ANNUAL
REPORT
31 March 2019
9 Spokes International Limited and subsidiary companies
ARBN 610 518 075
01 CHAIRMAN'S REPORT
02 CHIEF EXECUTIVE'S REPORT
03 DIRECTOR'S REPORT
04 INDEPENDENT AUDITOR'S REPORT
05 CONSOLIDATED 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
4
6
11
13
20
21
22
23
24
54
58
64
TABLE OF
CONTENTS
01
CHAIRMAN'S
REPORT
CHAIRMAN'S
REPORT
There is no doubt that 2019 has been the most demanding year yet for our young company. On one hand we have
made good progress by increasing revenues and developing new account relationships with banks around the world
whilst, on the other hand, we have very significantly reduced our monthly cash burn. Re-structuring on this scale has
been painful, but necessary, and the overall result has been to take a large step towards our ultimate goal of profitability.
In turn, this has enabled 9 Spokes to underpin a successful capital-raise and which now gives us the breathing space
where we hope to complete some major business development drives and take the company to long term sustainability.
With the recent capital raise we have many new shareholders on our register who we warmly welcome. For those new
shareholders, 9 Spokes acts as a business software aggregation platform between the SMB and parties with whom they
have deep operational and business relationships. The primary relationship is with their banking partner but over time
this ecosystem will expand as we add new capability to the platform.
Whilst the past year has been demanding, we have also achieved much. In the past year we have;
» delivered two new Enterprise Channel Customers;
» made significant changes to the entire leadership team, including the appointment of Adrian Grant as Chief Executive;
» significantly reduced our people costs while ensuring capability was well deployed with headcount falling from 94 to
62 which of itself removed $3 million cost from the business;
» reviewed our product strategy which while affirming our core value proposition for SMB’s has meant that we are
changing how we position the interaction of our products to our clients;
» we commenced a major rebuild of our platform, known as V2, taking all our learnings from operating over the last two
years to both improve our speed and operating cadence but importantly giving us the technical flexibility to rapidly
build capability into our core platform;
» re-platformed our infrastructure utilising Microsoft Azure which has resulted in significant service and cost benefits
and
» revised our distribution model, the first such step being a co-sell relationship with Microsoft.
It has been a huge effort by all the team to undertake these activities while maintaining a positive and concentrated
focus on our goals and we can only commend our team on the significant progress made as we write this report.
The Board and management believe 9 Spokes has the right long-term business model. In every market we see
increasing disruption within core banking and for SMB's the demand for more relevant and timely credit solutions is
driving preference. For SMB's our ability to deliver a seamless aggregation of their business data, and to deliver a
‘permissioned’ bridge between the bank and the SMB drives a stronger, more relevant relationship.
Looking forward, 9 Spokes will continue to exercise operational caution as we focus on moving the company to break-
even. But that is not at the expense of the work to deliver a V2 platform, new banks and SMB's onto the platform.
Building a platform takes time and we are confident that the necessary steps have been taken to position the company
well for the future.
Approved for and on behalf of the board on 28 June 2019
P a u l R e y n o l d s
Chairman
4
02
CHIEF
EXECUTIVE'S
REPORT
CHIEF EXECUTIVE'S
REPORT
The 2018/19 year has been a year of significant change, as the company elected to pivot its core strategy to achieve
break-even as soon as feasible. At the same time all operational aspects of the company were reviewed in order to
align all strands of the business to achieve our operational goals.
The following core achievements can be noted.
Revenue
Total revenue for the year was $8.2 million, (2018: $6.7 million) up 22% on the prior year. Platform access revenue
was $4.5 million (2018: $4.1 million) while recognised Implementation revenue was $2.4 million (2018: $1.7 million).
Implementation revenue is deferred when invoiced and recognised over the initial term of an Enterprise Channel
Customer contract. Implementation revenue this year includes $0.6 million of deferred revenue recognised early,
following cancellation of the contract with Royal Bank of Canada. As at 31 March 2019 the Annual Recurring Revenue
from platform access fees amounted to $3.9 million, while deferred Implementation revenue was $1.5 million.
The Group also generated $0.4 million of revenue for additional services such as Marketing services, referral fees and a
proof of concept, with existing and prospective Enterprise Channel Customers.
Grant Income received mainly from Callaghan Innovation, a Crown entity of New Zealand was $0.8 million (2018 $0.5
million).
Expenditure
Total expenditure for the year is $16.8 million (2018: $24.1 million) a decrease of $7.3 million, down 30% year on year.
Cost management and control has been a key objective for this financial year with a focus on alignment of costs to the
requirements of the business.
Over the course of the year, costs have progressively reduced, for the first half year total expenditure was $9.9 million,
this has reduced to $6.9 million (down 31%) in the second half of the year. This compares to $11.2 million for the second
half of the last financial year. The Group is continuing to work with a keen focus on cost control against the backdrop of
continued expected revenue increases.
6
CHIEF EXECUTIVE'S REPORT
Total employee costs have reduced by $3.0 million a decrease of 23% year on year, Headcount has reduced, with the
average during the last quarter of the year being 66 full time equivalents across the group compared to 100 staff for the
same quarter last financial year. This reduction has been managed to ensure that the Company continues to have
capacity to service Enterprise Channel Customers and to seek and secure new revenue opportunities.
Other significant cost savings in the year have been marketing spend, down by 86%, a reduction of $2.1 million
compared to marketing spend last financial year. Marketing focus this year has been on supporting growth of users from
Enterprise Channel Customers who now account for over 60% of total users.
Cost reductions have also been achieved in hosting and infrastructure as we have moved to new hosting environments,
travel and professional fees including having brought legal resources in house.
Cash flows
Annual net cash outflows from operations were $9.4 million, reducing by 43% year on year, reflecting a 27% increase in
receipts from Enterprise Channel Customers and government grants and a 25% reduction in payments to our people
and suppliers. Quarter on quarter there has been a reduction in net cash outflows from operating activities, reducing
from $3.2 million in the first quarter to $1.3 million in the last quarter, a trend that is expected to continue.
The cash flows from financing activities records the $2.5 million short term lending provided to the Company during the
year, see note 14 of the Consolidated Financial Statements for more detail on the loan.
Cash and cash equivalents at 31 March 2019 were $1.4 million (2018: 7.3 million). Subsequent to the year end the
Company announced a fully underwritten pro rata renounceable entitlement offer to raise A$5.3m before costs, see
note 25 of the Consolidated Financial Statements.
7
CHIEF EXECUTIVE'S REPORT
ENTERPRISE CUSTOMERS AND CHANNEL PARTNERS
9 Spokes delivered two new bank Enterprise Channel Customers during the year. BNZ which was signed in March 2018
and OCBC Bank signed in August 2018 were both delivered successfully in December 2018. OCBC went live in January
2019, and BNZ at the beginning of April 2019 which 9 Spokes has supported in its go to market campaign by providing
a Marketing service programme.
There are number of new Enterprise Channel opportunities under development across Asia, North America and Europe.
Discussions with a tier one North American Bank are now at an advanced stage while the Company successfully
delivered a paid Proof of Concept (POC) to a major European Bank during the last quarter of the year.
Continuing our strategy of working with key partners with strong banking associations the Company announced a
relationship with Microsoft and notified the market of discussions with VISA USA; both to support the growth and
distribution of the 9 Spokes platform and to extend the sales model through global distribution partnerships.
On 1 March 2019 the Company announced it had entered into a co-sell partner agreement with Microsoft under the
Microsoft One Commercial Partner (OCP) programme, a program specifically designed for Microsoft Azure partners.
