ANNUAL
REPORT
31 March 2018
9 Spokes International Limited
and subsidiary companies
ARBN 610 518 075
9 Spokes is a tracking tool designed to help SME's enhance their
performance, and be their best business self. It collates and sorts the
SME’s data so they can more easily see their progress against the things
that matter most to their business; then provides access to tools, tips and
motivation to help them be their best.
Founded as a Software-as-a-
In November 2015, we acquired
Over the past 12 months, we’ve
Service company in Auckland, New
Barclays as a key enterprise
expanded through a series of
Zealand, in 2011. We listed on the
customer. A year later we launched
strategic partnerships, and have
Australian Securities Exchange
our 9 Spokes direct platform in
created an international business
(ASX) in June 2016.
the UK, and within four months
platform for both our banking
acquired our first 1,000 customers.
partners’ small-business clients and
our own direct users.
The 2018 integrated annual report covers the period 1 April 2017 to 31 March 2018 and provides an overview of 9 Spokes
International Limited. This report covers all our operations across the various geographies in which we operate and has been
structured to provide stakeholders with relevant financial and non-financial information.
01
02
03
04
05
FINANCIAL
SNAPSHOT&
DEFINITIONS
CHAIRMAN &
CEO REPORT+
YEAR IN REVIEW
DIRECTORS'
REPORT
INDEPENDENT
AUDITOR'S
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
06
GOVERNANCE &
DISCLOSURES
» NEW ZEALAND STATUTORY INFORMATION
» ADDITIONAL INFORMATION FOR ASX COMPANIES
» COMPANY DIRECTORY
01
FINANCIAL
SNAPSHOT &
DEFINITIONS
TOTAL FY18
REVENUE
TOTAL ANNUAL
REVENUE GROWTH
$6.7m 474%
ANNUAL
RECURRING
REVENUE
FY18
$6m FY17
$3m
Q1
Q2
Q3
Q4
FY18 QUARTERLY OPERATING
RECEIPTS AND BURN
OPERATING
RECEIPTS
OPERATING
NET CASH
BURN
NZ$ MILLIONS
$3.0
$2.0
$1.0
$0.0
-$1.0
-$2.0
-$3.0
-$4.0
-$5.0
CASH AND CASH
EQUIVALENTS
AT 31
MARCH 2018
$8.3million
6
FOR DEFINITIONS, PLEASE SEE PAGE 7
/01
DEFINITIONS
ARR: or Annual Recurring Revenue, is the value of the contracted
recurring revenue components of term subscriptions or contracts
normalised to a one-year period. ARR is often used by SaaS or
subscription businesses.
Cash equivalents: short-term, highly liquid investments that are
readily convertible to known amounts of cash. These could, but may
not necessarily include certificates of deposit, commercial paper or
marketable securities.
CMA9: The UK’s nine largest personal and small-business current-
account providers that created the country’s Open Banking
Implementation Entity.
ESOP: Employee share option plan.
FY: In this report FY refers to the company's financial year, which
applies from 1 April to 31 March.
GDPR: The General Data Protection Regulation is a legal framework
that sets guidelines for the collection and processing of personal
information of individuals within the European Union (EU).
MOU: A memorandum of understanding is often the first stage in
the formation of a formal contract. It is a non-binding agreement
between two or more parties outlining the terms and details
of an understanding, including each parties' requirements and
responsibilities.
Net cash burn: Operating receipts less operating expenditure.
Open Banking: The use of open APIs that enable third-party
developers to build applications and services around the financial
institution, delivering greater financial transparency options for
account holders. The UK is the first nation to launch an open banking
initiative, which was rolled out in March 2018.
PSD2: The revised Payment Services Directive is an EU Directive
aimed to increase competition and participation in the payments
industry from non-banks. PSD2 is administered by the European
Commission to regulate payment services and payment service
providers throughout the EU and European
Economic Area (EEA).
SME: Small to meduim-sized enteprise.
Total revenue: Total recognised revenue of a given quantity of goods
or services over the financial year. This includes implementation
revenue, platform access revenue, government grants and other
income.
7
02
CHAIRMAN &
CEO REPORT+
YEAR IN REVIEW
A YEAR OF
VALIDATION
/02
DEAR FELLOW
SHAREHOLDERS
9 Spokes’ aim is to empower a significant share of the millions of
SME's globally to be more successful at everything they do. We do
this by providing a business app marketplace where they can select
the right software to run their business, and by providing a dashboard
to give them a single view of their business performance. We are
rapidly moving towards providing small to medium businesses with
insights and actions they need to be confident in the decisions they
make.
We made the decision to focus on the provision of white-label
solutions for major banks, as it is the most effective means of rapidly
accessing SME's globally and leveraging what we see as very clear
opportunities for significant growth. This year, our partnerships with
major banks expanded from our first banking partner, Barclays, to
include both the Royal Bank of Canada (RBC) and the Bank of New
TABLE 1: FY18 QUARTERLY USERS
60k
50k
40k
30k
20k
10K
0
Zealand (BNZ). In support of this approach, we have invested in
both in our own brand (9spokes.com), and our banking partnerships,
building a robust alliance programme with key global consultants and
we go into our 2019 financial year with confidence.
integrators to the banking sector, resulting in a more broad range of
Finally, we’d like to extend a huge thanks to our shareholders,
potential banking partners.
team, enterprise customers, users and partners for getting us to this
We learned from experience to focus more specifically on core major
juncture. We are extremely grateful to our shareholders who have
banks who have the resources and incentive to drive SME platform
supported us. We recognise the prevailing share price has been
adoption. Consequently, we carried out an agreed withdrawal from
disappointing and that shareholder support has not yet translated
an unprofitable white label relationship during the year.
into the value that we would like to have demonstrated. On the back
The strategic focus on providing banks with a compelling SME
offering has been strengthened by the wider societal requirements
for greater data clarity and integrity, and the regulatory introductions
of the global regulatory trends detailed earlier, we believe that these
intersect our ability to deliver significant business progress and in
return, shareholder value.
such as Open Banking (CMA9 in the UK and PSD2 in wider Europe)
We will share more exciting announcements over the course of the
and the GDPR. As these strands have come together over the past
year ahead as we continue to grow a world-class company.
12 months, 9 Spokes finds itself in a strong position to utilise its API-
based technology to provide banks with solutions that offer their SME
customers multi-account visibility and transaction capability.
Operationally, we have made strong gains this year. All the metrics we
track as critical indicators to our growth showed solid improvements:
» Revenue growth was up 474% year on year, to $6.7 million
» We achieved our Annual Recurring Revenue target of $6m, a 100%
year-on-year increase
Approved for and on behalf of the Board of Directors
on 31 May, 2018.
» Our user base grew 50-fold from 1,000 users to 50,000 by the end
of the financial year (see Table 1).
PAUL REYNOLDS
Chairman
MARK ESTALL
CEO
With progressively good results and the emergence of solid progress
9
/02
ENTERPRISE
PARTNERS
AND ALLIANCES
Over the past year, we’ve focussed on building our partnerships with
And finally, in March 2018 we signed a contract with Bank of New
leading global banks—following our success with Barclays, 9 Spokes’
Zealand (BNZ—a fully owned subsidiary of Australian big-four bank
first enterprise customer.
National Australia Bank) to provide a white-label 9 Spokes platform
In September 2017, we signed a Memorandum of Understanding
that’s available to the bank’s 130,000 SME customers.
(MOU) with OCBC Bank, the second largest financial services group
As touched upon, we see the greatest avenue for growth coming
in Southeast Asia by assets and one of the world’s most highly-rated
from our banking channels. It plays to our strengths as an agile SaaS
banks, with an Aa1 rating from Moody’s.
company to help some of the world’s leading banks embrace digital
In the same month, we also officially entered a partnership with Royal
disruption in their small-business relationships, so they can build their
Bank of Canada (RBC) - one of the world's largest banks based on
own ecosystem and get closer to their customers.
market capitalization.
Showing our versatility, agility and speed of delivery, the RBC
platform went live shortly after, in November 2017. Then, in February
2018 we deepened our relationship with RBC by signing a contract
Continuing into the new financial year, we see strong opportunities
to scale further into the North American market. The tail-end of the
financial year saw some great interest in the 9 Spokes proposition
from some of the biggest banks in the US, and we’re excited to see
to provide a white-label version of the 9 Spokes platform for Ownr, a
where these emerging relationships take us.
product launched by RBC affiliate RBC Ventures Inc.
On the subject of deepening relationships, we spent the early part
of 2018 working closely with Barclays in the UK on a new strategic
partnership with a major payment provider.
10
MARCH 2018
BNZ CONTRACT
SIGNED
FEB 2018
OWNR CONTRACT
SIGNED WITH RBC
NOVEMBER 2017
RBC PLATFORM
GOES LIVE
SEPTEMBER 2017
MOU SIGNED
WITH OCBC BANK
SEPTEMBER 2017
RBC CONTRACT
SIGNED
RBC logo is a registered trademark of Royal Bank of Canada. Used with permission.
