existing
shareholder to resolve their claim, in which case this may be dilutive to shareholders. 9 Spokes advised that it was currently
assessing the merit of that claim in good faith.
The Company has now concluded its good faith investigation into the merit of the claim and has determined that the claim
does not have merit. No Options have been issued to the relevant shareholder.
33
ANNUAL REPORT 2017
Options issued to IPO Advisors
In June 2016, the Group issued additional options to its advisors over an aggregate 8,750,000 shares, at an exercise price
of A$0.20 per share treated as share based payments.
8,500,000 of the options issued will vest on the date the price per share of the Company on the ASX is equal to A$0.30.
The remaining 250,000 options will vest based on the following conditions; if the price per share of the Company on the
ASX achieves a 30 day VWAP price of a 50% premium to the issue price of A$0.20 (30 day VWAP Price) on or before the
date that is two years after the date the Company listed on the ASX (Second Anniversary), the Options will vest on the
Second Anniversary. These options are exercisable on or before 30 June 2019.
The weighted average of the fair value of each option is A$0.066 under the Black Scholes valuation model resulting in a
charge to the Company of A$579,375 ($618,711). The significant inputs into the model were a share price of A$0.20 at the
grant date, exercise price A$0.30, volatility of 50%, no dividend, expected option life of three years and a risk-free interest
rate of 2.51%.
Employee share options – Pre IPO
The fair value is measured at grant date and expensed over the vesting period.
At the end of each reporting period, the Company revises its estimates of the number of options that are expected to vest.
Revisions to original estimates, if any, are recognised in the statement of comprehensive income, with a corresponding
adjustment to equity.
In December 2015, the Board approved an employee share option scheme to issue options to selected employees. One-
third of the options granted to an employee vest to the employee on each of the first three anniversaries of continuous
employment with the Group. The vested options can be exercised at any time up to 21 December 2025. Each option
entitles the holder on payment of the exercise price to one ordinary share in the capital of the Group. If employment ceases
the options automatically terminate unless the Board determines otherwise. Payment must be made in full for all options
exercised on the dates they are exercised. No further options were issued. At 31 March 2017, there were 1,190,810 options
granted and unvested.
Employee share options – Current ESOP
Effective from 10 May 2016, the Company adopted a new employee share option plan (Current ESOP) which replaces the Pre
IPO employee share option scheme. As at the date of issuing these financial statements, no options have been issued under
the Current ESOP. However, any future issues of options to employees will be pursuant to the terms of the Current ESOP.
The Current ESOP has no impact on the Pre IPO employee share options.
Key provisions of the Current ESOP include:
•
•
the options are to vest in accordance with the employee’s letter of offer;
the expiry date of the options will be as set out in the employee’s letter of offer; and
• should the relevant employee cease to be employed by the Company, all options not yet vested will be cancelled and,
all options vested, must be exercised within three months following the relevant employee’s leaving date, unless the
Board otherwise determines.
34
ANNUAL REPORT 2017 Share options outstanding at the end of the financial years have the following expiry dates, vesting dates and exercise prices:
Vesting Conditions
Expiry month
Exercise price
31 March 2017
No of options
31 March 2016
No of options
Vested
Vested
Vested
Vested Dec 2017
Vested Dec 2018
Vested
Sep 2017
Sep 2017
Dec 2025
Dec 2025
Dec 2025
Jun 2019
$0.18
$0.22
$0.16
$0.16
$0.16
$0.21
’000’s(1)
28,593
14,296
595
595
595
8,750
’000’s(1)
28,593
14,296
625
625
625
-
Balance at end of year
53,424
44,764
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
31 March 2017
31 March 2016
Weighted average
exercise price
Options
Weighted average
exercise price
(pre-share split/
post share split)
$ per share
’000’s
$ per share
Balance at beginning of
year
Issued
Issued
Issued
Lapsed
$0.19
$0.21
-
-
44,764
$1.45
8,750
$1.35/$0.18
-
-
$1.65/$0.22
$1.20/$0.1606
$1.20/$0.1606
(90)
$1.20/$0.1606
Options
’000’s
5,592
98
49
292
(41)
Share split 6.472 for 1
-
-
n/a
38,774
Balance at end of year
$0.19
53,424
$0.19
44,764
1. Incorporating share split 6.472:1
35
ANNUAL REPORT 2017 15. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Group by the
weighted average number of ordinary shares on issue during the year. Diluted earnings per share is determined by
adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares on
issue for the effects of all dilutive potential ordinary shares, which comprise share options.
Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease
earnings per share or increase the loss per share from continuing operations.
Total comprehensive loss attributable to shareholders
2017
’000’s(1)
($14,061)
2016
’000’s(1)
($5,412)
Ordinary number of shares
402,963
277,963
Weighted average number of shares on issue (after share-split)
397,521
251,898
Basic and diluted loss per share
($0.04)
($0.02)
The potential shares are anti-dilutive in nature. The diluted loss per share is therefore the same as the undiluted loss per
share; ($0.04) and ($0.02) for the respective periods.
16. RECONCILIATION OF REPORTED LOSS AFTER TAXATION WITH CASH FLOWS FROM
OPERATING ACTIVITIES
Loss after income tax
Non-cash items:
Depreciation
Share based payments
Share option expense
2017
$’000
2016
$’000
(14,036)
(5,412)
79
18
619
472
68
31
Foreign exchange gain on monetary assets
(237)
-
Changes in working capital:
(Decrease)/increase in trade and other payables
(168)
445
Increase in deferred revenue
2,102
1,535
Increase in trade and other receivables
(835)
(208)
Increase in capital work in progress
(772)
(301)
Net cash flow from operating activities
(13,180)
(3,420)
1. Incorporating share split 6.472:1
36
ANNUAL REPORT 2017 17. FINANCIAL INSTRUMENTS
Financial assets
Classification
The Group’s only financial assets comprise cash and cash equivalents and trade and other receivables and are classified as
loans and receivables, determined at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the
balance sheet.
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade date which is the date on which the Group
commits to purchase or sell the asset.
Impairment of financial assets
Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only
if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the
asset (a ‘loss event’) and that a loss event (or events) has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial
reorganisation, and where observable data indicates that there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate with defaults.
For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in the profit and loss.
There has been no impairment of financial assets and there were no past due not impaired financial assets as at 31 March
2017.
Credit risk
Financial instruments which potentially subject the Group to credit risk, principally consists of bank balances and receivables,
the maximum potential exposure to credit risk is $13.4 million (2016: $3.5 million). The Group monitors the credit quality of its
major financial institutions that are counter-parties to its financial statements and does not anticipate on-performance by the
counter-parties. All financial institutions have a credit rating of AA-.
The Group has not provided any guarantees or collateral and has no securities registered against it. The Group does not have
any significant concentrations of credit risk apart from its deposits with large and reputable banks.
Liquidity risk
Management and the Board monitor cash forecasts of the Group’s liquidity reserve on the basis of expected cash flow, to
enable the Board to determine the funding needs and to ensure the Group meets its future operating requirements.
At 31 March 2017, the contractual cash flows of the Group’s financial liabilities are equal to the carrying value and are due
within 12 months or less.
37
ANNUAL REPORT 2017 Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a
currency that is not the entity’s functional currency. The Group is exposed to foreign exchange risk currently arising as a result
of commercial transactions involving the Australian dollar, US dollar and the British pound. The policy requires the Group to
manage foreign exchange risk against its functional currency (New Zealand dollar).
The Group’s exposure to monetary foreign currency financial instruments is outlined below in New Zealand dollars:
31 March 2017
31 March 2016
AUD
GBP
USD
AUD
GBP
USD
$’000
$’000
$’000
$’000
$’000
$’000
Cash and cash equivalents
Trade, other receivables and prepayments
123
81
Trade and other payables
(140)
(1,633)
627
-
1,102
1,635
-
725
64
(191)
13
(221)
61
(5)
18
(46)
Total foreign currency exposure from
financial instruments
64
(281)
(127)
894
1,691
(28)
As at 31 March, a movement of 10% in the New Zealand dollar would impact the net loss before income tax as detailed in the
table below:
Impact on net loss before income tax:
Balances in AUD (net)
Balances in GBP (net)
Balances in USD (net)
10% decrease
10% increase
2017
$’000
(6)
28
13
2016
$’000
(89)
(169)
3
2017
$’000
6
(28)
(13)
2016
$’000
89
169
(3)
When necessary, the Group uses derivatives in the form of forward exchange contracts to reduce the risk that movements in the
exchange rate will affect the Group’s New Zealand dollar cash flows. The Group did not hold any forward exchange contracts at 31
March 2017 (2016: Nil).