As part of the OCP programme, Microsoft incentivises its sales teams to co-sell the 9 Spokes platform into key global
banking communities. The model is specifically designed to help approved partners, like 9 Spokes, enter new markets
and scale quickly by tapping into the deep customer relationships and technical expertise of Microsoft’s enterprise sales
teams around the world.
On 12 March 2019 the Company announced it had signed a ‘Collaboration Framework Agreement’ with Visa. This
agreement provides a basis for 9 Spokes and Visa to potentially collaborate on mutual areas of interest. The agreement
itself does not infer any commercial benefits or obligations on either party. Discussions are continuing well.
Users
The majority of new growth in platform users comes from Enterprise Channel Customers who now account for
approximately 60% of total users. Total user numbers reached 95,000 by 31 March 2019, an increase of 90% compared
to March 2018. Since the end of the financial year these numbers have exceeded 100,000.
8
CHIEF EXECUTIVE'S REPORT
NEW PRODUCT DEVELOPMENT
Platform functionality
A key theme for this year has been the enhancement of our platform functionality, feature sets and user experience.
Internally this is referred to as V2 of which a number of elements have already been delivered:
» Move to Microsoft Azure Platform
Going forward all new Enterprise Channel Customers will be deployed on the 9 Spokes V2 platform. Operationally, this will
result in improved implementation cadence and a reduction in costs.
» New data service framework
The new framework speeds up integration of new apps into the platform, improves scalability of the data extraction
processes and expands the breadth and depth of the data set 9 Spokes can work with. This framework will be deployed
during the first quarter of the new financial year to power all apps on current and future dashboards.
The launch of V2, planned for later in 2019, represents the start of a significant product refresh, built on new architecture. This
will enable 9 Spokes to enhance the user experience both for the Company’s banking Enterprise Channel Customers and for
its small medium business (SMB) users.
Core foundation technology
The Company released a new REST API service layer. The APIs provide the foundation for mobile apps and support scenarios
where Enterprise Channel Customers prefer to write their own user interface or embed the 9 Spokes services into their
existing product offerings.
Open banking
The Company has also developed opening banking functionality in compliance with the European PSD2 requirements which
will enable 9 Spokes to integrate bank accounts within the platform from multiple banks. 9 Spokes has been granted a licence
as an Open Banking Account Information Service Provider by the United Kingdom’s Financial Conduct Authority, one of a small
number of accredited agents that is not a bank.
Mobile
The iOS mobile app was delivered internally and has now entered beta testing. The launch of the native app will provide a user
experience for the 9 Spokes platform in line with user demands. For the Company’s banking Enterprise Channel Customers,
9 Spokes has also successfully completed integrations enabling the 9 Spokes platform to be a part of each of the bank
customers mobile applications.
A D R I A N G R A N T
Chief Executive - Co-Founder
9
03
DIRECTOR'S
REPORT
DIRECTOR'S REPORT
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 2019.
The financial statements presented are signed for and on behalf of the Board and were authorised for
issue on 28 June 2019.
P a u l R e y n o l d s
Chairman
Ad r i a n Gr a n t
Chief Executive - Co-Founder
11
04
INDEPENDENT
AUDITOR'S
REPORT
Independent auditor’s report
To the shareholders of 9 Spokes International Limited
We have audited the consolidated financial statements which comprise:
the consolidated statement of financial position as at 31 March 2019;
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.
Our opinion
In our opinion, the accompanying consolidated financial statements of 9 Spokes International Limited
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 31 March 2019, its financial performance and its cash flows for the
year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
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, 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.
Material uncertainty related to going concern
We draw attention to note 2(b) in the consolidated financial statements, which discloses that the
Group has incurred a loss of $9.3 million and net cash outflows from operating activities of $9.4
million for the year ended 31 March 2019. At the current run rate the Group only has sufficient cash
for a further four months from the date of signing these financial statements. In order to generate
sufficient cash for at least the next 12 months the Group will need to secure the deal with the North
American bank and other smaller scale customers, or raise additional capital. As stated in note 2(b),
these events or conditions, along with other matters as set forth in note 2(b), indicate that a material
uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Our audit approach
Overview
An audit is designed to obtain reasonable assurance
whether the financial statements are free from material
misstatement.
Overall Group materiality: $370,000, which represents
approximately 4% of loss before tax.
We chose loss before tax as the benchmark because, in
our view, it is a close approximation for the net operating
cash outflow and together these are financial
benchmarks against which the financial performance and
sustainability of the Group is currently measured by
users.
We have determined that there are three key audit
matters:
Adoption of NZ IFRS 15 Revenue from Contracts
with Customers
Recognition of research and development costs
Valuation of the derivative conversion option.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
PwC
14
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. In addition to the matter
described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report. These matters
were addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon. We do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit
matter
Adoption of NZ IFRS 15 Revenue from Contracts
with Customers
The Group adopted NZ IFRS 15 Revenue from
Contracts with Customers from 1 April 2018. This
new standard changes the recognition and
measurement of revenue.
The Group’s revenue is largely derived from system
implementation fees and platform access fees
charged to customers. Management did not identify
any material changes to the recognition and
measurement of the Group’s revenue (note 3) upon
adoption of NZ IFRS 15. Management has exercised
judgement to determine that contracts with
Enterprise Channel Customers, including
implementation fees and platform access fees,
represent one performance obligation, which is to
provide the platform services. This is because the
customer could not benefit from the system on its
own and separately from the platform access.
The Group aggregates the fees received from system
implementation and platform access and recognises
revenue on a straight-line basis from the start of the
hosting period until the expected end of the hosting
services. Fees received which relate to the
implementation phase are recognised on the
balance sheet as contract liabilities until hosting
commences at the ‘Go live’ date.
The Group’s revenue accounting policy is set out in
note 3 of the financial statements.
Given the significance of the balances and the
judgements involved, this was an area of focus for
our audit.
To assess the appropriateness of
management’s treatment of implementation
fees and platform access fees as one
performance obligation, we:
read management's assessment of the
impact of NZ IFRS 15 on the Group's
revenue arrangements
read the material customer contracts and
analysed management’s assessment of
the technical objectives, performance
obligations and the commercial factors of
these arrangements against the contracts
and the requirements of NZ IFRS 15.
confirmed the date when the Group
commenced hosting services.
We considered alternative situations,
including whether there were separate
performance obligations for implementation
and platform access services or other
performance obligations that better reflected
the terms of the Group’s revenue
arrangements.
We have no matters to report.
PwC
15
Key audit matter
Recognition of research and development costs
The research and development accounting policy is
contained in note 5 of the financial statements. The
Group incurred $4.2 million of research and
development costs (excluding capitalised
implementation costs) during the year, which was
all expensed. There were no development costs
capitalised.
There is judgement in determining whether
particular activities meet the definition of
“research” and/or “development” and then whether
the costs should be expensed or capitalised as
product development costs (an intangible asset) in
accordance with accounting standards. All costs
incurred as part of the research phase are expensed.
Costs incurred in the development phase are only
capitalised if they meet the capitalisation criteria.
Management assess the capitalisation criteria for
each project in accordance with the Group’s
accounting policy. At 31 March 2019 they
determined that there was no certainty of funding
or future economic benefits from current
development projects and therefore none of the
costs should be capitalised.
Given the judgement involved, this was considered
to be a key audit matter.
How our audit addressed the key audit
matter
Our audit procedures included obtaining an
understanding of the processes and controls
over the recognition of research and
development costs. We discussed the nature
of the research and development work
undertaken during the year with the Head of
Product & Engineering and other
management staff.