11
/02
PRODUCT
DEVELOPMENT
The 9 Spokes product has continued to develop over the past 12
months, driven by both the needs of our enterprise customers and
improvements in user experience for small-business users. Some
product development highlights include:
» Development and introduction of live chat into 9 Spokes to take
advantage of the current and future popularity of voice search.
» Development of our user-experience capabilities to streamline and
clarify the 9 Spokes sign-up journey, part of which includes new
integrated social media and Google sign ups.
» Introduction of alerts, which users can set up to make them aware
of changes to their business performance metrics.
» Positioning 9 Spokes to be ready on day one when key regulations
(CMA9, PSD2, GDPR) come into play during 2018/2019 and
onwards.
Like the majority of early-stage technology companies, R&D has been
an essential expense. Investment in R&D grew 41%, from $2.9 million
last year, to $4.1 million this year.
INVESTMENT IN RESEARCH
AND DEVELOPMENT
2017
$2.9m
2018
$4.1m
12
/02
MARKETING
Ongoing investment in marketing has proven key to building awareness and
preference for the 9 Spokes brand, and our efforts have translated into strong
growth in our user base. While marketing is always a significant expenditure
for an early-stage tech business, we have taken steps to make our efforts
increasingly efficient and data-driven. At the same time, we’ve invested in
putting the right people on the ground, building industry presence across key
markets, and expanding our relationships with global partners.
We are pleased with results to date which include a dramatic decrease (76%)
in our acquisition cost per user at 31 March 2018, compared to the previous
year end.
Other highlights include:
We sponsored and/or exhibited at key
strategic events throughout the year, including
Accountex, QuickBooks Connect, Singapore
FinTech Festival, SaaStr and the Open
Banking Summit—at which initial engagement
discussions were established with a number of
potential new enterprise customers.
Establishment of an exciting programme to
build our global SME community platform,
which will provide a place for small and medium
businesses to connect, communicate and share
ideas. This will allow us to evolve the 9 Spokes
proposition by harnessing the power of direct
user insight.
Significant improvements to our website
performance as both a marketing and
eCommerce channel. As well as halving
the platform page load speed, which saw
engagement rate more than double, other
improvements to drive engagement included
the addition of new functionality, streamlining
of the sign-up process and enhancement of the
user-experience journey.
FY17
76.4%
FY18
37.5%
MARKETING COST AS
A PERCENTAGE
OF REVENUE
13
/02
USER
GROWTH
In last year’s annual report, we passed our first customer adoption milestone of bringing on board 1,000 users. We
then set ourselves the ambitious target of growing this 50-fold in the following 12 months.
At the time (and indeed still today), we saw user-acquisition growth coming from our enterprise customers, when
banks introduce their clients to the platform, and through our own marketing efforts in introducing users to the 9
Spokes product directly.
We were pleased to announce that we reached our goal of 50,000 users by 31 March 2018. We see it as a continued
validation of our proposition and a positive trend for future user growth.
MARCH
2017
1k
JUNE
2017
5k
SEPTEMBER
2017
20k
MARCH
2018
50k
15
/02
TEAM
Over the past 12 months as we’ve matured as a company, we’ve invested in and built out our teams to position
9 Spokes for sustainable growth. We’ve brought many talent-related costs in-house, giving us greater skills,
capabilities and experience to respond to the needs of our banking partners and wider market demands.
This can be seen throughout the business, from the expansion of our agile sprint teams to UX, business
development and marketing departments.
On that note, we’d like to introduce you to three key hires to our leadership team from the past 12 months:
JESPER PETERSEN
Vice President
Product and Engineering
Jesper is a technology leader with
extensive experience in leading software
product teams to deliver software products
that customers love. He has worked
for tech-focused and highly innovative
companies across New Zealand, US, UK
and Denmark, bringing global experience
in SaaS, IT team leadership and agile
product development from ideation and
strategy through to execution. Jesper is
also a mentor for Lightning Lab, a business
accelerator in New Zealand supporting
innovative companies.
16
ANDY BIRCH
Vice President EMEA
Andy brings extensive sales and business
development skills and expertise
working in the vast EMEA region. This
includes Senior Director, Partner and Vice
President roles at both leading, global
IT companies and smaller enterprises,
working particularly in the fields of IT and
technology consulting, software
and telecommunications.
JULIAN SHARPLIN
Chief Marketing Officer
Julian is an experienced Marketing
Director, consultant and technology start
up co-founder.
He has lead marketing functions at high
profile brands in the technology, telco,
energy and financial services sectors,
driving substantial year-on-year revenue
growth and digital customer experience
transformation. He’s built his career on a
deep understanding of customer needs,
strategic focus, fresh ideas and
delivery experience.
17
/02
OFFICES
Having a foothold in our four strategic regions, with a major banking partner in each, was a crucial step in
preparing our business for the years ahead.
Our enterprise partnership with banks around the world, and prospective contracts in the making, have seen
us move into new territories. In the past 12 months, we’ve set up an office presence in both Toronto and Los
Angeles—small but nonetheless scalable to our North American opportunities.
Meanwhile, our growing Auckland and London offices position us on the doorsteps of major partners in both
EMEA and Asia Pacific.
LONDON
18
LOS ANGELES
TORONTO
AUCKLAND
/02
FINANCE
UPDATE
REVENUE
Total annual revenue increased by 474% year on year, to $6.7 million (2017: $1.2 million). Growth was achieved
with increased revenue from enterprise customers—a result of our focus on enterprise customer acquisitions.
The major portion of enterprise customer revenue was derived from recurring platform access license fees
charged to enterprise customers, which has increased by $3.3 million year on year.
Implementation revenue, from third party enterprise customers, for the deployment of 9 Spokes’ systems
increased by $1.4 million year on year.
Implementation fees are recognised as revenue, equally over the initial term of the agreement with the
enterprise customer, once a system is deployed. The portion of implementation revenue received, but not
recognised, is shown as deferred revenue in the Statement of Financial Position, amounting to $3.3 million at 31
March 2018 (2017: $4.0 million). This deferred amount will be recognised in future financial years.
Total revenue for the year also includes an additional $0.8 million (2017: Nil) of other operating income from
government grants (opposite) and consultancy services for strategy workshops and proof of concepts,
connected with new business opportunities.
With the successful signing of BNZ in the last quarter of the year, the Group achieved its target of $6 million
Annual Recurring Revenue (ARR) by 31 March 2018 (2017: $3 million).
SOURCES OF REVENUE
EUROPE
NORTH
AMERICA
ASIA
PACIFIC
2018
$4.0m
2017
$1.0m
2018
$1.4m
2017
-
2018
$0.7m
2017
$0.2m
20
GOVERNMENT GRANTS
During the year, 9 Spokes was recognised by Callaghan Innovation, a Crown entity of New Zealand, who
approved a Growth Grant to fund 20% of the Group’s expected New Zealand-based research and development
(R&D) spend over three years. This grant is in addition to the approval for $600,000 of co-funding over three
years granted by New Zealand Trade & Enterprise, to support expansion into North America. Total grant income
recognised this year was $0.5 million (2017: Nil).
EXPENDITURE
This was the first financial year of full operations to support and grow our enterprise customer business. This is
reflected in the 55% year on year increase in operating expenditure, with the largest portion of costs continuing
to be in people, accounting for 53% of total expenditure (2017: 56%). We continued to develop our resources
and skill sets particularly in product management, product development, marketing, and new channel business.
The average staff numbers for the year were 102 (2017: 76), though headcount reduced to 92 by 31 March 2018
(2017: 79). During the second half of the year, we undertook a reorganisation of operations with a reduction
of staff in certain areas, placing a greater focus on product development and engineering, and customer
engagement. Additional new product development staff have further been funded through the Callaghan R&D
grant.
A focus on new business enterprise customer growth has seen the initialisation of regional hubs and hiring
of new sales and marketing personnel in the UK and Canada. There has also been an increase in travel with
a 29% increase in international travel from New Zealand, reflecting our priority of seeking new business
opportunities in Europe, North America and Asia. This investment has seen an improvement in our new
business pipeline.
Growth in users and engagement follows an increase in marketing activities. Marketing spend was up $1.6
million, 182% on last year, with spend directed at user on-boarding and engagement across both direct and
enterprise customer platforms. With a drive towards data-driven marketing and automation, the monthly cost of
user acquisition by the end of the year fell 76% compared to the beginning of the year.
21
CASH FLOWS
With new enterprise customers on board, annual operating cash receipts grew by 101% year on year. Quarterly
growth during the year is shown in the table below.
Net cash outflows from operating activities for the year were $16.6 million (2017: $13.2 million).