Credit facilities
The Group has no credit facilities, other than trade creditors.
Fair values
The fair value of the Group’s financial assets and liabilities is considered approximately equal to their carrying amount. The
Group has no assets or liabilities that are measured at fair value. Accordingly, information on the fair value hierarchy is not
required.
38
ANNUAL REPORT 2017
18. CONSOLIDATION
Subsidiary companies
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when 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 over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the Group.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s
accounting policies.
Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
a) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of
that statement of financial position;
b) income and expenses for each statement of comprehensive income and statement of changes in equity, are translated
at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and
c) all resulting exchange differences are recognised in other comprehensive income.
The Group had the following subsidiaries as at 31 March 2017 (no change from 31 March 2016):
Name
Country of
incorporation and
place of business
Nature of business
Proportion of ordinary
shares directly held
by parent (%)
9 Spokes Australia Pty Limited
Australia
Trading operation
9 Spokes UK Limited
United Kingdom
Trading operation
9 Spokes US Holdings Limited
New Zealand
Holding Company
9 Spokes Knowledge Limited
New Zealand Holder of provisional patent
9 Spokes Trustee Limited
New Zealand
Non-trading
100%
100%
100%
100%
100%
Ultimate holding company
There is no ultimate holding company.
39
ANNUAL REPORT 2017 19. COMMITMENTS
Capital commitments
The Group had no capital commitments as at 31 March 2017 (2016: Nil).
Lease commitments
The Group has lease agreements on certain premises. Future minimum rentals payable under non-cancellable agreements
are:
2017
$’000
2016
$’000
Not later than one year
712
243
Later than one year and no later than five years
1,947
-
Total lease commitments
2,659
243
In November 2016, the Company signed an Agreement to Lease commencing 1 February 2017. The lease is on a 6-year
term with an option to cancel the lease after 4 years, at 31 January 2021.
In May 2017, the Company exercised the Option to take the additional lease space on the current floor. The lease
commitments noted above does not include the cost of this Option – which results in an additional commitment of
$1.2 million at 31 March 2017.
20. CONTINGENCIES
As at 31 March 2017, the Group had a $404,000 lease premise guarantee for the operating lease for the premises, held by
ASB Bank Limited (2016: Nil).
21. KEY MANAGEMENT PERSONNEL
Total key management compensation comprised salaries and contractor fees for the year of $2.0 million (2016: $0.89
million) and share option expense of $0.04 million (2016: $0.02 million).
22. RELATED PARTY TRANSACTIONS AND BALANCES
As at balance date, the Directors of the Company held 18.4% of the share capital of the Company (2016: 51%).
40
ANNUAL REPORT 2017 Transactions with the following related parties during the year:
Name of related party
Nature of relationship
Transaction
Adrian Grant
Director
(resigned on 9 May 2016)
Consulting services
Other
Kestrel Corporate
Advisory, Inc. 1
Director
Paul Reynolds
Director
Social Power
(Surrey) Limited 2
Director
Directors’ fees
Directors’ fees
Consulting services
Consulting services
Other
Directors’ fees
Directors’ fees
Consulting services
Consulting services
Other expenses
Directors’ fees
Consulting services
Consulting services
Other
Te Arai Coast Lodge Limited 3 Common Shareholder
Other services
Waiere Limited 3
Common Shareholder
Consulting services
Thomas Power
Director
Directors’ fees
Directors’ fees
Umbrellar Limited 4
Common Shareholder
Internet/ Hosting
Settled
in cash
or equity
2017
2016
$’000
$’000
Cash
Cash
Cash
Equity
Cash
Equity
Cash
Cash
Equity
Cash
Equity
Cash
Cash
Cash
Equity
Cash
Cash
Cash
Cash
Equity
Cash
4
8
86
-
97
-
9
141
-
73
-
2
74
79
-
20
2
-
-
-
-
48
-
25
25
21
17
-
27
53
44
68
-
-
29
109
-
-
240
17
33
10
Total transactions with related parties
595
766
Amounts owed by the Group to related parties were:
Name of related party
Nature of relationship
Balance Type
Adrian Grant
Director (resigned on 9 May
2016)
Trade and other payables
Kestrel Corporate Advisory, Inc. Director
Trade and other payables
Paul Reynolds
Director
Trade and other payables
Social Power (Surrey) Limited
Director
Trade and other payables
Waiere Limited
Common Shareholder
Trade and other payables
2017
2016
$’000
$’000
-
8
13
20
-
8
24
35
29
46
Amounts owed to related parties
41
142
23. EVENTS AFTER THE REPORTING PERIOD
With the exception of the Lease Option exercised in May 2017 (refer Note 19), there have been no other reportable events
arising after the end of the reporting period.