On a sample basis we validated these
activities through discussions with individual
team members. We discussed the nature of
the work being undertaken and ensured that
they met the definition of “research” and/or
“development” as defined by the accounting
standards.
We considered management’s assessment
that the capitalisation criteria had not been
met, and therefore why it was appropriate to
expense all development costs. Our
consideration included challenging their
assessment of the certainty of funding and
the certainty of future economic benefits
resulting in management’s conclusion to
expense all development costs.
Based on our procedures, we have nothing to
report.
PwC
16
Key audit matter
How our audit addressed the key audit
matter
Valuation of the derivative conversion option
During the year ended 31 March 2019 the Group
entered into a short term loan that included an
option to convert some or all of the loans into
shares of the Group. As explained in note 14,
management determined that this conversion
feature should be accounted for separately and held
as a liability at fair value.
Management valued the conversion feature at the
date of initial recognition and then again at 31
March 2019 ($0.6 million) using an expected cash
flows approach. The key inputs into the valuation
included the market price of the ordinary shares,
potential discount options under the facility
agreement, loan exit fees on the portion of the loan
not converted, and the likely quantum of shares
that could be converted given the cap on the
quantity of shares available for conversion due to
takeover regulations.
The terms of the conversion feature were bespoke to
this instrument and required management to
interpret the contract to perform the valuation.
Judgement was also required to perform this
valuation as the expected cash flows depended on a
number of expectations about uncertain future
events. This was therefore an area of focus for our
audit.
Our audit procedures included:
understanding management's procedures
and approach for this valuation
reviewing management’s valuation model
reading the facility agreement
engaging an internal expert in valuation
to review the valuation methodology used
by management
verifying inputs, assumptions and
calculations in management’s
valuation model to the quoted share price
of the Group, the number of shares on
issue, the terms of the facility agreement
and external foreign exchange rate
sources
performing a sensitivity analysis of the
valuation for key variables including
those relating to expectations about
uncertain future events.
The valuation of the derivative conversion
option is within an acceptable valuation
range.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not express
any form of assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, 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.
PwC
17
In preparing the consolidated 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.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
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
28 June 2019
Auckland
PwC
18
05
CONSOLIDATED
FINANCIAL
STATEMENTS
9 Spokes International Limited
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2019
Notes
2019
$'000
2018
$'000
Operating revenue and other operating income
Operating revenue
Other income
3 (a)
7,341
6,069
3 (b)
850
609
Total operating revenue and other operating income
8,191
6,678
Expenses
Operational expenses
5 (a)
(3,146)
(6,778)
Research and development expenses
5 (b)
(4,523)
(4,144)
Sales, marketing and administration expenses
5 (c)
(9,156)
(13,128)
Total expenses
Operating loss
(16,825)
(24,050)
(8,634)
(17,372)
Net finance (expense)/income
(690)
306
Net loss before income tax
(9,324)
(17,066)
Income tax expense
9
- (125)
Net loss from continuing operations
(9,324)
(17,191)
Other comprehensive income:
Translation of international subsidiaries
57
(175)
Total comprehensive loss attributable to shareholders
(9,267)
(17,366)
Earnings per share
Basic and diluted loss per share
17
($0.02)
($0.04)
The accompanying notes form an integral part of these financial statements.
20
9 Spokes International Limited
Consolidated Statement of Changes in Equity
For the year ended 31 March 2019
Share
capital
$'000
Notes
Share
based
payments
reserve
Foreign
currency
translation
reserve
Accumulated
losses
$'000
$'000
$'000
Total
$'000
Balance as at 1 April 2017
36,145
1,658
(25)
(26,848)
10,930
Proceeds from shares issued
15
12,955
- - -
Share option expense
Costs of capital raise
Reclassification of previously expensed
amounts from share based payments
16
15
15
-
- -
180
(1,012)
- - - (1,012)
940
(940)
- - -
12,955
180
Reserve arising on conversion of foreign
currency subsidiary
-
-
-
(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
Share option expense
16
- 8
- - 8
Costs of capital raise
(44)
- - -
(44)
Reserve arising on conversion of foreign
currency subsidiary
-
- 57
- 57
Net loss for the year
-
- - (9,324)
(9,324)
Balance as at 31 March 2019
48,984
906
(143)
(53,363)
(3,616)
The accompanying notes form an integral part of these financial statements.
21
9 Spokes International Limited
Consolidated Statement of Financial Position
As at 31 March 2019
Assets
Non-current assets
Notes
2019
$'000
2018
$'000
Property, plant and equipment
10
346
480
Total non-current assets
Current assets
346
480
Cash and cash equivalents
11
1,360
7,297
Term deposits with maturities of more than three months
-
1,000
Trade and other receivables
12
805
2,077
Contract assets
5 (b)
266
660
Total current assets
2,431
11,034
Total assets
Equity
Share capital
Share based payments reserve
2,777
11,514
15
16
48,984
49,028
906
898
Foreign currency translation reserve
(143)
(200)
Accumulated losses
(53,363)
(44,039)
Equity attributable to the owners of the company
(3,616)
5,687
Total equity
Current liabilities
Trade and other payables
Short-term loan
Fair value of loan conversion option
(3,616)
5,687
13
14
14
1,685
2,551
2,637
-
585
-
Contract liabilities
3 (a)
1,486
3,276
Total current liabilities
Total equity and liabilities
6,393
5,827
2,777
11,514
The accompanying notes form an integral part of these financial statements.
22
9 Spokes International Limited
Consolidated Statement of Cash Flows
For the year ended 31 March 2019
Notes
2019
$'000
2018
$'000
Cash flows from operating activities
Receipts from customers
6,518
5,227
Receipts from government grants
839
312
Payments to employees and suppliers
(16,821)
(22,445)
Interest received
(9,464)
(16,906)
82
323
Net cash flows from operating activities
18
(9,382)
(16,583)
Cash flows from investing activities
Purchase of property, plant and equipment
(67)
(183)
Transfer from term deposits
1,000
4,900
Net cash flows from investing activities
933
4,717
Cash flows from financing activities
Proceeds from the issue of share capital
15
-
12,955
Proceeds from short-term loan
2,500
-
Cost of raising capital
(44)
(992)
Net cash flows from financing activities
2,456
11,963
Net change in cash and cash equivalents
(5,993)
97
Cash and cash equivalents at the beginning of the year
7,297
7,484
Foreign exchange loss on cash and cash equivalents
56
(284)
Cash and cash equivalents at the end of the year
11
1,360
7,297
The accompanying notes form an integral part of these financial statements.
23
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
1. General information
These financial statements are for 9 Spokes In
C
and its
G
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 28 June 2019.
2. Summary of significant accounting policies
These are the financial statements for the Group for the year ended 31 March 2019.
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
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS), as appropriate for for-profit
entities.
The Group has adopted External Reporti
-
-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 $9.3 million for
the year ended 31 March 2019 and at balance date had available cash of $1.4 million. The net cash
outflows from operating activities were $9.4 million during the year.
During the financial year the Group significantly reduced its monthly cash burn, while post year end it
continued to reduce its cash burn and completed a rights issue and placement, raising A$5.9 million
before costs, see note 25.
At the current run rate, the Group has sufficient cash for a further four months from the date of signing
these financial statements. In order to generate sufficient cash for at least the next 12 months, the Group
will need to secure new revenue opportunities and/or raise additional capital.