As we have been reporting to the market in our Quarterly Reports, the improved revenue receipts and
reduction in costs, particularly during the second half of the year following the company reorganisation, resulted
in lower net cash operating outflows quarter on quarter from $4.8 million in quarter 1 to $3.5 million in quarter 4.
The Group had $8.3 million of cash and cash equivalents at 31 March 2018 (2017: $13.4 million).
Q1
Q2
Q3
Q4
TABLE 2: QUARTERLY OPERATING
RECEIPTS AND BURN
OPERATING
RECEIPTS
OPERATING
NET CASH
BURN
NZ$ MILLIONS
$3.0
$2.0
$1.0
$0.0
-$1.0
-$2.0
-$3.0
-$4.0
-$5.0
22
03
DIRECTORS'
REPORT
/03
DIRECTORS'
REPORT
FOR THE YEAR ENDED
31 MARCH 2018
The Board of Directors has pleasure in presenting the financial statements and independent auditor’s report for 9 Spokes International
Limited for the year ended 31 March 2018.
The financial statements presented are signed for and on behalf of the Board and were authorised for issue on 29 June 2018.
PAUL REYNOLDS
Chairman
MARK ESTALL
CEO
24
04
INDEPENDENT
AUDITOR'S
REPORT
Independent auditor’s report
To the shareholders of 9 Spokes International Limited
The financial statements comprise:
the consolidated statement of financial position as at 31 March 2018;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Disclaimer of opinion
We were engaged to audit the financial statements of 9 Spokes International Limited (the Company),
including its subsidiaries (the Group).
We do not express an opinion on the accompanying financial statements of the Group. Because of the
significance of the matters described in the Basis for disclaimer of opinion section of our report, we
have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit
opinion on these financial statements.
Basis for disclaimer of opinion
As described in note 2(b) to the financial statements, the Group has incurred a net loss of $17.2
million, had net operating cash outflows of $16.6 million for the year ended 31 March 2018, and at
balance date had available cash of $8.3 million. The Group forecasts that it has sufficient cash, at the
current run-rate, to continue to fund operations for a further three months from the date the financial
statements are signed. Note 2(b) describes the Group’s plans to obtain further funding from strategic
investors within the necessary timeframe and highlights that the ability to do this is a material
uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern.
Discussions and negotiations with potential strategic investors are on-going and an expression of
interest letter has been signed by one party, however at this stage no commitments have been made by
these parties and there is limited time available to secure these commitments. Accordingly we were
unable to obtain sufficient appropriate audit evidence to enable us to form an opinion as to whether
the going concern assumption is appropriate. As a result we are unable to determine whether any
adjustments are necessary to the amounts recorded in the consolidated statement of financial position
and the consequential impact on the consolidated statement of comprehensive income and the
consolidated statement of changes in equity.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with New Zealand Equivalents to International Financial
Reporting Standards and International Financial Reporting Standards and for such internal control as
the Directors determine is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
26
Auditor’s responsibilities for the audit of the financial statements
Our responsibility is to conduct an audit of the Group’s financial statements in accordance with
International Standards on Auditing (New Zealand) and International Standards on Auditing and to
issue an auditor’s report. However, because of the matter described in the Basis for Disclaimer of
Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion on these financial statements.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of tax compliance, tax consulting,
preparation of a remuneration policy and remuneration market report, and a review opinion on the
Group’s Confirmation of Eligible Research & Development Expenses for Callaghan Innovation. The
provision of these other services has not impaired our independence as auditor of the Group.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Troy Florence.
For and on behalf of:
Chartered Accountants
29 June 2018
PwC
Auckland
27
27
05
FINANCIAL
STATEMENTS
/05
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Revenue:
Operating revenue
Other operating income
Total revenue
Expenses:
Operational expenses
Research and development expenses
Sales, marketing and administration expenses
Total expenses
Operating loss
Net finance income
FOR THE YEAR ENDED
31 MARCH 2018
2018
$'000
2017
$'000
5,866
1,162
812
1
6,678
1,163
Notes
3 (a)
3 (b)
5 (a)
5 (b)
5 (c)
(6,778)
(4,081)
(4,144)
(2,894)
(13,128)
(8,572)
(24,050)
(15,547)
(17,372)
(14,384)
306
344
Net loss before income tax
(17,066)
(14,040)
Income tax (expense) / benefit
8
(125)
4
Net loss from continuing operations
(17,191)
(14,036)
Other comprehensive income:
Translation of international subsidiaries
(175)
(25)
Total comprehensive loss attributable to shareholders
(17,366)
(14,061)
Loss per share
Basic and diluted loss per share
15
($0.04)
($0.04)
The accompanying notes form an integral part of these financial statements.
29
/05
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED
31 MARCH 2018
Share
capital
$'000
Notes
Share
based
payments
reserve
Foreign
currency
translation
reserve
Accumulated
losses
$'000
$'000
$'000
Total
$'000
Balance as at 1 April 2016
12,743
971
-
(12,812)
902
Proceeds from shares issued at
IPO
Share option expense
Costs of capital raise
Reserve arising on conversion of
foreign currency subsidiary
13
14
13
26,169
-
-
-
26,169
-
687
-
-
687
(2,767)
-
-
-
(2,767)
-
-
(25)
-
(25)
Net loss for the year
-
-
-
(14,036)
(14,036)
Balance as at 31 March 2017
36,145
1,658
(25)
(26,848)
10,930
13
14
13
13
Proceeds from shares issued
Share option expense
Costs of capital raise
Reclassification of previously
expensed amounts from share based
payments
Reserve arising on conversion of
foreign currency subsidiary
12,955
-
-
-
12,955
-
180
-
-
180
(1,012)
-
-
-
(1,012)
940
(940)
-
-
-
-
-
(175)
-
(175)
Net loss for the year
-
-
-
(17,191)
(17,191)
Balance as at 31 March 2018
49,028
898
(200)
(44,039)
5,687
30
The accompanying notes form an integral part of these financial statements.
/05
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT
31 MARCH 2018
Notes
2018
$'000
2017
$'000
Assets
Non-current assets
Property, plant and equipment
9
480
535
Total non-current assets
Current assets
480
535
Cash and cash equivalents
10
7,297
7,484
Term deposits with maturities of more than three months
1,000
5,900
Trade and other receivables
11
2,077
1,278
Capitalised work in progress
5 (b)
660
1,073
Total current assets
11,034
15,735
Total assets
Equity
Share capital
Share based payments reserve
11,514
16,270
13
14
49,028
36,145
898
1,658
Foreign currency translation reserve
(200)
(25)
Accumulated losses
(44,039)
(26,848)
Equity attributable to the owners of the company
5,687
10,930
Total equity
Current liabilities
5,687
10,930
Trade and other payables
12
2,551
1,377
Deferred revenue
3 (a)
3,276
3,963
Total current liabilities
Total equity and liabilities
5,827
5,340
11,514
16,270
The accompanying notes form an integral part of these financial statements.
31
/05
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED
31 MARCH 2018
Notes
2018
$'000
2017
$'000
Cash flows from operating activities
Receipts from customers
5,227
2,595
Receipts from government grants
312
-
Payments to employees and suppliers
(22,445)
(16,212)
Interest received
Income tax credit received
(16,906)
(13,617)
323
293
-
144
Net cash flows from operating activities
16
(16,583)
(13,180)
Cash flows from investing activities
Purchase of property, plant and equipment
(183)
(442)
Transfer of term deposits
4,900
(5,900)
Net cash flows from investing activities
4,717
(6,342)
Cash flows from financing activities
Proceeds from the issue of share capital
13
12,955
26,542
Costs of raising capital
(992)
(2,767)
Net cash flows from financing activities
11,963
23,775
Net change in cash and cash equivalents
97
4,253
Cash and cash equivalents at the beginning of the year
7,484
3,381
Foreign exchange loss on cash and cash equivalents
(284)
(150)
Cash and cash equivalents at the end of the year
10
7,297
7,484
32
The accompanying notes form an integral part of these financial statements.
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. General information
FOR THE YEAR ENDED
31 MARCH 2018
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 29 June 2018.
2. Summary of significant accounting policies
These are the financial statements for the Group for the year ended 31 March 2018.
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.
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.
The financial statements have been prepared on the historical cost basis.
b. Going concern
The financial statements have been prepared on the going concern basis, which assumes that the Group will continue its operations for the
foreseeable future. The Group incurred a net loss of $17.2 million for the year ended 31 March 2018 and at balance date had available
cash of $8.3 million. The net cash outflows from operating activities were $16.6 million during the year.
During the financial year to 31 March 2018, the Group’s planned investment in product functionality and new business development has
meant that expenditure has exceeded revenues. Management plans to maintain a growth strategy and therefore continues to forecast
that expenditure will exceed revenues at least for the next 12 months. Without additional funding or an increase in revenue beyond current
assumptions, the Group will be unable to fund these losses from the current cash position.