1. Non-executive Director, Wendy Webb is a Director and shareholder of Kestrel Corporate Advisory, Inc.
2. Non-executive Director, Thomas Power is a Director and shareholder of Social Power (Surrey) Limited.
3. Executive Director, Mark Estall is a Director and shareholder of Te Arai Coast Lodge Limited and Waiere Limited.
4. Former company Director, Adrian Grant (resigned on 9 May 2016) was a Director of Umbrellar Limited (resigned on 31 December 2016).
41
ANNUAL REPORT 2017 Statutory
Information
42
ANNUAL REPORT 2017 1. NATURE OF THE BUSINESS
9 Spokes has developed an online, Software-as-a-Service application platform and store allowing a business to access a
range of online services made available on a Software-as-a-Service basis by third party vendors. The 9 Spokes platform
targeting small medium enterprises (SME’s), incorporates a dashboard which takes data from third party services and
among other things, provides a graphical snapshot of the status of that business. Each business may allow access to the
9 Spokes platform for its employees and representatives and in addition may grant access to third party technical and
business specialists, such as accountants. 9 Spokes also develops and licences bespoke versions of the platform for third
party channels, which provides the features of the platform and store to channel customers.
2. BOARD OF DIRECTORS AND SUB-COMMITTEES
The Directors in office at the date of this Annual Report were:
Name
Position
Date appointed to the board
Paul Reynolds
Non-Executive Chairman
Wendy Webb
Independent Non-Executive Director
Thomas Power
Non-Executive Director
10 September 2014
18 March 2015
7 October 2014
Mark Estall
Executive Director and Chief Executive Officer
19 September 2011
Board meetings
The Board met formally eleven times during the financial year ended 31 March 2017. In addition, there were separate
meetings of the Board Committees. At each meeting the Board considers key financial and operational information as well
as matters of strategic importance.
Name
Position
Paul Reynolds
Non-Executive Chairman
Wendy Webb
Independent Non-Executive Director
Thomas Power
Non-Executive Director
Mark Estall
Executive Director and Chief Executive Officer
Adrian Grant
Executive Director (resigned 9 May 2016)
Adrian Grant joined the Board on 6 December 2011 and resigned on 9 May 2016.
Number of meetings
eligible to attend
Number of meetings
attended
11
11
11
11
1
11
11
11
10
0
Board committees
Following the IPO in June 2016, the Board established two committees to perform certain functions of the Board and to provide
the Board with recommendations and advice: the Audit and Risk Committee and the Remuneration and Nomination Committee.
The Charters of each committee are available on the Company’s web site at
https://www.9spokes.com/hubs/investors/corporate-governance/
43
ANNUAL REPORT 2017 Audit and Risk Committee
The role of the Audit and Risk Committee is to assist the Board to meet its oversight responsibilities in relation to the
Company’s financial reporting systems, the systems of internal control and risk management and internal and external audit
functions. In fulfilling these roles, the Audit and Risk Committee is responsible for maintaining free and open communication
between the Board, itself, management and auditors.
The Audit and Risk Committee provides advice to the Board and reports on the status and management of the risks to the
Company. The purpose of the committee’s risk management process is to assist the Board in relation to risk management
policies, procedures and systems and ensure that risks are identified, assessed and appropriately managed.