24
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
The Group is now in an improved position to follow its goal to achieve breakeven. With a tight control of
costs, the key to breakeven will be maintaining existing and growing new revenues. The Group has a
number of revenue opportunities that are progressing. New Revenues include a tier one North American
bank which is now at an advanced stage of negotiations and should the Group be successful in closing
this contract, revenues are expected to be material to the Group. In addition to building opportunities
directly, the Group also announced a relationship with Microsoft and notified the market it is in
discussions with VISA USA; both to support the growth and distribution of the 9 Spokes platform and to
extend the sales model through global distribution partnerships. Should the Group decide to raise
additional capital, the support for the recent rights issue and placement provides the Group with
confidence in investor support.
The requirement to secure new revenue opportunities and/or new capital within the next four mon ths
going concern and therefore, the Group may be unable to realise its assets and discharge its liabilities
in the normal course of business.
Based on our assessment of progress with a number of potential revenue opportunities, management
and the Board, believe the Group will be able to secure new revenues in line with expectations which
will provide the Group with sufficient funds to support planned expenditure and maintain operations.
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 timing of revenue recognition of
implementation fees (refer to note 3(a)), fair value of the convertible option of the short term loan (refer
to note 14), expensing of research and development costs (refer to note 3 (b)) and the non-recognition of
deferred tax assets (refer to note 9).
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
A number of new standards became applicable for the current reporting period, which has resulted in
the Group changing its accounting policies.
25
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
The new standards are:
• NZ IFRS 9 Financial Instruments
• NZ IFRS 15 Revenue from Contracts with Customers
The impact of the adoption of NZ IFRS 15 is disclosed in note 3 on Revenue and the adoption of NZ IFRS
9 is explained in the following paragraph. These notes also disclose the new accounting policies that
have been applied from 1 April 2018, if they are different to those applied in prior periods.
NZ IFRS 9, Financial Instruments, as it relates to the Group, replaces the provisions of NZ IAS 39 that
relate to the recognition, classification, measurement and impairment of financial assets. The adoption
of NZ IFRS 9 from 1 April 2018 resulted in changes in accounting policies but no adjustments to the
amounts recognised in the financial statements.
Restatement of prior period disclosures
Following completion of the 2018 tax return for the Company, the value of tax losses as at 31 March
2018 as reported in note 9, has increased from $27.1 million to $32.0 million.
In note 15 the number of shares at the beginning of the year has been restated to 402,963,000 having
been incorrectly stated as 391,744,000. Consequently, the number of shares at the end of the year has
been restated to 495,271,000 from 484,052,000.
Neither restatement affected the reported loss nor any other aspect of the financial statements for the
prior 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 currenc ). 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
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.
26
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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, amendments and interpretations which are not yet effective, and which
The Group has not applied the following
standard in preparing these financial statements and will apply it in the period in which it becomes
mandatory:
NZ IFRS 16: Leases (effective for the Group from 1 April 2019)
-of-
This standard requires a lessee to recognise a lease liability reflecting the future lease payments and a
contracts and will be effective for the year ended 31 March
2020. The Group is yet to quantify its assessment of the impact of NZ IFRS 16. The Standard will increase
ating 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. Management are still in the process of assessing the impact to the financial
statements.
-of-
3. Revenue
a) Operating revenue from contracts with customers
Implementation revenue
Platform access revenue
2019
$'000
2018
$'000
2,446
1,732
4,532
4,134
Other revenue from enterprise customers
161
-
Other revenue
202
203
Total operating revenue
7,341
6,069
Adoption of NZ IFRS 15: Revenue from Contracts with Customers
The Group adopted NZ IFRS 15, Revenue from Contracts with Customers, from 1 April 2018, which
resulted in changes in accounting policies relating to the recognition of revenue.
Following a detailed review of the Group s portfolio of contracts, Management concluded that the
implementation of NZ IFRS 15 has no material impact on the way in which the Group recognises revenue.
Therefore, there is no requirement to restate revenue reported in prior periods. The details of the review
process is outlined below. Accounting policies have been amended to ensure that the five-step method,
as defined in NZ IFRS 15, is applied consistently to revenue recognition processes across the Group.
To assess the impact of NZ IFRS 15 on the Group, the five-step method was applied to the revenue
assess the impact on revenue recognition.
27
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
The five-step method for recognising revenue from contracts with customers involves consideration of
the following:
1.
Identifying the contract with the customer
2.
Identifying performance obligations
3. Determining the transaction price
4. Allocating the transaction price to distinct performance obligations
5. Recognising revenue
The accounting policy and key judgements are outlined below.
Implementation fees and platform access fees
The Group receives implementation fees and platform access fees in relation to the platforms it provides
to it enterprise customers. Implementation fees are received as part of the deployment of the
platform to these customers. Platform access fees are charged to customers throughout the term of the
service.
Together these fees are the majority of the revenue of the Group. While there are two forms of fees,
there is only one performance obligation, which is to provide the platform services to the enterprise
customer over the contracted period. The implementation and platform access fees are aggregated
(based on the expected total fees over the expected period of service including the most probable
outcome of variable arrangements) and then recognised as revenue in the Statement of Comprehensive
Income on a straight-line basis over the expected term of the service, starting when the system has been
deployed.
The table below provides further information on the application of NZ IFRS 15 across the two main
revenue categories in the Group. The segments detailed below represent 95%
revenue for the year ended 31 March 2019.
Revenue Type
Description
Key Judgements
Outcome
Implementation
Revenue
Deployment of 9
systems.
Determining whether
the deployment is a
distinct performance
obligation.
The customer could not
benefit from deployment
of the system on its own
and separately from the
platform access and as
such there is no distinct
performance obligation.
Platform Access
Revenue
The right to
access 9
Determining whether
the platform access is
a distinct performance
obligation.
As above.
28
Timing of Revenue
Recognition
while
Over time
cash is received at the
time of
implementation,
revenue is recognised
on a straight-line
basis, equally over the
expected licence
period, once the
system has been
deployed.
Over time -
recognised monthly,
on a straight-line
basis, recurring over
the expected licence
period.
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Revenue Type
Description
Key Judgements
Outcome
As above.
Implementation
Revenue and
Platform Access
Revenue
Determining the
length of the
expected licence
period.
The expected licence
period is the minimum
contractual period
excluding extension
options, unless these
options have formally
been exercised.
Timing of Revenue
Recognition
As above.
In terms of impact to the presentation of the financial statements, NZ IFRS 15 requires the disaggregation
of revenue to provide clear and meaningful information. Management concluded that presentation of
revenue in terms of the method of revenue recognition was most appropriate. As disclosed in note 4, the
Group operates as a single business segment therefore further disaggregation of revenue is not deemed
material.
Contract liabilities (deferred revenue)
Implementation fees received prior to deployment are treated as a contract liability (deferred revenue).
The Group had deferred implementation revenue as at 31 March 2019 of $1.5 million (31 March 2018: $3.3
million). $2.2 million of Implementation revenue included in the contract liability at 31 March 2018 was
recognised in the Statement of Comprehensive Income for the year ended 31 March 2019.
Accounting for costs to fulfil contracts
During the implementation process the Group incurs costs directly related to fulfilling its obligations in
the contract and expects to recover these costs against implementation revenue. These costs are
capitalised as contract assets (previously presented as capitalised work in progress) on the balance sheet
and amortised on a straight-line basis over the same period that the implementation revenues are
recognised.
b) Other operating income
Government grants
Other income
2019
$'000
2018
$'000
801
520
49
89
Total other operating income
850
609
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.
29
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Other income
Other income comprises income
revenue classified as Other income in the prior year has been reclassified as Other revenue.