Management and the Board have been engaged in active discussions with a view to raising additional funding from strategic investors. The
Group is focused on progressing these discussions over coming weeks and is cognisant of its compliance requirements which may influence
timing. The Group will provide an update to the market as soon as the discussions are sufficiently advanced. At the date of issue of these
financial statements, while potential strategic investors have signalled interest in participating and one party has signed an expression of
interest, discussions are continuing, and no commitments have been entered into at this point.
The Group forecasts it has sufficient cash, at the current run-rate, for a further three months from the date of signing these financial
statements. This period may be able to be extended if the Group reviews the extent of its development plan, reduces costs and focuses on
existing business.
The requirement for sufficient additional funding within the next three months indicates 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.
33
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
Based on their discussions and negotiations with the potential strategic investors, Management and the Board believe the Group may be
able to raise sufficient funds in the necessary time to support the current operations and planned growth or to support a scaled-back plan
until sufficient funding is secured. Therefore, they consider it appropriate to continue to adopt the going concern basis in preparing these
financial statements.
c. 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 are the expensing of research and development costs (refer to note 5 (b)) and for the
non-recognition of deferred tax (refer to note 8).
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.
d. Change in accounting policies
There have been no changes in accounting policies in the current financial year.
Certain expenses for the year ended 31 March 2017 have been reclassified from operational to sales, marketing and administration expenses
to ensure consistency in the presentation of expenditure. The amount of the reclassification is $435,000. This has not affected the reported
operating loss or any other aspect of the financial statements for that year.
e. 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 currency.
Foreign currency transactions
Transactions in foreign currencies are translated to the functional currencies of the Group’s companies 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.
f. Standards or interpretations issued but not yet effective and relevant to the Group
The International Accounting Standards Board and New Zealand Accounting Standards Board have issued a number of standards,
34
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
amendments and interpretations which are not yet effective and which may have an impact on the Group’s financial statements. These are
detailed below. The Group has not applied these in preparing these financial statements and will apply each standard in the period in which it
becomes mandatory:
NZ IFRS 9 – Financial instruments – Classification and measurement (effective for annual periods beginning on or after 1 January 2018)
This standard addresses the classification, measurement and de-recognition of financial assets, financial liabilities, impairment of financial
assets and hedge accounting, and will be effective for the year ended 31 March 2019. The Group is currently in the process of assessing and
does not expect there to be a material impact from the implementation of this standard.
NZ IFRS 15 – Revenue from contracts with customers (effective for the Group from 1 April 2018)
This standard establishes the framework for revenue recognition, and will be effective for the year ended 31 March 2019. The Group is
currently in the process of assessing and does not expect there to be a material impact from the implementation of this standard.
NZ IFRS 16: Leases (effective for the Group from 1 April 2019)
This standard requires a lessee to recognise a lease liability reflecting the future lease payments and a ‘right-of-use asset’ for substantively all
lease contracts, and will be effective for the year ended 31 March 2020. The Group is yet to undertake a detailed assessment of the impact of
NZ IFRS 16. However, based on the Group’s preliminary assessment, the Standard will increase the Group’s assets (a ‘right-of-use’ asset) and
liabilities (‘lease liabilities’) and operating lease expenses will be removed and be replaced by an amortisation expense for the right-of-use
asset and finance expense for the lease liability. The impact on net assets and net loss/profit is not expected to be material.
3. Revenue
a. Operating revenue
Implementation revenue
Platform access revenue
2018
$'000
2017
$'000
1,732
339
4,134
823
Total operating revenue
5,866
1,162
Revenue is measured at the fair value of consideration received or receivable, and represents amounts receivable for services rendered,
excluding sales taxes, 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 the Group's activities.
Implementation revenue
Implementation fees are received from third party enterprise customers for the deployment of 9 Spokes’ systems. As the Group maintains
ownership of the developed system, and has an obligation to provide continuing services to the enterprise customer, these fees are
recognised as revenue in the Statement of Comprehensive Income, once the system has been deployed, equally over the expected initial
term of the service.
Implementation fees received prior to deployment are treated as deferred revenue. The Group had deferred implementation revenue as at 31
March 2018 of $3.3 million (2017: $4.0 million).
Platform access revenue
Revenue from the right to access the platform is recognised monthly, on a straight-line basis, recurring over the expected licence period.
35
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
b. Other operating income
Government grants
Other income
FOR THE YEAR ENDED
31 MARCH 2018
2018
$'000
2017
$'000
520
-
292
1
Total other operating income
812
1
Government grants
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 the grant conditions. When a grant relates to an expense item, it is recognised as income over the period necessary
to match the grant on a systematic basis to the costs that it is intended to compensate.
The Group was awarded two Government grants in the current financial year:
a) Funding Agreement for a Growth Grant with Callaghan Innovation (a Crown entity of New Zealand), to fund 20% of the company’s
expected New Zealand-based research and development spend over three years, effective from 1 October 2017.
b) Funding Agreement from the NZ Trade & Enterprise International Growth Fund for $600,000 to co-fund the Group’s expansion into North
America, for three years from 27 June 2017.
Other Income
Other income comprises revenue from related services such as the running of workshops for potential new business opportunities. Revenue
is recognised as the services are provided to the customer.
Interest Income
Interest income is recognised when the Group gains control of the right to receive the interest payment.
All revenue is stated net of the amount of goods and services tax.
4. Segment Reporting
a. Operating segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision makers, who are responsible for allocating resources and assessing performance of the operating segment, have been
identified as the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer.
The chief operating decision makers have determined that the business operates as a single business operating segment; providing an
online, Software-as-a-Service platform application and store allowing a business to access a range of online services.
The chief operating decision makers currently report on the Group as a whole at an operational level, with revenue reported at a
geographical level based on the location of the customer. However as the Group is investing in regional global hubs in Europe, North
America and Asia future reporting will include more emphasis on the regional results.
36
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
b. Geographical segment information
Revenue was sourced from the following geographical locations:
Europe
North America
Asia Pacific
FOR THE YEAR ENDED
31 MARCH 2018
Notes
2018
$'000
2017
$'000
4,014
968
1,435
-
709
195
Total operating revenue and other income
6,158
1,163
Comprising:
Total operating revenue
3 (a)
5,866
1,162
Other income
3 (b)
292
1
During the year ended 31 March 2018 the Group had six enterprise partners (2017: three). Revenue from enterprise partners is currently the
Group’s primary source of revenue and contributed more than 90% of the Group’s revenue in both years. In the year ended 31 March 2018
three enterprise customers each accounted for 10% or more to the Group’s revenue (2017: two), including the largest enterprise partner who
contributed to more than half of the Group’s revenue in both years.
5. Expenses by nature
a. Operational expenses
Note
2018
$'000
2017
$'000
Employee benefit expenses
7
4,509
2,217
Platform hosting
Third party contractors
Other operational expenses
1,480
1,401
323
105
466
358
Total operational expenses
6,778
4,081
Operational expenses represent infrastructure and technical operations not classified as research and development.
37
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
b. Research and development expenses
FOR THE YEAR ENDED
31 MARCH 2018
Note
2018
$'000
2017
$'000
Employee benefit expenses
7
2,650
2,673
Third party contractors
Depreciation expense
493
443
52
24
Other research and development expenses
536
526
Capitalisation of expenditure as work in progress
(265)
(850)
Amortisation of previously capitalised work in progress expenditure
678
78
Total research and development expenses
4,144
2,894
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 it
meets the following recognition criteria:
• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
• it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
• the expenditure attributable to the software product during its development can be reliably measured.
Identifiable costs incurred in fulfilling contracts with customers are capitalised as an asset and amortised on a systematic basis over the
enterprise partners initial licence term. The expenditure capitalised includes payroll expenses, external contractor fees and overhead costs
that are directly attributable to preparing the asset for its intended use.
Total capitalised work in progress at 31 March 2018 was $0.7 million (2017: $1.1 million).
38
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
c. Sales, marketing and administration expenses
Depreciation expense
Directors' fees
FOR THE YEAR ENDED
31 MARCH 2018
Notes
2018
$'000
2017
$'000
130
55
344
301
Directors' consultancy services
304
134
Directors' IPO services
Remuneration of auditors
Expensed costs of capital raises
Employee benefit expenses
Marketing expenses
Travel
Professional, rent, office running costs and other
administration expenses
6
7
-
115
176
275
169
383
5,474
3,804
2,510
889
1,206
2,815
803
1,813
Total sales, marketing and administration expenses
13,128
8,572
39
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
6. Remuneration of auditors
FOR THE YEAR ENDED
31 MARCH 2018
Audit and review of financial statements by PwC
Audit of the annual financial statements
Review of the half year financial statements
Other review services
Audit of subsidiary financial statements by subsidiary auditors
2018
$'000
2017
$'000
68
30
6
100
22
-
Audit of the annual financial statements
13
-
Other services performed by PwC
Tax compliance services
Remuneration policy advice
Other tax advice
IPO Investigating Accountant
12
12
35
-
15
22
45
97
Total fees paid and payable to auditor
176
301
Breakdown of fees expensed and capitalised:
Administration expenses
Capitalised IPO costs
176
-
275
26
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 is satisfied that PwC is currently independent of the Group and the other non-audit services have not impaired that
independence.