Since the IPO, up to the end of the financial year, the Audit and Risk Committee have met twice. The members of the
committee at the date of this Annual Report were:
Name
Position
Wendy Webb
Chairwoman
Paul Reynolds
Member
Thomas Power
Member
Number of meetings
eligible to attend
Number of meetings
attended
2
2
2
2
2
2
Remuneration and Nomination Committee
The role of the Remuneration and Nomination Committee is to review and make recommendations to the Board on
remuneration packages and policies related to the Directors and senior executives and to ensure that the remuneration
policies and practices are consistent with the Company’s strategic goals and human resources objectives. The Remuneration
and Nomination Committee is also responsible for reviewing and making recommendations in relation to the composition
and performance of the Board and its committees and ensuring that adequate succession plans are in place (including for the
recruitment and appointment of Directors and senior management). Independent advice will be sought where appropriate.
Since the IPO, up to the end of the financial year, the Remuneration and Nomination Committee have met twice. The
members of the committee at the date of this Annual Report were:
Name
Paul Reynolds
Position
Chairman
Wendy Webb
Member
Thomas Power
Member
Number of meetings
eligible to attend
Number of meetings
attended
2
2
2
2
2
2
44
ANNUAL REPORT 2017 3. ENTRIES RECORDED IN THE DIRECTORS’ INTERESTS REGISTER
The following are entries made in the Interests Register as at 31 March 2017:
Director/Entity
Mark Estall
9 Spokes Australia Pty Limited
9 Spokes Knowledge Limited
9 Spokes Trustee Limited
9 Spokes UK Limited
9 Spokes US Holdings Limited
Franc Holdings Limited
M & M No.1 Limited
M & M No.2 Limited
Te Arai Coast Lodge Limited
Waiere Limited
Paul Reynolds
eircom Holdco S.A.
eircom Holdings Ireland Limited
Tightline Advisory Limited
Volant Partners Limited
XConnect Global Networks Limited
Thomas Power
Digital Entrepreneur Limited
Electric Dog Limited
SA Vortex Limited
Social Power (Surrey) Limited
Teamblockchain Limited
The Business Café Limited
Wendy Webb
ABM Industries Inc.
Kestrel Corporate Advisory, Inc.
4. SHAREHOLDINGS OF DIRECTORS
Mark Estall
Paul Reynolds
Thomas Power
Wendy Webb
Relationship
Director
Director
Director
Director
Director
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Non-executive Director
Non-executive Director
Director & Chairman
Director
Director
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Non-executive Director
Director & Shareholder
2017
Shares
2016
Shares
66,754,863
66,754,863
4,423,625
4,423,625
1,843,784
1,006,673
1,843,784
1,006,673
45
ANNUAL REPORT 2017 Additional Information
For Publicly Listed
Companies
As at 31 May 2017
46
ANNUAL REPORT 2017 THE FOLLOWING INFORMATION IS CURRENT AS AT 31 MAY 2017 AND IS INCLUDED
FOR THE BENEFIT OF SHAREHOLDERS AND FOR COMPLIANCE WITH THE
AUSTRALIAN SECURITIES EXCHANGE (ASX) LISTING RULES
1. CORPORATE GOVERNANCE STATEMENT
In accordance with ASX Listing Rule 4.10.3, a copy of the Company’s Corporate Governance Statement can be obtained on
the Company’s website: https://www.9spokes.com/investors.
2. SUBSTANTIAL HOLDERS
The Financial Markets Conduct Act 2013 (NZ) (FMCA) includes substantial holder disclosure requirements for persons with a
5% or more holding in a New Zealand listed company. These requirements are similar to those under the Corporations Act
2001 (Cth) (Corporations Act), which is applicable in Australia. However, the FMCA requirements are not applicable to the
Company because the Company is not listed on a New Zealand Exchange. Furthermore, Chapter 6C of the Corporations
Act does not apply to the Company. However, the Company is nevertheless aware of the following information regarding
substantial shareholdings in the Company:
Substantial Holder
Associates
Mark Estall
Adrian Grant
M & M No. 2 Limited
Franc Holdings Limited
Adrian David Grant & AJ Trustee
Services Limited
Continue reading text version or see original annual report in PDF format above