. $202,000 of
All revenues and income are 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 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.
b) Geographical segment information
Revenue was sourced from the following geographical locations:
Europe
North America
Asia Pacific
Notes
2019
$'000
4,210
2,475
1,506
2018
$'000
4,014
1,435
1,229
Total operating revenue and other income
8,191
6,678
Comprising:
Total operating revenue
Other income
3 (a)
3 (b)
7,341
850
6,069
609
30
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
During the year ended 31 March 2019 the Group had six enterprise partners (2018: six). Revenue from
than 87%
enterprise customers each accounted for 10%
8: three), including
and other income in both years. In the year ended 31 March 2019 two
Customers invoices are paid on terms ranging from 20 to 60 days.
5. Expenses by nature
a) Operational expenses
Note
2019
$'000
2018
$'000
Employee benefit expenses
7
2,177
4,509
Platform hosting
Third party contractors
790
1,480
-
323
Other operational expenses
179
466
Total operational expenses
3,146
6,778
Operational expenses represent infrastructure and technical operations not classified as research and
development.
b) Research and development expenses
Note
2019
$'000
2018
$'000
Employee benefit expenses
7
3,034
2,650
Third party contractors
Depreciation expense
362
493
66
52
Other research and development expenses
721
536
Capitalisation of expenditure as contract assets (implementation
costs)
Amortisation of previously capitalised contract assets
(implementation costs)
(54)
(265)
394
678
Total research and development expenses
4,523
4,144
Research expenditure is recognised as the expense is incurred.
31
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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 a contract asset and
amortised on a systematic basis over the enterprise customers initial licence term. The expenditure
capitalised includes payroll expenses, external contractor fees and overhead costs that are directly
attributable to the implementation activities.
Total capitalised contract assets (implementation costs) at 31 March 2019 was $0.3 million (2018: $0.7
million).
c) Sales, marketing and administration expenses
Notes
2019
$'000
2018
$'000
Depreciation expense
Directors' fees
Directors' consultancy services
Remuneration of auditors
Expensed cost of capital raises
Employee benefit expenses
Marketing expenses
Travel
Professional, office running costs and other administration
expenses
6
7
123
130
169
344
136
215
304
176
-
169
4,464
5,474
361
2,510
793
1,206
2,895
2,815
Total sales, marketing and administration expenses
9,156
13,128
32
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
6. Remuneration of auditors
Audit and review of financial statements by PwC
Audit of the annual financial statements
Review of the half year financial statements
Other services performed by PwC
Other review services
Tax compliance services
Remuneration policy advice
Other tax advice
Total fees paid and payable to PwC
Audit of subsidiary financial statements by subsidiary auditors
2019
$'000
2018
$'000
104
53
12
31
-
-
200
68
30
6
12
12
35
163
Audit of the UK Financial Statements by Oury Clark
15
13
Total fees paid and payable to auditor
215
176
The Audit and Risk Committee oversees the
considers
independent of the Group and the other non-audit services have not impaired that independence.
7. Employee benefit expenses
Wages and salaries
Share option expense
Other benefits
Note
16
2019
$'000
2018
$'000
9,429
12,046
8
238
180
407
Total employee benefit expenses
9,675
12,633
33
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Employee benefit expenses have been allocated between operational,
research and development and administration expenses as follows:
Note
2019
$'000
2018
$'000
Operational expenses
Research and development expenses
Research and development capitalised as contract assets
Sales, marketing and administration expenses
5 (a)
5 (b)
5 (b)
5 (c)
2,177
4,509
2,992
2,436
42
214
4,464
5,474
Total employee benefit expenses
9,675
12,633
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.
8. Finance expense/(income)
Interest receivable on short term bank deposits
Bank interest payable
Finance expense on short term loan
Fair value loss on loan conversion option
Notes
14
14
2019
$'000
(42)
11
683
38
2018
$'000
(311)
5
-
-
Total finance expense/income
690
(306)
34
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
9. Income and Deferred Tax
Income tax (expense) / benefit is represented as follows:
2019
$'000
2018
$'000
Current tax (expense) / benefit
- (125)
Total current tax (expense) / benefit
- (125)
Deferred tax expense
Origination of temporary timing differences
62
(42)
Tax (income)/deduction of research and development expenses deferred
(150)
482
Tax losses
(2,506)
(4,955)
Deferred tax assets not recognised
2,594
4,515
Total deferred tax
-
-
Total income tax expense
- (125)
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 $31.2 million (2018: $28.6 million) subject to
shareholder continuity being maintained. The Group has deferred research and development
deductions of $6.0 million (2018: $5.5 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
35
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
when it will generate taxable profits. There are no imputation credits available, as the Group is yet to
generate taxable profits in New Zealand.
Reconciliation of effective tax rate:
2019
$'000
2018
$'000
Loss before income tax
(9,324)
(17,066)
Prima facie taxation at 28% (2018: 28%)
(2,611)
(4,778)
Expenses not deductible for tax purposes
17
138
Temporary timing differences
(62)
42
Research and development expenses deferred/(recognised)
150
(482)
Total losses not recognised
2,506
4,955
Total income tax expense
- (125)
10. Property, plant and equipment
2019
Office and
computer
equipment
$'000
2019
Leasehold
improve-
ments
$'000
2019
Total
$'000
2018
Office and
computer
equipment
$'000
2018
Leasehold
improve-
ments
$'000
2018
Total
$'000
Carrying amount at start of
year
219
261
480
210
325
535
Additions
23
33
56
111
22
133
Disposals
- - -
(9)
-
(9)
Depreciation expense
(85)
(105)
(190)
(96)
(86)
(182)
Depreciation on disposals
- - -
3
-
3
Carrying amount at end of
year
157
189
346
219
261
480
At cost
432
383
815
409
350
759
36
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Recognition and measurement
Property, plant and equipment are stated at historical cost less depreciation.
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 Consolidated 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
Leasehold improvements
2-10 years
Over the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and
adjusted if appropriate.
11. Cash and cash equivalents
2019
$'000
2018
$'000
Cash at bank
935
1,266
Term deposits with maturities of three months or less
425
6,031
Total cash and cash equivalents
1,360
7,297
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.
37
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
12. Trade and other receivables
2019
$'000
2018
$'000
Trade receivables
367
1,083
Prepayments and accrued income
401
690
Other receivables
37
304
Total trade and other receivables
805
2,077
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 expected credit losses. The Group applies the NZ IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all trade receivables and
contract assets.
13. Trade and other payables
2019
$'000
2018
$'000
Trade payables
469
838
Other creditors and accruals
1,012
1,396
Deferred rent
204
317
Total trade and other payables
1,685
2,551
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 24).
14. Short-term loan and fair value of conversion option
Short term loan
During the year, the Company entered into a short-term funding facility intended to provide the Company
with working capital to allow time to conclude its capital raise, with a total sum of $2.5 million drawable
38
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
under the facility. The loan was initially taken out of 17 October 2018 and terms varied on 16 January
2019. The key commercial terms of the facility are:
The interest rate is 6.5% per annum until 31 December 2018, and 12% after that date.
•
• Completion and work fees are payable.
•
Advances are secured by way of a general security agreement over the material assets of the
Company and subsidiaries.
• Contingent of the timing and nature of the capital raise lenders have the option to convert any
portion of the total loan to ordinary shares. Under certain situations this conversion may be
exercised at a discount to the current market price of the shares. This option was introduced at 16
January 2019.
The carrying amounts of financial and non-financial assets pledged as security for the short-term loan
are:
Financial assets
Property, plant & equipment
Other non-financial assets (contract assets and prepayments)
Total assets
2019
$'000
1,408
353
594
2,355
There was no default on the short-term loan facility during the year ended 31 March 2019.