40
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
7. Employee benefit expenses
Wages and salaries
Share option expense
Other benefits
FOR THE YEAR ENDED
31 MARCH 2018
Note
2018
$'000
2017
$'000
12,046
8,393
14
180
68
407
233
Total employee benefit expenses
12,633
8,694
Employee benefit expenses have been split between operational, research and
development, and administration expenses as follows:
Operational expenses
5 (a)
4,509
2,217
Research and development expenses
5 (b)
2,436
2,132
Research and development capitalised as work in progress
5 (b)
214
541
Sales, marketing and administration expenses
5 (c)
5,474
3,804
Total employee benefit expenses
12,633
8,694
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting
date are recognised in other payables and are measured at the amounts expected to be paid when the liabilities are settled.
41
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
8. Income and Deferred Tax
Income tax (expense) / benefit is represented as follows
FOR THE YEAR ENDED
31 MARCH 2018
2018
$'000
2017
$'000
Current tax (expense) / benefit
(125)
4
Total current tax (expense) / benefit
(125)
4
Deferred tax expense
Origination of temporary timing differences
(42)
(24)
Tax income / (deduction) of research and development expenses deferred (net of
income)
482
(216)
Tax losses
(4,955)
(3,513)
Deferred tax assets not recognised
4,515
3,753
Total deferred tax
-
-
Total income tax (expense) / benefit
(125)
4
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.
The Group has tax losses available to carry forward of $27.1 million (2017: $12.8 million) subject to shareholder continuity being maintained. The
Group has deferred research and development deductions of $5.5 million (2017: $7.2 million), after offsetting related revenue. 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.
There are no imputation credits available, as the Group is yet to generate taxable profits in New Zealand.
42
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Reconciliation of effective tax rate:
FOR THE YEAR ENDED
31 MARCH 2018
2018
$'000
2017
$'000
Loss before income tax
(17,066)
(14,040)
Prima facie taxation at 28% (2017: 28%)
(4,778)
(3,931)
Expenses not deductible for tax purposes
138
182
Deferred tax assets not recognised:
Temporary timing differences
Research and development expenses (recognised) / deferred (net of income)
42
24
(482)
216
Total losses not recognised
4,955
3,513
Total income tax (expense) / benefit
(125)
4
9. Property, plant and equipment
2018
2018
2018
2017
2017
2017
Office and
computer
equipment
$'000
Leasehold
improve-
ments
$'000
Office and
computer
equipment
$'000
Leasehold
improve-
ments
$'000
Total
$'000
Total
$'000
Carrying amount at start of year
210
325
535
96
-
96
Additions
111
22
133
204
328
532
Disposals
(9)
- (9)
(19)
-
(19)
Depreciation expense
(96)
(86)
(182)
(76)
(3)
(79)
Depreciation on disposals
3
-
3
5
-
5
Carrying amount at end of year
219
261
480
210
325
535
At cost
409
350
759
307
328
635
Accumulated depreciation
190
89
279
97
3
100
43
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Recognition and measurement
Property, plant and equipment are stated at historical cost less depreciation.
FOR THE YEAR ENDED
31 MARCH 2018
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.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are recognised in the Statement of
Comprehensive Income.
Depreciation
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.
10. Cash and cash equivalents
2018
$'000
2017
$'000
Cash at bank
1,266
866
Term deposits with maturities of three months or less
6,031
6,618
Total cash and cash equivalents
7,297
7,484
Cash comprises cash balances and deposits held at call with banks. Cash equivalents are 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.
44
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
11. Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
FOR THE YEAR ENDED
31 MARCH 2018
2018
$'000
2017
$'000
1,083
665
690
406
304
207
Total trade and other receivables
2,077
1,278
Trade and other receivables are initially recognised at the fair value of the amounts to be received, plus transaction costs (if any). They are
subsequently measured at amortised cost (using the effective interest method) less impairment losses.
12. Trade and other payables
Trade payables
Other creditors and accruals
Deferred rent
2018
$'000
2017
$'000
838
366
1,396
938
317
73
Total trade and other payables
2,551
1,377
The Group recognises trade and other payables initially at fair value and subsequently measured at amortised cost using the effective interest
method. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid. The
amounts are unsecured, non-interest bearing and are usually paid within 45 days of recognition.
Included in trade payables and other creditors and accruals are amounts owing to related parties (refer to note 22).
45
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
13. Share capital
FOR THE YEAR ENDED
31 MARCH 2018
2018
2018
2018
2017
2017
2017
$'000
Shares
000's
Options
000's
$'000
Shares
000's
Options
000's
Share capital at beginning of the year
36,145
391,744
39,866
12,743
266,744
39,866
Shares issued for cash at A$0.20 per share ($0.21)
-
-
- 26,169
125,000
-
Shares issued for cash at A$0.13 per share ($0.14)
12,955
92,308
- -
-
-
Costs of capital raises
(1,012)
-
- (2,767)
-
-
Expired shareholder options
-
-
(39,866)
-
-
-
Reclassification of previously expensed amounts from
share based payments (for shares issued)
940
-
- -
-
-
Share capital at the end of the year
49,028
484,052
- 36,145
391,744 39,866
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 issue transaction costs during the year of $1.0 million (2017: $2.8 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.
Share options are classified as equity because the holder has the option to acquire a fixed number of shares in exchange for the share option.
The Company issued share options in 2014 in conjunction with an equity raising process. For every two shares the investor subscribed for, they
received three options to acquire one ordinary share each on or before 30 September 2017. None of these options were exercised and they all
expired during the year ended 31 March 2018.
46
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
14. Share based payments
FOR THE YEAR ENDED
31 MARCH 2018
Note
2018
$'000
2017
$'000
Share based payments reserve at beginning of the year
1,658
971
Reclassification of previously expensed amounts to share capital
(940)
-
Pre-IPO employee share options (a)
IPO advisory share options (b)
Employee ESOPs (c) (i)
NEDs ESOPs (c) (ii)
27
-
68
619
109
-
44
-
Total share option expense
7
180
687
Share based payments reserve at the end of the year
898
1,658
The fair value of share options issued as part of share based payment arrangement 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.
a. Pre-IPO employee share options (December 2015)
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 (NZ$0.16)
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.
The fair value of each option was calculated to be $0.08 on the grant date. This fair value is being expensed over the vesting periods for
each tranche up to December 2016, December 2017 and December 2018.
At 31 March 2018, there were 1,533,008 options that were outstanding. Of these, 1,022,005 options had vested.
b. IPO advisors share options (June 2016)
In June 2016, the Company issued additional options to its advisors over an aggregate 8,750,000 shares, at an exercise price of AU$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 AU$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 AU$0.20 (30 day VWAP Price) on or before the date that is two years after the date the Company lists
on the ASX (Second Anniversary), the Options will vest on the Second Anniversary. These options are exercisable on or before 30 June 2019.
47
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
The weighted average of the fair value of each option is AU$0.066 under the Black Scholes valuation model resulting in a charge to the
Company of AU$579,375 ($618,711) during the year ended 31 March 2017. The significant inputs into the model were a share price of AU$0.20
at the grant date, vesting price AU$0.30, volatility of 50%, no dividend, expected option life of three years and a risk-free interest rate of
2.51%.
c. Current Employee share options plan (ESOP)
Effective from 10 May 2016, the Company adopted a new ESOP which replaces the Pre IPO employee share option scheme. The ESOP has
no impact on the Pre IPO employee share options.
Key provisions of the ESOP include:
a) the options are to vest in accordance with the employee’s letter of offer;
b) the expiry date of the options will be as set out in the employee’s letter of offer; and
c) 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 determines otherwise.
(i) Employee share options (August 2017)
On the 6 June 2017 the Board approved the offer of options under the ESOP to employees on the following terms:
a) an exercise price of AU$0.20 per share;
b) the options vest in full on the date of issue; and
c) the expiry date of the options will be 5 years after date of issue.
The weighted average of the fair value of each option is AU$0.037 under the Black Scholes valuation model resulting in a charge to the
Company of AU$101,478 ($109,980) at the time they were granted. The significant inputs into the model were a share price of AU$0.12 at
the grant date, exercise price AU$0.20, volatility of 50%, no dividend, expected option life of five years and a risk-free interest rate of 2.17%.
These options were issued in August 2017.
(ii) Non-Executive Directors (NEDs) share options (September 2017)
At the Annual Meeting of Shareholders held on 12 September 2017 the shareholders approved the issue of options under the ESOP to the
NEDs on the following terms:
a) an exercise price of AU$0.225 per share;
b) the options vest on the price of the quoted shares reaching AU$0.30 per share, calculated on a 10 trading day VWAP; and
c) the expiry date of the options will be 5 years after date of issue.
The weighted average of the fair value of each option is AU$0.023 under the Black Scholes valuation model resulting in a charge to the
Company of AU$40,268 ($44,383) at the time they were granted. The significant inputs into the model were a share price of AU$0.10 at the
grant date, exercise price AU$0.225, volatility of 50%, no dividend, expected option life of five years and a risk-free interest rate of 2.19%.
These options were issued in September 2017.
48
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
IPO advisor
Pre-IPO
share
employee share
options
options
Dec 2015
Jan 2016
NZ$0.16 AU$0.20
'000's
'000's
NEDs
Employee
ESOPs
ESOPs
Aug 2017
Sep 2017
AU$0.20 AU$0.225
'000's
'000's
Weighted
average
exercise
price
$ per option
Total
'000's
1,875
-
-
-
1,875
0.16
-
8,750
(90)
-
-
-
-
8,750
-
(90)
0.21
0.16
1,785
8,750
-
-
10,535
0.20
595
-
-
-
595
0.16
Exercise price
Balance outstanding at 1 April
2016
Granted
Forfeited
Balance outstanding at 31
March 2017
Balance exercisable at 31 March
2017
Granted
Forfeited
-
(252)
-
-
2,721
1,713
4,434
(1,006)
-
(1,258)
0.23
0.21
Balance outstanding at 31
March 2018
Balance exercisable at 31 March
2018
1,533
8,750
1,715
1,713
13,711
0.21
1,022
-
1,715
1,713
4,450
0.22
49
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
15. Loss per share
FOR THE YEAR ENDED
31 MARCH 2018
2018
000's
2017
000's
Total comprehensive loss attributable to shareholders
($17,366)
($14,061)
Ordinary number of shares
495,271
402,963
Weighted average number of shares on issue
462,039
397,521
Basic and diluted loss per share
($0.04)
($0.04)
Basic earnings per share is calculated by dividing the comprehensive profit or loss 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 comprehensive 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.
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
($0.04) for the respective periods.
50
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
16. Reconciliation of reported loss after tax with cash flows from operating activities
Loss after income tax
Non-cash items:
Depreciation expense
Share based payments
Share option expense
2018
$'000
2017
$'000
(17,191)
(14,036)
182
79
-
619
180
68
Foreign exchange loss / (gain) on monetary assets
104
(237)
Changes in working capital:
Increase / (decrease) in trade and other payables
1,215
(168)
(Decrease) / increase in deferred revenue
(686)
2,102
(Increase) in trade and other receivables
(799)
(835)
Decrease / (increase) in capitalised work in progress
412
(772)
Net cash flow from operating activities
(16,583)
(13,180)
17. Financial instruments and financial risk management
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 are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market.
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
At each reporting date, the Group assesses whether there is any indication that a financial asset (or group of financial assets) is impaired. A
financial asset 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 that can be reliably estimated.
51
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
Evidence of impairment may include indications that the debtor 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 2018.
Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board
of Directors has established an Audit and Risk Committee, which is responsible for developing and monitoring the Group’s risk management
policies. The Committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and
controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined
and constructive control environment in which all employees understand their roles and obligations.
The Audit and Risk Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and
reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
As a result of the Group’s operations and sources of finance, it is exposed to credit risk, liquidity risk and foreign exchange risk. These risks are
described below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations, and arises principally from the Group’s
receivables from customers.
Financial instruments which potentially subject the Group to credit risk, principally consists of:
a. Trade receivables - the maximum exposure to credit risk at balance date to recognised financial assets is the carrying amount, net of any
provision for impairment of those assets, as disclosed in the statement of financial position. These predominantly relate to trade receivables.
Refer note 11 for further details.
b. Cash and cash equivalents - the maximum potential exposure to credit risk at balance date is $8.3 million (2017: $13.4 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 collateral and has no securities registered against it. Note 20 of these Financial Statements provides details of
guarantees held by its financial institutions. The Group does not have any significant concentrations of credit risk apart from its deposits with
large and reputable banks.
The Group has no credit facilities, other than trade creditors.
52
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled
by delivering cash or another financial asset. 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 2018, the contractual cash flows of the Group’s financial liabilities are equal to the carrying value and are due within
12 months or less.
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, British pound, Canadian dollar, Singapore dollar and US dollar. 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 (in currencies other than each entity’s functional currency) is outlined
below in New Zealand dollars:
31 March 2018
31 March 2017
GBP
AUD
CAD
USD
SGD
GBP
AUD
CAD
USD
SGD
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
1
269
30
1
-
575
96
-
-
-
8
32
214
280
-
610
70
-
64
(121)
(54)
-
(351)
(8)
(13)
(57)
-
(191)
-
-
(112)
247
244
(70)
(8)
1,172
109
-
(127)
-
Cash and cash
equivalents
Trade, other
receivables and
prepayments
Trade and other
payables
Total foreign currency
exposure from
financial instruments
53
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2018
As at 31 March, a movement of 10% in the New Zealand dollar would impact the Statement of Comprehensive Income and Statement of Changes
in Equity as detailed in the table below:
Impact on net loss before income tax:
Balances in GBP (net)
Balances in AUD (net)
Balances in CAD (net)
Balances in USD (net)
Balances in SGD (net)
10% decrease
10% increase
2018
$'000
2017
$'000
2018
$'000
2017
$'000
11
(25)
(24)
7
1
(117)
(11)
-
13
-
(11)
25
24
(7)
(1)
117
11
-
(13)
-
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 2018 (2017: Nil).
Capital risk management
The capital structure of the Group consists of equity raised by the issue of ordinary shares in the Company. The Group manages its capital so
that it is 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.
Fair values
The fair value of the Group’s financial assets and liabilities is considered approximately equal to their carrying amount. The carrying value of the
Group’s financial instruments do not materially differ from their fair value, accordingly, information on the fair value hierarchy is not required.
54
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
18. Consolidation
The Group had the following subsidiaries as at 31 March 2018:
FOR THE YEAR ENDED
31 MARCH 2018
Name
Country of
incorporation and
place of business
9 Spokes Australia Pty Limited Australia
9 Spokes US Holdings Limited New Zealand
New Zealand
9 Spokes Knowledge Limited
New Zealand
9 Spokes Trustee Limited
United Kingdom
9 Spokes UK Limited
U.S.A
9 Spokes US, Inc.
Canada
9 Spokes Canada Limited
Nature of business
Trading operation
Holding Company
Holder of provisional patent
Non-trading
Trading operation
Non-trading
Trading operation
% of
ordinary
shares
held by
parent
100%
100%
100%
100%
100%
100%
100%
Date of incorporation
10 April 2014
12 November 2014
5 May 2015
16 July 2015
21 December 2015
11 May 2017
16 August 2017
9 Spokes Asia Pte Limited, was incorporated in Singapore on 2 April 2018. 9 Spokes Asia Pte Limited is 100% owned by 9 Spokes International
Limited.
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 and losses on transactions between Group companies are eliminated. When
necessary, amounts reported by subsidiaries have been adjusted to conform to Group accounting policies.
Group companies
The results and financial position of all 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 ultimate holding company of the Group is 9 Spokes International Limited.
55
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
19. Commitments
Capital commitments
The Group had no capital commitments as at 31 March 2018 (2017: Nil).
Lease commitments
FOR THE YEAR ENDED
31 MARCH 2018
The Group has lease agreements on certain premises. Future minimum rentals payable under non-cancellable agreements are:
2018
$'000
2017
$'000
Not later than one year
1,221
712
Later than one year and no later than five years
1,985
1,947
Total lease commitments
3,206
2,659
20. Contingencies
As at 31 March 2018, the Group had a lease premise guarantee to the value of $831,000 for the operating lease for the premises, held by ASB
Bank Limited, this replaced the guarantee previously held at 31 March 2017 of $404,000.
21. Key management personnel
Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, directly or indirectly and include the Directors, the Chief Executive Officer and his direct reports.
The following table summarises remuneration paid to key management personnel:
Short-term employee benefits
Additional expenses related to restructure
Directors' fees
Share based payments
2018
$'000
2017
$'000
3,294
1,987
205
-
344
301
101
49
Short term employee benefits relate to salaries and other benefits paid to the Executive Team. Three new roles were created during the year
ended 31 March 2018, to head up product and engineering in New Zealand and to increase resource in business development and customer
support in Europe. Included in the 2018 short-term employee benefits was $900,000 related to roles which have since been disestablished.
56
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
22. Related party transactions and balances
FOR THE YEAR ENDED
31 MARCH 2018
As at balance date, the Directors of the Company held 28.4% of the share capital of the Company (2017: 18.4%).