As a result of the conversion option introduced on 16 January 2019 the loan is accounted for as two
separate components, the pure debt portion and the loan conversion option.
Where there are financial instruments, with embedded derivatives, whose economic characteristics are
not closely related to that of the host financial instrument, the embedded derivative is separated and
accounted for separately.
uity
instruments, the derivative is classified as equity if the conversion feature results in a fixed amount of
debt converted into a fixed amount of equity instruments. Otherwise they are classified as liabilities.
Derivatives classified as liabilities are initially recognised at fair value and then subsequently measured
at fair value at each reporting date. The gains and losses are recognised as finance expenses or income
in the Consolidated Statement of Comprehensive Income. In these cases, the debt portion of the financial
instrument is presented as borrowings and measured at amortised cost.
Accounting for the debt portion of the loan
The loan is assumed to be settled on 24 May 2019 (see settlement paragraph below). At 31 March 2019
the carrying value of the loan at amortised cost was $2,636,000.
The fair value of the loan at 31 March 2019 is estimated to be $2,778,000. Since the loan was payable at
that date, the fair value is based on the principal, interest and other fees that were outstanding at that
date. This is classified as a level 2 fair value in the fair value hierarchy.
39
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Finance expense of the debt portion
The finance expense is made up of interest plus completion and work fees estimated over the life of the
loan. The finance expense is accounted for using the amortised cost basis. Total finance expense up to
31 March 2019 was $683,000.
Fair value of the derivative conversion option
As a result of the conversion option introduced at 16 January 2019 a derivative was recognised for the
loan conversion option.
The fair value of the conversion option was initially calculated as at 16 January 2019 and has been
revalued as at 31 March 2019. The calculation took account of the market price of the ordinary shares,
potential discount options, loan exit fees that were payable on the proportion of the loan not converted,
and the likely quantum of shares that could be converted given the cap on the quantity of shares
available for conversion due to takeover regulations.
Changes in the value of the option at 31 March 2019 are recognised in the Consolidated Statement of
Comprehensive Income as Fair value loss on loan conversion option (note 8).
Settlement of the short-term loan
On 18 April 2019 the Company announced a fully underwritten pro rata renounceable entitlement offer
(Offer) to raise A$5.3 million before costs at a share price of A$0.016. On completion of the offer on 24
May 2019, the loan including interest to that date and exit fees were discharged by the payment of $2.32
million and the issue of 80.1 million shares at the Offer price. This repaid the outstanding amount and the
was released. The derivative conversion option was also derecognised at that point.
15. Share capital
2019
2019
2019
2018
2018
2018
$'000
Shares
000's
Options
000's
$'000
Shares
000's
Options
000's
Share capital at beginning of the year
49,028
495,271 -
36,145
402,963
39,866
Shares issued for cash at A$0.13 per
share ($0.14)
-
12,955
92,308
-
Costs of capital raises
(44)
- -
(1,012)
- -
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
48,984
495,271 - 49,028
495,271 -
40
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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.
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.
16. Share based payments
Note
2019
$'000
2018
$'000
Share based payments reserve at beginning of the year
898
1,658
Reclassification of previously expensed amounts to share capital
-
(940)
Pre-IPO employee share options (a)
Employee ESOPs (c) (i)
NEDs ESOPs (c) (ii)
8
27
-
109
-
44
Total share option expense
7
8
180
Share based payments reserve at the end of the year
906
898
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 Consolidated 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.
41
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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 2019, there were 1,533,008 options that were outstanding all of which have 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.
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 employee share option plan (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)
b)
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
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)
c)
the options vest in full on the date of issue; and
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
42
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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
the expiry date of the options will be 5 years after date of issue.
c)
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.
Movements in the number of share options outstanding and their related weighted average exercise
prices are as follows:
Pre-IPO
employee
share
options
Dec 2015
IPO
advisor
share
options
Jan 2016
Employee
ESOPs
NEDs
ESOPs
Aug 2017 Sep 2017
AU$0.22
5
Weighted
average
exercise
price
$ per
option
Exercise price
NZ$0.16 AU$0.20 AU$0.20
Total
'000's
'000's
'000's
'000's
'000's
Balance outstanding at 1 April
2017
1,785
8,750
-
-
10,535
0.20
Granted
Forfeited
-
(252)
-
-
2,721
1,713
4,434
0.23
(1,006)
-
(1,258)
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
-
2,737
0.22
Granted
Forfeited
-
-
-
-
-
-
-
-
(363)
(570)
(933)
0.24
Balance outstanding at 31
March 2019
Balance exercisable at 31
March 2019
1,533
8,750
1,352
1,143
12,778
0.21
1,533
-
1,352
-
2,885
0.19
43
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
17. Loss per share
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. The number of shares and weighted average number of shares has been
adjusted for the dilutive impact of bonus shares that arise from the rights issue completed in May 2019.
2019
000's
2018
000's
Total comprehensive loss attributable to shareholders
($9,267)
($17,366)
Ordinary number of shares
518,301
518,301
Weighted average number of shares on issue
518,301
476,778
Basic and diluted loss per share
(0.02)
(0.04)
44
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
18. Reconciliation of reported loss after tax with cash flows from operating activities
Loss after income tax
Non-cash items
Depreciation expense
Share option expense
Foreign exchange loss on monetary assets
Finance expense on short term loan
Fair value loss on loan conversion option
Changes in working capital
(Decrease)/increase in trade and other payables
Decrease in deferred revenue
Decrease / (Increase) in trade and other receivables
Decrease in contract assets (implementation costs)
2019
$'000
2017
$'000
(9,324)
(17,191)
190
8
-
683
38
(866)
(1,790)
1,285
394
182
180
104
-
-
1,215
(686)
(799)
412
Net cash flow from operating activities
(9,382)
(16,583)
19. Financial instruments and financial risk management
Financial assets
Classification
comprise cash and cash equivalents and trade and other receivables
and are classified as amortised cost. Financial assets at amortised cost 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.
45
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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 based on the probability-weighted estimate
of credit losses that are expected to result from all possible default events over the expected life of a
financial instrument. There has been no impairment of financial assets and there were no past due not
impaired financial assets as at 31 March 2019.
Financial risk management
management framework. The Board of Directors has established an Audit and Risk Committee, which is
responsible for developing and monitori
Committee
reports regularly to the Board of Directors on its activities.
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
res, aims
to maintain a disciplined and constructive control environment in which all employees understand their
roles and obligations.
management policies and procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
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
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 $1.4
million (2018: $8.3 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-.
46
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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.
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
enable the Board to determine the funding needs and to ensure the Group meets its future operating
requirements.
With the exception of the short-term loan (note 14), at 31 March 2019, the contractual cash flows of the
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).
is outlined below in New Zealand dollars.
(in currencies other than each
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
2019
$'000
2018
$'000
10% increase
2019
$'000
2018
$'000
0
7
0
(15)
0
11
(25)
(24)
7
1
0
(7)
0
15
0
(11)
25
24
(7)
(1)
When necessary, the Group uses derivatives in the form of forward exchange contracts to reduce the
flows. The
Group did not hold any forward exchange contracts at 31 March 2019 (2018: Nil).
47
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
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.
business and to maintain investor and creditor confidence.
ain future growth and development of the
agement of capital during the year.
Fair values
Apart from the short-term loan, the fair value of the Group financial assets and liabilities is considered
approximately equal to their carrying amount. The
financial instruments do
not materially differ from their fair value, accordingly, information on the fair value hierarchy is not
required for those instruments. Information on the fair value and carrying value of the short-term loan is
in note 14.
Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial
instruments that are recognised and measured at fair value in the financial statements. To provide an
indication about the reliability of the inputs used in determining fair value, the Group classifies its financial
instruments into the three levels prescribed under the accounting standards. An explanation of each
level is below.
Level 1: Financial instruments traded in active markets (such as publicly traded derivatives, and equity
securities) whose fair value is based on quoted market prices at the end of the reporting period.
Level 2: Financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) where the fair value is determined using valuation techniques which maximise the use of
observable market data and rely as little as possible on entity-specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: Financial instrument that have one or more of the significant inputs that is not based on
observable market data.
ivative conversion
option (note 14). The valuation technique for this instrument is the present value of expected future cash
48
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
20. Consolidation
The Group had the following subsidiaries as at 31 March 2019:
Name
Country of
incorporation
and place of
business
Nature of business
Singapore
9 Spokes Asia Pte Limited
9 Spokes Australia Pty Limited Australia
Canada
9 Spokes Canada Limited
New Zealand
9 Spokes Knowledge Limited
New Zealand
9 Spokes Trustee Limited
Trading operation
Trading operation
Trading operation
Holder of provisional patent
Non-trading
9 Spokes UK Limited
United Kingdom Trading operation
9 Spokes US Holdings Limited New Zealand
Holding Company
9 Spokes US, Inc.
United States
Non-trading
Subsidiary companies
% of
ordinary
shares
held by
parent
100%
100%
100%
100%
100%
100%
100%
100%
Date of
incorporation
2 April 2019
10 April 2014
16 August 2017
5 May 2015
16 July 2015
21 December
2015
12 November
2014
11 May 2017
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
b)
rate at the date of that statement of financial position;
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.
49
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
21. Commitments
Capital commitments
The Group had no capital commitments as at 31 March 2019 (2018: Nil).
Lease commitments
The Group has lease agreements on certain premises. Future minimum rentals payable under non-
cancellable agreements are:
2019
$'000
2018
$'000
Not later than one year
793
1,221
Later than one year and no later than five years
713
1,985
Total lease commitments
1,506
3,206
22. Contingencies
As at 31 March 2019, the Group had a lease premise guarantee to the value of $423,635 for the operating
lease for the premises, held by ASB Bank Limited, this replaced the guarantee previously held at 31 March
2018 of $831,000.
23. 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 and the Chief Executive Officer, and his direct reports.
The following table summarises remuneration paid to key management personnel:
2019
$'000
2018
$'000
2,641
3294
-
169
3
205
344
101
Short-term employee benefits
Additional expenses related to restructure
Directors' fees
Share based payments
50
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Short term employee benefits relate to salaries and other benefits paid to the Executive Team. In 2019
members of the executive management team took a reduction to salary, while two roles in place during
2018 were disestablished by the end of that year.
24. Related party transactions and balances
As at 31 March 2019, the Directors of the Company held 28.2% of the share capital of the Company
(2018: 28.4%).
Transactions with the following related parties during the year:
Name of related
party
Nature of relationship
Transaction
2019
$'000
2018
$'000
Paul Reynolds
Director
Tightline Advisory
Limited [1]
Director
Social Power
(Surrey) Limited [2]
Director
Directors' fees
Consulting services
Share based payments - ESOP
169
77
-
49
- 17
Consulting services
27
-
Directors' fees
40
80
Consulting services
Share based payments - ESOP
96
225
- 12
Mint Recruitment
Limited [3]
Family Member of a Director Provision of recruitment services
138
74
Kestrel Corporate
Advisory, Inc. [4]
Director
Directors' fees
40
95
Consulting services
Share based payments - ESOP
23
30
- 15
1. Non-executive Director, Paul Reynolds is a Director and Shareholder of Tightline Advisory Limited
2. Non-executive Director, Thomas Power is a Director and shareholder of Social Power (Surrey) Limited.
3.
4. Non-executive Director, Wendy Webb is a Director and shareholder of Kestrel Corporate Advisory, Inc. Wendy resigned
from the board on 21 September 2018.
During the year the non-executive directors voluntarily
for consultancy services.
and ceased charging
51
9 Spokes International Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
Amounts owed by the Group to related parties were:
Name of related party
Nature of relationship
Balance type
Paul Reynolds
Director
Social Power (Surrey) Limited
Director
Trade and other
payables
Trade and other
payables
Mint Recruitment Limited
Family Member of a
Director
Trade and other
payables
Kestrel Corporate Advisory,
Inc.
Director
Trade and other
payables
Amounts owed to related
parties
25. Events after the reporting period
Company announces underwritten rights issue and placement
2019
$'000
2018
$'000
13
36
7
8
-
51
50
28
28
165
On 18 April 2019 the Company announced a fully underwritten pro rata renounceable entitlement offer
(Entitlement Offer) to issue 330,180,791 shares at A$0.016 per share to raise A$5.3 million before costs.
Further on 21 May 2019 the Company announced that as a consequence of demand from shareholders
and sub-underwriters for the Rights Issue and shortfall, the Company has secured a placement of up to
43,500,000 fully paid ordinary shares at an issue price of A$0.016 to raise up to an additional
A$696,000.The rights issue and placement was completed on 24 May 2019.
Settlement of short-term loan
On completion of the offer on 24 May 2019, the short-term loan (note 14) including interest to that date
and exit fees were discharged by the payment of $2.32 million and the issue of 80.1 million shares at the
.
There have been no other reportable events arising after the end of the reporting period.
52
06
GOVERNANCE
&DISCLOSURE
9 Spokes International Limited
New Zealand Statutory Information
As at 31 March 2019
1. Board of Directors and sub-committees
The Directors in office at the date of this Annual Report were:
Name
Position
Date appointed to the board
Adrian Grant
Executive Director, Founder and Chief Operating Officer
17 August 2017
Mark Estall
Executive Director, Founder and Chief Executive Officer
19 September 2011
Paul Reynolds
Non-Executive Chairman
Thomas Power
Non-Executive Director
10 September 2014
7 October 2014
Independent, non-executive Director, Wendy Webb resigned from the Board on 21 September 2018.
a) Board meetings
The Board met formally 24 times during the financial year ended 31 March 2019. Normally the board
would meet up to 10 times a year during which the board considers key financial and operational
information as well as matters of strategic importance. Additional meetings were held during the year
ended 31 March 2019 to consider matters relating to capital raising and the short-term loan.
Name
Position
Paul Reynolds
Adrian Grant
Mark Estall
Thomas Power
Wendy Webb
Non-Executive Chairman
Executive Director and Chief Executive Officer
Executive Director and Chief Strategy Officer
Non-Executive Director
Independent Non-Executive Director
b) Board committees
Number of
meetings
eligible to
attend
Number of
meetings
attended
24
24
24
24
9
23
21
21
24
7
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
eb site at
Nomination Committee.
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
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,
management and auditors.
The Audit and Risk Committee provides advice to the Board and reports on the status and management
ent process is to assist the
54
9 Spokes International Limited
New Zealand Statutory Information
As at 31 March 2019
Board in relation to risk management policies, procedures and systems and ensure that risks are
identified, assessed and appropriately managed.
During the financial year, the Audit and Risk Committee met once to review the results prior to the release
of the Interim Financial Statements for the 6 months ended 30 September 2018. Other matters were
dealt with either at Board Meetings or through direct communications with Committee members. The
members of the Committee at the date of this Annual Report are Paul Reynolds (acting Chairman) and
Thomas Power.