Transactions with the following related parties during the year:
Name of related party
Nature of relationship
Transaction
2018
$'000
2017
$'000
Adrian Grant
Director
Consulting services
-
4
Kestrel Corporate
Advisory, Inc. 1
Director
Mint Recruitment
Limited 2
Family Member
of a Director
Paul Reynolds
Director
Social Power (Surrey)
Limited 3
Director
Directors' fees
Consulting services
Share based payments - ESOP
95
30
15
86
97
-
Provision of recruitment services
74
-
Directors' fees
Consulting services
Share based payments - ESOP
169
49
17
141
73
-
Directors' fees
Consulting services
80
225
74
79
Share based payments - ESOP
12
-
Te Arai Coast Lodge
Limited 4
Common shareholder
Other services
-
2
1. Non-executive Director, Wendy Webb is a Director and shareholder of Kestrel Corporate Advisory, Inc.
2. A member of Executive Director, Adrian Grant’s, family is a Director and shareholder of Mint Recruitment Limited.
3. Non-executive Director, Thomas Power is a Director and shareholder of Social Power (Surrey) Limited.
4. Executive Director, Mark Estall is a Director and shareholder of Te Arai Coast Lodge Limited.
Increased consulting services during the year ended 31 March 2018 reflect greater involvement by the Directors on business development and
supporting Enterprise Customer relationships.
57
/05
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Amounts owed by the Group to related parties were:
FOR THE YEAR ENDED
31 MARCH 2018
Name of related party
Nature of relationship
Balance type
2018
$'000
2017
$'000
Kestrel Corporate Advisory, Inc.
Director
Trade and other payables
28
8
Mint Recruitment Limited
Family Member
of a Director
Trade and other payables
50
-
Paul Reynolds
Director
Trade and other payables
36
13
Social Power (Surrey) Limited
Director
Trade and other payables
51
20
Amounts owed to related parties
165
41
23. Events after the reporting period
There have been no other reportable events arising after the end of the reporting period.
58
06
GOVERNANCE &
DISCLOSURES
59
/06
NEW ZEALAND STATUTORY
INFORMATION
1. Board of Directors and sub-committees
The Directors in office at the date of this Annual Report were:
AS AT
31 MARCH 2018
Name
Position
Date appointed to the board
Adrian Grant
Executive Director, Founder and Chief Operating Officer
Mark Estall
Executive Director, Founder and Chief Executive Officer
Paul Reynolds
Non-Executive Chairman
Thomas Power
Non-Executive Director
Wendy Webb
Independent Non-Executive Director
17 August 2017
19 September 2011
10 September 2014
7 October 2014
18 March 2015
a. Board meetings
The Board met formally eight times during the financial year ended 31 March 2018. 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
Adrian Grant
Executive Director and Chief Operating Officer
(appointed 17 August 2017)
Mark Estall
Executive Director and Chief Executive Officer
Paul Reynolds
Non-Executive Chairman
Thomas Power
Non-Executive Director
Wendy Webb
Independent Non-Executive Director
Number of meetings
eligible to attend
Number of
meetings
attended
5
8
8
8
8
5
8
8
8
8
b. Board committees
The Board currently has 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/
c. 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.
60
/06
NEW ZEALAND STATUTORY
INFORMATION
AS AT
31 MARCH 2018
During the financial year, the Audit and Risk Committee have met three times. 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
3
3
3
3
3
3
d. 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 Group’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.
The Remuneration and Nomination Committee did not meet specifically during this financial year as all relevant matters were dealt with either
at Board Meetings or through direct communications between the Committee members. These matters included approval of Employee Share
Options and changes to the Executive Team during the year. The members of the Committee at the date of this Annual Report were Paul
Reynolds (Chairman), Thomas Power and Wendy Webb.
61
/06
NEW ZEALAND STATUTORY
INFORMATION
2. Entries recorded in the Directors’ Interests Register
The following are entries made in the Interests Register as at 31 March 2018:
AS AT
31 MARCH 2018
Director/Entity
Adrian Grant
Aminoex Property Fund No 1 Limited
Domain Central Holdings Limited
Domain Central NZ Limited
DWDA Holdings Limited
Franc Holdings Limited
Mark Estall
9 Spokes Australia Pty Limited
9 Spokes Knowledge Limited
9 Spokes Trustee Limited
9 Spokes UK Limited
9 Spokes US Holdings Limited
9 Spokes Canada Limited
9 Spokes US, Inc.
Franc Holdings Limited
M & M No.1 Limited
M & M No.2 Limited
Te Arai Coast Lodge Limited
Waiere Limited
Paul Reynolds
9 Spokes UK Limited
eircom Holdco S.A. (resigned 6 April 2018)
eircom Holdings Ireland Limited (resigned 6 April 2018)
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.
Wynn Resorts (appointed 17 April 2018)
62
Relationship
Director & Shareholder
Director
Director & Shareholder
Shareholder
Director & Shareholder
Director
Director
Director
Director
Director
Director
Director
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director
Non-executive Director
Non-executive Director
Director
Director & Chairman
Director
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Non-executive Director
Director & Shareholder
Non-executive Director
/06
NEW ZEALAND STATUTORY
INFORMATION
3. Shareholdings of Directors
Adrian Grant (appointed 17 August 2017)
Mark Estall
Paul Reynolds
Thomas Power
Wendy Webb
4. Directors’ remuneration
AS AT
31 MARCH 2018
2018
Shares
66,680,151
66,754,863
4,423,625
1,843,784
1,006,673
2017
Shares
66,680,151
66,754,863
4,423,625
1,843,784
1,006,673
The remuneration receivable by Directors in office during the financial year ended 31 March 2018 was:
Directors’
fees
$'000
Employment
remuneration
$'000
Consultancy
services
$'000
Share based
payments
$'000
Adrian Grant (appointed 17 August 2017)
-
218
-
-
Mark Estall
Paul Reynolds
Thomas Power
Wendy Webb
-
420
-
-
169
80
95
-
-
-
49
225
30
17
12
15
344
638
304
44
63
/06
NEW ZEALAND STATUTORY
INFORMATION
5. Employee Remuneration
AS AT
31 MARCH 2018
The number of employees or former employees, not being Directors of the Group, who received remuneration and other benefits in their
capacity as employees, the value of which exceeds $100,000 is set out below:
$100,000 - $109,999
$110,000 - $119,999
$120,000 - $129,999
$130,000 - $139,999
$140,000 - $149,999
$150,000 - $159,999
$160,000 - $169,999
$180,000 - $189,999
$200,000 - $209,999
$230,000 - $239,999
$250,000 - $259,999
$270,000 - $279,999
$280,000 - $289,999
$300,000 - $309,999
$320,000 - $329,999
$360,000 - $369,999
$380,000 - $389,999
$410,000 - $419,999
6. Donations
2018
No.
2017
No.
5
4
9
2
6
3
1
1
-
1
1
1
1
1
-
-
1
1
5
2
4
5
-
3
1
2
1
1
-
1
-
-
1
1
-
-
The total value of donations made by the Group during the year ended 31 March 2018 was $1,103 (2017: $1,888).
64
/06
ADDITIONAL INFORMATION FOR
ASX LISTED COMPANIES
AS AT
31 MAY 2018
The following information is current as at 31 May 2018 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 (Consolidated)
Mark Estall
Associates
M & M No. 2 Limited
Franc Holdings Limited
Adrian Grant
Adrian David Grant & AJ Trustee
Services Limited
Franc Holdings Limited
Substantial Holder
M & M No. 2 Limited
Adrian David Grant & AJ Trustee Services
Limited
Harrogate Trustee Limited
Number of
Ordinary Shares
82,064,998
Voting Power
16.57%
81,990,286
16.55%
Number of
Ordinary Shares
51,444,727
Voting Power
10.39%
51,312,727
10.36%
43,720,095
8.83%
Franc Holdings Limited
30,620,271
6.18%
3. Number of Holders in each Class of Equity Security
Class of Equity Security
Fully Paid Ordinary Shares (quoted)
Options over Fully Paid Ordinary Shares (unquoted)
Number of Holders
1,358
See paragraph 13 below
65
/06
ADDITIONAL INFORMATION FOR
ASX LISTED COMPANIES
4. Voting Rights Attaching to each Class
AS AT
31 MAY 2018
The voting rights attaching to the fully paid ordinary shares is that each share is entitled to one vote when a poll is called, otherwise each
member present (or represented by their proxy, attorney or other representative) has one vote on a show of hands.
No voting rights attach to any of the options over the fully paid ordinary shares.
5. Distribution Schedules
a. Ordinary Shares
The distribution schedule for fully paid ordinary shares is as follows:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals
b. Unquoted Share Options
IPO Advisors Share Options:
Holders
Total Units
17
58
161
743
379
3,947
233,806
1,369,144
32,337,986
461,326,304
%
0.00%
0.05%
0.28%
6.52%
93.15%
1,358
495,271,187
100.00%
The distribution schedule for options over fully paid ordinary shares issued to advisors in relation to the Company's IPO (the details of which
are set out in the Company's Replacement Prospectus dated 17 May 2016), each with an exercise price of AU$0.20, is as follows:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
Holders
Total Units
0
0
0
0
4
4
%
0.00%
0.00%
0.00%
0.00%
0
0
0
0
8,750,000
100.00%
8,750,000
100.00%
None of the options issued under the IPO Advisors Share Option Scheme have vested.
66
/06
ADDITIONAL INFORMATION FOR
ASX LISTED COMPANIES
AS AT
31 MAY 2018
Pre-IPO Employee Share Options:
Originally issued in December 2015, the distribution schedule for options over fully paid ordinary shares issued to employees, under the Pre-
IPO Eemployee Share Option Scheme (the details of which are set out in the Company's Replacement Prospectus dated 17 May 2016), is as
Holders
Total Units
The table includes both vested and unvested options.
Current Employee Share Options:
Originally issued in August 2017, the distribution schedule for options over fully paid ordinary shares issued to employees under the
Company's current ESOP, each with an exercise price of AU$0.20, is as follows:
Holders
Total Units
follows:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
All the options issued in August 2017 have vested.
Non-Executive Directors (NEDs) Share Options:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
0
0
0
3
2
5
0
2
5
26
5
38
0
0
0
0
3
3
0
0
0
150,262
1,413,463
%
0.00%
0.00%
0.00%
14.70%
92.20%
1,533,008
100.00%
0
5,840
30,703
796,110
817,534
%
0.00%
0.35%
1.86%
48.24%
49.55%
1,650,187
100.00%
%
0.00%
0.00%
0.00%
0.00%
0
0
0
0
1,713,526
100.00%
1,713,526
100.00%
67
Originally issued in September 2017, the distribution schedule for options over fully paid ordinary shares issued to NEDs under the
Company's ESOP (the details of which are set out in the Explanatory Memorandum attached to the Company's Notice of Annual Meeting of
Shareholders dated 28 August 2017) is as follows:
Holders
Total Units
None of the options issued under the Non-Executive Directors (NEDs) Share Options Scheme have vested.
/06
ADDITIONAL INFORMATION FOR
ASX LISTED COMPANIES
6. Marketable Securities
AS AT
31 MAY 2018
The number of holders holding less than a marketable parcel (i.e. the value of a parcel that is less than AU$500) of the Company's main class of
securities (fully paid ordinary shares), based on the closing market price of AU$0.040 as at 31 May 2018 was 282.
7. 20 Largest Holders
As at 31 May 2018, the names of the 20 largest holders of fully paid ordinary shares, the number of those shares held, and the percentage of
capital held, is as follows:
Holder name
M & M No.2 Limited
Adrian David Grant & AJ Trustee Services Limited
Harrogate Trustee Limited
Franc Holdings Limited
Citicorp Nominees Pty Limited
Brendan Paul Roberts & Ml Trustees 3287 Limited
National Nominees Limited
Tappenden Holdings Limited
Aminoex Trustee Limited & RDP Trustees Limited
Forsyth Barr Custodians Limited
Wallis-Mance Pty Limited
HSBC Custody Nominees (Australia) Limited
First NZ Capital Securities Limited
Paul Joseph Reynolds
CSB Partners Limited
BNP Paribas Noms Pty Limited
J P Morgan Nominees Australia Limited
Custodial Services Limited
Mr Hien Quang Trinh
Michael Jeremy Thomas Stokes & Anna Victoria Stokes
Number of shares % holding
51,444,727
51,312,727
43,720,095
30,620,271
25,959,343
14,779,609
12,735,942
8,572,349
8,239,128
6,003,660
6,000,000
4,585,191
4,543,471
4,423,625
4,230,414
3,975,000
3,759,908
3,697,750
3,540,086
3,450,316
10.39%
10.36%
8.83%
6.18%
5.24%
2.98%
2.57%
1.73%
1.66%
1.21%
1.21%
0.93%
0.92%
0.89%
0.85%
0.80%
0.76%
0.75%
0.71%
0.70%
68
/06
ADDITIONAL INFORMATION FOR
ASX LISTED COMPANIES
8. Company Secretary
AS AT
31 MAY 2018
For the purposes of the ASX Listing Rules, the Company Secretary is currently Neil Hopkins, who also acts as the Company's Chief
Financial Officer.
9. Address
The Company's principal administrative office is:
Level 4, AECOM House, 8 Mahuhu Crescent, Auckland, 1010, New Zealand
The Company's registered office in Australia is:
Level 22, 19 Martin Place, Sydney, NSW, 2000
The Company does not have a contact telephone number in either New Zealand or Australia. The Company is contactable at
investors@9spokes.com.
10. Register of Securities
The register of securities is held at the following address:
Boardroom Pty Limited,
Level 12, 225 George Street, NSW, 2000, Australia
Telephone: +61 1300 737 760
11. Stock Exchanges
The Company’s securities are not quoted on any stock exchange other than the ASX.
12. Restricted Securities
None of the Company's securities are currently restricted.
13. Unquoted Securities
The following unquoted securities are on issue:
Class
Number of Holders
Number on Issue
A - Options over Ordinary Shares 1
B - Options over Ordinary Shares 2
C - Options over Ordinary Shares 3
D - Options over Ordinary Shares 4
4
5
38
3
8,750,000
1,533,008
1,650,187
1,713,526
Foster Stockbroking Nominees Pty Limited holds 5,400,000 of the Class A Options (IPO Advisors Share Options).
[1]
[2]
[3]
[4]
IPO Advisors Share Options: exercise price AU$0.20
Pre-IPO Employee Share Options: exercise price is NZ$0.16.
Options issued to Employees under ESOP: exercise price AU$0.20
NEDs Options under the ESOP: exercise price AU$0.225
69
/06
ADDITIONAL INFORMATION FOR
ASX LISTED COMPANIES
14. Review of Operations
AS AT
31 MAY 2018
A review of the operations and activities of the Company is provided in the Year In Review section of this Annual Report.
15. Buy-Back
There is no current on-market buy-back being conducted by the Company.
16. Business Objectives
During the financial year ended 31 March 2018, the Company continued to follow the Business Objectives as set out in the Company’s
Replacement Prospectus dated 17 May 2016. Cash, and assets readily convertible into cash, that the Company had at the time of its admission
to the ASX (and cash that it has received from subsequent placements of fully paid ordinary shares to institutional investors) has continued to
be used by the Company to continue 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. More specific details on the outcomes from the current reporting period are provided in the Year In Review section of this Annual Report.
17. Further Information
The Company is incorporated in New Zealand.
The Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of its shares (including substantial
holdings and takeovers).
•
In general, securities in the Company can be transferred freely, with restrictions or limitations applying only in relation to takeovers, overseas
investment and competition. Limitations on the acquisition of the securities imposed by the law in which the Company is incorporated (New
Zealand) are as follows:
• The New Zealand Takeovers Code and the FMCA prescribe a general 20% threshold under which a person is prevented from increasing the
percentage of voting rights held or controlled by them in excess of that threshold or from becoming the holder or controller of an increased
percentage of voting rights if they already hold or control more than 20% of the voting rights, subject to some exceptions. Under the New
Zealand Takeovers Code, compulsory acquisitions are also permitted by persons who hold or control 90% or more of the voting rights in the
Company.
• Generally, the consent of the New Zealand Overseas Investment Office is required where an overseas person acquires shares in the
Company that amount to more than 25% of the total shares issued by the Company, or if the person already holds 25% or more of the shares,
the acquisition increases such holding and the value of the shares, or of the Company's and its subsidiaries' assets, exceeds $100 million.
• Under the Commerce Act 1986 (NZ), a person may be prevented from acquiring shares in the Company if the acquisition would have, or
would be likely to have, the effect of substantially lessening competition in the market.
70
/06
COMPANY
DIRECTORY
Registered Office
Level 4, AECOM House
8 Mahuhu Crescent
Auckland 1010, New Zealand
New Zealand Company Number
3538758
New Zealand Business Number
9429030957862
Australian Registered Business Number
610 518 075
Directors
Paul Reynolds (Chairman)
Adrian Grant
Mark Estall
Thomas Power
Wendy Webb
Australian Lawyers
Bird & Bird Lawyers
Level 11, 68 Pitt Street
Sydney, NSW 2000, Australia
New Zealand Lawyers
Simmonds Stewart
Level 4, 4 Vulcan Lane
Auckland 1140, New Zealand
Group Auditors
PricewaterhouseCoopers
188 Quay Street
Private Bag 92162
Auckland 1142, New Zealand
Share Registrar
Boardroom Pty Limited
Level 12, 225 George Street
Sydney, NSW 2000, Australia
ASX
The Company’s ordinary shares are listed
on the ASX, under ASX code ASX:9SP
Website
www.9spokes.com
71