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
strategic goals and
ensure that the remuneration policies and practices are consistent with the
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 included changes to the executive team and remuneration matters. The
members of the Committee at the date of this Annual Report were Paul Reynolds (Chairman) and Thomas
Power
2. Shareholdings of Directors
Adrian Grant
Mark Estall
Paul Reynolds
Thomas Power
2019
Shares
66,680,151
66,754,863
4,423,625
1,843,784
2018
Shares
66,680,151
66,754,863
4,423,625
1,843,784
55
9 Spokes International Limited
New Zealand Statutory Information
As at 31 March 2019
3. Entries recorded in the
Interests Register
The following are entries made in the Interests Register as at 31 March 2019:
Director/Entity
Adrian Grant
Aminoex Property Fund No 1 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
Computershare Limited
Tightline Advisory Limited
Volant Partners Limited (dissolved 2 April 2019)
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
4. Donations
Relationship
Director & Shareholder
Shareholder
Director & Shareholder
Director
Director
Director
Director
Director
Director
Director
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director
Independent Non-executive Director
Director & Shareholder
Director & Chairman
Director
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
Director & Shareholder
The total value of donations made by the Group during the year ended 31 March 2019 was $140 (2018:
$1,103)
56
9 Spokes International Limited
New Zealand Statutory Information
As at 31 March 2019
5.
The remuneration receivable by Directors in office during the financial year ended 31 March 2019 was:
Adrian Grant
Mark Estall
Paul Reynolds
Thomas Power
Wendy Webb
Directors' fees
Employment
remuneration
$'000
$'000
Consultancy
services
$'000
Share based
payments
$'000
- 262
- 296
78
40
39
-
-
-
18
- 96
- 23
-
-
-
-
-
157
558
137
-
6. Employee Remuneration
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
$170,000 - $179,999
$180,000 - $189,999
$190,000 - $199,999
$210,000 - $219,999
$230,000 - $239,999
$250,000 - $259,999
$260,000 - $269,999
$270,000 - $279,999
$280,000 - $289,999
$290,000 - $299,999
$330,000 - $339,999
$380,000 - $389,999
$410,000 - $419,999
.
2019
Number
10
2
6
2
3
1
-
1
1
1
1
-
2
1
1
1
1
-
-
-
2018
Number
5
4
9
2
6
3
1
-
1
-
-
1
1
-
1
1
-
1
1
1
57
9 Spokes International Limited
Additional Information for ASX Listed Companies
As at 30 May 2019
The following information is current as at 30 May 2019 and is included for the benefit of shareholders
and for compliance with the Australian Securities Exchange (ASX) Listing Rules. The information includes
shareholdings following the recent rights issue and placement completed on 24 May 2019.
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
Adrian Grant
Associates
M & M No. 2 Limited
Franc Holdings Limited
Adrian David Grant & AJ
Trustee Services Limited
Franc Holdings Limited
Associates
Harrogate Trustee Limited
Number of
Ordinary
Shares
82,064,998
Voting Power
8.65%
81,990,286
8.64%
Number of
Ordinary
Shares
Voting Power
72,866,826
7.68%
Citicorp Nominees Pty Limited
62,601,822
6.60%
M & M No. 2 Limited
Adrian David Grant & AJ Trustee
Services Limited
51,444,727
51,312,727
5.42%
5.41%
58
9 Spokes International Limited
Additional Information for ASX Listed Companies
As at 30 May 2019
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
1,637
See paragraph 13 below
4. Voting Rights Attaching to each Class
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
Holders
23
45
123
798
648
Total Units
4,249
178,254
1,047,103
34,994,953
912,668,229
%
0.00%
0.02%
0.11%
3.68%
96.18%
Totals
1,637
948,892,788
100.00%
b) Unquoted Share Options
IPO Advisors Share Options:
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
0
0
0
8,750,000
0.00%
0.00%
0.00%
0.00%
100.00%
8,750,000
100.00%
None of the options issued under the IPO Advisors Share Options Scheme have vested.
59
9 Spokes International Limited
Additional Information for ASX Listed Companies
As at 30 May 2019
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 Employee Share Option Scheme (the details of which are set
out in the Company's Replacement Prospectus dated 17 May 2016), is as follows:
Holdings Ranges
Total Units
Holders
%
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
All options have vested.
Current Employee Share Options:
0
0
0
2
3
5
0
0
0
119,545
1,413,463
0.00%
0.00%
0.00%
7.80%
92.20%
1,533,008
100.00%
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
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 vested on issue.
Non-Executive Directors (NEDs) Share Options:
0
0
2
14
5
21
0
0
11,463
421,597
817,534
%
0.00%
0.00%
0.92%
33.71%
65.37%
1,250,594
100.00%
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:
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
2
2
0
0
0
0
1,143,413
0.00%
0.00%
0.00%
0.00%
100.00%
1,143,413
100.00%
None of the options issued under the Non-Executive Directors (NEDs) Share Options Scheme have vested.
60
9 Spokes International Limited
Additional Information for ASX Listed Companies
As at 30 May 2019
6. Marketable Securities
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$0.017 as at 30 May 2018 was 503.
7. 20 Largest Holders
As at 30 May 2019, 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
Harrogate Trustee Limited
Citicorp Nominees Pty Limited
M & M No.2 Limited
Adrian David Grant & AJ Trustee Services Limited
G&S Capital Limited
Sekots Group Limited
Franc Holdings Limited
Custodial Services Limited
Mr Bin Liu
Optimum Holdings Limited
J P Morgan Nominees Australia Pty Limited
Brendan Paul Roberts & ML Trustees 3287 Limited
North of The River Investments Pty Ltd
MGL Corp Pty Ltd
Rubi Holdings Pty Ltd
Tappenden Holdings Limited
IBT Holdings Pty Ltd
Upsky Equity Pty Ltd
Mr Adam Stuart Davey
Sargon Ct Pty Ltd
Number of
shares
72,866,826
62,601,822
51,444,727
51,312,727
37,617,886
32,029,452
30,620,271
25,082,457
17,635,376
17,572,440
16,352,592
14,779,609
12,500,000
9,673,584
9,374,972
8,572,349
7,447,876
6,705,374
6,278,419
6,250,000
%
holding
7.68%
6.60%
5.42%
5.41%
3.96%
3.38%
3.23%
2.64%
1.86%
1.85%
1.72%
1.56%
1.32%
1.02%
0.99%
0.90%
0.78%
0.71%
0.66%
0.66%
8. Company Secretary
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
61
9 Spokes International Limited
Additional Information for ASX Listed Companies
As at 30 May 2019
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
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
21
2
8,750,000
1,533,008
1,250,594
1,143,413
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
14. Review of Operations
A review of the operations and activities of the Company for the year ended 31 March 2019 is provided
in the Chairman report and Chief Executive report sections of this Annual Report.
62
9 Spokes International Limited
Additional Information for ASX Listed Companies
As at 30 May 2019
15. Buy-Back
There is no current on-market buy-back being conducted by the Company.
16. 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.
63
9 Spokes International Limited
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)
Australian Lawyers
Adrian Grant
Mark Estall
Thomas Power
Bird & Bird Lawyers
Level 11, 68 Pitt Street
Sydney, NSW 2000, Australia
New Zealand Lawyers
Webb Henderson
Level 3, 110 Customs Street West
Auckland 1010 New Zealand
Group Auditors
PricewaterhouseCoopers
Share Registrar
ASX
Website
188 Quay Street
Private Bag 92162
Auckland 1142, New Zealand
Boardroom Pty Limited
Level 12, 225 George Street
Sydney, NSW 2000, Australia
listed on the ASX, under ASX code
ASX:9SP
www.9spokes.com
64
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